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Posted on Sun, Sep 12, 2010 : 8:30 a.m.

Michigan's economic recovery hinges on turnaround strategies debated by Rick Snyder, Virg Bernero

By Nathan Bomey

As Michigan’s gubernatorial candidates vie for the chance to lead the state’s economic revitalization efforts, regional economic developers are hoping to influence the state’s strategy after the Nov. 2 election.

Michigan’s economic development strategy is becoming a central issue in the race between Ann Arbor venture capitalist and Republican candidate Rick Snyder and Lansing Mayor and Democratic candidate Virg Bernero.

Ann Arbor SPARK's Michigan Life Science Innovation Center incubator.JPG

Scientists research new drug technologies at a Plymouth Township incubator run by Ann Arbor SPARK, which runs the facility in partnership with the Michigan Economic Development Corp., Wayne County and private companies.

Nathan Bomey |

The new governor will shape the future of Michigan’s economic development strategy, which will decide the pace and complexion of the state’s resurgence.

At stake: the future of the Michigan Economic Development Corp.’s tax incentives and the state’s role in distributing small amounts of capital to private companies.

“There’s a fair amount of uncertainty at the MEDC with the change in administration,” said David Parsigian, managing partner of the Ann Arbor office of law firm Honigman Miller Schwartz and Cohn. “A lot of people have left, and it’s kind of hard to see what’s going to happen in terms of who staffs that thing, how it’s built and what it’s going to focus on.”

Since Gov. Jennifer Granholm took office in 2003, MEDC’s Michigan Economic Growth Authority Board has distributed $3.56 billion in tax incentives to 508 companies, according to a list of tax credits MEDC provided to Studies by the Anderson Economic Group and the Mackinac Center for Public Policy say the MEGA program has been a waste of government resources, while a competing study by the Upjohn Institute says the tax incentives are worthwhile.

MEDC’s tax incentives: Snyder v. Bernero

  • Battery tax credits: Both candidates like this tool, but Snyder questions whether several hundred million dollars was too much.
  • Film incentives: Bernero generally supports them. Snyder said they were a “dumb” idea but said they would have to be phased out gradually.
  • Michigan Economic Growth Authority board’s high-tech tax credits: Bernero said he supports them for now but wants to make companies return dollars if they don’t generate the jobs they promised. Snyder said the tax credits are being overused and could be reduced significantly if the state had a more competitive overall business tax structure.

Regardless, Michigan’s economy, pummeled by the automotive crisis and global economic trends, has lost 592,900 jobs since 2003, according to the Michigan Department of Energy, Labor and Economic Growth. Some 13.4 percent of Michigan’s jobs have been eliminated over the last seven years.

Snyder and Bernero told they would both take a harder look at the effectiveness of the state’s tax incentives and give more economic firepower to Michigan’s regional economic development groups.

But they differ on the tax incentives MEDC should be allowed to distribute - incentives local economic developers promote heavily in discussions with businesses that are considering their future in Michigan.

Snyder and Bernero both claim to be the most effective “job creator” in the race. But their policy proposals, placed in the context of Michigan’s evolving economic development picture, illustrate the


University of Michigan Vice President for Research and Ann Arbor SPARK Chairman Stephen Forrest

increasing influence of groups like Ann Arbor SPARK, Grand Rapids-based The Right Place, Detroit-based TechTown and the University Research Corridor, a coalition among the University of Michigan, Michigan State University and Wayne State University.

Those organizations are convinced incentives need to stay in some form. But their main focus is on the pursuit of collaborative opportunities with other economic development groups, major corporations, startup companies, universities and state government.

“It is all about collaboration if you’re going to make this work,” said Stephen Forrest, chairman of Ann Arbor SPARK and U-M's vice president of research. “People who want to come to this region are not interested in our differences. They’re interested in how we work together, how SPARK and any other economic developers can connect them to the state and how the state can connect them to the national.”

