Wither the State-Local Partnership for Economic Development?

Jobs and economic development are the first and second goals of policy makers in Michigan, at both the state and local levels and in both the public and private sectors.  In the last few years the State of Michigan has mounted a successful program to reform its tax code to promote economic growth.  The dramatic shift has been away from relying on tax breaks targeted to specific companies to a more general approach to reduce taxes on all forms of economic activity.  The next step in this reform is a proposal to eliminate the Personal Property Tax (PPT) which falls largely on industrial equipment used in manufacturing.  Michigan is one of only a few states in the Midwest to have such a tax, and Governor Rick Snyder correctly points out that eliminating this tax will provide a financial boost to both existing and new companies.

The challenge to local governments, including schools, is that they rely on the revenues from these property taxes to provide the services with which they are responsible to provide.  While the City of Owosso is not as dependent on these revenues as some local governments, we do receive more than $218,000 annually in personal property taxes.  This represents about 3.4% of our estimated revenues of $6.38 million in the coming fiscal year.  Of course, in a time when the City is extremely conscious of every dollar in our budget, any six-figure cut is difficult to deal with.

Because of the potential impacts on local government budgets, several organizations have called on the Michigan Legislature to "Replace Don't Erase" the personal property tax (there is even a website with that  name that provides background information).  Current proposals in the legislature would phase in the elimination of the PPT by starting with only small businesses, and postponing future cuts.  If enacted, this would limit Owosso's hit to only $32,000 in 2012-13 (about what the City invested in Bentley Park and Kiwanis Ballfield improvements).  Future impacts are hard to gauge because most of the current proposals involve complex calculations and record-keeping (that would impose a burden on the City and/or the State Treasurer to administer), but no clear replacement scheme has yet to be adopted by any legislative body.

What role for local government in economic development? is the bigger question raised by the reforms that the State is pursuing.  Traditionally, local governments like Owosso have worked in partnership with the State in promoting specific projects to create new jobs, encourage the expansion of local businesses, or make infrastructure or downtown improvements to boost the attractiveness of a market for new private investment.  With Governor Snyder's first budget, several tools used in these economic developments ventures were eliminated (see my earlier post on the loss of tax credits and my post on state budget changes), along with several hundred thousand dollars in revenue sharing the State formerly passed on to Owosso.  While both the State and local governments as a whole may likely end up enjoying more economic growth, and accompanying increases in tax revenues, from the total package of tax reforms, the immediate effect was to end lots of local specific projects (such as the rehabilitation of historic structure in downtown Owosso) and put a strain on our ability to deliver services.

The elimination of the personal property tax would take away another local economic development tool: the use of tax abatements on new investments in manufacturing equipment or building renovations.  Owosso has long used these provisions in state law to provide incentives to private job providers.  In the last two years, we have used this program to assist a major manufacturer in the County expand into a new facility in Owosso, help a software security firm add to its employment, and subsidize a new company to move into an abandoned downtown building and create new jobs.  Importantly, the City of Owosso has adopted its own policy in the use of PPT abatements that gives preferences to companies that create higher paying jobs, employ Owosso residents, and/or have been in business in the community for several years or more.  State legislation which would end the PPT would negate the effect of this state-local economic development incentive.

Small Places are Important.  Recently, we in Owosso were proud when the Director of the Michigan Economic Development Corporation (MEDC) visited our community (see news coverage here).  Mike Finney made the case for the State's tilt toward "economic gardening" with cogent arguments, powerful statistics, and specific anecdotes.  In response to my question about the role of local government he also gave an effective answer about the State's support for regional economic development efforts, something the City of Owosso has formally chosen to participate in.  However, he was not able to identify what region Shiawassee County was part of . "Are you in the Lansing region?  Or Genessee County? or with Saginaw?" (In fact, we are part of the five-county I-69 corridor effort which stretches from Shiawassee to St. Clair Counties).  I am not critical of the lack of geographic knowledge, but it does feed into my fear that small places like Owosso are easily forgotten by State agencies that are trying to capitalize on research driven growth, save struggling urban centers, and respond to demands from more populated areas.

