Submitted Testimony of Sandy K. Baruah for Senate Transportation Committee

February, 28, 2012 – Thank you Mr. Chairman and Members of the Committee for inviting me to testify today on this very important topic.  I especially appreciate the leadership of the sponsors of this package including Senator Casperson, Senator Johnson and Senator Warren also Governor Snyder for highlighting this important issue in his special message on Infrastructure. The Detroit Regional Chamber strongly supports Senate Bill 909, 911, and 912.  Frankly, we support the entire package that has been introduced to provide badly needed funding to our transportation infrastructure and a coordinated voice for public transit in our region.

The Detroit Regional Chamber was founded in 1903.  Over 100 years ago, business leaders from this region identified transportation and ability to move individuals and products safely and efficiently as one of the primary challenges facing our region.  Since that time, transit in metropolitan Detroit has actually deteriorated and we are left with a system with low levels of coordination and service that doesn’t meet the needs or expectations of our residents or businesses.  Over the last 20 years, the Detroit Regional Chamber has been at the center of the fight for regional transit.  My predecessor, Dick Blouse, was the leading voice in support legislation to create the Detroit Area Regional Transit Authority.  Dick helped lead a remarkable effort that included business, labor, and political leaders throughout the region.

My support for public transit is both professional and personal.  From the perspective of the business community in our region, our lack of coordinated public transit is a missed opportunity.  Public transit serves as a means for our members to ensure that their employees have a safe and efficient means to travel to and from work.  Over the last several decades the population and economic centers of metro Detroit have spread out over a significant geographic area.  Like many regions, many employers in the core city rely on employees from the suburbs.  Economic and environmental concerns make transit an attractive option to many employees who work in the core city.  Additionally however, many suburban employers rely on employees from Detroit.  We all know that Detroit’s auto insurance rates are among the highest in the nation making individual auto ownership a challenge for many of the city’s residents.  Fixing transit can be part of the solution to making those residents valued employees for companies based outside of the city.

I am also encouraged that bus rapid transit is part of the dialogue.  The Chamber believes that BRT combines the best of both worlds to create a transit system from scratch.  BRT offers the speed and accessibility of light rail by using dedicated lanes, signal pre-emption, and fixed pre-paid stations.  Also, it embraces the lower start-up costs and long-term route flexibility of a traditional bus system.  Many regions around the world have found BRT to be an excellent option for starting up high-speed transit.  BRT has the potential to drive needed efficiencies in both the SMART and DDOT systems.  Additionally as an umbrella agency could lead to increased service coordination and eventual merger if it appears to be in the interests of users and taxpayers.  Further, BRT has the opportunity to better feed and utilize the People Mover system.  The People Mover has never been able to meet its potential to move residents around downtown, but regular BRT service can help move the People Mover from a visual signature for the city to a key cog in a regional transit system.  As an owner of an Yearly People Mover pass and regular user, I can confirm and even a committed car lover will use transit and can confirm its ease of use and quality.

Which leads me to the final point I wanted to communicate to you.  Prior to coming to Detroit in 2010, I have lived with coordinated public transit all of my adult life.  As a resident of Portland, OR and Washington, DC, I have seen firsthand the economic impact that transit can have on cities and the surrounding areas.  Both regions have strong public transit options that I utilized regularly in spite of my love for automobiles.  Detroit is the first city I have lived in where my transportation options were limited to driving the black car or the white car.

Moreover, there is a human element to consider.  As mentioned earlier many of the residents in our city and our region find that having their own car is prohibitive for either economic or other reasons.  However, this doesn’t erase their needs to safely travel around our region.  Some are isolated from necessary services including grocery stores, medical care and child care.  Further, the young talent we hope to continue to attract to our region demand the ability to move around the region without an automobile.

In short, if we desire to be a world class city and region, coordinated public transit is an absolute necessity.  On behalf of the Detroit Regional Chamber and our membership, I ask you to support our region and support Senate Bills 909, 911, 912.

Michigan Implements Positive Corporate Tax Reform

The Tax Foundation

Michigan lawmakers approved significant corporate tax reform last year that went into effect at the beginning of 2012. Previously Michigan had a dual corporate tax system called the Michigan Business Tax (MBT). Under the MBT corporate profits were taxed at a rate of 4.95 percent, and all transactions were taxed at a rate of 0.8 percent (a gross receipts tax, or GRT). In addition, there was a 21.99 percent surcharge on the total tax liability from the MBT. We had been critics of the MBT, specifically the gross receipts tax, since it was implemented in 2008. GRTs are an outdated, economically damaging tax that leads to tax pyramiding (read more here).

But in 2011, recognizing the mistake, the Governor proposed and lawmakers approved a significant package of corporate tax changes. Most importantly, they eliminated the GRT, implemented a flat 6% net income tax (a tax rate which is very close to the previous rate after accounting for the 21.99% surtax), and broadened the tax base by eliminating tax preferences. These reforms were set to come online beginning in 2012.

