The Local Area Watch

GUV JEN'S GOT A PROBLEM WITH THE TRUTH, TOO

We have, of course, taken Dick DeVos to task for his slippery rhetoric and dishonesty in his campaign for governor.  Governor Jennifer Granholm hasn't been much better.  Today she ran a campaign ad on t.v. declaring that she would never take money from our public schools to give tax breaks to "rich corporations".

Oh really?  And what is her economic plan founded upon other than tax breaks to select companies?  According to the Wall Street Journal earlier this week, in April Guv Jen doled out $40 million in tax breaks to General Motors to retool a couple of its plants.  In September she gave away $28 million in tax breaks to Ford to overhaul its powertrain plant in Flint.  The month before she told Ford she is ready to "invest" $151 million in the company to retain 50,000 jobs in Michigan.  That figure would be in addition to the $315 million in tax breaks and loans that the good governor showered upon favored businesses in just August and September this year as the campaign heated up.

No doubt Guv Jen has a slick answer about how all these giveaways don't contradict her campaign ad, just don't believe it.

GETTING DOWN TO BUSINESS WITH DICK AND JEN

GUV JEN HASN'T A CLUE ...

The governor's race has focused upon what policies will best generate jobs in Michigan.  Governor Jennifer Granholm's campaign has skewered her opponent Dick DeVos, because his family's company, Amway Corporation, took $965,000 in corporate welfare from the state in the early '90s to keep from moving a distribution center to Georgia.  However, corporate welfare is the key to Guv Jen's economic program to create new jobs in Michigan.  So far her administration has handed out $315 million in tax breaks and government loans to Michigan businesses, and she is trying to give even more taxpayer dollars away to flailing automakers General Motors and Ford.

Thus, Amway sucked up the taxpayers' cash just like she wants any business to do that she picks out as recipient for corporate welfare.  So Guv Jen's criticism of Dick Jr. is in fact an indictment of her own plan for revitalizing the state's economy -- and a somewhat incoherent one at that.  But then, when it comes to business, Granholm hasn't a clue.  There is nothing she, or any public official, can do to sort out the mess the big automakers are in.  Automaking is going through a revolution in technology and international trade, and General Motors and Ford are on the skids today, because they didn't prepare for the future.  Guv Jen forking over our tax dollars to the companies in the vain hope of job creation by them is no better than setting fire to the money.

If Granholm can't figure out the fundamental problems with two large and very well-covered companies like GM and Ford, then why should we have any comfort in her decision to pour more than a hundred million taxpayer dollars into small "high-tech" businesses?  If the pros on Wall Street were blind to pumping billions of dollars of capital into a dead-end high-tech sector just before it collapsed half a decade ago, who in his right mind thinks the governor, beauty queen/lawyer/politician, is going to place smarter bets on high-tech?  It's just another rathole for the taxpayers.

What's particular disgusting about Guv Jen's whole approach to the economy during this campaign is that she indulges in business-bashing to appease her union contributors while stumping for more and more corporate welfare.  It would appear that Granholm thinks a business is respectable only if it takes a hand-out from the state.  So why Amway, Dick Jr., and his family don't shine in her eyes, I just don't know.  After all, none of them have been shy about taking millions of taxpayer dollars to fund their business ventures.

... BUT THEN DOES DICK?

And that now brings us to DeVos's promise to revitalize the Michigan economy.  Actually he's been short on specifics.  Of course, he says that the hated Single Business Tax (which is an insane way to raise revenues) must go.  Even Guv Jen sees the sense in that.  But he says in a vague way that Michigan businesses will have to replace the two billion dollars that the tax collects annually by paying some other sorts of taxes, while not promising to put an end to Guv Jen's corporate welfare programs.  That still boils down to the same old pipe-dream of the government boosting the economy by collecting taxes from most businesses and then forking over the largesse to favored businesses supposedly incentivized to create new jobs.

What DeVos really expects voters to do is rely upon his claimed business acumen to finesse better than Granholm this old and discredited redistribution plan.  Setting aside the fact that these redistribution plans have never worked to the benefit of taxpayers (only to politicians who make themselves look good by handing out the cash), let's take a look at whether or not Dick Jr. has the savvy to make it work somehow.

We can start with his corporate experience.  He landed a job as Amway's chief executive from 1993 to 2002 because -- well, because he was the owner's son.  DeVos boasts that as the boss he pulled the company out of the dumper.  Keeping in mind that Amway was fishing around for chump-change corporate welfare checks before he took over, and it is now apparently profitable, let's take him at his word.  But he didn't improve the performance of Amway so well that it became a bigger employer in Michigan.  In fact, it is now a smaller employer, and part of that is because under DeVos the company lacked the clout to tell the Chinese that Amway will supply products to that country from its factory in Michigan.

Now Dick Jr. is chief executive of Windquest, a small closet-organizer company.  That wasn't the case in 1989 when he founded the company as a venure capital firm.  One of the big opportunities Windquest passed up was buying Prince Corporation, a successful automotive component supplier owned by his wife's father.  Her father died intestate, which meant estate taxes had to be paid on it.  What a chance for Dick Jr. running a venture capital firm to pick up a large and profitable manufacturer -- you know, a REAL business.  He passed.  Instead Windquest went downmarket, closed its doors to the venture capital trade, and bought a small outfit making trays and shelves for storing the clutter in closets.

By criticizing DeVos on this score, I do not mean to denigrate small businessmen.  It takes a solid set of skills most people lack to keep a company running, big or small.  But let's face it.  If you have a lot of capital to throw at a small business to keep it going, you haven't done anything special.  And that brings us to how well Dick Jr. does picking business investments.  We need look no further than the Alterra fiasco, in which Dick Jr., his family, and their associated ventures flushed away $173 million over the course of a few years.  That is sufficient evidence that we cannot trust DeVos to pick the right businesses to invest our tax dollars in.

