Council on Future Mobility & Electrification - 2021 REPORT - Michigan ...
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Part 03 Actions of the Council/Policy Recommendations Council on Future Mobility & Electrification 2021 REPORT 1
Part 03 Actions of the Council/Policy Recommendations Contents PART 01 Executive Summary 05 PART 02 Introduction 07 PART 03 Actions of the Council – 09 Policy Recommendations i. Automated vehicle and smart 10 infrastructure technologies ii. Economic development 15 iii. Talent and workforce 25 iv. Electrification 32 v. Insurance, regulations, and 45 public safety PART 04 Status of MI’s Mobility and 51 Electrification Industry and Non-State Mobility Assets PART 05 Status of MI’s Government/ 60 Public Mobility and Electrification Assets PART 06 Public Policy Review 66 Comparative Analysis Update PART 07 Appendix 1 – CFME Process Overview 67 PART 08 References 69 2
Foreword by the Lt. Governor Back in 1985, when Robert Zemeckis’ Back to the Future first appeared on the big screen, the notion of flying cars and hoverboards seemed impossible. That was a concept that could only be experienced in movies. Now 36 years later, mobility, public transportation, and vehicle electrification have come further than ever imagined, but we are still waiting on a flying Delorean. When I started serving as the Lieutenant Governor and scale-up of emerging technologies and of Michigan back in 2019, I lived in the heart of businesses. Detroit and didn’t have a car. That might be a first in Michigan politics. I understand firsthand what it Governor Whitmer and I want to develop and means to rely on public transportation. My story is attract the skills and talent necessary to meet the like that of many Michiganders who are dependent changing demands of the mobility sector. This is a on public transport to get to work, buy groceries or challenge that Michiganders are ready to meet. attend medical appointments. After all, Detroit put the world on wheels. Now it’s Governor Whitmer and I are committed to building time for us to be the leader in clean transportation, a more robust state economy through safer, and we are ready. The Council on Future Mobility more equitable, and environmentally conscious and Electrification is another example of how transportation for all Michigan residents. Now we’re fighting to build a stronger, more sustainable more than ever, it is critical that Michigan future for our kids and for future generations of strengthen opportunities for economic growth Michiganders to come. and job creation while securing our continued The following report from the Council on leadership in mobility and electrification through Future Mobility and Electrification will show the forward-thinking policies, innovative partnerships, progress we have made and what is next. As the and smarter infrastructure. future continues to evolve, so will the Whitmer In July of 2021, Governor Whitmer announced Administration. the formal launch of the Office of Future Mobility and Electrification. This office is focused on working across state government, academia, and private industry to enhance Michigan’s mobility Lt. Governor ecosystem, including dynamic mobility and Garlin Gilchrist II electrification policies and supporting the startup
Message from the Chairwoman Michigan has long been the world leader in the mobility sector, and we are committed to doing whatever it takes to maintain our state’s position at the forefront. The Council on Future Mobility and July that set a target for all new vehicle sales to be Electrification (CMFE) has developed public electric by 2030. policy recommendations that will help maintain Michigan’s leadership in advanced mobility and This signifies the creation of new jobs and the need electrification, and I am proud to serve as the Chair for highly-skilled workers. The CFME’s February of the CFME as it releases its second report. 2020 report noted that the demand for computer- related engineers, for example, will eclipse 45,000 The public policy recommendations included in nationally by 2030. Additionally, estimates from this report were designed, debated and chosen the USDOE regarding job creation in the utility because of the significance they will play in sector deploying charging infrastructure will reach ensuring Michigan remains the global epicenter 105,000 by 2030. for next generation automated, connected, shared and electric mobility. It is imperative that state These are exciting times in both Michigan and the policymakers see these recommendations through mobility and electrification industry in general, and to implementation. I am anxious to see what the future holds for our great state. The report’s primary findings stress how Michigan must continue its leadership in automated vehicle Edsel Ford, the son of legendary automotive policies and smart infrastructure deployment, while pioneer Henry Ford, once said, “There are also investing in economic and talent development. no