Tag Archives: taxes

Why Michigan’s roads suck

According to a Free Press/WXYZ-TV poll last week, 58% of Michiganders would rather continue whining about their roads than fixing them.  I don’t find this terribly surprising.

It is conventional wisdom in Michigan that the condition of our roads is among the country’s worst.   I’ve read a number of different theories for why this may be.  One is that we have unusually high weight limits for trucks.  Another is the freeze-thaw cycle that results from our harsh winters.  Another is American road construction standards, which generate cheaper bills but demand more frequent repairs.  Presumably each of these factors contributes to our bumpy rides, to some extent.

What I almost never hear cited as a factor is how incredibly overbuilt Michigan is.  (Credit due to Urbanophile, who has written at length about this phenomenon elsewhere in the country, and Charles Marohn, whose theory of the “growth Ponzi scheme” I’ve praised.)  And by Michigan I primarily mean metro Detroit,  with Genesee and Saginaw counties also shouldering significant amounts of blame.  Is it any coincidence that these areas also have some of the most segregated populations, auto-centric layouts, depressed home values, and dysfunctional inner cities in the entire country? The Detroit, Flint and Saginaw metropolitan areas are the poster children for autocentric sprawl, and have reaped their just desserts for it. Among the consequences of the sprawl is that, of course, we can’t afford to pay to maintain the countless miles of asphalt laid to service it.  And MDOT, unbelievably, responds to this situation by proposing expansion projects like adding lanes to I-94 in the city of Detroit.  You can’t blame respondents to the Free Press poll for thinking that the last thing we need to do is throw more money at the imbeciles running our state’s transportation policy.

In the spirit of problem-solving, here’s my proposal to help solve two problems at once:  our threadbare roads and our decimated industrial inner cities.   Restrict all state dollars allocated toward road construction and maintenance to the oldest paved segments.  Earmark the majority of road dollars toward the core streets that serviced central cities and inner suburbs before, say, World War II, giving an edge to fiscally struggling older communities across the state like Detroit, Grand Rapids, Ypsilanti, Pontiac, and Saginaw, as well as dense and walkable older communities like Plymouth, Rochester or Brighton.

This will never happen, of course, because Michiganders continue to overwhelmingly choose exurban isolation over city life, and dependency on car travel to the exclusion of any other form of transit.  They will continue to do so, even as the roads they travel disintegrate to rubble and eventually, one by one, revert to gravel.  They will continue to lament the potholes and the flat tires because they’d rather complain than pay a nickel more in gas taxes.   Their leaders will continue to subsidize greenfield development over infill, convinced that for their particular community at least the bill will never come due.

It’s the Michigan way.

PS 2-8-12:  I also want to make it clear that I think the proposal, introduced by State Sen. Howard Walker, to scrap the state’s gas tax in favor of paying for roads with a sales tax increase is insane.  The gas tax should be increased, not scrapped, and we should not be shifting the burden of paying for roads from heavy users (people who drive a lot) to light users (people who bike, walk, carpool or ride the bus).   This bill idea deserves to die.

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Results from WDET’s “Detroit Move” Survey

WDET conducted a survey last month centered around the question, ‘What would it take you to move to the city of Detroit?’ The station’s analysis of the results of that survey have been out for several weeks now, so I figured it was well past time for me to post on them.

The response far exceeded the expectations of WDET’s staff:

We set a goal of 1,000 responses in seven days. We met that goal in 48 hours, over the course of a weekend. A total of 2,200 respondents were collected at the end of the week, making this the largest known data set of it’s kind.

It’s so rare to see quantitative data on people’s attitudes about moving to Detroit, which up til now have mostly been captured in a jumble of conflicting anecdote.  As the introduction to the summary notes,

The latest iteration of the persistent “Detroit authenticity/Detroit love”  battle shows little evidence of the participants actually engaging with the arguments/ ideas of  the other side. Instead, there is a lot of interaction with existing beliefs, misremembered history,  convenient reformulations of the past and a willful disregard for “live and let live” acceptance.

WDET wisely engaged the services of a social scientist, a PhD candidate at Brandeis named  Sara Elliott, to help design the survey.  The survey questions they developed were concrete and specific, and admirably, Elliott and her collaborators at the station steered clear of extrapolating too much from the results.