There have been repeated statements from the Snyder administration and some Republican legislators about their preference to directly invest state dollars, rather than use tax breaks, for specific economic development endeavors, including place-making efforts in downtowns.  Again, they make a strong intellectual case for the wisdom of this approach, but we have yet to see any of these limited dollars.  In a state with pressing needs, it may be hard for Owosso to make the case that we deserve a share (though I would like to have the chance to try).  However, it tough to lose the few local economic development tools we have so that incentives can be directed to large companies and large cities in areas that will not likely directly benefit our local economy.

Local economic development efforts, especially those that involve both the private sector and local government, are unique in their ability to understand the particular needs of local companies, to direct private investments that further public objectives (such as maximizing use of local infrastructure),  and to support local entrepreneurial efforts.  The State needs to take a large-scale perspective that compares Michigan's tax structure to competing states; local governments need to be involved in the specific development projects where jobs actually are created.   While the Legislature and the Governor are attentive to the former, they also need to be cognizant of the important functions that local governments play in economic development.

Replace, and Reward.  I support the proposal to eliminate the Personal Property Tax to the degree that it will encourage further private investment and growth.  However, I believe two things are necessary to keep local governments like the City of Owosso as partners in economic development efforts.  First, we need to have our lost revenue replaced.  The proposed first year hit may seem small, but it happens to be just about what we invest annually in the Shiawassee Economic Development Partnership (SEDP), the public-private body that represents us in regional efforts, works with MEDC, and assists local companies grow.  In order to accommodate the loss in tax revenues, should Owosso step back from its role of being the largest supporter of  SEDP?  A larger reduction in local revenue will surely necessitate more painful cuts in services and higher taxes and fees. (Note: the City of Owosso has managed its finances very well. Despite cuts in State support, we have maintained a reserve fund, have no large unfunded pension liabilities, and employees make significant contributions to their health care payments; we cooperate financially with neighboring units of government)

Secondly, if the PPT is done away with or not, I would like the State to reward or encourage local governments to be active in economic development.  Because we believe the development of our local community and our regional and state economy go hand-in-hand, the City of Owosso has not only invested in the SEDP, we have hired professionals to assist and promote economic growth.  As well, we scratch at our budget annually to find a few dollars to make investments in roads, parks, and other infrastructure necessary for a healthy community. We have managed this level of emphasis for the last several years through difficult budget decisions; further cuts will make it even more difficult to maintain our momentum.  As the State takes an appropriate big picture view of the economy, it would be nice if some of the small places and small players be recognized and rewarded for their commitment to Michigan's future.

The State Budget and Owosso

As Michigan crawls its way out of the recession, the State faces difficult budget decisions. Owosso too is trying to find its way forward economically, and how the details of the State's budget are worked out could make our community a partner in--or a victim of--the State's recovery plan. Governor Rick Snyder proposes a major overhaul of fiscal planning at the State level, and several weeks ago introduced his new budget. Job growth is his primary goal, and to achieve this objective he proposes major cuts and restructuring of taxes on businesses. He also proposes significant reductions in several areas of State expenditures. According to the official budget document (click here), "the financial models of our state and local governments are unsustainable. Service duplication, debt, public employee compensation and unfunded retirement obligations are impacting the long-term fiscal health of state and local governments. Governor Snyder believes Michigan and its public institutions must correct course, stop spending money they don’t have, and implement pragmatic solutions to the economic and fiscal problems that exist." How will this budget effect Owosso?

Revenue Sharing. First and foremost to the City of Owosso, the Governor proposes a reduction in statutory revenue sharing. If approved by the Legislature, this will result in about a $461,000 cut in the City's revenues (which were budgetted at $6.7 million for this year). Untouched, because it is written into the State Constitution, is over $1 million in state aid the City receives. Revenue sharing was implemented to compensate local governments for not imposing local sales taxes. In other states, many cities have their own sales tax or receive a set percentage of sales tax revenues. In Michigan, statutory revenue sharing favors older cities with higher populations of lower-income residents.

For Owosso to weather the (estimated) seven percent (7.0%) cut in its revenues, it will likely be necessary to reduce labor costs, either through the elimination of positions or the reduction in pay and benefits. Governor Snyder's budget message suggests that the benefits municipal workers, as a whole statewide, receive are out of line with the private sector. While City spending on infrastructure improvements like sidewalks are sometimes identified as a source for budget cuts, these have generally paid for through state or federal grants, or specific local assessments. The City's unrestricted revenues are mostly dedicated to labor costs. There is little else to cut in the City's budget.

