The Tuscola County Economic Development Corp. is forming a new nonprofit modeled after successful economic partnerships in other parts of Michigan, with hopes to secure more funding – and business for the area.
The idea, said Christine Young, chair of the Tuscola County EDC, is to give businesses and other organizations more incentive to contribute funds to the newly formed nonprofit because such contributions would be tax deductible.
The as-yet unnamed nonprofit would operate in conjunction with the existing Tuscola County EDC, Young said.
The new nonprofit would take on the business attraction and retention duties of the Tuscola County EDC, the board of which approved Tuesday spending up to $5,000 on legal expenses related to forming the organization.
“The main idea that we want to move forward with, is to leave this committee in place, but create a new entity that would go after funding sources,” Young said.
Young said during Tuesday’s Tuscola County EDC meeting that the idea came after the board formed a strategic committee in late 2016 that has since met with officials from the Lansing Economic Area Partnership and the Shiawassee Economic Development Partnership to learn how each respective organization operates.
“What we want to do, is pattern a new organization to kind of run side-by-side with this one,” Young said, referring to the existing Tuscola County EDC. “So we’re putting together articles of incorporation and by-laws, which we received from those other two groups (Lansing and Shiawassee)…this is the way they both operate.
“Our funding sources would then be government, agriculture, industry, and public and private nonprofits,” Young said. “We would increase our funding sources dramatically.”
Currently, the Tuscola County EDC is a “special-unit agency” of Tuscola County started in 1982 by a group of farmers, essentially to issue bonds and help pay for new equipment while taking advantage of tax incentives that existed at the time.
A lot has changed since.
Today, the Tuscola County EDC is essentially a three-person team working to promote the economic success of Tuscola County – it’s involved in everything from park planning and small business loans to retaining the area’s largest employers.
The organization has been involved in big projects, such as Poet Biorefining Inc. in Caro and the Dairy Farmers of America (DFA) plant in Cass City.
It has helped smaller businesses, too, with business planning and as a source of seed money for start-ups in the form of low-interest loans that they likely wouldn’t be able to get from a traditional lending institution.
Instead of farmers, the current Tuscola County EDC is funded mostly from the county, though additional monies are provided by local units of government, business and other nonprofits.
However, funding from local units of government is down 30-40 percent. According to a recently completed audit for the year ending June 30, 2016, the Tuscola County EDC had revenues of about $94,000 and expenses of about $127,000 – a loss of about $33,000.
Steve Erickson, executive director, Tuscola County EDC, said by forming as a 501(c)(6) nonprofit, businesses and other organizations could help fund the EDC – and enjoy the benefits of their donations being tax deductible.
According to IRS standards, a 501(c)(6) is a membership-based organization or club that exists to serve its members and further their interests. Examples include professional membership clubs, trade associations, and sports leagues. By comparison, the more common 501(c)(3) nonprofits exist to improve the public good overall.
So why not just eliminate the current Tuscola County EDC and just have the new nonprofit do everything?
Erickson outlined several reasons, such as the ability for the current EDC to issue bonds – something the new nonprofit would not be able to do. The only time Erickson could recall that potentially happening in the past was “when the DFA thing blew up and we thought we were going to need to build a sewer plant.” (DFA ended up building their own.)
“Would that ever come up again? Probably not. But if you don’t keep something like that intact, then you would have to recreate an EDC board,” Erickson said.
There are other reasons to keep the existing Tuscola County EDC, such as a law that requires brownfield grants to come through the EDC.
“So you cannot eliminate that (current EDC) board,” he said, adding that the Tuscola County EDC also is unique to other comparable organizations because of its small business loan program.
“We do things that others don’t do,” Erickson said.
However, Erickson said, the current Tuscola County EDC board – which consists of about 20 members – would likely meet less frequently, or if there is a specific project on the table that requires its involvement.
Further, he said, the majority of operations would be handled by the new nonprofit – a system that has worked well with the Tuscola County EDC’s counterparts around the state. Erickson said the Lansing Economic Area Partnership “broke off” from the city of Lansing. Similarly, the Shiawassee group spun out of the Owosso Chamber of Commerce.
But many questions remain as to what Tuscola County’s version might look like, which is why the board was asked to approve directing funds toward legal counsel.
“The challenge is, how to we put this thing together, to make it work?” Erickson said. “How do we pattern it after what others have already switched to, that’s worked for them, because they’ve been able to draw more money?
“How does this fit with what we currently do? How do we adjust that?” he said.
Andrew Dietderich is editor of The Advertiser and can be reached at email@example.com