The Tax Foundation’s State Business Tax Climate Index measures which states have the most neutral, simplest, most business-friendly tax structures. In the most recent edition of the Index, which reflects tax law that applied on July 1, 2011, before Michigan’s reforms were implemented, Michigan ranked 18th overall (and 49th on the corporate income tax component). If Michigan’s tax reform had been in effect on July 1, 2011, the state would have ranked 12th overall (and 7th on corporate income tax component). While the state’s actual rank in the next edition will depend on changes other states may make between now and then, it is clear that this set of reforms is a major improvement for Michigan’s business tax system.

Effects of Michigan’s Corporate Tax Reform on Their State Business Tax Climate Index Rank
FY2012 Index Rank Rank With Reforms*
Overall 18th 12th
Corporate Tax Component 49th 7th
*Rank if Reforms Been in Effect on July 1, 2011, the first day of the standard 2012 state fiscal year.

Note that we wrote about the reform when it was still in the proposal phase last year, and at that time provided an estimate of how much it would improve Michigan’s ranking on the Index. But now that the reform has been implemented in its final form we thought it would be good to update our estimate of the reform’s impact. The new estimate differs from last year’s because, as is common with tax policy proposals, it developed and became more defined over time.

Finally, it should be noted that Michigan’s reform also included some changes to the personal income tax, most of which do not come on line until 2013. These changes are not included in the estimate above.

Roger Penske Joins the 2012 Mackinac Policy Conference Lineup

DETROIT, February 14, 2012 – Today, the Detroit Regional Chamber announced that Penske Corporation founder and Chairman Roger S. Penske is joining an impressive list of headliners at the 2012 Mackinac Policy Conference. The Conference, held Tuesday, May 29 through Thursday, May 31, is focused on innovation, collaboration and positioning Michigan to succeed in the 21st century global market.

Penske will conduct a moderated discussion about the turnaround of Detroit and Pittsburgh as both cities continue to progress and become more economically competitive.  This session builds off the dialogue from the 2010 Mackinac Policy Conference, which resulted in the Detroit Regional Chamber sending a delegation of business, civic and political leaders on a tour to see Pittsburgh’s economic turnaround.

“Detroit and Pittsburgh are resilient and can continue to learn from each other about adapting and staying competitive in the global economy,” said Henry Ford Health System CEO Nancy Schlichting, who is Chair of the 2012 Mackinac Policy Conference. “These two cities are making great progress in re-inventing themselves and rely on committed leadership by high-profile leaders like Roger Penske to help guide their recovery. He can speak to the importance of coupling industries like automotive and steel with other emerging sectors like medical and bio-sciences.”

Penske is the Founder and Chairman of Penske Corporation, a diversified transportation services company whose subsidiaries operate in a variety of industry segments, including retail automotive, truck leasing, transportation logistics, component manufacturing and professional motorsports.

Penske joins a lineup that already includes New York Times Foreign Affairs Columnist and best-selling author Thomas L. Friedman, noted print and broadcast journalist Fareed Zakaria and former Utah Governor and U.S. Secretary of Health and Human Services Michael O. Leavitt.

The 2012 Mackinac Policy Conference’s three pillars are innovation, collaboration and the 21st century global market. To learn more about how the Conference aims to increase economic development and create a globally competitive, financially attractive business environment in Michigan, visit mpc.detroitchamber.com.

Detroit Regional Chamber 2012 Mackinac Policy Conference

The Mackinac Policy Conference – the Detroit Regional Chamber’s annual event – brings together business and government to re-energize Michigan. Since 1981, the Conference has provided access to Michigan’s top business professionals, legislative leaders, corporate CEOs, entrepreneurs and veteran regional champions. Over 1,500 attendees will gather for the 2012 Conference, held May 29 – May 31 at the historic Grand Hotel on Mackinac Island.

About the Detroit Regional Chamber

With over 20,000 members and affiliates, that employ over three quarters of a million workers, the Detroit Regional Chamber is one of the largest chambers of commerce in the country. The Chamber’s mission is carried out through business attraction efforts, advocacy, strategic partnerships and providing valuable benefits to members. For more information, please visit detroitchamber.com.

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Detroit Regional Chamber, Connection Point Travel to the White House

On Friday, Feb. 10, the Detroit Regional Chamber and its Connection Point program traveled to the White House for a special meeting to strategize about job creation and economic growth in the Motor City. The event, This invitation-only meeting capped a two-day visit to Washington D.C. by the Chamber’s Senior Vice President of Economic Development Benjamin Erulkar and Connection Point Program Director Trevor Pawl. At the White House, the two shared their insight with senior officials from the Obama administration including Gene Sperling, the Director of the National Economic Council and Assistant to the President for Economic Policy. The Departments of Commerce and Transportation, Small Business Administration, Federal Transit Administration, White House Office of Public Engagement, United States Patent and Trademark Office and the White House Joining Forces Initiative were also represented.

