Businesses seek talent, and talent seeks places, so help Michigan cities

Few people pick where they want to live because of low taxes.

They pick a place because it offers the things that matter to them. But in Michigan, we remain anchored to a decades-old funding model that does not direct revenue in a way that will invest in the things that really matter. Make no mistake, businesses value talent above all else and if we can attract and retain the talent, the businesses will follow.

The research supports community-based placemaking strategies as a way to strengthen both our economic and social future. Walkable urban places command a premium of over $20 a square foot, generate 10 times the tax revenue, and maintain higher values during recessionary times. Property values are typically 5 percent higher when homes are located near parks. Investments in the arts create jobs. Transit and multimodal infrastructure are correlated with increased jobs and wages. It is time to begin investing in Michigan’s future, and Michigan’s future is in its communities.

To grow and prosper, we must invest our resources in a way that will foster that growth. This holds true for individuals, businesses, and governments.

In Michigan we have endured some of the most heinous examples in the country of what disinvestment can bring. Our largest city was forced into bankruptcy. A former industrial hub is dealing with the most significant human and infrastructure crisis in memory, and many other communities were forced into emergency management as the solution to “their” problem. The popular answer is we aren’t living within our means, or mismanagement, or some other self-inflicted ailment. The real answer is arguably worse.

This is all the result of Michigan’s systematic disinvestment in local government. With the new budget proposal, we now stand at over $7 billion in revenue having been diverted from cities, villages, townships and counties to fund state government.

These are dollars that should have flowed to your hometown and mine to provide services that help foster better places to live. We previously raised the impacts of disinvestment in “the Great Revenue Sharing Heist” article. First published in the Michigan Municipal League’s Review magazine, it laid out the difference those dollars would have made to our in a number of core cities.

Believe it or not Michigan is the only state in the country that reduced total funding for municipal government from 2002-2012. Our state is investing less in creating strong communities than it did in 2002. We are 50th in the nation in local funding, and every other state has increased their total funding levels during that time. The 49th state, Ohio, has increased total municipal funding by over 25 percent. The average increase nationwide is nearly 50 percent, but Michigan is down almost 9 percent in total and the state’s investment in communities is down over 56 percent.

In spite of a strong economy, the proposed state budget is another in a long line that fails to make strategic investments that promote strong communities. This strategic choice fails to recognize the enormous role that cities play in our economy, and more importantly in our daily lives.

We need great cities that will enable Michigan to attract and retain talent, because in 2016, that is what truly drives prosperity. This budget simply does not recognize that strong vibrant communities are necessary to drive a strong economy and every year that we continue on this course we lose ground. Attractive business taxes mean nothing without great places to attract those businesses to.

Michigan needs to rethink its priorities and begin investing where the greatest return exists, and that is locally. This budget provides no increase in statutory revenue sharing, even though projected sales tax collections are up. This is currently the only significant discretionary money from the state’s general fund that flows to Michigan communities. If we truly want a great Michigan, then we must commit to a strategy of investing in what really matters: our communities.

Bridge welcomes guest columns from a diverse range of people on issues relating to Michigan and its future. The views and assertions of these writers do not necessarily reflect those of Bridge or The Center for Michigan.

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Bridge’s mission is to inform Michigan citizens about their state, amplify their views and explore the challenges of our civic life.

