Editor's note: The Michigan Economic Development Corporation has been no stranger to controversy during this year, with perhaps the most exceptional case being its attempt to give a special tax deal to a company run by a convicted felon. This week, MichCapCon.com will be reviewing another MEDC project that has become mired in controversy.

In 2008, the newly built Pinnacle Race Course in Huron Township was eligible for more than $48 million in tax incentives over 30 years. The MEDC trumpeted this project as "the beginning of a world-class commercial and industrial complex and transportation hub that will mark the entry of western Wayne County into the global economy."

But today, county officials say the track has liens on it and has unpaid property taxes for 2009 and 2010. One horse racing organization says it has given more than $1 million to keep it operating.

Using a Freedom of Information Act request, MichCapCon.com has acquired more than 500 pages of documents that show a rare inside look at the policy and politics of how a state-subsidized economic development deal doesn't pan out as expected.

More in this series:

'Schizophrenic' State Planning

State Officials 'Stretch' the Law to Award Special Tax Deal to Troubled Business

Race Track Says Wayne County "Perfectly Comfortable" With Controversial Land Deal

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Prior to issuing millions of dollars in special tax favors to a race course, the state's flagship economic development corporation "sweetened" its offer to Post It Stables because of all the jobs the project was projected to create.

Job projections that companies submit to the Michigan Economic Development Corporation are seldom on target, causing one state senator to say the job creation numbers are "an absolute disconnect with reality."

Is the MEDC giving away taxpayers' dollars to companies based on bloated job estimates? The MEDC didn't respond to e-mails seeking comment.

An e-mail obtained involving the negotiations between the MEDC and Post It Stables for the Pinnacle Race Course in Huron Township shows that state officials may have believed the hype about job creation. That's problematic because a state Auditor General report and a Mackinac Center study found that only about 3 of 10 new jobs that companies project will be created actually come to fruition.

The Mackinac Center received more than 500 pages of documents involving the Pinnacle Race Course in a Freedom Of Information Act request. The track is eligible for up to $48 million in tax incentives over 30 years.

The documents in the FOIA give a rare glimpse into the inside workings of tax breaks many companies from Michigan are receiving. The e-mails show that the MEDC relies on the company to provide job projections.

On Aug. 12, 2008, MEDC official Mark Morante wrote: "Mr. Epolito, in consultation with the Leadership Team, has decided to sweeten our offer to Post-It in recognition of it being a really good tourism deal but that our tourism mega credit cannot accurately reflect all the jobs that the project will be directly creating."

James Epolito was then the CEO of the MEDC.

It's not clear how the deal was sweetened or how much money the track got via its job creation estimates. The MEDC considers tax information private and the amount of money the company received in tax credits was blocked out in the documents.

Pinnacle Race Course has struggled financially. Wayne County officials say it has liens against it. Huron Township officials say the track hasn't paid it taxes for all of 2009 and the summer of 2010. An official for a lobbying organization for horse racing said they have spent more than $1 million to keep the track open.

The MEDC press release stated the project would create 71 new jobs at the race track. Huron Township Supervisor Elke Doom said she thinks there may be as few as 30 full time jobs at the track from her observations. Track officials and the MEDC haven't released how many jobs projects create after the projections are trumpeted in press releases.

"This is really an expensive game used by the political class to create an illusion they are creating jobs," said Michael LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center.

LaFaive said the MEDC doesn't seem to understand incentives they have created for a company to inflate its job creations projections when dealing with an organization looking to subsidize it.

Whenever faced with the possibility of lower revenue, Michigan's public school establishment perennially cries that it's already been "cut to the bone." Many people find the claim plausible given the state's "lost decade," so they may be surprised to discover how many school districts have consistently cut costs in recent years:

Five.

That's how many districts actually cut real per-pupil spending for each of the seven years between 2000 and 2008 (the latest data available), and represents about one half of 1 percent of all schools. Specifically, they are Breckenridge, Godwin Heights, Lamphere, Lincoln Consolidated and Wayne-Westland districts.

What's more, Michigan has been a "leader" by this measure: Those five districts comprise 71 percent of districts nationwide that can legitimately make the same claim (the national total is seven).

The figures were uncovered by Andrew Coulson of the Cato Institute's Center for Educational Freedom, who compiled and analyzed spending data from the nation's 14,000 school districts as produced by the National Center for Education Statistics. He was responding to this statement by U.S. Secretary of Education Arne Duncan: "The vast majority of districts around the country have literally been cutting for five, six, seven years in a row."

In addition to those five Michigan districts, only 32 (3.6 percent) in the state cut spending in each of the five years leading up through 2008, and 128 (14.5 percent) cut real spending over the last three years for which data are available. By and large, the data show that public schools here have increased inflation-adjusted per-pupil spending in spite of a statewide economic depression.

Schools that spend more while crying poor aren't necessarily trying to deceive the public. The problem Coulson points out is that "cuts" are usually defined by school boards and officials as spending less than previously anticipated. This creates a situation where districts can spend more each year, but still claim to be making cuts.

In addition, skyrocketing labor costs - nearly all of which are built into budgets by union contracts or state mandates - mean that districts may spend more overall each year, but still be forced to cut programs and staff. In Michigan, costs for school employee health insurance and state-mandated pension payments since 2000 have ballooned by 49 and 25 percent, respectively.

Those rising labor costs are the real budget problem in Michigan schools, not insufficient revenue. Injecting more cash only delays the inevitable need to reform what drives them - primarily the power of school employee unions both in Lansing and in local districts.