Mackinac Center Legal Director Calls on Legislature, Law Enforcement to Scrutinize Hangar42 Deal

For Immediate Release
Thursday, June 17, 2010

Contact: Patrick J. Wright
Director, Mackinac Center Legal Foundation
Michael LaFaive
Director, Morey Fiscal Policy Initiative

MIDLAND — Mackinac Center Legal Foundation Director Patrick Wright today called for an official inquiry by the Michigan Legislature, Michigan Attorney General and the U.S. Attorney's Office into the Hangar42 state film subsidy deal in wake of troubling revelations and state silence surrounding the project.

Concerns about the purchase price of the studio, the nature of the arrangement between the seller and buyers and the level of the potential state subsidy were compounded yesterday when The Grand Rapids Press reported on a state representative's aide bragging publicly about his ability to profit from state subsidies on an unnamed film incentive deal.

"While there is no clear indication that a crime has been committed, there are enough questions surrounding this deal that the Legislature, the Michigan Attorney General and the U.S. Attorney's Office should carefully scrutinize it and take appropriate action," said Wright.

The Mackinac Center was the first to publicly raise questions about the Hangar 42 deal with an essay and investigative video posted on its website May 20. Fiscal Policy Director Michael LaFaive and Communications Specialist Kathy Hoekstra reported that the building converted into a studio was on the market for $9.8 million as late as February, but apparently sold for as much as $40 million shortly thereafter. The result was a significantly larger potential state subsidy.

"The state of Michigan, which normally makes a public spectacle out of these projects, has thrown up a Berlin Wall between information and taxpayers in this case," said LaFaive. "The governor crowed about Hangar42 in her State of the State address, so why are the involved agencies now claiming that the details of this multimillion-dollar project are a closely held secret?

"Taxpayers deserve to know how the financing of this project was structured," LaFaive added. "If the Michigan Film Office, the Michigan Economic Development Corp., the seller and the buyers are all unwilling to answer questions, the Legislature should start asking them."

LaFaive pointed to a series of unusual actions related to Hangar42. One of the buyers (some of whom have not been identified) told The Grand Rapids Press that the property was purchased on a land contract. LaFaive and Hoekstra were told by contractors hired to improve the studio that they have not been paid by the seller. The buyer told The Press that contractors would be paid once the state infrastructure credit was received.

"Why would the studio buyers pay the seller's contractors?" asked LaFaive. "And why would it be contingent on securing the state subsidy? Do legislators and the Governor want a film subsidy program that costs so much public money while avoiding serious public scrutiny? If not, they have to say so; if so, they should explain why."

Apparently, Janet Lockwood, director of the Michigan Film Office, also has qualms about the project. In an e-mail obtained by the Mackinac Center, Lockwood wrote to colleagues, "I feel completely responsible after encouraging the Gov. to mention this project. They've received not a penny but perception is all. If it will help, I'm happy to claim fault and deflect it from the front office. So disappointing, it looked so promising. But it's not. This time I am agreeing with the Mac Center."

The MFO, the MEDC, the Department of Treasury and the Office of the Governor, however, all refuse to say whether the subsidy will be awarded.