Creating the Strategic Outreach and Attraction Reserve Fund gave Michigan a new tool to lure major economic development projects that business advocates say has quickly altered the national perception about the state.
Legislators recently replenished funding for the SOAR Fund, which has enabled Michigan to compete with other states for large corporate investments in jobs and facilities. The fund was instrumental in securing new electric vehicle and battery plants.
“With the SOAR Fund, Michigan is better positioned to attract some of these large projects that more recently we have seen go to other states,” said Wendy Block, vice president of business advocacy at the Michigan Chamber of Commerce. “We feel we need to be more competitive for these projects, many of which are creating those next-generation jobs for our state and even the nation. Whether it’s getting more competitive on EV (electric vehicles), batteries or in other areas, Michigan really needs to make some strategic investments in positioning itself for the future.”
The state Legislature and Gov. Gretchen Whitmer in late 2021 created the SOAR Fund with a $1.1 billion appropriation.
State lawmakers two weeks ago steered another $846.1 million into the fund. The new funding was part of a $1.11 billion supplemental spending bill for the state’s current and new fiscal years that was worked out between legislators and Whitmer, who signed the legislation on Oct. 4.
Of the $846.1 million that legislators appropriated, $613 million was new funding and $233 million remained over from the initial allocation last year that would have reverted to the state’s general fund unless re-authorized.
The new money for the SOAR Fund directs $250 million to the Michigan Strategic Site Readiness Program. The funding includes $25 million for grants to regional and local economic development organizations, $100 million for improving industrial project sites when a potential user has not been identified, $75 million for the assessment and development of so-called “mega-strategic sites,” and $50 million for improving sites for a planned project by a specific user.
Sending a signal
Replenishing funding for SOAR sends a “signal to corporations across the country and around the world that Michigan is committed to supporting economic development,” said Jeff Donofrio, president and CEO of Business Leaders for Michigan, a roundtable of corporate executives and university presidents.
“The message is the same whether you are in California or Korea: Michigan is ready to compete on the world stage for world-class projects,” Donofrio said. “We have strengthened our economic development tool kit, further invested in homegrown talent and are actively working to create development sites and strategies across the state. This is an invitation to corporations in manufacturing, technology and R&D to join a state with a proud manufacturing legacy and the intelligence and experience necessary to support 21st-century success.”
Since its formation, the SOAR Fund has supported projects by General Motors Co. and Ford Motor Co. for electric vehicle manufacturing in the state, and most recently battery plants in Big Rapids and Wayne County and a large agribusiness project in Muskegon and Ottawa counties.
The Michigan Strategic Fund Board last week approved support for Gotion Inc.’s planned $2.36 billion investment for a battery plant near Big Rapids that promises to create up to 2,350 new jobs. In Wayne County’s Van Buren Township, Novi-based Our Next Energy Inc. plans to invest $1.6 billion on a new manufacturing facility to produce battery packs for vehicles that will create more than 2,100 jobs.
In West Michigan, the MSF Board approved a $60 million grant from the SOAR Fund to support a wastewater improvement project to accommodate $187 million in capital investments by five companies that will create 145 new jobs in Coopersville and Ravenna. The five companies — Fairlife LLC, Continental Dairy LLC, DeVries Meats Inc., Applegate Dairy LLC, and Swanson Pickle Co. — collectively now employ nearly 560 people.
The SOAR fund gave the Michigan Economic Development Corp. a significant new tool that was long lacking to compete with other states for major projects, said MEDC President and CEO Quentin Messer, Jr.
Lacking assistance from SOAR, each of the battery plant projects would not have happened in Michigan, according to Messer. The MEDC previously only had a program to provide business development grants that was capped at $10 million per opportunity, a size “that would not have been sufficient for us to land these projects,” given their size and capital intensity, he said.
“SOAR signaled an ability for Team Michigan to come together and play as a team in a bipartisan way to deliver results across both sides of the state, east and west, and none of these deals would have been consummated or on the precipice of being consummated without the presence of the SOAR Fund,” Messer said.
The legislative action to create SOAR followed Ford’s announcement in September 2021 that it was joining partner SK Innovation Co. to invest $11.4 billion and create 11,000 jobs in Tennessee and Kentucky to build facilities that manufacture both electric vehicles and batteries.
The Ford project represented a “bit of a wake-up call” to Michigan to better compete with other states to attract major projects, especially as the homegrown automotive industry electrifies, said Mike Johnston, executive vice president of government affairs at the Michigan Manufacturers Association.
In an era when Michigan has to compete nationally and globally for business investments and jobs, including with states with lower labor costs, the SOAR Fund has clearly begun to make a difference, Johnston said. As the Ford project in Tennessee and Kentucky showed, other states will gladly offer lucrative incentive packages to lure automakers and their suppliers as the industry electrifies, he said.
Creating the SOAR Fund signaled to other states that “Michigan is in the game for transformational investments” after a “zig-zaggy history on doing economic development incentives,” including eliminating most incentives 2011 early in then-Gov. Rick Snyder’s administration, Johnston said.
“We are the center of the automotive industry in America, and everybody wants what we have,” he said. “Michigan, being the center of the internal combustion engine, has to make that transition to electric vehicles to maintain the strength of our economy and the strength of the auto industry. So, it’s critical that Michigan plays actively for those kinds of transformational projects, those kinds of investments, if we’re going to protect Michigan’s economic future.”
In talking with colleagues at manufacturing trade associations in other states, “They all say, ‘OK. Michigan’s back in the game,’” Johnston said. “And I think that makes them a little nervous.”
Likewise, Block at the Michigan Chamber said forming the SOAR Fund “definitely put us on the map” nationally in competing for major projects.
“There are other states noticing that we’re doing this now, too, and we’re doubling down,” she said. “We’re proving to others that we’re not just going to sit on our hands and watch these companies and jobs grow elsewhere.”
One of the key differences between SOAR and past state incentives is the transparency and legislative oversight written into last year’s enabling legislation. The state House and Senate retain the final authority to appropriate funding for projects that the Michigan Strategic Fund Board approves.
As lawmakers and the governor this month appropriated more money for the SOAR Fund, separate legislation advanced in Lansing that would provide a permanent funding source.
Senate Bills 981-983 that passed a Senate committee on Sept. 21 would capture and steer new corporate and income tax revenues generated through SOAR-supported projects to the fund.
The Michigan Chamber testified in support of the legislation, sponsored by Sen. Ken Horn, R-Frankenmuth.
“That’s another way to communicate to the world, ‘Look, we’re going to be invested in the future because we have a sustainable funding source going forward,’” Johnston said. “Let’s capture the tax off those jobs and replenish the fund so we can continue to build more jobs of the future.”
Speaking last week in Grand Rapids after the Michigan Strategic Fund Board approved the latest projects, Whitmer said the Legislature may have to consider appropriating further funding for the SOAR Fund to support “a lot of the opportunities that are in front of us.”
“We are going to have to continue that conversation,” she said. “We are going to have a long-term strategy about how we maintain that ability to compete.”