The Governor has proposed to restore in the State budget about two-thirds of the statutory revenue sharing, but distribute the funds through a new incentive program that would reward cities and townships for "best practices" which may include funding for regional cooperation. The specific details of this program have not yet been announced, nor is it clear whether local governments will be rewarded for existing, or future, best practices. The details of this program will determine how big a financial hit the City of Owosso takes. If we are recognized for existing regional cooperation (e.g. water), or given the opportunity to combine services (e.g. public safety), then perhaps we will thrive under this new program. If the program is designed primarily for urban and suburban communities that occupy one metropolitan area, then Owosso may not recover much or any of its lost revenue sharing dollars. Given the goal of job creation in the State, I would favor incentives that reward local governments that participate in robust economic development efforts (for instance, the City has committed at least $15,000 annually to the Shiawassee Economic Development Partnership for several years).

Job Growth through Tax Cuts is the primary goal of the budget, and the Governor proposes to do away with the complicated Michigan Business Tax (MBT) and replace it with a flat six percent tax on corporations. Those businesses organized as partnerships and other limited owner structures will be exempt from most State taxes. This promises to be a boon to small and new businesses, and the Governor believes that "economic gardening" will result in broad and deep job growth. He also proposes to do away with targeted tax credits that are given to specific companies in exchange for commitments to create new jobs. This past approach of "picking winners and losers" benefitted our area with several expansions of manufacturing plants and other businesses that bring in dollars to our community. It is unclear whether these new jobs would have been created locally without these tax incentives, and it is unclear whether the proposed tax reforms will attract or spur equal or greater job growth. What is clear is that the changes would favor many locally-owned businesses and improve the economics for the creation of new jobs. To fully capture the benefits of the tax changes, we (the City and its many partners) will need to emphasize assistance to entrepreneurs and small businesses.

Loss of Development Incentives. In the debates about taxes and spending, much less attention has been given to the potential loss of specific tax credits that have been key to new growth in Owosso. We have been fortunate in recent years to have several new projects built in Owosso, including the Comstock Inn, Woodward Station, and the under-construction Lebowsky Center. All of these projects have been made possible by the Brownfield Tax Credit, which the Governor's budget proposes to eliminate. Going forward, redevelopment of the downtown will depend on not only the Brownfield Tax Credit, but also the State's Historic District Tax Credit. Owosso went through considerable effort last year to put into place a historic district in its downtown, and in response we have already seen several property owners move forward with new storefronts or major reconstructions. Much of this private investment is made possible by the presence of the tax credits, which provide equity investment and improve the opportunities for financing (which has become quite difficult in the last few years). Loss of these development incentives would hurt Owosso's efforts to spur economic development.

The argument against "picking winners and losers" does not apply to these two tax credits, as they are available to any business who develops in certain areas. The Brownfield Tax Credit was put in place to encourage revitalization of downtowns and urban areas, many of which were contaminated in the past and for which there are extensive clean-up costs (this was especially true at the site of the Comstock Inn). Without this tax credit, there would be more empty, blighted lots in Owosso and throughout the state. Without this credit, state policy would push new development out into "green" fields with attendant environmental impacts. The Historic Tax Credit is even more limited in its area of application, but helps developers offset the higher costs of restoring older buildings. Both tax credits are major tools in helping cities like Owosso rebuild its tax base. If we lose revenue sharing dollars from the State, it becomes even more important to increase our tax base through redevelopment.

Summary. The Governor has called for "shared sacrifice" to put Michigan's fiscal house in order, and it would be unrealistic and unfair for Owosso not to do its part (there are also other impacts of the budget on education, health care, and other sectors of our community). And the Governor has the right primary goal in encouraging job growth. If successful, the changes in taxes and spending will restore Michigan's economy and that will do more for Owosso than any particular job program or new development. However, it is important that State adopt a plan that makes Owosso a partner in economic recovery. I believe our greatest contributions can come through creating a vibrant community that provides a platform for entrepreneurs. This platform would consist of a support system for small businesses and manufacturers, a growing downtown, and a community with a high quality of life. Owosso is building this platform for growth, and it seems appropriate to ask our Governor, and our legislative representatives, to adopt a budget--and accompanying policies--that allows us to be partners in, and not victims of, the State's recovery plans.

