News Story

State Agency Approves Subsidy Deals Despite Repeated Shortcomings

Hyundai Tech Center

In 2003, the Hyundai Tech Center in Superior Township was approved for up to $22.2 million in state incentives with the claim 400 jobs would be created.

Two years later, Hyundai Tech Center officials announced they were going to expand the facility and add 600 more jobs; the state offered $32.6 million more in incentives.

However, only 124 jobs have come to fruition, according to company officials, far short of the projected 1,000 that were touted in the two deals with the Michigan Economic Development Corp.

Yet, despite only a fraction of the projected jobs becoming a reality at the company's Washtenaw County campus, the state still gave the Hyundai Tech Center another $2.5 million in state incentives in 2012 as part of the Michigan Business Development Program (which is part of the MEDC), with the state supporting the decision in part by citing the company's claim the money would create 50 jobs. State officials also touted the Hyundai deals to Asian government officials to try to get more companies to locate operations in Michigan.

Hyundai is far from the only company to fall short of job projections while receiving state subsidies.

Five green solar companies all failed to live up to the number of jobs they projected they would create with state subsidized projects. And in a high-profile failure, electric car battery maker A123 Systems was approved for more than $140 million in tax credits, tax breaks and other subsidies before filing for bankruptcy in 2012.

Hyundai officials said the automaker is a global company with options to locate and take their $80 million in investment anywhere in the nation.

"We could have built that (technical center) anywhere," said Hyundai Spokesman Miles Johnson. "We chose Michigan."

And Mark Torigian, general counsel for Hyundai, said not living up to the number of jobs created was not a liability to the state. The state's incentives paid tax credits when the company hired people, he said.

"If the company doesn't do it, it doesn't cost the state anything," Torigian said.

James Hohman, assistant director of fiscal policy for the Mackinac Center for Public Policy, said there are about 800,000 jobs created in the state each year that do not require taxpayer money.

One of the problems with the state's incentivizing program is that it doesn't have any accountability to claims made by companies, Hohman said.

The Hyundai Tech Center was 0-for-2 in its jobs claims and still got a third incentive, in part based on more jobs claims, he said. Often the state trumpets these deals and job announcements realizing that the company has a track record of falling far short of its projections.

"The MEDC should know these things rarely work out," Hohman said. "You should take these things with a grain of salt. They don't take it with a grain of salt. They pull out the margarita glasses."

Kathy Fagan, spokeswoman for the MEDC, didn't respond to a request for comment.


See also:

CapCon Coverage of the MEDC

Rosy Solar Jobs Projections Fail To Live Up To The Hype

Spotty Track Record Doesn't Stop State Agency From Doling Out Deals

GM Asks for More Tax Incentives

Economic Development a Campaign Tool

MEGA, the MEDC and the Loss of Sunshine

Job Numbers Vary Widely for Taxpayer Funded Electric Car Battery Maker A123 Systems

A123 Logs Its Own List Of Failures

Michigan Home to Half of the Largest Bankrupt Green Energy Companies

A123 Files For Bankruptcy - Yet another failure of central planning

Bankrupt Solar Company Stimulus Money Missing From Federal Records