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Behind all of the deep, scholarly statistical analyses is a raft of anecdotes, many of which the Mackinac Center has reported on in detail over the years. Consider the following companies and the deals they received.
The Michigan Business Development Program offered a $2 million subsidy through to a subsidiary of Biogenic Reagents, located in the Upper Peninsula, in the hope a project there would create 27 jobs. The firm was also given a Renaissance Zone designation that would exempt it from real and personal property taxes. State bureaucrats rolled taxpayer dice for a company that officials knew was, to use their term, “pre-revenue.” State documents show that the company’s leadership told state officials that the firm had a $2 million debt payment due, and without the government subsidy “the project could be at risk.” Lansing bureaucrats gambled anyway and taxpayers lost. In 2018 a spokesperson for the Michigan Economic Development Program said, “We have not received any repayment, and at this point don’t expect that we will. The asset sale was not sufficient to cover all of the creditors, including MSF.”
The story above is hardly the first-time state officials have used the public purse to place a huge bet on a company. One company that received state funds from the 21st Century Jobs Fund, and an offer of tax credits, as well as federal money, was A123 systems. It filed for bankruptcy in 2012 after being enthusiastically praised by supporters of subsidies, including President Barack Obama and Michigan Gov. Jennifer Granholm.
The history of the Michigan Economic Growth Authority is littered with big promises and big failures. Walden Books was among a group of the first three MEGA tax credit deals (worth up to $7.7 million) ever struck in 1995. Company officials had to assure the state that the MEGA subsidy was the reason they were moving their headquarters to Michigan. They did move it, but journalists discovered that executives for the firm had put down deposits on homes in the Ann Arbor area before MEGA was even passed into law. This suggests the firm was moving here anyway and just enjoyed a windfall courtesy of taxpayers. The company filed for bankruptcy in 2011.
The dot-com era led to a number of poor decisions by state officials. One beneficiary, internet darling Webvan.com, was described by the Michigan Economic Development Corporation as “one of the best-financed retailers on the market” when its $23.4 million MEGA offer was announced in December 1999. At the time, the stock was trading at more than $18 per share, but a year later, the stock was worth 47 cents per share. The company would ultimately file for bankruptcy and vanish into dot-com history.
The company, thankfully, never collected on its award. The deal did illustrate in bright lights the inability of government officials to consistently separate market winners from losers and then bet on the winners. That’s why they shouldn’t try. The marketplace has been creating jobs long before there were state governments. It will continue to do so in the absence of subsidy programs and bureaucratic meddling in the economy.
