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Michigan Legislature passes $1B incentive plan for big projects like GM

lansing dome
Michigan lawmakers were expected to work late Tuesday to allocate billions of dollars. (Shutterstock)

LANSING — The Michigan Legislature late Tuesday approved a $1.5 billion economic development proposal that boosters say will help the state land major projects like a General Motors Corp. battery plant near Lansing.

The six-bill plan, headed to Gov. Gretchen Whitmer, would divert $1 billion into the new fund that could be used to recruit and retain so-called “critical industries” like manufacturing.

Chief among them is a $2.5 billion plan by General Motors Corp. and its battery-making partner, Ultium Cells LLC, to build a third U.S.factory in Delta Township, just west of Lansing. A formal announcement is expected soon on the plant that would employ up to 1,700 workers by 2030.

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Lawmakers also approved $409 million in grants for businesses affected by the pandemic. They also voted to exempt more small businesses from taxes on personal property and equipment and steer $75 million to local governments to offset those losses.

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Sen. Jim Stamas, R-Midland, said the bills signal that “Michigan is still fighting for every job.

“Our families expect and deserve us to do nothing less than fight for that.”

Passage came after lawmakers in the Republican-led Legislature negotiated all day Tuesday. 

The centerpiece, SB85, is the $1 billion to lure big-ticket manufacturing to the state, which boosters said is critical to compete with the South. The bill was approved by the Senate 25-11 and House 78-25.

According to revisions to the plan distributed Tuesday, money would be directed to at least two new funds: one to aid in site selection and infrastructure improvements, and a second targeting so-called critical industries, representing only the largest potential deals for every region in the state. 

The vote came about 10 weeks after Ford Motor Co. announced it would invest $11 billion in two electric vehicle production campuses in Tennessee and Kentucky. Michigan did not compete for the project that will create a total of 11,000 jobs.

Lawmakers worked with Whitmer on the package for weeks, and boosters said time is of the essence.

Now, 10 high-tech projects, including electric vehicle facilities, worth a combined $64.8 billion and projected to employ 21,000, are considering Michigan, according to Consumers Energy. 

"I am confident that, together, we can continue to create tens of thousands of good-paying jobs and uplift our communities by setting up this critical economic development fund," Whitmer said in a statement. 

She is expected to sign the legislation.

Michigan’s incentives would not be solely for the auto industry, but that is the sector with the most growth, said Glenn Stevens, executive director of MICHAuto, a statewide initiative of the Detroit Regional Chamber to promote the state’s largest industry.

The urgency comes from a faster-than-anticipated shift to electric vehicle production from Michigan-based Ford and GM, who are fighting for market share with other companies, like Toyota and Tesla.

“It's a complete upheaval and transformation, and if Michigan doesn't move with it, then we could have some serious consequences,” Stevens told Bridge Michigan ahead of the vote.

Past economic incentives have been costly. One analysis, by the free-market Mackinac Center last year estimated all of Michigan’s programs since the 1980s cost an average of nearly $600,000 for every job created.

Rep. Cynthia A. Johnson, D-Detroit, called the new incentives “corporate welfare handouts” that only help wealthy businesses.

“There's no guarantee of long-term high paying jobs here,” Johnson said. “With these bills, there will be winners and losers. Guess who the losers will be? Small businesses.”

But Rich Studley, president and CEO of the Michigan Chamber, said the latest plan offers “enough checks and balances so that lawmakers can be confident.” 

“We are in a fierce competition with other states and foreign countries for jobs,” Studley told Bridge earlier Tuesday.

Among other things, the proposal would allow the Legislature and governor to oversee the funds and offers greater protections if projects don’t live up to job promises. 

The small-business tax exemption, though, received some criticism from the Michigan Municipal League and groups that townships and counties. That's because the package does not address a long-term funding solution to the $75 million that will be lost annually local governments by more than doubling the personal property tax exemption for small taxpayers.

$1 billion fo COVID-19 response

In a separate measure, the Legislature also approved spending $150 million of federal COVID relief funding for school testing and screening. This amount is half of what was granted to the state. 

Sen. Curtis Hertel, D-East Lansing, told reporters Tuesday the supplemental spending bill would allow schools to continue with in-person learning. 

“Do I wish it was more? Yes.” Hertel said. “But I'd much rather get a good portion along the way, and those testing dollars will mean that next month those kids are tested … there's contact tracing.” 

Lawmakers also approved  $36.3 million for emerging environmental health threats in Benton Harbor and other communities. The city in southwest Michigan is amid a water crisis involving high lead levels. 

The Legislature has already allocated $1 billion to replace lead pipes across the state. 

The funds passed Tuesday can be used for water sampling, the expansion of Food Assistance Program benefits for Benton Harbor residents, and the hiring of a health officer in Berrien County.

Rep. Pauline Wendzel, who represents Benton Harbor, said the money will help ensure access to clean water. She applauded colleagues for not making the issue political.

“We've seen what happens in the short and long term when emergencies are politicized in other communities — the people suffer while politicians point fingers,” Wendzel, R-Watervliet, said in a statement.

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Earlier Tuesday, the Michigan House passed a supplemental bill that would allocate $1.08 billion to address the COVID-19 pandemic. 

The measure, which the Senate could not take up until early next year because of procedural rules, would allocate $151 million to buy tests for schools and $50 million to create “early treatment” sites. 

Democrats proposed a series of amendments rejected by Republicans, including a plan that would have provided a $2,500 bonus to all frontline health care workers who directly interact with patients.

House Appropriations Chair Thomas Albert, R-Lowell, said he did not necessarily disagree with the proposals but said those negotiations could wait until next year.

"It's a zero-sum game," he said. "There's only so much money that we have. I think we've done a lot here with the $300 million to address the (health care) workforce issues, and we'd like to see how that works before we venture into other areas."

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