Article in June 22, 2007 Detroit Free Press

Think positively, U-M expert says

Jobs in education, health care among the bright spots

June 22, 2007

BY JOHN GALLAGHER

FREE PRESS BUSINESS WRITER

Give yourself a break, Michigan.

A new report from the University of Michigan warns that the state's negative self-image may be doing more harm than its very real economic challenges.

Study author Thomas Ivacko said Thursday there's no question Michigan's signature automotive industry has suffered tremendously in recent years.

But ignoring signs of an emerging knowledge-based economy of the future is holding back the state's progress, he said.

His report, "Michigan's Economic Transition: Toward a Knowledge Economy," is being released today.

It can be found at http://www.closup.umich.edu.

Ivacko, a program manager at U-M's Center for Local, State, and Urban Policy, said parsing hope from despair is a fine line in Michigan.

"We can't say things are good. Clearly, things are pretty darn bad," he said. "But we can choose what to focus on, and there are plenty of good things happening."

As the report makes clear, there's no question Michigan's 20th-Century economic model is fading. The state's factory jobs shrank 27% between 1997 and 2006, while automotive parts manufacturing slid even more, down nearly 34% during that time.

But at the same time, jobs increased in health care, education, professional and technical services, scientific consulting and other fields.

Employment in colleges, universities and professional schools rose nearly 72% during the past 10 years.

Also positive, Michigan ranks as a top-10 state in several scientific and technical fields, including patents awarded, the percentage of engineers in the workforce and employment in high-tech enterprises.

"We have some real, honest, serious assets that would support a knowledge economy," Ivacko said. "If we choose not to focus on those, we're just holding ourselves back."

An unanswered question is how much of Michigan's emerging high-tech, entrepreneurial workforce is still tied to the automotive industry in some way, such as in engineering consulting firms.

Ivacko said he suspects that a lot of it is. But those firms might evolve into something else, either in other forms of transportation or alternative energy, as their automotive work fades.

"One key to the new economy is that firms and individuals simply have to become nimble," he said. "If you're doing one thing today, it doesn't necessarily mean you're going to be doing the same thing five years from now."

While the report supports policy prescriptions such as more money for education, Ivacko said the real message is directed at Michiganders' mind-set.

"I think the place that could really use focus is the culture, and that's up to us. We've got to change this rust belt mentality and this entitlement mentality to this more proactive, forward-focused vision."

He cited the example of musician Jack White of the White Stripes, who recently sold his home in Detroit and moved to Nashville, Tenn., because he said he couldn't take the negativity here any more.

"We're driving away some of our best talent by this negative focus," Ivacko said.

Article in June 21, 2007 Detroit Free Press

Detroit seizes the moment to rebuild

As varied interests cooperate, results rise in concrete, steel

June 21, 2007

BY JOHN GALLAGHER

FREE PRESS BUSINESS WRITER

Detroit's new RiverWalk, which officially opens Friday in a splash of celebrations and special events, offers more than fountains, a carousel and waterfront promenade.

It also offers a new model of redeveloping Detroit.

Born of widespread regional cooperation, the project saw the City of Detroit, General Motors Corp., the Kresge Foundation and dozens of other public and private players team up to create the RiverWalk and its nonprofit governing body, the Detroit Riverfront Conservancy.

In a region riven by city-suburban feuds over such issues as Cobo Center, bus routes and water rates, the RiverWalk shows that competing interests can and do cooperate to achieve major goals.

"We really created a sense of urgency by convincing ourselves that this was a moment in time," Matt Cullen, a GM executive who serves as co-chair of the nonprofit riverfront conservancy, said this week.

"Three hundred years of history on the riverfront, and there was never a time in our history when somebody had the opportunity to say, 'We're going to reclaim the whole thing.' It was the coming together of a powerful vision and a real sense of urgency."

Nor is the RiverWalk a one-of-a-kind phenomenon. Similar models of public, private and nonprofit cooperation led to the creation of Campus Martius Park in 2004 and to the city's effort in hosting Super Bowl XL in 2006.

The same blend of city, corporate and nonprofit effort will see the Eastern Market reconstruction begin soon. The Riverfront Conservancy will take over operation and maintenance of an old railroad right-of-way known as the Dequindre Cut that the city is turning into a landscaped pedestrian and bike greenway.

