Saturday, March 12, 2011

Does Snyder's budget proposal disarm Michigan in battle to win business?

In the battle with other states to attract business and create jobs, is Michigan under Gov. Rick Snyder disarming?

Most people who have paid attention to Snyder's budget proposal seem to understand what the new governor does not want to do in the economic development arena:

• He doesn't want to pick winners and losers by lavishing incentives on certain pet industries.
• He's getting rid of long-term tax credits.
• And he wants to limit subsidies for the film industry, if not eliminate them altogether.

OK, I get the impulse to change tactics after Michigan's decade as the caboose of the U.S. economic train.

But if we don't have brownfield credits to revive old industrial sites; or historic tax credits to bring grand buildings such as the Book-Cadillac back to life; or the catnip of fat cash rebates to entice Clint Eastwood and Drew Barrymore to make films here, how do we plan to fight back when neighboring states try to poach our jobs and companies?

In case you didn't notice, it took Ohio about 8 milliseconds to steal "The Avengers" movie from Michigan when Snyder moved to cap film support with a $25-million grant program, replacing open-ended subsidies.

And that gunslinger Gov. Scott Walker of Wisconsin is assembling a $196-million two-year economic development war chest, which will presumably be operational as soon as he can round up enough AWOL legislators to hold a vote.

So, how is Michigan is responding?

In a nutshell, Team Snyder is saying, "Trust us."

The 2012 budget requests $75 million for the 21st Century Jobs Fund, including $25 million to spur entrepreneurship and the rest for traditional stuff like "plugging gaps" when Michigan is competing with other states for projects, says Mike Finney, head of the Michigan Economic Development Corp.

Exactly what form that $75 million will take -- cash, loans, land or other incentives -- is still undecided. Finney says he's talking with regional economic developers, banks and others for ideas. He's aiming to pin down specifics in the next 45 days.

If it seems that Michigan's playbook is still a work in progress, well, perhaps there's some comfort in knowing we are definitely not alone.

Some practices, such as using deal-closing funds to make big cash payments to lure companies, are losing favor as more states face big budget deficits. Illinois hasn't replenished its closing fund in several years, while Texas and other states are under pressure to shrink theirs.

"Most states are still doing targeted incentives and, frankly, they're not very effective," Finney says. "We've taken a very different mind-set, with a simple, lower business tax that makes us less costly than all the other Great Lakes states but Indiana.

"Once we're through the initial angst people have about losing specific targeted programs, we'll be fine," Finney says.

In other words, trust us.

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