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Chamber-Supported Economic Development Bills Move to Governor’s Desk

Advocacy News – December 15, 2021

Late last night, the House and Senate put the finishing touches on a new, bipartisan economic development fund and structure designed to make Michigan more competitive for jobs and investments and set Michigan up for long-term economic success.

The bills, which were supported by the Michigan Chamber and many other business groups, were negotiated over the weekend with the Governor. She is expected to sign the measures in the coming days.

The bill package is broad, diverse and inclusive. There’s something in the bill package for big and small businesses across all industries and urban and rural areas – and importantly, the bills are focused on attracting and retaining jobs in Michigan. The package is different from economic development bills passed in the past; they were crafted to put Michigan in a more competitive position as it relates to job creation and retention, but balance that with transparency, legislative oversight and efficiency.

The bills are timely, given there are a few transformational projects in the pipeline that Michigan would like to secure, projects that may be announced as early as January.  But the bills are broader than just these projects and create a framework for the state to use to help lock in other opportunities in the future.

Here’s an overview of what was approved:

  • New Strategic Site Readiness Fund to support business attraction efforts in both rural and urban areas (House Bill [HB] 5603).  This legislation creates a strategic site readiness program to provide grants, loans and other economic assistance for the purpose of creating investment-ready sites to attract and promote investment in this state.  It could be used for items such as land acquisition, site preparation, infrastructure improvements, demolition or rehabilitation of a site, environmental remediation and some fees related to engineering, surveying or architecture. This bill is important because site availability and readiness are key deciding factors for companies when considering future growth and expansion opportunities.  The bill permits the site readiness fund to be used for large and small parcels of land across the state.
  • New Critical Industry Fund to secure long-term growth and opportunity (Senate Bill [SB] 771).  This legislation creates a critical industry investment fund that will allow Michigan to use financial resources efficiently by providing support to businesses critical to closing deals and creating and preserving qualified jobs in the state while generating significant capital investment. It could be used to pay for costs such as gap financing, deal-closing or workforce training. When considering an application, the Michigan Strategic Fund has to consider several criteria for a project, including:
    • Its importance to the community;
    • Whether it will be a catalyst for further community revitalization;
    • Amount of local community and financial support;
    • Financial need;
    • Re-use of vacant buildings or blighted properties;
    • Creation of new jobs; and/or
    • Overall return on investment.
  • Legislative oversight of economic development projects (SB 769). These bills create The Strategic Outreach and Attraction Reserve (SOAR), which would be funded by the Legislature only after an open and transparent process. It would distribute money to the proposed Michigan Strategic Site Readiness Fund and the Critical Industry Fund to aid in the development of sites and the creation of jobs. The state could not make any investments without a legislative appropriation.  It is important to note that this type of financial oversight is different than other business incentive programs handled by the Michigan Economic Development Corporation (MEDC).

The final versions of the bills (SBs 769 and 771 and HB 5603) passed by a vote of 81-22 in the House and 25-11 in the Senate.

In terms of funding for the site readiness and critical industry programs, the Legislature worked in a bipartisan fashion to appropriate $1 billion to fund the program (SB 85).  The appropriation is intended to allow the state to put attractive economic development packages on the table.  However, to ensure the funds are being used appropriately, each program has claw-back and audit provisions to ensure the companies meet and maintain promises in their grant or loan agreements, including project dates and benchmarks.  The appropriations bill passed by a vote of 78-25 in the House and 25-11 in the Senate.

