The state of Michigan on Tuesday modified its tax-credit agreement with Fiat Chrysler Automobiles to nearly $2 billion, in an effort to cap a broader liability that critics say helped blow a hole in the state budget earlier this year.
The so-called MEGA tax credit for FCA was originally estimated at $1.3 billion and will end up rising to $1.93 billion based on the value of the jobs saved with increased wages, according to officials. But the head of the state’s economic-development arm said the new agreement provides more certainty and mandates greater investment — $1 billion through 2029 — in the state.
“As you know, in 2011 the MEGA tax credits were eliminated,” Steve Arwood, CEO of the Michigan Economic Development Corporation said in a statement Tuesday. “The state, however, must honor agreements and where prudent, amend contractual arrangements”.
Arwood said the amendment to the global MEGA agreement with FCA US, which was originally authorized in October 2010, provides “budget transparency and certainty.” The change, he said, limits obligations of the state, provides periodic forecasts of estimated tax credits to help with state budgeting and cash-flow planning and reduces the term of MEGA tax credit by two years.
In addition, according to Arwood, the new agreement requires $1 billion in new capital investment through 2029, in addition to FCA US’s investment of more than $4 billion since 2009.