GETTING DOWN TO BUSINESS

So neither candidate has given us good reasons to trust their plans for rejuvenating the Michigan economy.  Governor Granholm doesn't understand business.  She thinks that corporate welfare is the way to make a business successful.  What eludes her is why a business needs the hand-out in the first place.  If private capital isn't willing to take the risk to invest in a business, what in heaven makes Granholm think that the taxpayers should then step up to the plate?  It is one thing to reduce the overall tax and regulatory burdens the state places upon business, so that start-ups have lower hurdles to clear on their way to becoming successful businesses and already-successful businesses are attracted to the state's friendly climate.  It's another to tax one business to give that money to another.  It doesn't work, plain and simple.

And Dick DeVos isn't going to make the unworkable work because of his self-proclaimed business acumen.  If he indeed had that acumen, he could make a persuasive case to the voters as to how lessened burdens upon business actually increase jobs and the taxbase in Michigan instead of vaguely arguing he will make things work better than Granholm has.  In any event, it just isn't clear from his record that DeVos has the business acumen he says he does.  So the bottom line when it comes to the state's economy, the voters have a choice in the governor's race between Tweedle-Dee and Tweedle-Dum.

CORN AND THE TAXMAN

Periodically agribusiness manages to get the politicians and the bureaucrats excited about throwing your tax dollars down a deep dark hole called "alternative fuels", ethanol in particular.  The latest ethanol craze comes from the hysteria over this summer's spike in gasoline prices (and hysteria is the word, seeing that last summer's spike was in fact higher and in any event prices have already dropped by almost a third).

Ethanol is an alternative to gasoline made from corn.  You can pump it into your car just like gasoline, which will run fine on it.  So ethanol is an alternative fuel that is practical for ordinary people to use without much fuss.  Plus, people like the idea of growing "gas" right here in our own backyard instead of importing petroleum from all those foreign hotspots.  So why not use the stuff?

No reason, except that ethanol is competitive with gasoline only because your tax dollars are subsidizing well-heeled corporations to distill corn into ethanol -- and increased production of this fuel is predicated upon public funding of new ethanol plants.  Now, some might say that this tax subsidy is good policy, because it will reduce our dependency upon foreign oil.  No, it won't.  The prospect of bio-fuels substantially displacing fossil fuels like petroleum is a myth.  This is because, as I have noted elsewhere, there is not enough land in this country to grow the biomass needed to dispense with petroleum, let alone coal and natural gas.

But you don't have to take my word for it.  On Saturday the Grand Rapids Press ran an opinion piece by Kenneth Piers, a professor of chemistry at Calvin College.  Prof. Piers noted that: [1] Michiganders consume about 5 billion gallons of gasoline annually; [2] if EVERY bushel of corn grown in Michigan were distilled into ethanol that would produce only 617 million gallons of ethanol; [3] a gallon of ethanol provides only 65% of the energy of a gallon of gasoline; and finally -- this is the kicker -- [4] the production of 1 unit of ethanol energy requires 3/4 of a unit of petroleum energy (to plant, fertilize, harvest, dry, transport, and distill corn into ethanol among other things).

According to Prof. Piers the bottom line is that ethanol would replace at most 100 million of the 5 billion gallons of gasoline Michiganders use every year, or two percent, and only if the state's entire corn crop went into the production of ethanol.  That means no corn for food, including feed for animals we use for food.  In other words, ethanol replacing gasoline -- it ain't gonna happen.  So, Prof. Piers's closing remark should give us pause about feeding the taxman any more of our dollars for the ethanol boondoggle:  "Before we rush into large investments in corn-to-ethanol plants with publicly-funded incentives, we should ponder the realities ..."

MISSING THE POINT

Maybe I have missed the point of the DDA's "Keep It a Secret" campaign.  (See preceding article.)  Maybe they really mean it.  I looked for the website that was supposed to be the reason for the increased cost of the campaign by googling "keep it a secret" plus "Grand Rapids", and I couldn't find it in the first 100 hits.  I guess the campaign is more effective than I thought.

SIMPLE SAYS IT BEST

Most of us are now familiar with the bill-of-goods that the Hanon McKendry ad firm sold the Downtown Development Authority with the "Keep It a Secret" campaign to promote downtown Grand Rapids.  You know what I'm talking about:  The allegedly clever tagline plastered on a drab logo of sloppy circles.  Indeed, the circles are mostly in camoflague colors which surely helps to keep it a secret.

We learned late last week that the Hanon McKendry has sent another big invoice to the DDA, boosting the campaign cost by 50% to $126,000.  Only now does the folly of this promotion seem to be dawning on some of the members of the DDA.  Of course, closing the barn door after the horse has bolted is little comfort to the downtown businesses forced to pay for this nonsense.  Where was the DDA's supervision of Hanon McKendry as it developed the "Keep It a Secret" campaign?

It seems to be the thing in advertising lately to promote supposedly provocative themes that don't appear to have any obvious relationship to the product being pitched.  I noted this most recently when in a commercial for the lemon-lime pop called Sprite.  In it a pair of sumo wrestlers, painted in green and yellow respectively, slam their capacious guts into the head of a man looking for refreshment.  How thirst-quenching.  Yeah, I remember Sprite now.  I also don't want to drink it anymore.

While the "Keep It a Secret" campaign isn't as repulsive, it is as pointless.  Advertising doesn't have to be complicated.  Simple says it best.  Identify the best quality of downtown Grand Rapids.  Identify the greatest advantage we have over competing city centers.  Identify the one unique thing about us that is good.  Three words can say it all.  Then attach those three words to a colorful eye-catching logo that actually means something, like the City's "sun-river-Calder" logo does, and -- voila! -- you have an ad campaign that actually communicates something to people.

And I don't think that would've cost $126,000, unlike the rocket scientists who gave us a slogan that says precisely nothing and used olive green as the eye candy in a logo.

