Is Michigan the "comeback state?" It depends who you ask.

Jun 1, 2012

Governor Snyder has been busy touting Michigan as America’s “comeback state"--most recently at last week's Mackinac Island Policy Conference.

Unemployment is dropping as the US auto industry is booming again. And the state has a budget surplus for the first time in many years.

But many of Michigan’s local leaders say they’re not seeing any comeback.

In fact, they maintain things are more dire than ever. And many think state leaders are helping themselves—and the state’s business community—at the expense of cities’ well-being.

Losing state money for 10 years

Things have been bad in Michigan for a long time. Before the rest of the country fell into recession, we’ve dealt with the kinds of budget problems other states have only recently encountered.

Dan Gilmartin, CEO of the Michigan Municipal League, says Michigan’s state and local governments have historically had a strong, cooperative relationship.

Gilmartin says that unlike many other states, Michigan has streamlined things like sales tax collection at the state level—then distributed those funds for local governments to fund their own services.

“But in the past decade, when the state’s gotten into the financial problems it has, they’ve basically raided those funds,” Gilmartin said. “To the tune of about five billion dollars. With a “B.”

And Gilmartin says that shortchanging has had very real, visible consequences: “We now have 3600 less police officers on the street in Michigan today than we did on 9/11.”

Now that the state economy is rebounding, local leaders were hoping some of that money would flow back into city coffers. But instead, they continue to face deep cuts.

Many local leaders are especially steamed over a new proposal to phase out a long-standing tax on business equipment—a critical source of revenue for them.

Sterling Heights: “We’re getting beat up pretty good here”

Michigan’s fourth-largest city, Sterling Heights, is a largely residential suburb a few miles north of Detroit. But like many of Michigan’s larger cities, it’s heavily dependent on industry.

That’s evident here along this stretch of 18 Mile Road, which is lined with industrial businesses including Ford plant—one of four big auto factories in the city.

Sterling Heights Mayor Richard Notte says the city is in better fiscal shape than many Michigan cities. But it will be hard hit if the state does away with the personal property tax, which largely amounts to a tax on industrial equipment.

This year, Notte had to do what used to be unthinkable: cut police officers and firefighters. He insists any more cuts will be scraping bone—and if state leaders follow through on their proposal, the city will be in even bigger trouble.

“They say Michigan’s the comeback state,” Notte said. “Well, I don’t know about the comeback state. We’re getting beat up pretty good here in Sterling Heights.”

State officials have assured local leaders they'll make up most of the lost revenue in other ways. But as of yet, there’s no guarantee that will happen. And many local leaders are skeptical.

Governor Rick Snyder says he’s sympathetic—but insists repealing the personal property tax is about doing away with a barrier to investment in manufacturing.

“The goal of bringing up the proposal to begin with wasn’t to harm them,” said Snyder, speaking this week from Mackinac. “It’s to actually say: ‘Here’s a replacement revenue stream, so you can be successful, you can be more competitive, you can bring more jobs to your community, you can grow more, and you can prosper.’”

Quality of life: Key to a sustainable comeback?

But some analysts doubt that getting rid of the tax will create many jobs—and say it will only really help big companies like Detroit’s automakers.

The Michigan Municipal League’s Dan Gilmartin says providing the state’s residents—and businesses—with a good quality of life is really the only way to ensure a solid comeback.

“If we continue to disinvest the way that we’ve been doing... it doesn’t matter what our tax rate is,” Gilmartin said. “It could be zero. So the state needs to accept that challenge, and be a true partner to cities.”

While Governor Snyder insists he does want to partner with cities, many of those cities’ leaders see this personal property tax debate as a litmus test for just how serious Michigan is about re-investment.

And everyone’s eager to see just when the state’s rebounding economy will make its communities better places to live.