Michigan approves $846 million in aggressive bid to attract new business

• Michigan lawmakers approved $1 billion in spending Wednesday, mostly to fund business incentives
• The deal was reached between Republican legislative leaders and Democratic Gov. Gretchen Whitmer, with some critics 
• The SOAR fund was launched last December with $1 billion, with most of it spent on three deals, requiring its replenishment 

LANSING — Michigan is intensifying efforts to bring more large-scale development to the state, voting Wednesday to add hundreds of millions of dollars to a fund that would sweeten how much it can offer “transformative” businesses in incentives.

A bipartisan vote in the Michigan Legislature boosted the state’s business attraction budget by $640 million and reauthorized more than $200 million left over from a previous investment in the fund. 

The Legislature approved the increase to the Strategic Outreach And Attraction Reserve (SOAR) Fund late Wednesday, bringing the available balance to $846.1 million — which supporters said will keep Michigan competitive with rival states, while critics bemoaned the deal as reckless.  

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In the Senate, lawmakers voted 25-8 to approve the deal, which was negotiated between Republican legislative leadership and Gov. Gretchen Whitmer’s administration. The House approved the measure 76-28.

The SOAR fund was launched last December with $1 billion, which dwindled to about 20 percent of its initial investment after three deals, including awards to Ford and General Motors, were made over nine months. 

But there are plenty of future opportunities to chase, legislators say, as Michigan seeks to attract a share of more than $500 billion in expected U.S. investments in the next decade as the auto industry transitions sharply toward electric vehicles.

“It sets the tone that we are still engaged in the economic development space,” Rep. Ben Frederick, R-Owosso, said ahead of the Wednesday votes. “This is a piece of our strategy. It's a tool in our toolbox.”

Business leaders cheered the spending late Wednesday,.

"Michigan will be positioned to attract some of the largest projects in our state’s history, which will benefit businesses of all sizes across all industries in urban and rural areas and strengthen communities statewide,"  said Jim Holcomb, president and CEO of the Michigan Chamber of Commerce.

In Wednesday’s supplemental, the Legislature earmarked additional funds for site development. Senate Majority Leader Mike Shirkey, R-Clarklake, told reporters he believes state officials should be proactive in finding and readying for development a “mosaic” of potential sites with varying geographic locations and levels of development. 

He said the fund should not be viewed as a rubber-stamp fund for businesses, noting it’s up to the Legislature to ensure “we don’t lose our discipline” in determining worthy projects. 

The money comes as part of roughly $1 billion in supplemental spending that also included funding for other economic development efforts, as well as funding for behavioral and mental health providers and a $20 million earmarked for settlement payments to those wrongfully accused of fraud by the Unemployment Insurance Agency. 

Lawmakers approved a separate spending bill Wednesday that appropriates $12.1 million for literacy tutoring and robotics programs, and lays the framework for the Michigan Achievement Scholarship, which could provide up to $5,500 per student per year at Michigan’s 15 public universities and colleges.

But the SOAR funding dominated spending approved Wednesday. While backers lauded the plan as an investment in economic development, others criticized the incentive spending without adding safeguards — such as protections that companies receiving incentive funds won’t later authorize layoffs of Michigan workers.

“Lawmakers continue to send hundreds of millions of dollars to wealthy corporations without ensuring layoffs aren't right around the corner,” said Jess Newman of Fund MI Future, a coalition of labor, environmental and social justice groups.

Michigan’s $7 billion budget surplus puts the state in a rare and enviable position as states all over the country — including Indiana and Ohio in the Midwest — boost incentive spending to attract the wave of large-scale industry now shopping for locations that could lead to thousands of jobs, said Bob Schneider, senior researcher at the Citizens Research Council of Michigan, who previously served in the state budget office.

“Never have we had anything close to $7 billion” in surplus, Schneider told Bridge Michigan on Wednesday, recalling years of steep budget cuts before and during the Great Recession.

Deciding to fund incentives is “easier when you’re sitting on this type of revenue.”

The SOAR fund was approved late last year and within weeks issued its first grant: $666 million to General Motors as part of a major battery manufacturing expansion with Ultium Cells in Delta Township near Lansing. It was part of a $7 billion investment by the Detroit-based automaker in its Michigan facilities.

But over the following months, as Michigan competed for multiple large-scale electric vehicle battery factories  — and offered millions to companies promising thousands of new advanced manufacturing jobs — some officials pushed for more money in the SOAR Fund before year’s end.

