The price to Michigan taxpayers for keeping Chrysler jobs in the state appears to be about a quarter of a billion dollars.
Michigan governments have agreed -- or are expected to agree -- to grant $256 million in tax breaks and incentives to entice the Chrysler Group to make $1.8 billion in investments in four communities: Marysville, Sterling Heights, Trenton and Warren.
This past week, the state announced $11.2 million worth of tax incentives and $66 million in local incentives to ensure Chrysler would build its new $730-million engine plant in Trenton.
The state did not include the rest of the expected incentive package -- which it typically does.
In a state where the unemployment rate is among the highest in the country, communities are ecstatic at the idea of attracting such investment and say giving out tax abatements and other breaks is the norm to get such projects.
The price is worth it to local community leaders, who want to keep jobs and spur growth.
"These operations don't go anyplace unless they have free land and they get the tax abatements," Jack Schumacher, Marysville city manager, said. "It's going to be beneficial for our community."
Marysville will be home to a new $700-million axle plant, Chrysler has announced. It will replace the company's axle plant in Detroit, where 1,600 people currently work. When the new plant opens in 2009, it is expected to employ 900 people.
Schumacher hopes that eventually local people will get hired at the plant and that it will create other business. "The spin-off stuff is important, too: the additional plants that will probably come with it and locate around it. People will start commuting up here more. They will use our businesses, start to buy our homes. ... We see a tremendous spin-off effect with this," he said.
Trenton officials, who worried the current engine plant would be closed for a new one built elsewhere, said it was important for them to put together a lucrative incentive package to make sure the investment occurred locally.
"We wanted to make it very difficult for them to find another site," Trenton Mayor Gerald Brown said.
The total local and state incentive package for the Trenton project is projected to be about $122 million. Some parts of it still require approval, including abatements on property taxes.
While the Trenton plant is slated to have fewer jobs than the current facility, Brown said officials hope the plant will gear up in the future and need more people.
"We are looking at our stability decades out; we are not just looking out five years. As far as a windfall of money for us, no it is not. Our incentives are eating it up," he said. The mayor expects the City Council to approve the incentives later this spring.@@page@@
When Doug Alexander, the head of the Economic Development Alliance of St. Clair County, heard late last summer that the Chrysler Group was looking for land to build an engine plant, he rushed a proposal to the state's economic development office for a site in Marysville.
The state told him Chrysler was looking at other areas, Alexander recalled. Then suddenly about seven weeks ago -- after the Chrysler Group was put on the sales block -- the automaker came calling.
The company wanted to look at the site for a possible project, and things quickly snowballed until Wednesday's announcement that Chrysler would build an axle plant there.
"I've probably done that 500 times before in my eight years of doing this and never had any materialize to this extent," Alexander said of his proposal. "It makes all of the lines you throw in the water that never yield anything -- kind of makes it all worthwhile."
Alexander said Chrysler was looking for three main things from communities: free land, 12-year abatement on property taxes and infrastructure improvements needed to support the project.
Although city officials said they do not yet know what the total incentive package will be, the state estimates the local government will provide $17.6 million in incentives.
The city plans to purchase more than 200 acres -- valued at $3 million -- for the new plant and expects that the new taxes generated will eventually pay for the purchase.
Part of the package Marysville put together included about $500,000 in local grants to provide worker training.
Alexander believes this helped their case. Chrysler officials appreciated "that we stepped forward to do something like that without even being asked to do it," he said.
The City of Warren is expected to approve $32 million in abatements for $50 million in improvements being made at Chrysler's Warren plants, Diana Kolakowski, the city's economic development director, said.
In addition, Chrysler will get about $3 million in state tax breaks for the Warren investment and about $45 million in local and state tax breaks for a new paint shop at the assembly plant in Sterling Heights, according to state numbers.
The entire package is a complicated mix of tax abatements and incentives that span different time frames. Some still need local and state approval, others are automatic under Michigan law.
On Tuesday, the Michigan Economic Growth Authority approved $13.2 million over nine years associated with the biggest investment package announced in the state in at least five years.
Some analysts, however, doubt that the investments will be made if the automaker is sold, which parent DaimlerChrysler AG is considering.
A Chrysler Group spokesman said the incentive packages were an important factor in the company's decision to locate the new investments in Michigan.
At Wednesday's announcement, Gov. Jennifer Granholm was asked about incentives going to a business to build new facilities that will employ fewer people than current sites.
"It was a choice between this and no investment and jobs going to Ohio or Mexico or Indiana," Granholm said. "Michigan should feel very fortunate that DaimlerChrysler got these investments here."
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