Still, when ‘84% of city residents said they would be unlikely to move to the suburbs in the future,’ I suggest we’re a bit closer to guessing why, in spite of the conventional wisdom that Detroit is a dying city, over 700,000 residents remain.  Those who survived the exodus of the 2000s are a resilient bunch and have compelling reasons to stay.

Another interesting data point pertains to how Tree Towners and other Washtenaw residents view the city:

Paradoxically, a smaller percentage of survey takers were from Washtenaw County and this group comes to Detroit less frequently than those living in Wayne or Macomb counties, yet this group was the most likely to say they would be likely or very likely to move to the city in the future (50%). The next largest group of respondents who said they would be likely or very likely to move to the city in the future lived in a county other than Macomb, Oakland, Washtenaw and Wayne (outside Metro Detroit) (42%). Smaller percentages of survey takers from Wayne (35%) or Macomb (34%) counties and Oakland County (31%) said they would be likely or very likely to move to Detroit. The largest group of survey takers was from Oakland County, but they were least likely to say they would move to the city in the future.

Responses to the statement ‘I would support a friend or family member’s decision to move to the city of Detroit’ were more positive than I’d have expected:

There is data to back up an observation that I’ve seen made frequently (and have made myself), which is that younger people view the city in a more positive light than older generations:

Over half (55%) of those under 25 years of age said they would be “likely or very likely” to move to the city in the future, compared to one third (36%) of those 26-45 and one-quarter (24%) of those 45 and above. As age increases, likelihood of moving to the city decreases significantly.

And there are some clues for whoever ends up in charge of the city as to what priorities they should focus on:

A few factors stood out as mattering to more of the respondents who said they were likely or very likely to move to the city in the future…

  • Better city services (57% of likely movers compared to 51% of unlikely movers)
  • Better public transportation (60% of likely movers compared to 36% of unlikely movers; this factor rises past lower crime to the #1 issue among the very likely subset respondents) 
  • Increase walkability (53% of likely movers compared to 41% of unlikely movers)

Note the walkability figure;  in spite of pockets like Greektown, Midtown, Corktown and Mexicantown (basically any neighborhood ending in ‘-town’), Detroit lags many of its suburbs in that respect.  Also, the most likely recruits appear to be swayed more by service provision (including both schools and transit) than by “lower taxes” or “better jobs” which are way down the list.

Surprisingly, I haven’t seen reaction to the survey from Detroit’s other media outlets such as the Free Press or the Metro Times.  Perhaps they were embarassed they didn’t think of it first.

For more, check out the summary of the survey results (PDF).

Barlow v. Miller

So there’s been, as Supergay Detroit puts it, “a little bit of a shitstorm” over Toby Barlow’s piece for the Huffington Post, ‘”Detroit,” Meet Detroit.’

I don’t actually disagree with Barlow — if I were to take a job in the tri-county region, I would want to live & work in the city of Detroit.  I always encourage acquaintances to consider living in the city and applaud when they do.  I’m quick to correct outsiders when they make blanket generalizations about living in the city.  So I agree with him when he writes:

(Y)ou can’t have a region without a center… It is not just some idealistic dream, it’s an economic necessity… (I)t’s the straightest path to getting your property values back… (I)f you’re in Southeast Michigan, you’re from Detroit. It’s your brand. So deal with it. When companies are thinking of relocating to the region, bringing jobs here, the perception of Motown is the biggest thing that matters. And when companies start thinking of relocating away from the region, the health and reputation of Detroit has a certain undeniable weight. Those companies aren’t going to listen when you say “Come on! We’re different! We’re Troy!” They may have fallen for that in the past but now they know the truth. Detroit is right here, front and center, our inescapable fact.

But then Barlow kind of shot himself in the foot with this: ‘Seriously, nothing good ever came out of suburbia.’  God only knows what kind of damage control his employer, (suburban-based) Ford, has been doing on that statement alone.  (Although they appear to keep him on a pretty loose leash.)  A sloppy, ill-considered attempt at tongue-in-cheek?  With that sentence, a perfectly good sales pitch fatally devolved into a city-v.-suburbs debate, and naturally, suburbanites with an axe to grind pounced.

