December 4, 2023 –The Center for Economic Accountability has selected Michigan’s $1.75 billion in planned subsidies for an electric vehicle battery plant operated by a joint venture between Ford Motor Company and Chinese firm CATL as America’s “Worst Economic Development Deal of the Year” for 2023.

The award recognizes a state or municipal government subsidy of a private company in the name of “job creation” and economic growth that goes further than any other that year to exemplify the massive wastefulness and ineffectiveness of state government economic development subsidy programs.

After 2022’s record-setting pace of gigantic corporate subsidy deals, 2023 continued the dangerous trend of state and local government subsidies across the country committing billions of dollars at a time to corporate projects. Even in that environment, Michigan’s subsidy of the joint venture between Ford Motor Company and Chinese battery manufacturer Contemporary Amperex Technology Co., Limited (CATL) in rural Marshall, Mich. stood out for a unique combination of factors.  These included a massive $700,000 per-job price tag for below-average jobs; the use of unrealistic “job multipliers” to artificially justify its massive price tag and an uncertain future where success would depend on labor negotiations, consumer preferences, federal policy and technological advancements all combined to make this deal stand out from a crowded field.

However, what truly cemented the project as the Worst Economic Development Deal of the Year was the way Michigan’s political establishment responded when Marshall-area residents, small business owners and others affected by the project began expressing their concerns and asking for transparency into their state and local governments’ decisions.

In September, the Detroit Free Press broke the story that political groups tied to Michigan Gov. Gretchen Whitmer spent an estimated $100,000 in “dark money” to run a public relations campaign against local Marshall-area residents who were being inconveniently vocal in their opposition to the deal. The Free Press made the connection between the governor’s political allies and the PR campaign because it used consultants, lawyers and even phone numbers tied to Gov. Whitmer’s 2022 re-election campaign and the state Democratic Party. Campaign activities included mailing out postcards that used photos of local opponents, as well as robocalls and other professional campaign tactics.

“At the end of the day, the reported use of political consultants to run a smear campaign against skeptical local residents that really set Michigan’s subsidies for Ford’s Marshall battery plant apart from all the other terrible corporate welfare deals across the country,” said CEA president John C. Mozena. “It’s one thing for politicians to use fuzzy math to throw massive amounts of public money at a giant corporation so they can take credit with voters for so-called ‘job creation;’ we see that all the time. This award was nailed down for Michigan when a governor’s political cronies reportedly pushed out campaign-style mailers and robocalls against average, everyday people who dared to exercise their fundamental right to ask their elected officials for straight answers to questions that mattered to their community.”

The Center for Economic Accountability is an independent and nonpartisan 501(c)(3) that works for transparency, accountability and market-based reforms of state and local economic development programs across the country. 2023 is the fifth year of the award and the first time the State of Michigan or Ford Motor Company has been a recipient. It is the second electric vehicle battery plant to receive the honor, following Ohio’s subsidy of a joint venture between General Motors and LG Chem in 2020 despite decades of broken promises from General Motors at its neighboring Lordstown Assembly plant.

Last year’s award, to Georgia’s subsidies for startup EV manufacturer Rivian, also involved electric vehicles. “It’s notable that in five years, we’ve now had two electric vehicle battery plants and one EV assembly plant stand out as the worst economic development deals of their respective years, even during an era of unprecedentedly large and dumb subsidies by state and local governments,” said Mozena. “Federal industrial policies promoting politically favored technologies are driving short-sighted decisions by state and local elected officials, and communities across the country will be paying the price for those deals long after the politics and policies have moved on.”

The CEA publicly advocated against Michigan’s subsidy deal with Ford after it was announced, as it has against prior award winners and for many other projects across the country that were considered for it. CEA President John Mozena testified against the deal at the Michigan Strategic Fund meeting where the primary subsidy was approved, and also spoke at a Marshall City Council meeting regarding the plant at the invitation of local residents.

Award Background:

Massive cost:

The original $1.75 billion price tag reportedly included $630 million in road, infrastructure and site development incentives, $772 million in tax credits over a 15-year period through the Michigan Strategic Neighborhood Fund, a $120 million grant through the Michigan Strategic Site Readiness Program, a $210 million grant through the Michigan Critical Industry Program and $36 million through the Jobs for Michigan Investment Fund Loan Program.

