Maria Tyszkiewicz, Fiscal Analyst
Customer Service and Small Business Services
Michigan Business Development
National Business Development
International Business Development
Michigan Business Ombudsman
Strategic Fund Programs
Michigan Renaissance Fund
Community Development Block Grants
Tax Abatement Programs
Tables and Charts:
FIGURE 1 - Michigan Jobs Commission Economic Development Agencies Flow Chart
FIGURE 2 - Michigan Jobs Commission Account Managers
FIGURE 3 - Michigan Renaissance Zones
TABLE 1 - Status of
the Business and Industrial Development Corporations (BIDCO)
This paper is a review of the economic development process and programs in the Michigan Jobs Commission. This paper does not make any assumptions or draw any conclusions about the merits of these programs, but merely provides a description of the programs that are available to local communities and private businesses in Michigan. The paper reviews the structure of the economic development agencies within the department and provides a description of the financial incentives that are available, whether through a direct grant, a loan, or a tax abatement.
The Michigan Jobs Commission (MJC) was first created as a temporary autonomous agency overseen by a 20-member Commission. Executive Order 1993-2 located the Commission within the Executive Office for a two-year term as allowed under Article V, Section 4 of the Constitution of the State of Michigan of 1963. A series of subsequent Executive Orders transferred the responsibility for administering the job training and economic development programs from the Departments of Commerce, Labor, Corrections, Natural Resources, and the Family Independence Agency (formally known as the Department of Social Services), Education, and the Michigan Employment Security Agency.
In 1995, after the two-year term had expired, the MJC was given departmental status through Executive Order 1994-26, and all remaining job training and economic development programs in other departments were transferred into the MJC. In all, 50 Federally and State-funded economic development and job training programs have been transferred to and combined in this department.
The goal of the Michigan Jobs Commission, as outlined by Executive Order 1993-2, is "..to encourage economic expansion by maximizing job creation and job retention". The department works to achieve this goal through a number of job training and economic development programs. Job training services provided by the department range from specialized programs for the disabled to general skill upgrading, and comprise close to three quarters of the department's annual gross appropriation. These programs also supplement economic development programs when used as a tool to attract new or expanding businesses. Economic development programs consist primarily of financial assistance or tax incentive programs offered by the State to various local units of government or private businesses. The majority of these programs were transferred from the former Department of Commerce and have been in existence since the mid-1980s.
This paper reviews the economic development programs within the department. The first half of the paper discusses the role of the department, the program responsibilities of the staff, and the structure of the agencies within the department. The second half of the paper describes the different financial programs and tax abatement programs that are administered by the department and make up a major portion of the State's economic development effort.
The administrative support for the economic development programs in the MJC serve as the sales and marketing divisions for the financial programs. Department employees meet with business representatives, assess their needs, and in some cases determine eligibility for financial assistance. Within the department's budget, administrative support for these programs is funded under the Economic and Retention appropriation unit, which has an annual gross appropriation of $18.2 million for fiscal year (FY) 1998-99, of which $16 million is General Fund/General Purpose revenue. The unit is broken down into two line items. The first, the Job Creation Services line item, has a $14 million appropriation for FY 1998-99, which includes funding for four different agencies: Customer Assistance and Small Business Services; Michigan Business Development; and the Office of the Michigan Business Ombudsman. The second, the International and National Business Development line item, has a $4.2 million appropriation for FY 1998-99, which includes funding for two agencies: National Business Development; and International Business Development.
Figure 1 is a flow chart showing how the different divisions within this unit interact with one another. The role of each division is described below.
Assistance and Small Business Services:
The Customer Assistance and Small Business Services Bureau has a dual role in the Economic Development portion of the MJC. One role is to act as the intake unit for all inquiries regarding economic and workforce development issues, and the other is to assist the small business community in the State. The division is broken into two offices, the Customer Assistance Office and the Small Business Resource Office.
