MEDC CEO Michael Finney: 'I'm extremely comfortable' with elimination of MEGA tax credits
While he was CEO of economic development group Ann Arbor SPARK, Michael Finney helped growing tech companies apply for tax credits from the Michigan Economic Development Corp.
But, as part of tax reform legislation pushed by Gov. Rick Snyder and approved by the Michigan Legislature last month, MEDC's Michigan Economic Growth Authority tax credits for high-tech companies were killed in favor of a $1.7 billion overall tax cut for Michigan businesses.
And Finney, who once said the tax credits were necessary to help attract new companies, is not shedding any tears for the MEGA tax credits.
Michigan Economic Development Corp. CEO Michael Finney, pictured with Gov. Rick Snyder and DTE Energy CEO Gerry Anderson, speaks to reporters at a press conference at the Detroit Regional Chamber's Mackinac Policy Conference.
Nathan Bomey | AnnArbor.com
But over time, the MEGA credits turned into a political curse, as a multitude of companies, including local offices of companies like Atwell Hicks and Google, failed to add the jobs they promised to add in exchange for receiving the credits. And Lansing lawmakers were forced to explain why they distributed tax breaks to companies that weren’t meeting their expansion promises.
During Granholm's eight-year administration, the MEGA board distributed more than $3.56 billion in tax credits to 508 companies, according to an analysis conducted by AnnArbor.com in September.
The purging of business tax credits would frighten most U.S. economic development leaders, who survive on a steady diet of tax credits designated for hot companies.
But Finney is confident that the state’s lower overall business tax rate, a simpler filing system, a governor who is very business friendly and a capped pool of incentives that survived the funding cuts will lead to more jobs and business growth.
The death of the MEGA credits — and all the “saved,” “retained” and “indirect” jobs the MEDC claimed would be created as a result of the credits — is just fine with Finney.
“I’m extremely comfortable with it,” he said in an interview Thursday at the Detroit Regional Chamber's annual Mackinac Policy Conference at the Grand Hotel on Mackinac Island.
The credits are gone, but the state Legislature devoted $175 million for various MEDC incentives and programs for the 2011-12 fiscal year, which starts Oct. 1. Here’s the breakdown:
--$25 million for the Pure Michigan marketing campaign.
--$25 million for film industry subsidies, about one-fifth of the amount distributed in 2010, when the film tax credits were theoretically unlimited.
--$25 million for entrepreneurial programs.
--$100 million for all other tax incentives and credits, including brownfield projects.
Finney said the types of incentives and tax credits in the $100 million pool would be tailored on a case-by-case basis for each company or project selected to receive a boost. He described it as “a negotiated incentive that can be structured either as a grant, loan or investment.”
“A big part of it is understanding what the company needs,” Finney said.
It’s all part of the MEDC’s emerging “economic gardening” strategy, which favors helping existing businesses grow over “hunting” for outside companies to come to Michigan.
Finney also:
--Declined to say much about Snyder’s statement Wednesday that he would push for a statewide talent enhancement network in November. The concept is modeled after an initiative created by SPARK, which distributes a free weekly newsletter with job openings to several thousand subscribers and tries to help companies connect and hire talented workers. The talent enhancement plan is likely to feature a push to show Michigan’s benefits to people who used to live, work or attend classes here.
“We had a lot of ideas that we couldn’t implement because they weren’t regional,” Finney said. “They really required statewide capability.”
--Praised SPARK’s hiring of Paul Krutko, a Silicon Valley economic development veteran with experience in Cleveland and Jacksonville, Fla., as his replacement as CEO.
“I think they made a great hire,” Finney said. “It really says something about the community and about SPARK that we’re able to attract an executive from Silicon Valley. I think that’s probably the story that no one has focused on. The fact that he’s from the Midwest helps. He brings an awful lot of know-how and opportunity as a result of the relationship he built out there.”
--Suggested MEDC’s incentives would not be directed toward the big auto companies. “They basically just continue to invest and hire, so their impact is obviously being seen right now in Michigan’s economy,” he said.
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
FatherXmas
Tue, Jun 7, 2011 : 2:27 a.m.
Two comments: 1) Engler tried this "lower tax rates for everyone, no special breaks for anyone" philosophy during his first term. By the end of it, he was rushing to get the legislature to enact the legislation creating MEGA and the tax credits because Michigan was, right or wrong, losing too much investment to nearby states who "play the game." Here's five bucks that if Ricko makes it to a second term he does the exact same thing. 2)"I think they made a great hire." Really Mike, an out of work guy who left his last job under questionable and murky circumstances (and on which A2.com still has yet to fully inform us)??? Please, nothing more than the great American tradition of failing upward on display.
