GRAND RAPIDS — The West Michigan Policy Forum hosted a conference today in Grand Rapids where speakers promoted sweeping K-12 education reforms and lamented the ongoing use of large incentive packages to lure automotive supplier jobs.
At the Amway Grand Plaza Hotel downtown, the first half of the conference focused on Michigan’s competitiveness with other states in attracting large economic development projects.
One office furniture executive — whose company benefited from sizable state incentives in the past — called incentive packages “insidious” and “government-sponsored discrimination.” While the head of the region’s economic development agency agreed that Michigan is “stuck” in the past by continuing to lure auto-sector jobs with incentives, they are proving necessary to retain a semblance of the historical auto sector while adapting to its shift to electrification.
“We’re one of three states in the country that has fewer jobs today than we had in 2000,” The Right Place Inc. President and CEO Randy Thelen said during a panel, citing Michigan alongside Ohio and Connecticut. “It’s almost mathematically and demographically impossible to achieve that kind of number. For all of the policy and economic development efforts, we have lost ground.”
By having “what other states want” with a previously built-out auto sector, those jobs have steadily flowed to southern states over the past three decades.
Michigan, Indiana and Ohio have “been in a defensive posture where we try to hold on to what we had because it is such a strong economic force in this state. … We’re trying to forestall the loss, trying to offset it with some growth, so we find ourselves at times providing incentives,” Thelen said.
He also noted that “diversifying at a much more rapid rate” is needed, citing efforts in West Michigan around life sciences and, more recently, tech.
“The incentive mix has to be more broad and more diverse in its approach. We are stuck, and the math shows we’re stuck, no doubt,” Thelen said. “That protectionism versus diversification is a real challenge for the state. We want to hold on to the (auto) industry and it’s changing right in front of us, and we’ve got to find a way to manage that because so many people rely on it for their income while still pushing ahead to diversify our economy.”
The panel also featured Haworth Inc. Chairman Matthew Haworth, who said “wasteful” incentives “distort markets.”
“It’s a tax on our citizens and businesses. … It’s government-sponsored discrimination and it’s insidious,” Haworth said during the panel. “It hurts businesses that are not as competitive when they’re not the beneficiaries, and it undermines all of our citizens’ confidence in business.”
Haworth Inc. has received millions of dollars in state-backed incentives, including $22.4 million in Michigan Economic Growth Authority (MEGA) credits in 2009 under former Gov. Jennifer Granholm to bring manufacturing jobs to West Michigan from Alberta, Canada, WOOD-TV8 reported at the time. The incentives helped to bring nearly 650 jobs back to Michigan. The company also received a Single Business Tax credit in 2004 to consolidate operations in Michigan rather than Arkansas.
Haworth said in an interview after the panel discussion that the incentives were approved prior to his appointment as chairman 13 years ago.
“I fight for the right rules, but once the rules are set, I’ve got to play with them. I might hate them, and I have an obligation to my stakeholders — 350 dealers, 7,500 employees worldwide, our shareholders — within the rules that have been set to have them so that we’re not at a disadvantage,” Haworth said. “I will fight to make sure nobody, including Haworth, has access to them. But once they’re in play, I have an obligation to my stakeholders to utilize them.”
Thelen also said that talent is the “fundamental driver of business decisions, far and away, and Michigan hasn’t been a growth state.” Incentives can be used “right out of the gate to overcome that perception,” or at the end of a deal to differentiate Michigan from other states.
“Incentives never make a bad deal good,” Thelen said. “It’s not a perfect tool.”
Christopher Lloyd, senior vice president and director of infrastructure and economic development at Virginia-based McGuireWoods Consulting LLC who presented during the conference, ranked incentives as the seventh-most important component to securing deals. Incentives are more important than permitting processes but less important than marketing a region, he said.
In order of importance, Lloyd said “consistent bipartisan support” for the business community, data analysis, affordable housing and child care, utility infrastructure, and a strong workforce are all more important to securing deals than incentives.
“You need to make sure that the business climate and economic development issues are bipartisan,” Lloyd said. “Creating a future for our children and grandchildren is not a red or blue issue. There may be different approaches and ways you may want to approach economic development or business climate issues. But at the end of the day, the fundamental core is a pro-business climate, a place where our children and grandchildren can thrive, good infrastructure, affordable housing — those are things that all parties can unify around. It’s important for the business community to be the one that stands above partisan politics.”
