Economic Development in Hillsdale

The origins and recent history of the Hillsdale EDC

The Origins of the Hillsdale EDC

The City of Hillsdale has within it an asset-holding entity called the Economic Development Corporation. The organization was constituted in 1978 with the express purpose of giving corporations and businesses loans and earmarked cash as well as buying and selling public property. EDC board members, who make the decisions pertaining to these municipal assets, are appointed to six-year terms by the mayor and confirmed by council. The board is governed by Act 338 of the Public Acts of 1974, otherwise known as the Economic Development Corporations Act. With a single sentence that legislature set in motion an agenda that dominated and continues to dominate municipal politics across the state to this day:

There exists in this state the continuing need for programs to alleviate and prevent conditions of unemployment, and…it is accordingly necessary to assist and retain local industrial and commercial enterprises, including employee-owned corporations, to strengthen and revitalize the economy of this state and its municipalities.

The Michigan legislature claimed that the only way municipalities can remain economically viable is by creating “programs” that would address “the conditions of unemployment.” That is, the EDC is a form of corporate welfare—trickle-down economics adjoined to state programming, designed to transfer public assets to corporations so that those corporations might in turn provide jobs. It would, they determined, be necessary for municipal governments to partner with these corporations in order to protect the people from “the conditions of unemployment.”

Furthermore, the legislature assumed that, without direct assistance from municipalities, business enterprises could not be sustained; business owners would be tempted to leave, taking their productions—and jobs—elsewhere. It would therefore, according to the 1974 legislature, fall to each municipality to market itself to corporations in an attempt to lure them in with (1) state statute-governed tax abatements, (2) monetary assistance programs, or (3) both. So, the EDC organizations created by this act cut deals on each municipality’s behalf with private entities, redistributing taxpayer assets to the EDC’s preferred causes.

Thus the legislature rejected the traditional economic view that corporate welfare could lead to corruption and inefficiency. For instance, the Act limits public oversight once the municipality’s assets have been transferred to an EDC, because, once created, an EDC is difficult to dissolve. In fact, the statute denies elected municipal officials the ability to dissolve the EDC that they created, except by two indirect routes. (1) The EDC may choose to resign itself by ⅔ vote, with that resignation coming for approval before the municipal board. (2) The EDC may be dissolved by ballot referendum, that is, going before the people in a direct vote wherein its articles of incorporation would be rescinded only by popular majority. And yet, all of the above is tempered by the penultimate provision of the statute, admitting that the act should be “liberally construed” in interpretation, as its larger purpose is to serve economic development.

So a municipality, once it has given over its assets to an EDC, has only one mode of recourse to reacquire its assets: the dissolution of the organization. According to section 24 of Act 338, titled “Disposition of net earnings and property upon dissolution of corporation,”

Any net earnings of the corporation beyond that necessary for the retirement of indebtedness or to implement the public purposes or program of the municipality may not inure to the benefit of a person other than the municipality and, upon dissolution of the corporation shall belong to the municipality. Upon dissolution of the corporation title to all property owned by the corporation, subject to existing rights in other parties, shall vest in the municipality

That is, upon the dissolution of the EDC, the municipality that created it is eligible to recover its assets.

The Hillsdale EDC itself is subject to all of the above. Stemming from Act 338, it has its own bylaws, some of which grant the governing municipality additional power to check the EDC. For instance, section 3 declares that an EDC member may be removed from office, by council or the EDC itself, for reasons of “inefficiency, neglect of duty, or misconduct or malfeasance.” Further, the governing municipality is granted control over who sits on the EDC board. But, contrary to that provision, Hillsdale’s City Council in practice grants the EDC broad latitude to recommend its own new members, thus perpetuating the economic development agenda already in place.

The EDC, then, was created as a means of creating semi-independent corporate welfare organizations, placing taxpayer money and city property into the hands of these boards for redistribution, with an inherent bias toward corporate interests. In addition, the organization effectively shields a portion of the city’s assets from direct city control. Then, the EDC denies the city the ability to dissolve the board that it constituted to begin with, thereby forcing future elected officials to abide by the biased economic commitments of prior elected officials and legislatures. Further, in Hillsdale’s particular instantiation of the EDC, the organization’s existence has led to an increase in the size and scope of the city’s bureaucracy.

