MichiganRadio

Hope For A Major Film Studio Near Grand Rapids Turns To Concern Over A Possible Shady Deal (with update) GRAND RAPIDS, MI (Michigan Radio) - UPDATE: Friday afternoon the Michigan Attorney General's office confirmed it is investigating Hangar42.


In February, we told you about a new film studio project near Grand Rapids called Hangar42. Developers said the studio would have the largest sound stage in the world - a major step forward for the film industry in Michigan.

But now, serious questions have been raised about the project. Those questions led to the resignation of a state House staff member yesterday, and more questions about the film tax credit program in general.

For almost a year, Hangar42 was a secret.

The first person to mention it publicly was Governor Granholm in her State of the State address. It came among a list of companies the Governor said were creating jobs.

The details of the project were impressive: a nearly 500,000 square foot former auto plant turned into the world's largest sound stage. Developers said the project would create 1,000 jobs.

They told reporters the deal was worth about 45 million dollars. That made them eligible for a state film tax rebate of more than 10 million.

But one group still had questions.

The Mackinac Center for Public Policy is a free-market think tank. It's been a critic of the film tax incentives from the beginning.

In the spring, Michael LaFaive and others at the center tried repeatedly to contact the Hanger42 seller, the buyer, and a person at the film office. LaFaive says not one call was returned.

"The fact that they wouldn't even return a phone call and say no comment just piqued our curiosity even more," LaFaive says. "We thought to ourselves, what is everyone hiding, and why?"

LaFaive and his team looked deeper, and found that shortly before the $45 million film studio deal was announced, the same property was listed for just $10 million - that raised the question: was the sale price inflated to increase the tax rebate?

And then there's the connection to Grand Rapids state representative Robert Dean.

After doing some digging of its own, the Grand Rapids Press detailed longstanding ties between Dean's chief of staff Noah Seifullah and the developer behind Hangar42, Jack Buchanan.

Then this week, the Press uncovered audio of a speech by Seifullah in which he describes a deal that sounds similar to Hangar42.

"I'm buying a building from one of my partners for $50 million," Seifullah says in the speech posted to MLive.com. "To get the building costs us $4 million. The 20 percent tax credit will provide us $12.5 million dollars.

"So how much the building cost us? We made a profit off the state."

Thursday, Seifullah resigned.

But in a press conference, his former boss said Seifullah had done nothing wrong - that the resignation came merely because of the perception of wrongdoing.

Representative Dean said Seifullah's comments were a hypothetical description of a deal. Dean said he'd been reassured that Seifullah did not benefit in any way from

Hangar42, but Dean didn't ask if Seifullah had advised the developers.

"He can talk all day long, he can make up whatever he wants to, but then if he did something unethical, then we have a real problem," Dean said.

When pressed about how he could know if Seifullah did anything unethical, if he didn't ask about advising Hangar42, Dean responded, "I'm not as astute as you, I'm sorry."

It's important to note, the state has not paid out a penny for Hangar42. The developer's tax credit application was denied.

That application may be resubmitted. A spokeswoman for the developers says the high sales price for the deal reflects work that was done to the property and a change in use. She says there are independent appraisals to back up the price.

But those appraisals have not been made public. And at this point, no state official will discuss Hangar42, because they say state law prohibits them from talking about a business's tax status.

For Michael LaFaive at the Mackinac Center, that just adds more questions.

"Is this what the legislature wanted when they created the Michigan film incentive program?" he asks. "Did they really want tens of millions of dollars sloshing around individual deals, with no ability whatsoever of the public, of the press and even of members of the legislature to see who is getting what and when?"

Since the questions about Hangar42 first came to light, a number of state legislators have proposed changes to the state's film tax incentive program.

And there are growing calls for a full investigation of Hangar42.

To see the Hangar42 reports from the Mackinac Center for Public Policy, click here.

Contact Dustin Dwyer at dtdwyer@umich.edu.

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