Dumb on transit again

It goes from bad to worse when it comes to transit in metro Detroit. First the city and state walking away from the Woodward light rail, now the city of Troy refusing to take federal funds for a transit center. What makes Troy worse is that the vote is only partially about not valuing transit, it also is about keep “them” out.

In each case the cancelled projects were strongly supported by the business community. They understand – as apparently our elected officials don’t – that transit is an economic growth asset. This is becoming a pattern that goes far beyond transit. Business leaders are far ahead of state and local officials when it comes to what matters in a knowledge-driven economy. As I have written previously businesses understand that welcoming to all is an economic imperative in a world where talent – which comes in all of human varieties – is the asset that is the most important to economic success. On gays, immigrants and affirmative action, as well as the importance of quality of place public investments like transit, they are far ahead of policy makers.

As readers of these posts know I often ask “what planet are they living on?” for folks who advocate positions that are so clearly out of line with what is going on in the real world. It may be that the more appropriate question is “what century are they living in?”

In an insightful, must-read Free Press column entitled “In Troy, an all-too-familiar fear of the other”, Brian Dickerson makes this case as well as I have read anywhere. Dickerson writes:

To be a hick in 2011, then, is to be in a state of denial — which is why “hicks” is precisely the right word to describe Troy Mayor Janice Daniels and the like-minded elected city leaders who’ve sent Troy reeling backward in time, grasping for a past that is not so much racist or unsophisticated as it is, well, past. … Daniels & Co. invoked a series of spurious arguments to defend their decision, including the claim that they were striking a blow against federal spending. … But their real motive was transparent: the fear that outsiders currently disinclined to visit Troy may do so if enticed by a modern train station and convenient parking, at an incalculable cost to Troy taxpayers and their way of life. To dismiss this sort of thinking as bigotry is almost beside the point; it’s simply bad policy, predicated on a world that no longer exists. There may have been a time when communities could compete effectively for residents and employers by making themselves less accessible to surrounding municipalities, but that time is a distant memory. The era when the absence of public transit was a boon to property values may never have existed at all.

Dickerson quotes a lobbyist for Magna International, a huge multi-national auto supplier who is a big employer in Troy, as saying that he would encourage the company to reduce its footprint in Troy and look elsewhere for expansion opportunity. So much for the claim from policy makers that we need to be more business friendly and jobs are priority 1!

Andrew Basile Jr., an owner of the Young, Basile law firm in Troy, in a letter to the Troy Chamber – a strong supporter of the transit center – forcefully makes the case that these kind of actions are anti-economic growth. Basile wrote:

… I believe her (Mayor Daniels) whole “debt” rationale is disingenuous.  If it were federal money for a hospital or a highway overpass, I cannot imagine her turning it away.  This may be therefore really an attempt to thwart transit for motives that, in my opinion, are closed-minded. … One might be ready to overlook one or two bad decisions by the mayor were they not coming on the heels of her disgraceful handling of the controversy surrounding her Facebook post on gay marriage.  From her post itself through her response to the public outcry, she seems wholly unconcerned with the economic wellbeing of Troy, at least insofar as it may impinge on her freedom to publicly display herself as a classless, tasteless bigot.  It’s bad for business for Troy to have a mayor who harbors (much less publicly voices) anti-gay perspectives.  She might as well have taken out a full page ad in the Detroit News admonishing corporations not to locate in Troy.  That she does not appear to understand this is both telling and troubling.

Michigan policy makers need to learn quick what Michigan employers know: being welcoming to all and making public investments that create places where talent wants to live and work are economic growth imperatives.

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For economic growth: M1

The news that the city and state have walked away from the Woodward light rail (M1) is not a good way to end the year. Big mistake! M1 – and not a bus rapid transit system which is now the preferred alternative – is the most powerful potential long-term game changer for Detroit. For a city that desperately needs a game changer.

What is the difference between bus and rail transit? Buses are an effective way to move people. Rail transit is primarily a powerful catalyst of economic growth. As Megan Owen, Executive Director of Transportation Riders United, is quoted in a terrific overview Free Press article on M1: “Weʼre basically throwing away a $3- billion economic development investment.”

Several years ago at a Urban Land Institute (ULI) Michigan Real Estate forum I heard a presentation on the Portland, Oregon street car system put in place in the 70s. It was described as development oriented transit. The city made the investment first and foremost for rail transit’s ability to stimulate and steer economic development, not to move people. And it paid off! Portland’s boom has been very much rail transit driven.

