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Sunday, 05 March 2017 20:07

Role for economic developers moves beyond corporate attraction, retention as economy shifts

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Joining MiBiz for an economic development roundtable were (top left to right) Jill Bland of Southwest Michigan First, Mike Franzak of the City of Muskegon and Ryan Kilpatrick of Michigan Economic Development Corp.; (bottom left to right) Birgit Klohs of The Right Place Inc., Tony Minghine of Michigan Municipal League and Jennifer Owens of Lakeshore Advantage Joining MiBiz for an economic development roundtable were (top left to right) Jill Bland of Southwest Michigan First, Mike Franzak of the City of Muskegon and Ryan Kilpatrick of Michigan Economic Development Corp.; (bottom left to right) Birgit Klohs of The Right Place Inc., Tony Minghine of Michigan Municipal League and Jennifer Owens of Lakeshore Advantage Photos by Jeff Hage

Economic developers from West Michigan and across the state increasingly find their roles shifting. 

With changes to the state’s top economic development agency and new pressures from major employers, many regional organizations now find themselves supporting housing development, regional transportation issues and infrastructure demands, as well as addressing issues related to diversity and inclusion. 

MiBiz convened a group of economic development professionals for a roundtable discussion about some of the issues the industry is facing. Participating in the discussion along with MiBiz Editor Joe Boomgaard were:

  • Jill Bland, managing partner at Southwest Michigan First in Kalamazoo
  • Mike Franzak, zoning administrator and economic development planner at the City of Muskegon 
  • Ryan Kilpatrick, community assistance specialist at Michigan Economic Development Corp. 
  • Birgit Klohs, president and CEO at The Right Place Inc. in Grand Rapids
  • Tony Minghine, associate executive director and COO at Ann Arbor-based Michigan Municipal League
  • Jennifer Owens, president at Zeeland-based Lakeshore Advantage 

Here are some highlights of the discussion: 

What’s the view from the state on economic development strategy this year?

Kilpatrick: The MEDC has recently changed its community development platform to incorporate the Redevelopment Ready Community program, a technical assistance platform that we use to help municipalities to streamline their processes. So the idea is that the master planning should be aligned with zoning ordinances and the development review process should reflect both of those documents. Then the community engagement and public awareness should all be centered around those core attributes.

What impact is that having? 

Kilpatrick: (W)e’ve been primarily in the role of coming to the table with financial assistance that goes directly to projects. What we’ve discovered along the way is that some communities are really great at providing the backup technical support and other communities struggle through that process on a case-by-case basis. What we wanted to do is shore up the process from the community side and say we’re going to come to the table with a lot more technical assistance to ensure that we’ve got a master plan and zoning ordinance that are in alignment with one another. (We also want to ensure) the development review process reflects both of those things so that if the community has been engaged and has really well articulated what they want to see for the future, they’ve then codified that in the zoning ordinance.

Franzak: We’re part of the Redevelopment Ready Communities. We’re using some of those strategies and we think that’s a great program. Our big thing: We used to have a mall downtown and now we have all these vacant acres. We’re trying to get the residential, but it’s always the chicken or the egg: the commercial or the residential. We’re finally starting to see the residential come back, and we’re using programs like TIFs and brownfields and Neighborhood Enterprise Zones. They all seem to be adequate packages to get people to invest.

Obviously, some of the urban areas like Grand Rapids are going through a development spurt. What are you seeing in the region’s more rural communities? 

Klohs: A small community in Newaygo or Montcalm counties, they don’t have that same kind of robust staffing (that a city like Grand Rapids has). Our role has been from both a regional and collaborative perspective and to first off inform all of our communities about the new rules, if you will.

How’s that playing out?

Klohs: We’re working with some of these smaller communities to help them figure out how to comport with these new standards. There’s a vast array, I would say, from someone like Holland that’s extremely ready, or Muskegon, which has robust staffing, (down) to somebody like Fremont or Newaygo or a township that may not have those resources. We look at it as part of our job — particularly in those three rural counties that we serve — how we help them if a project comes along.

