Michigan's $256 Million in Incentives
Helps Spur GM's $1 Billion Investment
Michigan, continuing the aggressiveness that's made it a potent business expansion player, has landed another behemoth. State and local governments put together a US$256 million incentive package that helped entice General Motors (www.gm.com) to build two plants just outside Lansing. The two plants will add 2,800 jobs to GM's Lansing-area work force.
In some ways, it was déjà vu all over again for Lansing. In January, GM broke ground on a $558 million luxury car plant in the Lansing area.
One key part of the incentive package only fully took shape on June 6.
That was the day that Gov. John Engler signed into law a bill that allows the Michigan Economic Growth Authority (MEGA), which is administered through the Michigan Economic Development Corp. (medc.michigan.org), to award tax credits to existing employers that locate in a brownfields area. Previously, brownfields redevelopment tax credits could only be granted to employers who brought new jobs to an area.
Commented Engler, "This project wouldn't have been possible without the support of the Michigan Legislature. Their approval of legislation, which allows the MEGA credit to be used for job retention, kept more than 28,000 jobs in our state. This is a tremendous victory for Michigan and Lansing area workers and businesses." (According a University of Michigan study, GM's newest investment in the Lansing area will retain an estimated 28,561 combined direct and indirect jobs in Michigan.)
Putting the revised legislation into play in a major way, MEGA awarded GM a job creation tax credit worth an estimated $61.8 million over a 20-year span.
Smart players, of course, don't make location decisions on incentives alone. At most, the savvy ones use incentives only as a tiebreaker between sites of equal quality that meet the business case.
GM, history suggests, is certainly a knowledgeable operator when it comes to site selection. Nonetheless, the incentive package, particularly the extension of the brownfields job-creation tax credits, certainly seems to have made an impression.
After the entire incentives package was made public, GM spokesman Jim Hopson commented, "This goes a long way toward GM making the valid business case for making the investment in Delta Township." (Lansing is part of the Delta Township.)
Commenting after the GM Board of Directors officially approved the expansion that the automaker has earlier proposed, Lansing Mayor David Hollister said, "This announcement marks the completion of our committee's efforts in obtaining a second plant. Throughout this process, every marker we were required to complete was met on time.
"We have set the stage for this community to become the only community in the world with two new automotive manufacturing facilities," Hollister added.
GM's incentives are unquestionably hefty, with the state foregoing some $62 million in revenue. An analysis from the governor's office, however projects a considerable payoff. State officials say that Michigan will reap more than $1.8 billion in revenue over the life of the MEGA agreement.
As a result, Michigan will realize a net positive gain of more than $1.74 billion after the credits are subtracted, according to the analysis from the governor's office.
In addition, the new GM project in Lansing is expected to generate more than $22.5 billion in personal income.
Hopson says the GM expansion will take place on 1,300 acres (520 ha.) of leased farmland near I-69 and I-96 outside Lansing.
One of the new facilities, a stamping plant, could open as early as 2002, company officials say. That facility would supply sheet metal not only to the new assembly plant that GM will build in the Lansing area, but also to other GM assembly plants in the region.
GM's new assembly plant in Lansing is scheduled to open late in 2003, Hopson said. GM officials say that the company has not yet decided what kind of vehicles the new Lansing assembly plant will produce.
Here's a capsule look at some of the other major planks in GM's $256 million incentives package:
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