SPARK, for one, is emphasizing the importance of “open source economic development,” the idea that successful economic development practices should be shared with other communities because the various regions throughout the state rise and fall together.

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Michigan Republican gubernatorial nominee Rick Snyder chats with Manchester resident Ken Rogge after a town hall meeting last month in Chelsea.

Melanie Maxwell I

“To have this what I would call boundary-less development strategy is extremely important and it has borne many fruits for the Washtenaw County area as well as for southeast Michigan in general,” Forrest said. “And I believe that philosophy has extended appeal to other economic developers around the state and outside the state.”

SPARK’s collaborative moves offer pathway

Increased collaboration in Michigan’s economic development process is already unfolding as the gubernatorial transition draws near.

SPARK announced in August that it would lead a $1 million business plan competition in cooperation with Oakland County-based Automation Alley, Detroit-based TechTown and the new Macomb-Oakland University Incubator. The New Economy Initiative for Southeast Michigan is funding the project through the new Business Accelerator Network for Southeast Michigan.


Lansing Mayor and Democratic candidate Virg Bernero, shown here visiting Ann Arbor before the primary, said Michigan can't afford to scale back its tax incentives.

Ryan J. Stanton |

The statewide business plan competition - which aims to encourage entrepreneurialism in Michigan - is the latest in a series of collaborative economic development projects SPARK has agreed to lead.

The group already manages the Michigan Pre-Seed Capital Fund, which invests in startup technology companies on behalf of the MEDC and the state’s 15 SmartZones, as well as the Michigan Microloan Fund, which provides small amounts of financing to companies that can’t get traditional bank financing. Collectively, SPARK has distributed $11.2 million to 84 companies through those programs.

The group has also coordinated with local communities, universities and the state to launch several business incubators. The biggest, a 57,000-square-foot life sciences facility in Plymouth Township, was the result of cooperation among SPARK, MEDC, Wayne County and private companies.

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Ann Arbor SPARK CEO Michael Finney

File photo |

Collaborative economic development efforts like those, which have been praised by local businesses, should serve as an example for Michigan’s future economic development strategy, SPARK CEO Michael Finney said.

“I think it’s part of the solution,” said Finney, whose ties to Snyder could make him a candidate to become the next CEO of the MEDC. “We think we’ve created a model that has huge upside potential, and the upside potential is definitely beyond the Ann Arbor region.”

The evolution of SPARK provides a framework for understanding the economic development mindset of Snyder, who co-founded SPARK in 2005.

Snyder said MEDC should encourage economic development organizations throughout the state to replicate successful business services offered by groups like SPARK. One program he likes is a service in which SPARK collects job openings at local companies and connects talented local jobseekers to those businesses. SPARK posted 2,781 job openings for 1,001 companies from 2006 to 2009.

“I’m still amazed that more organizations aren’t doing that,” Snyder said. “That’s something that we should be doing statewide.”

Jeff Mason, executive director of the URC and a former vice president at MEDC, said collaborative efforts among the state’s top economic development groups are vital.

Jeff Mason.jpg

University Research Corridor executive director Jeff Mason

“It just becomes stronger when everyone is rolling in the same direction,” he said. “We see the opportunity to work with the MEDC and with a new administration and the existing administration to effectively harness the assets and the resources we have to benefit the future of the state’s economy in anyway that we can be of assistance.”

In Lansing, tax incentives reign

Bernero’s economic development approach can be viewed through the lens of his strategy in Lansing.

Over the last five years, the Lansing Economic Development Corp. gave out $177.6 million in tax incentives in 121 installments - including 37 brownfield redevelopment credits, 24 obsolete property rehabilitation tax certificates and 18 tax abatements. LEDC claims those efforts created more than 5,100 jobs in the city of Lansing.

“Much of my strategy is what I’ve done in Lansing,” Bernero said. “It’s not based on hypotheticals. It’s based on actual things we’ve implemented in the city. We’ve leveraged every asset we have locally.”