Customer Assistance - This office is often the first point of contact a business representative will have with the MJC. The office acts as a clearinghouse by identifying an individual's or business's needs and making the appropriate referral to the servicing units within the department, or to another State agency if applicable. This office staffs the MJC phone bank and fields all calls placed to the department's 800 number. This number appears on publications distributed by the department. These staff also provide responses to written requests for information. In 1997 the office fielded a total of 27,224 calls. The majority of these calls, approximately 43.7%, related to starting a business. Other types of inquiries included questions regarding workforce development, regulatory issues, and unemployment issues.
Customer Assistance staff also provide support to the Michigan Business Roundtable program. There are 10 Business Roundtables which are organized around specific industries previously identified by a consultant to be the key industry sectors in the State. The targeted industries include: Plastics, Automotive, Research Development and Engineering, Information Technologies, Forestry, Office Furniture, Printing and Publishing, Machine Tool, and Construction, as well as a Distribution Roundtable, which is still in development. The purpose of the roundtables is to bring together major organizations associated with a key industry for discussion on industry-wide problems. These groups are industry led and staff work to facilitate the ideas proposed by the members. Staff provide administrative support services to the groups and work to secure grants. The department funds research studies on topics of interest to the industry members. Some examples of these studies include an automotive industry communications study, a study on the availability of forestable land in the State in comparison to other states, and a competitiveness targeted industry study.
Small Business Resources - This office administers two programs that are targeted at small, minority, women, and disabled business owners. The first program, the Small Business Group, works to create a network between small and minority business advocacy organizations, small businesses, and the Michigan Jobs Commission. The five staff members are responsible for meeting with these various organizations or interest groups in order to collect information on specific services offered by these organizations. The office then makes a connection between a business owner and an organization serving similar businesses or having an expertise in a certain area.
As an expansion of the networking services, the department created the Small Business Providers Forum in 1997. The Forum, which is staffed by Small Business Group employees, is made up of 20 organizations that represent and/or service small or minority-owned businesses in the State. One member from each organization attends the quarterly Forum meetings, which provide the opportunity for information sharing on services available, concerns of members, etc. Some examples of groups participating in the Forum include: the Council of Minority Business Organizations, the Michigan Association of Certified Public Accountants, the Michigan Chamber of Commerce, and the National Association of Women Business Owners.
The second program administered by the Small Business Resources Office is the Michigan Business Strategies 2000. This program provides management consulting services to small businesses through private sector management and certified public accountant consulting firms at a reduced rate. Eligible businesses must: have annual sales of at least $500,000; be located in a Renaissance Zone, Enterprise Zone, or Enterprise Community; and be able to demonstrate substantial future growth, or be able to show a viable need to upgrade infrastructure and/or equipment. Interested businesses submit applications for funding and support under this program; the applications are reviewed and approved based on the criteria listed above. The MJC currently contracts with seven privately owned consulting firms statewide to provide these services. The program is funded with both public and private funding. The department allocates General Fund/General Purpose funding which serves as the match for private funding offered by business owners.
This bureau acts as the department's sales and marketing division for all in-State companies. This is the major retention and expansion office in the MJC. The staff in this bureau are referred to as account managers and are charged with making the information regarding expansion and retention services available to local governments and Michigan businesses. Staff in this unit assess the needs of in-State businesses and assign the task of meeting those needs to a program specialist in the Account Management Services office housed in the Michigan Business Ombudsman Office.
There are 24 account managers who are responsible for meeting with business owners located within an assigned region to promote the State's economic development programs and to inquire about problems or questions that a business owner may have. Each account manager is assigned a specific geographic region as shown in Figure 2, and is charged with making a minimum of 16 retention calls to businesses located within his or her region each month. Account managers also respond to inquiries placed with the Customer Assistance office from businesses within their respective regions. The retention call program focuses on businesses with 100 or more employees, though inquiries are made by companies of all sizes. Account managers identify businesses that could benefit from an existing State program, and then refer a business representative to the Account Management Services staff within the Office of the Ombudsman unit for assistance.
