Q&A: Help is on the way in 2021 for firms struggling in Michigan

Among the largest Michigan Economic Development Corp.’s projects in 2020 was the General Motors plan for its Detroit-Hamtramck assembly plant, which will be retooled so that it’s 100 percent devoted to production of electric vehicles by fall 2021. (Shutterstock)

Michigan’s $10 million grant program for small businesses opened for applications at 9 a.m. Dec. 15, and 12 hours later had more than 22,000 applicants.

 

Only 667 will be funded, signaling the level of need among businesses in 2021.

“The need is so incredible,” said Mark Burton, CEO of the Michigan Economic Development Corp., the state’s public-private economic development entity.

The agency has long worked on some of the state’s largest business expansion projects, as well as supporting community-based projects, like downtown building redevelopments.

But in 2020, it also turned into a lifeline for smaller businesses impacted by the pandemic, distributing more than $180 million in what it calls “critical relief funds” through several programs.

The agency continued to finalize high-profile projects. Among the largest: a new, $44 million North American headquarters for Perrigo in Grand Rapids and the $2.2 billion conversion of General Motors Corp.’s Detroit-Hamtramck plant to assemble electric vehicles.

Projects approved through the Michigan Strategic Fund (MSF), its funding arm, resulted in $5.2 billion private investments in 92 locations.

Burton, formerly chief strategist for Gov. Gretchen Whitmer,  became MEDC’s president and CEO on March 4, just days before the pandemic closed the state’s nonessential businesses. He spoke with Bridge Michigan’s business editor, Paula Gardner. Here are excerpts from the conversation:

Mark Burton, CEO of the Michigan Economic Development Corp.

You took over at the MEDC during a year with a reduced budget and pandemic. What did that do to your project pipeline?

Around October 2019 when the fiscal year 2020 budget was adopted, there was obvious tension between Legislative Republicans and Governor Gretchen Whitmer, and Governor Whitmer came out and used a number of line-item vetoes and administrative transfers across state government. The result of that, from an MEDC perspective, was moving throughout FY 2020 with the lowest funding on record for our flagship programs, especially business development and community development. 

When COVID hit, we obviously did whatever we could to use funds for relief purposes.

The shift to relief efforts caused those pipelines which were already starting to backup because of the funding cuts  … [face an] even worse problem than we had in the first six months of the fiscal year.

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What does your $139 million budget for this year mean for your programs? 

We were very pleased to be able to get back Pure Michigan [travel advertising campaign.] We were able to gain our business attraction and community revitalization line back up to $100 million. [It means we were] able to move those projects through the pipeline.

Now the pipelines are full. They’re healthy. We anticipate to be able to move through the entire 2021 fiscal year without any difficulty … We look to be aggressive.

What might we see in 2021 in development or job retention?

One of the major opportunities that we have in the state that’s not only a competitive advantage but also a circumstantial advantage is onshoring and reshoring. Michigan’s always been the center for manufacturing and advanced manufacturing. With the stay-at-home orders in the spring, all over, we really saw disruption of the supply chain. When manufacturing came back online, they had supply-chain problems. They all have that as a top priority to work on. … That’s a real opportunity for us. I think we will get more opportunities  there than we would have without the crisis. 

There's the question of workforces and how the remote nature of them will be significantly higher than pre-COVID. We think we have a great opportunity there.  … Michigan has such a wonderful quality of life and a much lower cost of living. We think we’ve got a great argument and opportunity to attract some of these higher tech workers who can live anywhere they want.

Do you think we’ll see fewer corporate headquarters move to Michigan because of remote work?

I don’t really think so. There is a higher percentage of remote workers, but across sectors, it’s different. Manufacturing heavyweights can’t largely do remote work. Overall, we still think headquarters decisions will be made and we still have a good value proposition.

Large warehouse deals are starting to look common. Do you see the state continue to award tax breaks to companies like Amazon?

Amazon is an interesting company because most of the time they don’t consider incentives because they’re more interested in speed [of opening warehouses.] I think those sorts of projects will continue to come up.

From a statewide perspective, there are some regions that really just don't have as much land available or buildings available that can host those companies easily. I think we’ll see a push toward more spec[ulative] buildings. Companies will make a decision, and within 90 days, maybe, they’ll want to be in place. That’s not going to happen unless there’s a spec building in place.

Do you see the environment for tax incentive changing, especially as communities deal with COVID and their own funding?

The conversation has ebbed and flowed over my time, especially around Lansing. That’s largely a function of the economy. In the Great Recession, with [municipal and state] budget problems, there was movement toward tax credits. After the economy picked up and started to rebound, there was less reliance on tax credits and more reliance on business development programs [that offer performance-based grants.]

Now I think it’s interesting because we’re faced with this particular crisis and a question will be how long will  recovery last, and what are the best tools in those circumstances to be able to either retain or attract. I think the Legislature struggles with that. A lot of different states struggle with what’s the right approach. We feel like we’ll be competitive either way.

 

A lot of businesses in the struggling travel sector will count on that Pure Michigan advertising campaign funding. Is it enough to make a difference to them?

Pure Michigan is funded at $15 million this year. When it was cut in October 2019, it was $36 million. We’re very happy with the $15 million, given the circumstances. We’ll …  promote a strong winter season. The reality is who is traveling and from where is just different now.

One thing the Pure Michigan team did over 2020 was keep the brand alive. They used donated billboards and things of that nature on the “Two peninsulas, one Michigan” campaign. That moved into the early summer with the Pure Michigan pledge … [which was taken by travel-related businesses to show they promoted COVID-] safe travel.

Smaller and midsize Michigan communities seem to count very much on redevelopments to spur activity in their downtowns. Given the pandemic, how much attention can you pay to this type of economic development?

Those projects are hugely important. Many times, they’re the first domino. If you can get one building on one block, it acts as a beacon of sorts [for investors.]

We have had a focus on that, and considering the challenges local governments have from a revenue standpoint moving forward, we’re going to continue to do it. Given the importance of projects in communities, we are willing maybe to do a little bit more (for some areas) than we would for projects in areas that get a lot of development. We’re sensitive to that. 

What are you losing sleep over?

The next few months, until we see the light at the end of the tunnel with vaccines. We have so many small businesses that will struggle to survive the winter without significant assistance. 

[We need] policymakers, not just here in the Legislature, but in Congress, to deliver additional resources to keep these small businesses alive and keep people on payroll. That’s the hardest part of this crisis over the next few months, I think.

What do you expect for Michigan in 2021?

I absolutely have hope, as long as we can control the public health side. The quicker we can do that, the quicker we can shift to recovery. We are fairly well positioned to be competitive for speeding toward that recovery.

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Comments

Val
Mon, 01/11/2021 - 8:34am

We've seen how small business has done with Whitmers help, I'm not sure they can take any more of it. Naturally she wants to "help" more as there are still some small businesses operating in Michigan

realscience
Tue, 01/12/2021 - 11:40am

open for business...that would solve the problem...quit trying to make us dependent on govt