Owens: I think for us, the broad base is to educate (local municipalities) why economic development and businesses are important, and how your community can make sure that business needs are met. A lot of that starts with just retaining your existing business base, and looking at making sure they’re growing and happy. If there are challenges like long-term processes for permitting … it’s bringing them directly to the community and working with them to address that, helping them understand how those little movements can make a big impact on the future of growth for your community and being that bigger-picture voice for them. 

Bland: I would add that it’s helping those communities understand what they need to do today to be competitive. Part of it is, the economy is great. It’s so great we don’t have a lot of buildings or shovel-ready sites. How do we help those local units of government be ready for when that company comes that has a need, and be ready to respond in a quickly timed manner? In many cases, we play that role for that local community. But that’s something we’re spending a great deal of time on in the southwest corner of the state, and looking at the unique assets that each one of those communities have, and helping the elected officials and others understand how to use that to their benefit.

What kinds of infrastructure demands are your organizations dealing with in rural areas? 

Bland: I think wastewater is a huge thing right now. The city of Kalamazoo provides wastewater treatment to the entire county. Way back 20 years ago, we thought the paper industry was going to continue to boom, we thought the pharmaceutical industry would continue. We rebuilt the wastewater treatment plant, and today I’m sitting there with a plant that could handle pretty much anything. To have shovel-ready sites where sewer and water and broadband are all there is extremely important, but a lot of those smaller communities on major thoroughfares, it’s helping them to be prepared.

Klohs: I’m in the opposite place. With the exception of Muskegon which has tremendous capacity for wastewater treatment, we in Region 4, in at least 11 of the 13 counties, have serious wastewater treatment capacity issues. The city of Grand Rapids, for five or six years, had excess capacity. The city provides a lot of wastewater service to suburban communities. But then something happened called the craft brewing industry. That’s a good thing, but there’s a huge waste stream that comes out of there that needs to be handled. So the city is going to add a biodigester for $30 million to their wastewater treatment plant. That’s great the city has the means to do that, but we had a project in one of our rural counties where we needed to literally expand their wastewater treatment capacity or the project would have gone to Iowa. 

Owens: Coopersville has grown a small wastewater system to as big as it can get and really doesn’t have the ability to bond for it anymore. But because of our relationship with Muskegon and Ed Garner (at Muskegon Area First), we knew that Muskegon’s system actually had significant capacity and so we’re trying to find a way to connect those two systems together, and then encourage Coopersville — who’s been really progressive — to let go of that waste stream, which is like letting go of money. It’s a delicate balance, but it makes sense. Because we have those relationships, we can make it work.

Southwest Michigan First CEO Ron Kitchens previously talked about how, for the first time in the organization’s history, it’s actively involved in supporting housing issues. Can you share some details about that?

Bland: Traditionally, our focus has been on primary employers, and that will remain as our key focus for the area. But looking at the strengths of some of our staff members, especially around brownfield redevelopment programs, some of our communities don’t have that strength. We’re working in partnership with them on some residential development. We’re going in and advising and assisting them, perhaps from the development side. (We’re) assisting the developers so they know and understand the capabilities of those local municipalities. That’s something we haven’t done. That’s kind of a new role for us, and it’s working very well. (It’s) one that we view as part of our talent-attraction efforts.

Why has housing become more of an issue for economic development?  

Owens: The vast majority of new downtown housing is high-end housing. Why? It’s because the return on investment for high-end housing, it makes sense. It doesn’t make sense to build affordable units because the rent rates were decreased during the recession. Now the wages are growing, but not at a rate that people can pay more, so you have a mismatch. Affordable housing, for a lot of our employers … it’s just not available. And living in a lakeshore community, that drives rates up as well to have the access to the lake. So I don’t see a solution and I’m still looking for one to make it make sense to build more affordable housing units.

Klohs: We used to be much closer to this. When a couple of laws came along 20 years ago — Renaissance Zones and brownfields — we were in the middle of it all. Grand Rapids used it more than almost any other city and what you see around you is the result of that. It’s going back now 20 years. We were heavily involved in that. To some degree, Rick Chapla works with the city still, but we have some superb developers who have taken over. And to me, that’s what’s supposed to happen. A lot of economic development happens without economic developers, and that’s just fine. We applaud all (developers). 

