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Sunday, 24 November 2013 18:41

State improves development incentive process, adds funding

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After getting its feet wet with new processes for a couple of years, the Michigan Economic Development Corp. says it has improved how it delivers development and business incentives with a few minor tweaks.

Chief among the changes: The agency gave its community assistance representatives more autonomy in the early review of projects seeking Community Revitalization Program incentives, said Joe Martin, manager of the CRP and brownfield programs for the MEDC.

“There are less faces and less signoffs,” said Martin, noting applicants previously had to meet with several state officials in the approval process. “We’ve empowered staff in the field to facilitate deals and determine award amounts. They are much more integral now.

“There’s nothing more frustrating for a developer to work with someone, get passed to someone else and then get passed on to another person.”

The new CRP process is closer to how a bank operates its commercial lending practice, Martin said.

Similarly, Business Development Program officials are trying to scale back companies’ expectations that the fund is a first line of support for businesses entering or expanding in the state, said Josh Hundt, the MEDC’s manager of development finance.

The fund is meant as a last resort gap-financing tool to help close deals or for second-stage companies looking to clear the hurdles of expanding, Hundt said. The program is not simply a financial incentive that all companies can get, he said.

The Business Development Program should be a backup tool to other non-incentive-based programs, such as the MEDC’s talent enhancements services and Pure Michigan Business Connect, Hundt added.

“That’s the big change in the model that we are now first and foremost looking at more asset-based economic gardening services before we look at this grant funding type of program,” Hundt said.

With these changes, both programs are more sustainable and are gaining flexibility with traditional lenders, MEDC program managers said.

For the current 2014 fiscal year, the MEDC wants to match the 30 or so projects that it helped with CRP funding in the last fiscal year. That’s up from fewer than 10 deals in the program’s first year, Martin said.

The MEDC’s Business Development Program supported 64 deals that helped companies expand or locate a new facility in Michigan, Hundt said. The goal is to hit roughly that same mark this fiscal year.

“We’re getting comfortable, but by no means have we closed our ear on suggestions to improve our process,” Martin said.

Nor has the MEDC turned its attention from securing more funding for its incentive programs.

The state’s 2014 budget outlined an additional $27.5 million to spur job creation and economic development, including $20 million for a new program that would provide creative debt financing solutions to assist banks and other lenders to extend capital in underserved communities.

With a limited pot of approximately $120 million in funds each fiscal year to split between both the CRP and Business Development programs, Martin said it’s important for the state to work with developers to really understand the dynamics of projects and their financials.

Without good project information, the process of attaining CRP funds can often bog down the project pipeline, Martin said. That’s an important consideration given that CRP funds are typically just one layer of incentives in a development market that often uses a handful of state and local programs to bring a single project to market.

“It’s kind of a balancing act,” Martin said. “We’ve been trying to get developers to work with us earlier in the process so we know what the needs are. When projects come in, depending on their size, getting support can also just be a timing issue.”

A few larger CRP deals are currently moving through the project pipeline, he said. With approximately $55 million to work with this fiscal year, Martin said he’s confident in the ability of the state and its local partners to unlock funding to kickstart some financially challenging projects.

“Our track record for successful projects keeps improving,” Martin said. “The more deals we do, the more comfortable we get with our partners in the private sector.”

Read 1458 times Last modified on Friday, 22 November 2013 14:04
Elijah Brumback

Staff Writer

ebrumback@mibiz.com

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