State Lawmakers Consider Plan to Cut Economic Development Funding

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Last week, Michigan lawmakers introduced a proposal to fix the state’s roads and infrastructure that would reduce funding of the state’s Economic Development Corp.

In addition to re-purposing funds used by the Development Corp., which funds the Pure Michigan tourism initiative, the plan would raise diesel taxes to match gasoline, create fees on electric and hybrid vehicles and eliminate the Earned Income Tax Credit.

Many in the state’s tourism industry view the proposal as a threat to the Pure Michigan tourism campaign, which promotes travel in the state.

RV industry companies have received incentives in the past from the Development Corp. for expansions in south Michigan. Earlier this year, Forest River received economic incentives from the group for its expansion in White Pigeon, and in October last year, Lippert Components was awarded a performance-based grant when it acquired and retained Innovative Design Solutions, an electronics supplier. 

Michigan House Speaker Kevin Cotter proposed the plan after Michigan voters struck down a proposal by a 4-to-1 margin that would have raised the state sales tax by a penny on the dollar (from 6 to 7 percent) to repair the roads, and use the remaining money for schools, local governments and the working poor.

Thursday (May 21), the Committee on Roads and Economic Development, which Cotter created, will consider the plan and other options to determine what action, if any, the legislature will take in the 2016 budget.  

Cotter’s proposed plan promises $700 million over the next four years by redirecting General Fund dollars, and another $300 million would be drawn from eliminating tax credits, redirecting tobacco settlement and tribal gaming revenue and enacting project-bidding requirements on construction projects.

As lawmakers began talks on the issue last week, the Michigan Association of RVs and Campgrounds notified members of the proposal in an email, but for now, the Association will wait to see how the proposal is received by the legislature before considering action, according to MARVAC Director Bill Sheffer.

“We’re not exactly sure where this whole thing is going to go,” Sheffer said. “We’ve hesitated to start a grass roots effort on the part of our membership because we feel there’s some things to be vetted yet.”

Michigan House Republicans responded to industry concerns that funding cuts to the Michigan Economic Development Corporation could negatively affect the Pure Michigan tourism campaign in a statement this week.

“Our roads plan makes no mention of the Pure Michigan campaign and does not affect the popular campaign in any way. Our plan redirects some funding from the Michigan Economic Development Corporation, which operates the Pure Michigan campaign, but the organization will still have hundreds and millions of dollars to use for its programs,” according to the statement.

The Michigan Strategic Fund, which oversees the Michigan Economic Development Corp. and its Pure Michigan program, reported annual expenditures of  $604 million in 2014. The Strategic Fund plans to spend $837 million in the 2015 fiscal year, according to reported fiscal data.

Despite the uncertainty about the where the money will come from, most in the state seem to agree that the roads need repair.

“I think a prerequisite to economic development is to have roads that are at least in reasonable condition,” Cotter told in a statement. “When businesses consider where to locate, having “roads that look like bombing ranges” won’t help Michigan.

Sheffer and many in the tourism industry agree that fixing roads can help the tourism economy, but it’s a matter of where the state finds the funding.

“The roads are terrible. We know that and I think the public knows it,” Sheffer said. “Everybody knows it, but it’s a question of what kind of solution – whose pocket are we going to reach into to fill the need to get these roads fixed, and I think that’s what they’re working on right now.”

Alternative plans likely are in the works. The Michigan Senate is likely to propose a plan “in the next couple of weeks,” Floor Leader Mike Kowall told, though it’s unclear what impact any new plan would have on funding to the Economic Develpment Corp.


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