Barlow is a fairly recent transplant to Michigan but you’d think even he would have recognized that “Detroit v. the suburbs” is a tired, fifty-year-old argument that no one on either side has ever won.  It’s an argument that, for that matter, nobody would even be having if Detroit were not perpetually in crisis.  (I’m pretty sure there is not a similar feud between, say, New York City and Westchester County.)  And it’s not an argument Detroit proper can ever win.

Toby Barlow’s heart was in the right place with this essay, and 90% of it is right on target.  He would have done well to have left the 10% that everybody is all riled up about on the cutting room floor.

Like me, SupergayDetroit fundamentally agreed with Barlow.  And I nodded in agreement with some of what he had to say, too:

(T)he fact is, if you don’t live in the city, if you don’t put up with the bullshit along with the glory, then you ARE a suburbanite.  The biggest lesson I learned when I moved to Detroit was that living in Detroit was a completely different experience than just hanging out in Detroit.  And you can’t fake it and you can’t learn it from the outside and it is almost impossible to create authentic, meaningful, non-douchebaggy change unless you live here.

Supergay starts to lose me, though, with a personal anecdote:

I was having a drink with an old acquaintance a while back. someone who knew me from my store back in the Ann Arbor days and who now lives in Royal Oak.  He was doing what I call the Suburban Shuffle … getting in on the street cred of Detroit while trying to rationalize staying in the ‘burbs.  The old, “I’d move to Detroit except …” And I said listen, nobody who lives in Detroit has any superpowers.  But they did make that leap, and they take the bad with the good.  So don’t expect a pat on the back because you tool down I-75 for the fun stuff and then tsk-tsk from the comfort of your fake loft when the latest calamity strikes.

I can’t recall the last time I had a conversation like this.  The closest I’ve come is discussions with parents with young kids, or expectant parents.  I’m thinking specifically of my cousin Kate, who was raising 3 kids in Farmington Hills, and of a former colleague who had moved from Southwest Detroit to Plymouth after her marriage and was planning to have children.  Both of them were perfectly upfront about the fact that they would not consider parenting in the city with young kids, which I feel is a pretty solid excuse:  living in Detroit is not always a cakewalk even without the demands of parenting.

Where I HAVE witnessed it, it is companies using the Detroit ‘brand’ as a marketing device, the prime example being Chrysler’s marketing campaign.  THAT is the douchebaggery Supergay is talking about:
There’s a lot of cool stuff going on in Detroit right now, and it hasn’t always been this way.  And suddenly it’s cool to say you’re a Detroiter.  I do believe there are Detroiters “in spirit,” but at the end of the day you don’t get to use Detroit to validate yourself without fully committing.

So what IS the status of the suburbanite who loves Detroit but won’t or can’t move to the city?  Or who just loves where they live (because frankly our suburbs are pretty great if you’re into that kind of thing)? Well, I think you are “A Suburbanite Who Loves Detroit.”  Or a “Detroiter in Spirit.” It’s not an aspersion, it’s just a fact. I know a TON of people who fit that description. Please, do stuff in the city, work to make it better if that’s what you believe in, say good things about it.  And be honest and unapologetic about your level of involvement.  I think you’ll find everyone appreciates that.

At first I wondered if Supergay is maybe building a wee bit of an imaginary problem with this argument, because again, I do not personally know a lot of suburban residents running around claiming to be hard-core Detroiters.   He is much more active in city boosterism than am I, so again, he may meet lots of these kinds of people.  For everybody else, it seems like hair-splitting.

But then it occurred to me:  Maybe I was one of those people SGD was talking about, racking up visitor hits to this blog in part due to the way I throw around my Detroit references.  Am I a douchebag because I no longer work, live or pay taxes in Detroit — only did it for a year or so, in fact — but still blog about it?

Hmm.

And I thought:  You know what?  I don’t give a shit.

