Michigan Taxpayers Will Lose on Ford Deal

by | Dec 5, 2023 | Opinion

By James M. Hohman

Michigan Gov. Gretchen Whitmer gave Ford $210 million in taxpayer money for its battery plant in Marshall, plus other giveaways and tax abatements. The company later said it will be building a smaller plant that will employ 1,700 people instead of the 2,500 originally announced. Taxpayers are still going to be making payments to the company regardless of how many people it employs.

Under Michigan’s business subsidy policy, companies collect money from taxpayers in the short term, and the state may ask for some of its money back if the company doesn’t create jobs. Under the deal with the state, Ford will collect two $105 million payments. The company gets the payments whether the Marshall Plant employs the expected number of people or not.

The state has the option to get some of that money back in the future if Ford does not create the 2,500 jobs it pledged. It’s unclear when that would happen. The contract runs until 2027, so perhaps in four years taxpayers will get their money back.

Or maybe they won’t get their money back at all. The state often amends deals when companies fall short of expectations. This is typically accompanied by a proportional reduction in state assistance. Yet the reduction in state payments is up to administrators and not required by state law.

Taxpayers are also going to be out the $120.3 million spent on site preparation for the company’s benefit. Some of this money is used to purchase land for the company. None of it is contingent on the company creating the expected number of jobs.

Though the state pays companies in exchange for jobs, that’s not what is in the fine print. Taxpayers lose money even when the jobs fail to materialize. The state might get some of its money back, but not all of it and maybe not any of it.

Writing big checks to big companies is a bad policy to begin with. It is ineffective at creating jobs, unfair to other businesses, and expensive to taxpayers. Lawmakers also have also written some bad terms into their bad policies. Companies can collect taxpayer money right away, regardless of whether they create the jobs they announced. If lawmakers are paying companies for jobs, they ought to tie payments to strict job-creation targets.

AMP America

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