AK Steel deal behind proposed $3 million budget hit for MEDC

LANSING, MI — The House Appropriations Committee on Wednesday voted for an amendment to strip $3 million out of the Michigan Economic Development Corporation’s administrative budget after it negotiated for AK Steel to inherit a tax credit earlier this week.

According to our media partners at Mlive.com, AK Steel acquired the Severstal Dearborn plant in 2014. Before it was acquired by AK Steel, the Dearborn plant had received a legacy Michigan Economic Growth Authority tax credits.

The credits have since been discontinued, but AK Steel sought the credits anyway.

At first, the company tried the legislative route. The Senate passed bills that would have let it collect the credit, but the House didn’t take them up.

The company got what it wanted from the Michigan Economic Development Corporation instead. The Michigan Strategic Fund Board on Tuesday amended the Severstal credit to allow AK Steel to collect up to $20.3 million in tax credits.

But a coalition of lawmakers have come out against the credits or how MEDC handled the credits. Some Democrats oppose the credit because the plant they apply to has a history of environmental violations, and some Republicans oppose the credits because of the process they were granted through.

One lawmaker who didn’t approve of the MEDC’s actions is Rep. Rob VerHeulen, R-Walker, who chairs the House Appropriations Subcommittee on General Government. He wanted the legislature to have input.

“I’m not saying that they weren’t authorized to do this under the MEGA credit rules and regulations and statutes. But to me it’s a question of it needs to be vetted with the legislature, and in this case it was not,” VerHeulen said.

His subcommittee had inserted some language into the yearly budget slated to begin Oct. 1, 2017 that aimed to require legislative approval on any deals like the AK Steel one. But the MEDC facilitated the deal before the next budget — which still has to be finalized — goes into effect.

VerHeulen offered an amendment before the full House Appropriations Committee on Wednesday to dock the agency’s budget by $3 million in response, an amount he says aligns with how much the AK Steel deal will cost the state per year.

The amendment passed, and got some support from both Republicans and Democrats.

“We need to take a stand as appropriators and say if you get told no over here… That you shouldn’t be able to go behind our backs to try to find another way to get to a yes,” said Rep. Jon Hoadley, D-Kalamazoo.

The bill didn’t get support from Rep. Yousef Rabhi, D-Ann Arbor, who said he didn’t want to take money out of the line item before knowing impact cutting that money would have on the MEDC.

An MEDC spokesperson said the agency would continue to work with its legislative partners on the budget.

VerHeulen wants to work something out with the agency, too.

“I want to do everything we can to get a commitment from MEDC to ensure that the legislature is fully aware of what’s happening,” VerHeulen said.
The House and Senate are still working on budgets separately, after which they will resolve any differences and seek approval from Gov. Rick Snyder. The budget has to be done by Oct. 1, when the new fiscal year starts, but Snyder has put an emphasis during his term on getting it done earlier.

This story first appeared on Mlive.com.

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