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Introducing The State’s ‘Kohl’s Cash’ Of Economic Development

February 20, 2024

A revamped version of the 2017 “Good Jobs for Michigan” program received testimony before the House Economic Development Committee, where it was likened to the “Kohl’s Cash of economic development programs” by Rep. Graham Filler (R-St. Johns).

Filler, who was joined by bill sponsor Rep. Jasper R. Martus (D-Flushing), testified in support of the three-bill package bringing back the rebranded “High-Wage Incentive for Regional Employment” or H.I.R.E. program. Like Good Jobs of 2019, it would incentivize high-wage job creation by allowing companies to keep up to 100% of the income taxes their new employees would otherwise pay the state.

Sen. Sam Singh (D-East Lansing), who is spearheading the Senate’s version of the legislation, testified that the program lapsed in 2019 because the Legislature wasn’t able to find common ground on re-establishing it.

The original program allowed businesses to enter into a written agreement with the Michigan Strategic Fund (MSF) to receive a percentage of new employee withholding taxes for up to 10 years, with the Department of Treasury then directing new employee tax revenue into the Good Jobs for Michigan Fund and paying out those amounts to eligible businesses, which excluded retailers, professional sports stadiums and casinos.

If an eligible business created at least 3,000 certified new jobs in Michigan with an average annual wage at or above the prosperity regional average wage, or created at least 500 new jobs with an average annual wage at or above 125 percent of the prosperity region average wage, that business could capture up to 100 percent of withholding tax revenues for up to 10 years.

Under the H.I.R.E., including Rep. Jason Hoskins (D-Southfield)’ HB 5413, Martus’ HB 5414 and Filler’s HB 5415, the MSF could designate businesses as eligible for the incentive and enter written agreements with those businesses for eight years.

The bill would change the qualifying criteria to be based on the median wage of a prosperity region, rather than average wage. Instead of creating 3,000 jobs, an eligible business would need to create a minimum of 250 with a median annual wage of 125 percent of the prosperity region median wage, or a minimum of 25 new jobs in Michigan with a median annual wage that is at least 150 percent of the prosperity region median wage.

For example, Michigan’s Upper Peninsula prosperity region median wage was $19.26 in 2022, while the Detroit Metro prosperity region median wage was $36.83, according to the Michigan Department of Technology, Management and Budget.

Any company that meets the criteria, regardless of the number of jobs created, could receive up to 100 percent of tax capture revenues for up to 10 years.

The jobs must be permanent, and jobs created by a primary supplier would no longer qualify.

The changes would not apply to written agreements in effect before the bill takes effect. The MSF could not commit more than $200 million a year and could not grant the entire amount to a single business.

Businesses requiring construction would have three years to begin building and two years after construction starts to begin hiring, while those not requiring construction would have three years to start hiring. If a business doesn’t meet deadlines or receive an extension, the agreement would be voided.

Singh said this program is different from other economic incentive packages because of how it’s geared towards bringing more higher-knowledge, higher-wage jobs to Michigan.

Martus said bringing back the program addresses consistency across business incentives.

“If you’re thinking of investing here in Michigan, one of the most important things for a business is consistency,” he said. “They need to make sure that a lot of our tax policies, a lot of the programs that we’re pushing at the state level, are not going to be taken away. They’re not going to be added. These business folks really need a lot of consistency.”

Martus said with the former Good Jobs program, “we’ve been talking about the benefits of Good Jobs longer than Good Jobs was actually in effect,” and extending the program’s lifetime will be encouraging for companies that want to reinvest in Michigan.

He added that some concerns, especially from Democrats, center around having enough funds in the budget to well-fund community development programs.

“But, with the specific structure of this, we’re not giving money away,” he said. “These tax dollars have never actually come in to be a part of our state government’s revenue, and so, because these dollars are not coming in, it’s not necessarily a hit to the budget, in comparison to other programs that we’ve supported in the past.”

Filler went further with that explanation.

“It’s like the Kohl’s cash of economic development programs,” he said, in that the businesses receive a benefit after they spend, and not before.

“This isn’t just an attraction tool,” he said. “It’s a cultivating tool.”

Republican Vice Chair Mark Tisdel (R-Rochester Hills) expressed concern, however, that only providing incentives won’t be enough, as “we don’t operate in a vacuum.”

If Michigan grows its manufacturing industry but doesn’t have affordable and reliable energy, high-tech isn’t going to come here, he said, and if Michigan doesn’t have good roads and infrastructure, companies won’t stay.

Martus responded that the program is a start, and a way to provide a bipartisan, consistent incentive to get companies to Michigan.

The bill package was also opposed by James Hohman, Mackinac Center director of fiscal policy, who asked for a change to the program that included performance targets.

“The supporters of the bill clearly believe that this is going to have a meaningful impact on Michigan’s job picture, and so I think we should have performance targets for this bill, and the requirement that if… (a business is) unable to meet its performance, (MSF) stops rewarding those companies.”

Rep. Greg Markkanen (R-Hancock) criticized the bill package for sticking too closely to the first Good Jobs program, which he said did not create any verified jobs, and for a lack of legislative oversight measures, substantive clawback provisions or transparency-increasing measures.

He also didn’t like the use of median wage requirements, which Markkanen said will restrict the ability of companies to meet the program standards, and criticized Gov. Gretchen Whitmer for focusing on large economic attraction initiatives without providing sustainable options for existing Michigan small businesses.

“I sure hope the Governor doesn’t own plants,” Markkanen said. “If she treats them anything like she treats the economy, they really need to be watered. Right now, she’s too busy at the store looking for the next perennial when she needs to care for the plants she already has. Michigan businesses must take priority. The Governor must get off the national stage and help find real solutions back home.”

During the hearing, the bill was supported by Michigan Economic Development Corp. Chief Executive Officer Quentin Messer, who said programs coming down the pipeline already could include an engineering and design company looking at southeast Michigan.

Other groups in support included Business Leaders of Michigan, the Michigan Manufacturers Association, the Michigan Works Association, Dow, the Detroit Regional Chamber, the Southeast Michigan Council of Governments and the Metropolitan Affairs Coalition.

Opposition included the Michigan Freedom Fund.

The bills were not voted out Tuesday, and await further consideration in the House Economic Development and Small Business Committee.

In other news, the committee heard testimony on Rep. Sam Singh (D-East Lansing)’s SB 417, which makes modifications to the Michigan State Housing Development Authority (MSHDA) Pass-Through Bond Program.

The changes would allow MSHDA to use the proceeds of the bonds to finance some senior housing projects, accept private placements as a form of credit enhancement and allow eligible borrowers to have up to $100 million in outstanding loan commitments.


Article courtesy MIRS News for SBAM’s Lansing Watchdog newsletter

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