Mackinac notes: A train to Traverse City; road funding; MEDC cuts

MACKINAC ISLAND — Michigan should have a train connecting Ann Arbor and Traverse City, Michigan Democratic Party Chairman Lon Johnson told me last week during a Grand Hotel porch chat.

Johnson, in town for the Mackinac Policy Conference, said passenger rail connecting Southeast Michigan with up north cities like Cadillac, Traverse City and Petoskey should be on the top of policymakers’ to-do lists.

“How do we create a Michigan where people can stay and succeed?” said Johnson, who lives in Kalkaska County. “That’s how we have to look at rail. … These are investments in the future.”

Traverse City-based nonprofit Groundwork Center for Resilient Communities — formerly the Michigan Land Use Institute — has been one of the leading voices calling for the new rail service. Currently, national passenger rail provider Amtrak runs three lines to Chicago that start in Detroit, Port Huron and Grand Rapids.

But who will pay for it? In 2013, during my previous gig as a business reporter for the Lansing State Journal, I reported that the Michigan Department of Transportation subsidized Amtrak’s three existing routes — Wolverine, Blue Water and Pere Marquette — to the tune of $25 million, and none make money. And Congress has proposed federal budget cuts for rail.

Johnson said the answer to the funding gap will require buy-in from local, state and federal governments and the private sector.

“It’s going to take time,” he said, “but it’s an investment.”

Dems to push road ideas ‘at the right time’

Expect numerous versions of a road funding deal to swirl in the Capitol in coming months. Don’t, however, expect Democrats to push their own proposal.

With Republicans holding a 27-11 majority in the Senate, “if we lead off with a plan, too often it becomes dead on arrival,” Senate Minority Leader Jim Ananich, D-Flint, said at the Detroit Regional Chamber’s Mackinac Policy Conference.

“The proper way to do it,” Ananich said, “is, as we go forward, to propose ideas at the right time.”

Democratic House and Senate leaders instead are likely to rally the caucus to negotiate with the GOP around their central points, including having businesses and the wealthy pay a larger share to fix Michigan’s crumbling roads and protecting the income tax credit for the working poor.

For now, a new House roads panel is debating a Republican-led bill package that would raise more than $1 billion by 2019 for road and bridge projects. Among its facets: Drawing on anticipated future new revenue, diverting $185 million from state economic development programs, cutting the Earned Income Tax Credit, raising the 15-cent diesel tax, and charging fees to drivers of electric and hybrid vehicles.

Democrats say the plan’s reliance on revenue that isn’t guaranteed is not a permanent solution. It also doesn’t incorporate any new dollars from boosting sales or regular fuel taxes, which had been a component of the rejected Proposal 1 ballot issue last month.

“If anything’s going to get done, it will require at least Republican acquiescence, if not full-out support,” said House Democratic Leader Tim Greimel, D-Auburn Hills.

A compromise could be possible. House Speaker Kevin Cotter told Crain’s he’d consider raising Michigan’s flat 19-cent gasoline tax, which hasn’t gone up since 1997. “I want to give the plan that we have right now” a chance, said Cotter, R-Mount Pleasant.

But, he added, “I’m not saying alternative revenue can’t be part of the plan.”

Business pushes back on proposed MEDC cuts

Tim Allen probably won’t stop selling Pure Michigan on TV.

The popular marketing campaign starring the movie star and native Michigander has helped the state attract millions of out-of-state visitors and hundreds of millions of dollars in new tax revenue. The “Pure Michigan” slogan is everywhere — on the radio, on buses, on license plates.

But the $29 million program has been thrust into the center of a larger debate. Republican lawmakers are eyeing nearly $200 million in economic development money to fix the state’s failing roads and bridges.

Business leaders are pushing back against proposed cuts that would amount to nearly half of the Michigan Economic Development Corp.’s funding, arguing that the state has momentum in a post-recession economy and now is not the time to slow it down.

Key administrative figures, from MEDC CEO Steve Arwood to Gov. Rick Snyder, are publicly warning of the consequences that would result from raiding the state’s business arm to pay for roads.

Chief among them: Doing so would send a clear message that Michigan is not welcoming to business.
They point to the state’s jobless rate dropping to 5.4 percent in April, the first time in 15 years it has matched the national rate, as proof that their efforts are working.

And the cuts, amounting to $185 million of the MEDC’s proposed $403 million budget next year, could force the agency to pit its own programs against one another for limited dollars.

For instance, should the state focus on luring tourists, or traditional corporate attraction and retention? Since 2006, Pure Michigan has contributed to 22.4 million trips from out-of-state visitors, $6.6 billion in revenue for Michigan businesses and $459 million in tax revenue, MEDC data shows.

