A company that had never manufactured solar modules before used promises of two relatively modest incentives in Texas, one of them $2.8 million from the city of Corpus Christi, in a kind of slingshot maneuver to win a roughly $40 million incentive package to build a solar module plant in Saginaw, Mich.
The problem was neither of the Texas incentive packages existed at the time GlobalWatt Inc. applied for and was granted at least 14 times as much in tax credits from the Michigan Economic Growth Authority. Officials for the Texas Enterprise Fund and the Corpus Christi Regional Economic Development Corporation confirmed that GlobalWatt did not meet requirements necessary to qualify for the incentives, in a story by the Mackinac Center for Public Policy in Midland, Mich. Texas Watchdog contributed reporting.
Lucy Nashed, a spokeswoman for Gov. Rick Perry, said GlobalWatt's application was declined after an extensive review, "which includes the company's ability to demonstrate a significant return on the state and taxpayers' investment, local support, job creation and wages, capital investment, financial strength of the applicant and the applicant's business history."
In late 2008 when company officials first approached J.J. Johnston, director of the Economic Development Corporation in Corpus Christi, the company had no business history and no plant. The company was rejected for a state Skills Development Fund grant because the company had no staff to train.
Still, Johnston said the city offered what he called a very basic incentive package that included no money up front. Instead, GlobalWatt would be eligible for up to $2.8 million if it met a series of performance requirements, including buying or leasing a building in Corpus Christi by the end of October of 2009. Deadlines in the future included hiring between 175 and 400 new employees and establishing a payroll that showed employees making between $45,000 and $50,000 a year, Johnston said.
GlobalWatt met none of the requirements, and by the time Johnston heard the company was dealing with the state of Michigan he had closed his file.
"Even for an established company, we would never have made an offer of cash up front," Johnston said. "The only thing they showed us was a piece of paper that supposedly was an order for solar panels from a European company that was supposed to give them cash flow for their first several months. They didn't even let us have a copy of it for our file."
Johnston said he was surprised to learn that GlobalWatt was claiming to have state and local money in hand in Texas and was using it for leverage with the state of Michigan. In an application for a high-technology business tax credit filed in November of 2009 with the Michigan Economic Growth Authority, the company asserted "both the state and local government (in Texas) have offered substantial up-front cash incentives sufficient to fund a module lines [sic] in the first year, and, recruit and train employees." (emphasis added)
In a second application for something called a Brownfield Redevelopment Michigan Business Tax Credit, made in December, the company again suggested the Texas incentives "included up-front cash for assistance in purchasing and installing machinery and equipment and recruitment, training, and hiring of employees."
The misleading applications were crucial to GlobalWatt winning a high-technology business tax credit and a package valued between $39.8 million and $42 million. Michigan Gov. Jennifer Granholm singled out the deal, in which GlobalWatt has promised to create 500 new jobs in the Saginaw area, in her Feb. 3 state of the state speech.
Since the publication of the Mackinac Center story, Granholm and officials with the Michigan Economic Growth Authority have been silent. The agreement between GlobalWatt and the Authority includes a clause that says, "[I]f the MEGA determines that the Company misrepresented information in order to qualify for, or increase the amount of a MEGA Tax Credit, the MEGA may revoke the Company's designation as an authorized business."
GlobalWatt officials, who didn't respond to Texas Watchdog and Mackinac Center reporters seeking comment, instead issued a terse press release shortly after publication of the story:
"The recent article put out by the Mackinac Center is a gross misrepresentation of the facts. We will not be drawn into the Mackinaw Center’s standard Michigan political battles. Our company is on track with its growth plans. We remain focused on building our business and leading the revitalization of the Saginaw area by providing new employment opportunities."
Johnston said that, unfortunately, companies pitting cities, counties and states against one another shopping for the best taxpayer-funded incentive deal is all too common. While hesitant to criticize officials in Michigan directly, Johnston said the state has significantly increased its risk in the way it went after a company that offered nothing up front but promises.
"It sounds to me like the height of absurdity," Johnston said. "In this business, you can never forget that the people you are working for are the taxpayers."
Contact Mark Lisheron at 512-299-2318 or email@example.com.
Photo of a solar module by flickr user by flickr user Press Release Finder, used via a Creative Commons license.