Chamber, Detroit Business Community Provide Feedback to Washington

Erulkar and Pawl joined more than 50 business leaders from the Detroit community at the event, which was the seventh in a series of business leader briefings that are taking place at the White House throughout the year.

“The Detroit Regional Chamber and Connection Point are working with innovative Michigan companies every day to help rejuvenate the Detroit region and we were proud to share our insight and experience with the White House,” said Erulkar.

Participants provided feedback to the administration on ways to work together to support economic competitiveness, job creation and innovation. The business leaders had the chance to ask questions, express ideas, and brief administration officials on manufacturing issues, access to capital, workforce development, health care reform, and infrastructure development.

Patent Office in Detroit Will Continue to Drive Innovation

One of the main topics of discussion was the proposed opening of a U.S. Patent and Trademark Office branch at 300 River Place in Detroit, formally the old Parke-Davis building and Stroh Co. headquarters. The branch, the first one ever to be located outside of Washington D.C., is expected to provide a boost to the region’s economy and create more than 100 high-paying, highly skilled jobs.

“There’s never been a patent office outside the Washington D.C. area – this is a big deal,” Erulkar said. “Patents remain one of the most important measures of innovation, something at which Detroit already excels at. Anchoring this facility in the Motor City is a great opportunity to increase the flow of talented people into our region and further position the city to lead the country in innovation.”

Connection Point in the Spotlight

Connection Point drew major interest among Detroit business leaders attending the event. Pawl addressed the group, highlighting the successes of the Connection Point program in helping Michigan suppliers expand their business by connecting with purchasers and pursuing new opportunities across diverse industries.

“Michigan is still the global epicenter of the auto industry with first-rate engineering and research and development resources that drive innovation in so many industries,” Pawl said. “Connection Point can help companies across the global supply chain unlock that potential and grow their business.”

This past year, for instance, Connection Point enabled Michigan suppliers to access $113.7 million in pre-qualified sourcing opportunities with the U.S. subsidiary of Deutz A.G. – the world’s largest independent diesel engine manufacturer. Connection Point also hosted a forum with NASA in December to help build research and development partnerships with Michigan companies.

While in Washington, Erulkar and Pawl also met with private sector companies that might serve as prospective purchasers for Michigan businesses. They also met with the U.S. Departments of Commerce and Energy as well as NASA to explore greater partnership opportunities with the Detroit Regional Chamber.

Detroit Well Represented During Event

In addition to the Erulkar and Pawl, participants represented a wide range of industries that comprise make up Detroit’s economy. Executives from Ameriprise Financial, TechTown, Original Equipment Suppliers Association, R&B Development, Avis Ford Incorporated, Detroit Casino Partnership, Detroit Aircraft, LLC., Dunamis Clean Energy Partners, LLC., Powerlink Facilities Management Services, and Utility Services of America will participated along with entrepreneurs and V.C.’s from the Greater Detroit area.

“Business leaders are a critical voice in the policymaking process,” said Bert Kaufman, Vice President of Business Forward in a press release. “White House officials were more than a little eager to hear directly from Detroit leaders on issues important to the area’s economy and ideas for spurring job growth.”

Access to Senior Obama Administration Officials

Senior Administration officials who took part in the briefing included, Dr. Rebecca Blank, Acting Deputy Secretary, Department of Commerce; Marie Johns, Deputy Administrator, Small Business Administration; Peter Rogoff, Administrator, Federal Transit Administration, Department of Transportation; David Kappos, Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, Department of Commerce; Greg Nelson, Deputy Director, White House Office of Public Engagement; Brad Cooper, Executive Director, White House Joining Forces Initiative; and Gene Sperling, Director of the National Economic Council and Assistant to the President for Economic Policy, White House.

Detroit Regional Chamber’s Connection Point to Attend White House Strategy Meeting for Detroit Business Development Efforts

DETROIT, February 8, 2012 – Members of the Detroit Regional Chamber’s Connection Point program will visit the White House on Friday, Feb. 10, as part of a discussion on job creation and business growth with the Obama administration. The White House Business Council and Business Forward are hosting the leading voices from the Detroit region to discuss growing its economic development prospects.

“The White House has asked the Detroit business community to share its perspective on how to drive economic growth most effectively in the Motor City,” said Senior Vice President of Economic Development Benjamin Erulkar. “The Detroit Regional Chamber and its Connection Point program are pleased and ready to share our insight on how innovative Michigan companies add to the city’s recovery.”

