Wed, 22 Mar 2023 05:45:00 EDT
Ford factory subsidies, at $690,000 per job, tally up to much more than other deals
LANSING — Michigan notched a win with Ford Motor Co.'s decision to build a $3.5 billion, 2,500-job electric vehicle battery factory in Marshall.
But the deal, more pieces of which lawmakers could finalize as soon as Wednesday, will not come cheap.
The state will provide significantly more money for the project than for other major business expansions announced since the creation of a new fund to lure companies 15 months ago.
The cost is expected to total $1.7 billion, or about $693,000 a job, or $1 billion and $384,000 per job if only cash, but not a special tax break, is factored in.
The spending will be far more than what is being disbursed for other top projects benefiting from the Strategic Outreach and Attraction Reserve Fund or, in some cases, a direct appropriation enacted into law by the Legislature and Gov. Gretchen Whitmer. The account was formed in late 2021 after Dearborn-based Ford chose to locate EV assembly and battery plants in Tennessee and Kentucky.
"I believe that we paid a premium for Ford to tell a good story, which is: 'We created this fund because we lost Ford, and now we've attracted Ford.' But the issue is at what cost? That's $1.7 billion of benefits they received, totaling $725,000 a job, which is way out of whack with what we paid" for other agreements, said House Minority Leader Matt Hall, a Republican from Kalamazoo County's Richland Township and a critic of the deal.Legislators and Whitmer recently enacted a law setting aside $630 million for the Michigan Department of Transportation and the Marshall Area Economic Development Alliance to prepare the megasite for Ford's factory. An additional $120 million is expected to be sought in the future.
State officials defend the Ford project subsidies, pointing to especially tough competition from other states as the federal government provides incentives for domestic battery production. They say Michigan is playing catch-up to offer build-ready sites. They also say the Marshall site will create spin-off jobs and is big enough to host other businesses, not just Ford.
Michigan Economic Development Corp. CEO Quentin Messer Jr. said $525 million of the $750 million in site-readiness spending "would need to be done for this site to be competitive for any project, whether it was going to Ford or company A, B, C, Y or Z. It's important to note that other states and provinces have been doing this and deliver to companies, especially companies in the mobility space, semiconductor and clean energy, sites — lock, stock and barrel, water, wastewater, you name it — as part of the package."
The aid to buy and prep land, expand roads and upgrade water infrastructure is substantial. It is 11 times what is being spent to upgrade the site of an EV battery plant in Lansing that is considered more pad-ready partly because it is adjacent to a General Motors Co. assembly factory.
Here is what the state has committed toward different business expansions since early 2022:
$1.7 billion for the Ford project. That includes a $210 million Critical Industry Program grant to Ford, a Renaissance Zone tax exemption worth $772 million over 15 years, $630 million for MDOT and the Marshall Area Economic Development Alliance, and $120 million for other site prep work.
$824 million for Detroit-based GM to spend up to $4 billion converting its Orion assembly plant to build full-size EV pickups and for Ultium Cells LLC, a joint venture of GM and LG Energy Solution, to construct the $1.5 billion to $2.5 billion battery plant in Lansing. The agreement includes a $600 million Critical Industry Program grant to GM, a Renewable Energy Renaissance Zone exemption worth $158 million over 18 years and $66 million from the Strategic Site Readiness Program for electric, water and sewer upgrades. The projects will add between 3,200 and 4,000 jobs and retain 1,000 jobs. That comes to roughly $206,000 to $242,000 per new job.
$715 million for China-based Gotion Inc. to build a $2.4 billion factory near Big Rapids and create at least 2,350 jobs. The deal includes a $125 million Critical Industry Program grant to Gotion — one of the world's biggest battery manufacturers — a Renaissance Zone break worth $540 million over 30 years and a $50 million SSRP grant to support the purchase of land and infrastructure improvements. That is around $304,000 per job.
$222 million for Novi-based startup Our Next Energy Inc. to open a $1.6 billion plant at an existing facility in Van Buren Township and create 2,112 jobs. The agreement includes a $200 million Critical Industry Program grant to ONE and a tax exemption valued at $21.7 million. That is about $105,000 per job.
$200 million for Billerud U.S. Production Holding LLC, a subsidiary of a Swedish company, to spend $1 billion and transform its Escanaba plant to make a more technologically advanced paper product known as paperboard or cartonboard, retaining at least 1,240 jobs in the Upper Peninsula. That is $161,000 per retained job.
$135 million for Ford to add 3,260 jobs and spend $2 billion across 10 facilities. That deal includes a nearly $101 million Critical Industry Program grant and a $34 million State Essential Services Assessment exemption. That is $41,000 per job.
$60 million for Muskegon County to help redirect wastewater, increase capacity and bolster growth in the local food and dairy industry. The agreement includes Strategic Site Readiness Program funds. Economic development officials have said five businesses will spend at least $187 million and add up to 145 jobs. That is $414,000 per job.
$27 million to upgrade wastewater treatment infrastructure near Hemlock Semiconductor, a move officials have said will help the company spend up to $375 million and add up to 170 jobs. That is $159,000 per job.
Sen. Thomas Albert, Republican, said the $1.7 billion price tag for Ford's expansion is too much. Many workers, he said, will make $20 an hour, or $41,600 a year.
"I for one would like to see the math showing how Michigan taxpayers would ever receive a positive return on investment with this scale of commitment," he said. "Over the next 20 years, the investment is expected to return less in the state's personal income and sales tax revenue than the state's overall investment. This simply does not make good economic sense."
But House Speaker Joe Tate, a Detroit Democrat, said such an analysis does not tell the "whole story." Michigan must continue to secure auto investment amid the industry's electrification, he said
"You see the spin-off of other jobs. You see the co-location of the supply chain around the areas where there is this manufacturing," Tate said. "When you look at the technology that's going to be manufactured here, this is only the start of those opportunities. I think it's going to be definitely a value add not only for what's being built there but also the supply chain that's going to go along with it."
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