How does the regional transportation fit into your strategies?

Klohs: We need a strong urban community, but I can’t put a German manufacturer who needs 30 acres in the city of Grand Rapids. It’s not happening. So they’re going to go to Caledonia or Gaines Township, but they need workers. Those workers live farther up here. How do I get them from A to B? Our transportation system was made for something that worked 15 or 20 years ago. It’s not a criticism, it’s just a reality. So we’re struggling with how to (move) the person who lived and worked in the city and now lives in Kentwood but needs to work in the city, and vice versa.

Bland: I would take it one step further: It’s county to county. We can’t get workers from the inner city of Kalamazoo — who need jobs — down to Three Rivers, because we’re going through different counties and municipalities. Heaven forbid you connect the two.

Minghine: This is a conversation we’ve been having. What’s the impediment? There are individuals that get it, but as soon you put it to a vote, it collapses under its own weight, and it makes no sense. You go anywhere else in the country, people pay a premium because they’re close to the transit stop. All these things, we come back here and we walk away from it.

With some of these challenges, are you having to get more involved with zoning and land use policy or infrastructure planning? 

Kilpatrick: The way that we have planned for 85 years with exclusionary zoning and a mass dispersal of people across a region has really undermined both our ability to pay for infrastructure in a sustainable way, as well as our ability to move people in a sustainable way on mass transit.

Klohs: Take a look at every bank branch anywhere. How many people go to a bank branch anymore? But the community expects you to have X number of parking spaces. There may be, at any one time, three cars in that lot. You’re looking at 2 acres of land, one of which is wasted. You don’t need it. How do we change that mindset that for every person you have to have two parking spots? We build big things like that for Easter Sunday service and the rest of the time it sits vacant. Just look at Woodland Mall and all the (parking) space that’s there.

Kilpatrick: Let’s say Barry County has a developer that wants to build 150 single-family homes in a subdivision. That’s fine. But (then) you’ve got to expand a county road for two and a half miles in order for folks to get there. If that expense isn’t underwritten by a developer, there’s a problem. That means the rest of the county and the state are footing the bill for that inefficiency of infrastructure usage. I have no problems with that type of land use. I just think we’ve got to recognize the true costs of those investments and be transparent about how those costs currently get spread to taxpayers. That’s what’s undermining our ability to not have public transportation.

Franzak: We’ve recently gotten rid of our parking minimums downtown. We have a parking maximum. That’s worked out pretty great, but it was a tough sell to the public. And I think it’s a tough sell to the public on a lot of the land use issues. Right now, I’m trying to get more multifamily and missing middle homes in our downtown area, and put back to use the old vacant, smaller garage-type buildings that are in these neighborhoods, which just sit vacant because of zoning. I can’t do it because everyone freaks out about multifamily next to their single-family homes. Educating the people on these, it took a lot of public meetings to get this parking idea. A lot of developers weren’t on board at first either, until they went through the process. Some of them actually thanked us for talking them into a different way of thinking.

Minghine: You go to a lot of places, the best house on the block is half a block away from the grocery store. You go to those places because the people are there, it’s a different experience, it’s more vibrant. Every value measure is better. We’ve tricked ourselves into thinking that it’s more important to have a parking garage than a grocery store. Those are assets. I don’t know if it’s messaging, but you go to other places and it works so much better.

How much will promoting broadband access play into your economic development strategies going forward? 

Owens: Laketown Township tried to pass a millage for high-speed (internet). It was voted down. Homes right on the water can’t be resold because there’s an expectation that there is high-speed internet availability. Being right on the lake, that’s an interesting challenge. There’s nowhere else to ping, except all the way to Chicago. There are some really rural areas in West Michigan that don’t have access. They’ll start to be off the list for residents and for businesses. You absolutely have to have it.  

