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LAN01-#214632-V1-Reintegrating MEDC Into State Government

LAN01-#214632-V1-Reintegrating MEDC Into State Government

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Published by Richard D. McLellan

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Published by: Richard D. McLellan on Mar 20, 2010
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03/20/2010

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Reintegrating MEDC Into State Government
March 19, 2010The March 17 revelation that the MEDC awarded a $9.1 tax credit to a convicted embezzlersuggests that the Michigan Legislature may want to reintegrate the MEDC programs into stategovernment. Such a reintegration would subject the state’s economic development programs tostate laws and oversight that are now frequently avoided by the legal structure and opaqueoperating style of the MEDC.
Reintegration can be accomplished in the 2010 budget bills by “boiler plate.”
In the event the Legislature decides to bring the economic development functions back intostate government, the documents establishing the Michigan Economic DevelopmentCorporation (“MEDC”) allows it to do so.1.
 
The MEDC was created under the following document:AMENDED AND RESTATED INTERLOCAL AGREEMENTBETWEENMICHIGAN STRATEGIC FUND(A Public Body Corporate and Politic of the State of Michigan)ANDPARTICIPATING PUBLIC AGENCIES AS SIGNATORIES TO THISINTERLOCAL AGREEMENTCREATING THEMICHIGAN ECONOMIC DEVELOPMENT CORPORATIONA Michigan Public Body CorporateEffective: April 5, 1999(As adopted by the Michigan Strategic Fund Board on December 18, 2003)2.
 
The stage for the MEDC was created when Governor Engler issued Executive Order1999-1, pursuant to Michigan Constitution of 1963, Article 5, §2 and the laws of theState of Michigan, consolidated State of Michigan economic development functionsand programs and their accompanying powers in the Michigan Strategic Fund.3.
 
The next step in moving the economic development functions was taken pursuant to theMichigan Constitution of 1963, Article 7, §28 and the Urban Cooperation Act of 1967,Act No. 7 of the Public Acts of 1967, Ex. Sess., being MCL 124.501 et seq. of theMichigan Compiled Laws (the “Cooperation Act”). The laws permit a Public Agency(i.e., the Strategic Fund) to exercise jointly with any other Public Agency any power,privilege or authority which such Public Agencies share in common and which eachmight exercise separately.4.
 
As a result of entering into an interlocal agreement to jointly exercise economicdevelopment powers, the Strategic fund and local economic development agencies
 
MEDC NotesPage 2 of 4
created the Michigan Economic Development Corporation, as a separate legal entityand as a public body corporate.5.
 
No new economic development functions were created when the MEDC was created. Itsimply transferred state functions outside state government and legislative control. Thepowers of the MEDC are listed in Section 3.01 to include performing “successful,effective and efficient economic development programs and functions throughout theState” as follows:a.
 
Provide information and assistance to new and existing businesses to facilitateresolution of governmental disputes concerning issues such as zoning and landdevelopment;b.
 
Facilitate, coordinate, and advance Projects for encouraging new and existingbusinesses in locating, purchasing, constructing, reconstructing, modernizing,improving, maintaining, repairing, furnishing, equipping, and expanding in theState;c.
 
Provide information to new and existing businesses regarding taxes, insurancerates, environmental audits, safety audits, permits and worker recruitment andtraining;d.
 
Encourage and solicit private sector involvement, support, and funding forProjects;e.
 
Encourage the export of products and services to national and internationalmarkets;f.
 
Provide information to tourists and the travel industry and encourage tourismwithin the State;g.
 
Conduct studies and research, develop and maintain data and records inconnection with a comprehensive economic strategy; andh.
 
Provide, upon request, centralized administration of local economicdevelopment programs.6.
 
The MEDC was never intended as a permanent entity. Section 6.01 provides:The Corporation commences on the Effective Date and continuesfor a term of ten (10) years (“Initial Term”). The term of thisAgreement may be extended for a term of five (5) years (“FirstRenewal Term”) and may further be extended for an additionalterm of five (5) years (“Second Renewal Term”). The maximumterm of this Agreement shall be twenty (20) years.7.
 
Pursuant to Section 6.02, the Strategic Fund itself may withdraw from the MEDC
 
MEDC NotesPage 3 of 4
upon expiration of the Initial Term [i.e., 2009] or First RenewalTerm [2013] upon six (6) months notice to the Corporation prior tothe expiration of the Initial Term or the First Renewal Term. If theFund does not give notice of withdrawal, the Corporation shallcontinue until expiration of the First Renewal Term or SecondRenewal Term8.
 
Pursuant to Section 6.04, the MEDC is terminated upon “withdrawal of the [Strategic]Fund” or upon “Three-fourths (3/4) vote of the Executive Committee.” [Note: Themembers of the Executive Committee are appointed by the Governor.]9.
 
Pursuant to Section 6.05, upon Termination all the MEDC’s remaining assets aredistributed back to the Strategic Fund within state government.10.
 
The interlocal agreement recognizes that the MEDC is operating with state funds at thesufferance of the Legislature. At anytime the Legislature and Governor could decide toappropriate economic development funds to the Strategic Fund, or another agency,without permitting the transfer to the MEDC. The language reads as follows:Section 9.05 State Appropriated Funds. Beginning on theEffective Date, the Fund shall transfer to the Corporation theestimated available balance of all State appropriated funds andrelated obligations…after deduction from the appropriations for allof the personnel and related operational costs of State classifiedservice employees to the extent permitted by law. The remainingbalance, if any, shall be transferred from the Fund to theCorporation after the State’s fiscal year 1999…and each ensuingfiscal year thereafter, the Fund shall transfer to the Corporation allavailable State appropriated funds after deduction from theappropriations for all of the personnel and related operational costsof State classified service employees to the extent permitted bylaw….
The ability of the Fund to make transfers made underthis provision is subject to annual appropriation by theLegislature and as provided by law
.Furthermore, the Legislature retains the power to required the return of all MEDC fundsto the Strategic Fund under the following provision:Section 9.14 Transfers to the Fund. Upon request by the Fund,
the Corporation shall return any unexpended orunencumbered funds
, personnel, or property to the Fund to betterfurther the purposes of economic development upon a three-fourths(3/4) vote of the Executive Committee or
as required by law
.11.
 
The salaries and benefits of classified employees were protected under the followingprovision:

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