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	Governor Jennifer Granholm's economic development strategy is based on Smart Growth

Progressive economic and cultural reform in America follows a familiar path. The majority demands action. Leaders of both major political parties heed the call and a capable and courageous political leader finds a way to serve the public interest.

Michigan is nearing just such a breakthrough on sprawl. Public opinion polls consistently show the majority of residents embrace fixing existing roads before building new ones, consider public transit an effective antidote to traffic congestion, want more spending to limit pollution, and support redevelopment in Michigan’s depleted cities and older suburbs.

The polls also show that citizens are intensely interested in improving Michigan’s economic competitiveness and in closing state and local budget deficits. These concerns are not solely the province of Democratic urban residents. They also spark lively conversations in Republican strongholds along the coast of Lake Michigan and in the newer suburbs outside Detroit, Grand Rapids, and Traverse City.

Faced with growing public pressure to make Michigan a better place, Democrats and Republicans are making some progress in enacting Smart Growth measures. The parties cooperated extensively in the Michigan Land Use Leadership Council, which in 2003 recommended 160 steps the state should take to curb sprawl, improve the economy, and rebuild the state’s cities.

During the final four months of 2003, Governor Jennifer M. Granholm signed two executive orders and seventeen bills passed by the Republican-led Legislature that, among other things, empower municipalities to get tough on owners of blighted property, help expedite redevelopment of abandoned industrial sites, and raise the cap on bond money available for such projects. Other successful legislation encourages regional planning and permits townships to include open space in their mixed-use zoning laws.

In 2004, the Legislature passed, and the governor signed, 10 more Smart Growth measures — making such measures a rare arena of bipartisan cooperation.

Now, the Hard Work Begins
But the truly hard work is yet to come. The real challenge in reining in sprawl, as we’ve described in this report, is changing the priorities of the big-ticket public spending programs that drive development, particularly the $3 billion transportation budget and the more than $1 billion revenue-sharing budget.
 
Governor Granholm understands how public spending drives the decisions that businesses, families, and individuals make about where they work, live, and play. In 2003, the governor and the Legislature agreed to indefinitely halt 17 highway projects in order to redirect $250 million slated for new highways to fixing existing roads. In 2004 Ms. Granholm awarded $100,000 “Cool Cities” grants to economic development projects in 17 cities. Her administration says that the grants signal a new willingness to open to the state’s cities and towns the billion-dollar treasure house of subsidies, grants, low-interest loans, and other economic development tools that were once reserved almost solely for luring factories and employers to Michigan. 

Republican leaders also have ideas about spurring investment and slowing sprawl. In May 2004 Senate Majority Leader Ken Sikkema announced an eight-bill CORE package — Creating Opportunities for Renewed Economies. The package proposes “commerce centers” that channel state dollars to existing community centers, tax incentives for redeveloping historic neighborhoods, new procedures to speed construction inspections and permits, tax credits for rehabilitating old plants, and enabling legislation for downtown development authorities, neighborhood improvement authorities, and downtown parking bureaus.

Such ideas from both sides of the aisle are just the sort of courageous policymaking that Michigan needs to thrive in the 21st century. They demonstrate that both parties understand that how the state invests in economic development is crucial to what happens to our land. The question is: Will Michigan give cities and existing communities a much larger share of the economic development dollars than they’ve gotten in recent decades? Or will lawmakers make sweeping statements about curbing sprawl while still spending profligately to spur growth on the state’s expanding urban edges?

Seeking a Formula for Success
Surely there is no way for the Legislature or the governor to avoid these questions; they are the political questions of the era. In 2006 and 2007, for instance, the governor and state lawmakers will have to decide whether to change the formula for distributing more than $1 billion annually to cities, villages, townships, and counties. The source of the shared revenue represents 36.3 percent of state’s sales tax receipts. In many communities revenue sharing is the single largest source of operating funds.

The payout formula for local governments was altered in 1998 under the rubric of spreading the money more fairly. But separate studies by the Citizens Research Council (2000) and researchers at Michigan State University (2002) found the 1998 formula turned townships and villages into winners, and older cities into big losers. According to the MSU analysis, 22 of the 50 fastest-growing communities received larger revenue sharing payments under the 1998 formula than they would have with the old formula. The council found that of the 104 largest communities, 52 lost money under the 1998 formula and 52 gained. Only 11 of the winners are old Michigan cities. The rest of the winners are sprawling townships and outstate cities like Mt. Pleasant and Marquette. Of the losers, 39 are cities and just 13 are townships, most of them in the Thumb region and the western Upper Peninsula.

The 1998 formula expires in 2007 and the entire revenue sharing system will be reconsidered by the Legislature. If she is reelected, Governor Granholm will have an opportunity at the start of her second term to work closely with the Legislature and local government leaders to adjust revenue sharing to improve the fiscal health of existing communities and make a real difference in slowing sprawl.
 
Clearly, where to invest the many billions of dollars that state and local governments spend each year for economic development is the most important conversation Lansing will have in  this decade.