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$1B Economic Development Deal Officially Landed

December 21, 2021

The House, Senate and Governor’s office finalized $1 billion in a new economic development fund Tuesday designed to lure large industrial projects to Michigan. The bills creating the funds that will facilitate the spending were also given final approvals and sent to the Governor as the Legislature ended floor action for 2021.

A conference committee formalizing the agreement happened shortly after 9 p.m. Tuesday after the $1 billion number was put up as a goal that all sides appeared comfortable with setting, as MIRS reported Monday.

The Senate passed the spending portion of the bill, SB 85, 25-11 with Sens. Tom Barrett (R-Charlotte), Jon Bumstead (R-Newaygo), Stephanie Chang (D-Detroit), Erika Geiss (D-Taylor), Jeff Irwin (D-Ann Arbor), Ruth Johnson (R-Holly), Ed McBroom (R-Waucedah Twp.), Aric Nesbitt (R-Lawton), Jim Runestad (R-White Lake), Sylvia Santana (D-Detroit) and Lana Theis (R-Brighton) voting against it.

The House passed SB 85, 77-25 with a collection of conservative Republicans and liberal Democrats voting against it.

Under the plan, the new Strategic Outreach and Attraction Reserve (SOAR) fund will receive $1 billion from the state’s General Fund surplus. The Michigan Economic Development Corporation will use the money as bait to snag large-scale industrial deals. Once they have a bite, the Legislature will review the proposal and steer money from SOAR into one of two funds to be used for the project.

One fund will be for site preparation and the other is last-dollar support to close the deal.

SB 85 by Sen. Ken Horn (R-Frankenmuth) would include $409 million in federal funding to assist businesses impacted by the COVID-19 pandemic and will infuse $75 million in General Fund dollars to help reimburse local units of government that are taking a hit with the passage of the higher personal property tax exemptions.

In the House, SB 769 and SB 771 passed with votes of 81-22. The third bill, HB 5603, passed the Senate, 25-11. In both cases, the no votes came from the Democrats’ most progressive members and the Republicans’ most conservative members. 

“These bills are corporate welfare handouts to offer the working business owners with no guarantees they will reinvest this money in people,” said Rep. Cynthia A. Johnson (D-Detroit). “There’s no guarantee of long-term, high-paying jobs. With these bills, there will be winners and losers. Guess who the losers will be? Small businesses, businesses who are already hurting from the fallout of a pandemic. Specifically, people of color in places like my district who are trying to start and sustain small businesses, mom and pop stores. Everyone loves moms and pops until it’s time to open our purses and wallets to help them.”

Voicing support for the bills was one of the co-sponsors, Rep. Jack O’Malley (R-Lake Ann).

“We’ve shown that we can lead in production and labor,” he said. “These proposals only add to our willingness to deliver jobs and prosperity for our state. We’re going to be extremely mindful that within this approach, simply, if it’s not good for Michigan, it’s not good enough for Michigan tax dollars.”

The Michigan Department of Treasury will be responsible for creating and managing the $409 million “afflicted” business relief program, with individual grants that can’t surpass a business’s financial hardship in value and could not exceed $5 million. 

A financial hardship would be defined as a decline in total sales “capped” at the sum of property taxes, or 17% of lease costs plus 50% of unemployment insurance taxes on top of 100% of the fees connected to liquor licenses, food inspections and other state permits and checkups. Property taxes are also 100% reimbursed.

Businesses that certified a reduction of at least 20% from gross receipts in 2020 would receive maximum-size grants, those that certified 15% to 20% would receive 75% of the maximum grant and those that certified 10% to 15% would receive 50% of the maximum grant. 

According to the Senate Fiscal Agency, “an afflicted business that started operations between Oct. 1, 2019 and Jun. 1, 2020, must receive 25% of the amount that it would have received” if it had opened before the aforementioned 2019 date. However, a new business must also document that it was either fully or partially closed due to a state pandemic order. 

“We applaud the Governor and the legislature for finding common ground to provide meaningful relief for Michigan’s still ailing hospitality industry,” said Justin Winslow, president and CEO of the Michigan Restaurant and Lodging Association. “The COVID-19 pandemic inflicted unprecedented destruction on restaurant and hotel operators across the state, with thousands closing their doors forever. For those that remain, erratic supply chains, crippling inflation and a persistent virus continue to complicate their day-to-day operations.  This funding will help many keep their doors open by allowing them to pay down debt and to subsidize their operations.”

The total price tag for the Fiscal Year (FY) 2022 supplemental would be more than $1.484 billion, with more than $104 million in federal dollars being allocated for FY 2022 and $1.075 billion from the general revenue surplus.

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