Some examples of the types of referrals include a business interested in estimates on operating cost, funding or information regarding workforce recruitment and training, workers' compensation information, tax analysis, technical assistance on site location, tax abatement information and assistance with tax abatement applications, and financing for infrastructure improvement. In 1997, 4,089 businesses were visited by an account manager; 45% of the businesses had 100 or more employees and 63% requested services from the Michigan Jobs Commission.
These managers also work cooperatively with local economic development agencies and provide information on new programs or incentives that are available from the State. In addition to the regional account management teams, an individual on the account management staff serves as the statewide account manager and by providing statewide site searches, works with businesses interested in relocating to Michigan or expanding.
This office is the sales and marketing division for Michigan to out-of-State companies and is primarily responsible for attracting businesses to the State. Staff meet with out-of-State companies to promote Michigan and to inform business representatives of the programs available in Michigan to new or expanding businesses. These programs are similar to those listed above for in-State companies and include site location assistance, coordination of environmental permitting, tax abatement information, job training information, and tax and business cost analysis. Prospective businesses are referred to either an Account Manager or the Account Management Services staff.
In 1997, staff in this office, visited 294 companies of which 91% were "targeted industry" companies (as identified by the business consultant for the Business Roundtables, described above under "Customer Assistance"). Of these 294 contacts, 13 resulted in locations in Michigan. National Business Development staff also attend investment seminars and trade shows, and respond to inquiries, in addition to calling on out-of-State companies.
This office administers the two international programs. One program promotes the export of Michigan products and the other attracts investments into Michigan from foreign-based companies. First, the export program, targets firms that are already exporting or are "export ready". Export assistance services include the coordination of services with economic developers and trade associations, referrals to public/private marketing organizations throughout the State, agent, importer and distributer search and qualification, market surveys, and advertising opportunities through the foreign offices. Additional responsibilities of the staff include organizing trade shows, conducting trade missions, and compiling and producing export directories.
The second program, the Investment Attraction Program, is the international marketing program aimed at increasing foreign investment in Michigan for either direct or joint venture investment. Michigan companies are also assisted in entering into joint ventures abroad. This program works directly through the seven overseas offices. These offices are located in Toronto, Canada; Brussels, Belgium; Hong Kong; Tokyo, Japan; Mexico City, Mexico; Shanghai, Peoples Republic of China; and Johannesburg, South Africa. In 1997, staff in this office visited 658 companies, 75% of which were targeted industry companies. Of the 658 contacts, 30 resulted in Michigan locations.
This office administers two economic development programs, the Account Management Services program and the Business and Clean Air Ombudsman program. The first, Account Management Services, addresses the issues identified by businesses, the account managers, National Business Development staff, and International Businesses Development staff. Account Management Services staff serve as experts on the various economic development programs offered by the State. For example, one member of the staff may be an expert on the Renaissance Zones while another on the Community Development Block Grant (CDBG) program or job training programs. Account Management Services staff are assigned tasks based on the assessment made by attraction and retention staff and their area of expertise. The Account Management Services staff work directly with a business to provide specific services such as: working with the business to complete the operating cost estimates; verifying eligibility for tax abatements and assisting with applications; providing environmental technical assistance; or providing industry and market information. The staff may work independently or as a team depending on the needs of the business.
In 1997, the most requests by in-State companies were for workforce recruitment screening, and job training grant dollars. Of those companies that were referred to in the monthly economic development report as successful locations, 54% received CDBG assistance and 36% received job training assistance.
The Business and Clean Air Ombudsman program provides liaison services between business or industry and State agencies. The staff make recommendations to department directors and the Governor's office on policy issues by determining what the effect of a policy or promulgated rule may have on the business climate. Staff work to implement suggestions made by the private sector regarding government service or regulations, while also tracking other agencies' rules and regulations and encouraging that the adopted version be "user-friendly". Assistance is also provided in expediting the approval of forms or applications required of Michigan businesses operating within the State. Complaints made by businesses against the regulatory agencies - the Departments of Consumer and Industry Services and Environmental Quality - are investigated by this staff. In May 1998 the responsibilities of the Clean Air Ombudsman were combined with those of the Business Ombudsman.
