State’s Economic Central Planning Agency Behaving Differently Under New Leadership

In the first year under Gov. Rick Snyder, the Michigan Economic Development Corp. hasn’t been acting like its old self, says Michael LaFaive, director of the Mackinac Center’s Morey Fiscal Policy Initiative. For the first time, the state’s flagship economic development program recently penalized one of the companies receiving specialized tax breaks because the recipient didn’t meet promised staffing requirements. The MEDC shortened the company’s term for how long the tax breaks could be claimed.

According to the Michigan Information & Research Service (www.MIRSNews.com), the MEDC reduced by one year how long Production Engineering, Inc. in Jackson County could maintain its status in a “virtually tax-free renaissance zone.”

MEDC spokeswoman Karla Campbell was quoted in MIRS as saying it was the “least punitive” action the MEDC could take.

But that isn’t the only practice the MEDC has changed lately.

In May, the MEDC announced that it was no longer going to quote “indirect jobs” as if they were successful accomplishments of the MEDC’s special tax status giveaways.  Theoretically, indirect jobs are jobs created in the local economy due to capital investment, operating expenses and payroll of a facility’s expansion. But the legitimacy of claiming jobs not directly created by the company receiving MEDC assistance has been questioned.

For example, former Gov. Jennifer Granholm wrote in the Huffington Post about 2,200-plus jobs A123 Systems would provide in 2010 in return for $383 million in special assistance. According to a MEDC briefing memo, only 844 of those jobs were “direct” jobs, or ones actually created at the facility. There were 1,373 “indirect” jobs for a total of 2,217 jobs in the state by 2024.

But “indirect” jobs are not tracked or verified. And the actual jobs that were supposed to be created directly at the facility were not close to what the MEDC press releases trumpeted.

The Mackinac Center released a study in August 2009 which found that only 28 percent of direct jobs that were reported by the MEDC were actually created. In April 2010, Michigan’s Auditor General did its own audit and found that only 28 percent of “direct” jobs announced actually came to fruition.

“Obviously, there’s a new sheriff in town,” wrote LaFaive in an e-mail. “We see it in their policies and we can measure it in access to information and returned phone calls.  The previous administration refused to return our telephone calls and they dragged their feet on every request for information. That said, the Michigan Economic Development Corp. is still entirely unnecessary and probably ineffective. It should be shut down and monies currently used by the organization redirected to broader tax relief.”