By JOHN WIEGAND, NICK MANES and JOSH VEAL | MiBiz
The budget cuts at the state’s economic development organization have forced industry executives in West Michigan to adjust their tactics.
During an executive roundtable discussion, local economic developers said they see a wide array of issues to contend with in 2016, especially in the wake of a 27-percent budget cut at the Michigan Economic Development Corp. (MEDC).
In particular, industry executives in West Michigan say that educating state legislators on the importance of budgeting for economic development — and holding consistent policies year in and year out — are among their high-level priorities going forward.
While Michigan has improved its position nationally, other states have gained ground in their corporate and talent attraction efforts. That all translates into a need for Michigan economic developers to deploy more resources to remain competitive, according to executives who gathered for a roundtable discussion.
Joining MiBiz reporters and Editor Joe Boomgaard for the conversation were:
- Linda Blair, executive vice president, chief business unit officer and president of ITC Michigan, the organization that sponsored the roundtable
- Jill Bland, executive vice president of Kalamazoo-based Southwest Michigan First
- Ed Garner, president and CEO of Muskegon Area First
- Karen Hinkle, business development manager in West Michigan for the Michigan Economic Development Corp.
- Birgit Klohs, president and CEO of Grand Rapids-based The Right Place Inc.
- Jennifer Owens, president of Zeeland-based Lakeshore Advantage
- Bob Trezise, president and CEO of Lansing Economic Area Partnership
- Kara Wood, executive director of the City of Grand Rapids Economic Development Corp.
Here are some highlights from the discussion.
How does Michigan stack up in competing for businesses against other states?
Trezise: I think the state deserves a major congratulations and we should be thankful that we’ve (been) drawn — from a tax policy perspective — into a competitive environment with other competitive states. (But) they are ultra-loaded with economic development incentives and programming (where) the state of Michigan is not. We’re still missing that second tier of competitiveness.
Klohs: If we could have a national industrial development policy and everybody would play on a level playing field, we would all be fine with that. … (But) if you look at our competitors and they throw in free buildings or a building for a dollar a year, then we have to compete somehow. What they also have is that they don’t argue each and every year if economic development is a necessary thing to do at a state level. We need to instill in our elected officials that we need a consistent and predictable economic development policy and strategy. We can’t argue every time we go through a budgeting process if the MEDC is needed or not. It should be a given.
Owens: I wonder if, ‘What is economic development?’ is a broader theme. I’ve noticed a little bit with the newly-elected officials (that) they don’t quite understand what all of us do. It’s really focused on supporting high-quality jobs in the region and the other jobs will follow as a result of our support of that primary industry.
With that in mind, the MEDC is facing some lawmakers who don’t think they should exist — period. How do you counter that?
Klohs: That’s what I mean. We need consistent economic development policies and strategies out of Lansing. I was at an International Economic Development Council meeting, sitting with a site consultant over dinner who told me that he works in about 25 states. This is the only state that he works in that decides (annually) if economic development is important enough.
Owens: I think every time an existing employer expands significantly or a new company decides to be here, it’s a business case. They have to decide where to put their investment long term. To have that uncertainty in the business place as to what the tax environment might be or the tools to support your company long term, that creates a red flag.
What are your strategies to help legislators and others realize that economic development is a necessity and that it’s counterproductive to debate the industry’s merits every year?
Wood: We educate on a regular basis. Anytime a project comes up that has incentives, we encourage our legislators to participate in learning about the program that was implemented, the project, what it’s driving in terms of economic return, job creation, new investment, transformation of underutilized property, etc.
Garner: It starts at the local level, with us being in communication with our legislators and making sure they understand what we do. Some of them will call me before they take positions on things at the state level. For me, it starts there. Trying to grab them all together is tough to do, but getting into it one-on-one, I’ve found, is much easier from our perspective.
Blair: From a corporate perspective, you operate in a very competitive environment and you all operate in a competitive environment every day, trying to attract that same customer, incremental revenue and growth. From a policy perspective, for the legislature to take a short-term view on something that’s tied to strategy, growth and sustainability, it’s self-defeating.
Trezise: A lot of it has to do, too, with our profession itself. The MEDC, we rely very heavily on to carry our water and message, which has worked very well. I think it starts here with economic development. We all can be unified in that we want better roads, better police, better firefighting, more money for schools. In other words, you want more money. We need to tell everybody that, at the end of the day, there is only one way to increase revenue. There is no way other than economic development. It is the secret key that unlocks all the doors. Out of all the departments where we’re looking at cuts or trying to alternate or whatever, there’s one department that generates revenue, a return on your investment. That’s economic development. We need to hammer that home.