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Business Leaders for Michigan CEO and former MEDC CEO Doug Rothwell

Bernero said that without incentives, the state would be missing a vital element in its economic development tool kit.

“I believe in a global economy we’re competing not just in a local basis, but state and global basis. It would be disarmament, waving the white flat, to scale back the use of economic incentives,” Bernero said.

That aggressive use of incentives reflects a philosophical divide between Snyder and Bernero.

Snyder believes MEDC’s incentives are indirectly making it more expensive for Michigan’s existing companies to do business. He wants to significantly slash the number of incentives MEDC distributes through programs like the Michigan Economic Growth Authority (MEGA) Board’s tax credits.

Snyder wants to eliminate the state’s controversial Michigan Business Tax in favor of a 6 percent corporate income tax.

“A natural consequence of that is you should be able to reduce the amount of incentives that are required,” he said. “Why do you need incentives at that level? It’s because we’ve got a broken tax system. In some ways those are Band Aids. You’ve almost got to buy someone to come into our state because of our broken tax structure.”

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Former MEDC CEO James Epolito

Opinions about Michigan’s tax incentives strategy vary among the state’s economic development leaders, past and present. Several economic development leaders said in interviews that they believe the incentives need to stay, although they also said they’d like to see the Michigan Business Tax reworked.

“I believe we need to make Michigan a much more business friendly state,” said James Epolito, who served as CEO of the MEDC under Granholm before resigning in spring 2009. “But at the same time you can’t just throw away your tax incentives and expect people to come to Michigan. You’re not only competing against other states in the Midwest but all over the county and all over the world.”

Doug Rothwell, CEO of Business Leaders for Michigan, which has endorsed Snyder, said the MEGA tax credits have been misguided. He said the state shouldn’t be focusing on specific sectors of the economy MEDC has historically favored, such as life sciences, alternative energy and advanced manufacturing.

“I think the issue here is not too much that they have too many incentives, it’s the way it’s being used,” said Rothwell, who served as CEO of MEDC when Snyder was chairman of the agency under Gov. John Engler.

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Michigan Manufacturers Association CEO Chuck Hadden

“We get enamored with the economic development fad of the month. There is no one answer to this. The answer is the basic blocking and tackling, which is get yourself a competitive business climate, make sure you’re having an aggressive economic development strategy and incentive program.”

Bob Trezise, CEO of Bernero’s Lansing Economic Development Corp. rejected the suggestion that incentives are part of the problem. He hopes “those core community tools,” like brownfield redevelopment credits, aren’t eliminated under the next governor’s administration.

“Those tools have been magic bullets for cities,” he said. “Without those tools, we would have really been dead in the water. I do not think this is the time to be cutting incentives. That is absolute insanity.”

Finney said some level of tax incentives is necessary though not always decisive for companies considering where to expand.

Bob Trezise.jpg

Lansing Economic Development Corp. CEO Bob Trezise

Photo courtesy of LEDC

“Being on the ground and talking to companies on a daily basis, incentives is not one of the topics that come up very early in the conversation,” Finney said. “In fact, it tends to come up when companies are very close to their final decision making. You’ve got to package and sell all the other things. You’ve got to lead with the talent we have here, the infrastructure we have, the quality of education we have. When you lead with all those things, this state fares very well when compared to other states throughout the country.”

Lack of business capital haunts economic developers

One of the main problems for small companies is lack of access to capital, which typically helps them expand, introduce new products and hire more workers.

Bernero wants to form a state-owned-and-operated bank to offer loans directly to Michigan companies that can’t get access to credit from big banks that “have basically stymied our recovery.”

“Our small businesses are being punished for the abuse of Wall Street,” Bernero said. “They’re the most creative, dynamic businesses. They’re the ones that create the jobs and they’re being stifled from the growth.”

