MIRS Weekly Report

Michigan News And Capitol Report, Week Ending Fri., Nov. 25, 2022

 

$10M In Seed Money Asked To Lure More Big Events

The NCAA announced this week the Men’s Final Four basketball tournament will return to Ford Field in Detroit in 2027, the first time the city will experience it since 2009 when Michigan State University spectacularly lost to North Carolina in the championship game.

The tournament is projected to bring upwards of $200 million of revenue into the state, said Christopher Moyer, senior director of communications at Visit Detroit, which promotes Metro Detroit regionally, nationally and internationally as a tourist hot spot and business and convention destination.

The Final Four contract was awarded to the Detroit Sports Commission (DSC), a subsidiary of Visit Detroit, after a 12-month “long, arduous process” spent responding to a 200-page Request for Proposal, which culminated in the final, successful pitch on Oct. 31, said Dave Beachnau, senior vice president, on Wednesday’s “Michigan’s Big Show starring Michael Patrick Shiels.”

But, while big events bring in big money for the host city, big money needs to be spent upfront to win and successfully host large-scale events.

“One of our biggest challenges is funding,” Beachnau said. 

In order to compete with states like Texas, that have the “Cadillac of (event funding) programs,” he said, certain assurances need to be made to organizations such as the NCAA and NFL.

In their successful bid, one of the items the DSC promised the NCAA selection committee was that downtown Detroit would have the required 6,000 hotel rooms available when the tournament comes around.

“We’re just shy of that right now,” Beachnau said. “But what we pitched to them is we have current hotel development in the pipeline, so we expect to have another 800 rooms open by 2027.”

These types of infrastructure investments and other ancillary costs, such as transportation, comped hotel rooms and reserved spaces for related events, are common and paid for by the host.

The monies for these expenditures comes from donations by large Southeast Michigan international corporations and philanthropists, Beachnau said.

“We can only go back to our well (of donors) so often to fundraise to pay for the expenses that these events require,” he said. 

And that’s why the DSC plans to reintroduce a new and improved piece of legislation with its partners in the upcoming state legislative session.

"We’re currently working on large special events fund legislation that we hope to get passed here in 2023,” Beachnau said.

Now is the perfect time to reintroduce the revised legislation, with the $6 billion budget surplus, bipartisan support and the backing of the Michigan Economic Development Corporation, Moyer said.

The proposed fund would “level the playing field” with states like Texas and allow for cities and counties across the state to be competitive on a national stage – and it's not just for sports.

“I do want to be very clear as we look at the Final Four coming into town,” Moyer said. “That would be an event that could draw money from this large special events fund, but it’s not just sporting events.

“You could be talking about conferences and large meetings and other events that a city or county could go try to attract,” he said.

Any event where most of the attendees are people from out of state “who are spending their non-Michigan dollars here in Michigan,” would qualify to apply for a grant through the fund, Moyer said.

“For instance, a Detroit Tigers game wouldn’t ever qualify for this because that’s Metro Detroiters coming in,” he said. “The preponderance of the people coming in would be local.”

However, the national horse show in Traverse City, which brings in thousands of national and international horse aficionados every year, is the perfect example of a qualifying event, Moyer said. And the host organization, Traverse City Horse Shows, did qualify for seed funding in 2015 through a comparable special events fund created by the MEDC in 2013.

But the MEDC fund was only in place for two and a half years, and the total investment for all grants was capped at $2.5 million.

This time around, the request is for a one-time $10 million infusion to “seed” the fund.

"With the Final Four Tourney alone bringing $200 million into the state, you've got to think this one-time seed money is a drop in the bucket," Moyer said. “Particularly when that's just one of the events that could benefit from this legislation.”

The initial investment by the state would also be the last.

From there on forward, the fund would self-sustain through Tax Increment Financing where half of the tax revenue would go to the State Treasury and the other half would go into the fund, Beachnau said. (TIF financing is where the local entity pays for expenses up front but recoups the funds later through tax revenues generated by the event.)

Similar legislation has been introduced in the past, most recently in 2018 through Senate Bill 1065, which was sponsored by Sen. Ken Horn (R-Frankenmuth). However, the bill did not receive a hearing. 

As Moyer understood it, prior efforts got caught up in transitions between administrations and legislative sessions and didn’t make it through budget negotiations. 

He said each large-scale event brought to the state would deposit substantial sums of money into local communities as well as have the potential to create tens of thousands of jobs, so a single, never-to-repeat legislative investment would engender a long-term, self-sustaining, shot-in-the-arm to the economic engine that powers Michigan.