Change is Coming to Lansing

"If you want something different, don't keep doing things the same way," was how Doug Rothwell put it at the December 13 Summit of the Center for Michigan and the Business Leaders for Michigan. This was on the same day that Rothwell was named to be the new chair of the Michigan Economic Development Corporation (MEDC) by Governor-Elect Rick Snyder and outgoing Governor Jennifer Granholm who took the unprecedented step of jointly appointing a mostly new board to run MEDC. I was fortunate to be at the Summit, and I came away inspired and a little anxious after Rick Snyder spoke to the audience. Change is coming to Lansing, and the implications for elected officials and engaged citizens are profound.

"We are going to be bold" said the new Governor, and while he recognized that turning around the economy of Michigan will require a marathon of persistence, "our sprint will be at the beginning, not the end of the race." I have known Rick Snyder for several years now, and while he has a reputation of being cool and cerebral (i.e. a nerd), he was more fired up and passionate in this speech than I have ever seen him. "Get ready" he said, "it is time to stand up." While his speech was short on specifics, the day was filled with numerous speakers, and here are some things I think we need to prepare for:

Jobs and Economic Development were the #1 issue on everyone's mind. A first step was the remaking of the MEDC, and the Governor-elect and several Republican speakers stressed that government does not create jobs. The Michigan Business Tax (MBT) will be reformed in significant ways, but it also sounds like that specific tax incentives and other industry-targetted economic development efforts will be abandoned, or at least de-emphasized. Doug Rothwell noted that Michigan has the 48^th most burdensome business income tax among states. While he said that cutting taxes is not a long-term economic development strategy, in the short term state government has limited options to spur new private investment quickly. And, a big cut in business taxes would also get Michigan international attention because it is unexpected.

A business location specialist, Ron Pallina, who is author of a new book, Selling out a Superpower, said "We need to understand that we are competing with other nations. Companies say, 'we want to stay in US, but for us to stay here we need the least cost environment.' Today business location is a case of economic survival." His top three recommendations for Michigan: lower corporate taxes, create a right-to-work state, and foster more cohesion in the economic development team of elected officials, MEDC, and local economic development teams. "Michigan is not as well coordinated or speedy in its response to the need of employers."

Doug Rothwell also called for state investment in business incubators: "We need entrepreneurialism to grow our economy, but it takes time."

Budget Reforms. Michigan faces a $1.5 billion structural budget deficit in the coming year, and there will be short-term pain in addressing it. No one talked specifics, but I fear for the impacts on local revenue sharing which represents 25% of the City of Owosso's revenues. A lot of attention was given to the cost of public employees. This is a particular challenge for local governments, where employee compensation represents a majority of their costs; for the state, labor costs are only about 10% of the budget. Legacy costs for retired workers are also a looming challenge that could "eat up the entire stream of new revenues" according to Jeff Guilfoyle of the Citizens Research Council. There are $50 billion in unfunded pension and health commitments in the State, which is equivalent to $5,000 for every Michigan resident.

Solutions for budget reforms centered around multi-year budgeting and shared services. Robert Daddow of Oakland County advocates for the State to go to a multi-year budget. This will provide more stability, certainty, and understanding, especially to local governments and school districts. Oakland County has a three year budget. It gives local leaders more time to realize savings and solve problems; it spurs long-term thinking and avoids one-time budget fixes and gimmicks. Also, he stressed the importance of local governments to provide timely accounting reports to board and the public on a monthly, quarterly, and annual basis. This year Owosso started providing detailed budget reports on a monthly basis; our budget however is an annual one.

Jack Poll, Mayor of Wyoming, the second largest city in Kent County, stated his belief that local governments can achieve cost savings and efficiencies through shared services. He cited the opportunities and challenges with doing this around firefighting services in Kent County. The primary stumbling block is reaching agreement on the desired, or acceptable, level of service. "We need an effective model and standard to measure ourselves against," he said in asking for the State to help facilitate service sharing. "We need to get the legislature to clear the decks to allow for inter-municipal cooperation."

