Summary:
Clearcover, an auto insurance startup, failed to meet its job creation goals in Detroit.
The company was awarded a $4.65 million grant package, but did not open a downtown office as promised.
Instead, Clearcover opted for a remote-work model, resulting in the withholding of a $750,000 grant.
The Michigan Strategic Fund is suing Clearcover to recover $500,000 from a separate grant.
The case highlights the risks associated with providing grants and the need for accountability from businesses.
Startup Fails to Deliver Promised Jobs in Detroit, State Seeks Grant Repayment
Clearcover, a Chicago-based auto insurance startup, was awarded a $4.65 million grant package in 2020, with the promise of opening a Detroit office and creating 303 jobs. However, the company fell short of its goals, prompting state development officials to attempt to reclaim the grant money.
Instead of leasing office space in downtown Detroit as initially planned, Clearcover opted for a primarily remote-work model for new hires. This change in plans led to the Detroit Economic Growth Corp. (DEGC) withholding a $750,000 performance-based grant that was contingent on meeting specific milestones.
Despite failing to meet its job creation targets, Clearcover did receive an initial $500,000 from a separate $3.5 million state-level grant. However, the Michigan Strategic Fund (MSF) is now suing the company to recover this amount.
The lawsuit alleges that Clearcover failed to maintain the initial job numbers, prompting the MSF to request repayment. Clearcover has not responded to requests for comment on the matter.
This situation highlights the risks associated with providing grants and tax breaks to attract new businesses. While incentives can be effective in driving economic growth, they also need to be carefully monitored to ensure that companies deliver on their promises.
The MSF's lawsuit against Clearcover serves as a reminder that state and local governments are increasingly taking action to hold businesses accountable for fulfilling their commitments.
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