Many of the programs that are promoted to in- and out-of-State companies provide financial assistance either to a local community or directly to a business. Selection and screening for eligibility are often done by the economic development staff as outlined in the process above. There are two major sources of funding for these programs, the Michigan Renaissance/Strategic Fund and the Community Development Block Grant program.
Most of the financial assistance provided to businesses or communities is through the Michigan Renaissance Fund (MRF), formerly known as the Michigan Strategic Fund. This Fund is an off-budget fund, meaning that the enabling legislation creating the Fund specified that the oversight authority was granted to the Governor-appointed board as opposed to the Legislature; therefore, any grants or loans provided out of the Fund are not appropriated and do not require legislative approval. The Strategic/Renaissance Fund is currently funded through Indian Casino gaming revenue based on a compact between the Governor and seven of the Michigan Indian tribes. The compact provided the Indian tribes with an exclusive right to gaming in Michigan for which the tribes would pay the State 8% of the revenues generated from electronic gaming each year. With the passage in 1996 of Proposal E, which allowed three privately run casinos to be built in Detroit, the tribes will no longer be liable for this 8% as Proposal E eliminated the Indian tribes' exclusive right to gaming in the State. In FY 1996-97 the revenue from Indian gaming totaled approximately $34.3 million.
According to the Strategic Fund FY 1997 Annual Report, in 1996 the focus of the Fund was shifted from providing capital for high-risk projects to providing funding to municipalities for infrastructure improvements and site development. Strategic Fund programs are now components of the MRF which administers these and a number of smaller funds and programs. The types of funds or financial assistance programs under the MRFare described below.
Strategic Fund Programs:
Capital Access Program - This program supports banking institutions that make high-risk loans to businesses or entrepreneurs. Participating banks are provided with a reserve account that is controlled by the Strategic Fund, but earmarked in a bank's name. This account is used to cover the losses on a portfolio of loans instead of guaranteeing each individual loan. Payments are made by the Strategic Fund, the borrower, and the bank into the reserve each time a loan is made under this program. According to the Strategic Fund FY 1997 Annual Report, this program made 935 new loans totaling $55 million, the average loan being $59,000. The Strategic Fund contributed $2,107,289, with an average cost per loan to the Fund of $2,251. The Board of the Strategic Fund has approved an additional $5 million to fund the program through September 2000.
and Industrial Development Corporation (BIDCO) - BIDCOs are
private financial institutions that provide financing to small and medium-sized
businesses that are unable to obtain loans from conventional banks or venture
capital investments. The BIDCOs are funded with public investments as well
as investments from the Strategic Fund. Any returns from these investments
are shared by the investors. The BIDCOs are licensed and regulated by the
Department of Consumer and Industry Services, Financial Institutions Bureau
as a separate type of financial institution. The Strategic Fund had investment
in 11 BIDCOs, eight standard, and three specialty BIDCOs (meaning one minority
BIDCO and two rural BIDCOs), but in 1996 the eight standard BIDCOs consolidated
to form the five existing standard BIDCOs. The rural BIDCOs, which are
located in Marquette and Sault Ste. Marie, focus on businesses located
in areas that are considered rural and are economically distressed. Through
FY 1996-97 the Strategic Fund had invested $24.5 million in these institutions,
which have in turn invested $116.4 million in 229 small businesses. In
FY 1996-97, income from BIDCO investment totaled $1,103,657, which was
made up of both dividends paid and interest income. Table 1 below
shows how these BIDCOs have performed.
of the Business and Industrial
Development Corporations (BIDCOs)
|BIDCO||MSF Investment||FY1996-97 Dividend and Interest Income|
|Horizon (Formerly named Jackson)||$1,466,660||$17,600|
|Michigan (Formerly named Northern Michigan)||$3,000,000|
Industrial Development Revenue Bond Program (IDRB) - This program provides below-market rate financing for manufacturing and other firms locating or expanding in Michigan. The bonds are issued by the MSF on behalf of the borrower and are classified as tax-exempt revenue bonds, which means that any interest income earned on a bond that is issued by a governmental entity for a project that has demonstrated that it is for a good public purpose, is exempt from Federal and State income taxes. The financing is used for capital improvements including new building construction, rehabilitation, land acquisition, and the purchase of machinery or equipment. In FY 1996-97 the MSF issued $293 million in IDRBs for 78 projects. In addition, the MSF began issuing taxable bonds in 1994 as a pilot project but has continued to issue them every year since. In FY 1995-96 the MSF issued $30 million in taxable bonds for six companies and in FY 1996-97 the MSF issued $19 million in taxable bonds for two companies.
