LANSING – Michigan has been shedding jobs for about a decade and economists see that continuing for at least another couple of years. But Michigan Economic Development Corporation CEO Greg Main sees the turnaround coming as soon as next year.
The MEDC has been working with a substantial number of companies over the past few years to bring them into the state, and he told Gongwer News Service in a recent interview those efforts are about to bear fruit.
“I think we’re going to see some overall growth in 2010 based on the number of companies we’ve worked with and the amount of investment has been committed to.”
Main said the MEDC has issued a number of tax credits and provided capital investment over the last two or three years, and he said that two or three years is generally the time it takes for a company to gear up and begin creating the jobs it has promised.
“I think we’ve made a fair amount of progress in the last year, the last couple of years,” Main said of beginning to turn the state’s job picture around.
The state has, in fact, already seen some improvements. “We actually had an increase in manufacturing the last four months of 35,000 jobs,” he said. “We’re seeing the same thing in business services employment.”
The MEDC, and other state economic development efforts, have been successful in concentrating on industries that fit the state well, Main said. And one of the best fits is going to be battery development, particularly as the remaining automobile industry moves toward hybrids and electric vehicles.
Main said there has already been $3 billion in commitments for new battery development. “There’s that much again that’s in our pipeline,” he said.
And he said that development is exclusively coming to Michigan. “Michigan has really, really anchored ourselves as the place where you’re going to see most of that production, at least the next few years,” he said.
After that initial growth, he said, the opportunities are unclear. “The whole alternative energy thing is still a nascent opportunity,” he said. “The big unknown is how quickly it’s going to develop.”
One thing that will likely change is the focus on hybrid vehicles. While the recent cash for clunkers and other incentive programs have been aimed at moving the general public into more efficient vehicles, Main said it will be commercial customers moving there more rapidly. “Many of those fleet operators have already decided to go to electric,” he said.
Solar and wind power are also growing industries, but he did not expect the growth there to be as dramatic because those technologies are more established.
A potentially more promising focus for the state is not in any particular industry, but in helping new business ideas get off the ground. “The more interesting thing that really holds great potential for us is the area of entrepreneurial development,” he said.
The state has a good base of people with ideas for new products or services. “We need to get such people to invent their own jobs,” he said.
Part of the effort of growing entrepreneurs has been attracting venture capital to the state. Main said the MEDC has invested some $500 million into venture capital firms and has built the base to 15 now from no more than three a decade ago. And he said another $300 million is needed to continue boosting the investment.
“It’s not the state saying we ought to go and to this industry or that industry. The entrepreneurs will do that,” he said. “That will help us figure out what the next sector ought to be.”
One sector where at least the MEDC will not be going is agricultural development. While the economic development division has been eliminated from the Department of Agriculture, Main said he did not expect those efforts to be coming his way.
“We try to stay in our own lane,” he said. While the MEDC is willing to work with Agriculture to develop and implement programs, he said his agency does not have the expertise to work with farmers and processors directly.
It also does not really have the expertise to work with artists, but it is now that the Department of History, Arts and Libraries is no more.
“It’s not a direct fit,” Main said of the Arts Council. But he said the council’s efforts do lead to community development that in turn aids with economic development. “It’s part of communities where young people want to be,” he said. “You’ve got to create the places where people want to live and work and play. But in itself having a great community isn’t enough.”
The MEDC’s efforts have come under some fire over the past few years as the economy continued to tank. Mr. Main admitted the efforts looked short. “Even our efforts haven’t been sufficient to offset a major collapse in the auto industry worldwide,” he said.
But he also countered that the MEDC’s programs should be judged by comparing the current economy to what it could have been. “Without the (Michigan Economic Growth Authority) program we’d be a lot worse,” he said.
He said putting more money, not less, into the MEDC’s programs, including MEGA, would lead to an even faster recovery. “I think we’re now at a point where it’s time to re-up,” he said.
For instance, the 21st Century Jobs Fund is supposed to be $75 million a year, but the current budget provides only $28 million.
While he urged more funding for current economic development programs, Main said he was not ready to follow some neighboring states down a new incentive road: cash. He said the state has lost deals to Indiana and Canada because companies were offered cash grants.
“Once you start putting money in up front, what happens if it doesn’t play out?” he said. “Companies who demand up front money usually don’t have the strongest balance sheets.”
Tax credits, on the other hand, require some performance by the company first before the state steps in to help, he said.
Even the film tax credit, which has been maligned for costing the state too much, requires some activity up front. And Main said use of that credit will go more smoothly now that the agency has experience administering it and has a better handle on what activities qualify.
And it is beginning to pay dividends, he said, with as many as three studios on track to actually be built.
It will still take time, however, to determine if the state will actually develop a film industry of simply attract activity to qualify for the credit. “It’ll take three to four years before you see whether it happens or not,” he said of an industry. “If you still have an itinerate film community, then you haven’t gotten what you wanted.”
But he argued threatening to limit or eliminate the credit now will ensure it doesn’t work by keeping the atmosphere unstable.
On the overall tax burden as a tool for economic development, Main said the most important thing the state can do now is nothing. “The most important thing we could do is get to a tax situation that’s stable,” he said. “The thing that companies hate the most is unpredictability.”
That said, he acknowledged that the state’s business tax should be shifted to more evenly spread the burden across manufacturing and services. “We need to have a tax system that’s more in line with the economy,” he said. “Services are such a big part of the economy, they need to be a source of (state) income.”
He said a proposal by Business Leaders for Michigan, formerly Detroit Renaissance, would be an improvement over the current Michigan Business Tax.
And, while much of the MEDC’s job has been putting together tax reduction packages for new businesses, Main said that does not mean the state needs to cut taxes overall.
“We’re not necessarily uncompetitive in terms of cost for taxes in Michigan,” he said. “You don’t have to be the lowest cost place, you just have to be somewhere in the middle.”
The key, he said, is the services
