In light of the growing secrecy surrounding the Michigan Economic Growth Authority, the Mackinac Center has posted on its Web site a public database on MEGA-related deals. The database, posted at http://www.mackinac.org/depts/fpi/mega.aspx, represents a convenient repository of original information on deals made and jobs promised by MEGA and MEGA recipients. Much of the information, secured from dozens of FOIA requests, is not readily available to the public or to state policymakers.
The data go back to April 1995 and it will be updated by Center staff on a regular basis. The database consists of the primary informational paperwork for each MEGA deal, including:
- Briefing memoranda (an MEDC summary of each deal);
- "Economic effects" reports (summaries of economic impact analyses made primarily by University of Michigan economists under contract with the state); and
- MEGA tax-credit agreements (the binding but amendable agreement between MEGA and each corporate or business recipient's representative).
Visteon as an Example
Here's an example of one way the database can be useful: Consider the announcements that Lear, Visteon and Metaldyne corporations have filed for bankruptcy. Reporters, legislators, bloggers and taxpayers can learn from the database that all three firms had been declared MEGA "winners" by the Authority's board and the MEDC. (General Motors itself has probably achieved MEGA's all-time "winner" status, having been offered a record 10 deals.)
From the database, users could also discover that failure to achieve job goals was not a new thing for these firms, and that MEGA officials erroneously predicted that the 2001 Visteon deal would result in 75 net new jobs by 2005 and 475 new jobs by 2008. University of Michigan economists, under contract with the state to forecast the "spin-off" jobs associated with the deal, predicted that the economic activity surrounding this deal would result in 808 new jobs through 2016.
See Graphic 8 for output from MEGA's "economic effects" report for Visteon. These figures provide a baseline for determining Visteon's success or failure after it received its MEGA deal.
Graphic 8: Sample “Economic Effects” Report (Visteon Corp.)
Source: Michigan Economic Development Corp., 2001.
In particular, look at the predictions of year-by-year job creation. We now know that in reality, each of these lines in the original report should have said "0." (Arguably, the numbers should even be negative, because the state spent millions for road improvements specifically benefitting the firm — money that could have been spent creating actual jobs elsewhere.)
Under the terms of MEGA agreements with firms, tax credits are delivered as rewards for actually creating promised jobs. Visteon never collected a single one of those tax credit rewards, because it never created any of the promised jobs. As shown in the MEDC summary "MEGA Credits" spreadsheet and "MEGA Credits vs. Conversions — All Companies for all Years" report, the record is clear, though the former spreadsheet is easier to read. We have posted a copy on the Center Web site as an example.
Despite the fact that Visteon claimed no credits, this MEGA deal wasn't "free" to taxpayers. As mentioned, part of the agreement included the MEDC using its authority to arrange up to $5 million in road improvement work at the new Visteon facility.
Moreover, the MEGA statute originally mandated that local units of government make incentive contributions too. As part of the Visteon deal, Van Buren Township offered property tax relief worth up to $31.1 million over 12 years, and Visteon was able to start claiming that relief immediately for a jobs deal that failed to materialize.[*] To date, Visteon has enjoyed more than $9.6 million in local abatements resulting from the failed MEGA deal.
Of course, MEGA's poor performance in these cases has been influenced by the general decline in the automobile industry. Still, the job of MEGA and the MEDC is to assess the marketplace and determine which businesses to help in order to promote state economic growth. It hardly reflects well on the program that MEGA officials and state-hired economists, who sometimes provide MEGA forecasts stretching out 20 years, cannot envision MEGA firms filing for bankruptcy as little as 15 months after winning a MEGA deal, as occurred with Kmart.
The preceding suggests why a database like the one created by the Mackinac Center is desirable — and why government transparency on the MEGA program should remain a priority for policymakers.
[*] This was not the only MEGA agreement with which Visteon was associated. In 2004, MEGA offered a deal to Atlantic Automotive Components LLC, a company that was 70 percent owned by Visteon, according to MEDC documents. This firm too has been unable to collect on the employment tax credit it was offered.