Kyle Celebuski: I'm writing a paper on the Michigan Economic Development Corporation and the changes it underwent during the Snyder Administration so I was wondering if you could speak to that?
Michael Shore: We have under gone through a couple of major changes. Number one is a change in leadership at the top of the organization, I don't know how much you dug into people but Mike Finney is our President and CEO and comes with a whole lifetime of both business and economic development experience. I don't want to make him sound like a really old guy here, but he is a middle aged guy who has significant experience in both the manufacturing sector and the economic development sector. His most recent job before here was with Ann Arbor Spark which is an economic development entity in and around Ann Arbor and they have done some extraordinary economic development projects there over the years. So he was kind of a natural fit for here. Governor Snyder was actually on his board and when Governor Snyder actually took office he brought Mike Finney with him.
Kyle Celebuski: What has he brought to the table that the previous president didn't?
Michael Shore: For starters Mike has brought a very different sort of attitude. We are developing a new model of economic development that focuses much more on providing advantages to a broad number of businesses rather than a smaller rather limited number of businesses. The reduction or elimination of the Michigan Business tax state wide has been significant first step. What we used have was this odd business tax that everyone complained about, even the accountants who made money figured out the businesses tax liability didn't like, it was complicated, it was very difficult to understand, and the way we leveraged that in Economic terms was we had the authority to give tax credits to companies that made new investments in the state. We also had tax credits for example to help real estate developers take over contaminated sites and build new buildings or convert those properties into other uses, things ranging from hotels to retail stores. Those we our major incentive tools and once the Michigan business tax was eliminated all of the tax credits that were developed to work around that tax burden essentially disappeared. Those companies that got tax credits in prior years now have to decide whether they want to be taxed under the new formulation which is much lower than it was or keep their old tax credits and pay taxes under the old higher tax system. Since the new tax went into effect January 1st of this year, this is the first year that these businesses will have to make that kind of calculation where they will literally have to do their taxes twice in each different way. Going forward they will have made that choice and not have to continue to worry about it if they made the right choice. On balance what the change in the business tax did was it took the tax burden from ninety-thousand Michigan businesses and in one piece of legislation eased this burden from many companies. We still have incentives, now we can offer grants and loans to companies but given the fact that the tax burden is so much lower we don't need to help them financially to the extent we did before.
Kyle Celebuski: Where does the grant money come from?
Michael Shore: We have about one-hundred million dollars that is offered by the legislature. This is another fix, what happened before under the old credits system was you never had the same budget from year to year. In the old days the way for a company to get their tax credit was to meet whatever the terms of the agreement were like if the company would have to invest a certain number of dollars or create a certain number of jobs over time and the agreements were sort of mile posts they had to hit as they worked to collect that money. Now if you were the state treasurer trying to figure out how to budget this stuff you really didn't know from one year to the next what the credits would total. The new formula is that in this physical year we have got a one-hundred million dollar appropriation from the budget and everyone knows that for this year that one-hundred million will be the cost for these incentives.
Kyle Celebuski: So you are strictly given one-hundred million, no more or no less?
Michael Shore: The appropriation is the total we are allowed to work with, but if a major opportunity were to present itself then the number is liable to change. So using this purely hypothetical example let's say that Apple decided they wanted to build their I-pads in Michigan but to come to Michigan they would need an incentive that would take us over the one-hundred million dollar mark. In this situation we could still go to the legislature and say look we have this great opportunity but we need an increase in our appropriation in order to follow through with it and then they would figure out if they were willing to give us the money or not and we would move on from there. But in real everyday terms the hundred million is what we will spend for this year. So in short form at the end of the day what the MEDC does is market the state to businesses. We also work with the tourism industry in the Pure Michigan campaign, we are building that brand further beyond just traveling helping farmers market their products particularly oversees with the pure Michigan logo on it.
Kyle Celebuski: In researching you I found that you previously worked for some congressmen and one of the critiques of the MEDC is that it promotes interstate competition instead of the nation fixing its problems, what do you think about this argument?
Michael Shore: At the end of the day we don't choose how we compete. There are people who believe that in a perfect world the state of Michigan wouldn't have to compete with the state of North Carolina or the State of Ohio but the fact of the matter is all of that is legal. Even if there were a constitutional amendment which prohibited one state from competing with another, we are in a position geographically where we will always be competing with Ontario. The fact of the matter is where ever you are and whatever you do competition is a fact of life. The critiques of the MEDC are people who would like you to believe you could construct a perfect world, they insist Michigan should disarm and not compete for these kinds of projects but if that happened then you could have other states come in and try to poach our businesses. There is nothing to stop say a plant in Brighton from moving to other states like Indiana or North Carolina If the incentives from those states are attractive enough. If Michigan can't compete then we would see what we saw during the early part of the last decade where southern states were routinely coming to Michigan, states like Texas Tennessee, North Carolina, and talking to companies who have a presence in Michigan suggesting if they move their presence and their jobs to those other states then they would find lower costs and a better environment to run their businesses. There is nothing new in that but the reality is you can't stop competition, if you have two kids they will always be competing with each other and it is just human nature. So the guys who say we shouldn't have to compete, I don't know what universe they live in but I feel like they don't live in the same universe we do.
