State Business Subsidy Recipients Get, Keep Taxpayer Dollars

The Michigan Business Development Program is the state government’s primary vehicle for delivering incentives to select businesses, providing grants, loans and other aid for what it calls “highly competitive (expansion) projects.”

From its inception in 2011 through May 2017, the program awarded nearly $400 million in taxpayer funds to several hundred prospective recipients, according to a January 2019 report from the state Office of the Auditor General. It also disbursed $163.8 million of that total.

The awards, often announced with some fanfare, are designated as performance grants, with recipients contractually obligated to meet benchmarks for creating jobs and making investments. If a grant recipient defaults on an agreement, the state can demand that it repay the funds it has received.

But the Auditor General says that the Michigan Strategic Fund, which oversees the program, is at risk of giving money to businesses that have not met the benchmarks — and has limited its ability to recover money from them.

Using annual reports the Michigan Strategic Fund has submitted to the Legislature, Michigan Capitol Confidential reviewed 240 projects approved before October 2015, and their status through 2018. Many of them languished or were quietly concluded without having met their stated goals and with little public notice.

Sixty-five (27%) failed to create a net increase in permanent jobs. Almost one-fourth (56, or 23%) were terminated prematurely, mostly for failing to meet benchmarks. Twenty-eight of the ones that reported no net new jobs had received at least a portion of their initial grant. Most had made only partial repayments, or none at all.

From published reports, state records available online and interviews, Michigan Capitol Confidential pieced together the history of some of the projects which failed to meet expectations. The Michigan Economic Development Corporation, which oversees both the development program and the strategic fund, declined to provide additional information about the projects unless it received a formal Freedom of Information Act request.

Editor's note: The headline was changed on this story.