The Money

The Hillsdale EDC in particular exercises control over hundreds of thousands of dollars in assets. According to the latest available data, Fund 244, the Economic Development Fund, contains $348,898, much of which has come from the sale of city property. The origin of a large part of this money is shown in the “Sale of City Property” line item the budget records of the last four years below:

Through the sale of city property between 2021 and 2024, the EDC has collected $247,110, with that money accumulating interest in the organization’s investment funds. Per the language of Act 338, as demonstrated above, a city could use this money for its own purposes, if the appropriate steps were taken to eliminate the EDC. The money is eligible for use because the EDC was the seller of assets that were owned by the city. And yet, as things stand, the money from the sale has become a nest egg for the EDC, so that the group has more funding to distribute to its preferred interest groups.

In this model, the city itself is likewise treated as a corporation, with its purpose being to market itself to potential customers in order to initiate growth. According to the 2024-5 budget, the organization’s purpose is to “market the City of Hillsdale as an attractive place to work, live, and play.” Pursuant to these ends, the EDC has created a number of small development spending programs. A handful will be enumerated below:

1. Wayfinding Signage Project

In the past several months, the EDC decided to spend $23,958 on new signage for the city. This is the third phase of a larger signage project. See page 8 of this document.

2. Annual Hillsdale Robotics Club Donation

The EDC distributes approximately $500 per year to the Hillsdale Community Schools robotics club. Hillsdale Community Schools has several additional taxpayer revenue streams. See page 11 of this document for more on the EDC’s annual donations.

3. Annual Holiday Advertising Package

According to the minutes from the EDC’s October 15, 2024 meeting, the board approved the spending of $1,000 in city money to subsidize 8-second television ads for local businesses, focusing on bringing holiday shoppers to Hillsdale from Jackson, Lansing, and other places. The program appears in different forms in older EDC documents as well. The EDC has, in the past, also offered new business ad campaign subsidies. See page 70 of this document.

In addition to the money spent above, the EDC has been charged with recommending corporations and individuals for tax abatements, among which are the following:

1. Obsolete Property Rehabilitation Act (OPRA) abatements

2. Neighborhood Enterprise Zone (NEZ) abatements

3. Industrial Facilities Tax (IFT) abatements

Each of these types of tax abatements will require further description at another time.

The Plan

As shown above, the EDC exists as a semi-independent political body that redistributes public assets to preferred business partners and favored causes. So, what are the favored causes in Hillsdale?

All of the plans and marketing campaigns are initiated by the city’s economic development department, which have cost the city $58,000-$80,000 per year (depending on fluctuations in “contractual services”) over the past four years. The reported purpose of this department is to provide “support to the City’s Economic Development Corporation (EDC), Tax Increment Finance Authority (TIFA), the Office of Planning and Zoning, City Council and all City departments as needed for economic development.” Pursuant to these aims, the department has produced several documents, which set the tone and direction of the city’s economic development efforts.

First, the 2021 Development Guide commits the city largely to a service economy, including call centers, remote co-working spaces, data centers, leisure and hospitality, and education and health services. Naturally, therefore, such industries will receive and have received preferential treatment from the EDC and other city institutions.

Second, the 2023 Economic Development Strategy Guide lists the various stakeholders that the city is meant to serve. See the stakeholder list below:

In order to benefit the “stakeholders” ranked above, the city’s Marketing Strategy guide focuses on the “rebranding” of Hillsdale, laying out an extensive plan for increasing the city’s appeal to the various stakeholders. The plan includes the following provisions, among others:

• Making an “emotional connection” with people while helping “residents and nonresidents feel more compelling reasons to visit, invest, and reinvest in Hillsdale.”

• Taking advantage of “opportunities to consistently express and reinforce a community identity and brand.”

• Wielding the “power and significance of intelligent marketing to draw in tourism and investment” with the “grand display” of the “Pure Michigan campaign,” which “has won major awards for effectiveness.”

• Using social media platforms to express a “municipal brand identity.”

• Engaging in “tourism promotion.”

• Thinking “like a developer.”

In sum, the City of Hillsdale’s Economic Development Corporation uses taxpayer money to redistribute money and sell assets to select business enterprises. At least in practice, it keeps the earnings from asset sales—to the tune of approximately $350,000—in order to fund its corporate welfare redistributions. The operation as a whole is directed by the Economic Development Coordinator, a position that, with the input of various interest groups, creates guiding documents that determine the economic policies of the city.

Jacob Bruns

Related stories

CL Real Estate Seeks to End Lease Agreement for the Dawn Theater