Michigan Certified Development Corporation (MCDC) - This is a nonprofit corporation certified by the Federal Small Business Administration under the SBA 504 loan program. This program provides long-term fixed-rate loans to small and medium-sized businesses for acquisition or construction of fixed assets. Applications are reviewed and eligible recipients are identified by the MCDC. Financing is provided by private lenders (50% of project costs) and the MCDC (40% of the project costs). The MCDC charges an administrative fee to all applicants and uses this revenue to offset any administrative costs associated with running this program. Department staff provide administrative support to the MCDC and are reimbursed for their services. In FY 1996-97, 20 loans were approved by the MCDC for a total of $9.8 million.
Technology Deployment and Development - In 1995 the MSF changed the type of research and technology support it would provide. Initially, the Fund had provided ongoing support to various technology centers across the State. Since 1995, however, it has directed these resources toward more short-term financial support for technology efforts that directly relate to job creation. A consultant was hired to assist in the development of this new strategy and recommended that the MSF contract with an outside company, Michigan Technologies, Inc., to administer the research and technology programs. The company is overseen by a 15-member board, which is chaired by the Director of the Michigan Jobs Commission. In FY 1996-97 the Fund provided a total of $14,370,446 in grants to 13 different centers for technology-related projects.
Other Grants - The MSF has also provided grant or loan funding for projects that may not fall into any of the above categories. One example is the $55 million grant that was provided in September 1995 to the Downtown Development Authority (DDA) of Detroit for the new Tiger Stadium. The funding is to be used for infrastructure improvements including land acquisition, infrastructure, and soil clean-up. According to the 1997 Annual Report, $25 million has been paid on the grant to the DDA.
Under the newly created Renaissance Fund there are three different financial assistance programs, two of which are primarily focused on the 11 designated Renaissance Zones across the State.
Technical Assistance Grants - The first program provides a technical assistance grant of up to $50,000 to each of the zones to perform soil boring, base line environmental analyses, topography base maps, and preliminary design of storm and drainage systems and utility routes. These are one-time grants and are made at the request of a zone.
Prospective Business Assistance Program - This program provides loans to local communities within and outside of the zones to finance land acquisition, rehabilitation costs, and infrastructure costs related to a "prospective business and industrial park or parcel". A project located within a zone is eligible for a maximum of $5 million for up to 20 years without principal or interest payments due for the first five years of the loan. Interest on these loans does not begin to accrue until the beginning of the fourth year. Up to 90% of a loan can be converted to a grant based on credits that will be given for up to $20,000 for each job created within five years of the loan. For projects outside of the zones a maximum loan of $3 million is available for up to 15 years with no principal or interest payments for up to five years. Interest on these loans does not begin to accrue until the beginning of the second year. Credits toward repayment are also available for up to $10,000 per job created within the first five years of the loan. These credits can total up to 50% of the repayment on the loan.
The criteria used to select eligible recipients of these loans include:
- The likelihood that the project will create a "significant" number of well-paying jobs;
- The number of available business and industrial sites located in the community;
- The amount, if any, of public and private support for the project;
- The amount of community support for the project;
- Whether the project would occur without the loan;
- The amount of time needed to prepare the site for reuse.
Business Assistance Program - This program provides either a loan or a grant to a local unit of government for an economic development project. A municipality can apply for a loan to assist in the cost of acquiring, rehabilitating, or clearing a parcel of land for either a Project or a Point of Destination Tourism Project.
