Article courtesy of MIRS News Service
Attracting big business projects with big job creation numbers has been among the stories of the summer – in particular, Michigan and other states chasing after the coveted electronics manufacturer Foxconn and the purported thousands of jobs the company said it could create.
On the front end, there’s a lot promised, both in job creation and capital investment. But do these projects ever really pan out?
With business incentives on the brains of many this summer, MIRS attempted to look into what’s been pledged by the Michigan Economic Development Corp. (MEDC) to businesses in the past to see where those projects have exceeded expectations and where they’ve fallen short, at least in terms of jobs created.
MIRS reached out to the MEDC and reviewed the agency’s annual report to the Legislature to get an idea of some of the biggest examples of businesses that reported creating more jobs than required.
On the other side, MIRS also reached out to the Mackinac Center – an outspoken critic of publicly-funded business incentives – to get a list of the projects the MEDC had pledged to help that had fallen short of announced job creation requirements.
In some of these cases, the company in question sometimes never filed for the credit at all. In other cases where the company received money from the state but didn’t initially deliver, the MEDC can institute claw-back provisions to get the company to refund the state its money, or cure periods to give the company a chance to comply with its job requirements.
Exceeded Expectations
For the top-performing projects, MIRS looked at projects approved in the Michigan Business Development Program (MBDP), one of the MEDC’s core incentive programs for businesses.
MIRS reviewed the Fiscal Year (FY) 2016 MEDC-Michigan Strategic Fund (MSF) annual report, which had a list going back to 2012 of approved MBDP projects.
While there are a number of projects that have met what they’ve promised in terms of job creation commitments, MIRS found a few companies that actually reported creating more jobs than what they promised:
Ventra Ionia Main – The company was awarded an expansion grant in FY 2014 for $500,000 to create 144 jobs. According to the report, the company had actually created 406 jobs, which is 262 jobs better than expectations.
Dart Container – Dart was awarded a $3 million grant for an expansion in FY 2013 to create 325 jobs, but actually ended up creating 551 jobs, which is 226 jobs better than expectations.
Challenge Manufacturing Co. – This company was awarded $1 million in FY 2013 to create 180 jobs. According to the report, the company created 300 new jobs, good for 120 jobs better than previously promised.
Each of those examples was categorized as an expansion project for an existing company. MIRS also looked at grants termed as “new” to see how many jobs were created there.
A company doing business as Janesville Acoustics was awarded $1.5 million in FY 2012 for a new plant. Since then, the company has created 253 jobs when it only committed to creating 225 jobs.
Detroit Thermal Systems received a $750,000 grant in FY 2013 to create 312 jobs at for a new operation in Romulus. The company has since created 329 jobs.
And Costco received a grant in FY 2014 to open a facility in Belleville, according to the report they committed to 126 jobs created, and reported creating 179.
In addition to these projects, the MEDC identified a number of projects it deemed as “catalyst projects” for Detroit’s resurgence. Among those included Compuware and Quicken Loans relocating to downtown Detroit, as well as the Book Cadillac project downtown as well.
MEDC spokesperson Otie McKinley said the MEDC highlighted those not necessarily from a job generation perspective, but for what they have done as igniters for the city of Detroit.
Fell Below Expectations
The Mackinac Center provided a few examples of projects that fell short of expectations that had been announced at the time of the incentive award, both under the old Michigan Economic Growth Authority (MEGA) tax credit program and the newer MBDP grants.
Here are some of examples identified in the MEGA program:
Motown Motion Pictures – This project, involving the set-up of a movie studio at an old auto plant in Pontiac, was supposed to create 3,600 jobs with the help of a 12-year, $101 million tax credit. But the MEDC said the company never filed for a credit.
The story of the movie studio received some coverage from The New York Times.
But now the MEDC is involved in another go-around at the same site – the MSF Board in June granted Williams International $4 million to relocate its headquarters to the former Motown Motion Pictures site in Pontiac, which would also include acquiring two adjacent parcels of land to build a new production facility.
Diplomat Specialty Pharmacy – This company was recommended for a credit in 2010, and was expected to create more than 4,000 jobs.
In 2012, the company filed it had created 238 jobs, and hasn’t filed since, according to the most recent MEDC report to the Legislature on the MEGA program.
The MEDC said the reason is not known for why the company hasn’t filed since 2012.
Flagstar Bank – This company was approved for a credit, which came with the pledge to create 2,600 jobs.
By 2013, the company had reported creating 1,388 jobs. But the next year, the company filed and reported creating 699 jobs.
The MEDC said the company has submitted an application for a 2015 credit, reporting that it had created 768 jobs.
Under the more-recent MBDP grants, here are a few the Mackinac Center flagged as falling short of expectations:
Plasan Carbon Composites – The company planned to build a plant in Walker and was awarded a $6 million grant in 2014, along with a pledge to create 620 jobs.
In the most recent report to the Legislature, the state had already disbursed $4.8 million of the $6 million of the grant, or 80 percent of the grant.
Yet the company reported creating 16 qualified jobs in the most recent MEDC report. However, the MEDC said 418 jobs were actually created, and why the number 16 was reported inaccurately is unclear.
Either way, the MEDC said the company is still in default, which has triggered a repayment process for a portion of the previously dispersed funds, which is in process.
S & P Data – This company received a $1 million grant for a facility in Troy in 2014. It pledged to create 400 jobs, but only 100 jobs were reported created in the most recent report, after $600,000 of the grant had been disbursed.
The MEDC said the company was put into a cure period – or a short probationary grace period – and by the end of that period, they had met the qualified jobs number and are now in compliance.