Snyders impact less than business growth

February 14, 2012
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Gov. Rick Snyder outlined his new budget proposal last week with Budget Director John Nixon, and compared to his inaugural budget, it was as much a yawner as his second State of the State speech.

The headline for the business community is that it did not include the expected plan to eliminate — or at least phase out — the personal property tax paid by business owners on equipment and furniture. The consolation prize may be in road repair funding, though that may take the year to fully fund and sustain. The good news is that Snyder and Nixon plan to use $119 million from the state’s general fund for road and bridge repair — enough to keep federal matching funds.

The most significant bit of information in the document and in Nixon’s comments is a $630 million surplus from 2011 and increased revenue projections for 2012 and 2013 — heretofore an outcome most only dared to dream. Such projections in much smaller amounts are anticipated by area county governments, which also will see some revenue sharing funds (a complete reversal of taking such shared funds away).

The aspect of continued revenue increases, however, is directly related to the continued health of the business community. Brian Long, Ph.D., director of Supply Chain Management Research for Seidman College of Business at Grand Valley State University, notes this week that survey results continue to show slow growth in the region. He notes increases in consumer spending but an even bigger indicator is that “businesses at the industrial level also contributed to the upswing by building inventory.”

Long also notes two more trends which may prove to be a much larger component of regional economic impact than the governor’s budget.

First is that of re-evaluating Just In Time product deliveries, especially given the lessons learned from the disasters in Japan last summer. The Business Journal reported on those impacts to local automotive suppliers throughout 2011. If we were to refer to this as “emergency preparedness,” it certainly is already a new norm, exemplified in the continued increases in commercial and industrial real estate sales and leases. Since fall 2011, the Business Journal has reported sustained movement by local manufacturers leasing new or expanding space. Several local industrial property managers have been advising business owners that supply of available space is now at a premium.

Second, Long identified another new normal: The fact that all of the major auto producers are now profitable means that they are less likely to squeeze their suppliers into bankruptcy. He notes: “There is also a pretense of ‘supplier cooperation’ being floated around Detroit.”

During the annual Commercial Alliance of Realtors meeting, Duke Suwyn, Colliers International/West Michigan president and CEO, commented: “In West Michigan it takes so long for perception to catch up to reality.”

These are the more significant impacts to this regional economy.

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