The criteria for a Project include an industrial, commercial, or retail endeavor to be owned or operated by a business. Industrial and commercial businesses may be located anywhere in the State of Michigan but retail businesses may be located only within a designated Michigan Renaissance Zone. The criteria for a Point of Destination Tourism Project include a commercial endeavor owned or operated by a business that will attract out-of-area residents to the municipality and its surrounding area. There is no Renaissance Zone requirement for retail businesses under this type of project. Grants are awarded under this program to municipalities for the acquisition or construction of or improvements to the infrastructure or to a public facility such as a street, park, or playground for a Project or a Point of Destination Tourism Project.
The decision to provide assistance through a loan or a grant is based on the level of local financial support, the economy of the local area, and the level of support needed to make either type of project economical. The conditions of the grants or loans will vary from project to project, and will be set on any terms the Strategic Fund Board "...deems reasonable and appropriate". Some grants may be converted to a loan at the discretion of the Board if a business fails to provide the number of jobs estimated in the application within two years of the first payment of the grant. The selection criteria are consistent with those established for the Prospective Business Assistance Program.
Development Block Grants:
The other major source of funding for the financial assistance programs is the Community Development Block Grant Program. This is a program funded through the U.S. Department of Housing and Urban Development (HUD): an FY 1997-98 appropriation of $45 million that is administered by the Michigan Renaissance Fund. Federal requirements mandate that the funding be used to assist communities with a population of less than 50,000 and nonmetropolitan counties, which includes all counties except Wayne, Oakland, Macomb, Genesee, and Kent. The program provides four types of grants to local units of government for economic development projects that provide benefits to individuals of low or moderate income as established by HUD. In Program Year 1998 Michigan expects to receive $31,612,674 in funding from HUD combined with $1,700,000 in program income that will be available for allocations. The four grant categories are described below.
Economic Development Infrastructure Grants - These grants are provided to local communities for improvements in public infrastructure that will benefit a specific for-profit business. The firm can be relocating to the area, expanding, or retained. Eligible public infrastructure projects include public water and sanitary sewer lines and related facilities, streets, roads, bridges, and public utilities. Funding priorities are based upon the ability to raise other sources of funding at a ratio of 2:1 or greater. Other selection criteria include cost per job, financial viability of the business, job creation and retention, and amount of local funding. The maximum grant amount under this program is $500,000.
Economic Development Planning Grants - These grants are available to communities to assist in the planning and design of a specific economic development project. Projects are selected based on the future job creation (within the next four years) with at least 51% of the jobs being held by low or moderate income individuals, consistent with the Federal guidelines. The maximum grant amount under this program is $50,000 and requires a 10% match of local funding. This match may be waived if the local unit can demonstrate financial hardship.
Commercial and Industrial Rehabilitation/Redevelopment - These grants are provided to local communities for the rehabilitation of abandoned, underused, or deteriorating commercial and industrial facilities or sites. Eligible uses of the funding include but are not limited to site clearance, the purchase of land, new construction or improvement of public facilities, and environmental evaluations. If revenue is generated as a result of a redevelopment project, the community is required to repay the amount of the grant. Selection criteria include the ability of the local community to provide additional public funding and/or to generate private funding at a 1:1 ratio, the lowest cost per job, or that the project will prevent or eliminate slums or blight. The maximum amount available for these grants is $400,000.
Rebuild Michigan Infrastructure Grants - These grants are provided to local communities for public infrastructure projects that are determined to be critical because they have been required by a Federal or State agency. Eligible activities include but are not limited to water lines, sanitary and storm sewer lines, land clearance, and demolition or street/road repair. Communities applying for this grant program must first submit a notice of intent. The notice of intent is reviewed by the Michigan Jobs Commission, which then determines if the project meets the selection criteria. If it is determined the community meets the criteria, it is then authorized to prepare the full application. Selection criteria include the ability of the local community to provide additional public funding and/or to generate private funding at a 1:1 ratio, and the inability of the community to fund the project without other financial assistance. The maximum amount available for these grants is $400,000 but exceptions to this limit may be considered by the department.