Meanwhile, courting and retaining corporate residents can create permanent jobs.

Besides Pure Michigan and its tax incentive programs, the MEDC helps companies locate sites for new facilities and access capital, awards grants to cities and towns to improve their downtowns, and supports entrepreneurs.

“I don’t think that would be the place resources should be taken for transportation,” Snyder told reporters last week at the Detroit Regional Chamber’s Mackinac Policy Conference.

Economic development funding will be at risk every year the longer the state goes without a stable funding source for roads, Arwood told Crain’s last week. The Legislature already dedicated about $260 million in extra general fund tax revenues to put toward roads next year that otherwise could have gone to state departments. In other words, roads needs would trump other spending in areas like health, higher education and economic development.

Lawmakers, however, defend their support of Pure Michigan and say defunding it is not their goal.
Rather, they say, economic development depends on high-quality roads, and there is extra room in the MEDC budget without decimating the state’s tourism effort.

At issue is a 12-bill package from Republican House leaders that would raise more than $1 billion by 2019 for infrastructure projects. The plan would do that by drawing on anticipated future new revenues, cutting an income tax credit for the working poor, raising the 15-cent diesel tax to match the 19-cent gasoline tax, and charging fees to drivers of electric and hybrid vehicles.

But it also would divert $185 million from state economic development programs, including tobacco settlement dollars that fund business attraction and Pure Michigan, film incentives and tribal gaming compacts that now pay for programs such as Pure Michigan Business Connect, which matches companies with in-state vendors.

“This plan is a start,” House Speaker Kevin Cotter, R-Mt. Pleasant, told Crain’s. “Roads are a priority, so we’re going to fund them first.”

Snyder told Crain’s the House proposal is just one plan of what could be several and a final deal has yet to be negotiated. He stopped short of saying whether he thinks the Legislature would OK diverting economic development funding to roads.

Still, companies “want certainty and consistency in the environment you’re operating in,” Snyder said during his keynote address at the conference. “Every time you look like you’re bouncing around, or not have a clear direction that you stay true to, you’re creating a disincentive for investment.”

It’s a sentiment shared by some local government leaders. On Mackinac Island, Westland Mayor William Wild said he’s concerned that disinvesting in the MEDC while Michigan’s economy is growing will set the state and its cities farther behind.

But Joseph Lehman, president of the Midland-based conservative think tank Mackinac Center for Public Policy, told an audience at a session on roads that lawmakers could find rational cuts within MEDC.

He characterized some of its efforts, particularly tax credits, as “cloaked in secrecy.”

“It’s a program that consumes hundreds of millions of dollars,” Lehman said. “It isn’t fair to go to the taxpayers to ask for more when we’ve still got some really questionable spending that just goes on year after year.”

That mindset is partly the fault of the MEDC for not communicating enough about its programs and successes, Arwood told Crain’s.

He said he knows some people philosophically oppose incentives and he alone can’t change a perception problem. But, he added, the state can do a better job of articulating the importance of economic development in Michigan — a conversation that should happen separately from road funding.

“I’d rather play offense right now,” Arwood said of talking about Michigan’s and Detroit’s comeback stories.

“This is an excellent time to just be out there talking about how great we are, and we need to do that. We absolutely need to do that,” he said. “Every other state in the country we compete with is watching what’s going on. I’m sure they’re using it in their marketing material. I would.”

Comings and goings

Matthew Dobler, a Republican strategist who has worked on national campaigns, has been hired as political director for the Michigan Republican Party, party officials said.

Dobler previously worked as state field director for the Republican National Committee, as well as deputy political director for the California State Assembly Republican Caucus last year. He also has been a campaign manager for races in Florida, Oregon and Virginia.

He has a bachelor’s degree in political science from California State University San Marcos.

Kris Young has joined the external affairs team of AT&T Michigan, the company said.

Young, 35, previously worked for the state House as session manager for House Democratic Floor Leader Rep. Sam Singh, D-East Lansing, and previous floor leaders Rep. David Rutledge, D-Superior Township, and former state Rep. Rudy Hobbs, D-Southfield.

