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Home > News & Events > News Articles > Article Details

Michigan Cities Top Business Climate Benchmarking Study, Reports Michigan Economic Development Corporation:

Saginaw and Grand Rapids Receive High Rankings

LANSING, Mich., March 15 /PRNewswire/ -- A study released by the Michigan Economic Development Corporation found that Michigan cities are attractive settings for locating service and manufacturing firms. Conducted by Anderson Economic Group, a consulting firm dealing in business climate issues, the study benchmarked the business climate of select Michigan areas against competing economic development rivals. It compared tax rates, fees, regulatory burdens, utility costs, wages, business costs and other government burdens.

"This study establishes performance benchmarks for the business climate, and measures Michigan directly against those benchmarks," said Doug Rothwell, Michigan Economic Development Corporation CEO and president. "It shows we are on the right track, especially with our efforts to phase-out the single business tax. We are capable of competing with the best." The Michigan areas evaluated -- Ann Arbor, Saginaw, Grand Rapids, Auburn Hills and Delta Township -- were compared to the following cities that compete directly with Michigan for economic expansion: Birmingham (AL), Indianapolis, Columbus, Madison (WI), Fort Wayne, Georgetown (KY), Burlington (NC), Route 128 area (MA), Fairfax County (VA), and Toronto, Ontario.

In particular, Grand Rapids and Saginaw were found to be high performers. The study pointed to Saginaw's low business cost that makes it an attractive city to local service businesses. Grand Rapids ranked number one in terms of profitability for manufacturing and service firms, according to the study. In addition, the return on equity comparison for service firms found that Saginaw, Grand Rapids and Ann Arbor took the top three rankings, respectively. Michigan's cities make up the top five when comparing the lowest burdened of each state's income and value added tax.

"Michigan cities did very well against some of the toughest competitors in the eastern half of the United States," Patrick L. Anderson, managing director of Anderson Economic group said. "I was particularly impressed with how competitive cities like Saginaw and Grand Rapids can be for service sector and high-tech firms."

The study also concluded individuals and businesses have specific criteria when making site selection decisions, which must be recognized by state and local governments if they are to attract new citizens and businesses and retain existing ones. Tax rates, fees, regulatory burdens and other government costs all contribute to site selection decisions.

However, factors that are not under the direct control of governments also affect the business climate -- these include wage rates, costs of land and materials, as well as utility costs such as electric and natural gas. Some of the notable findings of the business climate study are as follows:

-- Michigan's business taxes are, for service firms, quite advantageous. The phase-out of the single business tax will be even more helpful.

-- Michigan service-sector wages are lower than those in most competing areas. Given the proper workforce and proximity to needed resources, Michigan could attract service-sector businesses from other areas of the country.

-- Michigan's property taxes overall are now competitive with most other states, although the personal property tax is much higher. Michigan should consider cuts to the personal property tax in order to reduce this disincentive.

-- Productivity is the single most important factor in the profitability of a firm. While not directly measured in this study, the skills of new entrants to the Michigan workforce should be of major concern to the State.

-- Electric rates for Michigan areas are near the average, but higher than the low-cost areas.

The study also offers suggestions for the Michigan Economic Development Corporation to continue attracting and maintaining Michigan businesses. Those recommendations include:

-- Address personal property taxation: Michigan's overall property tax burden is no longer well above its competitors, but is still relatively high.

-- Workforce productivity and a skilled workforce should remain a high priority: Overall wages and labor productivity are the most important factors in determining business profits.

-- Continue business climate improvements: The state has made progress in bringing taxes and payroll burdens into line. Yet other efforts must continue for Michigan to match pace with its toughest competitors.

-- Continue to improve service business opportunities: The state must encourage the formation of technology clusters, improve the availability of skilled workers, and reduce disincentives for such businesses to thrive in large numbers in this state.

Rothwell said the Michigan Economic Development Corporation plans to take these recommendations to heart. "This study not only confirms the strategies we already have in place, like improving our high-tech image through the Smart Parks initiative, but it also gives us other useful suggestions on how to best devote our resources to highlight the strengths in our state," Rothwell said.

To view this study on-line, visit the Michigan Economic Development Corporation web site at www.michigan.org .

SOURCE Michigan Economic Development Corporation CONTACT: Kathy McMahon of Michigan Economic Development Corporation, 517-335-4590