Finally, the package also provides support for small businesses:

  • $409 million in financial relief for companies disproportionately afflicted by the pandemic. The aid, which is similar to two other proposals previously pushed by the Chamber and vetoed by the Governor, requires the state manage an afflicted business relief grant program to distribute funds to eligible businesses. The individual grants could not surpass a business’ financial hardship and could not exceed $5 million. Under the legislation, an afflicted business is defined as a non-tax-exempt nongovernmental entity that experienced financial hardship because of the COVID-19 pandemic. The legislation describes a financial hardship as a decline in total sales capped at the sum of property taxes or 17% of lease costs, plus 50% of unemployment insurance taxes, plus liquor license fees, plus food inspection fees, plus State license or inspection fees. For businesses operating as of October 1, 2019, the amount of grant funding available is based on the reduction in gross receipts the establishment incurred. For example, if a business incurred a loss of 20% in their gross receipts during 2020, they would be eligible for the entirety of the individual grant. Businesses falling into the following categories are eligible to apply for the funding relief:
      • Entertainment venue, an exercise facility, a food service establishment, a recreational facility or place of public amusement, a cosmetology or barber services provider, a nursery dealer or grower, an athletic trainer, a body art facility, or a hotel or bed and breakfast with the first four of those terms being defined as well. Recreational facility or place of public amusement would include amusement parks, arcades, bingo halls, bowling alleys, casinos, nightclubs, skating rinks, water parks and trampoline parks.
    • The grant program was included in the appropriations bill (SB 85), which passed by a vote of 78-25 in the House and 25-11 in the Senate.  This relief is supported by federal American Rescue Plan Act (ARPA) dollars.
  • Personal Property Tax (PPT) exemption for small businesses.  House Bill 5351 would increase the Personal Property Tax (PPT) exemption from $80,000 to $160,000.  The PPT is a yearly tax on businesses for all real and tangible property (furniture, computers, etc.).  It is paid to a company’s local taxing authority.  In 2024, legislation was passed to include a small business exemption of $80,000.  This amount was a cliff; if a company exceeded $80,000 by even just $1 dollar, it would no longer be eligible for an exemption.  Increasing the PPT exemption to $160,000 would help small businesses throughout Michigan from paying this administratively complex and onerous tax on items that have already been taxed. This bill passed the House by a vote of 58-45 and 21-15 in the Senate.

Please contact the Chamber’s advocacy team with any questions at info@michamber.com.

Advocacy News – December 15, 2021

Late last night, the House and Senate put the finishing touches on a new, bipartisan economic development fund and structure designed to make Michigan more competitive for jobs and investments and set Michigan up for long-term economic success.

The bills, which were supported by the Michigan Chamber and many other business groups, were negotiated over the weekend with the Governor. She is expected to sign the measures in the coming days.

The bill package is broad, diverse and inclusive. There’s something in the bill package for big and small businesses across all industries and urban and rural areas – and importantly, the bills are focused on attracting and retaining jobs in Michigan. The package is different from economic development bills passed in the past; they were crafted to put Michigan in a more competitive position as it relates to job creation and retention, but balance that with transparency, legislative oversight and efficiency.

The bills are timely, given there are a few transformational projects in the pipeline that Michigan would like to secure, projects that may be announced as early as January.  But the bills are broader than just these projects and create a framework for the state to use to help lock in other opportunities in the future.

Here’s an overview of what was approved:

  • New Strategic Site Readiness Fund to support business attraction efforts in both rural and urban areas (House Bill [HB] 5603).  This legislation creates a strategic site readiness program to provide grants, loans and other economic assistance for the purpose of creating investment-ready sites to attract and promote investment in this state.  It could be used for items such as land acquisition, site preparation, infrastructure improvements, demolition or rehabilitation of a site, environmental remediation and some fees related to engineering, surveying or architecture. This bill is important because site availability and readiness are key deciding factors for companies when considering future growth and expansion opportunities.  The bill permits the site readiness fund to be used for large and small parcels of land across the state.
  • New Critical Industry Fund to secure long-term growth and opportunity (Senate Bill [SB] 771).  This legislation creates a critical industry investment fund that will allow Michigan to use financial resources efficiently by providing support to businesses critical to closing deals and creating and preserving qualified jobs in the state while generating significant capital investment. It could be used to pay for costs such as gap financing, deal-closing or workforce training. When considering an application, the Michigan Strategic Fund has to consider several criteria for a project, including:
    • Its importance to the community;
    • Whether it will be a catalyst for further community revitalization;
    • Amount of local community and financial support;
    • Financial need;
    • Re-use of vacant buildings or blighted properties;
    • Creation of new jobs; and/or
    • Overall return on investment.
  • Legislative oversight of economic development projects (SB 769). These bills create The Strategic Outreach and Attraction Reserve (SOAR), which would be funded by the Legislature only after an open and transparent process. It would distribute money to the proposed Michigan Strategic Site Readiness Fund and the Critical Industry Fund to aid in the development of sites and the creation of jobs. The state could not make any investments without a legislative appropriation.  It is important to note that this type of financial oversight is different than other business incentive programs handled by the Michigan Economic Development Corporation (MEDC).