Young also served as legislative director for former state Rep. Maureen Stapleton, D-Detroit, and as legislative director for and senior adviser to former state Sen. Buzz Thomas, D-Detroit. n

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Mon, 06/01/2015 - 9:37am
If they can't make money running trains to Chicago could trains to northern Michigan be seriously expected to do any better? Both Chicago and northern Michigan are tourist destinations. Sure they are all for it until they ask the private sector to foot some of the bill and then watch the support wither away.
Disgruntled Taxpayer
Mon, 06/01/2015 - 9:48am
"And the cuts, amounting to $185 million of the MEDC’s proposed $403 million budget next year, could force the agency to pit its own programs against one another for limited dollars." That sentence doesn't make sense to me. If MEDC programs are already drawing from the same pool of funds then they're already pitted against one another for limited dollars, regardless of the dollar amount.
Bruce Billedeaux
Mon, 06/01/2015 - 9:52am
The comment about support for the trains is inaccurate. Amtrak operates its Blue Water and Pere Marquette services under a contract with MDOT, but it does not receive any direct state support for the Wolverine.
Mon, 06/01/2015 - 1:39pm
LET UNCEL SAM build the trains with the Engineers of the Army and put our servicemen to work they build road & bridge in other countries, so time to start right here good old USA
Mon, 06/01/2015 - 9:56am
When will the legislature learn? Fund the roads with new tax dollars! Do not steal from other departments like MEDC or education or steal more money from the poor or fund the roads with fantasies of future economic growth. If and when there is future economic growth, the money needs to go toward returning funding for mental health and education to adequate levels. The legislature needs to find a road funding fix soon! From what the Gov says, we need $1.4 - 1.6 Billion per year in revenue to fund the needed infrastructure repairs and ongoing maintenance. Pick increasing the gas tax, increasing sales taxes, extending sales taxes to services, or increase the income tax to a level that supports that revenue and just do it!
Mon, 06/01/2015 - 12:49pm
AMEN. When are they going to stop trying to rob Peter to pay Paul. There is plenty of money and wealth in this state to pay for roads. They have already given money to businesses off the backs of the middle and retired classes. Now they are trying to get money from the roads on the backs of the poor. The surveys show that the people of Michigan are willing to have a tax increase, So why do they not put an EQUITABLE tax requirement out there for the people to vote on; forget about the lobbyists, parties, etc, and they will get the needed money.
Charles Richards
Mon, 06/01/2015 - 3:27pm
Of course, by "EQUITABLE" you mean having somebody else pay for your stuff. Why shouldn't middle income and working people help pay for the better roads that will benefit them through an improved economic climate? And how about the reduced car repair bills that moderate income people can afford least of all?
Mon, 06/01/2015 - 1:23pm
The Golden Spike railroad "under' constrution for over 30 years Ann ARBOR to brighton.taxpayers money waisted on roundabouts! street(without potholes) being reserved twice in a years. street turned from 4 lanes into 2 lanes.for Bicyle riders In the summertime ????? on mainstreets?
Mon, 06/01/2015 - 1:35pm
THE ROAD & bridge Budget was increasd by 369% under Gov. Engler to $ 1,54 BILLION from the 1990 budget of ONLY $ 328 million. lets see the books and Who are the contracters?check the Detroit news april 2001
John Q. Public
Mon, 06/01/2015 - 6:14pm
The legislature is showing indications of learning right now. A large part of the 80% 'no' vote on Prop 1 said, "We paid for roads, and you spent it on something else. You aren't getting any more." The money to fund the MEDC is taken from something else, too. Nearly every government program is funded with money that could be spent on something else. The fact that an agency was seen as a priority yesterday doesn't give it permanent status as such, and voters are telling the legislature they need to make a shift. At least some of the legislators are listening. We'll see if they are enough, or if the lobbyists start reaching reluctantly for their checkbooks.
Mon, 06/01/2015 - 9:59am
I know, I know. We can't "afford" train service. It doesn't pay for itself. How many people opposed to rail service, vote to subsidize the airline industry? (it doesn't pay for itself either) Bridge: What's the total State (city, county & state) investment in airline "support" annually?
Mon, 06/01/2015 - 10:24am
The automotive industry doesn't get any subsidies, either. No siree. Funny how people don't see the massive government subsidies for their own favorite pet industries (Big agriculture, big pharma, fossil fuels, etc.) But let the government try to subsidize something they consider "socialist," like passenger trains, and boy they get all bent outta shape.
Mon, 06/01/2015 - 10:34am
It's complicated. I think nearly all forms of public transportation can't completely pay for itself and it subsidized by the govt. Here in Lansing the local bus system has never been self supporting and gets support from local communities. I guess one way to look at it is how many people benefit from the amount of money given in support to keep it going and is it worth it?