Education. Mike Flanagan, Superintendent of Public Instruction for the State of Michigan, believes that local school districts should share services too. He does not see a need for the consolidation of local districts, but recommends that non-instructional services such as transportation be delivered by intermediate service districts. He also suggested putting in place statewide health insurance, benefits, and a salary schedule. He said that these changes would allow local boards and administration to focus on student achievement, rather than on labor issues and the delivery of services.

Beyond this discussion, there was little attention given to K-12 education. Rather, there were several calls for increased investment in early childhood education, which provides significant long-term benefits for kids. For every dollar invested in early childhood education, $17 will be returned in lower services and increased revenues. Higher education was also touted. John Austin of the Brookings Institute reported that Michigan is 50^th in the relative share of state budget allocations to higher education. He recommended that we leverage our world-class institutions for economic growth, citing the positive examples of the Research Triangle in North Carolina and Austin, Texas. "Universities are engines for local economic development, the growth of the state, and our global competitiveness."

Place-Making. John Austin also called for investments in the quality of life in Michigan. He noted that the growing regions of the country have world-class cities with culture, good transportation infrastructure, and a talented workforce . He also called for investments in our natural assets as a way to retain and attract an educated workforce: "Michigan is a beautiful state, but the beaches have got to be clean and the parks need to be open; Colorado has had great influx of talented people because of its natural resources. Our youth, our college graduates want to be part of sustainable communities and work in green industries; they do not perceive Michigan as a place for this – in fact, we have been antagonistic."

Bi-Partisanship. The day ended with a call for cooperation and action. Democratic State Senator John Gleason said that it was "time to put blame aside. Now is a unique opportunity for the State of Michigan. We have been too partisan in the Legislature. We cannot put forth our best effort because of the peripheral powers and parochial interests." Republican Jase Bolger, the new Speaker of the House, said that "our problems are too profound to let partisanship get in the way." Governor-elect Rick Snyder called all legislators "my partners" after being thanked by the Democrats for his efforts to reach out to them.

The next Governor also stressed that the reform efforts were not just about government. "We all need to work together," he said. And Phil Power, the visionary force behind the Center for Michigan, called on us to be "all in for Michigan." Given these strong statements, the seriousness of the problems before us, and the passionate commitment of Governor-elect Rick Snyder, I anticipate some radical changes in government in the year ahead. Whatever our line of work or effort, private or public, we need to be clear about our own mission and look for ways to move forward with new partners. It is said that the Chinese character for crisis is the combination of chaos and opportunity. I think there will be lots of both.

Shop Downtown to Build our Local Economy

The other day Joe Borgstrom (of Michigan's Main Street program, and the first director of the Shiawassee Economic Development Program) reminded me of the leaky bucket and its role in the economic health of our community. He also shared some data that reminds us of why we need to shop locally to get our economy going strong and employment as full as possible.

Our community, like all places, has a local economy where people buy goods and services from one another. Money comes into our community (the faucet) from a variety of sources: most importantly are the wages and other earnings from companies that make things here and sell them nationally or internationally; but money also flows into individuals and businesses that provide services to other outside the community; crops grown here and sold on the market also bring income; transfer payments (e.g. private pensions, Medicare, and other government aid) are also a major inflow.

When money comes into the community, it gets spent at the grocery store or other shops, at restaurants, for services like accountants or house cleaners, in buying supplies to run other businesses, to get healthcare, and in the form of donations to local charities or to pay local taxes. And of course when the local shopowner makes a sale, then he or she uses that income to buys goods and services. This is called the multiplier effect and has long been the subject of study by academics and the focus of economic development efforts.

Of course, not all the money that flows into the economy stays here. We make purchases at stores outside our community, we buy services from national companies, we shop online, and we pay taxes to the federal government. All of these outflows are the holes in the bucket. Typically, new dollars turn over several times in the local economy, thus filling the bucket, but they eventually seep out to other places as near as the regional shopping mall and as far as China for that new celphone or other electronic gadget.

The traditional approach of many economic development efforts is to increase the flows into the bucket, and Shiawassee County has done a relatively good job in recent years in supporting the growth of income-generating manufacturing companies; we need to do more, especially supporting entrepreneurs. However, we can also promote the local economy by seeking to plug the holes in the bucket of our local economy.

