HB-6052, As Passed House, December 19, 2018

HB-6052, As Passed Senate, December 13, 2018

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

HOUSE BILL NO. 6052

 

 

 

 

 

 

 

 

 

 

 

 

 

     A bill to evaluate certain economic development incentives; to

 

report those evaluations and make certain recommendations; and to

 

impose certain powers and duties on certain state employees and

 

officials.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 1. This act shall be known and may be cited as the

 

"economic development incentive evaluation act".

 

     Sec. 3. As used in this act:

 

     (a) "Contractor" means the private entity, nonprofit entity,

 

or academic institution selected by the department under section 5

 

to evaluate certain economic development incentives.

 

     (b) "Department" means the department of technology,

 

management, and budget.

 

     (c) "Economic development incentive" means the abatements, tax


credits, exemptions, grants, loans, or loan guarantees related to

 

economic development activities in this state as determined by the

 

Michigan strategic fund provided under the following acts:

 

     (i) The Michigan business tax act, 2007 PA 36, MCL 208.1101 to

 

208.1601.

 

     (ii) The income tax act of 1967, 1967 PA 281, MCL 206.1 to

 

206.713.

 

     (iii) 1974 PA 198, MCL 207.551 to 207.572.

 

     (iv) The commercial redevelopment act, 1978 PA 255, MCL

 

207.651 to 207.668.

 

     (v) The enterprise zone act, 1985 PA 224, MCL 125.2101 to

 

125.2123.

 

     (vi) 1953 PA 189, MCL 211.181 to 211.182.

 

     (vii) The technology park development act, 1984 PA 385, MCL

 

207.701 to 207.718.

 

     (viii) Part 511 of the natural resources and environmental

 

protection act, 1994 PA 451, MCL 324.51101 to 324.51120.

 

     (ix) The neighborhood enterprise zone act, 1992 PA 147, MCL

 

207.771 to 207.786.

 

     (x) The city utility users tax act, 1990 PA 100, MCL 141.1151

 

to 141.1177.

 

     (xi) The city income tax act, 1964 PA 284, MCL 141.501 to

 

141.787.

 

     (xii) The general property tax act, 1893 PA 206, MCL 211.1 to

 

211.155.

 

     (xiii) The Michigan economic growth authority act, 1995 PA 24,

 

MCL 207.801 to 207.810.


     (xiv) The Michigan renaissance zone act, 1996 PA 376, MCL

 

125.2681 to 125.2696.

 

     (xv) The obsolete property rehabilitation act, 2000 PA 146,

 

MCL 125.2781 to 125.2797.

 

     (xvi) The brownfield redevelopment financing act, 1996 PA 381,

 

MCL 125.2651 to 125.2670.

 

     (xvii) The Michigan strategic fund act, 1984 PA 270, MCL

 

125.2001 to 125.2094.

 

     (xviii) Any new economic development programs as determined by

 

the Michigan strategic fund.

 

     (d) "Exclusive economic development incentive" means an

 

economic development incentive that is intended to encourage a

 

single specific entity, project, or associated projects to locate,

 

expand, invest, or remain in this state or to hire or retain

 

employees in this state as determined by the strategic fund.

 

     (e) "The strategic fund" means the fund under the Michigan

 

strategic fund act, 1984 PA 270, MCL 125.2001 to 125.2094.

 

     Sec. 5. (1) The department shall contract with 1 or more

 

contractors for the periodic evaluation of economic development

 

incentives. The department along with the department of treasury

 

and the Michigan strategic fund shall develop a scope of services

 

for a request for proposals for professional services necessary to

 

complete the economic development incentive evaluations under this

 

act. The department may solicit input from a local governmental

 

unit or 1 or more public agencies, as those terms are defined in

 

section 2 of the urban cooperation act of 1967, 1967 (Ex Sess) PA

 

7, MCL 124.502, or a Michigan economic development corporation


corporate partner, in developing the scope of services for a

 

request for proposal for professional services necessary to

 

complete an economic development incentive evaluation under this

 

act. When selecting a contractor, the department shall consider the

 

ability for economic development incentive evaluations to be done

 

in an objective manner.

 

     (2) The contractor will complete the economic development

 

incentive evaluations within 270 days of entering into the

 

contract. The department shall provide the economic development

 

incentive evaluation with any additional information to the house

 

and senate appropriations committees no more than 30 days after the

 

completion of the evaluation.

 

     (3) The department shall enter into contracts with contractors

 

for economic development incentive evaluations as follows:

 

     (a) At least once every 6 years for economic development

 

incentives funded with state appropriations of $15,000,000.00 or

 

less each year.

 

     (b) At least once every 4 years for all other economic

 

development incentives, excluding programs that have entered into

 

legacy status. A program is considered to be in legacy status if

 

the Michigan strategic fund board or other governing body has not

 

approved, authorized, or originated any new abatement, tax credit,

 

or exemption, or distributed funds under a grant, loan, or loan

 

guarantee within the immediately preceding fiscal year period.

 

     (c) Upon the conclusion of an economic development incentive,

 

a 1-time final analysis.