THE LATEST PROJECT OF THE ELITE

The Sunday edition of the Press published an essay by Susan Lovell.  Ms. Lovell works with local rich guy and environmentalist Peter Wege.  (You might remember that Wege pulled out of the Clearwater Plaza deal pitched by the Global Enterprise for Water Technologies after its contamination by Berkey & Gay waste became public.)  In her essay she scolded those who oppose using taxpayer dollars to fund “Purchase of Development Rights” deals in Kent County.

A PDR is a transaction in which the Kent County Farm Preservation Board buys the development rights of a farmer’s land for $4,000 an acre.  The farmer pockets the cash and then either keeps farming the land or lets it goes untended back to nature.  Or he can sell his land or pass it on to heirs, who can either farm it or let it go wild.  However, none of them can develop the land for residential, commercial, or industrial use, because the preservation board has purchased those rights.  The purpose of a PDR program is to stop dead in tracks any further suburban development in Kent County.

Fortunately, the Kent County Board of Commissioners has refused to fund PDR deals with taxpayer dollars.  (Unfortunately, our federal tax dollars are still going into this program.)  Ms. Lovell continues to express her disgust with the commissioners, because she deems any suburban development of farmland as “urban sprawl”.  (A nicely loaded term to vilify what a working stiff does when builds a ranch house on an acre or two in the sticks.)  She believes that everyone except farmers ought to remain packed in our cities instead of having the opportunity to buy a modest home out in the country.  She has no sympathy for the fact that taxpayers would be forced to pay for land they cannot have any access to, either directly or through their government.  The property remains in private hands.  Disingenuously, she argues that would be the same result if a private developer bought a farmer’s land to build a subdivision.  Sure, except that the developer is using his own money, not ours.

Furthermore, Ms. Lovell argues that taxpayers then have to pay for new roads, sewers, schools, etc., to support new subdivisions which they wouldn’t if they funded a PDR instead.  Well, yeah, except that the taxpayers must pay for these things whether inside or outside the city, and besides they get to use this public infrastructure.  This is not true of the PDR’s that Ms. Lovell would force them to buy.  The taxpayers can’t develop the land – despite having paid for the very right to do so.  Indeed, they cannot even use it.  The farmer they paid $4,000 an acre gets to keep using the land for his own personal benefit.  The taxpayers get nothing for their money.  Nothing!  Ms. Lovell no doubt believes that the taxpayers get some sort of intangible benefit from all the farmland that would forever be locked up from development, but exactly what is not clear.  After all, any attempt by a taxpayer to enjoy in any concrete way this allegedly precious open space he was forced to purchase would likely be met with a backside full of buckshot from the farmer.

Ms. Lovell then indulges in the scaremongering that has become of hallmark of the environmentalist crowd:  “We all suffer the environmental and social damage of urban sprawl.  More traffic, more asphalt, more polluted air, more dirty water.  This push farther out of the city leaves behind lower-income households, meaning fewer tax dollars to fund the city’s schools and fewer students to attend them.”  Of course, facts don’t matter in an environmentalist crusade.  The population of the City of Grand Rapids has increased at the same time more people have moved out into suburbia.  The reason the city’s school district loses students is because of competition from suburban districts, charter schools, and parochial schools.  Moreover, after four decades of suburban development perhaps an area equivalent to six townships in Kent County are urban or suburban in character.  That leaves three-quarters of the county as farmland and wilderness!  Ms. Lovell is playing Chicken Little.

In short, Ms. Lovell is a member of the elite who has decided for the rest of us how we should live, what we should or should not like, and how we should enjoy “open spaces” that would actually be closed to us.  Plainly she is unhappy that people of modest means have, in increasing numbers, been able to buy a couple of acres of countryside to raise a family or enjoy a peaceful retirement.  She doesn’t like the fact that not all of us are happy to be city-dwellers under increasingly mismanaged governments, excessive taxes, brutal crime, and rotten schools.  (Living in Heritage Hill, I obviously revel in the urban rot and decay around me, but I unlike Ms. Lovell don’t expect everyone else to share my tastes.)  It takes a certain arrogance for a person to think that her particular choices should be mandated by the force of law.  Six decades ago, F.A. Hayek in his seminal book “The Road to Serfdom” explained that arrogance well by describing the tyranny and folly of central planners.  If Ms. Lovell wants to persuade people to voluntarily contribute to her cause, great –- but leave the rest of us out of the plan.

Oh, by the way, Ms. Lovell doesn’t live in the city.  She resides in Grand Rapids Township.  ‘Nuff said.

PICKPOCKET ALERT!

In the same article about DeVos, reporter Mark Fellows covered a statement by David Frey, co-chairman of the Grand Action committee, about public-private partnerships.  "We have never asked the city, county, DDA, state of Michigan, or our friends in Washington [i.e., the taxpayers] without first having private sector support in hand," according to Frey.  Hmm.

Keep in mind, folks, that one of Grand Action's big projects is a local campus for MSU's unwanted and unloved College of Human Medicine.  Some estimates of the cost of bringing the medical school to River City reach $600 million, along with a plethora of assurances (or at least double-talk) that the taxpayers won't be tapped for building part of the infrastructure that the Van Andel Institute demands for realizing its bio-tech dreams.

THIRTY-SIX BUCKS

Grand Rapids City Manager Kurt Kimball released the annual budget for the city government yesterday.  He told the Grand Rapids Press it was a "tortuous process" eliminating dozens of city hall office jobs including twelve assistant city managers.  (Twelve!  Why did we ever need so many?)  It is interesting that Kimball said the process was "tortuous" which means "marked by devious or indirect tactics" as opposed to "torturous" which means "painfully difficult or slow".  I wonder what trickery might be involved in this new budget.

For one thing is Kimball's great howls of distress over a budget deficit that is actually quite small.  Relying upon the figures printed in the Press, the general fund budget (which isn't all that the city government spends, but accounts for most its operations) for the next year is set at $118 million.  The budget shortfall will be $3.2 million.  That's it.  A 2.5% across the board cut in the general fund expenditures would balance the budget.  But that will never happen, because that would mean taking a slice out of the 800-pound gorilla of city expenditures, the salary and benefits of city employees.