At this time of year, we can plug some holes and support our local economy by shopping downtown, eating at local restaurants, and making donations to local charities. A study from West Michigan found that when a dollar was spent at a locally-owned business, 68 cents of that dollar recirculated through the local economy. For every dollar spent at a national chain store in the local market, 43 cents stayed locally. These figures vary somewhat from business to business, but several other studies from other communities confirm the economic benefit of shopping locally. What is clear is that when we shop in other counties very little economic gain accrues locally. Online shopping is the worst for the local economy, with only a penny or two coming back to the community in the wages of postal or delivery workers.

After the holidays are over, we need to take a look at our local economy and figure out what other holes we can plug by identifying what retail, entertainment, services, business support, and supplier businesses our community is lacking. When we identify the outflows in our local economy we will be identifying economic opportunities for a local entrepreneur to fill, and if we grow our local businesses, we will grow our local economy.

In the meantime, as you do your holiday shopping, take a stroll downtown, check out our local businesses before getting in your car or online, take someone out for a meal, buy a local gift certificate, or swing by the Shiawassee Arts Center or the Four Seasons gift shop at the hospital or the Steam Railroading Institute. Think too about making a donation to a local charity as a meaningful way to show someone you care (for instance you can participate in Operation Friendship at Arc Shiawassee or buy a theater seat from the Owosso Community Players). When you shop locally, not only will you be supporting the local economy, you might run into an old or new friend out and about. And relationships, whether personal or economic, are what really make our community special. Happy Holidays!

George Hoddy's Legacy

At the age of 105, George Hoddy has passed away (you can read the Argus Press news story here), but I know his influence on our community is not over. I have known George since I returned to Owosso 15 years ago, worked with him on the Team 21 effort and other community endeavors, and met with him regularly. After encouraging me in my run for City Council, he would call me up with suggestions and I welcomed the chance to sit with him and hear the perspective of someone who came to Owosso during the Depression and who had a lifelong commitment to creating jobs, encouraging business growth, and building up our community. I learned two important lessons from George, and I believe there are two important parts of his legacy we need to continue.

Lessons Learned. When I think of what I learned from my talks with George, two main points will stay with me:

1. Care about the Institutions of the Community. George was an incredibly loyal man. He was loyal to his company and the people who worked for them, and he was loyal to the community in which he and his employees lived. He recognized that a successful business needed a successful community and he worked hard to either support, transform, or create the organizations and institutions that made this community work. He joined the hospital board to ensure there was good health care for his employees; he ran for the school board because he felt the community needed a strong education system; he recruited Baker College to Owosso because there was a vacant property and because he knew such an education institution would support both education and business. He donated, he made calls, he lobbied elected officials, and he served (for years and years) because it was the right thing to do. His was the era when commitment meant more than joining a Facebook page, when change occurred not because of a letter to the editor, and when loyalty meant sticking with people and organizations even when they were out of favor.

2. Common Sense Makes the Most Sense. It is easy to get caught up in policy debates, political posturing, personal gossip, and media spin, but George never was. He always had a no nonsense approach to issues that was borne out of his training as an engineer and his experience as a businessman. Sometimes he offended people, sometimes he was rebuffed, but you always knew where he stood; his common sense logic was always clear. Frequently, the power of his presentation was sufficient, but even when he did not gain his objective, he was never defeated. He was not ever deterred from his goal, when I knew him, of industrial development and job creation. The last time I saw him, he told me "Give 'em Hell! Don't let them give you the run-around."

The George Hoddy Legacy. We are all sad to lose George from our community, but the testament of our devotion to him will be how carry on some of his work. He was the end of an era, but we should not think of his passing as the end of a way of life. Rather, we should be committed to continuing on those things he stood for. For me, two pieces of his unfinished work will be a focus:

1. Support for Entrepreneurs. George Hoddy was a sparkplug, a risk taker, and a hard worker. He was smart, and he applied himself diligently to see his business ideas realized. This is the definition of an entrepreneur, and we should appropriately remember George in the same way we think of Henry Ford, CS Mott, and Charles Kettering (who recruited George from Ohio State). While George was part of the history of American, and notably Michigan, industrialism before, during, and after World War II, we should not think of his passing as the end of entrepreneurialism in our State or our community. The nature of business is changing: away from automobiles to health care and renewable energy, and away from manufacturing to knowledge- and service-based industries. But we still have, and need, business people (yes, women as well as men) who have good ideas and have the moxie to realize them. Our role, as a community, is to help create an environment that spawns entrepreneurs, and as public and private organizations, that provides support to those willing to start a new business. George Hoddy was brave enough to start a business in the Depression; who will be the George Hoddy of this generation in this time and place?

