(Source: MIRS.news, Published 06/09/23) Although Democrats aim to make wide-reaching investments in "Projects, People and Places" as part of their economic strategy, one might wonder, what good is an economic incentive if there's expected to be 83,000 fewer Americans moving to Michigan in the future?
Now at the year's halfway point of June, lawmakers on the Senate and House Appropriations Committees have approved deploying $585 million in performance-based corporate incentives to be distributed by the Michigan Economic and Development Corporation (MEDC).
From January 2019 through September 2022 specifically, the MEDC oversaw the approval of more than $641.9 million in placemaking funding.
As Gov. Gretchen Whitmer's administration and the MEDC specifically look to compete for substantial investments from the semiconductor and electric vehicle industries, Michigan's economic development corporation has calculated that for every 100 direct jobs added to the state's "automotive electrical equipment industry," the population could change by 350.
The MEDC has additionally estimated that for every 100 direct jobs added to the semiconductor industry in Michigan, the population could change by 150.
However, during the 2023 Mackinac Policy Conference, which took place from May 30 to June 2, MEDC Chief Executive Officer Quentin Messer Jr. said an incentive for a particular project "will not necessarily relate (to) an immediate, sustainable population" boost.
"We need to look at, in 27 years from now, has Michigan grown in a way that outpaces the national average? I would argue we are in a very strong position to do that," Messer said to MIRS. "Frequently, what we're seeing companies doing (is) coming, making decisions today that it will take four or five years to fully ramp up full operations. Now, in the interim, you're going to have thousands of construction jobs, but you're not going to see the full number of people who are going to work…"
Although the state's Strategic Outreach and Attraction Reserve (SOAR) Fund – financed by the General Fund and designed for attracting large-scale corporate developments – has been linked to luring $16 billion in projects with 16,000 projected job creations, Messer said it probably won't be until 2040 when the awards will be linked to new Michiganders.
"You've got births and deaths, you've got other things … but we certainly know what happens when companies leave," Messer said. "What we're trying to do is get in front of it now, win in the sectors that we need."
Ultimately, when asked if economic incentives – like the aforementioned $585 million provided through the SOAR Fund this year – are a waste of money, Messer quickly said, "Hell no."
Even so, despite the latest stream of actions to compete and incentivize, the Citizens Research Council (CRC) of Michigan and the Ann Arbor-based Altarum Institute have started releasing a report finding that from 2025 to 2030, starting two years from now, the presence of Americans moving to Michigan domestically will fall by 72,000. From 2045 to 2050, the report estimated there will be 83,000 fewer Americans putting down roots in Michigan.
When asked if business incentives are a waste of money if Michigan is not attracting more residents in return, Brad Williams, the Detroit Regional Chamber's vice president of government relations, said it's a little more complicated than just that.
"Sometimes these incentives are laying the groundwork, making infrastructure that is going to allow for population growth," Williams said to MIRS. "We need to look at everything with a critical eye, whether it's tax incentives or government spending, we always need to make sure we're getting a good return on investment, but we can't only consider one metric to see if that's a return for investment."
For example, when it comes to state spending to support battery manufacturing developments for electric vehicles, like the approximately $800 million in approved legislative appropriations to back Ford Motor Company's incoming "BlueOval" battery park, Williams said he honestly couldn't speak to how much population growth Michigan will get in return.
However, Williams said the developments will "allow us to continue to do automotive manufacturing in this state going forward."
“If those battery plants were located in Tennessee or Alabama, the plants that we have now that are doing internal combustion engines, as we phase out of an internal combustion economy, those plants become … less and less needed," he said. "Having those battery plants in place keeps those plants viable going forward."
Nonetheless, he did say when the SOAR Fund was created in December 2021, it was intended to be the cherry on top of the ice cream sundae. Because of deals coming in so quickly, "it has had to become the whole sundae."
He said while it won't be easy, developing things like a state-funded research and development tax credit could be part of returning the SOAR Fund to what was initially intended.
"Those are the types of incentives that are in existence in other states that can make it, so the SOAR Fund isn't a $700 million check every time we have a new project coming into the state," Williams said. "There is some gray area here, but there are some concrete steps we know we can take."
