The Cutting Room Floor of Economic Development

[XLFD]

'This is not just going to set back economic development in Michigan, it’s going to kill it.'

           --  Heather Tykoski, Community Development Director, pictured below in thought 

A City of Ludington Daily News (COLDNews) article in the weekend edition had those words by the Ludington CDD highlighted and set off, rather than having a picture of Ms. Tykoski filling out job applications for a new line of work.  

Such hyperbole must have something quite dramatic as a basis behind it, one would think.  Is she worried about the devastating job-killing effects of Governor Gretchen's proposed gas tax hike?  Is she talking about legislation being considered by the state congress to defund economic development initiatives that have proven time and again not to work?  Nope, neither.

Using CDD Tykoski's vernacular, the murder of economic development is an indirect decision made by the Michigan Strategic Fund (MSF) to make the Michigan Economic Development Corporation (MEDC) poorer and remove three Façade grants from consideration after they were approved.  The article describes the usual machinations by the political parties to claim victimhood or higher ground when such things happen, in this case:

Democrats:  The Republican-led legislature cut $26 million in funding to the MEDC (a non-public funnel for MSF public fund distribution).  This is the usual overstatement, as the number is under $23 million. 

Republicans:  The governor and Democrat-led MSF/MEDC only cut projects in deep-red districts located in Manistee, Paw Paw, and Alpena.  Blaming the governor for what could be a partisan move in the MSF is misplaced.

Closer to the truth is that both parties cannot fathom cutting spending when it comes to economic development projects.  These projects are the means of providing political paybacks and showing favoritism towards individuals and businesses where it would otherwise be difficult to explain.  The only time a party complains of the MSF or MEDC is when the other party is effectively in charge of the agencies that routinely pick winners and make things difficult for the losers.

The reduction of MEDC funding is largely due to MEDC defunding Planet M ($8.7 million), Entrepreneurial Ecosystems ($2.5 million), and Matching grants for federal research ($4 million) along with cutting Strategic Development Services ($2.5 million) and slicing over half of the Community Development Support Services ($5 million).  Do not fret, staff salaries/benefits and marketing dollars went up.  

The support services is probably the worrisome aspect for our community development director, since most every project the MEDC approves allows the municipality to add on about a quarter of the project's worth as administrative costs.  This generally encourages local CDD's and city halls to have a high degree of loyalty to the MEDC.  

When the budget for grants and programs in the MEDC goes from $38.6 million to $16 million, there definitely has been a change in focus, and it would likely be fiscally irresponsible to go forth with a grant when the money is not there.  CDD Tykoski is rightly concerned that the $50,000 she expected in matching funds from the MEDC for the splash pad won't be forthcoming.

Reporter Riley Kelly allows Heather Tykoski to vent to explain how economic development will die: 

“There are several things locally here that we’ve had in the pipeline with MEDC. Some of them since the beginning of this year into last year, that we’ve already expended dollars on.  Things like plans, drawings, environmental assessments and private funding from business owners … We have the (James Street Plaza) project which is going to be somewhere in the $1.5 to $2 million range, we have rental rehabilitation projects, three buildings and 12 new apartments that are hanging in the balance with this determination.”

According to the proposed Tax Increment Finance (TIF) Plan the James Street Plaza will cost $2.5 million with all that money coming from TIF revenue (from our taxes), the new range differs from the designer's original estimate of $750,000, and now $1.5- $2 million with help from the MEDC spending taxpayer money for the economic development of redoing the plaza the right way-- one more time.  Yes, we were assured repeatedly by the DDA that not a penny of this Plaza project would be from taxpayer dollars.  

The determination by MEDC to not fund three façade projects do not leave all these Ludington projects hanging in the balance; the realities of meeting a much-reduced budget provided by the MSF does.  If the projects the CDD talks about were actually worthwhile and economically prudent, they should be able to go forth without MEDC supplementary funding.  If they don't, then 'survival of the fittest' ideas of economics has happened, and we've all probably gained because of it (except for project administrators who will amp up the rhetoric because they feel cheated out of money).  The article continues:

The largest project that would be affected is a planned renovation of the 801 N. Rowe St., which is set to be converted to be into “much-needed housing housing in Ludington,” according to Tykoski.
She also said there are future plans in the works that would require MEDC assistance.

I was assured by Third Coast Development principal Brad Rosely at the community meeting on August 15 that the only grants and outside funding this project would receive is potentially from tax credits for historic register, solar energy and brownfield redevelopment.  He apparently told reporter Noah Hausmann after the meeting that he would also be getting money provided by Michigan Community Capital, one of the many arms of the MEDC.  Rosely dodged my question or lied by not mentioning the potentially millions in funding from this resource.

As for "much needed housing housing" (is the CDD so focused on housing that she has to mention it twice?) in Ludington, she has made a mistake like the City of Manistee has been making over the last couple of decades.  Lack of housing is not what is hindering the area's economic development, the lack of good jobs in the area is the obstacle.  

Statistical results may vary slightly between websites as regards area vacancy rates, but the graph above is most readable, although it fails to point out that the bar just right of Ludington is Michigan's average occupancy/vacancy rate and just right of Scottville is the National average.  As you can see, Ludington's vacancy rate of 17% is a bit more than the national average of 12%.  Neighboring PM and Hamlin Township are well above that.  