Mon, 06/01/2015 - 11:43am
Mon, 06/01/2015 - 1:26pm
Big agriculture " yes 1400 FARMERS living in manhattan! check the earmarks that your congressperson "give' to there VOTE for business!
Mon, 06/01/2015 - 1:26pm
Depends on how tightly you want to define subsidy. Does the trucking industry get a subsidy because they use public roads? Airlines because they use public airports? The fossil fuels industry?? Please someone explain the subsidy they are getting. Other than they use public roads. Public transportation - buses, AMTRAC are in a realm all by themselves. Not only do they get their infrastructure 100% paid for with tax dollars, they continue sucking up money every year because they can't even cover their operating costs. I'm not sure folks like Lon Johnson understand the distinction.
Big D in Cvx
Mon, 06/01/2015 - 10:01am
Just downsize the need to eviscerate the small portion that is the "Pure Michigan" campaign. Funny this article makes tiny mention of FILM SUBSIDIES. Kill them. ...and while a rail connection between AA and TC would be a positive attraction, there is no way it should be (partly) funded by tax money... We just told you to focus on funding roads within your available revenue, and you're still whining about "transportation" and trying to siphon off even more money for other priorities. Jeez.
Mon, 06/01/2015 - 10:31am
At issue is a 12-bill package from Republican House leaders that would raise more than $1 billion by 2019 for infrastructure projects. I was under the impression we needed $1 billion for road projects 4 years ago not 4 years in the future where the amount needed yearly will probably be higher than 1 billion.
Mon, 06/01/2015 - 11:46am
I believe the Governor said we needed $2B a YEAR for road repair We'll burn through another construction season without getting anything out of this "we're scared too do anything" legislature
Mon, 06/01/2015 - 1:31pm
In 1990 the road & bridge budget was $ 328 ..million In 2001 the road & bridge budget went ..........$ 1,54 BILLION under Gov. Engler check the detroit news april 2001 Rep. John Dingell iussed $ 200 million in 2009 so we could take the train from Ann Arbor to Detroit for the thankgiving pared per MDOT ..!
Mon, 06/01/2015 - 11:39am
I guess the elephant in the room is our $2 billion prison system. Michigan locks up nearly 50,000 people annually,more people than any other state. Why? Because we have antiquated drug laws and prisons are big business. In fact, Gov. Synder just signed over another prison recently to private management. So we take again from the working poor (earned income tax credit) and environmentally concerned (electric and hybrid vehicles) to subsidize the suburban SUV and Cadillac crowd. Potholes before potheads and raise the gas tax so we become more energy independent. Let the SUV and Cadillac crowd pay more in higher gas taxes with their gas guzzlers.
Mon, 06/01/2015 - 1:19pm
LETS see the Budget and the numbers ...then we know who is getting what and where and Money from the casinos?in 2001 we had none .now over 24! liquor tax. taxes on cigaretts,taxes on phone lines,gastax, internet taxes, money saved from jail being privatized?hunting, fishing , driverlicense, plates for cars and trucks,.... etcetc
Mike in TC
Mon, 06/01/2015 - 1:24pm
As a U of M grad and Traverse City resident, what is there not to like about a train from Ann Arbor?? Nothing except that revenues would not cover a fraction of the cost. Rail service to tourist areas is a chimera; passenger rail is incredibly expensive and off the charts in cost-benefit analysis. How would you sell a huge AA to TC subsidy to taxpayers in Escanaba, Port Huron or Muskegon? Besides, if you have watched the TC Commission recently, you know the folks from Ann Arbor have found their way north without assistance or subsidy!
Charles Richards
Mon, 06/01/2015 - 3:18pm
"Meanwhile, courting and retaining corporate residents can create permanent jobs." How about some information about how many permanent jobs have been retained or created per $100,000,000 of funding? Without that information, how is anyone supposed to make a sound judgment as to the merits of transferring money from MEDC to roads funding? This article doesn't contain any such information. "At issue is a 12-bill package from Republican House leaders that would raise more than $1 billion by 2019 for infrastructure projects." Excuse me, but I thought we were trying to raise $1.2 billion a year, not $ 1 billion over four years.
Mon, 06/01/2015 - 3:50pm
Lon Johnson's comment that the building a train from Ann Arbor to Traverse City is an "investment" is probably correct if the Bulloch family from Traverse City were actually sending their football stars to UofM, but they don't. They attend Michigan State. While UofM students harm the reputation of the school by thrashing northern Michigan resorts, I suppose by building a train they at least would not be getting drunk driving tickets commuting. Of course, Mr. Johnson does not frame the issue in what type of investment this would be. Let me suggest the term "boondoggle."
Mon, 06/01/2015 - 4:42pm
