Ann Arbor city income tax won't help business development
If Ann Arbor gets serious about starting a city income tax, it could be the best thing that ever happened to Pittsfield Township.
Or Scio Township. Or Ann Arbor Township.
Or any other community within a short commute of Ann Arbor. That's because there is plenty of vacant office space, retail space and industrial space in these communities outside of the city limits that will look appealing to a company looking to have a local facility.
The year-end vacancy report by Swisher Commercial shows a 21 percent vacancy rate for office and flex (similar to light industrial) buildings in the 5.7-million square foot south office market. Many of those vacant properties - totaling 1.2 million square feet - are in Pittsfield Township. And many have some of the region's most competitive leasing rates.
To the west of the city, including Scio Township, flex space is over 25 percent vacant. It's a smaller market - just under a half-million square feet - but the area includes many vacant parcels already zoned for a variety of business uses.
All of these properties are competitive today with city of Ann Arbor buildings as they all fight for the very limited pool of companies looking for new facilities.
But what would happen if the city approves an income tax?
For more than 30,000 employees in Ann Arbor, the answer will be "nothing." They're the University of Michigan employees, who can be pretty confident that their employer won't be leaving Ann Arbor any time soon.
But the rest of the city's workforce - which totals an estimated 75,000 commuters in summer 2009 budget talks - may be more mobile.
And every property outside of the city limits would immediately get an edge among corporate leaders who'd view a city income tax as oppressive for its workforce, no matter how the rest of the tax bill stacks up.
My conversations with business leaders in this community over the past several years have often touched on the issue of the city income tax - because it's come up cyclically over those years.
No one doubts the budget pressures for the city. But there are doubts about whether the city truly is finding all of its potential efficiencies. And whether all of its priorities for spending align with the reality of the economy.
That leaves business leaders looking at the benefits of doing business in the city. At the top of the list is Ann Arbor's position as a cultural hub of Michigan.
But in many cases, operating a business in Ann Arbor already means paying more for space and paying for parking. So would it then be worth asking employees to pay more out of their own checks to work here?
Many say no. Especially when there's an alternative: Moving to a location outside of the city limits. Many of those buildings even have Ann Arbor mailing addresses, which means that corporate identity with the city wouldn't be lost.
That identity is what drives business development in this region. It's an intangible, yet very real to business leaders and economic developers trying to distinguish this region in an incredibly competitive environment.
So while the city considers putting the prospective tax to voters, it's important to consider the impact beyond the effects on city residents and their own tax bills.
We have a bigger stake in deciding if the tax will be worth it to Ann Arbor's future, beyond closing an immediate budget gap.
And if officials do decide to take it to the ballot, it's important to talk about the success of the tax in other communities. Grand Rapids has been cited as an example.
But we also should talk more about the business development impact on some of the other cities in Michigan that turned to the income tax. Detroit, Pontiac, Flint, Hamtramck, Jackson, Lansing and Muskegon business leaders probably have a story to tell about the impact in those communities, too.
Paula Gardner is business news director of AnnArbor.com. Contact her at 734-623-2586 or by email.