Ann Arbor SPARK’s collaborative economic development programs:

  • The Michigan Life Science Innovation Center: SPARK manages this 57,000-square-foot life sciences incubator in Plymouth Township, which it established in cooperation with MEDC, Wayne County and private companies.
  • Accelerate Michigan Innovation Competition: SPARK is managing this $1 million statewide business plan competition, which is funded by the New Economy Initiative for Southeast Michigan and includes partners such as Oakland County’s Automation Alley and Detroit’s TechTown.
  • Michigan Pre-Seed Capital Fund and Michigan Microloan Fund: SPARK leads these programs on behalf of the state’s 15 SmartZones. Collectively, SPARK has distributed $11.2 million to 84 companies since 2006.
  • Shifting Gears: This program, which offers retraining to people looking to go from the corporate world to a small company, was developed in partnership with Eastern Michigan University.

  • Job postings: SPARK posts jobs openings for companies in largely high-education industries. The job openings, which include positions in Washtenaw County and throughout the state, are sent weekly to 4,200 e-mail subscribers and posted online.

Chuck Hadden, CEO of the Michigan Manufacturers Association, said he would be willing to consider a state-owned bank like that in North Dakota. But he’s not sold on it.

“It’s definitely worth exploring, if for no other reason than it puts some heat on other banks out there to make something happen,” Hadden said. “We’re not really comparable to North Dakota though.”

Access to capital is a key aspect of the success of Michigan’s research universities in their efforts to launch startup companies and boost the economy in their respective communities.

Forrest, Snyder’s successor as chairman of SPARK, said the state’s 15 public universities form a major asset that needs to be leveraged more effectively. He said the URC was “the single greatest resource we have to build on.”

But those university spinoff companies generally can’t get off the ground without access to loans or venture capital, financing that helps them get their products ready for the market.

Rothwell said a state-owned bank is not an effective way to get capital to startup companies. He said he is comfortable with programs that place state money in the hands of professional investors to back promising Michigan companies. But he said he was uncomfortable with Michigan offering loans directly to companies.

“At some point you have to let the market determine what is worth investing in and what’s not,” Rothwell said.

Forrest, for one, wants to see visionary leadership from the next governor.

“I’m most interested to see how the old equation is going to change. What are the ideas behind moving us from an entrenched, heavy manufacturing economy, which we all know has drained away? How do we make this transformation? What is the long-term vision?” Forrest said.

He added: “The state of Michigan used to be at the very heart of the American economy. It was the driver. So what do we do to make that happen again? It may be too big of an ask to hope that at some point that we can overtake the state of California or Texas, but we can certainly be a player in their league, and I want to know what’s the strategy to go there?”

Contact's Nathan Bomey at (734) 623-2587 or You can also follow him on Twitter or subscribe to's newsletters.



Mon, Sep 13, 2010 : 10:26 a.m.

I don't doubt the sincerity of the people quoted in this story, but government cannot create jobs. If it could, there would never be a jobs shortage. Only employers can create jobs. Snyder is a neophyte in government and will be a poor governor for at least a few years if he keeps rolling out inane ideas like trading a 6 percent flat tax for the Michigan business tax. This will be a new tax to almost every business in Michigan while giant megabusinesses will get a huge reduction. It will also create about a $1 billion deficit in state government, worsening the already serious issues that exist where demand already outstrips supply by more than $1 billion a year. The whole concept of government doing something to create jobs is a red herring. It is a lie built upon false hopes. On the rare occasions when something government has done has been followed by increased employement, you can always find the real reasons why if you look. John Engler's tax cuts in the 1990s were said to create jobs. What actually did it was a labor shortage during an economic expansion, which created hiring at levels not seen since the years after World War II. Anyone that's counting on government to fix the economy is going to be disappointed.


Mon, Sep 13, 2010 : 8:37 a.m.

I couldn't get past the headline of this story. To say that the economy of any state "hinges on turnaround strategies" offered by gubernatorial candidates assumes elected officials have way more power than any economist (or informed citizen, for that matter) would claim they have. Very misleading and not at all grounded in fact. Can we tag this as an opinion piece, which is what it is? Or change the headline.