That's where most of your city tax dollars go, folks.  As a result the average annual salary and benefit package for a city employee is $81,552.  Not bad for government work.  After Kimball reduces the city staff by a net total of 43, there will still be 1,690 city employees.  If, instead of the taxpayers and residents of Grand Rapids receiving fewer services and paying higher user fees, city employees bore the brunt of the $3.2 million budget shortfall, then the cost to each one of them would be only $36 a week.

Is that so much to ask of public servants who, on average, are more highly compensated than the people who are paying their salaries?  Of course not.  But then City Manager Kimball works them, not you.  So don't expect him to put the public interest ahead of their pecuniary interest.

IT COULD BE WORSE

As bad as the economic and fiscal fortunes of the Great Lakes State are and the unsatiable public sector unions, the growth-stifling Single Business Tax, the moribund automotive industry, the slough of Detroit, a governor who's in over her head, and a challenger whose only experience with making money is a pyramid scheme, let us count our small blessings and remember we aren't New Jersey.  Read here Steven Malanga's article in "City Journal" about how the Garden State is consuming itself in a downward spiral of overtaxation, overregulation, and the corruption that comes of that.

LET'S MAKE BELIEVE

The Grand Rapids City Commission met this morning as it usually does in a "Committee of the Whole" session.  The commissioners were briefed on the budget the City staff prepared for the FY2007 budget.  To make the numbers for more spending work (primarily wages and benefits for City employees and retirees), the staff figured that income tax receipts, the City's government biggest revenue pot, would increase by 3%.

Mayor George Heartwell would have none of this nonsense!  He charged that the staff did not put any thought into that assumption of a 3% increase.  Now maybe you're thinking that the mayor, as the elected guardian of the public's interest, was chastising the staff for positing a rosy scenario.  If so, you're forgetting that Heartwell isn't happy if he isn't spending more and more of your money, folks.  He was p.o.'ed with the staff because they hadn't forecast even higher tax revenues.  They wouldn't give Santa Heartwell enough make-believe money to give away to all the progressive boys and girls.

The staffer briefing the City Commission reminded the mayor that big job losses from Steelcase etc. mean a large outflow of income tax revenue, among other things.  He even admitted that a 3% increase was optimistic.  Indeed, Second Ward Commissioner Rick Tormala pointed out that presently income tax revenues are increasing only at a rate of 1.9%.  Already the staff's semi-rosy scenario is off by almost 60%.  Yet, Heartwell wants more make-believe tax dollars to squander -- and certainly not on your parks and pools, cops and firemen, and streets.

THE LIE OF ECONOMIC DEVELOPMENT

This afternoon the Grand Rapids Press reported that a Harvard University study found that the City of Grand Rapids ranked third out of 82 cities in the nation in percentage of job losses from 1995 to 2003.  During that period Grand Rapids lost nearly one-fifth of the jobs that had been within the city limits.  Only Amarillo, Texas, and Detroit suffered a more severe decline.

So much for taxpayer-funded economic development.  Michael Porter, the Harvard business professor who conducted the study, found that none of the cities that gained the most jobs -- Jersey City, Long Beach, Tulsa, Anaheim, and Seattle -- participated in federal empowerment zones and other federal programs designed to create inner-city jobs.  But this was no surprise.  Alan Berube of the liberal think tank, the Brookings Institution, noted that these economic development programs are marginal at best in creating new jobs.

Apparently none of our local economic development officials, such as Susan Shannon, the Business Advocate for the City of Grand Rapids, and Birgit Klohs, Executive Director of the Right Place Program, had anything to say about the dismal ranking of River City.  Instead of questioning their job-creating performance while on the taxpayers' dime during these past several years, they would prefer to divert everyone's attention to the dream of bio-tech riches they tell us will be showered upon Grand Rapids somewhere in the distant future ... but only if we now pony up more in tax dollars and donations.

Instead of listening to yet another siren song of government-sponsored prosperity, we should keep in mind the wasted tax dollars we have already handed over to economic developers while Grand Rapids lost one out of every five jobs located here.

LIVING WAGE KILLS JOBS

I suppose the economic illiteracy of people seeking public office shouldn’t surprise me anymore.  The Grand Rapids Press reports that James Jendrasiak, seeking re-election to the Grand Rapids City Commission, and Rosalynn Bliss, also seeking a seat on the commission, have endorsed a “living wage” policy for the City of Grand Rapids.  At a recent debate hosted by Grand Valley State University, both candidates would give city contracts to high bidders over low bidders if the former is paying so-called living wages and benefits to its employees.

Of course, there is no objective basis for determining what constitutes a “living wage”.  It is an arbitrary amount based upon a set of assumptions that take no account of huge variability of personal circumstances employees actually are in.  A living wage for a young guy sharing an apartment is one thing.  A living wage for a parent of three or four children is another.  A living wage for a couple with severe medical problems and sky-high health care bills is yet another.  The logic of a living wage is that a business should pay an employee what he needs to live comfortably rather than for the amount of work he does.

A true living wage policy embodies the insidious Marxist decree:  From each everything he has, to each everything he needs.  Because that doesn’t fly in this country, lefties like Bliss and Jendrasiak slap the feel-good phrase “living wage” upon a completely arbitrary policy of fixed market wages.  So it sounds good to compassionate voters who don’t think through the job-killing effects of mandating non-competitive wages, and the candidates get a pat on the back from the unions with large campaign war chests.

And if the living wage policy goes into effect, the taxpayers get shafted by overpaying government contractors.  Sure, the rich taxpayers can afford it, but what about the ones still climbing the economic ladder to success?  You know, the guy who needs to spend his wages on living, not higher taxes.  Of course, that assumes he is even earning a wage after his employer eliminates his job to stretch out the payroll to meet the demands of the government’s living wage policy.  The living wage is economic idiocy that a politician supports because he is either a cynic or soft-headed.

