Over the last decade, Michigan municipalities have given more than a billion dollars in local tax breaks to industrial companies to keep the air clean.
But the reductions often haven’t fully materialized: The companies receiving the tax breaks have been cited by state and federal authorities dozens of times for environmental offenses. And a state oversight agency told BridgeDetroit it does not have the capacity to monitor compliance.
How does this happen?
It stems from the 1960s-era Air Pollution Control Exemption, which was adopted alongside the state’s landmark efforts to clean up the air in the Air Pollution Act of 1965. It uses taxpayer money to incentivize companies to reduce emissions that could threaten public health. If automotive manufacturers, coal plants or other industries add features like incinerators or scrubbers to their facilities, the law says they can stop paying millions in property taxes to local governments.
BridgeDetroit reviewed 344 pollution control tax exemption certificates that manufacturers applied for since 2015 and analyzed exemptions for nearly $9 billion of equipment and property meant to curb pollution. Nearly half of the exempted facilities received a violation, according to EGLE’s Air Quality Division online records, as cities lost out on millions of dollars in revenue each year.
Pollution control exemptions have cost local governments around $1.2 billion in property taxes over the last decade, according to the Michigan Department of Treasury online records and Tax Expenditure reports. In some cases, the exemptions were given to companies for pollution reduction that they were already legally required to do.
The exemptions are granted in perpetuity by the Michigan State Tax Commission, a three-person board appointed by the governor, after an environmental review and recommendation from the Michigan Department of Environment, Great Lakes and Energy (EGLE). EGLE says it doesn’t revisit the exemptions for compliance, because there’s neither the budget nor the staff provided to do so. Meanwhile, local governments are mostly cut out of the process of granting the exemptions, after which municipalities have 21 days to object or the exemptions go into effect. After implementation, municipalities have to take any concerns to court.
The exemptions can cost communities dearly.
In River Rouge, exemptions over the past decade equate to what it would have cost to replace the lead lines in half of the city’s households. In Detroit, the money offered in tax breaks is enough to operate the city’s more than 20 libraries for a year.
Meanwhile, nearly half of the businesses that received those exemptions have violated air quality laws at the facilities, received state citations, signed escalated legal enforcement orders or have been sued in federal court by the U.S. Environmental Protection Agency, alleging they violated the Clean Air Act.
Eric W. Lupher, president of the Citizens Research Council of Michigan, questioned whether we’re “giving something away when we don’t have to.”
“Why are we doing it? If all we’re doing is collecting pieces of paper and filing them in a cabinet, that’s hardly a government program as anybody would envision administering it,” said Lupher of the nonprofit public affairs research organization. “If we’re going to do it, let’s do it right, or let’s take the law off the books and find a different way to promote good behavior.”
Enforcement challenges
EGLE issues air quality violations in Michigan and is aware of noncompliance, but staff says it doesn’t revisit certificates after the initial recommendation.
“Our division does not receive money or any sort of allocations to fund staff to be able to do this (exemption program),” said Chris Ethridge, assistant director at the Air Quality Division of EGLE. “So we’re pretty strapped from a resource perspective in our ability to be able to do the reviews in the first place.”
Mike Johnston, executive vice president of government affairs and workforce development at the Michigan Manufacturers Association, said violations should “absolutely not” be considered in relation to the exemption. Companies already have an obligation to follow the law, per their operating permits from EGLE, he said.
“There are penalties for non-compliance, and it would be a piling on and double dipping on the penalty side, if you also eliminate a tax exemption afforded to all other competitors in the state and across the country,” he said, noting that the exemption is common in many states.
Local governments, which shoulder the financial burden through lost property tax revenue and detriments to health, have little to say in the process leading up to the exemptions being issued and have no authority to deny them. Most don’t keep track of, or report, how much tax revenue they lose from the exemptions, according to one review by the national policy center Good Jobs First, which researches tax incentives and generally opposes them.
Nick Leonard, executive director of the Great Lakes Environmental Law Center, said it’s concerning that EGLE has cited a lack of capacity to enforce the program.
“EGLE is already supposed to be enforcing air quality laws, so if they don’t have the resources to enforce this program, it means they don’t have the resources to adequately enforce air quality laws in general, which would be troubling in itself,” he said by email. “EGLE is asleep at the wheel.”
Port Sheldon impact
In some of the state’s largest cities, places where taxes on manufacturing and industry comprise just a little of the overall revenue stream for the government, the exemption doesn’t make things appreciably different. Still, in Detroit, the state’s biggest city, this exemption has meant the loss of $46 million in taxes over the last decade – enough, cumulatively, to operate the state’s largest public library system with a few million left over.
In smaller locales, the exemptions can be devastating to municipal finances.
In the tiny township of Port Sheldon, dozens of air pollution tax exemptions were issued to Consumers Energy for the J.H. Campbell coal-fired plant going back to the 1970s. It’s the company’s largest coal-fired plant in the state.
