Corporate Subsidies Appear To Work Sometimes — Or Firm Was Coming Anyway

Fullerton Tool, a manufacturer of high-tech cutting tools for a variety of industries, announced, in 2014, a plan to develop a new facility in Thomas Township, outside Saginaw. The plan called for the company to invest $8 million and create 58 new jobs.

In November of that year, the Michigan Strategic Fund said it would support the project with a $430,000 grant through the Michigan Business Development Program.

“Fullerton is an important employer in Saginaw County, and its investment means Michigan residents will get good jobs that could have gone to other states,” said Michael Finney, CEO of the Michigan Economic Development Corporation.

Fullerton did develop the new 35,000 square foot facility. But it failed to meet its benchmarks for new jobs, which were part of its agreement with the MSF. In the agency’s 2016 annual report, a footnote says “the company has defaulted on its agreement and is currently in a cure period.” The company had received $130,000 of its grant by that time.

The 2017 and 2018 annual reports list the Fullerton agreement as “terminated,” with the creation of no new, permanent jobs. The reports do not list any repayments of the grant funds, either. An MEDC spokesman declined to provide additional information about what happened with Fullerton absent a request under the Freedom of Information Act.

But Fullerton’s president, Patrick Curry, defended the deal in a telephone interview.

The MEDC’s assistance “was a success,” he said. “It helped us to launch the expansion.”

“The only thing we didn’t do is hire at the pace” required under the agreement. There are 48 employees at the new facility currently, Curry said. “We’re getting filled up and looking to expand again,” Curry said.

“This is actually a great success story. (The MEDC) has been really good to work with.”

Some economists are skeptical of the claim that corporate subsidies and incentives make a difference in the decisions businesses make when they select a site. The abstract of a 2018 study by Timothy J. Bartik at the W.E. Upjohn Institute described the skepticism this way: “In other words, for at least 75 percent of incented firms, the firm would have made a similar decision location/expansion/retention decision without the incentive.”