Michigan House fast-tracks tax incentives, brownfield renewal in EV plant 'arms race'

The Michigan House on Wednesday sent the Senate a package of economic development bills that one lawmaker described as an interstate "arms race" response to the fallout from Ford Motor Co. making multi-billion-dollar electric vehicle investments in Kentucky and Tennessee.

A four-bill package establishing a new set of funds for the Michigan Economic Development Corp. to use to recruit and retain businesses gained bipartisan support, clearing the Republican-controlled House on margins of 83-21.

House Speaker Jason Wentworth, R-Farwell, said the legislation is in direct response to Dearborn-based Ford deciding to invest more than $11 billion in EV battery and vehicle plants in the south.

"When you look at what happened with Ford, with them not even considering Michigan, I think that sent shockwaves through our state," Wentworth told Capitol reporters Wednesday. "And we need to make sure we have the resources and tools ready to be competitive across the country."

The House also approved a five-year extension of the tax-capturing incentives for transformational brownfield redevelopment projects that Rocket Cos. Chairman Dan Gilbert lobbied for in 2017 as part of the financing of his Hudson's site skyscraper that is under construction in downtown Detroit.

The four GOP-authored House bills would create and set rules for the MEDC to establish the Strategic Outreach and Attraction Reserve fund and two funds that would funnel down from it: a fund for making development sites shovel-ready and a fund specifically targeted toward critical industries.

The bills do not contain appropriations, though lawmakers are expected to dip into $8 billion in unspent federal stimulus funds or the state's $2.4 billion tax surplus to fill the funds with cash for potential job-creation deals.

The Legislature's financial commitment to the new job-creation funds is "to be determined," Wentworth said.

"We haven't gotten that far," Wentworth told reporters. "This is the first step in the process to make sure we had the vehicle set up and the tools necessary, and we'll have that discussion with the Senate and administration."

Unlike past incentive programs involving tax credits, lawmakers would directly control how much money is appropriated annually into the funds.

John Walsh, CEO of the Michigan Manufacturers Association, said the bills "provide dramatic incentives" and "puts us on the map for the first time in probably 20 years" for new large-scale industrial investment.

"What I'm telling you is we are getting our lunch taken away from other states that are more equipped to provide a variety of investments — training, business investments, land assembly," Walsh, a former Republican lawmaker, told a House committee.

The five-bill package was rushed through the House on Wednesday as economic development leaders say that Michigan is in the running for multiple large-scale business investment decisions totaling several billions of dollars in new investment. Lawmakers also have just five session days remaining before they break for the holidays.

MEDC officials have been publicly courting General Motors to build a electric vehicle battery plant after Ford decided to build four new plants across two mega sites in Tennessee and Kentucky.

A GM spokesman told The Detroit News on Tuesday that the automaker is "in the initial stages of considering the business case for a potential future investment at several locations, including the Orion Township area."

Wendy Block, a lobbyist for the Michigan Chamber of Commerce, told lawmakers there are "three big projects that are out there on the table" that the bills could be used to help seal the deal with those unnamed companies. She said the potential economic development projects center around electric vehicles and next-generation automotive jobs.

"We think this focus on site development is key," said Block, vice president of business advocacy and member engagement for the Michigan Chamber.

All five bills sailed through the House on Wednesday, starting with a morning hearing in the House Government Operations Committee and ending with an early evening floor vote, where a couple of Republican and Democratic representatives denounced the fast-moving legislation.

State Rep. Steven Johnson, a Kent County Republican, said the new tax incentives amount to a redistribution of wealth.

"This is one of the most anti-free-market things I've ever seen," Johnson said. "This is big business getting in bed with big government."

Rep. John Reilly, R-Oakland Township, called the bills "corrupting" and "Marxist."

Rep. John Cherry, D-Flint, said the incentive funds are needed in order for Michigan to maintain its position as the home of the domestic auto industry as it transitions from the internal combustion engine to electric engines with fewer parts. He talked about the decline of his hometown as GM closed plants over a period of 40 years.

"This (bill) package is making sure that we have the tools to ensure our communities don't crumble in 20 years," Cherry said.

Senate Bill 671, the transformational brownfield legislation, would extend the life of the incentives law to 2027. It is set to expire at the end of 2022.

Known at the Capitol as the "Gilbert bill," the transformational brownfield incentives law lets developers capture up to 100 percent of income taxes generated by a redevelopment project on a historically abandoned site. Developers can't capture income taxes from office workers or residents in a brownfield redevelopment site until after the building is constructed.

"There's no capture until the building fills up — that's the beauty of this," said Sen. Ken Horn, a Frankenmuth Republican and the bill sponsor.

But the incentive hasn't been used beyond Gilbert's downtown Detroit development projects and the rehabilitation of an abandoned historic paper mill in Vicksburg, south of Kalamazoo.

Gilbert's real estate development company lobbied heavily for the passage of the brownfield incentives four years ago as part of his plans to build a Hudson's site skyscraper, expand Rocket's One Campus Martius headquarter building, renovate the Book Tower and Book Building and redevelop the Monroe blocks site next to Campus Martius, which has not yet materialized.

In May 2018, the Michigan Strategic Fund board approved about $618 million in brownfield incentives for $2.14 billion in real estate development projects Gilbert had planned for downtown Detroit before the pandemic.

A lobbyist for Rocket Cos. told the House committee on Wednesday that the company supports an extension of the brownfield incentives law.

The new bill changes some of the criteria for qualifying for the brownfield incentive, fixing "the flaws that made it virtually unusable" in other communities, Horn said.

"This is not just about one developer," Horn said.

One Democrat on the committee who voted against the legislation said the 2017 law always seemed designed solely for Gilbert, a multi-billionaire and influential Republican mega donor.

"Under this plan, if Gilbert builds a tower, all of the people who live in the tower would pay a portion of their tax … would give it to Dan Gilbert," said Rep. Yousef Rabhi, D-Ann Arbor. "... To me it always felt like we were creating a little fiefdom where the tribute instead of being collected by the state is collected by the landlord."

Rabhi questioned the need for additional tax incentives for automakers, noting the state already shells out more than $500 million annually in Michigan Economic Growth Authority tax incentives to GM, Ford, and Stellantis.

"Where does it end?" Rabhi asked. "It seems like an arms race with each state offering more and more (incentives)."