MEGA Careful?

How much background research does Michigan's corporate welfare bureaucracy actually perform on the potential recipients of its selective tax breaks and subsidies? Due to recent embarrassments the amount may be increasing, but until now the answer appears to be, "Not much at all."

The latest embarrassment is a fraud charge brought by the state Attorney General against a man involved in an "assignable" (saleable) business tax credit deal for the Hangar 42 film studio scheme in Grand Rapids. This subsidy was trumpeted by Gov. Jennifer Granholm and others as a victory for the state's film incentive program until the Mackinac Center broke the story by raising questions about some of the specifics.

But this wasn't the MEDC's first major gaff this year. That belonged to the Michigan Economic Growth Authority program's approval of a $9.1 million tax credit/subsidy to convicted embezzler Richard A. Short, a felon on parole who was not even allowed to possess a credit card at the time. Short sought MEGA favors for what appears to have been a shell company he called "Renewable and Sustainable Companies, Inc," or RASCO.

The "Briefing Memo" on RASCO prepared by MEDC staffers shows just how little due diligence actually goes into the picking of these winners and losers. The board itself mostly just rubber-stamps the deal presented to them, with very few generating any substantive discussion, much less denials.

A comparison of the MEGA application submitted by Richard Short with the "History of Company" section of the official state "Briefing Memo" prepared by MEDC bureaucrats suggests that the latter just did a copy-and-paste of the PR puffery of the former, with virtually no checking, critical analysis, or even critical thinking:

RASCO Application: "RASCO has developed a unique and powerful solution called IDUN (Integrated Distributive Utilities Network). IDUN integrates the essential utilities of electricity, water, and sanitation with information and communication technologies (ICT) under a single network."

MEDC Briefing Memo: "RASCO has developed a unique and powerful solution, the Integrated Distributive Solutions Network (IDUN), which integrates the essential utilities of electricity and water with information and communication technologies under a single network."

This example involves just one of hundreds of firms that have been granted MEGA deals. How many other dubious deals have skated through the process with a similar lack of background checking? Without much greater transparency from the increasingly secretive MEDC, it is impossible to know, but with tens of millions of dollars worth of lucrative tax breaks and outright cash subsidies at stake, one would be foolish to conclude that there are none at all.

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