 

     (4) At the request of the department, state agencies shall


House Bill No. 6052 as amended December 12, 2018

provide to the contractor, to the extent permitted by law, any

 

records, information, data, or data analysis necessary for the

 

contractors to effectively evaluate the economic development

 

incentives. The contractor shall not disclose or release any data

 

received from state agencies, except as permitted by law. A record

 

or portion of a record, material, or other data that relates to

 

financial, commercial, or proprietary information of any entity

 

that received an economic development incentive provided by another

 

department, agency, municipality, or political subdivision of this

 

state to the department or a contractor in connection with review

 

of an economic development incentive under this act shall not be

 

subject to the disclosure requirements of the freedom of

 

information act, 1976 PA 442, MCL 15.231 to 15.246. The department

 

and contractor may only use the financial or commercial information

 

for carrying out the purposes of this act and shall not disclose or

 

release any data received from a department, agency, municipality,

 

or political subdivision of this state.

 

     (5) Economic development incentive evaluations shall be

 

published on the department's website. The department shall also

 

publish the name of each contractor who is awarded a contract under

 

this act and a schedule of economic development incentives and when

they shall be evaluated.

<<(6) Not less than 30 days prior to the department releasing the

economic development incentive evaluation under subsection(2) or publishing it on the department's website under subsection (5), the department shall provide a copy of the economic development incentive evaluation to the Michigan strategic fund, the Michigan economic development corporation, the state agency that has oversight of the economic development incentive, and the entity that is the recipient of the economic development incentive. The Michigan strategic fund, the Michigan economic development corporation, the state agency that has oversight over the economic development incentive, and the entity that is the recipient of the economic development incentive may issue a response to the economic development incentive evaluation.>>

     Sec. 7. The department, in conjunction with the strategic fund

and the department of treasury, shall, not later than February 28,

2019, develop a multiyear schedule that lists all economic

development incentives and indicates the year when an economic

development incentive evaluation will be published for each


economic development incentive. The department shall consider

 

economic development incentive sunset dates and program inactivity

 

when creating the schedule and may group economic development

 

incentives for review by objective or policy rationale of each

 

economic development incentive. The department shall update the

 

schedule annually and include any new economic development programs

 

as determined by the Michigan strategic fund. The department shall

 

also list all economic development incentives that are exclusive

 

economic development incentives.

 

     Sec. 9. (1) Evaluations of economic development incentives

 

shall include, to the extent practicable, all of the following:

 

     (a) A description of the history of the economic development

 

incentive and its goals.

 

     (b) A literature review of the effectiveness of this type of

 

incentive, including an inventory of similar incentives in other

 

states.

 

     (c) An estimate of the economic and fiscal impact of the

 

economic development incentive. This estimate shall take into

 

account all of the following considerations in addition to other

 

relevant factors:

 

     (i) The extent to which the economic development incentive

 

influences business behavior.

 

     (ii) The results of the economic development incentive for the

 

economy of this state as a whole. This consideration includes both

 

positive direct and indirect impacts and any negative effects on

 

other businesses located in this state.

 

     (iii) A comparison to the results of other economic


development incentives or other economic development strategies

 

with similar goals.

 

     (iv) An evaluation of the loss of potential gains from other

 

alternatives or programs enacted by the legislature or existing

 

economic development incentives that have been extended.

 

     (d) An assessment of whether adequate protections are in place

 

to ensure that the fiscal impact of the economic development

 

incentive does not increase substantially beyond the state's means

 

or expectations in future years.

 

     (e) An assessment of whether the economic development

 

incentive is being administered effectively, including a review of

 

auditor general reports.

 

     (f) An assessment of whether the economic development

 

incentive is achieving its goals.

 

     (g) Recommendations for how this state can most effectively

 

achieve the economic development incentive's goals, including

 

recommendations on whether the economic development incentive

 

should be retained, reconfigured, or repealed.

 

     (h) Recommendations for any changes to state policy, rules, or

 

statutes that would allow the economic development incentive to be

 

more easily or conclusively evaluated in the future. These

 

recommendations may include changes to collection, reporting and

 

sharing of data, and revisions or clarifications to the goal of the

 

economic development incentive.

 

     (i) Any other information the contractor considers necessary

 

to assess the effectiveness of the economic development incentive

 

and whether it is achieving its goals.


     (2) Each evaluation for exclusive economic development

 

incentives shall include all of the following based on a program-

 

wide basis:

 

     (a) Aggregate information and a description of trends related

 

to this state's exclusive economic development incentives, which

 

may include analysis of their structure, performance standards, and

 

economic and fiscal impact.

 

     (b) Recommendations for how exclusive economic development

 

incentives should be structured or in what circumstances they

 

should be offered to ensure they successfully change business

 

behavior.

 

     (c) Recommendations for how exclusive economic development

 

incentives should be structured or in what circumstances they

 

should be offered to maximize positive direct and indirect impacts

 

on this state's economy and minimize negative effects on other

 

businesses located in this state.

 

     (d) Recommendations for how exclusive economic development

 

incentives should be structured or in what circumstances they

 

should be offered to ensure that they represent a cost-effective

 

approach compared to other economic development incentive programs

 

or other economic development strategies.

 

     (e) Recommendations for what protections exclusive economic

 

development incentives should include ensuring their costs do not

 

substantially exceed this state's expectations.

 

     (f) Recommendations for how exclusive economic development

 

incentives should be structured or in what circumstances they

 

should be offered to avoid adverse impacts on the fiscal stability


of local units of government.

 

     (g) Recommendations for the types of performance standards

 

that should be included in exclusive economic development

 

incentives, how these standards should be structured, and how they

 

should be monitored.

 

     (3) A contractor shall disclose a summary of its methodology

 

and source materials in how it arrived at its evaluation under this

 

act.