It’s been a few months since the budget cuts at the MEDC. How has that impacted your efforts thus far and do you expect it to continue to have an impact on business attraction and development?
Trezise: It’s really hurt us. We have quite a small staff and were relying primarily on the MEDC (to do) the lionshare of our retention visits. That stopped and there were no retention visits and we really had to scramble to pick those up from our budget, which is not easy. I know the MEDC wants to move in a very timely fashion, at the speed of business, not at the speed of government.
Wood: We’re much more reactive to projects now, where we were proactive in learning about projects before they became a project. We had better timing. Now it’s all reactive.
Trezise:By God, they laid off a third of their staff. There’s no way that doesn’t have a significant impact. Surely, we’re the only state in the country that is doing that.
Klohs: That goes back to our earlier discussion about understanding the importance of having a strategy that’s consistent. That doesn’t mean you don’t change and tweak things like a business does. You have to adapt. We operate with a strategic plan and we stick to it. We’ve made the best out of a tough situation because we just had to adapt. You can’t not.
Hinkle: It’s truly a partnership and we rely very heavily on our local partners and are very thankful for the support we’ve had there. We are reactive, but as with private business, when the budget cut came, we did have to react and make those changes and we continue to do business.
Garner: I do feel that the budget cuts hurt the MEDC brand, when you start comparing ourselves to other states. The state had been very successful with the Pure Michigan brand on the tourism side. But really the economic development brand to me should be the number one brand, whatever that might be.
Speaking of Michigan’s brand, there are a couple elephants in the room with the issues surrounding Detroit Public Schools, Flint’s water and other political scandals. How does that affect the attraction piece of your operations when you go to companies outside of the state?
Trezise: We had a major Italian firm here a couple weeks ago. We had dinner with them and obviously, we didn’t bring up the topic — they did. I’m sorry to say but they said that Flint was the number one story in Italy and we were shocked by that. … When they see that in Italy, it’s very difficult for them to distinguish between Lansing, Grand Rapids, Detroit, Flint or Michigan. In fact, it’s all the United States in a weird way from their perspective because their first question was, ‘How could that happen in the U.S.?’
Klohs: To me, good infrastructure is the basis of economic development. You don’t transport that new piece of equipment on a non-load-bearing road. How are you going to do business? You’re not going down the freeway with potholes. We have totally neglected our infrastructure in our country, not just Michigan. It goes across the board.
Legislators seem to see it as one or the other: We can have money for infrastructure or we can have money for economic development. How do you navigate that situation?
Blair: From a policy perspective, if you start to invest in infrastructure, it’s going to drive the jobs and the tax base. There are huge tangible benefits from investing in infrastructure — it’s not just raising taxes. There are jobs behind all of that.
Trezise: It can’t be ‘either, or.’ We’re bigger and better than that. We’re a global economy, and global economies do not think in terms of ‘either, or.’ You have to work on multiple paths at the same time: economic development, infrastructure development, tax policy — they have to be distinguished in the debate but then understood that they go together.
Owens: You can have great roads, but if no one is working, then no one is going to drive on those roads anyway.
Other than infrastructure, how important is it to invest in talent?
Owens: If you look at the vocational education systems as part of our infrastructure, I think the systems are there but the supply of students coming into those programs is not great. In our region, engineering is the highest demand job and machinist is number two. The pipeline for machinists coming out of school can by no means meet the demand of those retiring. You ask students in high school, ‘Who wants to be a machinist?’ and not many hands go up, but machinists can make more money than someone with a four-year college degree.
Klohs: There still is that image of your dad’s Oldsmobile factory from 50 years ago. If you’ve been in these plants, they are more like labs today. Everything is run with computers. You’re more of a technician than anything else. I know we are rehashing the same conversation we’ve had umpteen times. There is such a lag of understanding and parents don’t want their children to go into manufacturing because when they think about it, they think about the crash of 2008 where everyone lost their jobs. They don’t want their child to be in that position.
As more companies focus on diversity and creating a welcoming atmosphere for attracting talent, how does that impact your job as economic developers?
Trezise: We started what’s called DiversityLansing.com a year ago. I hadn’t really imagined it. Now we run monthly training programs for corporations, (implementing) diversity statements that we didn’t previously have … to try and teach corporations. They’re all saying that they can’t attract candidates. Well, one way to attract talent is to make sure that you are providing an inclusive environment, that you have policies and techniques, and that you can actually teach those and educate corporations about them, which we are. Diversity is a huge component to the talent issue.