Kyle Celebuski: Now when you say other states would come in and try to steal our companies, would we kind of do the same thing to them?
Michael Shore: No. If a company made it known to us that they were interested in a Michigan location then we would pitch them to locate here. The scenario back in 2005 when Kellogg bought Keebler will show you the nature of economic development. Kellogg has been in Michigan since the late 1800's, starting with the invention of Cornflakes in Battle Creek Michigan and that company is now global with large profits. In 2005 when they bought Keebler the biggest concern in Michigan was that Keebler was based outside of Chicago and maybe Battle Creek would lose the Kellogg's business to this little town in Illinois because when all is said and done if you are a CEO of a global enterprise you are much more likely to be flying out of O'Hare airport in Chicago then whatever airport Battle Creek has. So faced with that reality we put together a proposal to pitch them to stay in Battle Creek saying we would help them move the Keebler headquarters into their operations in Battle Creek. Now there were a whole lot of people who worked with Keebler in Illinois who didn't particularly want to move to Battle Creek Michigan. I can take you to Battle Creek today and you can talk to those same people and you will find that they enjoy being two hours from Lake Michigan and the cost of living is so low that they can afford better homes and life was not so bad once they moved. For a company to take on that turmoil and what that means to their employees is a big decision, but we didn't want to lose Kellogg, we wanted to protect what was here. That is an everyday thing in Economic development and why you can't disarm. You can change your model and make Michigan a more business state in order to help businesses grow in Michigan without any particular government apparatus to do it, all we did was cut the business tax by 86%, but you can't say we are not going to be in the economic development business because as soon as you say that you can just watch businesses leave. There are far more states out there that want what Michigan has, like Wyoming or Montana that can't for the life of them get one auto plant let alone the dozen we have here in Michigan.
Kyle Celebuski: What is in that proposal you gave to Kellogg? What aspects of Michigan do you sell businesses on?
Michael Shore: If you're Kellogg and you have this new aspect of your company, it makes sense for your new senior management to be located near the existing senior management. You don't have to make the cookies here in Michigan but you want the guy who is the CEO of that operation close to who he is reporting to as well as the people who have run that business like the marketing and operations folks. So we sell companies on a lot of different pieces. One is the quality of life in Michigan which in many ways is unmatched anywhere around the country, if you live in Michigan you tend to take for granted that you can drive for an hour or two and be on a great lake where as people from other states don't know have access to places like that. We also sell companies that Michigan's workforce is more highly skilled and the work ethic in Michigan is much stronger than in many other places around the country. We sell the educational opportunities with our world class research universities like Michigan, Michigan State, Wayne State, again something Michigan residents tend to forget that we have a lot here other states don't. Basics of business like infrastructure, we have a great interstate system, you look at other states that are much bigger in size that have two interstates one going east and west and the other going north and south, so if you want to locate there and deliver your goods it's much more difficult to do from one of those states than it is to do in Michigan. So there are a lot of advantages to being in Michigan and we sell those every day. The biggest ones are a high tech workforce in southeast Michigan, we still are a major center of auto manufacturing but we are a globally center for our research and development (R&D), the is more automotive R&D in southeast Michigan than there is any other place on the globe, there is something like 370 different R&D operations here. Nissan has a huge R&D center in Farmington Hills; Toyota has more than 1000 employees outside of Ann Arbor. Along with these major automotive brands you have got companies who make breaks, tires, and other parts of the car, all of these companies have R&D centers many of which are right here in Michigan. Going back to the Kellogg example, what you have in Michigan that you don't have in many other states is a very sophisticated food processing industry, not just Corn Flakes but in southwest Michigan you have canneries going back one-hundred years, Birds Eye has a huge plant outside of Allegan. So sort of the manufacturing mentality is part of our existence from cars in the southeast, to chemicals and plastics and chemicals if you come from around Midland or Saginaw, or even food processing in plants around the state.
Kyle Celebuski: You sell all of aspects of Michigan but my question is do businesses look into those things themselves or do they just take your word for it, how much do businesses do for themselves compared to what you do for them?
Michael Shore: There is a whole industry of people who are site location consultants who help major corporations and even smaller corporations find ideal locations for their business. We work with site location folks every day, we are also at trade shows so if you are in the wind energy manufacturing you can come see us at the Wind Energy Show that's coming up (AWEA), we have people who go to those kinds of functions we also have people who understand a variety of interests. When Google was thinking about locating in Ann Arbor site location officers showed up in our office one day and thirty days later we had worked out a deal with Google to locate their facility in Ann Arbor. Now they showed an initial interest in Ann Arbor but it was important to them that we kept it confidential and really for thirty days no one knew what was going on and then the company agreed to locate an operation in Ann Arbor, mostly to serve their add words function and work next to the auto industry. Some companies just send a letter, like a company in Kalamazoo where the guy saw our commercials while in a hotel on his way to look at a location in San Francisco, called the number and two months and two days later he announced he was going to create a couple hundred jobs here in Kalamazoo. So it happens in a lot of different ways