crown princes at Ford.” Edsel earned his Similarly, Michigan must also become more EV- position and built his own reputation every day by friendly and better prepared for the future of continuously developing the next best vehicle. electric vehicles. We do not take our automotive heritage for granted, The CFME’s industry experts and public leaders and we plan on working hard to keep Michigan at also believe Michigan will take a bold step the forefront of innovative mobility. forward and continue embracing the mobility and electrification sector, if the findings in the report are acted upon. Susan R. Corbin The publication of this report comes at a time of great advancement in the mobility world. The Director, Michigan Department of Biden Administration announced new grants for Labor and Economic Opportunity; deploying EV charging stations in April 2021, which Chairwoman, Michigan Council on was then followed closely by an Executive Order in Future Mobility and Electrification
Part 01 Executive Summary Executive Summary The Council on Future Mobility and Electrification (CFME) has previously indicated 2030 as a year of demarcation. Over the next decade vehicle electrification will occur and become the dominant propulsion system on the market, advanced automated vehicle technologies and smarter infrastructure will become a more common part of the mobility experience, and the most valuable part of a new vehicle will change from hardware to software. Likewise, workforce demands will grow and shift, as will other inputs for the manufacturing process, and the need for high-tech talent will exceed what current development pipelines can produce. Luckily, Michigan currently enjoys the availability of resources necessary to not just plan for these future changes, but to help shape and benefit from them. If the recommendations included in this report are acted on, the industry experts and public leaders who make up the CFME believe Michigan will take a bold step forward and plant our state flag further than any other along the road embracing the mobility and electrification sector. Ignoring these recommendations on the other hand will leave our state far behind our competition and likely unable to catch up given the one-time nature of so many of the resources available to states today. This report’s recommendations center around how Michigan must continue its leadership in automated vehicle policies and smart infrastructure deployment, invest in ourselves and mobility sector economic and talent development, become more EV-friendly and better prepared for electric vehicles, and implement policies that will ensure the future of transportation is safe and enhances mobility solutions for more Michiganders. 5
Part 01 Executive Summary This all begins with developing a comprehensive and cohesive state mobility and electrification strategy. With such a North Star guiding the state’s actions and resiliency of startup firms and make them we can be assured that not only are state agencies more attractive for private capital investments. all traveling in the same direction, but that the Supporting the adoption of electric vehicles and state and industry are in lockstep. Other proposals the deployment of EV charging infrastructure included in this report are needed to open up is also a must in the Council’s view. While more new mobility solutions provided by technological study is required to develop efficient, targeted advancements to more Michiganders, like consumer incentives for the electric vehicles streamlining shared transportation systems themselves, the merits of incentives for charging and adapting antiquated policies regarding the infrastructure is well documented, easily replicated, physical and mental abilities of vehicle operators and ready to be implemented with funding. The for the automated vehicle future. The Council Council also strongly suggests establishing also sees a clear need for not just significant clear guardrails around the cybersecurity of but impressive investments in the future of auto intelligent transportation systems so as to protect related manufacturing, mobility tech startups the safety of Michigan residents and visitors. and associated venture capital, and talent and Lastly, if Michigan truly is to be the mobility and workforce development. To remain competitive electrification leader amongst its peers, the state for the automotive industry’s future growth should act as such in terms of being an advocate opportunities the state must be able to offer more on federal policies, beginning with issues related to and better site selections, prove it has a plan for connected vehicle communications, transportation building out the capacity of Michigan’s talent standards, and mobility incentives. pipeline, and offer supports to increase the number 6