Klohs: The CEO of Herman Miller is the co-chair statewide (of the Michigan Competitive Workforce Coalition) and the other co-chair is the CEO of AT&T in the state. (Editor’s note: The coalition favors updating the Elliott-Larsen Civil Rights Act to include protections for the LGBT community.) When we — my board — were asked to take a position on it, it was a very brief debate. There was no debate. This is a talent issue. If we as a state cannot get behind that particular act, to be inclusive, we are going to lose our brainpower. The only thing important today is (your brain). For my board, it was literally a slam dunk. We’re going to support Elliott-Larsen. If you are not a community or a state that is embracing of all talent, you’re going to play a catch-up game.
Wood: I would say that (diverse) populations are also very entrepreneurial, so we’re trying to cultivate as much of that activity as we can. We have a very diverse community and some of those ethnicities are the best entrepreneurs and job creators that we have. I think that in the past, we were focused solely on job creation of any kind and now we’re being more intentional about it because of the ability to build a great sense of place and a welcoming community that employers want to be in.
Klohs: I know that when they’re trying to recruit up on the (Medical Mile), they are coming from all over the world and they want to find a community where there are other people like them. It doesn’t just fall on our shoulders. It’s really a community-wide thing that everyone needs to participate in.
Bland: Down in Kalamazoo, Catalyst University was born out of sitting in our boardroom and looking around the table and, basically, it was 50-year-old males, all white, sitting around a table. We had that discussion and we started it at other boards around the community with a very similar makeup. How do we prepare for the future leadership of the community?
Have you had to contend with more companies jumping across the border for a better deal when it comes time for them to expand?
Klohs: We have a really robust group of companies in our region here — they’re locally grown, locally owned. A lot of people think, ‘Well, they’ve been here for three generations. They’re never going to look over the border at other opportunities.’ I have news for you: They do. We did a project recently, the company’s been here for 71 years, but they looked in Indiana, folks.
Bland: We had one move 37 miles down the road, across the border, last year, for a free building. (It was) 200 jobs.
How do you prevent that?
Bland: One of the things we face is the cost of energy. Across the border, it is slightly less than it is on this side of the border, even served by the same company. Right now, it’s about a penny difference, but that all adds up. This company that moved to Indiana, those jobs moved with it. Those individuals may not necessarily have moved physically from their home, but where’s that tax base going?
Klohs: I think the most critical thing that all of us can do is be as closely aligned with our local companies as we can possibly be. Every one of us makes retention calls in our individual communities or regions so they know ahead of time to call us when they need something. I think that’s the most critical thing you can do, because 80 percent of all new jobs come from the people you already have. It’s a lot easier to take care of what you have than to attract a new one when the old one is walking out the back door.
How prepared is Michigan to weather the next economic downturn whenever it comes?
Bland: I would say that West Michigan and Southwest Michigan as a whole are much more diversified, even more so now than we were.
Owens: There are a few (companies) that are getting a little too automotive-centric, but the vast majority of them are saying ‘this is the percentage we want to go after’ and continuing to diversify their business models.
Garner: In Muskegon, health care is still going to be the biggest trend for us. Mercy Health is still the largest employer and that trend may still continue. We don’t see manufacturing going away. Aerospace is a big deal. We do have automotive companies too, but there’s not the heavy concentration.
Owens: I think the biggest thing is that we’re not resting on our laurels. We’re always changing, always evolving. A lot of that comes from listening to our business customers and what they think the challenges are in the industry. If you’re not continually listening, changing and evolving, then you’re in trouble.
Klohs: You talk to Billy Ford and he’ll tell you straight to your face, he’s not in the car industry — he’s in the mobility industry. They understand that then we as a state need to use our universities to stay in this industry and not give it up to California and Silicon Valley, because there is a lot of brainpower that’s out there figuring out how to have a car without a driver, etc. Michigan needs to stay in that industry and all the new technology that’s going to come out of that, otherwise we will lose our place in line and someone else will take it.
Is the presidential election season having an impact on regional economic development initiatives?
Trezise: We have a young Ukrainian lady (and) we have a lady from Bahrain in our internship (program). All of them are very upset at the presidential election and what is being discussed by Trump. It is having an impact already. They are feeling very isolated or picked on or something like that. There is damage being done already to all of our efforts, with these incendiary comments. It is not cool.
Klohs: My young Russian (intern), even though she’s staying, she’s appalled at the commentary … about race, ethnicity, etc. I’m offended. I’m an immigrant. I hope I contributed something to this country in the last few years that I’ve been here. This is a country of immigrants. There wouldn’t be a Google without immigrants. We all came from somewhere else.