Economic Development and Government

Right Place: MEDC funding cut would ‘disarm’ Michigan

Business Leaders for Michigan also opposes the road funding proposal.

June 12, 2015
| By Pete Daly |
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Economic developers and Business Leaders for Michigan are sounding the alarm in response to legislation that passed the Michigan House that will divert almost half of the Michigan Economic Development Corp. budget next year to restore Michigan’s dilapidated roads.

Birgit Klohs, president and CEO of The Right Place Inc. economic development agency based in Grand Rapids, told the Kent County Board of Commissioners the MEDC is “under attack in the Legislature.”

A pair of bills that passed the House last week would reduce the MEDC budget by 46 percent, according to Klohs. She said it leaves “uncertainty” in Michigan’s ability to persuade new companies to locate in the state and also successfully retain existing companies that are considering major expansion at sites in other states.

The two House bills, 4607 and 4608, would reduce the MEDC budget by about $135 million and funnel the money to road repairs.

The legislation is yet to be considered by the Senate, which is expected to release a plan on funding Michigan roads by early July.

The scrambling in the Legislature is the result of Michigan voters overwhelmingly turning down Proposal 1 on May 5, which would have raised taxes by almost $2 billion to be dedicated to road repairs and reconstruction.

In recent weeks, the MEDC already had faced proposed multi-million-dollar budget cuts it feared would shrink the Pure Michigan promotional campaign and dramatically reduce by more than half the MEDC’s film credits program, which costs Michigan $50 million a year.

Some of those original budget-cutting proposals were later withdrawn, however.

“The House road-funding plan is the wrong direction for Michigan,” said Doug Rothwell, president and CEO of Business Leaders for Michigan.

“Michigan needs a permanent, long-term solution to increase road repair funding without raiding the General Fund and hurting other critical priorities that are important to our economy. The revenue should come from the users of our roads and bridges and be sufficient to ensure good quality road and bridge conditions. We look forward to working with the Senate on a solution that meets these thresholds.”

Steve Arwood, CEO of the MEDC, compared the House legislation to a “raid on our jobs and prosperity.”

“While I appreciate the recognition to restore some of the originally proposed cuts to our economic development efforts and the Pure Michigan campaign, this proposal will still significantly harm our efforts to restore a healthy economy in Michigan,” said Arwood.

“Today we enjoy our state’s most healthy economic moment in 15 years,” Arwood said last week, shortly after the House passed the two bills.

“Today’s votes, if enacted, will mean a significant decline in our state’s economic development capabilities. They will also damage our state’s ability to revitalize our community centers, from our largest cities to our smallest of villages. (Economic development) projects now in the planning process will be far less likely to receive state support,” Arwood said.

“Today’s actions open Michigan up to raids on our jobs and prosperity from competitors in 49 other states and any number of nations. We will do our best to stanch the impact of these votes.

“All should know we will now begin fighting competitors who are energized by this declaration to move Michigan to its most meager economic development capabilities in decades,” added Arwood.

Last Thursday, a day after the House vote, Klohs said The Right Place already had fielded questions from professionals in other states who locate and research new sites for industrial and food-processing companies in which to invest. The site developers are wondering if Michigan will have less to offer their business clients looking for a new plant site.

“Our competitors are looking forward to Michigan disarming,” Klohs told the Business Journal.

“Competitors” in this case are all the other states that invest heavily in economic development plans to lure new business or to keep existing businesses from moving to other states.

One of the key tools all states use are economic incentives in the form of tax breaks and also much assistance from agencies such as The Right Place.

Gov. Rick Snyder said in late May at a major business conference he does not think funding should be removed from the MEDC budget to devote to the state highway system.

In addition to managing Pure Michigan, the state government’s marketing campaign for the Michigan tourism industry, the MEDC also offers:

  • Procurement services to help Michigan businesses connect with the state’s largest purchasers of goods and services, and to help win federal contracts.
  • Export services for small and medium-sized businesses trying for sales in new markets.
  • Real estate development services for communities seeking to streamline “smart growth” in their downtown areas.
  • Talent services to help attract, retain and develop a competitive workforce that meets the needs of businesses.
  • Capital services to increase the private sector’s capacity for making loans and investments in business.

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