Mon, Sep 13, 2010 : 6:59 a.m.

I love it when liberals try to explain and support a false economic principle like how a thriving public sector is actually good for the private sector. Keep from laying off public workers by taking more money out of the private sector (the sector that actually produces wealth) and give it to the public sector to keep them going strong. When money comes out of the private sector either through taxation or borrowing, it reduces private spending and investment in income producing things. Our public sector grew fat and got sweet retirement committments during fat years when the auto industry (private sector) was strong. But we keep on paying for those committments when the private producing sector is weak. That has to change to match the private (paying) sector. It is a FACT that the public sector is now much higher compensated in both wages and benefits than the private sector. That has to change and there will be a big fight coming to be sure.

G.W. Williams

Sun, Sep 12, 2010 : 10:24 p.m.

How about reducing the Michigan Business Tax and eliminating the personal property tax. That's exactly what our state needs to do to get moving again. The costs of doing business in Michigan are 3- to 4-percent higher than the states with which we most often compete for jobs. That's such a bad state of affairs. We need to fix our tax and regulatory policies so that this 3- or 4-percent difference is eliminated. We can do so much better, and we must! Learn how we can make our tax code more competitive without sacrificing critical government programs such as education and transportation @


Sun, Sep 12, 2010 : 9:23 p.m.

"...When you have enough money to buy an election, your money speaks for you." "... money doesn't talk, it swears...."  — Robert A. Zimmerman ------------ "... balance the state budget without raising taxes (cut, cut and cut)..." A Lyrical Translation:  "... Those were the days!... Didn't need no welfare state... We could use a man like Herbert Hoover again!" Whew!  Way back when, few could bring more poignance to a talking point than did the duo of Archie & Edith. Still nearly brings tears to my eyes. If only Snyder could better assure his followers that he'll humbly follow in the giant footsteps of that historic standard bearer for the present-day tea party: "Hoover attacked Roosevelt as a dangerous radical who would only make the Depression worse by raising taxes and increasing the federal debt to pay for expensive welfare and social-relief programs...."  (Wikipedia) Had America only listened to dear Herbert, the nation may have been spared the horrid ravages of Social Security and unemployment insurance. ------------ This is a more thoughtful criticism: "... MEDC and SPARK... You have to be very careful when giving political appointees the power to give money to whomever they chose." Not to mention that a great deal more support is needed right away for the expanding armies of unemployed and underemployed. This isn't a good time for exhume the deceased politics of Hoover, not that there ever is one.

Basic Bob

Sun, Sep 12, 2010 : 8:12 p.m.

Michigan needs to quit spending so much on corrections. The prison population is way down but the cost is the same. If they were to return 10% of their budget, that would be $200 million to spend on the 99.5% of the people who are not incarcerated. Businesses have unloaded or reduced their health care and pension costs, but public sector employees continue to enjoy large increases in the value of their benefits, while at the same time getting guaranteed pay increases. If public sector employees want to keep getting these big increases, they will need to match the productivity increases in the real economy, i.e., do more with less.


Sun, Sep 12, 2010 : 6:45 p.m.

Interesting seeing the word "debated" in the headline! Snyder apparently doesn't think he needs to apply to the people of the state for his job by debating. His money should buy his election. How dare voters expect him to debate with the other candidate! Same plan he had with fellow Republicans. When you have enough money to buy an election, your money speaks for you.

Stephen Landes

Sun, Sep 12, 2010 : 5:16 p.m.

The biggest problem I see with the way we hand out tax incentives is that this approach pits one community or region of the state against another. We cannot afford to be bidding against each other -- we need to be working together. The smart way to do this is to have an attractive state-wide business tax and regulatory environment combined with organizations like SPARK, other similar groups, and the universities working together to provide a whole, competitive, environment. In my opinion Mr. Snyder's approach is far closer to that model than what is proposed by Mr. Bernero. And by the way, "ghost", no matter who is governor the budget is going to have to be reduced -- no one elected to office in November is going to bring more money with them immediately. The question I think we need to answer is which candidate is likely to create the bigger pie in the long run: the one that wants us to work together or the one that is proposing that we work against each other.