This broader cast of characters marks a substantial change from development practices in the 1970s through the mid- to late 1990s, when then-Mayor Coleman Young often negotiated deals one-on-one with powerful executives such as Henry Ford II, Peter Stroh and Max Fisher.

"The old way is Hank the Deuce and Al Taubman and Mike Ilitch and Coleman Young would sit down, and they would get a project done," Mayor Kwame Kilpatrick said this week. "But this is a new model, and because it's a new model, bringing everybody to the table, it's spurring so much development in other ways, people saying, 'Let's make it all happen.' "

Richard (Rip) Rapson, president and chief executive of the Kresge Foundation, which contributed $50 million in matching grants to create the RiverWalk, said the foundation tied its gifts to specific contributions and actions by others.

"It was an attempt to try to create the broadest possible spectrum of civic engagement in the project," he said.

Frustrations exist

This new model doesn't mean that development in Detroit has gotten easy, even for the RiverWalk.

"It's frustratingly slow at times," Cullen said. "There's a lot of times when it took a lot of cajoling and handholding to convince everybody to keep all the puppies in the box."

George Jackson, president of the city's Detroit Economic Growth Corp. and Kilpatrick's chief development officer, agreed.

"We haven't always been bosom buddies through the process," he said of the RiverWalk. "Not everyone agrees on everything. But I think the critical piece here, even with our differences, we all had the same objective, and we didn't let anyone get off the objective of making this a reality."

Robin Boyle, a Wayne State University urban planning professor, said the greater cooperation is real, not just a slogan.

"You do see a more diverse range of players who are making an impact. Is it a big enough impact? That's the $64,000 question. But at least it's different from 20 years ago, when the silver bullet was still being sought."

A turning point

Why the change? By the late '90s, planners began to realize the old single-player, single-project mode of development wasn't helping the city much.

Throughout the '70s, '80s, and early '90s, highly touted projects like the Renaissance Center, Riverfront Apartments, Harbortown and Stroh River Place tended to be individual projects that had little spin-off effect.

Similarly, Young's efforts to encourage new downtown skyscrapers saw two built -- One Detroit Center in 1992 and 150 W. Jefferson in 1989 -- but both did little more than take tenants from older downtown buildings.

"Back then, the focus was on building projects instead of building the city," said Larry Marantette, principal of the Detroit consulting firm Taktix Solutions who in the '80s helped develop the Harbortown project and later served as president of the Greater Downtown Partnership, which helped plan the Campus Martius area.

Beginning in the mid- to late '90s during the administration of Mayor Dennis Archer and continuing under Kilpatrick, planners have emphasized broader plans to revive entire districts, like the RiverWalk and Eastern Market.

"They're not one-off projects as much as a city rebuilding plan. There's a big difference," Marantette said this week.

New financial angles

Today's redevelopment efforts also benefit from a raft of new tax credits, investment pools and other aids that weren't available until the late '90s or later.

The Book-Cadillac Hotel renovation and several other recent downtown projects got part of their financing from the Detroit Investment Fund, a $52-million private capital fund set up by the corporate leadership group Detroit Renaissance to help revitalize the city.

"I think it's becoming a little more mainstream," said Colin Hubbell, a residential developer who has built several projects in the city's Midtown district. "There's more people that have gotten their arms around what we're doing in urban development."

Article in June 9, 2007 Detroit Free Press

A TALE OF 2 MICHIGANS: Job opportunities exist in new sectors, but growth is slow

June 10, 2007

BY JOHN GALLAGHER

FREE PRESS BUSINESS WRITER

Jennifer Baird is that rare thing -- an optimist about Michigan's economy.

Baird heads Ann Arbor-based Accuri Cytometers. The University of Michigan spin-off firm with 13 employees is testing biomedical instrument technology that it hopes to market to cell researchers around the world.

"I think sometimes we get blue because of all the struggles that the auto industry is going through," she said last week of Michigan's economic outlook.

"But that doesn't mean that there aren't great resources here. We can always get better, of course. But we do have a lot more here, I think, than sometimes people appreciate."

Baird's optimism hints at a resilience in Michigan's tired economy for which few people give the state credit. For Michigan really is two states economically.

The state in the gloomy headlines suffered the nation's worst unemployment rate in April, as well as nation-high gas prices in May, and has had among the highest housing foreclosure rates.

