LANSING ? Michigan?s state economic development efforts, including the governor’s jobs plan and Republican-led tax cuts, will pay off in job growth, said new Michigan Economic Development Corporation CEO James Epolito – but those new jobs will not outpace loss of existing jobs for some two years.
Epolito, who has now been head of the state’s primary economic development organization for three months, told Gongwer News Service he is trying to position the state for longer-term growth and is trying to structure the MEDC to facilitate that growth.
While he said providing tax breaks for business would help some in the short term and providing development funds by securitizing some of the state’s tobacco settlement dollars would provide some longer-term benefit, he warned not to expect either of those programs or anything done in the remainder of the administration of Gov. Jennifer Granholm to show results before the election.
“At least for the next two years I don’t think we’re going to square very well,” he said of annual reports of job losses versus job gains. “That’s just the transformation of the economy.”
Epolito said the tax changes proposed both by Granholm and by legislative Republicans would help to buffer the state from the economic transformation. “The tax plan is extremely important for the businesses. Michigan businesses need help now,” he said.
But he also urged the sides to work together in developing a plan. “I just hope that it arrives on (the governor’s) desk in a form she can sign,” he said. “People say that’s a foregone conclusion. I don’t know that’s a foregone conclusion.”
He said he had not reviewed the most recent changes to the legislative proposal and so could not say if he would recommend that the governor sign it.
The jobs legislation already enacted, which uses tobacco funds to provide venture capital and loan assistance to new and growing businesses will move the state in the direction it needs to go: a more diverse economy, Epolito said. “The way you come out (of the current economic slump) is by diversifying our economy and trying to pick the right seeds to plant,” he said.
But he said the funds provided by the securitization may not be enough.
“I was very, very hopeful that we would securitize $2 billion to $3 billion,” Epolito said (the final package is worth $1 billion, $400 million of that in securitized funds). “Venture capital activity in Michigan is not as strong as it needs to be. We need to build that up.” And he said banking in Michigan tends to be more conservative than in other states, meaning many trying to market new products do not qualify for business loans.
As important as the funding is making sure the money gets to businesses that could grow, Epolito said. A key advantage to the program as it developed is that the politics has been taken out of deciding who will receive assistance, he said. Instead, all of the applications for assistance will be peer-reviewed and approved based on that ranking.
The agency is working now to build the structure to support the various reviews of both the funds set aside for the loan and capitalization assistance and the plans submitted to use those funds. Epolito said he expected requests for proposals to be released no later than February with awards as early as June.
Epolito said planning has consumed much of the past three months and will be a significant focus of his into the future. “A lot of my time has been spent inside of this operation to build that strategic plan,” he said. “We’re going to get through this transformation (in the economy). We’re going to do it by adhering to a plan.”
That planning is essential with the loss of funding and personnel the agency has seen in recent years. “The agency has endured over the last several years having its budget cut 72 percent,” he said.
Most recently the MEDC had to move 35 employees to the Michigan State Housing Development Authority because it did not have the money in its budget to support the positions.
“One of the reasons our funding has declined with this Michigan Legislature is that they’re not fully aware of all the deals we’ve done,” he said.
Some of that will change next month when the MEDC unveils its new research and development facility. One of the tasks of the new operation is to better tie the agency’s efforts to job creation and retention. Epolito said one failing of the agency is the inability to track the specific effects of the incentive packages it offers.
“If we’re putting those deals together, we have to be able to track what the results were and are on an annual basis,” he said.
While having the data on the effects of the projects MEDC has negotiated will provide a stronger message for the agency to carry, Epolito said it still has failed to send the message it already has. “We haven’t gotten the word out,” he said.
But he said some responsibility (“I don’t blame them”) falls on the news media for not giving the coverage to the new jobs it has given to the losses. He pointed, for instance, to a press conference last month to announce the opening of the new Bosch research and development facility where no media attended. “That was big for us,” he said of the announcement of the 250,000-square-foot facility that is to initially employ 475 persons.
“The headlines are always about the thousands of jobs that we’re losing in the manufacturing sector, the rustbelt jobs,” he said. “Their not focused on the gains that we’re making as we begin to attract other types of business.”
In many cases, the MEDC’s work is not news because the companies it assists are too small to make a big splash. “We spend an inordinate amount of time talking to small business,” he said, though adding those are the businesses that often grow and add jobs the quickest.
The agency is also, to an extent, hampered by business practices from getting some of its successes out, Epolito said. In many cases, companies ask that the discussions they have with state officials be kept confidential. “These are (corporate) board decisions. You have to keep that information very tight,” he said.
He chastised other states for making public offers of assistance before completing negotiations. “Steve Miller (CEO of Delphi Corporation) does not want to read what MEDC wants to do for them in the newspaper,” he said.
And he said in many cases the focus of stories is on the companies, not on the incentives provided by MEDC to attract the jobs. “We’re kind of a catalyst. We’re not going to say that we’ve gone out and done this,” he said.
Some of the battle is also convincing people that the efforts the MEDC puts forward are needed. Epolito said one key to improving the state’s economy is eliminating the view that there are industries or companies the state will always be able to depend on. “Can Ford or Chrysler or General Motors go away? Oh yeah, they can go away,” he said. “We have to do everything we can to support them getting healthy.”
And he said GM’s recent announcements of cutbacks show the MEDC’s work has been successful and the company sees the value of Michigan. “Sixty-five percent of General Motors’ operations are in Michigan, but we only got 10 percent of the cutbacks,” he said. “We’re urging and continue to urge that when those consolidations occur, they occur within Michigan.”
But while supporting the staid businesses of the state, the MEDC also has to work to attract those businesses that are growing into the state. Epolito noted that, while the Big Three have been flagging in recent years, vehicle sales worldwide have been up.
Keeping existing business and brining in new business means keeping up relationships with business leaders around the world, Epolito said. “It’s still a relationship business, meeting face to face, breaking bread and talking,” he said.
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