And cities and regions across the country, except here, learned the Portland lesson. Including Salt Lake City which for more than a decade has and continues to invest in building an extensive light rail system as a lynchpin of their economic growth strategy.  You read that right: red state, small government, low tax Utah investing taxpayers money in a light rail system.

This year at the ULI forum I was on a panel where one of the speakers said that national retailers are increasingly making new investments in central cities along light rail lines. Light rail, not bus lines – rapid or not. They too understand that light rail uniquely spurs and concentrates development. It is a particularly powerful attractor of young professionals that the city, region and state so desperately needs for its future economic growth.

Unfortunately our city and state elected leaders don’t seem to have learned that lesson. We are walking away from this powerful economic development initiative because as the Free Press report the lack of $10 million dollars a year in operating funds. $10 million a year would bring billions in economic growth and we won’t even try to raise the funds. Not smart!

The folks that get it are metro Detroit’s private sector leadership. The hopeful news is that the Kresge Foundation and Detroit’s business leaders are not taking no for an answer. As Crain’s Detroit Business reports, they sent a letter to the Mayor and Governor supporting development of M1 from downtown to the New Center area. They wrote:  “Detroit is at a critical juncture,” the funders wrote in the letter. “The need for a powerful catalyst to spur investment, attract new residents and businesses and help restore the city’s tax base is urgent.”

In another Crain’s article Dan Gilbert put it best: “Detroit has a chance to make a decision. Does it want to be a second-class city or a first-class city? These kinds of decisions, like we are seeing right now, won’t allow us to compete as a first-class city,” he said.

And they have put their money where they mouth is. As Crain’s writes:

Signing the letter were Kresge President and CEO Rip Rapson, Penske Corp. founder and M1 Rail Chairman Roger Penske, Quicken Loans Inc./Rock Financial founder and M1 Vice Chairman Dan Gilbert and M1 CEO Matt Cullen. Compuware Corp. founder Peter Karmanos Jr.; the Ilitch family, which owns the Detroit Tigers, Detroit Red Wings and Little Caesar Enterprises Inc.; Henry Ford Hospital; and Wayne State University joined the other private funders in each having committed $3 million for the display advertising rights to a station along the planned rail’s route.

The lead funder is the Kresge Foundation which has committed $36.7 million to the project.

As we have written often, in a state where many candidates get elected by bashing Detroit, Governor Snyder deserves enormous credit for his courage to campaign across Michigan that for Michigan to succeed Detroit must be successful. He understands better than any Michigan governor since Bill Milliken that the most prosperous states in the nation are those with a high prosperity big metropolitan area anchored by a vibrant central city.

Now is the time to put that understanding into action. We need the Governor along with city and regional elected officials to join with business and philanthropic leaders to make M1 a reality and to put in place what we all so desperately need and want, a powerful spur for economic growth.

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Manhattan

Travelled to Manhattan over the Thanksgiving holiday. Wow! I’m always amazed at its vibrancy and prosperity. And then I come back to Michigan and get reengaged in the public conversation about our economy. A greater disconnect is hard to imagine.

Here the dominant narrative about the economy is that everything that makes Manhattan a powerful engine of economic growth is what has or will ruin the Michigan economy. How we can continue to believe that narrative when it so obviously fails to explain what is occurring in the real world is beyond me. If that narrative were right Manhattan would be Detroit. Characterized by widespread abandonment by both non-poor households and businesses.

Manhattan is probably the highest cost place to do business in America. Not only high state and local taxes, but also high labor costs and, maybe most important, sky high real estate prices. In many ways it is the poster child for big government: big police and fire departments; big park system; public support for the arts; transit, transit, and more transit; one of the few cities with safety net programs over and above the state and federal safety net and on and on and on. Add to that lots of regulation, powerful public employee unions, lots of renters; sky high density; lots of immigrants, gays and folks of different races, religions and ethnicity and you have a recipe for what we are constantly told leads to economic disaster. Wrong!

Instead it is a place where knowledge-based businesses from across the planet are increasingly concentrating. It is one of America’s great centers of innovation and entrepreneurship. A place where the affluent (the 1%) and talent concentrate. It all adds up to one of the most successful economies in the country. So strong that it is the main engine of a metropolitan area of more than 22 million people (more than twice Michigan) in four states. A metropolitan area that is the third most prosperous big metro in the country, with a per capita income of more than $52,000. ($18,000 higher than Michigan’s.)

