Policy Conference Attendees Challenged To Face State’s Population Decline
The 2023 Mackinac Policy Conference, hosted by the Detroit Regional Chamber, took place less than a month after the Citizens Research Council (CRC) of Michigan and the Ann Arbor-based Altarum Institute started publishing a research study on how, for the last 50 years, Michigan has lost seats in the U.S. House of Representatives every decade. The study also found that the number of Americans relocating to Michigan could drop by 83,000 from 2024 through 2050.
"It’s been a long, slow process. It’s not something that happened overnight. It happened over a period of decades, and I think one of the most alarming things is the way (that) it’s not just the population that isn’t growing," Turner remarked, during the conference’s kickoff. "We’re aging. We’re not replacing the young people and the population is getting older and older."
Turner said in another decade or so, projections suggest there are going to be 2.5 working-age people per every retirement-age individual. She said the population of those 65 years-old and over is growing by about 30% while the presence of children and young adults in the state is anticipated to decline throughout the next 30 years.
"Those trends are alarming for our workforce, for caregivers and just the future…" she said. "I think the audience for this paper was always intended to be policymakers, but also the business community and the philanthropic community and nonprofits."
However, when it comes to identifying what policy area Michigan is lacking the most in, CRC President Eric Lupher said it’s "a tough thing to put your arm around." Lupher described a lack in proficiency in Michigan’s K-12 education system as being an Achilles’ heel, as well as the price-tag of higher education and the obstacle of maintaining a healthy workforce.
He moreover suggested a need for Gov. Gretchen WHITMER and legislators to simultaneously invest in both the well-paying STEM careers of the future and the job opportunities that high school graduates and individuals with associate degrees can dive immediately into, such as manufacturing opportunities.
Asked what the biggest reason for the population stagnation might be, Lupher said:
"It’s hard to put any title of ‘biggest’ on any of this…I found that the further we dug into this, the more you found the interconnectedness of these issues. It’s not like one is out there and everything trickles down from that. There are a bunch of issues and they’re all related, and there’s no silver bullet."
Another attendee at this year’s Mackinac Policy Conference was Tyler Theile, the vice president and public policy director of the Anderson Economic Group (AEG), a boutique economic consultancy in East Lansing.
Theile said although the AEG isn’t necessarily advocating for a specific set of policies, Michigan does need to be focused on improving K-12 education, housing availability and affordability and road infrastructure funding.
Specifically, she argues that road infrastructure funding should be considered a "crisis right now."
"We’re clearly billions of dollars behind. And we are transitioning to electric vehicles that do not consume fuel or diesel, and so their owners are not paying sales and excise taxes," Theile said. "For the first three years of real transition in Michigan, we created an additional $50 million deficit from electric vehicle transition, and we’re going to be upwards of $90 million in annual deficit under the current policies."
She also said it’s time to get on board with "Megasite development" and to stop politicizing the incentive-based attraction of big new employers to Michigan.
"The dynamic is what it is – to compete, we’re gonna have to offer businesses that we want to come to Michigan, especially the super large employers, something to incentivize them," she said. "If that ends up being tax incentives, we need to remember that they’re not just going to be completely ‘tax free.’"
Income taxes being paid for by employees and the sales tax paid for "on every single penny" a corporation spends in Michigan will contribute to revenues, Theile explained.
Whitmer is also expected to discuss Michigan’s population during her keynote address to the conference on Thursday.
Michigan is 190,000 Housing Units Short
MSHDA Director Amy Hovey told a packed room at the Grand Hotel on Mackinac Island that the state is 190,000 housing units short, the housing size has shrunk from four people to two, there has been an uptick in the purchase of second homes, short-term rental purchases and more than 50% of the state housing stock is 50 years or older.
“Typically, affordable housing issues get a negative connotation that it is for people who don’t work or people not working enough. No, this is hitting everyone in our community,” Hovey said.
She said the cost of buying a home has gone up about 84% over the past decade, but over the same period, the cost of income has only risen 25%.
When it comes to building a house, she said the average cost is $375,000 and only one out of four Michiganders can afford it.
Jared Fleisher, Rocket Companies vice president of government affairs and economic development, said the answer was subsides.
“Grab somebody here at the MPC, a legislator, state senator, a governor, and say, ‘priority number one for this budget, you got to get your budget invested in housing,” Fleisher said.