This wasn’t what was originally sold to taxpayers, though. Less than a week after the Michigan Strategic Fund approved the original $1 billion subsidy package, the Michigan Economic Development Corporation surprised state lawmakers with a request for an additional $750 million in site selection and infrastructure improvements that had not been included in the original public discussion of the deal.

The CEA dove into Michigan’s budgets and financial reports to put the deal’s massive price tag into context, helping Michigan’s taxpayers and voters understand that $1.75 billion is:

  • More than the state paid out in unemployment benefits to every unemployed person in the state in 2021.
  • Four times more than all Michigan homeowners combined were able to deduct in homestead property tax exemptions in 2021.
  • Four times the amount of all state tax credits for low-income and at-risk households. including the Earned Income Tax Credit and property tax credits for senior citizens, veterans and people with disabilities.
  • More than a year’s worth of state government revenue sharing with the state’s municipal governments.
  • More than a year’s worth of state General Fund grants to Michigan’s colleges and universities.
  • The equivalent of three and a half decades’ worth of the state’s Farmland Preservation Tax Credit.

Minimal benefits:

The press release announcing the deal claimed “2,500 Good-Paying Jobs.” However, media reports eventually noted that the average worker at the plant would be making $20 an hour. That means an estimated 1,900 of the plant’s 2,500 workers would be expected to make just $41,600 a year, which is significantly below the $53,286 median regional or $63,202 statewide household income – hardly “good-paying” jobs worth hundreds of thousands of dollars in subsidies apiece.

Notably, even including the plant’s managerial employees to reach a $45,000 average wage for all employees at the plant would mean that the original $700,000 per-worker price tag for both direct and indirect subsidies would be enough money to cover Ford’s entire planned payroll at the plant for more than 15 years.

Unrealistic predictions:

According to Gov. Whitmer’s press release announcing the deal, the state’s economic impact predictions were based on, “an employment multiplier of 4.38, which means that an additional 4.38 jobs in Michigan’s economy are anticipated to be created for every new direct job, due to the extensive supply chain that exists in Michigan.” However, you only need to go fewer than 40 miles from the Marshall site to find one of the nation’s leading experts in the use of these kinds of economic impact multipliers, Dr. Timothy Bartik of the W.E. Upjohn Institute for Employment Research in Kalamazoo. In 2019, Bartik released a definitive assessment of the real-world results of multipliers, which found that it’s more realistic to use multipliers on the order of 1.5 at the local level or 2.0 at the state level, with a multiplier as high as 3.0 potentially being justified in dense high-tech clusters such as Silicon Valley.

In other words, the claimed return on investment for Michigan’s deal with Ford relied on future job creation predictions that were inflated far beyond what they should have been. Bartik would effectively confirm this in November 2023, when his analysis of the deal found that, “if the Ford project had a more typical multiplier—2.5 rather than 4.38—the project’s gross benefits would be less than the incentive costs.”

Uncertain future:

In September, Ford paused the project in response to a combination of factors that called its long-term value to the company into question.

 These included a United Auto Workers strike that included the issue of union representation at automakers’ joint-venture battery plants, lower-than-hoped consumer demand for electric vehicles and ongoing regulatory uncertainty over whether Chinese battery maker CATL’s role in the joint venture would make vehicles produced using the plant’s batteries ineligible for $7,500 federal tax credits for American-made EVs.

For these and other reasons, Ford announced on November 21st – just 280 days after the project was unveiled to the public –that it was “right-sizing” the plant with a 42% decrease in planned production and cutting 800 jobs from its future hiring plans there.

“Michigan’s elected officials used numbers pulled out of thin air to commit taxpayers to a 15-year payment plan for a project that held up for just nine months before economic headwinds, regulatory uncertainty and industry trends intervened with a dose of reality,” said Mozena. “If a private-sector financial advisor or fund manager had made this kind of hilariously unjustifiable investment with their clients’ money they’d have been fired, sued and would probably already be in jail. When politicians do it, they get reelected.”

Previous “Worst Economic Development Deal of the Year Award” winners:

About The Center for Economic Accountability:

The Center for Economic Accountability (CEA) is a nonpartisan and independent 501(c)(3) nonprofit organization that works to advance economic opportunity for all by promoting transparency, accountability and free-market-based reform of state and local economic development initiatives across America. Headquartered in Michigan, the CEA was founded in 2018. For more information, visit https://economicaccountability.org/.

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