LANSING – The size of tax credits General Motors can claim annually and in total through the remaining life of a large, Michigan Economic Growth Authority credit the state provided it in 2009 would be capped, but GM declined to reveal by how much and state officials said it is up to GM to disclose the number, so it would not do so.
Unanimous approval Tuesday from the Michigan Strategic Fund board for an amended agreement with General Motors on its MEGA credit made GM the last of the Detroit Three automakers strike a deal with the state on amending the Michigan Economic Growth Authority credits provided to the companies during the height of the Great Recession.
Unlike the revised deals with Fiat Chrysler Automobiles and Ford Motor Company, however, key details of the agreement were not made public. At GM’s request, the MSF board refused to reveal the amount at which GM’s MEGA credit had been capped. All that was revealed on that portion of the amended agreement was that the state’s obligations under the credit would be capped and include those credits already issued.
Chrysler’s credit was capped at $1.9 billion for the entire life of the credit ($1.71 billion for the remaining duration of the credit). And Ford’s credit (two credits were combined into one) was capped at $2.3 billion for the life of the credit.
Seeking agreements to amend large MEGA credits awarded with the state’s economy in dire condition in 2009-10 has been a top priority for the administration of Governor Rick Snyder. A year ago, the improving economy led to an unexpected rush of companies to claim those credits because they were meeting the required growth in jobs to qualify. That prompted some mid-year budget cuts and accounting maneuvers.
According to a document to the MSF board, the amendment would not increase the state’s liability to GM and would “serve to limit and even reduce the state’s costs.” GM officials said the amount of the cap is proprietary, and Michigan Economic Development Corporation officials said they had released the amount of the Chrysler and Ford credits only because those companies authorized them to do so.
Also part of the amended agreement is a pledge from GM to provide regular forecasts to the state of its estimated tax credits and that the company would not claim a credit in a tax year exceeding the estimated tax credit forecast for the year.
GM also agreed to $1 billion in capital investment in the state during the remaining life of the credit.
Under the original GM credit, the company was to receive a MEGA credit for 20 years if it retained a maximum of 30,000 jobs at its Michigan facilities. That was later amended to allow for a maximum of 34,750 retained jobs. As of December 31, 2014, according to the Strategic Fund, GM had retained 32,890 MEGA-eligible full-time jobs.
MEDC CEO Steve Arwood said the state now has no more MEGA credit amendments under negotiation though it will review others for possibilities next year. In the early spring, the MEDC estimated the outstanding MEGA credit liability at $9.38 billion. After the changes to the Detroit Three automaker credits, Mr. Arwood said he is hopeful that amount will drop, but it will take some time for the agency to review how the changes affect the overall liability.
Not only have the automakers lived up to their obligations under the credit agreement in jobs retained, but the state now will have more certainty on the amount of credits they can claim annually to add certainty to the state budget, Mr. Arwood said.
“I think the state got a really good deal here,” he said.
As to not disclosing the new value of the credit, Mr. Arwood said under the Strategic Fund Act, GM has the right to make that call.
“The company’s requested that I acknowledge that that’s confidential and proprietary,” he said. “I’ve acknowledged that because how do I question that.”
GM spokesperson Chris Meagher said the company considers the value of the credit proprietary and competitively sensitive because it is based off employees’ tax withholdings.
“So we don’t release that number,” he said.
Meagher said GM was willing to renegotiate some aspects of the credit with the state because the company wants to assist Michigan in its economic recovery.
“We are happy to have this amended agreement,” he said. “We are happy to be able to invest in Michigan.”
Rep. Jeff Farrington (R-Utica), chair of the House Tax Policy Committee, said he personally saw what the state’s outstanding liability was to GM, but that figure was never formally presented to his committee during hearings earlier this year.
“In my opinion, and this is just my opinion, if taxpayers are providing large tax breaks then it should be (public),” he said.
Arwood, asked about the public interest in knowing GM’s potential credit, said the important thing is the total and annual caps the credit puts in place.
“So for the public, there should be no further surprises,” he said.
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