But the less-well-known state boasts a $376-billion-a-year economy, roughly the size of Sweden's, and remains a top 10 state in total output, exports and manufacturing, despite the elimination of one in four factory jobs since 1999.

Nor, despite all the worries over globalization and automotive restructuring, is it hard to see where Michigan's new economy will come from. Health care, professional services, finance, logistics and tourism are among the fastest-growing sectors in Michigan.

Already, health care alone employs more workers in Michigan than auto manufacturing.

Economists say the real problem isn't the size of Michigan's economy, which is huge, nor the direction it's heading, which is toward a more knowledge-based workforce. The problem is the rate of growth, which is dismal.

"Michigan's glass is more than half full, but we have some big holes that we're not plugging in the bottom, and what we're spilling is being lapped up eagerly by our competitors in other states," said Patrick Anderson, an East Lansing-based economic consultant.

Charles Ballard, a professor of economics at Michigan State University and author of the book "Michigan's Economic Future," agreed.

"I try to not overemphasize how bad it is, but also to not gloss over the fact that we do have to change our behavior if we want to grab the future opportunities," Ballard said.

Not fast enough

Examples of Michigan's dual economic status -- a premier state imperiled by slow growth -- lie scattered throughout the piles of economic data collected by the federal government.

Michigan's output of goods and services -- trucks made in Flint, furniture made in Grand Rapids, surgical instruments designed in Kalamazoo and hamburgers served up in Port Huron -- ranks ninth in the nation, according to the U.S. Commerce Department.

But Michigan's anemic growth rate -- just 0.2% from 2004 to 2005, the most recent period when full data were available -- ranked 48th among the 50 states. Only the economies of Alaska and Louisiana were worse.

Meanwhile, Sunbelt states -- notably Georgia, North Carolina and Virginia -- enjoy economies that are almost as big as Michigan's and are growing much faster. They'll likely pass Michigan in a few years if nothing changes.

Or consider exports. Thanks to the huge volume of automotive shipments, Michigan ranks fifth among the 50 states as an exporter.

But between 2001 and 2005, the value of Michigan's exports grew 16%, while the nation's exports grew 24%.

If Michigan can't supercharge its exports, Ohio, Illinois and Florida might pass it soon in the export rankings.

Look at bank deposits, a basic measure of wealth in a community.

As of mid-2006, Michigan bank deposits totaled $152 billion. That was up from $104 billion 10 years ago -- but Michigan's ranking among the 50 states had slipped to 14th place from 10th as several other states grew more quickly.

Signs of hope

Much of the reason for this slow growth lies in the painful restructuring of the domestic auto industry. Yet even as Michigan's signature industry continues to struggle, there are signs of hope elsewhere in the state.

Michigan's three major research universities -- U-M, MSU and Wayne State University -- are contributing to the growth of life sciences and other new high-tech industries of the future.

U-M alone has been spinning off an average of eight to 10 high-tech firms each year for the past five years, said Ken Nisbet, executive director of U-M's Tech Transfer office.

Those spin-off firms, like Baird's Accuri Cytometers, are small yet promising.

"I think we're planting a lot of seeds," Nisbet said last week. "Although it will take awhile, obviously, to replace the base we are losing, it's very encouraging because the industry of tomorrow is coming out of a lot of the stuff we see here in the university."

Baird said her optimism stems in part from her firm's ability to find both the high-skilled employees and the venture capital it needed in the state.

"We have an absolutely tremendous talent pool," Baird said. "As a state, we have a growing expertise in the life sciences as well as in engineering and a wonderful work ethic, and those kind of things are what make it possible to build a capital-efficient, high-growth organization here."

In another sign of hope, a recent study that tracks how states are preparing for the knowledge-based economy of the future reported in February that Michigan had made more progress since 1999 than any other state.

Michigan ranked 19th overall in the 2007 State New Economy Index, up from 34th in the 1999 version of the report and up from 22nd place in the 2002 index.

Belying fears of a brain drain because of young people leaving the state, Michigan ranked sixth among the 50 states in attracting highly educated workers.

Robert Atkinson, president of the Washington, D.C.-based Information Technology and Innovation Foundation and chief author of the index, said that reflects the influx of engineers coming to Michigan from nations such as China, Korea and Taiwan.

They come for jobs not only in the automotive industry, but also in life sciences and other fields.

"That's a great number," Atkinson said. "Most people don't think of Michigan as a haven, but that's a really very good number."