Part 02 Introduction Introduction The Michigan Council on Future Mobility and Electrification (CFME) was established by executive order 2020-02, and charged with providing state policymakers on an annual basis with “recommendations regarding changes in state policy to ensure Michigan continues to be the world leader in future mobility and electrification, including autonomous and connected vehicle technology, electric powertrain technology and charging infrastructure, and diverse mobility such as shared and transit.” The CFME does this with the support of To reiterate from the previous report, the themes the Michigan Office on Future Mobility and for the major hurdles to maintaining global mobility Electrification (OFME), led by Michigan’s Chief and electrification leadership that the CFME Mobility Officer Trevor Pawl, under the direction recognizes are on Michigan’s horizon include: of the Department of Labor and Economic Opportunity’s Director Susan Corbin. • a need to adapt and persist against ever increasing pressure of global competition for As explained in the CFME’s last report, the future of automotive mobility technologies’ the COVID-19 pandemic had delayed the research, development, and manufacturing; start for development of these initial policy recommendations. This council’s last report was • preservation of Michigan’s current lead in terms published with a consensus outlook from CFME of future mobility asset concentration and membership about the value of Michigan’s next progressive advanced mobility governmental generation mobility and electrification assets approaches and public policies; and identifiable future obstacles to the state’s • a need to expand Michigan’s lead in terms of global leadership in this crucial economic sector. available automobility advanced talent and skilled Through the dedication and hard work of CFME labor; members and many of Michigan’s mobility and electrification partners some additional issues • making Michigan’s ecosystem for private sector were identified, and the policy recommendations investments in the mobility and electrification included in this report were developed. The goal sector more attractive to investors; and for these policy recommendations is to build off • continuing to ensure and discover new ways that the strong presence of the advanced mobility and the future of advanced and electrified mobility electrification sector already in Michigan, and will help diversify and strengthen Michigan’s prepare for the future. economy and grow good-paying jobs. 7
Part 02 Introduction During the CFME’s process developing the policy VOTING recommendations contained in this report, some additional themes for opportunities were identified State Entities and deemed imperative to Michigan’s mobility leadership. First, the investments made and proposed Susan Corbin, LEO by the federal government under the American Paul Ajegba, MDOT Rescue Plan, the American Jobs Plan, and other Anita Fox, DIFS federal legislation are too great to ignore. Michigan Col. James Gasper, MSP must take swift action on the deployment of and Rachael Eubanks, Treasury planning for these resources so as to not lose our Liesl Clark, EGLE future mobility and electrification leadership, be Tremaine Phillips, MPSC better positioned to maximize the state’s draw down of additional federal resources, and develop leapfrog Non-State Entities moments and projects that will catapult the state’s Bob Babik, GM mobility industry into an even greater leadership Emily Frascaroli, Ford position. Second, is a recognition that the advanced Steven Bartoli, Stellantis mobility and electrification sector currently enjoys Patrick Cadariu, Waymo being at the center of gravity of three important Derek Caveney, Toyota elements of policy agendas shared by both the federal Chris Nevers, Rivian and state governments: pandemic economic recovery, Cory Connolly, EIBC combating and adapting to climate change, and Jeffrey Dokho, UAW infrastructure investments. This is a unique situation Dr. Huei Peng, U of M that is not likely to exist for long and Michigan would Dr. Satish Udpa, MSU be wise to leverage this opportunity to its fullest extent while possible. NON-VOTING To tackle the daunting task of determining achievable policy recommendations which would further Michigan’s mobility and electrification leadership Legislators and fit the aforementioned themes, the Council on Sen. Ken Horn, Senate Majority Future Mobility and Electrification divided into four Sen. Mallory McMorrow, Senate Minority workgroups: Electrification; Insurance, Regulations, Rep. Jim Lilly, House Majority and Public Safety; Economic and Workforce Rep. Ranjeev Puri, House Minority Development; and Automated Vehicle Technologies and Smart Infrastructure. Each workgroup was Senior Advisors assigned a neutral, outside Senior Advisor with particular expertise to guide the policy process. The Alisyn Malek, SAFE workgroups were made up of Council members, as Carla Bailo, CAR well as relevant outside stakeholders (see Appendix 1 Reuben Sarkar, ACM to learn more about the CFME’s workgroup process). John Peracchio, CFME Chairman Emeritus 8
