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Friday, 18 December 2015 09:45

Snyder: Review needed before signing data center tax changes

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Gov. Rick Snyder Gov. Rick Snyder PHOTO: Jeff Hage

Gov. Rick Snyder will decide over the holidays whether to sign legislation accommodating Switch Communications Group LLC’s development of a $5 billion cloud data center in Gaines Township.

The company and its co-located clients would invest those funds over the next decade to build out its East Coast data center at the pyramid building, Steelcase Inc.’s one-time research and development center.

The state Legislature this week passed two bills that grant exemptions from sales and use taxes on equipment, storage and use for all data centers in the state.

In a year-end interview with MiBiz, Gov. Snyder said he likes the idea behind the bills, but wants to give them a good review before deciding whether to sign them into law.

What will you do with the bills for the new data center here in greater Grand Rapids?

I’m excited about the concept of seeing an expansion of a data-center industry in Michigan, and I think it’s good that the bills are about not just one company but creating an opportunity for data centers in Michigan to grow and create jobs in our state.

The two issues I’ll be looking at as part of the review: One is how it ties into fiscal responsibility for the state in terms of what it costs in revenues and the opportunities it presents. The other one is how it aligns in terms of good tax policy for the state.

[RELATED: Snyder to examine fiscal impact of data center legislation]

So this is about more than just about the single opportunity the Switch project represents. Why is that important?

If it was just one time, that would create serious policy issues. We have good centers already in Michigan that are successful and to say simply because you have one out-of-state opportunity coming in that they deserve an advantage versus them, that would be a difficult proposition.

How does this square with how you view tax credits?

I think it’s fairly well known that I don’t like tax credits. This is not a tax-credit situation. It’s really about an exemption for the sales and use tax. To put it in context, the policy question I’ll be looking at is, we currently have exemptions for industrial processing in Michigan. So when you get a manufactured good that could go through many manufacturers, they don’t pay any use tax because you pay it at retail.

The interesting policy question, in some ways, in what we’re talking about with data centers: Is that equivalent with industrial processing in cyberspace?

Is this a significant change in state tax policy that builds off the long-time use of industrial tax abatements?

That’s part of my review process. It’s really a new variation and extension of industrial processing but reflecting the fact that not everything is a tangible good anymore. I think in many respects, you could argue it’s consistent with old policy, but it’s really reflecting the fact that the world’s changed.

In reviewing whether to sign the bills, how much do you put into the equation that this is where the economy is going?

There is a lot of economic growth in basically the whole concept of software, the cloud, software as a service. These are areas that are expanding and so it’s good from an economic perspective to be proactive and look at these questions. Those are the issues I’ll be looking at as I review these bills.

As we head to the new year, what are your top priorities for 2016?

There is a continuation of several things that we started in ’15 that I would really like to see done, particularly from a legislative point of view. One is that we have this whole topic of longer-term energy policy and to update that. That’s something that’s important to Michigan for the next 20 to 30 years.

The other would be Detroit education in terms of the education for kids in Detroit. They deserve better.

The other one is ‘smart justice.’ We’ve proposed a number of things on the criminal justice front.

Where would you like to see done for energy policy?

What we’d really like to have is a flexible, adaptable policy that would reflect changing marketplace conditions in terms of prices for energy and (be) reflective of the fact that the federal government doesn’t have a comprehensive policy. The three pillars of what we’re trying to achieve are improvements in affordability and to make the cost of energy more affordable for Michiganders.

The second one is reliability and to make it more reliable for people. We occasionally have outages and such in our state. (We need to) make sure we have more reliable power.

The last one is more environmental sustainability. One of the things that clearly should be taking place, for example, is a move away from generation sources (and) moving from coal to natural gas and renewables in some fashion.

Define the smart justice changes you’d like to see.

Smart justice is where too often, historically, we’ve had a tradition of simply increasing sentences for people and locking more people up. That’s not necessarily smart justice.

Smart justice is on the front end of the criminal justice system. There clearly are situations of people who may be suffering from mental illness, they have drug abuse problems, or they have other issues in their lives. Are there ways we can do diversionary interventions to address those problems so we don’t end up locking them up? We solve their problem and help them be successful so they don’t end up going to prison.

Is there any precedence for that?

We’ve already started that for some years with things like drug courts, mental health courts, and specialty courts, but there’s more work to be done.

Can you give me some examples?

On the back end is to look at the correctional system. What is the appropriate sentence that they serve? And when they come out, have we done adequate work in preparing them to re-enter the workforce? If we can help someone come out of the system and be successful, if they can have the training and skillset to hold employment in some fashion, that’s the best way to prevent future crime.

It’s better for them and it’s a situation where it’s a better situation for all of society.

You had to make a decision this year to trim funding for the Michigan Economic Development Corp. What’s the future of funding for the agency and is there a chance of restoring its budget?

The MEDC plays a very important role in helping with economic development and job creation. I wouldn’t describe it as just restoring cuts. What I would say is I hope we can go to the Legislature and show, good thoughtful ways to invest in ways that will generate even more jobs for Michiganders, both in terms of helping with economic gardening and helping Michigan companies grow and be more successful, and then more business attraction. We’ve been successful on both fronts.

It’s great to see so many Michigan companies growing and doing well, and that is not just the traditional MEDC resources. It’s things like the skilled trades training fund or investing in career tech education because if you talk to employers out there, that’s one of their greatest concerns now — making sure they have people with the right skills.

And with respect to attraction, we’ve done very well with trips to China and trips to Europe. We’ve seen a lot of new companies set up in Michigan.

We did a reader sentiment survey last month and a fair number of business owners said they didn’t see the MEDC cuts as having a big impact. Is that a perception issue? What do you think needs to occur to reverse that view?

A lot of it is showing the results in a broader fashion. The way I view it is we’re trying to create an overall climate for success and the MEDC is one key component of that. But it includes things like how we reformed the tax system, getting rid of the MBT (Michigan Business Tax), regulatory reform. The MEDC in many cases is a customer service representative and a marketing representative for us.

We hear about the talent gap a lot. What’s ahead in 2016 that the state can do more of on that front?

That’s the top priority. That’s been the top priority and will continue to be so.

To give you a reflection of the numbers, you can go to and see our aggregation of how many open jobs (there are in Michigan). It’s really interesting. We had 11.2 percent unemployment when I took office and we had about 80,000 open jobs. It changes every day and the last time I saw, we were at 5.1 percent unemployment and we had 92,000 open jobs.

Over the last few years, we’ve done a lot, particularly with career-tech education in high schools, intermediate school districts and helping community colleges, with the biggest area being the skilled trades — welder, plumber, electrician. If you’re in health care, if you’re in manufacturing, if you’re in agriculture, you’re a skilled-trades person today. We’ve increased funding for CTE (career-tech education) programs, we increased resources to help colleges with capital equipment, we created the skilled trades fund to help companies to do more training. We’ve made significant investments — tens of millions of dollars — over the last few years, and I would expect to see us continue to invest in this area.

Anything specific you can mention?

You’re going to see a continual enhancement of the program we already have and an emphasis on essentially also getting kids and parents to look at these career options. There are a lot of great well-paying careers in being an auto technician, a welder, in the agricultural field, in robotics and manufacturing.

Do you have preference among the current Republican presidential candidates?

At this point, I am waiting to get closer to the primary.

Read 4421 times Last modified on Friday, 18 December 2015 17:22

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