Despite 500 fewer jobs, keeping Farmers Insurance MEGA tax credits was a good move, MEDC says

GRAND RAPIDS, MI – In June 2009, when Michigan suffered from the highest unemployment rate in the nation, the Farmers Insurance Group’s decision to create up to 1,400 jobs in Caledonia Township was celebrated as a major victory for the region.

Then-Governor. Jennifer Granholm appeared at a ceremony at the company’s Foremost Insurance complex to mark the occasion. Plans were announced for an $84.4 million office building, printing and distribution center, and multi-million dollar state MEGA tax credits were provided.

But, nearly 13 years later, the company’s hiring goals have not progressed as expected.

Last week, the Michigan Economic Development Corporation’s board of directors approved the farmers’ request to modify its 2009 MEGA tax credits. Citing staffing issues caused by the COVID-19 pandemic, the company called for its job creation targets to be lowered from 1,400 jobs to 900 jobs.

A Caledonia Township official told MLive/The Grand Rapids Press that it is disappointing that the company is not meeting initial job creation targets. Another township official said he appreciates the well-paying jobs the company has already created in the community.

Despite the cut, the MEDC said keeping the deal in place, rather than scrapping it altogether, was the right move.

“The MEDC’s primary mission is to help businesses succeed in Michigan,” MEDC spokesperson Otie McKinley said in a statement. “Ultimately, farmers will create new jobs in Michigan to benefit from the tax credits, as opposed to those remote workers who choose to live and work outside of Michigan.”

Since 2009, Farmers has received $22.5 million in tax credits under the deal.

Now, with the amended incentive agreement approved, farmers are eligible for up to $26 million in additional tax credits through 2026, according to the MEDC. The company had created 1,000 new jobs at the Caledonia Township facility in 2017. But, amid the COVID-19 pandemic, the number of new jobs created has dwindled and now totals around 823 positions, according to the MEDC.

In a statement, Farmers said it moved 90% of its workforce to a virtual environment due to the COVID-19 pandemic.

“Farmers, like many employers across the country, have struggled to find workers due to low unemployment rates, increased interest in hiring local employers, and other COVID-related factors” , the company said. “We remain committed to being one of the best employers in the state and believe the recently awarded adjustment provides us and the state with the flexibility to secure that outcome.”

Originally, the company was to create 1,000 new jobs by the end of 2022 and 1,400 new jobs by the end of 2027. The jobs were to pay a minimum of $680 per week.

However, the amended deal lowered that target to 900 new jobs by the end of 2024.

In addition to the reduced job creation goals, the MEDC board also approved the company’s request to count positions created anywhere in Michigan toward the 900 job goal. Originally, the jobs were to be based in Caledonia.

Caledonia Township Treasurer Richard Robertson shared the stage with Granholm in 2009 when Farmers’ expansion was announced.

“In a way, it’s disappointing to hear that they won’t achieve those goals,” he said. “On the other hand, the reality is that a lot of Farmers employees don’t really call Caledonia home.”

The township likes to see its employers grow, which drives demand for new housing and boosts spin-off jobs, Robertson said. But the impact of farmers’ reduced job creation targets is mitigated by the fact that Caledonia Township has grown significantly in recent years, he said.

“In our situation, (Farmers) wasn’t the only game in town in terms of the pressure we have for residential development,” he said.

Township supervisor Bryan Harrison said in an email that “I’m sure no one is more disappointed than the farmers to have failed.”

“To be clear, I appreciate the presence of farmers in the Caledonia community and the well-paying jobs they provide,” he said. “Hundreds of families are able to pay their mortgage because of their decision to be in West Michigan. We want them to succeed and prosper.

As part of the farmers’ expansion, the township in 2009 approved an eight-year, 100% personal property tax exemption for the business.

Robertson could not immediately be reached to provide the value of the tax exemption, but he said in an email that at the start of the eight-year period, the value of the company’s personal assets was one just under $4 million. It had fallen to $2 million in 2018.

The MEGA tax incentive program was created by former Governor John Engler and expanded by Governor Jennifer Granholm during the Great Recession. While the program was discontinued in 2011 by Governor Rick Snyder, the state remains responsible for existing credits.

Tax credits are calculated by multiplying the 4.25% state income tax rate by QNJ’s employer-paid salaries, wages, and healthcare benefits, according to the MEDC. . Thus, the amount of incentives provided to the company is related to the number of jobs created and the wages of those jobs.

Farmers has 2,941 employees in Michigan, according to the MEDC.

In light of the reduced job creation targets, the MEDC shortened the duration of the tax incentive from 18 years to 16 years. That reduces incentives by about $10 million, said Christin Armstrong, vice president of compliance and contract services at MEDC.

MEDC senior management discussed the farmers’ request to cut its job creation targets by 500 positions, she said. Ultimately, MEDC staff asked its board to approve the changes because they wanted to make sure Michigan residents were hired for the new positions, Armstrong said.

“What we were trying to avoid is that they don’t fill them with Michigan residents,” she said. “They could have employees located anywhere to work for farmers because they want to deliver this hybrid remotely. And so the idea was that this was going to ensure that residents of Michigan would be hired for the vacancies instead of someone in Ohio or Indiana or wherever.

In September 2009, Farmers launched its $84.4 million expansion project in Caledonia. In 2011, two new buildings opened there, adding 365,000 square feet of new office space. Today the campus includes the National Farmers Print and Materials Distribution Center, facilities for Farmers University, a national call center and “the primary location of our specialty insurance operation” , according to the company.

While the MEGA incentive was created in 2009 with the goal of creating new jobs at the Farmers’ Caledonia office, the company can now recruit workers from anywhere in Michigan to fill vacancies.

The idea is to attract workers from outside Grand Rapids with a hybrid remote work schedule, according to the MEDC.

“Farmers are finding they need to hire outside of the Grand Rapids area,” Armstrong said. “This MEGA was limited to their office in Caledonia, and people want to live where they live and work for farmers.”

Read more:

Why a white man in Muskegon is spreading the Black Lives Matter message in rain or shine

Grand Rapids Police Dog Who Did Bomb Sweeps For Rock Stars, Presidential Candidates Retire

Devos-backed private school tax credit petition will not submit signatures for November ballot