Michigan awaits ‘new era’ of economic development as $1B fund takes shape
Michigan officials are putting the finishing touches on a new $1 billion pool of funding they hope will bring new business investment and “transformational projects” to the state.
One effort, the Critical Industry Program, will allow the state to provide grants, loans or other incentives to target major projects that spur significant job growth and spin-off investment.
The other, the Strategic Site Readiness Program, will pay to clear property for construction of manufacturing facilities. Sites can either be public or private, and can include “mega” sites of hundreds of acres.
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“This is a new era for how we approach economic development,” said Maureen Krauss, CEO of the Detroit Regional Partnership, which represents 11 counties in southeast Michigan.
Tuesday’s unanimous vote came from the Michigan Strategic Fund board, which makes many of the funding decisions for the state’s economic development programs.
The incentives were created after state officials — smarting from Ford Motor Co. choosing Tennessee and Kentucky for a combined $11 billion advanced manufacturing investment — learned that General Motors was considering property just west of Lansing for its third electric vehicle battery production site.
GM has yet to make an announcement on whether it will build the factory in Delta Township, but in the meantime state officials are moving fast to line up the processes they say they need to streamline business recruitment.
The Legislature approved the bipartisan Strategic Outreach and Attraction Reserve (SOAR) legislation that created the $1 billion fund in mid-December. Gov. Gretchen Whitmer approved it shortly thereafter.
Besides the $1 billion funding for the incentives, the Michigan Public Service Commission in December gave approval to the state’s largest utilities to pursue industrial development rates to large-scale users in an effort to entice battery plants.
Tuesday’s approval “will support our ability to attract highly competitive projects,” said Quentin Messer Jr., CEO of the Michigan Economic Development Corp., the public-private partnership focused on job creation in the state.
The benefit to residents, he said, is new and retained jobs that pay above-average wages. The programs also should result in “billions of dollars in investment in communities throughout the state.”
The state will consider a host of factors for companies applying for the assistance, including whether it receives tax credits and the size, scope, feasibility and sustainability of the project. There is no dollar limit for what a single project can be awarded, the MEDC told Bridge Michigan.
Krauss said the industrial market is under pressure, as many older buildings are obsolete for newer projects that require high amounts of electricity to run high-tech equipment and “clean-room” features.
“There is really a shortage of buildings in certain areas,” she said. “We don’t have a lot of good, usable industrial buildings just sitting around.”
A survey from Colliers International at the end of the third quarter of 2021 showed that businesses were moving into existing buildings in metro Detroit at a near-record pace, filling at least 8.3 million square feet.
Another 8.6 million square feet of space was under construction, Colliers reported, with developers scrambling to finish it. Yet the overall vacancy rate on the overall market of about 650 million square feet was 4.4 percent.
The situation in west Michigan is similar, according to brokers at Advantage Commercial Real Estate, with little to no available space for industrial expansion.
Krauss said her 11-county group has seen the need to streamline building efforts for industrial space — which can include factories, logistics centers and other non-office or retail business uses — over the past few years, as the glut that accumulated during the Great Recession was filled and new construction didn’t catch up.
Among the hurdles are the costs of site preparation, including road construction and grading and environmental assessment, that can make construction too expensive and give companies second thoughts, Krauss said.
Krauss said the Detroit Regional Partnership this spring will launch the Verified Industrial Program to allow developers and prospective businesses to shop from a bank of shovel-ready listings. Costs of those assessments could be future uses for the $1 billion SOAR fund.
So-called “speed to market” is critical right now, she added, among the companies shopping for space.
Joshua Hundt, chief business development officer and executive vice president at the MEDC, told the strategic fund before their vote that the next step is for the agency to finalize applications.
Once an application is made for either type of funding, staffers will review it and weigh measures like impact to a community and the applicant's financial need.
Each application will be voted on by the strategic fund board, then will head to the Legislature so that it can approve a transfer of funds.
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