2. Regional Cooperation. I got to know George Hoddy late in his life when we worked together on Team 21 at the end of the 20th century. George understood clearly that new business growth depended on local government doing two things. First, cities and townships need to provide the infrastructure necessary for industry, in particular water and wastewater services. Second, local government needed to be efficient in the use of their revenues to get the most out of the taxes paid by business. George was no fan of government, and he told me several stories of his frustrating experiences at City Hall, but I never heard him suggest we could do without government; nor did I hear him complain about paying taxes. He just had a simple expectation that government should work effectively to meet the needs of local businesses.

After long years of personal experience, and then witnessing disputes between the units of local government in mid-Shiawassee County, George had a common sense solution: the Cities of Owosso and Corunna, and the Townships of Owosso and Caledonia should either merge into one local government (George liked the name "Curwood"), or at least cooperate closely in the construction of infrastructure and the provision of municipal services. Using his good name and his effective powers of persuasion, he brought a number of individuals from businesses and private organizations together with elected officials and staff from the local units of government. His logic was clear, and he was encouraged by several studies from MSU and the testimony from various experts that showed how much could be saved by combining services. What he did not anticipate, nor could he fully understand, was the level of distrust among local officials and their resistance to change. In the end, the strong attachment elected officials had to their particular units of government hampered Team 21 from achieving the objectives George hoped.

In retrospect, and ironically, George Hoddy in his nineties may have been ahead of his time. Now, as local governments are facing their own fiscal challenges, and as our economy becomes more dire, the benefits of cooperation may now be apparent to more people. But distrust and resistance persists. If we want to honor George Hoddy, we should strive to bring about regional cooperation among our units of local government. George Hoddy is gone, let's hope his good ideas, his approach to issues, and his loyalty to institutions can become his legacy to this community, a community which is not defined by policitcal boundaries.

Laying a Foundation for Future Growth

"The State of Michigan is beginning to experience modest economic growth," says the State Treasurer while reporting that sales and income tax revenues are now heading in a positive direction (see details here). Economist now think, and politicians now hope, that the worst is behind us. If the economy is soon to recover, the question for Owosso is "Are we ready?" A small municipality like ours cannot change the overall direction of the economy, which is largely driven by national polices and international forces. However, when the economic flow increases as the depression melts away, will Owosso be in a position to channel some of the run-off for positive growth here?

The City of Owosso has long been committed to economic development with a number of talented city staff helping out private companies that want to grow. As well, the City has supported the Shiawassee Economic Development Partnership and remains one of its largest financial supporters. SEDP, made up of both local governments and private businesses, plays a key role in helping both existing and prospective businesses grow in our community by working with developers, investors, and other government agencies like the Michigan Economic Development Corporation (MEDC).

Building on this history, there are three new steps underway that will help Owosso be in a position to take advantage of the economic recovery:

1. A new tax abatement policy

2. New infrastructure

3. Main Street program.

And there is one more step that the City needs to take to be fully ready: a new master plan.

1. Tax Abatement Policy. The City Council is scheduled on June 7 to adopt a new policy to encourage economic development in Owosso. Local government has few tools to incentivize job growth, but state law authorizes cities to grant a reduction or elimination of property taxes in several unique types of cases, such as industrial development, re-use of contaminated infill "brownfield" sites, and some other redevelopments. These tax breaks can help reduce the cost of new facilities, subsidize new equipment investments, and help improve the financial viability of a new venture. On the other hand, tax abatements cost the City precious revenue.

