When it comes to economic development efforts in Michigan, practitioners and policymakers say it’s important to legislate the tools to attract and retain companies, not individual projects.
A package of bills introduced in the state Senate in early February would do just that, according to proponents. The bills are modeled after legislation that died in the House at the end of the last legislative session.
“We have to compete with surrounding states. Indiana is playing hardball and we’re sitting in the bleacher seats. That ends today,” Sen. Ken Horn, R-Frankenmuth, said during a Feb. 7 press conference where he reintroduced the legislation that would allow developers of large-scale projects to tap into new types of gap financing.
Horn said he hopes to have the legislation passed by this spring.
Specifically, the bills would allow the developers of brownfield projects that meet certain investment thresholds to keep a portion of the new tax revenue generated by the development and thus close the last existing financing gap for projects, according to supporters.
“The brownfield redevelopment tool is important because you have to have an attractive place for people to come to, work and live in,” Business Leaders for Michigan President and CEO Doug Rothwell told MiBiz. “The brownfield tool will help redevelop our cities and … help meet that cost gap that still exists in places like Michigan where the urban market still hasn’t quite come back compared to other places in the country.”
Rothwell said his organization has long advocated for greater business attraction incentives to make Michigan more competitive with surrounding states such as Indiana and Ohio. Horn’s legislation goes a long way toward meeting that goal, he said.
Rothwell and other economic developers want to make good policy and avoid one-off legislation to support major projects, as was the case in 2015 when lawmakers had to change state law to offer tax abatements for data centers like Las Vegas-based Switch Ltd., which is building in Gaines Township south of Grand Rapids.
Horn’s five-bill package is mostly unchanged from bills he introduced last fall that garnered the support of MI Thrive, a statewide coalition of business leaders. Detroit billionaire Dan Gilbert, one of the Motor City’s largest real estate developers, also has lobbied for the legislation.
As Crain’s Detroit Business reported prior to the reintroduction of the legislation, a key focus of the policy supporters this time around involves taking the focus off Gilbert and his development proposals and instead highlighting how the legislation could impact other communities around the state.
“This legislation will give Grand Rapids the tools to activate key (brownfield redevelopment) sites,” said Andy Johnston, vice president of government and corporate affairs at the Grand Rapids Area Chamber of Commerce.
The Grand Rapids Chamber and other West Michigan business groups support increasing state economic development incentives.
The MI Thrive website cites projects across the state that could get a boost from the legislation. They include plans to restore the Grand River through downtown Grand Rapids and the redevelopment of the contaminated Sappi Paper plant site on Muskegon Lake.
Importantly, supporters argue the private sector partners shoulder all financial risk with the projects, as the state — and independent auditors, in some cases — will provide financial oversight of projects qualifying for the enhanced tax increment financing (TIF).
Additionally, the legislation mandates that each approved project produce a net fiscal benefit to the state’s coffers.
“This legislation includes some of the most rigorous caps and protections ever put in place in economic development legislation in Michigan,” according to a statement from MI Thrive.
While supporters say the legislation would help make Michigan competitive with other business-friendly states, BLM’s Rothwell said another critical component remains for the legislature to consider.
“We think we need the ‘good jobs’ incentive to fill up the buildings that will be built in these places,” Rothwell said of a BLM-supported push for an additional tax incentive for businesses that bring large numbers of jobs to the state. “You really can’t have one without the other. You need both.”
Other economic development professionals agree.
“At this point as a state, we really don’t have the tools in our box that can compete with Texas, for instance, or the Carolinas,” said Birgit Klohs, president and CEO of The Right Place Inc.
The Grand Rapids-based economic development organization supports the BLM-backed legislation.
Klohs said the new incentives would give the state a strong economic development policy compared to what it’s had in the past.
“And it’s not a MEGA,” she said, referring to the defunct Michigan Economic Growth Authority, which granted tax credits to companies throughout much of the 2000s, an issue that’s still creating holes in the state budget.
Additionally, Rothwell notes Michigan’s “good jobs” incentive likely will not be as lucrative as what some of the neighboring states offer, but that’s somewhat by design.
“I’m not sure we have to be as lucrative,” he said. “If we can offer other advantages to locate here — a better infrastructure, better place, better community — then we can compensate for some of those things. But you have to get in the game.”