At the beginning of March 2005, Site Selection
magazine ranked Michigan second among the states for the most new and expanded
facilities in the country. The Michigan Economic Development Corporation — the
state’s chief "jobs" department — quickly took the opportunity to publicize this
year’s rank in a March 3 press release[2]
and in its "This Week @ MEDC"[3]
e-mail. Don Jakeway, president and CEO of the MEDC, yesterday told a state House
committee that Site Selection magazine was "the Bible" among economic
development officials.
But as good as second place in "the Bible" sounds,
there are reasons to hesitate before declaring a victory for the state’s
economy.
Site Selection magazine is a site-development,
location and relocation periodical for real estate professionals and managers
associated with site location decisions. One of its most prominent features is
the annual "Governor’s Cup" award, given to the state with the highest number of
new or expanded facilities in Site Selection’s database.
Michigan has won Site Selection’s Governor’s Cup five
times since 1997. After last Thursday’s announcement that Michigan had placed
second in the 2004 race, the MEDC’s press release quoted Gov. Jennifer Granholm
saying that it "speaks directly to the effectiveness of our strategy for
attracting new business and new jobs to the state."
This claim, however, should include some
qualifications. Site Selection magazine, to its credit, does engage in some
independent research, such as searching for new facilities and expansions using
newspaper clippings and the online search tool Lexis Nexis, and it also works to
confirm that new facility data sent from states qualify for entry in their
database. But the magazine’s rankings are still "a function of what states
report to us,"[4]
as Site Selection Editor Mark Arend told one of the authors [LaFaive] in
January.
Because the magazine does rely in part on state
reporting, motivation to gather data (or to win the award) may well affect a
state’s rankings. If Kansas or Hawaii doesn’t dedicate staff to collecting and
forwarding new-facility and facility-expansion data, its chances of winning the
Governor’s Cup may fall.
Inversely, states that devote more resources to
economic development functions are probably more focused on gathering data that
help them win the award. In Michigan, according to a 2002 Detroit News article
by James Higgins about the Governor’s Cup, "(MEDC) agents around the state are
always on the lookout for new factory or office construction, much of which
doesn’t report to the MEDC."[5]
Hence, even if the MEDC isn’t responsible for the new
facility or expansion, its staff works hard to ensure the growth gets counted.
By doing so, state officials probably increase the chances of winning the Cup,
an award that has become very important to the MEDC. Higgins reports: "The
Governor’s Cup has been the centerpiece of Michigan’s economic development pitch
for four years. Millions are spent to advertise the award, and considerable
[sic] more resources are invested by MEDC in preparing for the annual magazine
contest."[6]
In at least one year, several MEDC bonuses paid to high-ranking staff relied in
part on Site Selection rankings.
It’s also worth remembering that Site Selection
rankings provide only a limited picture of a state’s economy. Consider a study
released in January by United Van Lines.[7]
The company’s residential moving figures showed Michigan to be a "high outbound"
state — that is, one of only 11 states in the continental United States in 2004
where "55 percent or more of moves (were) coming out of a state."
Of course, United’s figures have limitations of their
own, but the company’s executive vice president has noted that United’s study
"has been shown to accurately reflect the general migration patterns in various
regions of the country"[8]
and that the data have been used by "real estate firms, financial institutions
and other observers of relocation trends." Ultimately, it is probably not a good
sign that last year, according to the study, Michigan "reached its highest
outbound level since 1982" — 60.9 percent.[9]
Nor do Michigan’s broader economic statistics
reinforce Michigan’s repeatedly high rankings in Site Selection magazine since
1997. According to federal figures, from December 1995[10]
to December 2004, Michigan has ranked 50th among the states in percentage
employment growth. From 1993 to 1997, Michigan’s percentage increase in
per-capita gross state product was 18th in the United States, but from 1998 to
2003, it was 44th.[11]
And in 2004, Michigan was one of only two states on
net to lose jobs,[12]
and it was the only one to lose a significant number (46,500). Ironically, the
other state to fade was Ohio, which lost 200 jobs after placing first in the
2003 Site Selection rankings. Thus, Ohio finds itself in the same position as
Michigan in 2000, when the then-president and CEO of the MEDC commented about
winning the 1999 Governor’s Cup: "The award is a great reminder of how far we’ve
come. We’ve hit elite status among states. It is proof positive that Michigan’s
stable economy isn’t a fluke."[13]
Michigan then entered a period of sustained economic weakness.
It’s probably not time to break out the bubbly on
Michigan’s economic performance. After lagging well behind the surging national
economy for several years, the state may begin to recover in coming months — but
Site Selection magazine probably doesn’t tell us much either way.
[1]
A slightly modified version of this appendix was published on March 9, 2005
on the Mackinac Center for Public Policy Web site. See
http://www.mackinac.org/7000.
[2]
Michael Shore, "Michigan Number 2 in Nation for New Corporate Facilities and
Expansions in 2004," State of Michigan, Michigan Economic Development
Corporation, March 3, 2005.
[3]
Donald Jakeway, This Week @ MEDC," e-mail to unknown list, including
Michael D. LaFaive, State of Michigan, Michigan Economic Development
Corporation, March 7, 2005.
[4]
Site Selection
Editor Mark Arend, telephone interview with Michael D. LaFaive, January 26,
2005.
[5]
James Higgins, "We were robbed: Poor judging
wasn’t limited to the Olympics," The Detroit (MI) News, sec. B,
February 27, 2002.
[6] Ibid.
[7]
West and Southeast Gain in Appeal, North Sees More Leaving According to
Latest United Van Lines Migration Study, United Van Lines, news release,
January 6, 2005, available on the Web at
http://www.unitedvanlines.com/media/press/documents/
news_05_02-05_000.pdf.
[8]
Ibid.
[9]
Ibid.
[10] Michigan accelerated its "economic development"
measures in 1995, the year the Michigan Economic Growth Authority was
created and the Michigan Jobs Commission (now the MEDC) was elevated to
"department" status.
[11]
Regional Economic Accounts (State and Local Personal Income customizable
table), U.S. Department of Commerce, Bureau of Economic Analysis,
available on the Web at
http://www.bea.gov/bea/regional/spi/.
[12]
State Employment Statistics – December 2004, Joint Economic Committee
of the United States Congress, available on the Web at
http://jec.senate.gov.
[13]
Doug Rothwell, "President’s Report," Michigan Business Report
(Lansing, Mich.: State of Michigan, Michigan Economic Development
Corporation, 2:2 (2000): 3.
