We lived in another Century

To a large degree the growth
in SE Michigan was “artificial”

October 23, 2006

In the late 20th century, the auto industry “forced” supplies to be nearby. Support firms for those supplies then sprung up as well. We were not competing for jobs as much as controlling the flow of jobs and development.

They would come, sometime reluctantly, always citing the high cost of doing business in Michigan. High taxes, high labor costs, construction costs 15% higher than elsewhere in the country. They were here because they had to be.

“Economic Development” was coordination, information dissemination and facilitation. Beyond that, there was little for local, county and state governments to offer.

Incentives where minuscule when compared to competing states, but companies had to be here, so they sucked it up and did what they were asked to do.

Local Planning Commissions and elected government bodies saw their role as controlling the growth and allowing only the “best” companies to settle in their cities. Eliciting as much as possible was the norm. Grueling codes, ridiculous fees, unchecked consultant review fees and frequently pompous and arrogant treatment of corporate representatives were commonplace. Tax abatements were ridiculed – “they would come anyway” was the mantra.

As time went on, the rest of the country was competing for jobs and getting quite good at it.

Many still live in this long-gone artificial economic model for Michigan. Things are just not “getting better” like they always used to.

The CAVEmen and women (Citizens Against Virtually Everything) live on Monday nights around Michigan at local council meetings. They want nothing to change from historical practices and point to the fact that development is still occurring and jobs are being created in the RETAIL and MEDICAL sectors. WHY? They have to be here. It is hard to serve a chicken wing from Tennessee or treat the flu from Texas. They do have to be here and they are largely the only ones investing.

The world has “Flattened” our artificial economy.

Michigan is a legacy state and many practices, structures and perceived entitlements need to be broken down, restructured and streamlined. Much of this structure was developed in an artificial economy and will never work in the real world.

There is no credible reason to believe that these foundational problems will be cured anytime soon. Something as simple as the need for business tax reform ultimately produces a lukewarm result as the footprints of special interests and entitlement mentalities crawl over any reform efforts.

Bureaucracy needs to be killed, people need to be held accountable and legacy entitlements need to be brought back to reality if our city and state are to survive. Based on the current state of the 2006 election campaigns, no credible evidence exists that any of this is likely to occur anytime soon.

My next article will provide suggestions for starting efforts at a local level to address these issues.

Shortly after the MEGA Board approved a slate of SBT credits on October 17, including one for Novi’s Ryder Integrated Logistics Inc, a press release appeared on the Governor’s website. A quote from the press release included:

"Michigan is more than up to the challenge of competing in today's global economy," MEDC President and CEO James C. Epolito said. "Today's announcements show that companies all over the world believe in Michigan's economic future, and they want to invest and do business here."

While I am very excited about positive impact of the SBT credit on Novi’s ability to attract an excellent corporate citizen, I am stunned by the blatant use the MEDC and MEGA as a political tool by Governor Granholm. While the timing may be coincidental, I find it highly inappropriate to use the announcement of these grant for political benefit.

The following information is from a recent in Crain’s Detroit Business regarding the industries that pay SBT Taxes.

Manufacturers – 10% of filers pay 30.1% of the tax revenue generated.

Service – 29.9% of filers pay 24.3% of the tax revenue generated.

Retailers – 23.4% of filers pay 14.6% of the tax revenue generated.

Finance, Real Estate, Insurance – 11% of filers pay 6.9% of the tax revenue generated.

Construction – 10.5% of filers pay 6.1% of the tax revenue generated.

The article in Crain’s made it very clear that a small number of firms carry much of the SBT load. In addition to SBT reform, personal-property tax reform has to be part of any equation in considering Michigan’s next business tax structure.

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- Well done is better than well said.

Benjamin Franklin US author, diplomat, inventor, physicist, politician, & printer (1706 - 1790)

In the tradition of Ben Franklin, the Novi Post provides informed political commentary on current events in Novi, Oakland County and all of Michigan.