Fri, Jan 7, 2022
Michigan Announces $1 Billion in Funding to Support Economic Incentives
Over the holidays, the state of Michigan replenished its economic development toolbox. On December 20, 2021 the Governor of Michigan signed a bi-partisan package of bills creating two new incentives and funded the initiative with $1.0 billion.1 At the heart of the new tools is the Strategic Outreach and Attraction Reserve (SOAR) Fund (“SOAR Fund”), a new appropriation dedicated to the Michigan Trust Fund.2 After a decade of open mistrust between the legislature and the state’s economic development entities, embedding SOAR within the Michigan Trust Fund lends a sense of permanency and predictability to future funding. The SOAR Fund will support two new economic incentive tools, the Critical Industry Support program and the Strategic Site Readiness program.
Overview of the Critical Industry Support Program
- Supports companies investing in the state and its shift to attract electric vehicle (EV), battery, semiconductor, and software and hardware development.3
- Eligibility is broadly defined permitting the Michigan Strategic Fund to make “qualified investments” in “qualified businesses” to create “qualified jobs” as a result of a “technological shift in a product or production method.”4
- Qualified investments may be in the form of a grant, a loan or other economic development assistance to fund infrastructure improvements, capital investments, acquisition of machinery and job training.
- Before committing to funding a project, the Michigan Strategic Fund would have to consider and document 19 criteria, including the applicant’s financial need, reuse of existing sites, the economic and financial viability, and the overall return on investment to the state.5
Overview of the Strategic Site Readiness Program
- Supports Michigan communities to develop sites that are “investment ready.”
- Permits “eligible applicants” to receive funding for “eligible activities” to prepare “strategic and mega-strategic” sites for investments.6
- Eligible applicants include political subdivisions (e.g., state, county, township and village entities; authorities; local economic development organizations; landowners; and end users).7
- Eligible activities include land acquisition; site preparation; infrastructure development; demolition and construction of buildings; environmental remediation; and supporting architectural, engineering and professional fees.8
- A strategic or mega-strategic site may be owned privately or publicly and used for manufacturing and commercial purposes.9
- Before investing in a site, the Michigan Strategic Fund would have to consider and document 22 general criteria plus additional specific criteria depending on whether there is an end user identified at the time of the investment and the size of the site.10 For example, for a mega-site without an identified end user, the eligible applicant must also submit to the Michigan Strategic Fund an investment and spending plan, a site certification designation and a marketing plan.
Signing up for these new incentives is not to be taken lightly and applicants should carefully vet their projects. To demonstrate its desire to be kept informed about the status of these projects, the legislature inserted a unique provision regarding modifications of agreements.11 If an applicant seeks to amend its agreement with the state, the Michigan Strategic Fund is required to publish a notice on its website and to send the applicant’s request to the Michigan Governor, House and Senate Fiscal Agencies, Clerk of the House, Secretary of the Senate and to each member of the legislature. Careful planning is required to avoid potential amendments.
While the new legislation may seem rather detailed, the legislature directed the Michigan Strategic Fund to create and publish program guidelines. At the time of publication of this alert, the Michigan Strategic Fund is working on the guidelines for its first public meeting in 2022. If you would like a copy of these guidelines when they become available or if you have any questions regarding eligibility for these incentives, please, using the Contact Us button below, contact Greg Burkart, Leader of the Site Selection and Incentives Advisory Practice. Prior to joining Kroll, Greg served as a vice president of the Michigan Strategic Fund and was on its board for more than seven years.
1Public Laws 132, 134, 136 and 137 of 2021 (enrolled bills HB 5603, SB 771, SB 769 and SB 85)
2Public Law 132 of 2021, Section 304(1)
3Reuters, “Global Car Makers Now Target $515B for EV’s and Batteries” November 10, 2021
4Public Law 136 of 2021, Section 88s(2)
5Id at Section (3)
6Public Law 134 of 2021, Section 88t(2)
7Id at Section (16)(b)
8Id at Section (16)(a)
9Id at Section (16)(g)
10Id at Sections (2)(b) and (3)
11Public Law 134 of 2021, Section 88t(8) and Public Law 136 of 2021 Section 88s(5)