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Michigan Information & Research Service Inc.

SOAR Fund Could Collect Corporate, Income Tax Revenues To Be Replenished

06/10/22 03:05 PM By Team MIRS

(Source: MIRS.news, Published 06/09/2022) Michigan's new economic incentive account would be replenished by the corporate and income taxes generated by the business activities initially spurred by the seed money, under Senate legislation that was addressed in committee Thursday.


At Thursday's Senate Economic and Small Business Development Committee meeting, Chair Ken Horn (R-Frankenmuth) explained the legislation would offer a sustainable funding mechanism for Michigan's Strategic Outreach and Attraction Reserve (SOAR) Fund.


The fund was created in December 2021 with a $1 billion appropriation from extra dollars within Michigan's General Fund on the back of Ford's decision to build two battery plants in Kentucky – producing 5,000 jobs and a truck assembly plant in Tennessee, spawning 5,800 jobs.


Since being signed into law, the economic supplemental has been used to support a $7 billion electric vehicle investment from General Motors (GM) covering Lansing, Delta Township and Orion Township.


Recently, the SOAR fund also approved $100.8 million to smoothen out the transition for a $2 billion investment from Ford to advance productions at its Flat Rock, Dearborn and Wayne facilities – as well as setting up a new site in Monroe for customer service and packaging.


Maureen Krauss – the president of the Detroit Regional Project representing the city of Detroit and 11 surrounding counties – told the committee that the SOAR fund has been a game-changer.


"Not just in the GM and the Ford projects that have been announced, but in the conversations we are having with companies and influencers and site consultants," Krauss said. "We continue to get positive (responses), but we are looking at smart tools so that while we put our best foot forward in talent and supply chain, we also know that we have to be strategic in putting our entire package together."


Before announcing the Detroit Regional Project's support for the legislation, Krauss zoomed in on the importance of predictability, explaining how companies – whether they are home to one employee or 50,000 of them – "want the answers to the questions about their location and their total package to be consistent and predictable."


"The reason we are here today is to ensure that the SOAR program has adequate funding and support not only now, and not only until the next legislative session or the next election," Krauss said. "Companies do not make decisions to hire and make investments using this calendar. We need to align with their decision making process and the life of their project – so that we are both protected."


The package includes SB 981 by Horn, SB 982 by Sen. Wayne A. Schmidt (R-Traverse City) and SB 983 by Sen. Mark Huizenga (R-Walker). Under the bills, the captured corporate income taxes from a development site and the income taxes from qualified site workers would be returned to the SOAR fund "for future investments in job growth."


At the committee meeting, Lansing Mayor Andy Schor – whose own municipality was picked out by GM for 1,700 new jobs and $2.7 billion worth in investment – said the tax dollars to be directed into the SOAR fund "would not be there" without the account's creation last December.


"Local governments have been doing it for years – we capture taxes through local tax increment financing, and we are able to get projects done in our communities, which I am very proud of, but we can't do that at the scale that the state can," Schor said.


After the state's Senate and House approved a $666.1 million transfer from the SOAR fund for strategic site readiness ahead of the aforementioned GM investment, Senate Appropriations Chair Jim Stamas (R-Midland) was asked if the Legislature will consistently have to refill the fund.


David Guenthner, the senior strategist for state affairs at the Mackinac Center for Public Policy, the free market think tank, attended the committee meeting virtually to voice his organization's opposition.


He said based on calculations that future investments pay construction workers wages similar to those being paid for the full-time workers at the Lake Orion and Delta Township development sites for GM – "admittedly an optimistic scenario" – SOAR would earn up to $9.3 million in the initial year of the legislation.


"By 2030, when GM's deal with the state expires, the recaptured amount would reach somewhere between $81 million and $95.7 million," Guenthner said, underscoring that the bills divert state tax revenues typically used for classrooms, roads and public safety into "more preferential deals for decades."


Guenthner said large businesses aligned to benefit from the SOAR fund should remain expected to submit their request and go through the Legislature's appropriation process.

He illustrated these companies should state their case on why they should be selected for SOAR fund assistance, and "let the public see the terms and have a say, and defend your decision – whatever it is once you've made it."


Under SB 982 specifically, money exceeding $2.5 billion within the SOAR Fund at the end of a fiscal year would need to be placed into the General Fund as long as it was not distinctly assigned to the account outside of the proposed tax revenue system.