SOX FOR TAXPAYERS

This week the Grand Rapids Business Journal did a puff piece on the sale of The Zone, a team memorabilia outlet at the Van Andel Arena.  The article mentioned that The Zone was sold by DP Fox Sports & Entertainment L.L.C., which also owns the Griffins minor league hockey team and the Rampage arena football team both of whom call the Van Andel home.  Unmentioned was that DP Fox is one of the myriad of businesses owned and operated by the DeVoses, one of the Amway clans.  This is an excellent example of how one of the Amway clans, the Van Andels, put up a few bucks to persuade the public to build a facility and then the other clan, the DeVoses, swoops in to profit from the facility by running a business out of it.  Meanwhile, the taxpayers get stuck with the bill for the place, including its upkeep – like the $4.5 million in upgrades the Convention and Arena Authority recently reported it needs to make over the upcoming years.

Three years ago the U.S. Congress passed a bill called the Sarbanes-Oxley Act (commonly referred to as “SOX”) that mandated disclosure by publicly-traded companies to their shareholders of all transactions that might favor insiders.  How come the taxpayers don’t get the same disclosure from these “public-private” partnerships they have to foot the bill for, like the Van Andel Arena, the DeVos Place Convention Center, Rich DeVos’s new Marriott hotel that is receiving a $5 million taxpayer subsidy, or his Michigan Street medical towers complex that is getting $18 million or more from the taxpayers?  Why can’t we find out how the Amway clans (or any other private party) turn a buck from the public facilities we build and pay for?  Why don’t our public officials require disclosure to us by those who profit from our tax dollars?

BIO-TECH LOBBY BEATING THE DRUM FOR HANDOUT

A couple of weeks ago MichBio, a lobby of businesses, schools, and other organizations involved in biotechnology, held its annual conference in Detroit to drum up support for “stable funding” of bio-tech research and commercialization.  Next year the lobby will bring its show to the Van Andel Institute right here in River City.  Meanwhile it is opening up offices across the state.  No mystery as to all the fuss.  The Michigan House of Representatives just approved a $1 billion bond to fund bio-tech businesses in the state.  Once the state senate and governor sign off on it, the bond will be a done deal and the bucks will flow.

Of course, the whole thing is being pitched as a jobs creator because of all the new bio-tech businesses that this billion-dollar fund will supposedly build.  Why then are MichBio members like Pfizer Inc., a profitable publicly-traded pharmaceutical company, the University of Michigan, the most well-endowed school in the state, and the Van Andel Institute, allegedly backed by the late Jay Van Andel $2.6 billion fortune, holding their hands out?

If Pfizer has great ideas for bio-tech products it already has well-established access to the capital markets.  Why do the taxpayers need to help fund its research and development?  If it’s taking to long to bring a new drug to market, maybe it’s time to reform the notorious bureaucracy of the Food & Drug Administration instead of subsidizing the profitable pharmaceutical industry.

As for the University of Michigan, students with taxpayer grants and subsidized loans already pay through the nose for tuitions that climb at rates that wildly outpace inflation, only to be taught by wage-slave teaching assistants so that professors can spend their time doing research.  U-M’s research is already subsidized.  The taxpayers don’t need to shovel any more money its way.

Then there’s the Van Andel Institute.  Once again I must emphasize the one salient fact about its funding.  Van Andel pledged his Amway fortune to the support of the VAI.  Immediately after his death, his heirs who control the VAI disbanded the private foundation that Van Andel had supporting the institute to the tune of $30 million a year.  Since then the Van Andel children have refused to make any specific commitment to funding the VAI from their inheritance, while they have rattled the tin cup to collect contributions from the public.  So either the VAI needs the handout because the Van Andel heirs have reneged on their father’s pledge to support the institute with his fortune or there is no fortune in the first place.  The latter strikes me as most likely in light of the way both of the Amway clans continue to go to the public well for all of their projects.

The bottom line, folks, is don’t buy into the hype about this billion-dollar bio-tech boondoggle.  It will not be funding businesses that will create great jobs for you or your children.  It’s corporate welfare through and through.

BIG BUCKS FOR LEAN, MEAN, AND GREEN

Last month the Right Place Inc., River City's economic development agency, announced that it won a $400,000 grant from federal taxpayers to set up a test program to train manufacturers to increase productivity and reduce waste.  The grant is administered by the U.S. Environmental Protection Agency, so apparently the program's objectives have some sort of green angle to them.  Of course, the grant is a waste of money, because manufacturers already see the green in becoming lean and mean.  It's called profit.

KLOHS GIVES UP THE GHOST

Birgit Klohs is the executive director of the Right Place Program, the economic development agency for the Grand Rapids area.  The late Amway founder, Jay Van Andel, was the original patron for the program when Klohs founded it two decades ago.  Returning the favor, Klohs is the chief cheerleader for developing a "life sciences" infrastructure in River City to support her patron's biggest legacy, the Van Andel Institute.

As regular readers know, we are a bit skeptical about Grand Rapids successfully competing against the Bay Area, Boston, Seattle, San Diego, and other contenders for the title of North America's bio-tech capital.  We not even sure how Grand Rapids would displace Ann Arbor as top dog of Michigan's anemic Life Sciences Corridor.  That said, we wish everyone well who wants to invest their money in local bio-tech.  However, we don't think business ventures, especially risky ones like bio-tech that tend to move off to the coasts if successful, are any place for our tax dollars.  What doesn't get lost in that will otherwise end up in a lot of wasted bricks and mortar, concrete, and asphalt in a misguided "if we build it, they will come" pipe dream.

But our tax dollars are exactly what it's going to take to make a go of turning River City into a bio-tech mecca.  In a recent interview with the Business Review, Klohs made that plain.  She said that the effort to support the life sciences in Grand Rapids requires a united front of political leaders (read "taxpayers"), economic development agencies (read "taxpayers"), the education community (read "taxpayers"), finance and capital markets (read "buyers of taxpayer-backed bonds"), and the developers and construction firms (who will happily take the money from the rest of this "united front" to build anything they want).