Ironically, we consider the Scottville area to be troubled in the realm of economic development, but they and neighboring Amber Township have vacancy rates below the state average.  Maybe that's because they didn't mess up the affordable housing market like Ludington did four years ago by having big government make much affordable housing impossible with rental inspections.  Once new statistics come out, you're likely to see Scottville's vacancy rate rise dramatically because they just adopted Ludington's RI plan this year and small business landlords are going to have to pay through the nose for these inspections and fees and that money goes to out of county contractors.  Stupid is, as stupid does, they say.

The print edition of the COLDNews has even more quotes from all parties, here are more by Ms. Tykoski:  

"What this means is MEDC's entire community assistance team will not have jobs, and those are people in the field, in communities helping us figure out how to help small businesses succeed." 

Do not feel sorry for the people giving out taxpayer money at the MEDC, their staffing salaries and benefits both are set to increase in funding; they're up about 5% for administrators.  As for helping small businesses succeed, it's not rocket science to figure out that whenever you choose one or some businesses to benefit from MEDC programs, that they have unfair advantages over their competitors not receiving help from the government.  This is not a free marketplace, it's a cabal where government chooses the players, as well as winners and losers.  

Tykoski is encouraging people to contact legislators abut (sic) the decision to cut funding and to continue to support local entrepreneurs and business owners.

So on CDD Heather Tykoski's behalf, if you want to show your support for business owners and entrepreneurs, contact your legislator and ask them to stand behind their cuts, cut even more, and prevent government from screwing up the private sector with economic development programs that fail more often than succeed.

[Freedom Seeker]

Oh no! Does this mean that Ludington is at the brink of devastation because we're not getting some grants? I'm glad our governor is being more fiscally responsible. She may even realize that some of the locally-governed grants are used as favors and inclined to misuse. Grants are nice, and they might as well be given to Ludington, if some city will get them, except then we need more maintenance, more maintenance personnel, more insurance, more, more, more, to a city that is in the biggest debt it has ever been because of a myopic group catering to their plans. For what? One more beer tent or pavilion that caters to a select group of the "in crowd"? Or one more facade grant to a city official or someone using their position to gain personal benefit?

It's not only political tug-of-war of grants on a state level, its also potential misuse on a local level, and the mentality of overspending on pet projects of the DDA when the rest of the city needs are not taken care of that's the real devastation.

[Du Wright]

"The sky is falling" ... Henny Penny.

The great city spokesman. Is there no other way to be saved from economic death than to rely on government grants? Whatever happened to entrepreneurial enterprise and personal investment?

[Freedom Seeker]

Yes, it sounds like Ludington is not going to survive without state grants. The budget must be worse off than we've been told. And how many of these projects not fully discussed rely on state grants? It's like describing vagueness with more vagueness. Secret squirrel stuff going on behind closed doors never brought before the council? Is the CDD not responsible to disclosure or to the council? When did the council approve all these funding mechanisms? Who really knows what is going on?

[XLFD]

CDD Tykoski has made a habit out of keeping things secret from the public over the years, when they should be fully disclosed.  This would include all the times her and her husband's businesses have profited from City of Ludington patronage, the accounting of the DDA and 2008 Amended TIF Plan over the years, and her very incomplete minutes of the DDA meetings.

Even though few members of the public go to DDA meetings, the DDA still have done most of their work through subcommittees over the years, and a lot of the decisions they seem to make are from Jen, Heather, or even Kathy MacLean acting unilaterally.  There is signs of reform, but a short and funny story:

Dianne commented for about four minutes introducing several points including:  make parking easy and available, consider involving more residents in DDA decisions, respect the OMA, don't criticize people for their opinions, look at the greater economic future and consider overall debt, do not use public office for private gain.

Heather summed it all up in one word:  "(Dianne) spoke."  Too close to home.

[Willy]

Tykoski is just a high paid unelected politician. What in the World did we do before she came to town and how did business and the citizens survive without organizations like CDD, MSF, MEDC and all the other leaches. What we really need is a new citizens organization to purge society of all of these money grubbing people. Let's call it CRAP [citizens rejecting as_hole politicians].  She should try working for a living.

[XLFD]

The strategy of the MSF and the economic development of the MEDC have traditionally been way off the mark from what a good 'economic development strategy' would be.  They sank bankrolls on electric car batteries for a couple of years (flop), sank more bankrolls on data centers (flop), and now they are investing $50K in installing a splash pad in Ludington to spur the economy of Michigan.  Nobody from the MEDC did their research on the economic impact the splash pad would have on the Fourth Ward or Ludington, it was simply to match donations for what Ms. Tykoski no doubt dramatically misrepresented as a project critical for Fourth Ward's economic development.

This is why I celebrate the significant funding decrease in the MEDC, and hope that it was due in part to the crazy decisions they have made, which have a lot more to do with corrupt cronyism than it has with 'economic development'.  Any entity that disrupts free market mechanisms by using government authority and financial resources will only work against true economic development.