Site development and infrastructure grants:
Grants for public infrastructure improvements are made available to local communities that have an identified company that can commit up-front to job creation. An award of up to $10,000 for each new job created by the company can be given for 90 percent of the total infrastructure cost. The Michigan Community Development Block Grant (CDBG) program funds grants and loans for economic development, downtown and gateways, community development and planning, and discretionary projects that meet a federally required national objective to either provide direct benefit to low- and moderate-income people or to eliminate slum and blight. The fund provides money for public infrastructure improvements (water, sewer, roads).
Private Activity Bonds are tax-exempt instruments issued on behalf of the borrower by the Michigan Strategic Fund and purchased by private investors. These loans can be used for made-for-manufacturing and not-for-profit corporation projects and company-specific solid waste facilities and waste disposal facilities that dispose of waste through recycling. Bond proceeds can only be used to acquire land and buildings and for acquisition and installation of new machinery and equipment, not for working capital or inventory. These bonds are generally used when financing of $1 million and higher is required. The company for which the bond is issued must be creditworthy enough to attract a buyer for the bonds, because the state does not guarantee the bonds. The purchaser of an existing manufacturing facility must devote 15 percent of the bond proceeds to renovation of the existing facility and equipment.
New markets tax credit program:
The Michigan Magnet Fund (MMF), a partnership between the Michigan Economic Development Corporation (MEDC), the Michigan State Housing Development Authority, and the Great Lakes Capital Fund, was awarded $60 million in new markets tax credits for 2009 through the Community Development Financial Institutions Fund, a division of the U.S. Department of Treasury. In addition the Detroit Investment Fund received a $40 million allocation for the City of Detroit, and the Great Lakes Capital Fund Received an allocation of $28 million for its four-state region. When combined with the Wayne County allocation of $50 million, this will provide Michigan with investment potential of $178 million. The new markets tax credit program is a $15 billion federal tax initiative aimed at attracting new private investment capital to underserved markets and low-income communities. The allocation will allow the MMF to provide a new source of financing assistance to community development projects across the state. The new markets tax credits are very attractive. Investors that make equity investments in a qualified community development entity, such as the MMF, can qualify for a 39 percent federal tax credit over a seven-year period. This equity investment, when combined with other debt financing, offers the ability to make very attractive financing available to the borrower and stimulate difficult-to-finance projects forward.
Job Training Programs
Michigan New Jobs Training Program:
The Michigan New Jobs Training Program, offered via the community college system, is available to assist businesses that are creating new jobs in Michigan. If a business is expanding operations, or locating a new facility in the state, the Michigan New Jobs Training Program can provide flexible funding to meet a wide variety of training needs for new employees at no cost to employers. The training available ranges from highly specialized customized programs to basic skills development. For more information, please go to www.mcca.org or contact Adriana Nichols at the Michigan Community College Association at firstname.lastname@example.org.
The 21st Century Jobs Fund signed into law in November 2005 is a $2 billion initiative that leverages the state's tobacco settlement revenue to diversify Michigan's economy and promote innovation based economic development. The fund, which supplants the Technology Tri-Corridor (TTC) initiative, focuses resources in four areas:
1. Centers of Energy Excellence:
Legislation signed in 2008 authorizes the Michigan Strategic Fund (MSF) to allocate up to $45 million from the 21st Century Jobs fund to create Centers of Energy Excellence (COEE). In 2009 an additional $30 million was authorized.
COEE matches base companies with universities, national labs and training centers to accelerate next-generation research, workforce development and commercialization in alternative energy technologies. Grants are available only to for-profit companies, but university participation in each center is required. To date, six centers have been designated.
2. Increased commercial lending activity.
The Capital Access Program (CAP) was reauthorized in 2006, providing a loan loss reserve fund for participating banks, encouraging lending to small businesses. CAP operated from June 1986 to September 2002 and reinstituted in April 2006. Currently, 96 banks are enrolled. State contribution to the program totals $24.5 million since 1986 resulting in 11,252 loans totaling $649.5 million (leverage ratio of 27 to 1). 1,400 loans valued at $97 million since CAP was reinstituted (leverage ratio of 27.6 to 1). Total of 2,965 jobs created and 10,192 retained since reinstitution. Average 9.4 jobs created/retained as a result of one CAP loan.
The Michigan Supplier Diversification fund (MSDF) established in 2009 is utilizing $26.3 million of 21st Century funds to encourage bank lending to Michigan-based manufacturers trying to diversify their product and customer base to other industries. Michigan has undertaken an extensive program to train and assist suppliers who chose to diversify into alternative energy, defense, medical device and aerospace industries that is complimentary to MSDF. MSDF consists of two active loan enhancement programs, one for collateral support and one for loan participation, to assist in cash flow to service debt, the MSDF met a critical gap in capital access for manufacturers.