Turns out in the real world all those so-called liabilities are assets that lead to prosperity. A big city that works, a government that provides quality basic services and amenities, terrific alternatives to driving, density and welcoming to all. Combine those features with an entrepreneurial culture and you have a place where talent – from across the planet – wants to live and work. And where talent concentrates you get growth and prosperity, not decline and falling income and employment. To get back on the path to prosperity Michigan needs far more – not less – of what Manhattan has.

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Snyder on talent

Governor Snyder’s special message on talent is quite remarkable. The fact that there was a special message – reserved for only the state’s top priorities – on talent is noteworthy in and of itself. Believe me talent never before has received this kind of high profile attention by a Michigan governor.

Highlights of the message include a continuation of the Governor’s insistence that Michigan be friendly to immigrants including a call for Congress to take action to make it far easier for foreign born college graduates to stay and work in the U.S. And a recognition that quality of place is an essential ingredient to concentrating talent here. That creating places where talent wants to live matters along with preparing talent.

But what makes the message extraordinary and possibly transformational is that the Governor writes: In the 20th century, the most valuable assets to job creators were financial and material capital. In a changing global economy, that is no longer the case. Today, talent has surpassed other resources as the driver of economic growth. Talk about a complete break with the past!

For decades state and local economic development has been based on a belief that providing incentives to financial and material capital is how you grew the economy. Hardly anyone debated whether there were any other options. In this message Governor Snyder asserts that not only is there another option, but that talent is now the preeminent driver of economic growth. This means that actions that concentrate human capital should be economic development priority #1. Preparing (the subject of most of the message’s proposals), retaining and attracting talent are the actions that matter most to whether Michigan has a strong, prosperous economy in the future.

Evidence that as the Governor writes today talent has surpassed other resources as the driver of economic growth comes from the strong and growing alignment of college attainment and state per capita income. Of the top 15 states in the proportion of adults with a four-year degree or more, 13 are also in the top 15 in per capita income. Michigan’s fundamental problem is that we are now 36th in college attainment. Unless we fix that we are going to be one of the country’s poorest states.

Dome Magazine published a column I wrote comparing the Indiana and Minnesota economies. Indiana is a state that is viewed as offering the most business friendly environment in the Great Lakes and because of that has been held out for decades as a state Michigan should model. In the Governor’s words it has pursued a strategy of being friendly to financial and material capital. Minnesota on the other hand is the Great Lakes state with the highest proportion of adults with a four-year degree or more.

Indiana, in the 2011 state rankings by the well-respected conservative Tax Foundation, is the highest ranked Great Lakes state on both overall state business climate (10th) and corporate tax index (21st). Minnesota is the worst-ranked Great Lakes state by the Tax Foundation — 43rd from the top on its overall state business climate index. And its ranking of 44th on the corporate tax index is only better in the Great Lakes than Michigan’s ranking of 48th. On the other hand, Minnesota is the Great Lakes state with the highest college attainment rate, Indiana the lowest.  So the two states offer a real world test of the Governor’s assertion that today talent trumps financial and material capital.

My Dome article details the economic performance of the two states on both employment and income metrics as well as both current levels and growth. The bottom line: on every metric of economic well being residents of Minnesota are doing far better than residents of Indiana. For most metrics Minnesota is not only the highest ranked in the Great Lakes but a national leader and Indiana is at the bottom in the Great Lakes and not much better nationally.

Governor Snyder is right: talent is the most important driver of economic growth. In an increasingly knowledge-based economy (the Governor’s Michigan 3.0) talent is the most valuable and scarcest asset. Increasingly employers will move to the places that provide them with the largest talent pools. Understanding that talent is the economic growth priority is a major step forward. We need now to act boldly on that understanding with a new agenda that concentrates talent in Michigan. It is what matters most to Michigan’s economic future.

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Indivisible, with liberty and justice for all

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New high school(s) competition

Our Michigan Future Schools (MFS) initiative is taking applications for grants and support services to help launch at least one new high school serving students from the City of Detroit in the fall of 2013. For those interested in applying for a grant you can find the request for proposal here. All applicants must attend a mandatory bidders conference on December 21, 2011 at the Skillman Foundation.

As a reminder, MFS is designed to launch new high schools at scale with an initial goal of eleven new high schools by 2014. MFS expects that all students enrolled in the high schools it supports will succeed in college. It has committed to its funders that at least 85% of each schoolʼs students will graduate from high school, of those graduates at least 85% will enroll in college and of those who enroll at least 85% will earn a college degree. To date seven schools have received MFS grants averaging $800,000 over four years. Four have opened, three more are planned for 2012. You can find more information on the initiative here.

