The state of Michigan is giving Dow Chemical Co. a $120 million grant to retain 5,000 jobs, dipping into its business attraction account to keep jobs already in the state.

The Critical Industry Program Grant, allowed for in the state’s Strategic Outreach and Attraction Reserve Fund, or SOAR, was approved by the Michigan Strategic Fund on Tuesday, along with a $25 million tax exemption for the company.

The incentives package is meant to secure a promise by the Midland-based manufacturer to invest $785 million in mid-Michigan and retain at least 5,000 qualified jobs, according to a briefing memo from the Michigan Economic Development Corp.

As part of the deal, Dow agreed to forgo the remaining couple of years on its Michigan Economic Growth Authority tax credit, valued at about $20 million, MEDC officials said.

SOAR funding, which was created in 2021 and subject to increased criticism among legislators, is typically used to secure transformational projects and lure new jobs; not just retain them.

The Dow project marks the first time SOAR funding is being used solely to retain jobs.

Dow has considered making the investment beyond its Midland headquarters and Michigan altogether, making the grant funding essential to keep its business, according to the MEDC. The state economic development agency said the funding will offset the extra cost of investing in Midland over the company’s newer facilities in Texas, Louisiana, Pennsylvania, Kentucky, Europe and Asia.

“Modernization of Dow’s Michigan Operations Industrial Park and Auburn Operations, respectively, in combination with the global headquarters, will reinforce Michigan as the Company’s home, which it has been for more than 125 years,” the MEDC memo said.

The $785 million investment will be in addition to the $150 million committed in 2022 and will include infrastructure improvements, building renovations, new building construction and silicones manufacturing process equipment life extensions and capacity expansions.

The investment also involves scaled production of “silicone foams, gels, coatings, encapsulants, and other materials for use in electric vehicle batteries, among other technologies.”

Dow has more than 5,200 employees in Michigan. 

The average salary for the retained jobs is $100,000 per year, according to the company. The investment is expected to be complete by 2032.

The MEDC deal includes a few clawback provisions in the event Dow fails to fulfill its commitment. If the company abandons the project or relocates “more than 50% of the total number of the overall jobs commitment before the end of the term, it will be required to repay all or a portion of grant disbursements made under the CIP Award,” according to the agreement terms.