Let me explain why:  I moved to Ann Arbor for school, because it made no sense to me to commute forty miles each way every weekday.  I stayed in Ann Arbor after I finished school because it was University of Michigan, not University of Detroit Mercy, where I was offered a job, and once again, a daily commute from and back to Detroit made no sense.  In theory, I could eventually take a similar job in my field at, say, Henry Ford Hospital or Wayne State, but I’d do it because it made sense to me professionally, not because of a deep and abiding desire to “save Detroit.”

Ann Arbor residents like myself have been studiously ignoring the rest of the state, including the city of Detroit, for most of the city’s history.  I don’t see how that has served Detroit very well.  I’m paying attention and blogging about it because my partner lives there, I still spend a lot of time there each week (not to mention a small fortune on gym fees, parking, gas, food, drink & recreation), & I enjoy it.  My partner & I relish the increasingly frequent occasions when, while we’re walking someplace in the city, motorists from the suburbs (often black) pull over to ask us for directions.  But when people ask me where I live, I tell them Ann Arbor because, well, that’s the truth.  (I am still, arguably, a douchebag, but there are lots of other reasons that might be the case.)

The idea that suburbanites might somehow be benefiting from unearned street cred, associated with Detroit, may irk Detroit residents.  Supergay may have a point when it comes to rich celebrities (Kid Rock, Eminem) and companies (Chrysler) where image and branding is everything.  But I think Detroiters have enough problems already without getting all territorial and (as Rabbi Miller would put it) “Coleman Young” about what’s Detroit & what isn’t & is somebody pretending-to-be-cool-when-they’re-really-just-a-poseur.

Next post, I’ll jump back to Supergay’s & Toby Barlow’s side, and take a crack at Rabbi Jason Miller’s equally problematic response.

4 reasons to vote Bob Ficano out of office

Wayne County Executive Bob Ficano has got a lot of unwelcome publicity in the past week due to the enormous hole he dug for himself with the Turkia Mullin scandal.  (If you’re not local, or otherwise need to get caught up to speed on how Mrs. Mullin snagged herself a nice windfall courtesy of Wayne County taxpayers, let me steer you to the Detroit Free Press’ coverage & Jack Lessenberry’s op-ed on the scandal.)

Having read Oakland County Executive L. Brooks Patterson the riot act on this blog on more than one occasion, I figure it only fair to call out Mr. Ficano.  And this isn’t the only reason why Wayne County voters ought to replace him.  Let me recount some others:

1. First of all, it appears the Mullin case is only one of a number of other questionable cases involving separation payments to former Wayne County employees under Mr. Ficano.  For further detail, check out Sandra Svoboda’s story in this week’s Metro Times.

2.  These generous payments to Ficano appointees have taken place at the same time that Mr. Ficano has been laying off and instituting furlough days for rank and file county employees.  I’m not terribly sympathetic to public sector unions, but they have every right to be outraged that Ficano’s appointees are getting lavish payouts when they are being asked to sacrifice.

3.  The Aerotropolis.  Mr. Ficano ‘s been hawking the I-94-centered Aerotropolis for years.   From what I’ve read of the aerotropolis, a concept aggressively marketed by its originators John Kasarda & Greg Lindsay, it seems like a half-baked idea with little evidence that it generates the type of metropolitan economic growth its supporters claim it can.  (See the New York Times review of Kasarda & Lindsay’s book for a more detailed and nuanced discussion on this topic.)

Mr. Ficano’s embrace of the Aerotropolis is part of a bigger problem:

4.  A misguided sense of economic policy, which he shares with former Governor Granholm.  One thing I do appreciate about L. Brooks is his refreshing bluntness.  His initial reaction to state tax incentives for the Aerotropolis was to call them “another example of the never-ending torrent of legislative bullshit out of Wayne County.”  L. Brooks ended up coming around to Ficano’s side on the issue, but I think he was onto something with that characterization.   I think giving tax breaks to businesses to locate in the area around the airport, just because Mr. Ficano got sold on the Aerotropolis idea, is a lousy idea that only contributes to a race to the fiscal bottom between state and local governments.

It’s not just that Ficano has embraced special tax cuts on this particular pet project:  it’s that they seem to be his economic development tool of choice.  A 2009 quote says it all:

“If you’re going to consolidate anywhere in the world, you can now come here, because you are going to get tremendous tax breaks,” Ficano said at the time.

