Comments on: Ann Arbor LDFA Looks to Extend Its Life it's like being there Tue, 16 Sep 2014 04:56:38 +0000 hourly 1 By: Mary Eastcreek Mary Eastcreek Tue, 01 Jul 2014 03:15:01 +0000 @18 From the report:

“The Pure Michigan tourism campaign generated its best return ever in 2012, drawing an estimated 3.8 million people to the state that spent more than $1.1 billion during their stay, according to new research data…

The data show that 3.8 million people visited Michigan last year from other states, an increase of about 580,000 visitors from 2011. About 2.3 million people came from states in the Great Lakes region and 1.5 million traveled here from longer distances, according to Longwoods.”

Another in a long line of MEDC (written by or conducted for them) puff pieces. The premise of the tax “ROI” appears to be that but for Pure Michigan, nobody would ever visit the state so the spending of every visitor is attributed to the ads. That’s right out of the “if not for us, no business would come here” playbook.

It assumes every dollar spent generates 7% in state taxes. That seems reasonable enough.

How many additional visitors we had attributable exclusively to the Pure Michigan ad campaign would be informative. Of course, that’s nigh impossible to quantify, so they are free to make up whatever numbers they wish and say “Prove us wrong!”

It’d be neat to know, too, how many of those visits were by out-of-staters “coming home” to visit friends and relatives–after they left the state to find work or a less suffocating socio-political atmosphere. Their spending would hardly be attributable to an ad campaign.

Visits increased 18% from 2011 to 2012–from 3.22 million to 3.8 million, according to the report. Spending increased 13.3%, from $997.4 million to $1,129.7 million. Assuming every new dollar was attributable to Pure Michigan, and that there would have been exactly the same number of visitors in 2012 as in 2011 even without it, the incremental tax revenue is $132.3 million x 7%, or $9.3 million. That’s on a budget of $13.7 million. That’s a return of $0.68 for every $1 “invested.”

I’m not saying my assumptions are all correct; I’m saying that depending upon the assumptions you use, you can come up with conclusions radically different than what the MEDC would have you believe.

By: Kurt Riegger Kurt Riegger Mon, 30 Jun 2014 05:01:32 +0000 @16 Pure Michigan Campaign data
A third party, Toronto based Longwoods International, did the audit and analysis. Could be bogus but at least there is an arms length party preparing the numbers (not self reported).
This is state tax revenue returned for state tax dollars spent. I think as taxpayers we would be happy with dollar for dollar recovery — and more total Tourism business revenues in MI.

From a press release:
“Last year’s campaign brought in $5.76 in state tax revenue collected for every $1 spent on tourism promotion, up from $4.88 in 2011 and the best ROI since the state launched the Pure Michigan brand in 2006. The improvement for the overall promotion came on the strength of the national advertising campaign and was despite a lower ROI from a regional campaign in Great Lakes states.

The cumulative ROI over seven years totaled $4.10 for $1 spent, up from $3.70 as of 2011, according to data from the Toronto-based tourism research firm Longwoods International.”

- See more at: [link]

By: Tom Whitaker Tom Whitaker Mon, 30 Jun 2014 03:11:53 +0000 @14: Why should any believe for one second that the Pure Michigan campaign brings in $4 for every $1 spent? This data is even fuzzier than the jobs data. Futher, they are apparently saying that the campaign generates four private sector dollars for every public sector dollar spent. How much of that $4 goes back to the public sector?

By: Fred Zimmerman Fred Zimmerman Sun, 29 Jun 2014 16:02:55 +0000 @14 — I like the thinking here which is expressed in a more analytical and more constructive manner than the events described in the Chronicle. I might quibble about some of the details but this is the right direction and the right skill set to have involved.

Also a lifelong resident and recall the same long history of Michigan’s efforts to diversity and deal with structural unemployment. Here perhaps we diverge somewhat as I think there may be good reasons to use targeted mechanisms to assist perennial “winners” like Ann Arbor as well as perennial sufferers (“losers” would be a trivializing word choice).