“We know this is going to be beneficial for Detroit,” he said. “But Detroit is the gateway to the whole state and when Detroit does well, the state does well.

“We want every community in the Upper Peninsula to the Lower Peninsula to be thriving,” Moyer said.

 

 

Lame Duck: Few Items Of Interest, Few Days In Play

The House and Senate are looking at meeting as few as two or three days after the Thanksgiving break before calling it a legislative session based on the current plans brewing under the dome.

One approach being considered in the House is to cram lame duck into the week of Dec. 5, with session being the 6th, 7th and maybe the 8th.

The Senate's idea is to do a Tuesday-only calendar, with session days on Nov. 29, Dec. 6 and maybe Dec. 13.

Either way, the number of high-level items on the agenda are few at this point.

Gov. Gretchen Whitmer wouldn't mind seeing some additional economic development money socked away beyond the $840 million that was put into the Strategic Outreach and Attraction Reserve (SOAR) in September.

The perceived play is that Republican legislators are more likely than the incoming Democratic majority to support economic development dollars with few strings.

Republicans wouldn't necessarily be opposed to the idea as long as they don't need to pass a supplemental, which they fear will explode into a Christmas Tree if one becomes subject to negotiation.

Senate Appropriations Committee Chair Jim Stamas (R-Midland) would rather settle the typical book closing business through transfers if that's possible.

The governor would also like to see the state's presidential primary law changed to allow for Michigan to be one of the first states in the country to hold a contest if the Democratic National Committee breaks up the regular Iowa-New Hampshire-South Carolina-Nevada format.

This is more of a timing issue. Plans on the DNC's primary schedule need to be made sooner rather than later and U.S. Rep. Debbie Dingell (D), the main advocate for the change, wants to make the point that Michigan is on safe legal footing to hold the state-run primary election.

An outstanding issue is what the Republican National Committee (RNC) has in mind with its primary schedule. The two parties typically operate on the same calendar and if Republicans hold a primary that doesn't have the RNC's blessing, will that mean a delegate cut or the worst hotel allocations at the 2024 convention in Milwaukee?

Over in the House, House Speaker Jason Wentworth (R-Farwell) would like to see more of his health care package passed back from the Senate, with the flagship bill being the $50 copay limit on insulin.

Wentworth also would love for the Senate to take up the House Ethics Commission bill and the Freedom of Information Act legislation that was sent over last year. 

Senate Majority Leader Mike Shirkey (R-Clarklake) has always frowned on the bills, but with the Democrats taking the gavel after the new year, there's hope he'll be more receptive to the discussion. Shirkey is big into legislative oversight and the ethics commission creates a bipartisan body to look into ethical concerns at the legislative level. With the D's expected to craft an ethics package next session, the Republicans may not get a better deal than the one they have now.

The problem is Shirkey's list of bills he wants passed is all of one item. Mental health integration for the Medicaid population.

Shirkey considers this a legacy piece and he's disappointed that the Department of Health and Human Services isn't as excited about the idea of integrating mental health services in with physical healthcare as he is.

There is compromise to be found on the subject. House Appropriations Committee Chair Mary Whiteford (R-Casco Twp.)  has her own ideas on the issue, as well, but Shirkey isn't excited about passing a bill he'd consider half-of-a-loaf that DHHS isn't going to enforce with vigor anyway.

Another item floating in the ether is passing the State Officers Compensation Commission recommendations that would give 2% raises to legislators, the governor, the justices and the other statewide elected officers in both 2025 and 2026.

It would mark the first time since the 2002 reform that legislators or the governor would receive any type of pay increase. Several term-limited legislators are fine passing resolutions in the House and Senate to get this done, but they're probably not going to do it for nothing.

Another big question over in the House is the goodbye speeches. Wentworth isn't going to cancel them and there could be as many as 56 if every departing House member who could give a speech delivers one.

There are serious thoughts about limiting the length of the speeches. We've all heard that threat before, though (think of former Rep. John Olumba's 30-minute, burn-the-house down rant).

Over in the Senate, there's still 16 speeches that could be delivered if every Senator who is leaving the chamber opts to give one. Again, depending on length, (and they are typically longer), this may be a couple of days of sitting around.

 

Bolden To Take Over On Supreme Court For McCormack

Rep. Kyra Bolden (D-Southfield) was announced Tuesday afternoon as the next justice of the Michigan Supreme Court, taking over for Justice Bridget McCormack who is stepping down early to take a job with the American Arbitration Association's International Centre for Dispute Resolutions.