This is not a visionary long-term economic development policy.   Just because it is (sadly) popular among state and local officials across the country does not mean it is smart, appropriate, or good for metro Detroit.  Unlike Governor Snyder, who has waged war on tax incentives, Mr. Ficano has not yet recognized this.

Metro Detroit more than ever needs the best leadership it can get.  Sadly, between Mayor Bing and Mr. Ficano, it’s still not getting it.  Hopefully this will be the straw that breaks the voter’s back and leads to shakeups in the next elections.

The homeownership racket

The Detroit area has the dubious distinction of having lost more home value than any other large metropolitan area in the country.  Metro Detroiters are acutely aware of the consequences:

In metro Detroit home prices… are roughly 38% below their 2000 levels.

Other cities that have home prices below their 2000 levels when the index was set at 100 are Cleveland, which has an index of 98.88, and Las Vegas, which has a 95.6 level. Metro Detroit is at 62.

While other metros are slowly beginning to recover, we are not: “Home prices in metro Detroit were down 2.8% from April, according to the S&P/Case-Shiller home price index. The only other city to see a drop in prices over April levels was Tampa with a 0.6% decline.” And there’s no end in sight:

Detroit home prices posted sharp declines during the first 6 months of 2011, according to a new report.  And the decline is expected to continue during the next 6 months.  Clear Capital reports Detroit’s home sale prices were down 19.8% during the first half of the year compared to the first six months of 2010… Alex Villacorta with Clear Capital… says Detroit’s home prices are expected to dip another 4% between now and end of December.

L. Brooks Patterson loves to crow about how sprawl has supposedly helped Oakland County, but you won’t hear him admitting how overbuilding helped to destroy the wealth of OC homeowners after the housing bubble popped.

It is no coincidence that Detroit’s rate of homeownership was the highest of the nation’s largest metros in the mid-20th century.  Detroit’s culture of homeownership is tied hand and foot to its high levels of segregation.  It has been amply documented how realtors exacerbated white flight from Detroit neighborhoods beginning in the 1950s;  they deliberately stoked fear among white homeowners with rumours that blacks were moving in and would bring down home prices.  They profited from the resulting turnover as entire neighborhoods flipped within the course of a decade.  Other aging industrial metropoli with large black populations, like Chicago and New York City, were protected from such rapid turnover partly by their lower rates of homeownership; renters simply did not have as much at stake financially in their neighborhood, and were less overcome by panic.

Federal housing policy was the catalyzing agent that allowed Detroit’s metropolitan area to sprawl uncontrollably after World War II; it was the Kevorkian that enabled the region’s economic suicide.  And federal housing policy, under both Democrats and Republicans, continues to wreak havoc on Detroit.

But what role exactly does the government play in homeownership?  “The United States spends more than $100 billion annually to subsidize homeowners,” explain NYU business professor Viral V. Acharya and a number of his colleagues in a New York Times op-ed. These expenditures, Acharya et al continue, are a significant driver of the federal deficit: “according to the Congressional Joint Committee on Taxation, these tax breaks add up to $700 billion in lost government revenue over the five-year period through 2014.”  Joshua Green, formerly of the Atlantic, elaborates:

Even before the 2008 financial crisis, the government assumed the credit risk on most loans, which allowed banks to offer better rates, but ultimately left taxpayers footing the bill when the housing market collapsed: $138 billion and counting.

During the crisis, the government became even more involved in the mortgage market by rescuing Fannie Mae and Freddie Mac and agreeing to backstop larger loans… Today, the government backs 95 percent of new loans, leaving taxpayers more exposed than ever.

Many Americans have come to regard cheap mortgages as an entitlement.

And yet it’s not clear this fire hose of money has done much to increase the total level of American homeownership, Acharya et al suggest:

According to data collected by Alex J. Pollock of the American Enterprise Institute, a comparison of homeownership among economically advanced countries shows that the United States is in the middle of the pack, which suggests that subsidizing housing with tax breaks is neither a necessary nor a sufficient condition for a flourishing housing market. Rather, these subsidies enabled people to borrow more than they could afford so they could buy houses bigger than they needed…

Felix Salmon agrees that “there’s not even any real evidence that the deduction actually increases homeownership, rather than just artificially making houses more expensive to buy.”

