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.
Communications Specialist Kathy Hoekstra
interviews developer Jack Buchanan Jr. in the
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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
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.
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
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
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
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."