Actions of the Council/ Policy Recommendations Since the Council on Future Mobility and Electrification issued its last report in February 2021, there has been a monumental change in the importance of electric vehicles and charging infrastructure. The federal government is assessing and while enhancing grid resiliency and supporting job addressing gaps in auto manufacturing supply growth in the energy sector. chains; investing in a national EV charging network; and has set a national goal for EV adoption. In July Because advanced mobility and electrification 2021, President Biden signed an Executive Order issues sit at the intersection of the significant setting a target that half of all new vehicle sales federal and state policy initiatives of economic will be electric by 2030. These changes not only growth and job creation, infrastructure rebuilding highlight the importance of work being done by and upgrading, and addressing climate change, CFME and OFME, but create new opportunities for there is an opportunity at hand to further Michigan to leverage the strength of its automobility Michigan’s mobility leadership in these spaces with sector to further the state’s leadership and secure more resources available than ever before. The jobs for the next generation of electric vehicle and CFME firmly views this opportunity as one that the charging infrastructure manufacturing, strengthen state of Michigan cannot pass up if global mobility our state economy through diversification into and electrification leadership is to be maintained. more high-tech industries that are the emerging With these opportunities in mind, the product of the profit pools in automotive products, provide CFME’s policy development process and resulting attractive employment opportunities for a highly recommendations are broken down by workgroup talented workforce, and achieve climate goals topics as follows.
Part 03 Actions of the Council/Policy Recommendations AUTOMATED VEHICLE TECHNOLOGIES AND SMART INFRASTRUCTURE In its early meetings the CFME workgroup mobility strategy and vision plan. Such a covering automated vehicle technologies and strategy would provide state agencies better smart infrastructure surveyed and researched direction for their mobility and electrification other sets of public policies and determined that efforts and establish goals and metrics required Michigan’s automated vehicle (AV) and smart to keep the state on track. The $1.5 million infrastructure laws from 2016 are still among the proposed in Governor Whitmer’s FY’22 budget most cutting edge in the world and still strongly recommendation would support this work product, support development of the advanced mobility ensure it is coordinated with other state agencies’ sector. However, other states have begun to adopt strategic plans, and utilized to keep all of state Michigan’s original policies and the Great Lakes government on track and sharing in the mission of state no longer enjoys a convincing lead in this continuing Michigan’s mobility and electrification area. Furthermore, other states’ laws benefited leadership. from both being developed after industry had settled on some common terminology and Adopt the leading and most common AV definitional meanings and being able to incorporate standards and continue to survey and evaluate modern advancements in AV technologies. other states’ and trade associations’ model AV laws The workgroup determined that to remain the premier state for researching, developing, testing, The CFME recommends that the legislature commercializing, and deploying AV tech and smart update the taxonomy of the Michigan Vehicle Code infrastructure, Michigan must keep its AV statutes (Public Act 332 of 2016) to adopt terms which have up to date, develop a state strategy to plot a course become commonly accepted or industry standards for the future, and invest ample resources in the since the Michigan laws on AVs were enacted in state agencies focused on advanced mobility 2016. Certain terms, such as “personal delivery and developing that strategy. To remain a global device” have become widely used elsewhere. future mobility leader, Michigan must also build Other terms, like “automated mode” have been off its strength of forward-looking public policies replaced by different terminology. The Michigan by implementing new policies to facilitate the Vehicle Code should be amended accordingly to next generation of smart infrastructure and provide consistency with other states and federal AV technologies being developed in the state. authorities and ease discussions with industry and Additionally, it was noted that many AV and smart research partners. infrastructure policies are shifting focus from the The Automated Vehicle Technologies and states to the federal government, and Michigan Smart Infrastructure work group discussed 14 should embrace federal policymakers’ interest and specific recommendations of the AV Roadmap be the leader of state perspectives on these issues. proposed by the Alliance for Automotive Resource a cohesive Michigan Mobility Strategy Innovation. Michigan already complies with 11 recommendations for leading states. One of the There is a need for Michigan’s Office of Future remaining recommendations is to refrain from Mobility and Electrification to develop a cohesive adding equipment standards at the state level, but 10
