Want MSF incentive? Companies must say if they’re considering other places
November 1, 2016
Article courtesy of MIRS News Service
When the state awards an incentive to a company looking to do business here, it’s often not alone in trying to do so.
For example, Michigan was chosen over competing sites in Tennessee, West Virginia, Ohio and Indiana for a manufacturing project pitched by auto supplier Gestamp, which had a $1.175 million grant approved by the Michigan Strategic Fund (MSF) Tuesday for its plans to expand and build new facilities in Mason and Chelsea.
In a separate $400,000 grant awarded to Gestamp Tuesday for expanding its existing North American headquarters in Troy, the state’s press release said Michigan was “chosen over competing sites in the southern U.S. and Mexico.”
Between the two Gestamp projects, it’s going to result in a combined $158.7 million investment in Michigan and 295 jobs, according to the Michigan Economic Development Corp. (MEDC).
But how does the state verify there is indeed competition coming from other states, resulting in consideration of awarding an incentive here?
Josh Hundt, vice president for business development projects at the MEDC, said companies applying for incentives are required to indicate other states they’re considering for the project, plus the cost or other disadvantages that would result from locating in Michigan.
Hundt said it’s not about just listing other states, but to list why those other states are reasonable possibilities where the company could locate the project.
“That’s the first step” in the application process, he said.
Then, the MEDC will verify that information by way of receiving offer letters from the company, or in other cases, the MEDC uses third party analyses looking at the competitiveness of states for attracting business.
Hundt said those analyses provide an overall understanding of the incentive packages that are generally offered from those locations, as well as tax rates and other factors that go into the reasons for doing business in one location or another.
The information on competing sites is part of a company’s application to the MEDC for an incentive. Asked for some examples of specific documentation about proving the competition coming from other states, MEDC officials redirected the request to its Freedom of Information Act (FOIA) process.
Other states competing for the same business projects is often mentioned by the MEDC as part of the rationale for awarding incentives.
Last month, in explaining an incentive awarded to the automaker FCA, a memo for the deal stated, “The planned investment to re-tool and re-configure the existing assembly plant is so large, FCA US could have decided to construct a new facility anywhere in North America at a similar cost.”
The FCA memo continued, “Alternatively, production of this new truck could have been moved to existing plants in Illinois or Ohio.”
After the August MSF meeting, the MEDC’s press release said that Inteva Products, which received a $1.27 million in economic assistance, chose Michigan over competing sites in other states.
Hundt said out-of-state competition, as well as demonstrated need for an incentive, are two considerations outlined by the guidelines for the MEDC’s Michigan Business Development Program (MBDP).
“In most cases, that need is a competing site outside of the state,” he said.
Sometimes, companies could have existing facilities throughout the country, so it could come down to one branch of the company competing against other locations from the same company, Hundt said.
Jeffrey Wilson, president and CEO of Gestamp North America and Asia Pacific, said states take a “capitalistic” approach to attracting businesses to their borders.
“They understand the importance of their competitiveness,” Wilson said.
Greg Tedder, an executive vice president of the MEDC, said that, “we see all these jobs as jobs that we’re winning from other states and other competitors.”
The MSF Tuesday also approved auto supplier Flex N Gate Detroit as a qualified eligible business within the Next Michigan Development Corp. Renaissance Zone to support its plan to build a new manufacturing facility in the city.
The benefit involves the abatement of property taxes for 10 years, at $1.1 million a year, according to the briefing memo.
The project is expected to result in $95 million of investment and up to 650 jobs, with the “ability to create up to 750 jobs in the future,” according to the MEDC.