For more information about the failures of
Michigan’s economic development gurus to pick winners and losers in the marketplace, please see www.mackinac.org/10901
(Editor’s note: This is an edited version of a
commentary that appeared in Capitol Confidential on Jan. 6, 2012.)
The recent news that Michigan corporate welfare
“winner” GlobalWatt was evicted from its Saginaw headquarters for nonpayment of
rent is a reminder that even when no taxpayer cash changes hands,
government “incentive” programs can hurt real people in a number of ways.
GlobalWatt is a solar energy company that won a
state and local government tax break/subsidy deal that could have been worth as
much as $42 million had the company met performance milestones. The deal was
trumpeted by announcements from the company and Michigan corporate welfare
officials of “500 potential Saginaw jobs” at a time when state unemployment was
Several solar power companies that were approved for state taxpayer subsidies have either not lived up to expectations or are no longer operating, including Evergreen Solar, Suniva, Energy Conversion Devices and United Solar Ovonics.
The approval of these incentives by state economic
development “experts” misled taxpayers, investors, job seekers and local
leaders by lending credibility to a business plan that was apparently deeply
flawed on many levels. GlobalWatt itself was well aware of this effect, and
For example, a company PowerPoint presentation to
investors included two references to state backing. A slide titled “Why Solar,
Why Today, Why GlobalWatt?” lists “state and local incentives” as one of its
four major themes. Another slide reads, “State of Michigan has offered
GlobalWatt significant financial incentives to locate its first plant and is
fully supporting the company in its fundraising efforts.”
GlobalWatt also sent (at least) one Michigan
investor printed news stories about its state incentive deal that included
screenshot photos of the company’s CEO with Gov. Granholm from televised news
That investor, Ed Rahe of EAC Investment, led a
larger group of investors that initially placed $100,000 in the firm.
But Rahe explained to this author how the
government incentives were part of his rationale for this investment: “(W)hen I
saw Granholm’s picture … my thinking was, golly, $42 million dollars we were
getting from the state — we should, we should be taking advantage of that as
investors. You know, it’s going to save us $42 million dollars over five years
…” [Emphasis added].
In other words, state inducements for GlobalWatt
persuaded private investors to risk their dollars on a corporate welfare
project that ultimately collapsed; and one in which the Mackinac Center had
been an early skeptic. This was not the only time GlobalWatt would use the state’s imprimatur to gull the public.
It wasn’t just financial investors who were hurt.
Jobseekers attracted by the firm’s over-inflated prospects may have taken
unnecessary training at taxpayer expense. Delta College’s “Solar Manufacturing
FAST Start Program” trained eight students for GlobalWatt using a Michigan
The training lasted eight hours a day, four days a
week for months, but only two were ultimately hired by the company — and even
then through a temp agency. They did not actually become GlobalWatt employees.
The good news, according to Delta College, is that some found work elsewhere in
One local investor, Dr. Debasish Mridha, used a
GlobalWatt investment to promote his run for the state Senate. A campaign press
release read, “Local Doctor Invests $100,000 in Green Energy Economy, Creates
To this would-be lawmaker’s credit, he invested
only his own money in the firm, not dollars taken from his neighbors. Unfortunately, legislators who vote for corporate welfare handouts, and bureaucrats who hand them out, do just the opposite.
This is not an isolated incident, either. Several
solar power companies that were approved for state taxpayer subsidies have
either not lived up to expectations or are no longer operating, including
Evergreen Solar, Suniva, Energy Conversion Devices and United Solar Ovonics.
According to the Bureau of Labor Statistics, about 1,200 solar-energy related
jobs were created in Michigan in 2010 — compared to a statewide workforce of
about 3.8 million.
Michigan taxpayers can be grateful that the Snyder
administration has greatly scaled back Michigan’s entire corporate welfare
industrial complex. But until it is eliminated altogether, the special favors
and handouts are likely to create more victims, taxpayers among them, who may
never even know they’ve been taken for a ride.
Michael D. LaFaive is director of the Morey
Fiscal Policy Initiative at the Mackinac Center for Public Policy, a research
and educational institute headquartered in Midland, Mich. Permission
to reprint in whole or in part is hereby granted, provided that the author and
the Center are properly cited.