She will become the first Black woman to serve on Michigan's Supreme Court, a distinction that Bolden acknowledged in her remarks at Tuesday's press conference under the Hall of Justice's 6th floor Rotunda Room.

“For years, a Black woman's experiences and perspective have been absent from our state's highest court,” Bolden said. “To the countless Black women upon whose shoulders I stand . . . I promise that I will honor our experiences from this vantage point.”

She was joined at the press announcement by her husband, Dr. Greg Bolden, and 3-month-old daughter, Emerson, who started squawking moments before Bolden came up to give her remarks. Dad moved her to another room while three members of her family stood behind the incoming justice during her remarks.

But they returned for photos later. 

In her remarks, Bolden addressed Emerson by bringing up how her great grandfather was lynched in 1939 in Tennessee and his killers were not held accountable.

“Emerson, in just a few generations, our family has gone from lynching to law school, from injustice to a capital J justice. This is the greatness and possibility of our country,” she said.

Because Bolden is still a member of the Legislature, she is not eligible to join the bench until her legislative term ends at the end of the year, per Article IV, Section 9 of the constitution. The official appointment will take effect on Jan. 1 or immediately after, Gov. Gretchen Whitmer said Tuesday. The governor said the appointment came after a “rigorous process."

In order to qualify for the court, Bolden, along with other nominees need to make a run through the Judicial Qualification Committee within the State Bar of Michigan. The bi-partisan panel of litigators, prosecutors and others within the legal profession rank all judicial appointments with a "well qualified," "qualified," "not qualified" or "not qualified due to a lack of experience" rating. The ratings are confidential, but governors have traditionally not appointed a person who the committee believes is not qualified.

The governor did not share what the Qualifications Committee said about Bolden when asked by a reporter, but did say, “I think there's a lot of reasons to be proud.  The process works. Kyra brings a perspective, an aptitude, temperament and unwavering commitment to the law to the bench. I think that she will make us all very proud.”

A former civil litigation attorney, Bolden passed up a likely third House term for a chance to become the first African American woman to serve on the court..

Bolden won the Democratic Party's nomination for the Supreme Court over the summer, but fell 120,096 votes short in the general election to Justice Brian Zahra (23.84% to 21.91%).

While relatively young at 34, Bolden has received several awards in recent years for her work in the legal space, including the 2019 African American Leadership Awards "Emerging Leader Award."

Per the constitution, Bolden will need to stand for election in 2024 to fill out the remaining four years of McCormack's term.

Interestingly enough, Supreme Court justices will make less money next year than their Court of Appeals counterparts. With a pay increase approved two years ago, the Supreme Court justices will be at $181,000 (up from $164,500), while Court of Appeals judges make $182,000.

Also, since the Court of Appeals' salaries are tied to the civil service schedule, they will likely see pay increases next year and the year after.

Asked if the lower pay presented a difficulty in filing McCormack's spot, Whitmer said, “I'll just say that certainly it is an honor to be appointed to this court. It's an honor for everyone who has ever served on this court . . . there's always going to be a lot of interest from people who would love to have the opportunity to serve.”

Earlier this year, Whitmer added diversity to the Court of Appeals by naming Kristina Robinson Garrett and Noah P. Hood to the bench to succeed the only two people of color on the 24-member Court of Appeals at the time, Cynthia Stephens and the late Karen Fort Hood.

Given the lack of diversity on the Supreme Court, it was presumed Whitmer would pick an African American as her first Michigan Supreme Court appointment. McCormack said earlier this month she was "quite confident" the governor would appoint a person of color to replace her on the bench. 

 

No Quick Fix To Automobile Microchip Shortage

When you want a new cell phone, you can easily make a run to the local Verizon, T-Mobile or AT&T and pick one up at a minute’s notice. The same cannot be said for someone who wants to buy a new car. 

But why, when the world is on the tail end of the COVID-19 pandemic and the supply chain issues that disrupted industries on a global level have lessened, are there still extended wait times for new cars and certain car repairs?

Cell phones require only a couple microchips to make a call, but cars need thousands to keep rolling down the road, said Kristin Dziczek, policy advisor for the Federal Reserve Bank of Chicago, on Tuesday’s episode of “Michigan’s Big Show with Michael Patrick Shiels."

Prior to her role at the Fed in Chicago, Dziczek was the senior vice president of research at the Center for Automotive Research in Ann Arbor.

