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Economic Developers Confront Lawmakers Over Shifting Funds To Roads

June 2, 2015

With one businessman saying it could “irreparably harm” Michigan’s ability to compete, economic developers clashed with lawmakers Tuesday over the proposed shift of $185 million from development efforts to roads.  “The impact would be all across the state,” argued Steve ARWOOD, CEO of the Michigan Economic Development Corp. (MEDC).

But lawmakers seemed less than convinced of the alleged repercussions with one saying that economic developers were using “scare tactics.” 

“I’m not trying to say the incentives aren’t good,” Rep. Jeff FARRINGTON (R-Utica) said. “There is a purpose behind them. And it’s beneficial. But right now, before going to the taxpayers, I believe that it’s imperative that we look at our internal budget first. And this is where we’re looking.” 

Another lawmaker, Rep. Marilyn LANE (D-Fraser) suggested the MEDC temporarily change its entire focus to transportation. 

“Can you revamp, keeping your department intact, but focusing it all on road development?” Lane asked Arwood. 

The $185 million shift is part of House Speaker Kevin COTTER’s (R-Mt. Pleasant) proposal to find $1.05 billion more for transportation annually. 

The House Roads and Economic Development Committee has been discussing Cotter’s plan since last week, and today, the committee focused on   HB 4607 and   HB 4608. 

Votes on the entire package in committee could come as soon as next week. 

HB 4607, sponsored by Rep. Peter PETTALIA (R-Presque Isle), would shift $75 million in tobacco settlement revenue, which is currently going to the 21st Century Jobs Trust Fund, to transportation. 

HB 4608, sponsored by Rep. Lee CHATFIELD (R-Levering), would dedicate $60 million from Native American gaming compacts, which is currently going to the MEDC, to roads. 

Cotter’s plan would also allocate $50 million that currently goes to film incentives to transportation. 

The main argument from Republican lawmakers in committee was that over the last few years, the Legislature has taken major steps to make Michigan more attractive to businesses, and now, the state needs some help with another priority: improving roads. 

Those steps include issuing some $9 billion in business tax credits, doing away with the Michigan Business Tax and moving to phase out the Personal Property Tax on certain industrial personal property.

“Now we’re asking for some help,” Pettalia said at one point. “We want to make Michigan a better place to do business in.” 

According to multiple estimates, Michigan needs more than $1 billion per year annually in additional funding for its transportation infrastructure. Earlier this month, voters rejected a plan to raise that money through increasing the sales tax, so lawmakers are now looking for a new solution. 

“We are asking you folks to help us out,” Pettalia added during today’s committee hearing. 

But for about two hours, both state and local economic development officials, along with representatives from the business community, argued that by shifting dollars away from economic development, the state would hurt its chances to attract jobs. 

Frank ERVIN, director of government affairs for Magna International, said his company has benefitted from the incentives MEDC offers and those incentives have led to development in the state. 

By shifting the dollars away from MEDC, lawmakers could “irreparably harm” Michigan’s ability to compete for new manufacturing projects, Ervin said. 

Likewise, Paul LAMARRE, director of Port of Monroe, slammed the idea. 

“We are essentially creating a turnpike of the nicest roads through our state to do business elsewhere,” LaMarre said. 

But lawmakers seemed most interested in hearing from Arwood, who leads the state’s economic development efforts and previously issued a public statement against the idea of shifting the dollars to roads. 

Last year, MEDC’s total expenditures were about $493 million, according to figures presented at the meeting. 

The Speaker’s road plan would shift $185 million in funding — 37 percent of the $493 million figure — away from MEDC. 

In doing so, the proposals would “totally alter” the landscape of what MEDC is doing, Arwood said. MEDC would have to defund some programs and the impact would be felt “all across the state,” he continued. 

While roads are critical, Arwood said, “Taking this route, I believe, opens up just another problem.” 

Pettalia, who spoke out in support of the Pure Michigan tourism campaign, specifically asked Arwood what programs he would cut. 

“We have a crisis right now,” Pettalia said. He continued, “We’re trying to do our due diligence here by tightening our belts.” 

Arwood noted that MEDC is already seeing a $40 million reduction under budget plans for next year. 

“I am going to have to defund stuff … I don’t know what I would have to do,” he said. 

Asked after the meeting about the testimony from developers in committee today, Farrington said he wasn’t surprised and called some of the comments “scare tactics.” 

Asked if he thinks the shifts would “irreparably harm” development efforts, he responded, “No, I don’t.” 

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