Yet why is the deduction so popular?  One big problem is that a lot of Americans think they benefit from the tax treatment of mortgage interest more than they do, a belief perpetuated by misguided liberals who claim it helps low-income people attain the American dream. But  according to Adam S. Posen of  the Peterson Institute for International Economics, “This part of the tax code incentivizes speculation and borrowing, rather than investment and saving. It is very regressive.” Acharya et al write,

Renters get no breaks; homeowners get tons of them… homeownership policies and mortgage subsidies in the United States benefit the rich a lot more than the poor. For example, the economists James Poterba and Todd Sinai recently estimated that the benefits from the mortgage interest deduction for the average homeowning household that earns between $40,000 and $75,000 were about 10 times smaller than the benefits that accrue to the average household earning more than $250,000. These policies increase income inequality instead of reducing it.

Felix does a bit more of the math:

Households earning more than $200,000 a year account for less than 10% of the returns, but get 30% of all the benefits. And households earning more than $100,000 a year get 69% of all the benefit. The mortgage-interest deduction might be a middle-class tax break, but realistically it’s an upper-middle-class tax break…

He concludes, “Homeownership, especially during times of high unemployment, does more harm than good.”

If we capped federal loan limits for guaranteeing mortgages as well as the amount of interest that could be deducted, most homeowners would not be affected, only those that spend most lavishly on their homes.  As usual, the homebuilders  lobby for distortionary policy that encourages sprawl.

The banks do their bit to make a bad situation worse:

Lenders historically have treated residents of cities and rural areas as riskier than those who live in the suburbs… Poverty rates are higher in urban and rural areas. Potential borrowers tend to have lower credit scores and less money saved for down payments. In other words, lenders may charge higher rates on average because borrowers in these areas disproportionately pose greater risks.

Professor (Brent) Ambrose (of Penn State) said that determining the value of properties was also a challenge. Mortgage loans are secured by the value of the borrower’s home. The methods that lenders use to judge the value of a home, however, are best suited to the suburbs, where clusters of broadly similar houses allow easy comparisons… (I)n urban areas there can be too much noise in the data – large numbers of different kinds of homes in close proximity. The result is that lenders are less confident about the quality of their collateral…

Contrast our experience with that of Texas.  Slate’s Annie Lowrey cites one ingredient of the recipe for Texas’ economic resilience amidst the rest of the country’s recent contraction:

Texas kept its housing-finance regulations tight. As Alyssa Katz noted last year in The Big Money, Texas has had a longtime commitment to ensuring that homeowners make significant down payments and do not use their houses like piggy banks. The rules bar Texans from taking out home-equity lines of credit worth more than 80 percent of their mortgage. They also ban “cash-out refinancings,” which add to homeowners’ debt.

As a result, Texas never had a housing bubble.

Jonathan Chait echoes Lowrey’s account:

The best explanations for Texas’s success, other than its proximity to Mexico and resulting high levels of immigration, is (sic) genuinely good housing policies. Texas had tight lending requirements that prevented the inflation of a housing bubble, and it maintains loose zoning rules that allow for lots of cheap housing.

Adam Posen suggests other reforms:

Create a national tax leaning against land price swings: Local governments collect taxes already on all real estate transactions. The rates should increase when prices rise faster than population and income growth in an area (and decrease when prices rise slower). The revenue from the additional variable taxes should be transferred from booming markets to depressed communities. This would counteract large swings in housing prices and in local government spending…

Set a minimum mortgage loan-to-value ratio and have it vary over the business cycle: A simple rule that all mortgage lenders must require a minimum 20 percent down payment would restrict both speculation and exploitation of consumers. This ratio should automatically increase in boom times, but never go lower.

There’s arguably a silver lining to this catastrophe.  Kurt Metzger points out that, if nothing else, we now have some of the most affordable real estate in the nation.  What’s terrible for Metro Detroit’s homeowners is potentially enticing for those looking to buy a home here.

Full disclosure:  As I’ve previously noted on this blog, I own my home.

