MEMORANDUM
Date:
December 21, 2011
To:
Michigan Strategic Fund Board Members
From:
Peter Anastor, Director of Policy
Subject:
Approval of the Michigan Business Development Program and the Michigan Community
Revitalization Program and their Guidelines Under Enabling Legislation and Allocation of Funds
BACKGROUND
The Michigan Business Development Program (“MBD Program”) and the Michigan Community
Revitalization Program (“MCR Program”) are new economic development incentive programs that will
replace a number of tax credit incentives that are being eliminated due to the tax restructuring and creation of
the new Corporate Income Tax. These new economic development tools are funded with a $100 million
appropriation included in the fiscal year 2012 budget bill for the Michigan Strategic Fund (Public Act 63 of
2011).
The transparent, appropriated funds will allow the MSF to continue to provide economic development
incentives for impact projects that lead to jobs and investment or help to revitalize Michigan communities.
The funding replaces existing tax credit programs, including Michigan Economic Growth Authority (MEGA)
tax credits, as well as Brownfield and Historic tax credits.
The MBD Program will provide incentives to businesses that are creating jobs and making investments in
Michigan and is designed to replace the MEGA tax credit program. The MCR Program will provide
incentives to applicants that will redevelop property in our regional urban areas and is designed to replace the
Brownfield and Historic tax credit programs. Unlike the traditional investment programs of the MSF, these
programs have the primary outcome of its return on investment in the form of community redevelopment and
creation of jobs.
Funding became available on October 1, 2011, the beginning of the 2012 fiscal year. The MSF Board will
have oversight over both of these programs and all projects funded under these programs will need MSF
approval. The MSF will also approve the guidelines and other materials necessary to operate the programs,
including application templates, agreement templates and the general processes necessary to efficiently run the
programs. The programs will be administered by the MEDC and applicants seeking funding will have to
complete an application and due diligence process that will evaluate each project.
The Michigan legislature recently passed legislation authorizing the creation and operation of the MBD
Program and the MCR Program. The programs are funded with a $100 million appropriation in the FY 12
MSF budget and include $25,000,000 from the 21st Century Jobs Trust Fund and $75,000,000 from the
General Fund. Through the authorizing legislation, the General Fund appropriation will be placed in the 21st
Century Jobs Trust Fund as well. The MSF Board may then allocate the funds from the 21st Century Jobs
Trust Fund to the MSF for each program.
The guidelines for each program were approved under the general powers of the MSF, and will be revoked by
the new resolution providing approval under the new enabling act. As such, the recommended guidelines for
each program, under the new legislation, are being presented for board approval. MEDC staff will work with
the MSF Fund Manager to develop the application and processes going forward.
MICHIGAN BUSINESS DEVELOPMENT PROGRAM
The MBD Program will provide funding to qualified businesses for impact projects that make new investment
and create jobs in Michigan. Funding will be available in the form of a grant, loan, or other economic
assistance and the disbursement of funding will be based on an agreement, which will include milestones the
business would have to meet in order to draw down funding. Each agreement will include repayment
provisions in the event a project did not proceed as promised. Each project seeking funding under this
program will be evaluated on its net positive return to the state, with higher impact projects receiving greater
consideration. Other recommended program criteria are included in the recommended program guidelines
attached to the proposed resolution for this program.
MICHIGAN COMMUNITY REVITALIZATION PROGRAM
The MCR Program will provide funding to applicants for projects that revitalize our regional urban areas.
Funding will be available in the form of a grant, loan or other economic assistance and the disbursement of
funding will be based on an agreement which will include milestones the applicant would have to meet in
order to draw down funding. This program will also include repayment provisions that are part of the
agreement in the event a project does not proceed as anticipated. Projects will be evaluated on several criteria
which are included in the recommended program guidelines attached to the proposed resolution for this
program.
RECOMMENDATION
The MEDC recommends the establishment of the MBD Program and the MCR Program and the approval of
the guidelines for each program under the new legislation, and revoke the establishment and approval under
the general powers of the MSF.
The MEDC further recommends the MSF Board request that the Michigan Department of Treasury transfer
$100 million from the Michigan 21st Century Jobs Trust Fund to the MSF for the MBD Program and the MCR
Program. Staff recommends that once funds are received from the 21st Century Jobs Trust Fund, they be
allocated to the MBD Program and the MCR Program, with at least $20 million being allocated for the MCR
Program.