Investments Here Remain Strong

August 11, 2008
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GRAND RAPIDS — Kent County Commission Chairman Roger Morgan said he sees The Right Place Inc. as the county’s economic development department. In return, The Right Place President Birgit Klohs said the county is “one of our major investors.”

The county contributes $80,000 each year directly into the $1.1 million pot the The Right Place uses to promote economic growth in the area. And although the business climate, locally and globally, has seen better days, Klohs told county commissioners that the amount of new capital investments made here from 2004 to 2007 topped $400 million.

“That’s $100 million of capital investment each year for four years. That’s a huge return on investment,” she said of the payback in comparison to her agency’s annual budget.

In 2007, The Right Place reported that it helped to draw $53.3 million in new capital investments and $11.8 million worth of new payroll, retained 200 jobs and assisted 328 companies. All of those outcomes were below the agency’s 2007 goals.

But The Right Place exceeded two of the four goals it set for its five-year strategic plan in just four years (see related chart).

The Right Place turned 23 years old this year, and Klohs has been with the economic development agency for 21 of those years. Up until a few years ago, most of the agency’s business expansion, retention and attraction efforts centered on parts suppliers to the auto industry.

But the agency’s attention has since swung toward the alternative energy and life sciences industries, while still mostly looking to draw European firms here. Klohs said The Right Place is surveying 700 companies in the alternative energy field.

“We’re seeing prospects. We have quite a few in the pipeline,” said Klohs.

The fall of the U.S. dollar against the euro has made buying real estate here an attractive and more affordable purchase for companies in the European Union. That currency situation has helped to stimulate some of those firms to think about coming here.

But Klohs warned commissioners not to expect as many jobs to emerge from future expansion projects as the auto parts suppliers had delivered in the past.

“A $10 million project used to mean from 30 to 50 new jobs; now it’s eight to 10 new jobs. That’s where the change is occurring,” she said.

“There are less jobs being created, but these jobs pay more.”

When asked about the role that tax abatements play to lure new businesses here and keep local ones right where they are, she said the exemptions are necessary because every state her agency butts heads with offers some sort of public incentives.

Klohs said state MEGA grants, brownfield tax credits and local property-tax exemptions allow the region to compete for businesses that other states are also keenly pursuing. As an example, she said without the tax breaks she felt the Clipper Belt Lacer Co. would have gone to Downers Grove, Ill., last year, instead of investing $9 million into its Grand Rapids plant and creating 10 new jobs here.

“Without these tools, I wouldn’t want the job,” she said of the tax incentives. “I couldn’t do it.”

Klohs added it would be fine with her if every state quit pushing the abatements and competed solely on what they could offer a company. But she didn’t think that would happen any time soon.

As for the effect the controversial Michigan Business Tax has had this year on what she and her staff does, Klohs said the verdict wasn’t in yet.

“We’re still trying to figure that out,” she said. “Personally, I wish we had kept the SBT because we knew how that went. The good thing is that the MBT is not all that dissimilar (from the SBT) that we can’t talk about it.”

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