'Conservative' FCA tax incentives, land acquisition on track
Lansing — State and city officials remain optimistic that they can deliver 200 acres of land and adequate tax incentives so Fiat Chrysler Automobiles NV invests $4.5 billion in five Michigan plants and create 6,500 jobs in Metro Detroit.
Gov. Gretchen Whitmer hasn't specified the amount of state tax incentives but has argued they would be modest considering the economic impact of the planned factories.
Detroit Mayor Mike Duggan has indicated talks with land owners for acquiring 200 acres for the city's first new assembly plant in nearly three decades are "going pretty well." And he said land plans don't include buying homes and displacing residents.
Whitmer said Thursday the state's FCA package may include both "good jobs" and "transformational brownfield" incentives that allow companies to capture a portion of taxes paid by new hires or generated by new development.
“In comparison to the kind of economic developments that happen in this state, this dwarfs everything else that’s been done,” Whitmer said of the FCA plan.
As for pending state tax incentives, “my understanding of what’s on the table is incredibly conservative considering the return we’re going to get on the investment,” she added.
In Detroit, city officials have 60 days to secure City Council approval for buying the land, which is needed to expand the new factory's parking, provide storage for new vehicles, and allow supplier trailers access to the site. The targeted parcels include those primarily owned by the city, DTE Energy Co., the Great Lakes Water Authority and the Moroun family.
"Most people realize that ... we’re not likely to see this (opportunity) again," Duggan told a Thursday night east side community meeting. "So we can’t let this slip away."
Several residents asked Duggan if the expansion and work would mean displacing them.
“We’re not taking anybody’s homes,” he said. “We are not buying anybody’s house.”
Critics target problems
The pending deal comes amid increased public outcry over tax incentives in other parts of the country for profitable companies, including criticism by the progressive left.
Online retail giant Amazon last month cancelled plans to build a new headquarters in New York after local activists lambasted planned incentives. The withdrawal was hailed by U.S. Rep. Alexandria Ocasio-Cortez, D-New York, as a defeat of “corporate greed.”
Incentives are generally an inefficient development tool, said Michael LaFaive, senior director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy. He cited research by his free-market think tank and other groups, including the Upjohn Institute.
“You’d be better off spending the money that we’ll have to give up on this (FCA) deal on roads infrastructure, and you’ll create as many if not more jobs,” LaFaive said, referencing a top Whitmer priority the governor is expected to focus on in next week’s budget presentation.
Tax incentives are also usually “unfair to those of us who are forced to pay full freight as a result of these deals,” he added.
The Michigan Economic Development Corporation has not yet revealed its tax incentive package for Fiat Chrysler, and Whitmer said details may not be made public until the Michigan Strategic Fund meets to approve the deal in coming weeks or months.
Negotiations with MEDC CEO Jeff Mason began under Republican former Gov. Rick Snyder’s administration, Whitmer said, but “FCA kept coming back with even bigger plans to invest in Michigan.”
The Italian-American automaker's plans, as announced Feb. 26, are contingent on land acquisition and negotiation of development incentives with the state and with the cities of Detroit, Sterling Heights, Warren and Dundee.
Whitmer said earlier this week the state’s offer to FCA is likely to rely on existing incentive programs and will not require action by the Republican-led Legislature, which scaled back incentives in 2011 but authorized two new options in 2017.
Available tax incentives
Fiat Chrysler is still recouping on Michigan Economic Growth Authority refundable tax credits that Democratic former Gov. Jennifer Granholm’s administration used to try to stem massive job losses during the Great Recession.
The automaker in 2015 agreed to cap the maximum value of MEGA credits it may qualify for at $1.7 billion through 2029. It's possible FCA's new investment could qualify the company for some of those global retention credits, especially if it transfers jobs from other locations in the state, said James Hohman, director of fiscal policy for the Mackinac Center.
The "good jobs" incentive law Snyder signed in 2017 allows qualifying businesses to capture a portion of income taxes paid by new hires if they successfully create hundreds of Michigan jobs that pay average or above-average regional wages.
The Michigan Strategic Fund can approve up to 15 projects each year and can authorize up to $200 million total in tax capture revenue. The board has so far authorized income tax captures worth about $57 million, leaving the available program balance at about $143 million.
The "transformational" brownfield program, also signed into law by Snyder in 2017, is designed to spur development at blighted or polluted sites across the state by promising qualified developers a portion of the taxes they eventually generate.
The program includes various caps — the state can approve up to $1 billion in tax captures and no more than five plans per city. Bedrock Detroit owner Dan Gilbert pushed for the law and his company is the only to qualify so far, winning approval last year for a record $618 million in transformational and other tax incentives for four Detroit developments.
State Sen. Jim Runestad, R-White Lake, said he does not think the Legislature has any appetite for new “tax giveaways,” but whether FCA “can pigeonhole what their goals are into what the current tax credits are is yet to be seen.”
Tax subsidy questions
There is continued consternation over the MEGA tax credits issued under Granholm and Snyder that continue to drain the state budget, Runestad noted. As of November, outstanding tax credits guaranteed by the state were worth an estimated $6.3 billion through 2032, according to a Treasury Department report to the Legislature.
Sen. Ken Horn, a Frankenmuth Republican who sponsored the transformational brownfield plan, said he expects FCA will qualify for the good jobs incentive program because of its hiring plans. But lawmakers do not yet “have all the details on any kind of other incentives or credits that they’re currently receiving,” he said.
Separate from the FCA deal, Horn said he is working on legislation to propose a new research and development tax incentive to spur emerging autonomous vehicle and mobility fields.
Horn called Amazon’s withdrawal from New York an “eye opener” but said that unlike MEGA credits, recent Michigan tax capture plans created by the Legislature do not drain the state budget. “These aren’t giveaways,” he said. “These are just incentivizing a company to come in.”
Snyder wound down the MEGA tax credit program but argued that subsequent incentive packages were needed to help Michigan attract large-scale projects.
Whitmer offered a similar assessment this week.
“My philosophy has always been that we need to have tools in our toolbox,” she said. “We also have to insist on accountability and transparency and that we get a benefit for the people of Michigan.”
“There’s no question that 6,500 jobs (at FCA that are expected to pay an average of) $58,000 a year is going to be an enormous boost for all of us in Michigan.”
Staff Writer Christine Ferretti contributed.