GM to invest $1B in Michigan after credits amended – Detroit Free Press
General Motors plans to invest $1 billion in Michigan by 2030 as part of a new deal with the state to cap the automaker’s tax credits.
Immediately, GM said today it plans to spend more than $356 million in operations in Flint, Saginaw and Grand Rapids, creating more than 50 jobs and helping to retain nearly 500 jobs in the state.
The investment announcement was part of a deal to amend tax credits under the Michigan Economic Growth Authority tax credit program.
GM said since 2009, the automaker has invested more than $9 billion in the state after GM’s bankruptcy and subsequent rebound into profitability thanks to the industry’s surging car and truck sales.
Company officials however declined to say today how much its amended tax credits are expected to be worth. GM spokesman Chris Meagher said that information is proprietary and competitively valuable information.
But similar agreements reached with Ford and Fiat Chrysler included details about how much the amended tax credits are expected to be worth under the new caps. Michigan economic development officials said they could not release the projected tax information about GM unless the automaker agreed.
The lack of information about the true value of GM’s tax credit could raise new concerns from some lawmakers in Lansing, who had been critical of the tax program that helped blow a hole in this year’s state budgets. Gov. Rick Snyder in a statement praised the deal.
The new investments according to GM will be:
Officials at the Michigan Economic Development Corp. recommended in a memo to the Michigan Strategic Fund board that the previous GM agreement under the so-called MEGA program be amended.
The change “would serve to limit and even reduce the State’s costs and provide more certainty with its long term obligations to General Motors under the Global MEGA Tax Credit. The amendment will also provide greater predictability in the amount and timing of claimed tax credits,” Christin Armstrong, senior corporate counsel & director for compliance at MEDC, wrote in a memo to the board.
The board approved in a unanimous vote today to go forward with the amended agreement and finalize its details. A draft copy of the agreement was not immediately released.
Critics say large employers cashing in credits secured years ago under previous governors and meant to spur investment and job creation helped leave the state budget short $325 million earlier this year, according to some lawmakers.
As of December 31, 2014, General Motors has retained 32,890 MEGA-eligible full-time jobs and satisfied its original investment commitment in the state, according to economic development officials. It was unclear how much the automaker was able to receive in refunds as a result of redeeming its tax credits.
“This is a strong indication of the company’s commitment to growing and maintaining its operations in Michigan for the long term,” Armstrong wrote.
The tentative agreement with GM comes on the heels of similar agreements with Ford and Fiat Chrysler.
The tax credits for FCA were originally estimated at $1.3 billion and will rise to $1.93 billion based on the value of the jobs saved with increased wages, according to officials. But the head of the state’s economic development arm said the new agreement provides more certainty and mandates greater investment — $1 billion by FCA through 2029 — in the state.
“As you know, in 2011 the MEGA tax credits were eliminated,” Steve Arwood, CEO of the Michigan Economic Development Corporation said last month. “The state, however, must honor agreements and where prudent, amend contractual arrangements.”
Arwood said the amendment to the global MEGA agreement with FCA US, which was originally authorized in October 2010, provides “budget transparency and certainty.” The change, he said, limits obligations of the state, provides periodic forecasts of estimated tax credits to help with state budgeting and cash-flow planning and reduces the term of MEGA tax credit by two years.
In addition, according to Arwood, the new agreement requires $1 billion in new capital investment through 2029, on top of FCA US’s investment of more than $4 billion since 2009.
The MEGA contracts were signed for the credits during the administrations of Governors John Engler, Jennifer Granholm and Rick Snyder, before the program ended in 2011. And the MEDC has predicted that 80% to 100% of those credits will be redeemed by the companies that got them.
Most vexing to legislators, however, was the surprise nature of the cost of the credits, which had been estimated to require a $325-million budget cut earlier this year.
In June, the state’s economic development board reached a similar agreement with Ford that could lead to job retention and an additional $3.1-billion investment from the automaker and allow the state to get a better handle on a $9.38-billion liability created by businesses cashing in the tax credits.
Historically, the redemption rate was 35%-50%. But the rate has increased to closer to 100%.
The growth in the tax credit liability will cost the state an estimated $502 million to $607 million a year through 2030, Arwood said in June.