In addition to direct financial assistance, Michigan offers three different tax abatement programs: the Michigan Economic Growth Authority (MEGA), the Renaissance Zones, and the Plant Rehabilitation and Industrial Development Districts Act or P.A. 198 of 1978. All three programs are promoted by the economic development staff and are administered by the department.
Michigan Renaissance Zones - There are 11 Renaissance Zones located throughout the State; they are identified on Figure 3. As of January 1997, these zones have exemptions for any business or resident currently residing in or moving into the zone from the following taxes:
- The Michigan Single Business Tax
- The Michigan Personal Income Tax
- The six mill State Education Tax
- The local Personal Property Tax
- The local Real Property Tax
- Local income taxes
- The local Utility Users Tax
Seven of the zones are classified as urban, three are classified as rural, and two are classified as military zones. The maximum time limit for the exemptions was 15 years starting in 1997, and reducing to zero in 2011. All of the rural and military zones elected to have the full 15-year exemption, but only one urban area - the Flint Renaissance Zone - chose the full exemption; the others have either 10- or 12-year exemptions.
Michigan Economic Growth Authority - This authority was created by Public Acts 23 and 24 of 1995 within the MJC as a tax credit program. The program is overseen by the eight member authority that is made up of the Director of the MJC as Chairperson, the State Treasurer, the Directors of the Departments of Management and Budget and Transportation, and four members appointed by the Governor. The Acts allow the authority to provide up to 25 eligible businesses with credits against the single business tax (SBT) per year, based on the number of new jobs a company will create within 12 months of the expansion or location. An expanding in-State business must create a minimum of 75 jobs, a relocating out-of-State business must create 150 jobs, or 25 jobs if the business locates within a neighborhood enterprise zone or a Federally designated Empowerment zone, rural enterprise community, or enterprise community. An eligible business is defined as a business that proposes to create qualified jobs in the State in manufacturing, mining, research and development, wholesale or trade, or office operations.
The authority enters into an agreement with a company to provide an amount the business may claim as the SBT credit each year for up to 20 years from the date of the agreement. The amount of the credit can be only up to the amount of the company's payroll that is attributable to the employees who perform qualified new jobs multiplied by the tax rate. Eligible companies are often identified by the MJC before an application is submitted. To date, 56 companies have been awarded MEGA credits totaling an estimated $338,085,732.
The Plant Rehabilitation and Industrial Development Districts Act - This program is more commonly known as the P.A. 198 program, which was enacted in 1978. The program offers a property tax reduction to businesses that renovate an existing manufacturing plant or build a new one. The program requires that local units of government designate certain areas plant rehabilitation districts (for renovation projects) or industrial development districts (for new projects). Once the designation is established the interested company may apply for an exemption from property taxes (both real and personal) for up to 12 years. The exemption is called an Industrial Facilities Exemption Certificate, which requires the business to pay an alternate tax called the Industrial Facilities Tax.
The alternate tax is established differently for rehabilitation projects and for new building projects. The property tax on a rehabilitation project is determined by taking the assessed value of the plant prior to the improvements, resulting in a 100% exemption from the property tax on the improvements. The tax on a new facility is determined by applying half of the millage rate, resulting in a 50% reduction in the property taxes on the new construction, machinery, and equipment. An eligible industrial plant includes a manufacturing facility or any related facility such as an office, or an engineering, research and development, warehousing, or distribution facility. The exemption applies to buildings, machinery, furniture, and fixtures, and does not include land. Only those items covered in the application are eligible for the exemption.
This paper has been an attempt to identify and describe the economic development structure and programs in Michigan. Although the majority of the major programs that exist are outlined, the creation of new or special purpose programs or grants does occasionally occur, as was the case with the Tiger Stadium infrastructure grant. It is also important to note that these programs are not used exclusively for attraction and retention, but are used in coordination with many of the workforce development programs that are administered by the MJC. It is the combination of job placement and training with the direct financial incentives offered to a business that essentially makes up Michigan's approach to increasing economic development throughout the State.