Embattled Agency in Charge of Special Tax Favors Snaps at Critics

The state's flagship job creation agency made a plea to the media and legislators to stop "unwarranted criticism" against it and said attacks on the Michigan Economic Development Corporation will undermine the state's efforts to attract businesses.

The MEDC's open letter comes after some recent embarrassing disclosures, including a tax credit approved for a convicted embezzler and a state audit that found the MEDC awarded tax credits to companies for jobs that weren't created.

Last week, Michigan Capitol Confidential revealed that a $38 million MEDC tax credit program in Ann Arbor for Google had produced just 224 direct jobs during its first two years. This is well off the pace of 1,000 projected for the first five years when the credit was awarded.

"They are just not used to a spotlight being shone on them," said State Rep. Tom McMillin, R-Rochester Hills. "Now that it is, they are running underneath the rocks."

McMillin estimates that the MEDC gave out $150 million in tax credits erroneously after a report by the Auditor General stated that there was no follow up on company job projections that often fell short of required triggers to get tax credits. That report found that some companies that received tax credits didn't qualify for them.

Although the MEDC open letter doesn't point out any specific critics, the Mackinac Center for Public Policy has been one of the most vocal critics of the MEDC's Michigan Economic Growth Authority tax program.

State Sen. Nancy Cassis, R-Novi, held a hearing Thursday on the effectiveness of the tax credits. Mackinac Center analysts were invited to testify. Michael Hicks, a Ball State University economist, testified for the Mackinac Center and noted that rather than giving out selective tax favors for a few companies, the state would have been better off pursuing a policy of creating broad-based tax relief available to all employers.

An August 2009 Mackinac Center study by Michael LaFaive and James Hohman found that for every 1,000 jobs companies projected they would create in MEGA deals, only about 294 were created on average.

LaFaive said even that 29 percent job creation isn't factual, because the MEDC can't prove those companies wouldn't have come to the state without the tax incentive.

Then last month, the Auditor General report verified the Mackinac Center study when it found about 28 percent of projected jobs from MEGA deals came to fruition.

LaFaive said the MEDC didn't put any facts to support its claims in Tuesday's open letter. The letter stated that the MEDC has "gained ground" in establishing new industries and that it has played a part in making the state "the national leaders in high-tech, high-skilled, cutting edge, research and development driven job creation."

"Here's an idea," LaFaive wrote in an e-mail. "If the MEDC leadership feels that criticism of the agency is unfair or wrong, it should at least try to repudiate with evidence of its own the hard data brought forth by those of us who question the agency's work."

Mackinac Center President Joe Lehman said the think tank's research isn't jeopardizing businesses coming to the state.

"The only jobs our research might jeopardize are those at MEDC headquarters," Lehman wrote in an e-mail.

A study by the Kalamazoo-based Upjohn Institute presents what many — including LaFaive — consider the most positive view of the MEGA program's effectiveness. It found that the program provided a net gain of 18,000 jobs spread out over 11 years, or about 1,636 jobs for each year.

By comparison, the state of Michigan had a net loss of 203,240 jobs in 2008 alone, the last complete year of data provided by the Bureau of Labor Statistics.