By: Kurt Riegger Kurt Riegger Sun, 29 Jun 2014 04:39:37 +0000 First, excellent reporting and commentary. Thanks Chronicle for being there.
(1) If SPARK’s entrepreneurial services are working well, there should be good results to share. Who are those companies? Seelio is one; Avagent is another. Ornicept and Message Blocks are mentioned in the 2013 report.
(2) If the overall expenditure on SPARK is working (about $5M/year including $1.4M operating), the new tax revenues and even school district taxes that are captured by those new companies/expanding companies should funnel to the State more dollars than the TIF funds plus local units of government investment. If this is not happening after 8 years of operation, we should ask why and is it time to change something?
To avoid the label of ‘corporate welfare’, investing in Econ Dev programs must generate more taxes than it costs. The Pure Michigan travel campaign generates $4 for every $1 expended. ($79.1M in 2012 for $13.7M expended.)

As Councilmembers Petersen and Lumm have asked for previously of the LDFA/SPARK, this requires metrics. This requires transparency and accountability. I would add it requires performance at a level that justifies the dollars. With $1.9M this year, the total on Entrepreneurial Services from Jun 2006 to Jun 2014 is greater than $10 Million.

For the Entrepreneurial Services side of SPARK, my suggestion is to post a simple report that shows by year
Total TIF capture/Other MEDC:
Matching or reinvested dollars added to fund Entrepreneurial Services:
Total SPARK expenditure:
Administrative LDFA/Auditing:
Net Fund Balance:
These were the numbers that several council members asked for recently.

Within SPARK expenditure for Entrepreneurial Services to further breakdown:
Facilities (incubators+offices)
Directly on Companies (Phase II/III/IV engagements)

Total Startup Companies assisted: 124 for 2013;
Total Entrepreneurs educated:
List of Successful companies and their metrics summed (revenue, jobs-FTE & Contract, new hires FY, capital raised) for those successful companies.
All of these numbers should be readily available and posted at the LDFA website, SPARK website and other places for reference.

Finally, big picture, the SmartZones are designed to diversify the economy of Michigan, and specifically the enabling legislation was designed to deal with structural unemployment. As a life long resident and someone who follows the UM Economic forecast each year, Ann Arbor is the least likely area of Michigan to have structural unemployment. Downtown Ann Arbor is even less likely to need help. Ann Arbor has the most venture capital of any city in Michigan and more resources by virtue of the UM for assisting entrepreneurs. The bar should be very high for outputs from Ann Arbor.

Metrics should not be “forced upon” or a necessary evil for SPARK. Like many high performing businesses, the key metrics should be publishing on the walls of their building. Walk in and see the chart. Visit the website and see the chart. What do they measure to guide the organization?

By: Tom Whitaker Tom Whitaker Fri, 27 Jun 2014 12:09:43 +0000 @12: I say bring the School Aid Fund the replacement $1.8 million (and millions more skimmed over the years) the State promised to reimburse it for these crony-capitalist TIF schemes before extending the LDFA.

If the State doesn’t have the money, then the private sector should step up to pay for these private sector entrepreneur programs which belong completely in the private sector anyway. But of course, that isn’t the plan. The plan is to convert as much public sector money into private sector money as possible (See: ALEC, Mackinac Center, Heritage Foundation, etc.)

I’m still shaking my head over the fact that the head of SPARK makes over $250,000 to run a 22-employee “non-profit.” It’s simply obscene. Whatever metrics you want to use, I can tell you that there is no local, non-profit social service agency heads making anywhere close to that kind of money.

By: Fred Zimmerman Fred Zimmerman Thu, 26 Jun 2014 21:16:44 +0000 @11 -I think it is a mistake to fix too closely on the job creation claims numbers. I never put much stock in them anyway. To be fair, I don’t put a lot of stock in the human services “output metrics” either. I think a good outcome here would be for SPARK to move away from trumpeting job creation metrics and City Council to move away from focusing on flaws inherently fuzzy data.

There should be absolutely no question that the LDFA is going to be extended. It’s infuriating to me that a Council member would even put that on the table. Bring Ann Arbor entrepreneurs replacement $1.8M and *then* talk about getting rid of the LDFA.

By: Jack Eaton Jack Eaton Thu, 26 Jun 2014 14:44:37 +0000 Thank you for another informative article.

