Michigan transit backers race to $6B economic development plan

• Transit advocates hail new proposal to broaden Michigan corporate subsidy program
• The 10-year, $6 billion plan would dedicate income streams for transit, affordable housing and traditional business incentives
• The proposal comes after growing dissatisfaction with mega-deals the state has used to lure job creators

Michigan transportation providers are sizing up potential projects for the $2 billion that would be dedicated toward statewide transit over the next decade as part of a large-scale business incentive reform proposed by House Democrats. 

Autonomous vehicles delivering workers to a new megasite near Flint. Bus rapid transit along Woodward and Gratiot. Better air travel to and from northern Michigan. Even improved ferry service.

Those ideas and others were floated Tuesday in Lansing during the first legislative hearing over a 10-year, $6 billion economic development plan that would broaden the reach of the state's Strategic Outreach and Attraction Reserve (SOAR) mega-incentive fund. 

Related:

• 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
• Corporate subsidies cost Michigan $335M; 40% of deals create low-paying jobs

Michigan has used Gov. Gretchen Whitmer’s flagship economic development subsidy to try and lure big companies with the potential to create thousands of jobs. Since late 2022, the state has promised more than $2 billion in grants, along with at least $1 billion more in tax breaks and other incentives.

But with bipartisan support for SOAR waning and its final year of funding approaching, legislative Democrats are pushing reforms that have caught the attention of economic developers, transit agencies and housing developers who spoke Tuesday during the House Committee on Economic Development and Small Business Committee.

The new proposal would expand the program to fund community projects and halve annual spending on business incentives. But it also would extend that funding for a decade to allow for long-term planning, legislative sponsors said. 

“This is a historic and comprehensive economic development plan,” said Rep. Jason Hoskins, a Southfield Democrat who chairs the committee.

The 10-year funding plan calls for a total of: 

• $2.5 billion for the traditional economic development incentives intended to attract employers and create jobs — half the current funding for SOAR
• $2 billion in transformational transit and mobility projects
• $1 billion to the Housing and Community Development Fund to build affordable housing across the state.
• $500 million to the Revitalization and Placemaking Fund to support community projects, like increasing childcare options

The transportation component would be “the largest sustained investment in transit in Michigan's history,” Rep. Jason Morgan, D-Ann Arbor, said of his bill. 

“This is strategically necessary to strengthen talent attraction, grow Michigan's support for our businesses and remove barriers to economic opportunity.”

The funding will offer operating support for the state's transit agencies, dedicated funding for what Morgan called “transformational transit projects” and flexibility for lower-population regions to invest in options that meet their needs. 

“The lack of high quality, comprehensive transit is a fundamental barrier to talent attraction, workforce development and economic mobility,” Morgan said. 

Transit supporters from local governments and the Michigan Public Transit Association agreed with Morgan, detailing what kinds of options they’d like to see, from wish-list projects to basic services in largely rural areas.

“The majority of the riders for rural transit systems are transit-dependent riders, not choice riders,” said Heidi Wenzel, president of the statewide association.

The plan to expand SOAR comes amid mounting criticism over the program, in part because of the quality and pay of the jobs promised by recipients, the vetting of companies and whether the payback was worth the cost.

A Bridge investigation published in March showed that Michigan last year pledged $335 million in economic development incentives to 83 companies that planned to create 11,408 jobs. In all, 40% of jobs created pay less than the state’s average, and nearly 90% of incentives went toward manufacturing jobs.

Unclear so far is which elements of SOAR legislators might retain, and what could change with Michigan Economic Development Corporation oversight. The transportation component, however, would be directed by a new oversight board similar to the Michigan Strategic Fund, the MEDC’s public funding arm. 

Opposition to the House bills has been limited so far, Hoskins said, with over 90 letters coming in to support the plan. 

One critic is James Hohman, fiscal analyst for the Mackinac Center for Public Policy, a free-market think tank that has long opposed corporate subsidies. He said the policies won’t deliver jobs that justify the spending.

“The bills authorize $3 billion in new business subsidies that have proven ineffective at creating jobs and are expensive to the state,” Hohman told Bridge.

Supporters on Tuesday focused less on business attraction than how the new plan could alleviate the conditions that prevent business growth. 

“What makes this particular set of bills different is the corresponding investment that goes beyond just a business attraction,” said Dan Gilmartin, CEO of the  Michigan Municipal League.

“This is a way to attract and retain jobs in Michigan and make Michigan a better place to live.“

The bills from the Democrat-led House follow similar SOAR overhaul bills introduced by Senate Democrats in late 2023 after nearly a year of discussions and committee meetings led by Sen. Mallory McMorrow, D-Royal Oak.

McMorrow spoke at the Tuesday hearing, saying the House legislation advances the Senate plan, which called for 50% of any SOAR award to be spent on community-based projects that would improve a town and make it more appealing to a business. 

However, the Senate version set up a system that could have “sliced that pot of money too thin,” McMorrow said, noting she’s hoping to work with lawmakers across the aisle on a 10-year economic development strategy for the state. 

Michigan Republicans also have been pushing for reform, saying in April that they want to increase oversight of SOAR and move toward performance-based funding for the Michigan Economic Development Corporation. Few questions were raised by Republican legislators during the committee meeting on Tuesday. 

More hearings will be scheduled over coming months, Hoskins said.