The City of Owosso has crafted a policy that ensures that tax abatements are given to economic development ventures that represent major investments, create jobs, and provide higher wage jobs. The formula for tax breaks is a little complex, but in sum, the more jobs created at the the highest wages get a waiver on property taxes for more years. Companies with a long history here, and/or those that hire Owosso residents are also rewarded with longer abatements. The goal is to help encourage and assist economic development and job growth in Owosso, but do so in a careful way that ensures that decisions to forego tax revenues are made in an equitable manner that provides the greatest benefit for our community. As the economy recovers and the private sector begins to look at new investments, the new tax abatement policy will hopefully attract and encourage businesses to grow in Owosso.

2. New Infrastructure. We look to private businesses to create job growth, but government has a role to play in providing a well-equipped community to support new development. This means not only good tax policies and effective public services, but also sufficient and well-designed roads, water systems, and other public infrastructure. Owosso has been putting in place several platforms for new growth. Most visibly they include new sidewalks and streetscape improvements in our downtown. Local businesses have asked for, and are contributing downtown tax dollars to, these public upgrades. As the economy recovers, and entrepreuneurs look to start or expand a business, downtown Owosso should be an attractive location. Likewise the improvements to M-52, one of our major entryways into town, will make the entire City a more appealing community.

Often overlooked, our water and wastewater systems are an important infrastructure as well to support economic development. Several industries have located here because of the quality, supply, and low cost of our water delivery system. Recent water rate restructuring made by the City Council, which will be continued in the next budget, ensure that there will be adequate investment in the upkeep of this water system (see earlier posting; click here). The City in conjunction with our partners Corunna and Owosso and Caledonia Township, have begun to look at our wastewater treatment plant, which is now more than 30 years old. We will soon need to make upgrades here to maintain this necessary economic infrastructure in our community.

3. Owosso Main Street Program. When it comes to our downtown most of the attention seems to be given to new sidewalks, building upgrades, and other visible improvements like the new flower baskets. While these are important, there are other things going on that also help lay the groundwork for economic recovery of commercial business in our community. Owosso is participating in the Main Street Program, a comprehensive local effort supported by the Michigan State Housing Development Authority (MSHDA) and linked to national expertise on downtown revitalization. While public infrastructure and urban design are an important component of this effort, the Main Street Program also focuses on the economic structure of downtown to ensure complimentary and mutually beneficial growth of retailers. Technical assistance with marketing, customer service, and promoting the right mix of businesses are all part of this effort to encourage economic development downtown. All of this helps both existing businesses to grow and new enterprises to start.

Our community is at its best when people collaborate and work to support one another. The Owosso Main Street Program is a prime example of such an effort with businesses working together with community members and local government to promote business growth. The addition of the arts community with a reconstructed Shiawassee Performing Arts Center (the Lebowsky Center) further strengthens the partnerships. The creation of a downtown historic district (see earlier posting here) will aid the Owosso Community Players in their efforts, and create further economic incentives for downtown property owners to upgrade their buildings and invest in new growth.

A Master Plan. The primary power that local government can use to help, or hinder, private economic investment is its land use authority. The zoning decision to allow for a new development of a particular kind (e.g. retail, industrial, office) in certain places can encourage, deter, or just direct growth. Likewise, particular requirements on new development that protect the public health, safety, or welfare (e.g. driveway locations, fire safety concerns) may impose some costs on a construction project. It is important that the City of Owosso use these tools in an equitable, effective, and efficient way. The policy tool that guides these important land use decisions is the Master Plan. A Master Plan also provides specific guidance on where to make important infrastructure investments in roads, utilities, and other public facilities; these decisions can also have a significant impact on growth and economic development.

Sadly, Owosso has only a 1969 plan adopted for the mid-county area. An update is needed. The City set aside funds in its 2009-10 budget for a new master plan, but the city was unable to initiate this activity. Now, planning consultants are being interviewed, the City Manager is looking for a new Community Development Director to help with the process, and the City Council is committed to seeing a new plan put into place. Under State law, the responsibility for developing the plan rests with the City's Planning Commission. The adoption of a new Master Plan for the City of Owosso will give our community a policy foundation for encouraging economic development.

In the end, economic growth comes from individual decisions to invest, expand, and grow, but local government can both set the stage for the private sector as well as play a role as a partner. With strong and clear policies--and a plan--in place, the City will be best positioned to benefit from the economic recovery we all hope is underway.