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Worth reading

While I have been using this post to explore the findings in our new report, I have stockpiled lots of articles that I wanted to write about. Rather than wait until I get to them here is a list of recent articles that I think are worth checking out.

• Probably the most important education article I have read in a long time comes from the New York Times Magazine by Paul Tough. It deals with the essential question of what skill set students need to succeed in college. And suggests that character – actually performance, rather than moral, character – may trump academics. Built around the common learnings of an elite private school and a KIPP middle school.

• The Atlantic’s Can the Middle Class be Saved is highly recommended. It provides a good overview of how a changing economy is eliminating or lowering wages of formerly middle class jobs. Core to all of our work at Michigan Future is the belief that globalization and technology are mega forces – far more powerful than public policy – which are fundamentally changing our economy. This article raises all the right questions about winners and losers in that transition.

• A disturbing Yahoo News article deals with the widening wealth gap between the old and young. Now the widest it has ever been. The typical U.S. household headed by a person age 65 or older has a net worth 47 times greater than a household headed by someone under 35, according to an analysis of census data released Monday. While people typically accumulate assets as they age, this wealth gap is now more than double what it was in 2005 and nearly five times the 10-to-1 disparity a quarter-century ago, after adjusting for inflation.

• Another disturbing and thought provoking article comes from Bloomberg Businessweek. Its title and subtitle say it  all: Why Americans Won’t Do Dirty Jobs: In the wake of an immigrant exodus, Alabama has jobs. Trouble is, Americans don’t want them.

• A terrific Ron Dzwonkowski column for the Free Press entitled: Forget taxes and regulations, Michigan must build it so they’ll come. Based on the Michigan Municipal League’s new book The Economics of Place. (I am one of the chapter authors.) Read the article, better yet if you have time, buy the book.

• Last, but certainly not least, another Yahoo News story. This one an interview with Erik Brynjolfsson and Andrew McAfee, the authors of the new book Race Against The Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy. More on the constant change being driven by technology. Specifically the ability of machines to do more and more of the work humans used to.

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How residents of metro Lansing earn their income

We conclude our look at the components of income data from our new annual report with how residents of metro Lansing earn their income. We use the broadest definition of the region which includes four counties: Clinton, Eaton, Ingham and Shiawasee.

Per capita income for metro Lansing in 2009 was $33,273. By major components it was:

• Private sector employment earnings        $16,672
• Government employment earnings          $7,769
• Dividends, Interest, Rent                          $4,796
• Transfer payments                                    $6,952

We also looked at per capita income growth between 1989 and 2009 corrected for inflation. Over that 20 year period real per capita income grew by $5,351. An increase of 19 percent. By component the twenty year growth was:

• Private sector employment earnings        $829
• Government employment earnings          $1,222
• Dividends, Interest, Rent                          $2
• Transfer payments                                    $3,721

As you can see, transfer payments account for a large proportion (69 percent) of metro Lansing’s real personal income growth over the past two decades. The other obvious highlight (really lowlight) is small real growth (a little more than 5 percent) over two decades in private sector employment earnings. The region’s private sector employment earnings are 29 percent below the national average. Both of these trends need to change if metro Lansing is going to be a high prosperity region.

In 2009 73 percent of metro Lansing’s personal income came from employment earnings (50 percent from private employers and 23 percent from government employers.) Transfer payments were 21 percent. And if you combine transfer payments and government employment earnings, you find that 44 percent of the region’s personal income is paid for with government revenue. Twenty years earlier employment earnings were 81 percent of personal income (57 percent from private employers and 24 percent from government employers.) Transfer payments were 12 percent. And personal income paid for with government revenue was 35 percent.

How does metro Lansing compare to the US? Not well! The region’s per capita income is now $6,362 (16 percent) below the national average. Over the past two decades the region’s real per capita income grew $2,446 slower than the nation. About two-thirds the growth the country experienced. By component compared to the nation the 2009 levels and 20 year growth were:

• Private sector employment earnings        -$6,655/-$2,684
• Government employment earnings          $2,536/$302
• Dividends, Interest, Rent                          -$2,347/-$718
• Transfer payments                                    -$32/$616

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How residents of metro Grand Rapids earn their income

We continue our look at the components of income data from our new annual report with how residents of metro Grand Rapids earn their income. We use the broadest definition of the region which includes seven counties: Allegan, Barry, Ionia, Kent, Muskegon, Newaygo and Ottawa.