No mention of the entrepreneurs needed to create the bio-tech business ventures that are supposed to provide all these great jobs and fabulous wealth for Grand Rapids.  Just a list of groups expected to pass around the existing wealth of taxpayers.  Then again, what entrepreneur is going to get excited about a city where he'll be taxed to help others get into a business that can't get started on their own?  Like I've said before, folks, whenever you here "bio-tech" from the locals these days, hang onto your wallets.  Klohs has warned you.

BANNED ON URBAN PLANET, PART II

The River City contingent of the Urban Planeteers have kicked up a minor fuss on their site over my last mention of them on this site.  To the set the record straight, I was banned from Urban Planet after I voiced my objection to the restrictions the site's host placed upon a participant who had voiced his sympathy with giving minority residents of G.R. a larger say in urban development.  The host had compared this to supporting a Klan rally that had been held near Spring Lake.  I thought the host had acted unfairly and was giving the discussion a nasty and entirely pointless racial cast, and I said so.  I of course engaged in neither name-calling or incoherent rants, contrary to the recollections of one the regular Planeteers.  Not much of a flame war, folks.

None of this important, except that it points to a larger problem evidenced by the Planeteer mentality.  The Planeteers are enamored with the idea that Grand Rapids can be planned into a "Cool City".  There are obvious problems with this, the most fundamental of which is how do you plan a city to be cool?  Another big problem, who gets to say what's cool and what's not?  Once the government gets involved, how do you contain the corruption of public-private partnerships?

However, the worst problem with the "Cool City" concept is that it is utopian and elitist.  If you don't fit into the plan, you're out.  Hence, the Urban Planet host's impatience with the idea that the uncool elements of River City should be guaranteed a say in downtown development.  To be sure, you can be dark-skinned in Cool City -- just make sure you are young, beautiful, and a professional.  As for wearing a blue-collar around town, fuggetabuddit.  Old, fat, or ugly?  No room for you in Cool City.  Of course, no normal person would want to live in Cool City.  It would be like being trapped in a never-ending episode of "Friends".  Egads!

The thing is Grand Rapids is a cool city, or at least it was.  Thirty years ago it was a cool city for a working stiff to get a decent job and raise a family.  The city was peaceful, pleasant, and affordable.  Sure, downtown was a drag during the brief era between the collapse of the big department stores there and the return of the nightlife.  But the neighborhood parks were great, the public schools were solid, and the civic life vibrant.  We may not have had big concerts rolling through town, but tell me that the annual river raft race wasn't a classically cool city thing?

Maybe a lot of people think my idea of cool is pretty square.  I can't argue.  To each his own ... and that's the point many of the Urban Planeteers don't get.

BANNED ON URBAN PLANET

The other day while doing a Google search I ran across a comment in the Grand Rapids section of the Urban Planet forum where a couple of denizens of our fair city harrumphed that your executive director is "anti-growth".  Exhibit A for their argument is this website.  Apparently they disagree with my lack of enthusiasm for taxpayer-financed boondoggles and white elephants.

I would respond directly in the Urban Planet forum to the gentlemen who think my criticism of so-called public-private partnerships is "anti-growth".  Alas, I was banned from the Urban Planet by one its hosts when I did not share his enthusiasm for a Ku Klux Klan rally held last spring in Spring Lake.  So I'll put my answer here.

I suspect my Urban Planet critics have bought too deeply into the fashionable idea that manufacturing is dead and therefore think the importance I place upon retaining industry in the urban core of metropolitan areas like Grand Rapids is antiquated and reactionary.  I also suspect that they do not understand that a metropolis consisting only of lawyers, doctors, accountants, teachers, bartenders, restauranteurs, professional athletes, actors, and scientists does not create the wealth needed to support itself.  If an urban economy is not founded upon people who make, grow, or mine things -- i.e., the creators of wealth, then to survive it has to subsidized from regions where this wealth creation occurs.  Of course, such a transfer of wealth is not politically sustainable, and to the extent that it endures, it is corrupting for the city receiving the hand-outs.  My Exhibit A:  Detroit.

If I'm wrong about what my critics think, then they should understand that wanting to preserve the wealth-creation engine of a city is pro-growth.  It is an organic part of a city without which it begins to die, even with transfusions of wealth from elsewhere.  And once you understand that a city is like a living, breathing organism, you begin to see that you cannot plan and control its growth.  Its development should be unforced.  At best you can only guide it.  You learn that you cannot make it "cool" by political fiat.  You become skeptical of grand designs like the Life Science Corridor that can only exist with taxpayer dollars.  And you certainly don't see the sense in giving a billionaire government subsidies for a hotel project that wouldn't otherwise work.

If opposing this sort of forced development, which does more to line the pockets of insiders than benefit the public, makes me "anti-growth", I'll happily wear that Orwellian label.

[Click here for the latest the Executive Director has to say about the Urban Planeteers. - The Editor]

THE GREEN SOLUTION

Yesterday I was reading an article in the Western Michigan Business Review.  It was about the construction of "environmentally-friendly" housing in downtown Grand Rapids.  The reporter prefaced her article with the tease that it usually costs a lot of green to build green housing, which puts such homes out of the price range of ordinary people, however, two non-profits organizations have joined forces to build affordable green housing here in the city.

Well, that's interesting.  I wondered to myself, how did they square that circle?  I read on.  The West Michigan Sustainable Business Forum, one of those fashionable nags chiding businessmen to embrace the "triple bottom line" and operate their companies on green principles, linked up with the Inner City Christian Federation, a builder of affordable housing for the past quarter century.  Together they have put forward a plan to build River City's first green and affordable housing project in the Wealthy-Jefferson neighborhood near Heritage Hill.  The project is called "My Healthy Green Home".

