In her 2010 State of the State address last February, Michigan Gov. Jennifer Granholm dramatically listed the new business endeavors in the state she saw as instrumental to the state's economic recovery. Her speech read like an economic victory lap for the administration.
Many of the new projects highlighted had been offered generous state tax breaks from the Michigan Economic Development Corp. and Michigan Film Office. Among other projects, Granholm referenced "Hangar42," a new film studio in Kent County. In doing so, she drew Mackinac Center analysts' attention to a large state incentive deal.
She could not have known that four months later, a firestorm fueled by Mackinac Center findings would lead to an attorney general investigation, a felony charge, a lawsuit, the resignation of a key Lansing staffer and possibly the loss of a state senate bid.
Mackinac Center Fiscal Policy Director Michael D. LaFaive and Communications Specialist Kathy Hoekstra were tipped off that the Hangar42, being refurbished at a former Lear plant in Walker, Mich., may not have been worth the $45 million it reportedly sold for. Digging into the deal's inner workings, they learned that the building had sat on the market for months while listed for under
$10 million. How could the value of the building leap from less than $10 million to more than $40 million overnight?
The massive price increase is important because, as local media reported, the studio's new owner was in line to receive an "assignable" tax credit (one he could sell for cash) equal to 25 percent of his "investment." If the price was goosed up, so too would be the subsidy available to the buyer. In this case, the higher price brought a whopping $10 million credit.
Hoekstra and LaFaive left no stone unturned in their effort to discover the status of the tax credit application and the nature of the real estate deal. Neither representatives of the Michigan Film Office nor the MEDC would confirm or deny approval of the Hangar42 tax credit application. Worse, neither the buyer nor key seller would return phone calls when the Mackinac Center analysts sought answers.
Ultimately, Hoekstra and LaFaive were forced to go public with the questions they couldn't answer through dogged research. The Center raised the questions May 20 with a Hoekstra-produced video and LaFaive-penned essay.
Grand Rapids-area media immediately picked up on the story, with same-day coverage on two TV stations (WOOD-TV and WZZM) and in The Grand Rapids Press. Press reporter Chris Knape aggressively leapt into the story and continued the investigation into many angles on a local level.
One such story included state Rep. Robert Dean, who sent his chief of staff to investigate the hold-up in the film office tax-credit approval. Not long after that "intervention," an online video turned up in which that same aide was boasting of his own early involvement in the Hangar42 deal. The staffer was asked to resign shortly thereafter.
This same lawmaker later lost his primary bid for state senate and publicly blamed the loss on the developing Hangar42 scandal.
The fallout continued with several builders filing liens against the property owner for payment of work they completed but were never paid for. The contractors, whose companies performed construction-related work on the Hangar42 property, insisted they were told payment would come once the state tax credits came through. The matter is now the subject of a lawsuit by 11 contractors who want the property sold in order to get at least $2 million in compensation for their supplies and services.
In the meantime, Hoekstra and LaFaive continued to try to obtain documents from the state regarding the Hangar42 tax credit application, as well as simply confirm the application's existence. Finally, on June 17, after stalling tactics and excuses by state agencies, the Mackinac Center called on both the Legislature and law enforcement to formally investigate the deal. U.S. Rep. Pete Hoekstra quickly followed the Center's lead. Later that same day, Michigan Attorney General Mike Cox announced he had indeed opened a criminal investigation into the Hangar42 deal.
That investigation has resulted in one criminal charge of false pretense, announced on Aug. 2 against the buyer of the property. He's due back in court in November for a preliminary hearing. According to the Attorney General's office, the investigation is ongoing.
All the while, bills to require more transparency with film office dealings had been languishing in the Michigan House Tax Policy Committee. The Mackinac Center's investigative work, combined with the diligence of other reporters, drove many news outlets around the state to put pressure on legislators to once again take up and pass these measures. Several newspapers, including The Detroit News, cited the Mackinac Center's investigation as reason for more film office transparency.
Also amidst all of this, Michigan Film Office Director Janet Lockwood announced her retirement after 18 years at the helm. She claimed her retirement had been in the works since January 2010, long before the Hangar42 scandal erupted.
Before her departure, however, the Center obtained an e-mail exchange between Lockwood and others in the MEDC regarding Hangar42. Lockwood told the recipients that she felt "completely responsible" for having encouraged the governor to include Hangar42 in her State of the State address, and offered to deflect the blame from the "front office." But the final words of Lockwood's e-mail were perhaps the most telling: "So disappointing, it looked so promising. But it's not. This time I am agreeing with the Mac Center."