He said the state needs to put a minimum of $50 million in non-earmarked funding “for a few years” into community development and just into housing production.
He said the “Missing Middle” program needed to have another $50 million added to the $50 million approved. MSHDA recently expanded the parameters of the program to include all developers, not just non-profits.
Donald Rencher, the housing, planning, and development group executive for Detroit, said those subsidies needed to be directed toward the creation and rehabilitation of single-family homes.
“A lot of our federal programs are geared toward multifamily housing tax credit project processes, and it has been difficult to do a lot of single-family homes,” Rencher said.
He said one of the first things businesses ask him about Detroit is what was being done about housing.
He said Detroit has been working to not just develop new single-family homes, but fix the existing ones.
“If the Mayor was here, he would tell you about the Detroit Land Bank and the success that they have been able to sell homes on the market to private individuals and they’re fixing them up,” Rencher said.
Renovare Development Managing Partner Shannon Morgan said there have been difficulties in the development of rural areas, because many of them don’t have a long-term management plan or infrastructure.
“A lot of them you have to build out the basic utilities and roads to get the housing development, which we all know increases the cost,” Morgan said.
She said most of those rural communities need help to manage the development process.
Cherry Republic President Bob Sutherland said he had been warning about a housing shortage in northwest Michigan for the past 20 years.
He told a story about a development that was built near Traverse City and of the 56 lots that were developed, only seven of those went to actual families.
“All the rest went to second-home owners, AirBnBs, and retirees,” Sutherland said.
He said there have been incentives that businesses have been offering to help get people into housing, such as offering a free one-year payment to hospital workers and nurses to get them to move to the area.
He said Cherry Republic has been working with the counties in northwest Michigan as well to help incentivize people to move into houses.
“I’ve been dealing with this housing issue for over 25 years and I don’t think we’ve ever been in a better position to make things happen,” Sutherland said.
Short Term Road Funds Good, Long Term Better
Road agencies are praising short-term proposals for road funding but are urging legislators not to let the larger road funding need slip away.
"There’s no question that we need more investment in local roads, and so we are happy that there’s the conversation that’s taking place," said John LaMacchia, director of state and federal affairs for the Michigan Municipal League. "At the same time, we don’t want to lose sight of the overall conversation that needs to take place, which is finding a long-term, stable funding solution that going to provide investment in local roads, not just on a one-time basis, that’s going to allow them to maintain their infrastructure in a way that makes them competitive."
Whitmer proposed $200 million for the Michigan Bridge Bundling Initiative in her budget recommendation earlier this year. She also provided $124.5 million for the debt service related to the Rebuilding Michigan bond program, which funds many of the Department of Transportation’s road projects until 2024. That is only for state roads, though, and locally owned roads would see their usual funding allocation from the state’s transportation funds.
The Senate plan offers more money for local roads and provides one-time funding for several projects. It includes $150 million from the General Fund for the state’s bridge building initiative and local road funding and $100 million in investment grants.
The House plan includes $400 million for local roads that would be allocated based on population, rather than the formula provided by Act 51.
"It’s a little bit of wait-and-see as to where that shakes out at the end of the day," LaMacchia said. "Our focus is two-fold. One, obviously getting as much revenue as we can into local roads, but still not losing sight overall of the focus on finding a long-term, sustainable solution."
There are a lot of priorities to tackle in the transportation budget, but local road funding is important, said Rep. Ranjeev Puri (D-Canton), who chairs the House Appropriations Transportation Subcommittee .
"There’s a lot of moving pieces," he said. "The House included the largest portion dedicated to local road funding, compared to our counterparts, and so we’re hoping that the number is going to be closer to the House side, but it’s a little early in the negotiations … it’s hard to forecast right now where that’s going to land."
Ed Noyola, chief deputy and legislative director for the County Road Association of Michigan, said that counties are appreciative of whatever funding the Legislature and the governor are willing to provide.
"Whether it’s bridge bundling, or whether it’s $150 (million) for the large, populated counties … or the $400 million for all 83 counties and municipalities – those are all reasonable plans," he said.
Noyola said the efficacy of the House’s plan to use a different formula to distribute road funding was an open question.
"I believe the Michigan Transportation Fund has a good formula, which looks at all the different characteristics or elements within the state, which looks at registration fees, looks at miles of road and looks at population," he said. "So, based on those three elements that are used to distribute the Act 51 monies, we always thought that was pretty fair."