Well, OK, that's swell.  But how will this team build affordable homes with big-ticket green technologies and materials?  (And, yes, I know, I'm begging the question of just how much this so-called green technology actually benefits the environment.  But that's not the point here.  Right now all we need to know, as visions of Bambi frolicking with butterflies play in our heads, is that it makes feel good to use this expensive stuff.)  As I read on, I find out they won't.  David de Velder, ICCF's construction manager calculated that it will cost $175K to build a "My Healthy Green Home" compared to $115-135K for a similar home of conventional construction.

Well, jacking up the price of house by 30 to 50% to make it environmentally-friendly doesn't sound like a solution to making it affordable.  So what is the green solution?  Well, at the very end of the article, de Velder gives up the ghost:  They will seek subsidies from the state for the housing project.  So whatever benefits the "My Healthy Green Home" program may have for the environment, it looks like it's not going to be very healthy for the green in your wallets, fellow taxpayers.

BIG BIO-TECH HOO-HAW NEXT MONTH

The Western Michigan Business Review is hosting an economic forum on September 14th at the Van Andel Institute's auditorium.  The subject is "Life Sciences and the Economy".  No surprise now that bio-tech is the buzzword of the day.  All the usual suspects will be there, including taxpayer-supported Grand Valley State University, Western Michigan University, The Right Place Program, and the Michigan Economic Development Corporation.

Oddly, the big construction firm Owen-Ames-Kimball will also be in attendance.  Well, why not?  If there's to be a big public-private partnership to boost bio-tech in River City, then like all public-private partnerships here, it will involve a lot of bricks and mortar to prove to the taxpayers they got something concrete for their dollars.

The VAI auditorium will be open for seating at 4:30 p.m.  There's no admission, but you do have to register in advance.  To do so, phone 1-800-644-2846 or sign up at www.mlive.com/mbusinessreview/forum.

WATCH YOUR WALLETS

Two big tax subsidies for local bigshots hit the news yesterday ...

$7 million tax break for yacht-builder.

Guv Jen is picking winners and losers again.  S2 Yachts announced a $21 million expansion of its boatyard in Holland, Michigan.  The owners of the luxury yacht-builder are putting up two-thirds of that cost and you, the taxpayers, are covering the last third.  In return for the tax subsidies S2 Yachts says it will stay put in Holland and will add 400 jobs to its facility there.  So, folks, you now know the secret to getting a tax subsidy.  Threaten to leave the state, and the government will throw money at you to stay.  Just remember to send your change-of-address card to Guv Jen to get the ball rolling.

[An aside:  If any reader is a corporate accountant, maybe you can help me out here.  Four hundred jobs sounds like a pretty big number for a $21 million investment.  That’s only about fifty thousand bucks of capital behind each job, and I imagine a lot of that capital is going to bricks and mortar rather than productivity-boosting equipment.  I must wonder how many good-paying jobs the taxpayers are actually getting for contributing $7 million to S2 Yachts expansion plan.]

Amway billionaire gets new subsidies.

Well, let’s face it.  Amway co-founder Rich DeVos acquired his wealth through the world’s greatest multi-level marketing scheme, which by definition is financed with other people’s money.  So, should we be surprised that DeVos’s plunge into real estate development isn’t also financed with other people’s money?  A few months ago the alleged billionaire garnered millions in taxpayer subsidies to build a new hotel in the middle of downtown’s ailing lodging market.  A lot of howling over that.

However, nothing but the sound of crickets concerning the big subsidies for DeVos’s latest project:  The Michigan Street medical towers complex.  Technically the developer is Michigan Street Development L.L.C.  It is operated by RDV Corporation, which is owned by DeVos, Alticor Inc. (Amway’s successor), and The Christman Co. (a Lansing-based construction firm).  So far the politicians have approved $18 million in state and local tax breaks for DeVos’s project.  That figure represents 15% of the estimated $120 million price tag for the redevelopment of the corridor between Michigan Street and the I-196 expressway across from Spectrum Health’s Butterworth campus and the Van Andel Institute.

The pols and the developers are marketing the tax giveaway as an investment in River City’s burgeoning bio-tech industry.  Don’t be fooled.  Your tax dollars flowing into this project will not return one dime to you.  Indeed, it’ll cost you even more in the end.  These new towers are a for-profit venture and their largest customer will be Spectrum Health – of which DeVos just happens to be the former chairman and current boardmember.  At this year’s annual public meeting, Spectrum CEO Richard Breon announced an eight percent hike in hospital fees, which he justified as necessary to buy more space for the hospital’s operations.  Don’t be surprised by a new round of rate hikes when DeVos is ready to sell space in his new medical towers to Breon.

[Another aside:  The promise is that this $120 million investment will create 2,300 jobs.  Once again that works out to a ratio of about $50,000 in capital per job, which sounds slim to me, especially because the entire investment is going into bricks and mortar.  Therefore, a whole lot more capital will have to be poured into the medical towers project, to purchase equipment if nothing else, before these jobs will materialize.  What promise do the taxpayers have from DeVos that any of that will happen?  Oh, that’s right, his big piggy bank on the hill, otherwise known as Spectrum Health.]

PFIZER BAILS ON MICHIGAN BIO-TECH

Pfizer Inc. is the largest drug company in the world.  It has facilities here in the state at Ann Arbor, Kalamazoo, Portage, and Holland.  Yesterday, the company announced that it is restructuring to eliminate $4 billion in expenses by 2008 to return to double-digit growth in profits.  The means to that end is the reduction of its research and development at Pfizer.  As a consequence, the manufacturing plant in Holland will be closed, pharmaceutical research programs in Kalamazoo and Portage will be terminated, and drug development in Ann Arbor will move to Connecticut.

Pfizer's decision will effect up to 8,500 "bio-tech" jobs in Michigan and cut out much of the substance in the state's mostly imaginary "life sciences" corridor.  Pharmaceutical R&D is one of those many activities the Michigan's economic development bureaucrats and boosters lumped into the "life sciences" to beef up the state's bio-tech credentials.  Now the biggest chunk of that in Michigan will soon be gone.  So much for Guv Jen traipsing around the globe touting Michigan's bio-tech future.  Maybe she should have been minding the store and not let another big employer slip out of the state.