Townie
Tue, Jun 7, 2011 : 4:22 p.m.
Don't hold your breath waiting for A2.com to 'investigate' SPARK. There'll be no 'hard hitting' investigative reporting of SPARK from the cheerleaders at A2.com. And one doesn't have to look far either. Just try asking for their audits...not available except for a select few. And definitely not for the taxpayers of Washtenaw County who contributed a quarter of million dollars this year.
John Q
Mon, Jun 6, 2011 : 12:51 a.m.
Why are journalists still peddling the lie that the tax credits were primarily used to attract out-of-state businesses? The facts, that Mr. Bomey has access to, show that most of the businesses that benefited from MEGA and similar programs already had a Michigan presence. I don't like most of the business attraction programs used by states across the country. But it's a flat-out lie to keep claiming that Michigan's program largely benefited companies located outside of Michigan to the detriment of companies located in Michigan.
Dr. Rockso
Sun, Jun 5, 2011 : 7:54 p.m.
What THE RICK has done is surround himself with a bunch of cheerleaders. Finney is the head cheerleader. The Nixon guy from UTAH is the number two cheerleader. Expect nothing from this team but a bunch of Rah Rah Go Team Go. But, in the end the score will be Finney $250,000, Nixon $250,000, the people of the State of Michigan $0.
Townie
Sun, Jun 5, 2011 : 8:27 p.m.
Yup. Someone who sees where this is going... And they will list these 'successes' on their resumes and get some great new jobs and retire rich and happy. Thanks to our tax dollars. Isn't accountability great ?!
amlive
Sun, Jun 5, 2011 : 7:31 p.m.
Of course to be fair, if a Republican had supported half the business tax credits that Granholm did, they would have been blasted from the left for favoring corporate interests over workers. Just making clear that I'm not accusing one side of blind partisanship more than the other. Both are probably equally guilty (unless you were to count the Tea Party as part of the right, which tips the ridiculous bias scales quite a bit off center).
amlive
Sun, Jun 5, 2011 : 7:25 p.m.
Two points - if Granholm were to have lessened or ended major tax credit programs, I have little doubt we would have heard much more criticism of raising taxes on job providers and discouraging business investment in Michigan. I doubt Snyder will see quite as much criticism on changing corporate tax breaks, because he wears red. No comment here on whether I think this plan will or won't help, just an observation on destructive partisanship. Second, do we really need a Michigan Economic Development Corp. and a Michigan Economic Growth Authority? I mean, if you really want to streamline government, don't you think those two departments are identical enough that they could be merged in to one? How about the Michigan Department of Labor and Economic Growth? I'll admit, I know little about these agencies and have no idea if they are entirely separate entities or just specialty boards within the same department. From where I'm standing though, I have to say it just sounds stupidly redundant.
wereintroubl
Sun, Jun 5, 2011 : 6:03 p.m.
Being the "good businessman" that Syder is supposed to be (and I have my doubts), he shoud know that you feed your cash cows. To not offer incentives for the auto industry and assuming that they will invest without them is naive and shortsighted. Ask John Engler about Willow Run. All it is going to take is Michigan not being considered for a new auto plant, or heaven forbid one of the state's current auto plants to be lost to another state and Mr. Snyder is going to have some explaining to do.
Alan Goldsmith
Sun, Jun 5, 2011 : 5:24 p.m.
"And, again of course, AA.com will not look into anything or question the numbers." Ditto.
Dcam
Sun, Jun 5, 2011 : 4:51 p.m.
A few MEDC 'success' stories from my files, demonstrating the 'fairness' to business that brag... wants. I'm sure AA.com also has similar files of its own - if they chose to blow the dust off them. Covisint to get $59M incentives package LANSING -- Michigan Gov. John Engler and the Michigan Economic Development Corp. (MEDC) said Tuesday they will give Covisint LLC, the auto industry's fledgling Internet marketplace for parts and services, an incentive package of up to $59 million to locate its permanent headquarters in southeastern Michigan. As a result, Covisint has named Detroit and Southfield -- where its current headquarters are -- finalists for permanent world headquarters, the MEDC said. The agency estimates Covisint will generate more than $158.4 million in revenue for the state. Covisint was founded in February 2000 by DaimlerChrysler AG, Ford Motor Co., General Motors Corp., Commerce One and Oracle. Separately, the MEDC said it also gave tax breaks worth more than $59 million over 20 years to GM to entice the carmaker to invest in its Lake Orion plant. The MEDC also awarded tax breaks to Visteon Corp. to convince the auto parts maker to put its world headquarters in Michigan.
Townie
Sun, Jun 5, 2011 : 1:40 p.m.