The plant in the Ottawa County community just west of Grand Rapids has operated since 1962 and burns nearly 13,000 tons of coal every day to provide energy to people all across Michigan.
The first time the state tax commission issued an exemption to the Campbell plant was in 1974, for $816,766 spent on equipment, according to EGLE’s online exemption reports. Since then, the commission has issued dozens of certificates to the Campbell plant and to other Consumers Energy plants in small municipalities across the state.
Consumers Energy is one of the biggest benefactors of this exemption, using it to shield $2.9 billion in taxable property statewide since the law’s passing, according to a policy analysis by Good Jobs First.
Trisha D. Bloembergen, a spokesperson for Consumers Energy, said the company has claimed exemptions to install equipment to reduce environmental impacts. The company has also used Water Pollution Control Tax exemptions for projects involving coal ash landfills and water treatment systems, Bloembergen said by email.
The effect of these exemptions on Port Sheldon, whose 2024 tax revenue was $17 million, is dramatic. Over the past decade, Consumers’ exemptions have meant $122 million hasn’t come to city coffers – an average of $2,300 per resident per year. That does not include sales tax exemptions that are also part of the incentives.
In 2024, Port Sheldon collected community feedback to update its Master Plan and Economic Resiliency Plan. Among the concerns regarding the Consumers Energy Plant closure, most respondents (72%) cited the loss of tax revenue for the township.
Consumers is the township’s largest taxpayer, despite the exemptions. So plans to shut down the plant have raised even bigger fears about operating revenue and debt in Port Sheldon. In 2024, Consumers’ taxes made up roughly 11% of the township’s operating revenue.
Despite the millions in tax exemptions, EGLE notes the plant emitted more particulate matter or soot in 2019 than permitted. It did not trigger a review of the company’s exemptions.
Monroe impact
In Monroe, near the Ohio border in southeast Michigan, Consumers’ rival, DTE Energy, has received nearly $350 million in property tax exemptions over the past decade – equivalent to $1,734 per resident per year, or 50% of the city’s overall tax revenue.
DTE has been issued a number of violations by state and federal officials.
In 2010, DTE was sued by the EPA for upgrading the Monroe plant without installing controls for nitrogen oxides and sulfur dioxide. DTE violated the state’s air quality laws several more times in the years after the filing, and, in 2015, signed an administrative consent order with the state for repeatedly emitting more particulate matter pollution than allowed. Following the legal order to stop polluting, the state issued DTE four more air quality violations. In 2020, the suit was settled: DTE was fined $1.8 million and ordered to invest $5.5 million in mitigation. Following the settlement, DTE has violated state air quality laws four more times at its Monroe plant, according to EGLE.
A DTE spokesperson did not address the violations but did say that the company is committed to providing reliable, clean and affordable energy.
“That’s why we invest hundreds of millions of dollars in pollution controls and are working toward phasing out coal at our power plants by 2032. To help manage costs for our customers, we take advantage of available tax incentives—like the Air Pollution Control Exemption. Even with those savings, DTE continues to be one of the largest property taxpayers in many Michigan communities, helping support schools, roads and other essential local services.”
The Gerdau Special Steel plant is another exempted facility impacting Monroe residents. The plant has received 13 EGLE violations in the last decade. Last year, the company received a notice for violating five conditions of its permit over a three-year period. The steel plant was releasing more sulfur dioxide, carbon monoxide and volatile organic compounds than permitted, the violation noted. In July, Gerdau received its latest violation for failing to continuously monitor carbon monoxide emissions.
Gerdau communications manager Lindsey Erb said the company has “greatly improved its ability to minimize and prevent the release of air pollutants from its property.” Erb noted the installation of a baghouse to capture pollutants from the melt shop, upgrades to the furnace emissions collection system, ductwork, fans and installation of additional air monitoring technology.
“It is important to understand that the violations cited did not result in any excess emissions or adverse effects on the community. Gerdau is committed to complying with all environmental requirements, and when a violation does occur, we work quickly to resolve any issues to remain in compliance,” Erb said by email.
Erb also noted that EGLE did not issue fines for the most recent violations.
DTE and Gerdau have retained their tax exemptions and the only enforcement fines administered by EGLE were to DTE in 2015 for $16,619 and $90,000 to Gerdau for a 2016 violation, according to EGLE spokesperson Josef Stephens. Gerdau could receive more penalties stemming from violations in 2022, according to EGLE.
“We are currently negotiating a consent order with the company to resolve the violations alleged in the enforcement notice,” said Stephens.
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This project was an initiative of the Kozik Environmental Justice Reporting Grants funded by the National Press Foundation and the National Press Club Journalism Institute.
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This story was originally published by BridgeDetroit and distributed through a partnership with The Associated Press.
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