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Michigan can’t let economic momentum slow

From The Detroit News

By Daniel Howes

May 29, 2013

Four years into Detroit’s automotive revival and two-plus years into a fiscal re-engineering in Lansing, the hard work is beginning to pay handsome dividends for Michigan and to buoy the confidence of its business community.

Job creation is up and the unemployment rate is down. Business investment in the state is growing, a budget surplus is expanding, and the downward arc of Detroit’s financial collapse now is under the unprecedented scrutiny of a Gov. Rick Snyder-appointed emergency manager and his high-priced team of restructuring experts.

Progress? Yes, particularly when the alternative is chronic dysfunction and denial accomplishing little. But as 1,600 of the state’s business and political convene on Mackinac Island today for the Detroit’s Regional Chamber’s Mackinac Policy Conference, the truth is that the long-overdue transformation of Michigan and its largest city into economically competitive forces only is just beginning — and it is not assured.

“Detroit is a city, a region, in transition,” Chamber President Sandy Baruah said in an interview. “Everything is in transition here. An inflection point? Absolutely. The state has done a lot of what the state needs to do to lay the groundwork for economic competitiveness.

“We know where we’re going to end up. The (auto) companies … have made that turn around the corner. The state is making the turn. The urban areas, especially Detroit, are further back in the train. We know we’re going to end up in a much better place.”

Getting there is the hard part. The restructuring of Detroit promises to be a painful, even embarrassing, process. To share sacrifice and satisfy creditors, the workout is potentially as likely to claim Belle Isle, the city’s Water and Sewerage Department or even gems held by the Detroit Institute of Arts as it almost certainly will claim chunks of pension and health care obligations to city employees.

Michigan and its largest city are at an inflection point, a pivot likely to determine whether Detroit can shed the bad habits and contention of the past to become something new that works. Will the state’s historic gambit to seize control of the city’s financials and operations with appointment of Emergency Manager Kevyn Orr culminate in a workout that delivers in ways the smart people envision?

Or will the process further beggar the services and assets of the poorest major city in America, sullying yet again the image of a metropolitan area that accounts for nearly half the state’s population and marking it globally as a cultural wasteland predisposed to making the wrong decisions?

Many answers are likely to come over the balance of the year, in the details of official EM orders and probable court filings of aggrieved parties. The consequences would have profound implications for the state’s business climate, as well as Detroit’s ability to leverage its incipient downtown renaissance into a force that benefits its neighborhoods and tax base.

“Detroit is the last large piece of the puzzle,” DTE Energy Co. CEO Gerry Anderson wrote in an email. “It is the one part of our state that is viewed by the outside world as ‘not yet working.’ Investors view Michigan far differently than they did five years ago.

“Our core industries have dealt with their legacy issues and are now more fundamentally competitive. Our state government addressed its structural deficit and Michigan is now viewed as among the most financially sound states.” Detroit “must deal with its legacy issues and put itself back on sound financial footing. The success of the EM process, therefore, is critical to the city’s future vibrancy.”

If there’s an unofficial theme to a Mackinac conference heavy on themes of education, entrepreneurship and global competitiveness, as well as a session devoted to Mayor Dave Bing riffing on the makings of his legacy at City Hall, it’s “What Will Orr Do?”

The Washington bankruptcy lawyer-turned-EM won’t be on the island to offer answers, despite repeated attempts by ranking chamber officials to woo him to the annual confab.

But speculation about his next moves and whether they might, in fact, include lightening the DIA of some of its works likely will fuel lots of nervous chatter on the Grand Hotel porch.

“So much depends on the emergency manager’s efforts,” Cynthia Pasky, CEO of Detroit-based Strategic Staffing Solutions Inc., wrote in an email. “He has the difficult task of trying to balance the city’s books while at the same time preserving essential services and putting us on a path to sustained fiscal stability.”

That won’t be easy, as a quick read of Orr’s 45-day report to the state Treasury Department makes depressingly clear. The good news is that many of the state’s business drivers, as well as state government, are on demonstrably more solid footing than they were just a few years ago — a potential backstop for Detroit’s worsening financial problems.

The challenge is for the state and its business community to retain a collective competitive edge honed under the duress of the global financial meltdown, the Detroit auto collapse and the national recession that exacerbated it. What’s the biggest threat to Michigan’s momentum, I asked Doug Rothwell, president of Business Leaders for Michigan?

“Complacency with being competitive, a satisfaction with the fact we’re no longer in turmoil” he said in an interview. “Being competitive gets you into the game, but it doesn’t mean you’re going to win. When you step back, there’s still a lot that needs to be fixed or won’t be fixed for some time to come. It’s a work in progress right now.”
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Daniel Howes’ column typically runs Tuesdays, Thursdays and Fridays.