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Comments

Marty
Sat, 03/19/2016 - 8:04am
AMEN.....but tell me....how is this to happen when your BIG government is full of crooks? Little towns, like ours, doesn't have a chance. We've pulled ourselves up by the bootstraps & continue on. We may not be affluent, but have better than most. We believe in our community & we are there for each other even if BIG government shuns us!!!
David J Jaroch
Sun, 03/20/2016 - 7:43am
Thank you. This needs to be reported in every newspaper in Michigan.
Matt
Sun, 03/20/2016 - 10:03am
Another dose of the same ole song, if only the state would take money from people who are too stupid, too crude and uncultured, too bigoted, and too cheap to want to live in our cities and give it to US! This is what the Mich Muni League and Mr. Minghine so artful put as "disinvestment". Let’s be straight the MML is about one thing, sticking as many of Michigan's cities expenses and costs of their mismanagement (without any change) onto the state tax payers as possible. He tells us of the great returns because of walkability and proximity to parks, I live in a city (lower middle-income) that passed a local mileage to pay for them and bristles with them (and I’llcall bs on his conclusion). We should be all in favor of letting cities follow likewise ... if they want, and the state should stay out of their way. If cities are the driving economic and cultural force of this state as Minghine and his crowd claim, why do they need to take funds from the poor Podunk outstate hicks? Go crazy and tax (yourselves) away!!!
Observer
Sun, 03/20/2016 - 3:38pm
Matt is absolutely right when he asks, "If cities are the driving economic and cultural force of this state" why do they need subsidies?
David Waymire
Mon, 03/21/2016 - 3:43pm
What MML is saying is proven to be corrrect...in states that are thriving, it is cities that are driving the economy. In Michigan, where we have actively taken steps to cut city revenues, the cities are (not surprisingly) are failing to provide the kinds of services young college grads want, and our economy is flailing. The state in the Midwest with the lowest unemployment rate and the highest per capita income in Minneaspolis...a city with much support from the state that is thriving. Cities are driving successful states...Michigan's cities cannot.
Barry Visel
Sun, 03/20/2016 - 10:03am
Disclaimer, I don't live in a city or village, but I offer two ideas MML might consider to resolve their alleged revenue problems. 1. Work to eliminate any restrictions against cities and villages raising their own local taxes to fund what they think they need. 2. Work to eliminate all state tax incentives, deductions and credits which would free up billions of revenue each year which could potentially be used as the MML proposes. Aside from the above, the author uses the Flint water problem as an example of disinvestment...however water systems are funded locally through water rates and are not part of the general fund budget of local communities...hence, this is an apples to oranges argument. Also, businesses do like low taxes...hence, all the tax breaks both state and local governments offer. Getting rid of tax expenditures would free up revenue to invest as the MML suggests, and lower tax rates to make our state attractive to business...with the side benefit of not using the tax code to pick winners and losers.
Bernadette
Sun, 03/20/2016 - 11:29am
The problems in Michigan are so deep and complex and have been created by "old mechanistic politics". Everyone gazes at their belly buttons and "fight" for what is best for them. This situation has evolved over the past century, so to think "simple" solutions are going to fix this does not make sense. We need a government at all levels(city and state) working together for the "people". Instead, we have partisan dualistic, we/they decisions. Michigan as a state ranks last in most everything. For too long, we have had a patriarchal, hierarchical, "we know what is best for you" attitude in government. The 21st century approach is about "collaboration and dialogue". It is about getting the electorate involved. Instead, our current legislature and governor, do what they can to rewrite the rules so less people will be involved. We have many major tragedies facing us today in this state: Detroit Schools, Flint water, Infrastructure throughout the state to name a few. There is no leadership that I see in this state that will "lead" us out of this. There is no leadership with the competencies to lead us out of this. We have a sitting governor who is preoccupied with lawsuits against the state, who still says he will not resign. Making a mistake is one thing, but this governor is in so far over his head and now it is only his ego keeping him there. Governor Snyder did not have the competency to be governor before, and after everything that has happened, that has not changed. As Albert Einstein said: "You can't solve problems at the same level of thinking that created them."
Phil L.
Sun, 03/20/2016 - 11:54am
Would anyone be concerned about cities and counties deciding their own tax structure? Would the state become Balkanized with wide variation, (one area is like Mississippi, another is like Connecticut, etc.) By the way, I prefer the old-fashioned term of paying taxes, instead of calling it an investment. Is the Treasury department an investment advisor, expecting me to invest with an April deadline?
David Waymire
Mon, 03/21/2016 - 3:47pm
"Investing" in a good K-12 education means a child will get the background they need to go to college and get a degree and earn hundreds of thousands of dollars. "Investing" in mass transit helps people get to a job instead of being trapped in a neighborhood where there are no jobs. "Investing" in higher education meant I was able to see my daughter get a degree from MSU for thousands less than a private college. "Investing" in roads means you pay $50 a year more for gasoline that goes to repair roads, instead of spending $400 for new tires. Yes, most public goods are "investments." And you tend to get back more than you put in.
