$6 billion economic development plan on hold in Michigan House

• Michigan House Democrats delay planned vote on economic development plan amid public opposition by two members
• Plan would pair an extension of business incentives with new funding for mass transit, housing, placemaking
• Industry groups have praised plan, but key House Republicans have raised ‘significant concerns’

LANSING — Michigan House Democrats on Thursday delayed a planned vote on a sweeping economic development proposal, casting doubt on their ability to pass the fast-tracked legislation without significant revisions.

House Speaker Joe Tate, D-Detroit, declined to say when or if the lower chamber might still vote on the 10-year, $6 billion plan to pair business incentives with dedicated funding for mass transit, housing and placemaking. 

“We are going to continue this deliberation and really continue moving this forward and laying the groundwork for us to get really good policy that Michigan residents deserve,” he told reporters Thursday, expressing optimism. 

Related:

• Michigan has spent $1B on EV, battery plants. So far, they’ve created 200 jobs
• Where mega battery, EV projects stand after $1 billion in Michigan subsidies
• Mass transit wins big in new plan to retool Michigan corporate subsidies
• Bipartisan vibes as Michigan lawmakers seek to reform SOAR incentive fund
• Gov. Whitmer’s SOAR incentive fund, once a triumph, now faces headwinds
• Michigan Democrats offer plan to remake economic development
• New push to reform Michigan corporate subsidies, this time from Republicans

The vote delay followed recent demands by two House Democrats to amend the package, along with concerns raised by a pair of key Republicans. 

With just a 56-54 majority, and 56 votes needed to pass any bill, Democrats would likely need at least some Republican votes to advance the legislation. 

But with one week left on the session calendar before lawmakers are expected to start a summer recess, and votes on the state budget looming, Thursday’s delay means the business incentive reform plan may wait until at least the fall. 

Tate said Democrats anticipated some Republicans would support the legislation but told reporters that negotiations are ongoing. 

"It's not really about the votes," he said. "I think we're still having ongoing conversations around different pieces of it."

The House Democrats’ plan, which advanced out of committee earlier this month, proposes a decade of dedicated funding for various purposes, including:

• $2.5 billion to extend the Strategic Outreach and Attraction Reserve Fund, the state’s large-scale business incentive plan, and rebrand it as the Make It In Michigan fund
• $2 billion in transit and mobility, including a new transit oversight board
• $1 billion to the Housing and Community Development Fund to build affordable housing 
• $500 million to the Revitalization and Placemaking Fund to support projects such as child care

House Democrats unveiled the legislation last month after more than a year of debate by lawmakers from both parties about possible changes to economic development spending as the Strategic Outreach and Attraction Reserve (SOAR) fund expires next year. 

Critics have urged more transparency in the megadeals done under SOAR. 

Investigations by Bridge Michigan this year show that 40% of the deals created low-wage jobs, while all of the largest electric vehicle awards resulted in $1 billion of up-front spending by the state, even as all projects have been delayed and some have been downsized since original announcements. So far, the EV deals have generated 200 jobs.

‘Significant concerns’

Gov. Gretchen Whitmer, who last week praised House Democrats for making “progress” on the reform plan, has called SOAR a foundation of her economic development policy. Last year, she urged fellow Democrats to recognize the job growth from the large-scale incentives for EV, semiconductor and clean energy factories. 

Waves of supporters have come out to urge legislators to pass the new House plan. Many represent industry advocacy groups and businesses that have received funding or stand to benefit from the awards.

Not all Democrats support the proposal, however, creating uncertainty as House leadership scheduled a floor vote for Thursday.

Two Democrats last week released their own economic development plan, proposing to cut the SOAR allotment to $100 million per year (down from $250 million) and shift more money to a housing fund that would prioritize public housing. They also proposed raising the corporate income tax by 1%. 

“We stand firm in our beliefs that corporate tax breaks and handouts do not work, which unfortunately, is not the current mindset held by the majority of our colleagues in Lansing,” Rep. Dylan Wegela, D-Garden City,  and co-sponsor Rep. Emily Dievendorf, D-Lansing, said last week.

Also last week, Republican state Reps. David Martin of Davison and John Roth of Interlochen wrote Whitmer a letter expressing "significant concerns" with the House legislation. 

Roth and Martin — who both sit on the House Economic Development and Small Business Committee — sent they want to ensure at least 60 percent of economic development funding goes to "job providers that already have roots in Michigan," among other things. 

"While we appreciate the effort to create a better economic growth strategy, we believe the current proposals still fall short in several critical areas," they wrote. 

Republicans formed their own economic development plan this spring. It, too, targeted SOAR. seeking to increase its oversight by legislators and adding performance-based funding for the Michigan Economic Development Corporation (MEDC). 

More SOAR awards

SOAR was founded in late 2021 as Republicans and Democrats united to create the mega subsidy fund that grew to over $2 billion. The policy — which allowed grants of hundreds of millions and up-front land development spending — resulted from Ford Motor Co. bypassing Michigan for $11.4 billion EV campuses its building in southern states. 

Under current law, legislative appropriations committees must give final approval to SOAR awards. That happened earlier Thursday in the Democratic-led House Appropriations Committee, where lawmakers approved $397 million in SOAR funding to fulfill awards made to three companies. 

The money — approved with no discussion —  includes $97 million for a Corning Inc. solar component factory in Saginaw County, $50 million to Highland Copper Co. to develop Copperwood Mine in the Upper Peninsula and $250 million toward buying land to establish a new megasite near Flint in Mundy Township.

Those proposals head next to the Senate appropriations committee. The committee votes represent legislators’ only official voice in the deals, which are initiated by the MEDC and approved by the Michigan Strategic Fund. 

Reform bills and testimony that started in 2023 were intended to bring more transparency and community focused investment to the program, while also focusing on bringing higher-paying jobs to Michigan. 

“If we are spending taxpayer dollars, we must ensure that this is moving the state and all of our residents forward towards higher median incomes, better health outcomes, and better prosperity all around in national rankings,” Sen. Mallory McMorrow, D-Royal Oak, said last year. 

McMorrow helped craft an earlier Senate plan that would have retained SOAR's focus on critical industry attraction and site preparation but add a third funding element: directing 20 percent of subsidy awards toward a new community revitalization portion of the incentive plan called the Michigan 360 Fund.

House Democrats took the concept further, adding transit and housing funding streams, while removing the deal-by-deal community funding. Sponsors said the retooling would allow the community-based projects to proceed across the state without waiting for corporate incentive awards to dictate location and amounts.