One need only look at Finney's predictions of job creation at SPARK to realize that this man is clueless. But he's well connected and ultimately he will prosper but we'll be paying for his inflated salaries for years with our tax dollars. Looking at his statements in the article he's using the same vague stuff he and Snyder did at SPARK; 'always leave yourself an out' so he can deny later what he said or promised. And, of course, none of us who pay for this can see any stats, details or financials -- they're all 'secret' and, of course, there's no audit you can see or actual data on job creation that was vetted independently. And, again of course, AA.com will not look into anything or question the numbers.
Forever27
Mon, Jun 6, 2011 : 3:32 p.m.
question SPARK? AA.com wouldn't ever dream of such blasphemy!
zeke56
Sun, Jun 5, 2011 : 1:31 p.m.
i guess i am the one to rain on the praise parade. what a load of baloney! our tax rates aren't that bad and making the schools, poor and seniors pay for tax breaks for businesses is morally repugnant. michigan's tax rates were competitive. by this method, Snyder and crew DO pick winners and looser and will doom michigan so the same old economic cycles that have proven to be so unsustainable. the companies that win in via Snyder's plan are the same old car-making companies of our past. new companies have to take the risk of locating here and finding people educated enough to come work for them. study after study shows that michigan lacks exactly that workforce. so thanks guys for your economic gambling and train wrecking policies. we've done this before and we'll keep doing it until we break the strangle-hold of the car companies. this isn't new, its just re-branded.
braggslaw
Mon, Jun 6, 2011 : 12:48 a.m.
I would not use google as a good example of attracting businesses... they were basically paid to come to Michigan and they have hired nowhere near what they promised. GE bought the Visteon campus for a dime on the dollar... Agains we agree to disagree. These "sexy" (picking winners) corporate moves can in no way make up for the thousands of jobs that fled the state because of the taxes and business environment in this state.
zeke56
Sun, Jun 5, 2011 : 8:09 p.m.
we could have a lengthy debate. state workers traded competitive salarlies for a pension, taking that away after the promise was made is wrong and unfair. those workers have paid for their pensions more than other people in this state. taxes nearly the impediment these good ol' boys would like to make it sound like and it was not double taxation. handing all this money over to the idiots that didn't run their companies well is crazy - doing the same thing expecting different results. Google and GE certainly didn't see our previous structure as an impediment. but finding the highly educated people for their high tech jobs? that has hampered them. you are correct, we disagree. handing our state government over to business interests has rarely proven to be good for the people. this is a mistake made on a hunch for a guy who knows very little about good government
braggslaw
Sun, Jun 5, 2011 : 3:45 p.m.
Have to agree to disagree. "aren't that bad" is not what we should be shooting for... The problem with the old tax rates is that they were impediments to new business....double taxation etc. I've had the pension conversation with my older friends... the seniors that saved in a 401(k) (with their own money) are taxed and the state workers collecting state pensions are not taxed. That's what is not fair.
braggslaw
Sun, Jun 5, 2011 : 12:19 p.m.
Occams Razor-- simple All businesses are looking for is fairness and the ability to forecase and predict. The new tax systems does just that. No more picking winners and losers, let people benefit from their vision, talent and hard work.
xmo
Sun, Jun 5, 2011 : 12:04 p.m.
If you have a business friendly state, you will not need mega tax credits. I am glad that we have lowered our business tax rate and now we need to end a lot of the government "red tape" that will make Michigan the place where businesses want to come to.
Forever27
Mon, Jun 6, 2011 : 3:30 p.m.
@johnnya2, Spot on! You forgot to include one thing: an educated and able work force. Which, we are making sure we do not have by cutting education to afford these reduced business taxes.
johnnya2
Sun, Jun 5, 2011 : 9:56 p.m.
The facts do not bear out your opinion, but thanks for playing. If so South Dakota would be the hub of US business. TAX RATES DO NOT BRING BUSINESS GROWTH. Demand for products does.
trespass
Sun, Jun 5, 2011 : 10:24 a.m.
Snyder is Finney's political mentor so it is natural that he would never criticize Snyder. I find it interesting that we are spending money to help companies find talent but at the same time the University of Michigan has 1,300 engineering students from China most of whom return to China. There have been several news stories about how companies have chosen not to expand in Michigan because they could not find the engineers they needed in Michigan. If the UM graduated another 1,300 American engineers that might make it easier for these companies to find the talent they need.
Stephen Landes
Sun, Jun 5, 2011 : 10:24 p.m.
But you're happy with the $3.5 billion that was handed out to companies by the last two administrations? Where has that approach taken us? Let's try something different like being friendly to business and having a simple, flat, business tax.