Michigan lawmakers operate a Field of Dreams economic development program. They spend millions buying land and preparing it for private businesses. But if the state builds it and companies don’t come, taxpayers are out the money and have no jobs to show for their trouble. It’s a bad structure that wastes taxpayer funds.
Gov. Gretchen Whitmer wants to spend $150 million trying it again. But Michigan has racked up a long losing streak with site development.
The state already approved $259 million for site preparation for a semiconductor manufacturer deal that didn’t happen. The latest annual report — a year and five months out of date — says $145 million was spent buying the land and developing it.
That’s more than lawmakers spend operating state parks in a year. Local officials pledge that this will pay off, but the state will receive no repayment from this expense regardless of what happens.
A Chinese battery component manufacturer was offered $50 million to prepare a site for a factory that was later cancelled. It looks like $24 million was spent, which is as much as lawmakers spend on the veterans home in Marquette each year. Attorney General Dana Nessel wants to recover the site preparation money from the deal. A company spokesman says it could give the state back the land but not the money used to buy the land.
Lawmakers authorized $185 million to buy land and prepare it for Ford to build a battery plant. While the company said it was scaling back the project and manufacturing residential storage batteries rather than electric vehicles, the site preparation money was not scaled back. The latest report says $103 million has been spent buying and preparing land for an electric vehicle factory that didn’t happen. Lawmakers could have paid off an eighth of what they owe the state police retirement system with that money.
All told, the state government has transferred $425 million from taxpayers for site preparation. Private companies spent $155 million on their own facilities. The number of jobs created is not included in the state’s report on the program.
Lawmakers often boast that their programs are performance-based. If a subsidized company doesn’t create the jobs it promises, taxpayers either get their money back or the subsidies are proportionately scaled back. That rule does not apply to site preparation money. The money is gone and not coming back.
This matters because most deals do not live up to expectations. Only 9% of the jobs state and local officials announced would be created in major subsidy deals between 2000 and 2020 ever materialized. Front-loading costs for speculative enterprises with low success rates is poor program design.
The governor has said that it’s a priority for her to spend another $150 million on this site preparation program. That’s one-fourth of what she recommends taking out of the Rainy Day Fund for the current fiscal year, even though the state is not in a recession. Legislators should remember that taxpayers are often left holding the bag on these dicey deals.