“The people who are still in the market for a new car are buying vehicles at the top trim levels,” Dzicezk said. “The most tricked-out vehicles that have all the features.

“And, you know, that’s a demand issue. That people want to have advanced safety. They want to have a better fuel economy. They want to have all these convenience features that are enabled by chips,” she said.

And that’s only one contributor to the semiconductor (microchip) shortage that continues to plague the auto industry and car buyers alike.

In the first few months of the pandemic, amid the global lockdowns and business closures, the auto industry had a déjà vu moment and, fearing another industry collapse like the crisis of 2008-2010, it aggressively curtailed microchip ordering, Dziczek told a MIRS reporter after the show.

But the collapse never came.

“It was a much more resilient consumer and much more resilient market, so they pulled back too hard,” Dziczek said. 

At the same time, semiconductor production was reallocated because of increased demand from a different sector: consumer electronics.

“During the early part of the pandemic…every kid needed a Chromebook, and everyone had bought new consumer electronics to hunker down,” she said. 

Microchip suppliers met the demand by routing their fabrication and distribution capacity in this new direction – away from the auto industry.

Along the way, trust was lost, and turning that boat (or car) around takes time, Dziczek said.

“Now, they (the auto industry) have to go back and build some relationships and greater transparency in their chip supply chain,” she said.

“There are some quotes this week from Jim Farley from Ford saying, basically, ‘We screwed up. And now we’re learning what we need to do to fix that,’” Dziczek said.

During the Nov. 17 annual Semiconductor Industry Association dinner, Farley, the CEO for Ford Motor Company, said to the audience, “We need to understand your technology better. And we need supply chain people from your companies and our companies to get it right,” as reported in the media.

Dziczek wrote in the October 2022 Chicago Fed Letter that additional factors that have elongated and exacerbated the chip shortage include geopolitical tensions, such as Russia’s invasion of Ukraine and the increasing tension between China and Taiwan, environmental disasters and the continued lack of workers.

And if all that isn't enough, there’s a battle between producing analog and “mature” chips or the high-end, cutting-edge ones. 

Think of an iPhone. When an iPhone hits the market, it’s sexy, everyone wants one and it’s expensive. However, in a few years, that phone will be half the price, half the speed and have half the bells, whistles and camera quality of the newest iPhone because it has the old or legacy chips.

In internal combustion engine vehicles, around 90% of the semiconductors installed are mature, Dziczek said. They move the seats. They move the windows up and down. And while these legacy chips make a cell phone obsolete, they only serve to make automobiles more durable and long-lasting. They’re tried and true, so to speak.

“I always joke that I don’t leave my iPhone in the driveway when a storm is coming, but I leave my car out there,” Dziczek said. “My iPhone is probably going to last three years, and my car is going to last 15 or 20.”

Mature chips are “battle-hardened,” “safety critical” and “super durable,” which is important in the auto industry, and “right now, we’re heavily dependent on analog chips,” Dziczek said. 

However, people pay “top dollar for the cutting-edge chip,” whereas “mature technology is a low-piece price,” she continued, which makes expanding and building new plants to make mature chips not attractive to investors. 

That’s where government help comes in. 

For the U.S., the help came only recently in the form of the CHIPS and Science Act (H.R. 4346). The CHIPS Act allocated $52 billion in subsidies for semiconductor manufacturing. And, recognizing the importance of continued fabrication of mature semiconductors, the Act specifically earmarked $2 billon for same.

From here on out, the automobile industry needs to change how they do things and focus on solutions that incorporate the lessons learned during the pandemic, Dziczek said.

“You know, it goes to that old adage about when’s the best time to plant a tree? 20 years ago. The second-best time is now,” she said.

The automobile industry is working toward implementation of several new strategies, Dziczek said, which include streamlining the multitude variants of chips down to a smaller number. Also multiple supply sources need to be pre-qualified so if one goes down due to a physical or health emergency, they can quickly switch to another supplier.

Dzicezk projected the chip crisis will continue into 2024, but said that a pivot toward a different type of vehicle, away from internal combustion engines, bodes well for the industry’s future.

“The automobile is undergoing a tremendous transformation as we move to greater electrification, hybrids and plugins and battery electric, but also on the software side, we’re moving to a vehicle that is what’s called a software defined vehicle that requires different types of chips,” Dzicezk said.

And while software-defined vehicles require fewer chips, they’re the sexy, advanced chips, and that’s where the money’s at.