May 2011 millage results

Those tax-and-spend liberals seem to have gained the upper hand in Tuesday’s crop of millages across the region.  Nothing like a little bit (OK, a lot) of fiscal austerity from the state government to remind voters why they pay taxes.

The margins were pretty impressive locally.  Pittsfield Township approved a public safety millage, with 72% of the votes in favour.   A special education millage for the Washtenaw Intermediate School District — the only item on the ballot in my precinct — did even better, 77% in favour.

While I don’t much write about west Michigan — Grand Rapids isn’t that much closer to me than Chicago, Columbus, or Cleveland — I took a keen interest in the bus millage that was on the ballot there, especially since it would finance what is, to my knowledge, the first bus rapid transit in Michigan.  It ended up barely squeaking through.  According to MLive,

The millage passed in Grand Rapids and East Grand Rapids. The majority of voters in the surrounding cities who cast ballots were against it…

The transit millage will pay for extending service later into the evening on most routes, expanding some routes, decreasing wait times between buses, and operating the Silver Line high-speed bus line on Division Avenue.

The improvements will be made gradually over the next five years with the full millage levy eventually raising $15.6 million a year. One-third of the millage increase will go toward operating the Silver Line route…

I think it will be interesting to see the effects of BRT in its service area.  While less glamorous than rail, it strikes me as a particularly appropriate and cost-effective option for certain parts of Southeast Michigan, which is such a dispersed and multi-nodal region, and one which deserves more consideration from planners, policymakers and transit advocates than it has received.

Michigan’s film subsidies: Why I’m glad to see them gone

‘In less than a decade, the absurd notion of welfare for movie producers has evolved… to an unshakable American tradition…’ —Michael Kinsley, ‘Lights, camera, cut on Hollywood subsidies

As I’ve written before, there’s plenty to dispute in Governor Snyder’s FY 2012 budget.  But I’m tired of all the whining about at least one of his cuts:  the elimination of Michigan’s film subsidies.

What do I have against these particular “incentives,” as their supporters often euphemistically term them?  Let me start with the Craig Fahle Show on February 25, when Amy Miller interviewed James Hohman of the Mackinac Center.  Hohman explained that state subsidies are “not expanding the market for film, we’re just transferring wealth from one place to another instead of generating it,” that we’re taking taxpayer money and bribing an industry to move their work from one state to another.  As Amy noted, the industry has, as a consequence, become highly transient.  Jim Russell posted last month on BurghDiaspora about how they think they’re going to be the next Hollywood over in Pennsylvania, too.

But Michigan is special, right? If we just plant the seed and give it a couple of years, the industry will put down roots permanently, won’t it?  Michael Kinsley, in an early March 2011 article for Politico, explains that subsidizing films

essentially is a “beggar thy neighbor” strategy. Some of the movies that have been bribed to locate in New Mexico would have been made in New Mexico anyway… (M)obility giveth and mobility taketh away. Pit the states against one another, and the subsidies will inevitably become more generous and less effective at the same time…

As yet another observer, former Merrill Lynch entertainment industry analyst Harold Vogel, quoted by the Free Press at around the same time, puts it:

“It’s a false promise,” Vogel said. “The industry is notably mercenary. Any time it gets a better deal, they’ll be out of Michigan in the blink of an eye.”

And the studies that supporters have cited turn out to be garbage.  Kinsley again:

In the definitive document on this issue, a paper published in December by the Center for Budget and Policy Priorities, senior fellow Robert Tannenwald notes what he tactfully calls “flaws” in various studies the states have commissioned to justify the subsidy. Even after our recent experience with gullible or mendacious accountants in financial scandals such as Enron… it’s actually shocking that reputable firms like Ernst & Young would pull some of these stunts — such as counting the allowances film crews are paid for expenses as a benefit to the state and then counting the same money again when it is spent…

The really sad part is that our states aren’t just in a bidding war over film subsidies.  Midwestern policy guru Richard Longworth has written frequently about how the states themselves are an economic relic that now undercut the competitiveness of the Midwest’s metro regions.   Last week, he argued again for why tax credits for individual businesses are stupid policy, focusing in particular on the example of the Kansas City area, so eloquently and in such detail that I hope you will forgive my quoting it so extensively:

It’s precisely these states’ inability to compete globally that causes them to declare war on the folks next door.