The White House Business Council is hosting the meeting as part of its efforts over the last year to meet with business and civic leaders in all 50 states, Washington D.C. and Puerto Rico. The efforts are intended to explore job creation and to ensure that local business leaders are aware of federal programs and resources that can help them succeed.

Erulkar, along with Connection Point Program Director Trevor Pawl, will represent the Chamber at the White House, providing insight on how the program has helped Michigan companies diversify across industries. This past year, for instance, Connection Point enabled Michigan suppliers to access $113.7 million in pre-qualified sourcing opportunities with the U.S. subsidiary of Deutz A.G. – the world’s largest independent diesel engine manufacturer. Connection Point also hosted a forum with NASA in December to help build research and development partnerships with Michigan companies.

“Michigan and Detroit have one of the world’s most competitive supply chain platforms for advanced manufacturing, both in product and process. Connection Point has opened important new markets for suppliers throughout the city and state, and we’re looking forward to building on that success,” said Erulkar, who served in the U.S. Department of Commerce as the Deputy Assistant Secretary of Commerce for Economic Development from 2005-2009.

While in Washington, the Connection Point team will also meet with private sector companies that might serve as prospective purchasers for Michigan businesses. Connection Point will also meet with the U.S. Departments of Commerce and Energy as well as NASA to explore greater partnership opportunities with the Detroit Regional Chamber.

About Connection Point

Connection Point links small to mid-size Michigan suppliers with large potential customers worldwide to develop new sales and strategic partnerships. As part of the Detroit Regional Chamber’s economic development portfolio, Connection Point provides Michigan-based businesses with opportunities to diversify their customer portfolios and create sustained economic growth. It is funded by a grant through the Economic Development Administration, which operates as part of the U.S. Dept. of Commerce.

About the Detroit Regional Chamber 

With over 20,000 members and affiliates that employ over three quarters of a million workers, the Detroit Regional Chamber is one of the largest chambers of commerce in the country. The Chamber’s mission is carried out through business attraction efforts, advocacy, strategic partnerships and providing valuable benefits to members. For more information, please visit detroitchamber.com.

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Chamber President Discusses Auto Bailout of 2009

The 2012 campaign season has once again brought to the forefront the decisions made by both the Bush and Obama Administrations to throw a lifeline to General Motors and Chrysler.  Some, like Cato Institute’s Daniel Ikenson (in his January 25th article) are quick to criticize these decisions.  As a Republican, a smaller government conservative and the leader of a business organization, I understand where Mr. Ikenson is coming from – but he fails to consider five critical points:

First, Ikenson’s claim that “Ford, Honda, Toyota, Nissan, Mazda, Kia, Hyundai, BMW and Mercedes Benz were fine” is incorrect.   Not only was the entire industry in a free fall, many of the home countries of our international competitors offered some assistance to their auto companies.  The United States acting to support United States-based companies was a mirror of what other nations did for their companies.  While I am a strong advocate for free trade, I am not in favor of unilateral disarmament.

Second, Ikenson’s claim that Ford was denied “the spoils” of government assistance to GM and Chrysler is not altogether correct.  Ford supported assistance to its competitors.  Had GM and Chrysler collapsed, many critical suppliers that service all three companies would have been shuttered – therefore denying Ford the necessary parts to build everything from F-150s to Focuses.  (By the way, about 70% of today’s automobile, regardless where manufactured, is not made by the company with its name on the hood.  70% of today’s vehicle is made by supplier companies large and small.)

Third, the bi-partisan effort to provide assistance to GM and Chrysler was not about saving these two companies.  It was about saving the companies and jobs associated with the countless suppliers and dealers across the country – and the communities where they reside.  It was also about protecting American intellectual property.  Even if you are not a fan of the Cadillac DTS or the Dodge Journey, there is no doubt that GM and Chrysler have tremendous and highly valuable intellectual property.  I don’t know about you, but I’d rather not have American IP being sold to our international competitors in a court ordered bankruptcy.

Fourth, criticizing the government’s assistance to these two companies is easy now that it is 2012 and the industry has rebounded so smartly.  Back in 2008 and 2009 things looked very different.  Our nation was headed into a very dark hole and no one knew where the bottom was.  The damage to the national psyche had two of the world’s best known companies been forced to unravel could have been devastating.  While we will never know what the impact would have been, there are some things too serious to gamble with – especially if you are the leader of a nation and the responsibility is yours.  Not everyone has the luxury of serving as a spectator from the seat of a think tank.

Fifth, it worked.  Of all the things government has tried – and failed – the decision to give the U.S. auto industry another chance has paid-off even better than I could have hoped.  Most of the loans to GM and Chrysler have been repaid to the taxpayer (with interest) and when the Federal Government sells its equity stake in GM, it will have made a profit.  Not bad for government work.

Sandy K. Baruah
President & CEO
Detroit Regional Chamber