We have trillions for defense and foreign aid, but not a penny for road or rail improvement in our state. For every dollar we send to Washington in fuel tax, we get about $.45 back, while Massachusetts gets $1.10!! We need to revamp our Federal representation in Washington, until we get representation that REPRESENTS us!!! Not themselves!! It is time to start investing in the USA and in Michigan and stop wasting money overseas!! I'd rather subsidize rail lines in Michigan, than some foreign dictator in BFE!!
John Q. Public
Mon, 06/01/2015 - 6:05pm
1. Why should we act like any money "belongs" to the MEDC and shouldn't be taken from it? When it first started, the money to fund it was taken from something else. 2. I am an in-state vendor, and neither the MEDC nor anybody else has ever "matched me with a company." Yet, my business has finished in the red exactly one year out of thirty+--the year I started it. Maybe we ought to be sending a message to businesses that can't even manage to find their own customers that they aren't welcome here. How many MEDC defenders neither work there, nor benefit from its largesse? Maybe it is a rip-roaring success, but we'll never know, because they won't tell us, at least without limiting the story to generalities and platitudes. It's almost as if they're ashamed of their record.
Jim Fuscaldo
Mon, 06/01/2015 - 10:21pm
Michigan Economics: Contrary to the "feel good" hyperbole and rhetoric coming from Lansing, Michigan's performance doesn't appear to be all that Governor Snyder and his minions claim it to be. According to the 2015 ALEC-Laffer State Economic Competitiveness Index (see link below) Michigan ranks 50th (last) in Economic Performance. This rating is based on 3 important performance variables. State Gross Domestic Product: Rank 50th Absolute Domestic Migration: Rank 47th Michigan has lost 628,472 residents / tax payers since 2004. Maybe this is why the employment rate looks so good? Have those without jobs left the state? Just asking? Non Farm Payroll Employment: Rank 50th According to the ALEC-Laffer Report these 3 variables are highly influenced by state policy (i.e the governor and the legislature). The Economic Outlook: This ranking is based on 15 state policy variables as set forth in the ALEC-Laffer Report. Michigan has dropped from 12th in 2014 to Rank 24th. Previous years' low rankings were 34th in 2009; 26th in 2010; 25th in 2011. As John Adams once said, "Facts are stubborn things, you can ignore them, you can deny them, but you can't change them". Roads While Lansing debates how to raise funds to repair the roads, Congress is debating legislation to address the impending insolvency of the Highway Trust Fund. Their proposal ensures additional tax hikes potentially reaching 42%. According to an independent analysis 20% of the Highway Trust Fund has gone to finance light rail, bike lanes, landscaping projects and establishing a transportation museum. Is Michigan headed down the same path? Just asking? The problem in Michigan is we do not have creative leadership either in the legislature or the governor's office irrespective of what party has majority or administrative control. If I were "Chief of all the Indians" I would first get legal experts to explain and simplify to the lawmakers and policy makers what advantages and disadvantages a Public Private Partnership can offer as a means to "privatize" certain main roads to create a capital fund as a resource to fund secondary roads. There are law firms in Lansing that specialize in Public private Partnerships. Next I would ask Gary Wolfram, the economist from Hillsdale College, to provide an economic analysis of the pluses and minuses of PPP's as an alternative resource for infrastructure financing (i.e.roads). He did such an analysis several years ago with regard to water treatment facilities. The Governor also needs to step forward and demand that he wants a "clean bill" for road funding. If he doesn't get it, it gets vetoed. It is ironic that Michigan's Private Investment Infrastructure Funding Act (Act 250 of 2010) allows for private source funding (PPP's) for municipal infrastructure facilities yet a comparable law that would permit the state to enter into PPP's (roads) failed to pass the legislature in 2009 (House Bill 4961). Why? Just asking? Yes, facts are stubborn things! In closing P.J. O'Rourke said, "giving money and power to government (be it state or federal) is like giving whiskey and car keys to teenage boys". It is time to bring the private interest into the funding and managing of public infrastructure. Other states have created successful PPP's for infrastructure. Where is Michigan? Probably 50th!
Tue, 06/02/2015 - 4:30pm
This was a topic of discussion and wishful thinking when I lived in Traverse City 24 years ago. It would have been a great help to the ski resorts, because trains can go through snow when cars can't. Maybe that is an industry that could share in the expense of bringing the train back to Traverse City?
JD Said
Wed, 06/03/2015 - 9:30am
The mindset that passenger/commuter trains need to "make money" is absurd. Look at it differently: Interstate expressways, county highways and local roads consume billions of taxpayer dollars and do not "make money". Rather, they exist as an instrument for transporting people and goods. Investing in and strengthening rail, as an infrastructure investment for moving people and freight, along with roads, is what and where the conversation needs to be.