In a global economy, Kansas and Missouri aren’t competing with each other, any more than Illinois, Indiana and Wisconsin are competing with each other. The real competition is 10,000 miles away and all Midwesterners know that we’re losing it. The region — not just the individual cities and states but the entire region — is losing companies, manufacturing, jobs, people, congressional seats and college grads, which means they’re losing the resources needed to compete in a global economy.

Clearly, what the Midwestern states are doing isn’t working. You’d think they’d do what the Europeans, Indians, Chinese and other competitors are doing, which is to form regional alliances to leverage all their strengths, to maximize their economies of scale, to merge their assets in to a single world-beating economy. On a global scale, Midwestern states are tiny: there are more than 30 Chinese cities with more people than there are in all of Kansas. But as a region, the Midwest has more than 60 million people which, even on a global scale, counts for something…

By mandate, they are geography-bound, forced to limit all thinking and action within their state lines. Any business they can steal from next door looks good to their voters, whether it makes sense or not…

One reason this doesn’t work is that poaching businesses involves giving tax breaks to the poachee. Right now, states aren’t spending on the future because they’re broke, and one reason they’re broke is that they’re giving away badly-needed tax money. The letter from the Kansas City businessmen made this point clearly:

“… The states are being pitted against each other and the only real winner is the business who is ‘incentive shopping’ to reduce costs. The losers are the taxpayers who must provide services to those who are not paying for them.”

Neither does this poaching usually create new jobs. Most of these cross-border raids, in Kansas-Missouri and in other states, involve companies just moving a few miles away across the state line — usually so close that their workforce changes not at all. People just commute in different directions. The overall impact on job totals, incomes and economic gain in the region itself is absolutely nil…

The state governments and governors, like Brownback, claim that these tax lures are necessary to draw in companies not from next door but from far-away states. If so, they aren’t working. A University of Illinois study showed that there are some 300 significant corporate relocations in the United States every year, and about 15,000 different economic development organizations — state, county and local — competing for them. In other words, the odds against success are fifty-to-one…

… State economic development officials tell me that the company, such as Honda or BMW, simply announces that it intends to set up a new assembly plant somewhere in the Midwest. Then the company just sits back and watches the states throw money at them, trying to outbid each other with tax holidays, free land, training subsidies and other lavish gifts.

All the states know this goes on. All know they could stop it in an instant by banding together and refusing to play the game…

Mark Drabenstott, in… Past Silos and Smokestacks, wrote that these recruiting incentives and other bribes account for no less than 80 percent of economic development budgets in the twelve Midwestern states. That leaves virtually no money left over for approaches that might really work.

Every economic development professional knows that this adds nothing to the Midwest’s long-term growth or its ability to compete globally with China and other rising nations. The only true solution is to create truly  new companies and industries by building them from the ground up  — by investing in local education, encouraging local entrepreneurs, setting up incubators, growing business services, increasing venture capital.

This is called economic gardening, and it works. It means working regionally. It means spending money, not giving it away in tax breaks. It means planting seeds now, knowing they won’t sprout until some other governor is in office.

Right now, Midwestern governors are competing not with China but with each other to see how much they can slash spending in the next few months while stealing jobs from the next state… And it’s useless.

Again, Longworth’s entire post is worth reading in full when you get the chance (and I encourage you to subscribe to his blog as well).

The good news is, like Michigan, the madness may be subsiding in other states as well.  According to the Detroit News:

In the last couple of years, New Jersey, Kentucky, Connecticut, Iowa, New Mexico and Kansas have all cut back film programs. Georgia, where producers of “Detroit 1-8-7” originally planned to film, is considering ending its 20 percent rebate altogether. New Mexico lawmakers also are considering spreading out payments to more costly film productions over multiple years.

The bar for sanity has been set so low  in American public policy, I’ll take a little comfort wherever I can.  I like movies and want to see Michigan’s creative scene grow as much as anybody, but this year’s budget is a viciously zero-sum game.  I would much rather have my tax dollars plugging the massive holes in the education budget or local revenue-sharing, to cite two examples, than to some Hollywood producers who are shopping around for a handout.  Wouldn’t you?