Emergency funding for road repair is a big concern for several counties, Noyola said.
"Setting aside an amount of money in order to deal with disasters and emergencies as they arise from year-to-year instead of road agencies having to come to Lansing, hat in hand, and asking for support in order to maintain their systems, and continue their improvement program for the following summer," he said. "Once you have a disaster, you sort of bundle all your money together and try to deal with the disaster, and hopefully, there will be assistance forthcoming, but in the meantime, they’re sucking up all of their revenue, all of their resources, to deal with the disaster."
Another challenge the Legislature needs to consider is that sometimes evolving environmental requirements change what needs to be done to repair roads and bridges, and that means those repairs cost more.
Long-term, sustainable funding is also a concern for the County Road Association, Noyola said.
"These one-time, shots in the arm are great, but again, it’s one time," he said. "Then, what do we do the following year? And how do we budget for that?"
That becomes more difficult when the money must be spent within the fiscal year.
"Everybody’s scrambling trying to figure out, ‘how can we spend this?’" he said. "If it has to be spent within that fiscal year, it becomes a little bit more of a challenge for local agencies."
Most road agencies don’t have the necessary cash-on-hand to invest in engineering road projects.
"Our time is better used putting that money in the roads, and not necessarily the engineering," he said. "If the language is for project-ready projects, or you have to do an improvement, you can’t use it for maintenance. Then it becomes challenging. If they said it could be used for anything, it makes it a little bit easier for us because we could do … something that will preserve and extend the life of the pavement, as opposed to replacing or milling and filling."
Developing a long-term solution is important, as some estimates put the state at a $3 billion to $4 billion yearly shortfall, Puri said.
"That number is only going up the longer we continue to kick the can down the road. … Regardless of how much money comes out, it’s not going to be enough to fix the kinds of systemic underfunding issue we’ve had," he said. "I think the more important piece of this conversation is understanding that the House is showing that local road funding is a priority, and really the need to reevaluate how we tackle this conversation going forward from a broader sense."
Conversations are ongoing between leadership and the subcommittee chairs on budget priorities, Puri said.
A message left with Sen. Veronica Klinefelt (D-Eastpointe), chair of the Senate Appropriations Transportation Subcommittee , was not immediately returned.
The priorities represented in the Transportation budget proposals align with the priorities of the County Road Association, Noyola said. The question that remains is what will rise to the top and how quickly the money must be spent.
"The question is the amount, and the availability to spend that money," he said.
The solution for sustainable road funding won’t be one thing, LaMacchia said. It will need to successfully integrate electric vehicles, consider the current gas tax and accommodate everyone who uses transportation in Michigan.
"We need to shift our mindset a little bit. It’s not just about fixing the roads. It’s why we fix the roads," he said. "We need to do it to make sure that we’re putting Michigan in a place to be economically competitive, and that requires good infrastructure, which then ultimately requires investment."
The goes beyond investing in roads, LaMacchia said.
"We need to make sure we’re thinking about the solution holistically, beyond infrastructure, making sure we have sustainable and resilient systems in place that allow us to thrive at all levels," he said. "Whether that be infrastructure, or housing, or the way in which we try to attract and retain residents, all of that must be invested in if we want to be successful."
This budget may not be able to achieve all of that, but Puri said it could be an important first step.
"With the proliferation of electric vehicles and what that’s going to do to gas tax revenue and what the future sustainable model for local road funding is going to be … I don’t think it’s enough to tackle the issue that we have," he said. "But I think this could be a very strong first step in hopefully tackling that larger conversation."
DCD’s "Mini-Mackinac" Policy Conference
DCD was happy to host several state representatives, clients, local elected officials and C-suite executives and business owners at their first annual Cigar Night of the season on May 25th. These intimate and exclusive gatherings offer DCD’s clients the ability to interact with their state and local leaders and network with other executives across myriad industries.
If you’d be interested in attending a future cigar event please feel free to contact us.
DCD was also happy to host State Representative Brenda Carter recently at the Common Ground Crisis and Resource Center with CEO Heather Rae and Janet Sarkos, Chief Crises Operations Officer. Rep. Carter was happy to share some of her own stories from Pontiac constituents and was very appreciative of the work Common Ground does for those in crises in her own constituency.
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