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Direct Financial Incentives

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).

Tax-exempt bonds:
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 which 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.

Venture capital funds:
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 has developed two investment fund-of-funds capitalized at over $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.

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 which 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.

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 an 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.

For further information, please contact: Bob Payne, Credit Suisse Customized Fund Investment Group, at (248) 619-1868 or visit www.venturemichiganfund.org or www.michigan.org.

Angel Investors:
In the past few years, seven groups of angel investors (high net worth individuals who provide investment capital to start-up companies) have been organized across Michigan. In the last three years alone, these groups have helped finance more than 50 early-stage companies. An Angel Tax Incentive is available to help spur investment at this vital early stage in a company’s development.

New markets tax credit program:
The Michigan Magnet Fund (MMF), a partnership between the MEDC, the Michigan State Housing Development Authority, and the Great Lakes Capital Fund, was awarded $60 million in new markets tax credits through the Community Development Financial Institutions Fund, a division of the U.S. Department of Treasury.

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's Economic Development Job Training (EDJT) Program has been recognized as one of the top state-funded programs in the nation. Each year, the EDJT program provides grant funding to train Michigan's work force. It seeks to ensure that Michigan employers have the highly trained technical workers they need to compete in the global economy. Training is customized to meet specific business needs, and most participants are front-line workers who can apply the new knowledge and skills gained from this training to current as well as future jobs.

The Michigan Economic Development Corporation (MEDC) administers this program and works to expedite grant awards throughout the year for employers locating and expanding to Michigan. MEDC staff actively work with employers to develop effective training programs. Grants can be awarded directly to companies if they create at least 100 new jobs in the state of Michigan at a single location. Most training through the EDJT program is administered by community colleges, providing a network of low-cost training providers throughout the state.

Technology-based initiatives:
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 create thousands of new jobs and diversify Michigan's economy. The fund, which supplants the Technology Tri-Corridor (TTC) initiative, focuses resources in three areas: increasing capital investment activity; increasing commercial lending activity; and encouraging development and commercialization of four competitive-edge technologies: life sciences, alternative energy, advanced manufacturing and homeland security and defense. Also supported are advanced computing or electronic device technology, design, engineering, testing, diagnostics or product R&D related to any one of the four technologies.

From 2000 through 2005, the Technology Tri-Corridor and its predecessor Life Sciences Corridor, created to foster high-tech collaboration, awarded $232.5 million for research and commercialization projects. In 2006, the 21st Century Jobs Fund approved funding in the amount of $126.3 million for 78 projects.

Emerging Technologies Fund:
The 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 Michigan Economic Development Corporation (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 & defense.

SmartZones:
Michigan's 12 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, 2007: 16 incubators/demonstration facilities; 768 businesses located or expanding in SmartZones; 938 companies assisted; 8,300 jobs created; $1.021 billion in public and private investment.