In December, 2010, Michigan was the first state in the nation approved for the federal "State Small Business Credit Initiative" (SSBCI), which was part of the Small Business Jobs Act. Michigan economic development officials were the driving force behind the initiative, which was partly modeled after the Michigan Supplier Diversification Fund. Michigan will receive nearly $80 million in federal dollars to support loans to small businesses. MEDC will use the funds to continue the operation of its most successful loan enhancement initiatives, the Capital Access Program and the Michigan Supplier Diversification Fund. The Michigan Supplier Diversification Fund, under the federal initiative, will be renamed the Michigan Business Growth Fund (MBGF). MBGF will continue to operate the same two loan enhancement programs, the Michigan Collateral Support Program and the Michigan Loan Participation Program.
3. Encourage development and commercialization of four competitive-edge technologies: life sciences, alternative energy, advanced manufacturing, and homeland security and defense: Since its inception in 2006, the 21st Century Jobs fund has held two rounds of a commercialization business plan competition totaling $168 million in direct investment in 108 projects. Combined with the investment from the predecessor programs, the Michigan Life Science Corridor and Michigan Technology Tri-Corridor, between 2000-2009, $386 million has been invested directly in 132 start-ups, four venture funds, 136 basic and applied research projects, and 24 entrepreneurial support organizations.
4. Increased capital investment activity:
The 21st Century Investment Fund is prepared to invest up to $114 million in qualified private equity, venture capital, and mezzanine firms. A portion of those investments may also be placed directly in companies in which a qualified firm has made or is making a co-investment. The 21st Century Investment Fund will seek a superior rate of return and require that firms in which investments are made maintain an office in Michigan as well as make investments in the state that are equal to or greater than the amount invested in those firms. In addition to rates of return, the fund's goals target job creation and diversification of the state's economy.
In addition to the 21st Century Investment Fund, the Venture Michigan Fund was created to increase the availability of capital for seed and early stage companies. It is prepared to be a major force for strengthening the state's capital markets, promoting economic growth and diversification, and creating and retaining jobs. The fund will invest solely in venture capital firms that target seed and early stage investments with emphasis given to a firm's likelihood of providing above-average returns, its presence in and history of investments in Michigan, and its consideration of minority-owned businesses in its investment activities. The Venture Michigan Fund anticipates investing $95 million in qualified firms.
Recognizing that the availability of capital is critical to the growth and well-being of Michigan's businesses and strengthening of the economy, the State of Michigan developed these two investment fund-of-funds totaling $200 million to promote access to a continuum of capital. The Venture Michigan Fund and the 21st Century Investment Fund target competitive edge technology sectors as a way to promote job growth and diversify the State's economy. The funds have a single manager, Credit Suisse, and are designed to complement each other and enhance the capital environment in Michigan for companies across the entire spectrum of the capital lifecycle.
In 2010, the MEDC created the $12 million Accelerator Fund program, which is funding two new, early stage venture capital funds in Michigan. The purpose of the program is two-fold: to increase the number of early stage investments in the state, which is traditionally low throughout the country, and to develop new venture capital investment talent in the state. The new funds are required to invest state dollars into Michigan early stage companies.
Angel Investors and Seed Venture Capital:
In December 2010, the Small Business Investment Tax Credit ("SBITC") was signed into Michigan law. SBITC will provide Qualified Investors a 25 percent over a two-year period on Qualified Investments in Qualified Businesses. Qualified investors must invest through or alongside an investment group registered by the Michigan Strategic Fund. A Qualified Investor must be an individual taxpayer or an incorporated entity subject to Michigan income tax laws as stated in Income Tax Act, PA 281 of 1967. The new tax credit, which has a maximum annual allocation of $9 million, is expected to dramatically grow the number of early stage investments and investors in Michigan. The tax credit is one of the most competitive of its kind in the nation.
Michigan Emerging Technologies Fund:
Michigan ETF is designed to expand funding opportunities for Michigan technology-based companies in the federal innovation research and development arena. The MEDC, in partnership with the Michigan Small Business and Technology Center (MI-SBTDC) network, is dedicating up to $1.4 million to match federal SBIR/STTR funding for exceptional research and technical innovation generated in Michigan.
The Michigan ETF is a 21st Century Jobs Fund Program and supported projects must advance at least one of Michigan's four competitive-edge technology areas: Life sciences; alternative energy, advanced automotive, manufacturing & materials; homeland security and defense. This program is in its fourth year providing up to 25 percent in matching funds.
Michigan's 15 SmartZones allow municipalities to use tax increment financing for property acquisition infrastructure; business incubators; and other park facilities, management, and marketing. SmartZones are designed to stimulate the growth of technology-based businesses and jobs by aiding in the creation of recognized clusters of new and emerging businesses. The emerging businesses are primarily focused on commercializing ideas, patents, and other opportunities surrounding university or private institute research and development efforts. The SmartZone program has been very successful in spurring entrepreneurship and economic growth. Through June 30, 2009: 16 incubators/demonstration facilities; 1,128 businesses located or expanding in SmartZones; 1,552 companies assisted; 18,519 jobs created; $1.47 billion in public and private investment.
Michigan State Contact:
Michigan Economic Development Corporation
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.