The final versions of the bills (SBs 769 and 771 and HB 5603) passed by a vote of 81-22 in the House and 25-11 in the Senate.

In terms of funding for the site readiness and critical industry programs, the Legislature worked in a bipartisan fashion to appropriate $1 billion to fund the program (SB 85).  The appropriation is intended to allow the state to put attractive economic development packages on the table.  However, to ensure the funds are being used appropriately, each program has claw-back and audit provisions to ensure the companies meet and maintain promises in their grant or loan agreements, including project dates and benchmarks.  The appropriations bill passed by a vote of 78-25 in the House and 25-11 in the Senate.

Finally, the package also provides support for small businesses:

  • $409 million in financial relief for companies disproportionately afflicted by the pandemic. The aid, which is similar to two other proposals previously pushed by the Chamber and vetoed by the Governor, requires the state manage an afflicted business relief grant program to distribute funds to eligible businesses. The individual grants could not surpass a business’ financial hardship and could not exceed $5 million. Under the legislation, an afflicted business is defined as a non-tax-exempt nongovernmental entity that experienced financial hardship because of the COVID-19 pandemic. The legislation describes a financial hardship as a decline in total sales capped at the sum of property taxes or 17% of lease costs, plus 50% of unemployment insurance taxes, plus liquor license fees, plus food inspection fees, plus State license or inspection fees. For businesses operating as of October 1, 2019, the amount of grant funding available is based on the reduction in gross receipts the establishment incurred. For example, if a business incurred a loss of 20% in their gross receipts during 2020, they would be eligible for the entirety of the individual grant. Businesses falling into the following categories are eligible to apply for the funding relief:
      • Entertainment venue, an exercise facility, a food service establishment, a recreational facility or place of public amusement, a cosmetology or barber services provider, a nursery dealer or grower, an athletic trainer, a body art facility, or a hotel or bed and breakfast with the first four of those terms being defined as well. Recreational facility or place of public amusement would include amusement parks, arcades, bingo halls, bowling alleys, casinos, nightclubs, skating rinks, water parks and trampoline parks.
    • The grant program was included in the appropriations bill (SB 85), which passed by a vote of 78-25 in the House and 25-11 in the Senate.  This relief is supported by federal American Rescue Plan Act (ARPA) dollars.
  • Personal Property Tax (PPT) exemption for small businesses.  House Bill 5351 would increase the Personal Property Tax (PPT) exemption from $80,000 to $160,000.  The PPT is a yearly tax on businesses for all real and tangible property (furniture, computers, etc.).  It is paid to a company’s local taxing authority.  In 2024, legislation was passed to include a small business exemption of $80,000.  This amount was a cliff; if a company exceeded $80,000 by even just $1 dollar, it would no longer be eligible for an exemption.  Increasing the PPT exemption to $160,000 would help small businesses throughout Michigan from paying this administratively complex and onerous tax on items that have already been taxed. This bill passed the House by a vote of 58-45 and 21-15 in the Senate.

Please contact the Chamber’s advocacy team with any questions at info@michamber.com.