Better yet, the governor should be sticking to basics and knock down the impediments to doing business in general in this state.  Of course, that would mean giving up the political power game of picking winners and losers.  It would also mean admitting that the Michigan "life sciences" corridor is the emperor with no clothes.  Not likely so long as there's opportunity to stick the taxpayers with the bill for Guv Jen's big-ticket bio-tech/high-tech program.

WI-FI BOONDOGGLE WATCH

Many of us in River City are vaguely aware of the City Commission's bold initiative to transform us into one of Guv Jen's Cool Cities by making wireless internet access available thoughout the city.  In the parlance of the geeks, Grand Rapids would become one big "hotspot" where anyone with a "wi-fi" card in his or her p.c. can make a high-speed connection to the web without plugging into anything.  You would have internet mobility with your laptop kinda like you do for telephone service with your cellphone.

It appears that some progress has been made toward this publicly sponsored wireless wonderland.  Several wi-fi service providers have installed demonstration projects throughout the city to allow residents to sample their services in a bid to win a contract from the Grand Rapids City Commission for the entire city.  There are eight demos in the works within the City, one in Walker, and another in Kentwood.  Some are up and running right now, including those at Calder Plaza, GRPD headquarters, and Creston High School.  The rest of the demos are slated to up and running within the next few days.  The prevailing company will get monopoly to build and operate a hotspot over the city, kinda like what Comcast has over the city's cable t.v. infrastructure.

Yes, that's right, folks.  Just like you must subscribe to the one and only cable company in town to get its cable t.v., you'll have to subscribe to whomever the City Commission chooses to get access to the city's wi-fi service.  Expect to pay four or five bucks a day for immediate one-time access, or twenty dollars or more a month for a regular subscription.  If the publicly sponsored wi-fi service in Grand Haven is anything to go by, those uncompetitive prices may not give you either a reliable or a fast connection.

Mayor Heartwell wanted to avoid the mistakes the City of Grand Haven made in picking a vendor to operate its hotspot by paying a consultant $100,000 to make that decision.  Commissioner Tormala had the sense at least to object to the City Commission paying someone a king's ransom to do what the City Commission was elected to do.  So the City Commission two weeks ago mandated that the agreements with the contending wi-fi service providers must be re-written so that whichever provider wins the contract must reimburse the City for the $100,000 consultant's fee.  And who do you think, dear readers, will be reimbursing the winning provider for that $100,000 cost?  Like always, you and me, the customers.

Well, that assumes we will be customers.  One must wonder how necessary a citywide hotspot accessible only through a monopoly wi-fi service provider really is?  With McDonald's, coffee shops, and other commercial gathering places offering the same service for free, and also with the technology available to make any office building, factory, or home a mini-hotspot in its own right, do we need the government sponsoring the same service with, more than likely, less service?  After all, what's the big benefit of the citywide system?  You can get your laptop to talk to the internet outside in the cold and the snow?  (Yes, I know we also have nice sunny days too, but then aren't those the days to be doing something better than banging the keyboard of a computer?)

How confident can we be that this won't be a boondoggle, when the City Commission is so lacking in the ability to make the key decision about this new wi-fi system that it must spend a $100,000 to be told what to do?  Indeed, no one in the City has even drafted a firm plan for how such a publicly sponsored wi-fi system is supposed to work for the benefit of residents.

I am not predicting disaster here.  I'm simply pointing out that this venture doesn't seem to be on the surest footing.  It bears keeping an eye on it.

AIRPORT TAJ MAHAL

It appears that the governing board of the local airport is ready to approve the expenditure of $125 million to build the Taj Mahal of parking ramps.  Only a month ago the members of the Kent County Aeronautics Board, which oversees Gerald R. Ford International Aiport, balked at the price tag.  Little wonder.  The price was double the original estimate, which in turn was double what a run-of-the-mill parking ramp would cost.  Nevertheless, the ramp's designers persuaded the board members that the expensive canopy and skywalks were absolutely necessary.

The cost of the canopy only is estimated at twenty million bucks.  However, Kent County Aeronautics Director Jim Koslosky justifies the expense because without it the parking ramp would dwarf the terminal building and that is "just not going to present a positive image".  Sure, let's avoid ugliness in public architecture.  Heaven knows we need no more steel and glass monstrosities like City Hall and the County Building.  But twenty million to make sure the terminal building gets respect from the parking ramp?  I don't think so.

Even if the pricey canopy and skywalks make sense, how does the aeronautics board justify turning this project over to the group who needs wiggle room of $60 million to get the estimate in the ballpark?  The board owes the taxpayers and the flying public a second opinion on this project before approving it.

BIO-TECH BUCKS

This morning I cracked open a business rag and saw an article touting a new Kalamazoo-based venture capital fund that will invest in Michigan life sciences companies.  My first thought was this is a good thing.  With a local source of capital, bio-tech start-ups in Michigan are more likely to stay in Michigan.  Then I read on ...

What I thought was a private pool of capital ready to take a flyer on local bio-tech entreprenuers is in fact another dismal "public-private" partnership.  The lead partner in the $50 million Southwest Michigan Life Sciences Venture Fund is Kalamazoo's economic development agency, Southwest Michigan First.  The fund will invest in life-science ventures in Kalamazoo, Battle Creek, and Grand Rapids over the next ten years.

It's not exactly clear how much of the fund's capital is from public sources, but the fund's primary mission is to "foster economic development" in addition to turning a profit on its investments.  So it sounds like taxpayers have been roped into investing in bio-tech with no chance of getting any of the profit that investment might generate.  But then, that's what a "public-private" partnership is all about:  The public puts up the money, and the private partner gets the profit.

We'll check further into this to find out more about the public contribution to this venture capital fund.