Re (10), Council has no interest in micromanaging the LDFA or SPARK. The LDFA receives millions of public dollars because the Ann Arbor City Council authorized the creation of LDFA. The LDFA passes much of that money over to SPARK under contract to perform services.

I am unaware of any Council member who wishes to tell the LDFA or SPARK what to do to encourage economic development or how to do the things they decide to do. Instead, some of us are interested in having the LDFA and SPARK account for what they have done with those millions of dollars of public money. The City of Ann Arbor has more rigorous reporting requirements for human services entities who receive public money than we have for these economic development entities.

For many years we have been told that the LDFA and SPARK are a grand success, in part, because of all the jobs they have created and retained in our community. It turns out that the jobs numbers represent the original intent of the employers who received assistance from these entities, not the actual number of jobs created. I would like to see the verifiable job numbers.

Accountability is not micromanagement. We are merely engaging in responsible oversight. Before Council decides whether to extend the LDFA’s authority to operate for another 15 years, we must be sure it is making good use of the public funds we allow it to capture.

By: Mary Eastcreek Mary Eastcreek Thu, 26 Jun 2014 00:31:07 +0000 Dave:

How did the ludicrous notion that AA (or any other) schools forward the proceeds of the local operating millage to the state gain traction?

“That’s because in Michigan, local schools levy a millage, but the proceeds are not used directly by local districts. Rather, proceeds are first forwarded to the state of Michigan’s School Aid Fund, for redistribution among school districts statewide. That redistribution is based on a per-pupil formula as determined on a specified “count day.”

Generally (the school aid formula is a real Rube Goldberg contraption), local districts keep all the local millage. If it’s more than the per-pupil allowance (e.g., per pupil allowance is $5,000, you have 2,000 students, and the local millage brings in more than $10 million), that’s the end of that–you are “out of formula” and get no state aid. Most schools are “in formula” though. They get money from the school aid fund (made of the state education tax, part of the sales tax, use tax, and sundry others) to bring their per pupil allowance up to the minimum, and more for some. Nobody sends their local millage to Lansing.

When the LDFA takes the AA school millage, the school aid formula gives it back to the district. The same is true for all the tax increment districts around the state that “capture” school taxes. That reimbursement comes out of the general pot of money in the school aid fund. It just keeps the school district from being poorer because of a DDA, LDFA, or whatever, took their money.

If that happens to be $15 million the schools get reimbursed, it means every single school district takes a $10 cut in per pupil funding (the state has about 1.5 million public school students.)That, or statewide $15 million in programming doesn’t get funded.

School taxes captured by tifas are funded by every single school in the state. Public education dollars are skimmed off to fund economic development to the tune of tens of million of dollars annually. If AA loses $1 million to the LDFA and Lansing makes it up, that’s $1 million lost that would have been otherwise available for school spending somewhere, whether AA, Bridgman, Detour or Ontonagon.

While the state says they hold the local schools harmless, the reality is that the pot of money to provide public education is smaller because of it. That’s the dirty little secret of tifas.

If the council or anyone else wants to know the upshot of extending the smart zone another 15 years, it’s this: you aren’t costing the AA schools–you’re costing every single public school district in the state. The ones who suffer the most? Ironically, it’s the towns who don’t have tax capturing authorities. Their school districts lose money, but they don’t have any DDA’s taking it.

You know that hockey rink going in down I-94 for which the legislature and the governor changed the law in order to contribute another $12 million a year in school taxes toward its construction? Mr. Ilitch can thank the school children of Michigan for it. They are graciously, if unwittingly, paying more than half its cost.

By: Fred Zimmerman Fred Zimmerman Wed, 25 Jun 2014 20:46:10 +0000 Alan, LOL on Google Translate, but I think it’s working pretty well here. I am generally sympathetic to the idea of informed and energetic citizen leaders but what I see so far is a lot of asking questions, a lot of on-the-job training, and very little leadership. Asking probing questions is not exercising positive leadership. SPARK has a specific constructive agenda that is focused on helping Ann Arbor citizen entrepreneurs compete in a highly dynamic and challenging national and global marketplace. I’m not going to be impressed by the micromanagement coalition until they start bringing forward positive ideas that address the same issues.