Observer
Sun, 03/20/2016 - 4:42pm
Mr. Minghine says that our cities have suffered from "disinvestment". Isn't it possible that those cities have declined because they and their citizens could not successfully compete for investments? Can cities with a high proportion of uneducated, illiterate, unskilled citizens attract jobs in competition with cities not so handicapped, no matter how many parks and walkable spaces they have? He says, "With the new budget proposal, we now stand at over $7 billion in revenue having been diverted from cities, villages, townships and counties to fund state government." A very good case can be made for the state providing revenue sharing to pay for programs and services mandated by the state. But what is the rationale for other revenue sharing? Did the state have a surplus they could have sent municipalities? Therefore, he is suggesting that the state should have raised taxes in order to send money to municipalities. So we should tax the citizens of municipalities in order to send them money. What is the point of that? Admittedly, the Headlee Amendment restricts municipalities' ability to raise revenue, but I suspect many communities could have passed Headlee overrides had they so chosen. He says, "Believe it or not Michigan is the only state in the country that reduced total funding for municipal government from 2002-2012." Perhaps he doesn't recall that those were very hard times in this state with high unemployment and a lot of out-migration. Does he suggest that we should have raised taxes to fund revenue sharing? He says, "We need great cities that will enable Michigan to attract and retain talent, because in 2016, that is what truly drives prosperity." It is absolutely true that cities are where wealth is generated. When people move from rural areas to cities, they significantly improve their productivity, and thus the nation's wealth. But it is extremely doubtful that any of the great cities of the world grew through subsidies. They grew because they created economic value. The parks and other cultural amenities came after the wealth was created. We made a mistake with the Headlee Amendment. We did not anticipate that property values would crash, and that its structure would prevent tax revenues from rising in step with property values, and that it put localities in a fiscal strait jacket. We should change that. But having done that, we should require localities to raise whatever funds they wish to spend. State revenue sharing tends to distort people's perceptions of the costs of government. And it tempts them to attempt to finance their services at the expense of other people. Too often, people rate their state or federal representatives by how many projects and funds they bring home from the state or federal capitol.
David Waymire
Mon, 03/21/2016 - 3:50pm
Here is why you need revenue sharing. I live in a township outside of Lansing. Pay virtually no taxes. But I work in the City of Lansing. I go to movies in the City of Lansing. I shop in the City of Charlotte. I work out in the City of Charlotte. I regularly meet people for work in Detroit or Grand Rapids. I use services in those cities when I go there. Perhaps we shouldn't have revenue sharing. We should have walls around our cities. You want in to buy groceries, go to work, go to a college football game, etc you pay fee. But instead of that silly idea, we have revenue sharing, a recognition that virtually every person in the state spends major amounts of time in a city, even if they live in a low tax township.
John Q. Public
Mon, 03/21/2016 - 7:12pm
What did we get for the $7 billion that was diverted from cites? Maybe part of it--or even all of it--it was spent on something that is an even better investment. It isn't persuasive to say that just because cities didn't get the money, we made a bad policy choice. One of the outcomes is that there has been a large reduction in the number of police officers statewide. Lobbyists for cities and law enforcement all say that is a bad thing. Yet, crime rates are down in most parts of the state. That could indicate that crimes aren't being reported, or it could mean we were spending way too much on policing. Using the Lansing area as an example, there are tens of thousands of people domiciled in Delta, Meridian, and Delhi Townships who work in the townships, buy groceries in the townships, work out in the townships, go to movies in the townships. They seldom venture into Lansing. Those who work in the city DO pay a fee in the form of income tax. And it isn't as though it's a one-way street. I wonder how many people who work sporadically in multiple cities like Grand Rapids, Detroit and Flint are paying income tax to those cities based on the pro rata income they earn there. Not many, I'll venture, even though it would be the proper course of action, both legally and philosophically, to avoid "freeloading." While on the topic of local income taxes, it's an eye-opener to look at population growth among the Michigan cities with an income tax relative to municipalities without one. While the reasons for depopulation of the cities is complex far beyond tax rates, it certainly calls into question the premise that few people choose where to live because of low taxes. We should remember that cities are municipal corporations--an artificial construct of man, like all corporations. There's nothing inherently good about them. The advocates and lobbyists for them are engaging in the same dance advocates and lobbyists do for clients of every stripe: reify, then deify.