Per capita income for metro Grand Rapids in 2009 was $31,637. By major components it was:

• Private sector employment earnings        $20,396
• Government employment earnings          $2,877
• Dividends, Interest, Rent                          $4,887
• Transfer payments                                   $6,355

We also looked at per capita income growth between 1989 and 2009 corrected for inflation. Over that 20 year period real per capita income grew by $3,700. An increase of 13 percent. By component the twenty year growth was:

• Private sector employment earnings        $889
• Government employment earnings          $440
• Dividends, Interest, Rent                          -$55
• Transfer payments                                    $2,994

As you can see, transfer payments account for a large proportion (81 percent) of metro Grand Rapids’ real personal income growth over the past two decades. The other obvious highlight (really lowlight) is small real growth (less than 5 percent) over two decades in private sector employment earnings. Both of these trends need to change if metro Grand Rapids is going to be a high prosperity region.

In 2009 73 percent of metro Grand Rapids’ personal income came from employment earnings (64 percent from private employers and nine percent from government employers.) Transfer payments were 20 percent. And if you combine transfer payments and government employment earnings, you find that 29 percent of the region’s personal income is paid for with government revenue. Twenty years earlier employment earnings were 79 percent of personal income (70 percent from private employers and nine percent from government employers.) Transfer payments were 12 percent. And personal income paid for with government revenue was 21 percent.

How does metro Grand Rapids compare to the US? Not well! Particularly when you take into account that big metros on average are doing far better than the nation. The region’s per capita income is now $7,959 (twenty percent) below the national average. Over the past two decades the region’s real per capita income grew $4,097 slower than the nation. Less than half the growth the country experienced. By component compared to the nation the 2009 levels and 20 year growth were:

• Private sector employment earnings        -$2,931/-$2,624
• Government employment earnings          -$2,346/-$482
• Dividends, Interest, Rent                          -$2,256/-$755
• Transfer payments                                    -$629/-$111

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How residents of Metro Detroit earn their income

We continue our look at the components of income data from our new annual report with how metro Detroiters earn their income. We use the broadest definition of the region which includes nine counties: Genesee, Lapeer, Livingston, Macomb, Monroe, Oakland, St.Clair, Washtenaw and Wayne

Per capita income for metro Detroit in 2009 was $37,083. By major components it was:

• Private sector employment earnings        $22,723
• Government employment earnings          $4,103
• Dividends, Interest, Rent                          $5,938
• Transfer payments                                    $7,783

We also looked at per capita income growth between 1989 and 2009 corrected for inflation. Over that 20 year period real per capita income grew by $3,747. An increase of 11 percent. By component the twenty year growth was:

• Private sector employment earnings        -$542
• Government employment earnings          $730
• Dividends, Interest, Rent                          -$104
• Transfer payments                                    $3,727

As you can see, transfer payments account for virtually all of metro Detroit’s real personal income growth over the past two decades. The other obvious highlight (really lowlight) is no real growth over two decades in private sector employment earnings. Both of these trends need to change if metro Detroit is ever again going to be a high prosperity region.

In 2009 72 percent of metro Detroit’s personal income came from employment earnings (61 percent from private employers and 11 percent from government employers.) Transfer payments were 21 percent. And if you combine transfer payments and government employment earnings, you find that 32 percent of the region’s personal income is paid for with government revenue. Twenty years earlier employment earnings were 80 percent of personal income (70 percent from private employers and 10 percent from government employers.) Transfer payments were 12 percent. And personal income paid for with government revenue was 22 percent.

How does metro Detroit compare to the US? Not well! Particularly when you take into account that big metros on average are doing far better than the nation. The region’s per capita income is now $2,552 (6 percent) below the national average. Over the past two decades the region’s real per capita income grew $4,050 slower than the nation. Less than half the growth the country experienced. By component compared to the nation the 2009 levels and 20 year growth were:

• Private sector employment earnings        -$604/-$4,055
• Government employment earnings          -$1,130/-$192
• Dividends, Interest, Rent                          -$1,205/-$824
• Transfer payments                                    $799/$622

One final note: metro Detroit is not a big government region. Wasn’t twenty years ago, isn’t today. In fact one can make a better case that it is a small government region. Government employment earnings for the region are 78 percent of the nation’s.

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