Klohs: It’s a huge issue, even in northern Kent County, and you wouldn’t think so. On the other hand, I could sit on a bus in the middle of Israel answering my emails while being driven for an hour. If you want to be an entrepreneur in Newaygo or Fremont, you ought to be able to be an entrepreneur (there). Or, you might want to telecommute. If you live on Pickerel Lake and you work for Spectrum, you ought to be able to have your laptop out and work remotely. It’s crazy.

What are some solutions on a state and community level that can be done to solve this issue? 

Owens: In Holland, the municipal utility is actually going to start to potentially provide high-speed internet as an option, so it’s a bundle with your gas, water and internet. It’s a risk. At some point, we have to start questioning what model makes sense. For the rural communities, it’s that last-mile connection and who is going to invest in that last mile.

Minghine: Go back to electricity: You had to provide it and we all sort of shared that (cost). We haven’t adopted that model. You could adopt that model for internet. We’d all pay a little more to get it to the last house at the end of the block, but what we said is let business do it, so it’s going to be a dollar decision. 

Bland: It should be part of the infrastructure from a state level.

In light of recent reporting on economic inequality in greater Grand Rapids, what can economic developers do to encourage more wealth creation for minorities and other disadvantaged communities? 

Owens: I think it’s training and education, making that available where they are and work. Having access to those educational systems through the Skilled Trade Training Fund, apprenticeship opportunities — it’s really, make more of those resources available so that workforce can educate themselves into a more productive workforce. 

Franzak: A lot of our industrial companies, they can’t even hire anyone from around the area because they’re not trained. They’re doing a lot of work with the community college to do some specific types of trainings, but I still don’t think that’s enough. A lot of times, companies will have to hire from outside the county.

Klohs: I think there are three tracks here. One is a talent-attraction message to non-traditional talent. How do we as communities do a better job when we try to attract diverse talent, to really be ready for talent and how we keep it? I don’t think in West Michigan we have a robust enough minority supplier community. If you go to Southeast Michigan, all of the Detroit Three, their Tier 1s, they all have minimum standards of having minority content. We don’t do that terribly well over here. There are minority-owned businesses, (but) I don’t think there are enough of them. As economic developers, I’m trying to challenge my team how do we identify them, how do we help them, because that’s going to lead to job creation. 

Kilpatrick: I think it’s important to recognize that racism and inequality are systemic problems and if our solutions aren’t systemic, then we’re not going to get there. They might be able to get a grant from us, but they can’t get a financial institution to lend to them because they don’t have the collateral. How do we start to backstop some of those things, how do we figure out what are all the barriers we’ve put in place, whether they were well-intentioned or not, and start to remove those one by one. We all had a part in creating the system that exists today, so we have to slowly dismantle it and recognize that’s a long-term process. We have to move as quickly as we can. 

How can we encourage more minority businesses to get involved in development projects and other opportunities? 

Owens: I really like what Start Garden is doing by adding two new members to their team to really look at the way (minority) entrepreneurs can access their resources. (Start Garden CEO) Mike Morin has said they’re not going to walk into Start Garden. If we’re in the neighborhoods with them and part of educating them on the resources for loans, mentoring, and coaching, they will create new business ventures. But if we’re sitting here in our silos expecting them to walk in the door and say ‘help,’ it’s not going to happen. So it’s shifting that model and focusing on those immigrants as a solution for us to continue to grow. 

Minghine: Some of it is a retraining of our own thought processes. You could have all the programs in the world designed but if they aren’t aware of them or don’t think it’s something they can access, it doesn’t make a difference. 

Kilpatrick: Typically people who are entrepreneurs have had a positive entrepreneurial example in their lives at some point. Regardless of your race or ethnicity, if you haven’t seen someone be successful at that kind of endeavor, it’s much harder seeing yourself being successful. So ensuring that those opportunities for entrepreneurship are visible in all of our neighborhoods, regardless of the dominant race or ethnicity, those are some of the issues that we need to start to get over in order to help young people feel like these are options.

Bland: How do we help to elevate grassroots groups in showcasing what we’re doing to help the entrepreneur, to help someone who came out of prison and is in that re-entry stage? A lot of it comes back to the awareness, awareness of those groups and the success that they’ve had. It can be duplicated and it’s not necessarily on the back of government. 

