Oct. 5, 2022
A state fund meant to attract large-scale economic investment is set to receive a boost. That’s after Michigan Gov. Gretchen Whitmer signed a billion-dollar spending bill into law Tuesday.
The new law sets aside hundreds of millions of dollars for possible business incentives and preparing sites for new projects.
“The bipartisan legislation will help us grow, attract, and retain businesses in Michigan, ensuring we can lead the future of mobility and electrification and bring supply chains of chips and batteries home to Michigan,” Whitmer said in a press release.
Overall, the deal puts $846 million toward the Strategic Outreach and Attraction Reserve (SOAR). It aims to keep Michigan competitive with other states also competing for major developments.
So far, the state says it’s been used to lure billion-dollar projects from companies like General Motors and Ford Motor Company.
Brad Williams is with the Detroit Regional Chamber. He said other states have been ahead of the curve when it comes to fighting for new development.
“Michigan’s really been behind the eight ball, and so the creation of the SOAR program last year and now the Legislature stepping up and re-seeding the fund is putting Michigan at a strategic advantage going forward,” Williams said.
But not everyone is behind the incentives program.
James Hohman is the director of fiscal policy with the Mackinac Center for Public Policy. He said the approach of giving companies money to locate here doesn’t work.
“You don’t need to offer special favors to select companies to land jobs. And, in fact, the argument that the state needs to have its own economically destructive programs in order to compete with other states’ economically destructive programs is problematic. I mean, I think our mothers might mention something about bridges,” Hohman said.
He argued the state has told companies “no” to expensive incentives in the past without facing the consequences of a company leaving. Meanwhile, he said, racing with other states to create the biggest welcome package just creates more room for companies to try to get more money out of the state.
“Behind the calculus of asking for special favors is the company’s estimation over whether lawmakers are going to say yes,” Hohman said. “They’re not going to ask for hundreds of millions of taxpayer dollars if they think lawmakers are going to say no.”
A selling point of programs like SOAR has been claims that it pays for itself through attracting industry, investment, and jobs for communities and their surrounding areas.
Hohman disputed that, saying programs like SOAR end up costing states more money than they bring in because of the opportunity-cost associated with where else the state could have invested.
Still, Williams said the state can take an “all-of-the-above” approach. That would involve spending money on infrastructure priorities like roads and bridges while also keeping the state competitive in terms of its offers.
“We can’t focus on just one thing. We have to look at livability, but we also have to look at issues surrounding our business climate if we really want to be successful and grow,” Williams said.
He added he’d like to see the state find more permanent funding mechanisms for SOAR so it wouldn’t have to rely on continued appropriations from the Legislature, like the one signed Tuesday.