Another tax break application just doesn't add up.
(Permission to rebroadcast in whole or in part is hereby granted. A courtesy super or CG crediting the Mackinac Center would be appreciated.)
"Michigan has defeated Texas in the race to land a brand-new plant that builds solar panels. That company, GlobalWatt, will be opening right here in mid-Michigan," WNEM TV5 reported on Dec. 16, 2009.
On the surface, the headlines in December 2009 were joyous. Solar-panel maker GlobalWatt would set up in Saginaw. The governor even highlighted the so-called "victory" in her State of the State address.
"In fact, GlobalWatt literally left Silicon Valley in California to set up shop in an abandoned auto plant in Saginaw," the governor said.
One published report said the deal was made possible by $42 million in tax breaks from both the state and the city of Saginaw. GlobalWatt executives have been using the news of those tax awards as a selling point to investors.
The Mackinac Center looked into the applications for Michigan tax credits. Center Fiscal Policy Director Michael LaFaive found the information GlobalWatt submitted to the state just doesn't add up.
"For instance, both of the applications argue that the state of Texas and a local unit of government in Texas — what we know to be Corpus Christi — had offered substantial upfront cash incentives. We know that to be false," LaFaive said.
A spokesperson for the Corpus Christi Regional Economic Development Corp. told the Mackinac Center that "We did not offer 'upfront' cash." The spokesperson clarified that while Corpus Christi did offer grants, they were performance-based only.
And then there's the timing. GlobalWatt submitted one application for Michigan tax credits in November, the other in December. Again, both contained claims that Texas had tax incentive offers on the table.
LaFaive stated: "However, public records indicate that those incentives, that incentive offer, was withdrawn long before the CEO of GlobalWatt signed the application saying that there were these incentives available to them. In addition, with regard to the state of Texas, another application was signed by the CEO of GlobalWatt that also said that these incentives were available, even though he would have received a rejection letter for the request for incentives weeks before he'd even signed on the MEGA application. So again, that's just two, now, inconsistencies that we see in the MEGA application."
GlobalWatt's dubious claims on its Michigan tax credit applications is the latest in a string of high-profile cases of blunders involving the Michigan Economic Growth Authority, or MEGA, and the Michigan Economic Development Corp., which administers the MEGA program.
"In March of this year, we learned that Richard A. Short had been approved for a refundable tax credit equal to about $9.1 million through the state's MEGA program," LaFaive said. "It was discovered shortly thereafter that Mr. Short was actually a convicted felon out on parole, who wasn't even allowed to possess a credit card, as part of his parole agreement."
Then in May, the Mackinac Center uncovered alleged fraudulent activity involving tax credits for a proposed West Michigan film studio. Like GlobalWatt, it was touted by the governor in her State of the State address:
"And in Grand Rapids, it's Hangar42 Film Studios," Gov. Jennifer Granholm said.
"We uncovered some discrepancies between the amount of money that was claimed to have been invested in the film studio and the actual cost of the building," LaFaive said. "Subsequent research by the state actually led to a single fraud charge [against] the alleged buyer, Joe Peters."
LaFaive says the questions raised by the Mackinac Center about GlobalWatt's tax credits prove the state has not followed through on promises to more carefully screen its applicants. Those promises included scrutinizing agreements reached prior to the Richard Short-RASCO deal in March.
"Now we have this GlobalWatt deal, which they even said on record they had investigated retroactively after the deal had been signed, because, in part, of the Richard Short embarrassment," said LaFaive. "Now we know that it appears they did not really look too deeply into the matter. You know, I discovered these inconsistencies between what was said on the application and what we now know to be true, simply with a few phone calls to Texas and a Google search. The data was available — all you gotta do is look for it."
GlobalWatt did not return calls from the Mackinac Center.
LaFaive points out while rooting out any malfeasance involving tax credits is important for taxpayers, it's only part of the solution to an overall larger problem.
LaFaive said: "Even if these deals had not bubbled to the surface and been exposed, the program itself is a failure, and the empirical evidence is pretty clear. So on balance, we argue that the program could be eliminated, and should be eliminated, in favor of across-the-board tax cuts for all businesses, and not a favored few."
Kathy Hoekstra is a communications specialist at the Mackinac Center for Public Policy. The Mackinac Center for Public Policy is a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.