Klohs: There are lots of grassroots efforts and that means bottom up, not top down. We should not assume that we can zip into a community and tell people what to do. It needs to be very collaborative and take advantage of what’s already happening in those communities. How can we support that rather than saying, ‘Here, let me show you how to do this.’ That, to me, is the totally wrong approach. 

With a large crop of freshmen legislators in Lansing, what are some of their common misconceptions about what you do every day? 

Owens: Picking winners and losers. 

Bland: That only big business benefits.

Klohs: I was told both of those things at lunch yesterday. It takes a while. They are all well-meaning. You have to have a passion for it and it’s incumbent upon us to bring them the information to make decisions. 

Bland: We as economic developers sometimes forget to tell the story of the other benefits of landing that company, or by helping that company to expand in your community. Stryker, just before Christmas, announced this new R&D Center. Part of their R&D Center is their bioskills lab. We’re going to have a significant impact at our airport by people flying into our community to go to that lab, because all of the doctors and people they’re working with are going to do their training in Portage. We forget to tell all those ancillary stories.

Minghine: I think they also think it’s just about taxes, that if you have zero tax, you’d have every business in the world.

Klohs: It does not work that way. Look at Kansas. 

Minghine: Most people who run for office probably run for one or two micro reasons. Now they’re in charge of this massive bureaucracy. That education process, I don’t care what the issue is, you have to start at ground zero and help them build that, and just about the time they get it figured out, (they reach) term limits. … That’s a never ending (process).

What do you say to legislators and other government officials who question the need for the MEDC or any sort of statewide economic development agency? 

Owens: It’s a team sport. It’s not about incentives, it’s about problem solving. The biggest problems that we solve — diverting closures — we can’t even tell you about it. That’s the other challenge. We can’t say, ‘This company is still in business because we helped them overcome a major hurdle that would have put them out of business.’

Klohs: A lot of times, a company will call the state first. This is not an either/or thing. I will defend to the day I leave this job that we need a statewide economic development organization. There isn’t a state in the union that doesn’t have one. When we created the MEDC, it was the economic development organization in the country. It was a new model and Indiana modeled theirs after it. We’re partners on a daily basis. … There are things that the state can do that we can’t do. 

What is one thing that keeps you up at night or one headline that you think will happen in the next 18 months that no one will see coming? 

Minghine: Whatever we do around economic development in general, we have to recognize that we have to build this in a way that all ships rise. Our communities, right now under the current model: The general sense is that the economy is strong, but chances are good that the city you live in isn’t because the way we built our economic model for funding doesn’t benefit by the economic development model. So synching those things up is something I think is going to be important moving forward.

Bland: Talent and making sure that we’re producing the talent for the future — not tomorrow, but five years, 10 years down the road and making sure what we’re teaching young people today matches up with what the companies need in the future. The other thing is having the (sites) that a company looking at our area needs or for one of our companies that is expanding. We’re really in a bind right now, to be brutally honest. Could we produce something for an attraction project? Of course we will, but having that product ready to go is really (important). 

Owens: Talent for me is the big one that keeps me up. I think something that will come is that skilled trades (will become) the number-one career selection of choice. With all the resources that have come into it, I see skilled trades making a comeback and that will really drive the future of our economy, as will automation, which also will solve our talent crisis in a way. We have to embrace it, and welcome it and grow those companies that are good at it and not take a protectionist approach. 

Franzak: I say automation and how do we embrace it. It’s scary to think about all the things that we’re doing on a day-to-day basis and planning things out for the next 10 years, then what happens when half our jobs are gone to the robots? What exactly do we do as economic developers to help people out and redirect our resources and the way we run our economies? 

Kilpatrick: I think equity and community engagement are the big issues that I think about most, because we have the least amount of tools at the state level to work at that. I think the growth that we’ve seen in our urban centers is fantastic. I think it’s exactly what we were all hoping for 20 years ago, (but) I think some of the side effects are much worse than we expected in terms of the displacement that we’re seeing in some of our most vibrant neighborhoods. We have other communities that are really putting their heads down and thinking about it, but there’s still a lot more work to be done. 

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