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Bipartisan support grows to add millions to Michigan’s $1B tax incentive fund

Ultium Cells,
Ultium Cells, a joint venture of LG Energy Solution and General Motors, announced a $2.6 billion investment to build its third battery cell manufacturing plant in Lansing. The approximately 2.8 million-square-foot facility, funded in part by Michigan’s SOAR Fund, is scheduled to open in late 2024. (Courtesy photo)

MACKINAC ISLAND — The state continues to celebrate its so-called “transformative” job growth, but the gains also are depleting Michigan’s new $1 billion business attraction fund.

Now both Democrats and Republicans say they expect to approve an addition to the SOAR Fund in the coming year’s budget.

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Bipartisan support is not tied to a specific dollar amount yet, said state Sen. Ken Horn, R-Frankenmuth, who helped to broker the fund’s creation in December.

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But Horn said he will support the $500 million requested by Gov. Gretchen Whitmer because it’s important that the state not lose its momentum as companies  — particularly those searching for new sites to support the growing electric vehicle industry — search for new sites.

“We have to hit some home runs right away,” Horn said. “With that $500 million, we’ll get other deals.”

The Strategic Outreach And Attraction Reserve Fund — designed for awards to large-scale projects and site preparation for quicker construction turnaround — was enacted in December by the state legislature. 

Within weeks, it was supporting major battery manufacturing expansion by General Motors and Ultium Cells as part of a $7 billion investment by GM into its Michigan facilities.

Since then, the state has competed for other major projects, including the $2.5 billion Stallantis EV factory the automaker plans with battery partner Samsung SDI. That factory will be in Kokomo, Indiana, instead of Michigan, the company announced in May.

Losses like that will happen as Michigan competes for the biggest projects in the pipeline, Quentin Messer Jr., president and CEO of the Michigan Economic Development Corporation, told Bridge.

Messer said Whitmer’s proposed $500 million injection represents the amount the MEDC requested, in part because the state has been given “so many opportunities to compete” for new projects.

As of Wednesday, the  Michigan Economic Development Corporation said $332 million was left in the fund. Reports have indicated that more could be committed in coming days.

“We already have opportunities that would exhaust the remaining funds for the initial $1 billion, which is good news for Michigan,” Messer said. “Some of them are obviously subject to approval, but we feel very good about the pipeline.”

That pipeline of historic deals is “historic,’” Messer said.

An increase in the fund also would allow the state to get more aggressive about speculative site development, Messer added, that is not tied to a particular deal. Instead, he said, that could fund improvements to the more marketable pieces of property that would attract a company operating in a short timeframe.

Interest in the SOAR fund came during the first full day of the annual Mackinac Policy Conference, organized by the Detroit Regional Chamber.

While the chamber’s official theme of the event focuses on the business community’s civic role amid political polarization, many participants are talking about job attraction.

Increasing urgency in job growth comes as many in the automotive industry are looking at the expected waves of job losses forecast as internal combustion engines give way to battery electric vehicles. 

The typical EV has 148 fewer parts than one with a gasoline-fueled engine, with all of those parts representing jobs at manufacturers and their suppliers. About 170,000 jobs in Michigan are connected to non-electric vehicles.

The initial $1 billion SOAR fund made a good start toward industry growth, House Minority Leader Donna Lasinski (D-Scio Township) told Bridge Michigan on Wednesday.

“But there's definitely not enough in there to ensure that Michigan doesn't end up in (a jobs) hole,” Lasinski said, as she considered the potential rate of corresponding job losses.

“We have to win a substantial number of projects to actually grow our state.”

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The fund, Lasinski said, “gives companies confidence that they are engaged in a real negotiation with the state because there's dollars in that fund.”

Horn, meanwhile, plans to host testimony in the Legislature next week on bills that would allow the SOAR fund to capture property and corporate taxes generated by projects that receive dollars from it.

That, he said, would turn it into a revolving trust fund that no longer will turn to the Legislature annually for funding.

“People are hoping to make sure that Michigan doesn’t just grow jobs, but retains them,” Horn said. “We need to move forward. And we need dollars in the program.”

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