Macabre Sunset

Sun, Sep 12, 2010 : 3:30 p.m.

Is Bomey on Bernero's paid staff? Just askin'.


Sun, Sep 12, 2010 : 11:22 a.m.

Edward R Murrow's Ghost: So far the State has dodged the budget cutting bullet through federal taxpayer largess. What will happen on January 1, 2011 is a bump in the "unemployment surcharge" on private sector payrolls resulting in the long run of thousands more unemployed. Why can't the public sector 'participate' in our recovery just like the private sector? Or the alternative is to raise taxes - again sucking needed cash out of communities or businesses, resulting in more lost jobs and lost opportunities. You do understand, my friend, the only "cure" for socialism is more socialism? Neither one of our candidates have the cojones to put this state on the path to prosperity. Other than taking a dollar from Jane and giving it to Jose, by manipulation of the tax and subsidy code, neither candidate has a plan to get 1.5 million unemployed back to work, let alone any of the "discouraged" who later might seek gainful employment. We need to: - ban all public sector unions (won't happen soon) - lower the minimum wage to get teens some work (won't happen soon) - eliminate prevailing wage on public works(one can hope) - balance the state budget without raising taxes (cut, cut and cut) Or we can keep stoking the derailed Engine of Socialism as it sits turned over in the ditch. We'll enjoy lots of smoke, clouds of steam and the happy sounds of toot-toot-toot, but we won't be going anywhere (only, again, proving the emptiest wagon makes the most noise).


Sun, Sep 12, 2010 : 10:40 a.m.

Lets keep the Michigan Democratic Parties economic engine and ideas propelling Michigan forward in the future.


Sun, Sep 12, 2010 : 10:04 a.m.

$177 million in tax incentives resulted in 5,100 jobs ($36,000/job), why not just hire them as state employees? MEDC and SPARK are rife with cronyism and self dealing. They are giving money to their friends and political supporters. Just look into how much money Vice President Forrest has made since he came to Michigan. You have to be very careful when giving political appointees the power to give money to whomever they chose.


Sun, Sep 12, 2010 : 9:50 a.m.

"Simply cutting the budget by $1 billion (10% not adjusted for inflation--real cut closer to 13%) after it has been cut by 28% over the last decade (adjusted for inflation) is the road to perdition". If our state and federal government programs were run efficiently and based on real economics and not ideology or federal handouts, you would be right, but they are so bloated with layers of duplicity and an entrenched feeling of entitlment, that your argument does not work. Time to apply realistic business decisions (like we all do in real life) to state and federal programs. Most of us have cut our personal and business budgets reflecting similar percentage numbers and we are surviving. The Auto companies have learned to downsize and still be viable and make profits, why can't governments?


Sun, Sep 12, 2010 : 7:20 a.m.

"...Regardless, Michigans economy, pummeled by the automotive crisis and global economic trends, has lost 592,900 jobs since 2003..." Lies, lies, and more lies. Other sources have pegged that number over 1 million Michigan job losses. Add in the fact that there is something like over 600,000 people drawing unemployment and just as many, if not more, college grads who are not counted, and it appears the State is fudging the numbers. So realistically, with upwards of a million and a half unemployed it's high time the State stop taking money from local communities and handing it out (like in the film subsidy grab bag). Michigan's economic development has been a massive failure. Those on the receiving end (of Gov Granholm's $$Billions) of course will beg to differ. It's just not happening. We are withering away, just like the old Michigan "shadow towns." Synder will need to find a way to cut a $1 Billion or so from the budget by July 2011. That is, if he is lucky. I just hope he can man up and get the job done.