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