With the election this week, there may be significant changes to the Strategic Outreach and Attraction Reserve (SOAR) Fund that supports the state’s economic development initiatives. Enacted in December 2021, the SOAR Fund comprises the Critical Industry Program (CIP) and the Strategic Site Readiness Program (SSRP), but it faces uncertainty with future funding. A proposed legislative package aims to transform the SOAR Fund with substantial appropriations, yet it has met resistance from Republican lawmakers.
Proposed Changes
Currently, the SOAR Fund does not have any revenue sources beyond 2024-2025. The package of legislation would provide an annual $600 million appropriation for the fund through the year 2034-2035. The package of bills would provide:
- $250 million annually for the Make it in Michigan Fund, a rebrand of the SOAR Fund
- $200 million annually for a new program providing funding for public transit and public development projects funded by the Michigan Mobility Trust Fund
- $100 million annually to the Housing and Community Development Fund, a program aimed at alleviating affordable housing shortages in the state
- $50 million annually to the Revitalization and Placemaking (RAP) Fund, which would aim to help with community revitalization and rehabilitation
Expanded Economic Assistance Under MSF
In its current form, the Michigan Strategic Fund (MSF) can award funds under the CIP to provide assistance due to a technological shift in product or production. Under the proposed legislation, the MSF could provide economic assistance that it determined was critical to the economic growth and development of the State, with a wide number of factors informing this determination, including the investment’s economic impact on the local community, availability of other sources of funding, and whether the qualified jobs created are at or above the median hourly wage of the prosperity region in which the project was located, among many other factors.
The MSF can also award funds under the SSRP to provide economic assistance to create investment-ready sites to attract and promote investments for eligible activities. Under the program, eligible activities are defined as “land acquisition; site preparation and improvement; infrastructure improvements that directly benefit the site; demolition, construction, alteration, rehabilitation, or improvement of buildings on the site; environmental remediation; and architectural, engineering, surveying, and similar professional fees.”
Legislative Challenges
Overall, the package of legislation has failed to garner any support from Republican House or Senate members and stalled in both chambers. Senate Bills 559 and 562 were passed in the Senate along party lines on March 19, 2024, and were reported out of the House Committee on Economic Development and Small Business on June 11, 2024, but have yet to receive a vote from the full chamber. House Bills 5768, 5769 and 5780 also passed out of the House Committee on Economic Development and Small Business on June 11, 2024, but have yet to be voted on by the chamber. Finally, Senate Bills 560, 561 and 569 were all reported out of the Senate Committee on Economic and Community Development on October 31, 2023, but have yet to receive a full vote in the chamber. Given Republican opposition to these bills, if House Republicans gain control of the chamber, it could be difficult for this package of bills or a similar reintroduction to garner support. In fact, House Republicans introduced a set of bills in October 2023 aimed at imposing greater oversight of the SOAR Fund: House Bills 5136, 5137 and 5138. These bills would mandate audits of all payouts, impose heightened transparency requirements on recipients of the funds, and claw back funds when recipients fail to meet the statutory and administrative requirements. While these bills did not receive a hearing in committee, a Republican-led House could seek to institute similar oversight and enforcement provisions on the state’s various tax credits and incentive programs in the next legislative session.
With a pivotal election approaching, Varnum LLP is closely monitoring the changes that new leadership could bring to the state’s various tax credits and incentive programs. For questions or concerns regarding any of the developments in Lansing, eligibility requirements for one of the state’s various incentive programs, or general questions regarding potential programs your business could qualify for, please reach out to Zach Meyer or Brady Diller.