The funding approved on Wednesday is 32 percent more than the $500 million requested by Gov. Gretchen Whitmer in her proposed 2023 budget, an amount supported at the time by Republican Sen. Ken Horn of Frankenmuth, who helped to broker the initial SOAR deal. 

SOAR had a $206 million balance this month, with an expected request for Chinese-owned Gotion Inc. coming soon to support construction of an electric vehicle battery component factory near Big Rapids. Combined with the new funding approved Wednesday, the state now has an estimated $864 million for business incentives.

Negotiations over the additional spending took place throughout the day Wednesday in Lansing as the House and Senate met for the last planned session day prior to the Nov. 8 general election.

The day got off to a dramatic start as House Appropriations Chair Thomas Albert, R-Lowell, announced his resignation from the leadership post over the supplemental bill, citing disagreements with leadership over increasing government spending amid high inflation. 

“With all the uncertainty in the economy today, we should not be making new spending commitments,” Albert said of his decision, adding, “additional spending would just make things worse.”

Albert had become increasingly removed from the spending negotiation process, coming out earlier this month against passing a supplemental spending bill. House Speaker Jason Wentworth, R-Farwell, replaced Albert on Wednesday with Rep. Mary Whiteford, R-Casco Township, even as he commended Albert for his work on the last two state budgets.

In choosing Whiteford as the new chair, Wentworth said she “has the experience we need to continue the SOAR oversight process, oversight of the state appropriations and lead negotiations on any future spending we will consider this term.”  

Quentin Messer Jr., president and CEO of the Michigan Economic Development Corp., told Bridge in May that Whitmer’s then-proposed $500 million injection into SOAR was what the MEDC had requested, in part because the state has been given “so many opportunities to compete” for new projects.

Besides the grant to GM from the SOAR Fund, the state also approved $100.8 million toward a $2 billion investment from Ford into nine Michigan factories and a new shipping center, moves touted as adding 3,200 jobs. More recently, Ford was criticized for laying off 3,000 white-collar workers, most of them in Michigan, after getting the SOAR award.

Earlier this month, another $27 million was approved for Thomas Township to add sewer infrastructure capacity so Hemlock Semiconductor can expand in Saginaw County.

The fund also allows money to be used to make property ready for development, including land acquisition. At least three properties in the state are in varying stages of being turned into “mega sites” for large-scale development. 

Unclear is how many companies may have privately received development offers from the state for projects that have either not been made public or that are still in the approval pipeline. 

Among them may be Gotion Inc., a Chinese electric vehicle battery manufacturer that partners with Volkswagen and is based in Fremont, California. 

The company received local approval Monday for tax abatements if they invest $2.3 billion in a new factory that could employ an estimated 2,350 people near Big Rapids in Mecosta County. An incentive request would next head to the Michigan Strategic Fund, the public funding arm of the MEDC, for approval of the offer made by the state but not yet made public. 

On Tuesday, Tudor Dixon, the Republican candidate for governor, singled out the Whitmer administration for criticism in a video distributed on Twitter, saying Michigan should prioritize education, public safety and infrastructure and that Gotion should not receive an incentive package from the state.

“It’s pretty shocking,” Dixon said in the video. “... We’re seeing taxpayer dollars going to an adversary, a Chinese corporation.”

She told Bridge in a Wednesday statement that giving incentive money in this case would amount to “taxpayer-funded corporate welfare to foreign Chinese-backed companies.”

However, she added, she does support state efforts pay for site readiness and “in regard to the SOAR fund, I would continue to partner with businesses and job creators seeking to grow and maintain a significant presence in our state” if elected governor. 

While economic developers say the SOAR incentives make the state more competitive, having the money available doesn’t guarantee job wins. 

Michigan has competed for other major projects, including the $2.5 billion Stellantis EV factory the automaker plans with battery partner Samsung SDI that landed in Kokomo, Indiana, instead of Michigan. And Ultium Cells appears to be finalizing the South Bend, Indiana, area as the site of its fourth U.S. battery factory. 

Schneider, of the Citizens Research Council, said that while companies may make location decisions based on big-dollar incentives, Michigan may benefit most when — as in Thomas Township — funding is used for infrastructure projects that improve an area instead of a single company.

“At least that has a sort of permanent positive effect,” he said. “That, to me, is a better approach than a write-a-check-to-the-company approach.”

Jonathan Oosting contributed