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Published in Economic Development

‘Substantial and far-reaching:’ Federal proposal to change some metropolitan areas’ status could jeopardize crucial funding and economic development

BY Sunday, March 28, 2021 06:50pm

Several Michigan communities are at risk of losing crucial federal funding under proposed changes to their designation as metropolitan areas, which local officials say would negatively affect services and economic development efforts.

The White House Office of Management and Budget (OMB) is considering a proposal to redesignate 144 U.S. Metropolitan Statistical Areas as “Micropolitan Statistical Areas” that are based on smaller population sizes. The proposal would affect metropolitan areas in Niles, Battle Creek, Jackson, Midland, Bay City and Monroe. 

Currently, Metropolitan Statistical Areas must contain a U.S. Census Bureau-delineated urban area with a population of at least 50,000, while micropolitans are areas with populations of 10,000 to 50,000. 

The OMB’s proposed change would increase the minimum population to qualify as a Metropolitan Statistical Area from 50,000 to 100,000.

OMB published a notice on the proposed change on Jan. 19, kicking off a public comment period that ended March 19. OMB will consider recommendations from a review committee and public comments, and any revisions will be announced in a final notice. The potential changes could go into effect in 2023.

The Census-based formula is “tweaked” every 10 years, but Metropolitan Statistical Area (MSA) standards have been in place since the 1950s, said Chris Hackbarth, director of state and federal affairs at the Michigan Municipal League. The League is opposed to the proposed change. 

The OMB considers the changes as a way to update and standardize the Census process, but it is much more complicated because of the data collection and federal funding tied to the Metropolitan Statistical Area title, Hackbarth said.

“There are so many ripple effects,” Hackbarth said. “If this change were in place today, it would be directly impacting a host of communities and the COVID-19 relief they’re expecting.”

Local officials and congressional lawmakers in Michigan have also expressed concern about the OMB proposal. U.S. Sen. Gary Peters, D-Detroit, issued a letter to OMB in mid-March calling the potential effects “substantial and far-reaching.”

“If this change was finalized, communities in my home state of Michigan and across the country could lose access to vital federal resources that they rely upon,” according to Peters’ letter.

‘Devastating to the community’

A metropolitan area designation not only helps communities qualify for federal funding including community development block grants, but it also provides valuable data to companies that are considering locating in communities, said Rob Cleveland, president and CEO of Cornerstone Alliance, a Benton Harbor-based economic development organization for Southwest Michigan.

“The loss of an MSA designation will be devastating to the community,” Cleveland said. “It would eliminate in-depth accurate data that we use for economic development, workforce development, transportation, land use and other planning purposes. Reducing data and eliminating data that we get for the MSA designation will directly impact our area planning efforts and ultimately it will lead our community leaders to make decisions with less information.”

Berrien County Administrator Brian Dissette said whether a community is within a designated MSA is an early consideration of site selectors.

“At this point, we’re concerned about a downturn in block grant funding to all of the county, specifically to Benton Harbor and the Niles area, and we’re concerned about general economic development efforts,” Dissette said. 

The Berrien County Board of Commissioners passed a resolution on March 18 in support of  maintaining its local MSA designation. Berrien County Community Development Director Dan Fette told commissioners during the meeting that the proposed change could potentially eliminate monthly industry data, possibly disqualify the county from cost of living indexes, and could cause federal funding reductions for transportation, planning and housing.

Joe Sobieralski, president and CEO of Battle Creek Unlimited, believes businesses will continue moving to areas where they can find talent regardless of whether it’s in an MSA. However, losing the designation could cause trailing repercussions that affect whether businesses will move to the area, he said.

“Our transportation system is not fully self-sufficient and relies on federal government supplements and dollars from the city’s general fund,” Sobieralski said. “Something like that could eventually affect employment in Battle Creek.”

In the dark

Sobieralski also said that it remains unclear based on OMB guidance whether the change in MSA designation would mean less federal funding and data collection.

“They want to downgrade it but are not being forthcoming on what that will mean,” he said. “I also think it’s bad timing. I’m sure this was in the works for a while, but you’ve got all of this remote work and moving about. We need to take a pause and step back and wait to get past this pandemic.”

Sobieralski said Battle Creek Unlimited has had some conversations with business leaders on the proposed changes, but that the economic development organization is focused on moving past the pandemic. Despite a lack of notice from OMB about the change, Sobieralski believes the issue is gaining enough opposition that it could be paused.

In its January notice, the OMB said part of the proposal is based on “continuing change in U.S. population and activity patterns.”

However, local leaders from the potentially affected West Michigan communities told MiBiz they feel in the dark about the reasoning for the changes and what the effects will be.

“I’m not sure any of us really know what the cause of this was,” Cleveland said. “Losing the MSA designation will be significantly detrimental to communities like ours.” 

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