Part 03 Actions of the Council/Policy Recommendations to reserve those for federal attention. The Alliance system installations, it will mean direct funding of cited a provision for data recording which applies infrastructure. Other funding could bring more state only to SAVE project vehicles, as described in MCL engineers and planners to help more developers 257.665b, providing on-demand automated fleet and testers. The CFME is not able to recommend a transportation. specific value for funding, but desired policymakers to consider the role of funding in reaching policy Two specific examples were raised. First, the and economic growth goals. Just as the missions of 2016 legislation prohibited local ordinances on the CFME and the OFME includes ideas and efforts most aspects of on-demand automated vehicle from different state agencies, funding for mobility fleets to allow the concept to take form and work and electrification will include programs crossing through demonstrations. The predictions for traditional lines. Funding and personnel positions broad commercialization of such fleets has still not for the OFME should be included as well as been realized, and the CFME recommends either programs within EGLE focused on electrification, eliminating the current sunset date of December offices at MDOT focused on ITS and multi-modal 31, 2022 or extending it to December 31, 2025. The transportation, especially those dealing with public CFME also recommends that policymakers remove transit, and business development and community the current limitation for on-demand automated revitalization efforts at the MEDC. vehicle fleets that excludes commercial vehicles. Revising this provision would allow commercial Michigan should permit operations of personal motor vehicles to be included in demonstrations delivery devices (or automated delivery devices), and deployments showing new efficiencies in and extend the permissible vehicle type for freight movement. on-demand automated vehicle fleets to include commercial vehicles Improve the internal capacity of state government by increasing funding for state Balancing delivery desires, consumer preferences, departments’ mobility efforts and innovations changing the future of the logistics industry with the impact on jobs and economic The CFME recommends increasing the budget disruption, especially emerging from the current and staff for state agencies and offices working pandemic, requires a steady commitment and a on the future of mobility, electrification, and strategic plan for transition based on real data. The smart infrastructure. This will facilitate more growth of last mile or home delivery of goods is rapid decision making, innovative thinking and easily observed and well-known. Even accounting processes, as well as enhance current mobility for the special circumstances of the COVID-19 ecosystem development programs period, the phenomenon seems here to stay. While discussing new technologies, state Consumers have become more accustomed to regulations and state government interactions swifter and more convenient delivery of goods. with developers and industry, workgroup members Last-mile delivery innovations imply efficiency and noted the state and its private mobility partners minimized traffic impacts by replacing large delivery would be aided by additional funding for state vehicles with automated ground devices and agencies working to codevelop the sector. In unmanned aerial systems. Michigan lawmakers some cases, such as intelligent transportation have considered legislation to allow automated or personal delivery devices to transport goods 11
Part 03 Actions of the Council/Policy Recommendations over short distances on sidewalks and streets to homes and businesses. In the current 2021-22 legislative session, Senate Bill 538 and Senate Bill 560 have each been introduced to allow such devices and provide guidelines for their use. Over a dozen other states have enacted such measures. While new jobs in packaging and delivery seem likely to be created, special consideration is needed for workers who presently provide these services and who may be displaced. Part of the challenge is to understand what new job opportunities may be created. Attention is also needed to retrain current workers to obviate technology advancement at their expense. The CFME recommends passage of legislation that permits the thoughtful and safe, and scalable use of automated ground delivery devices with an associated jobs impact study so that the state can better prepare for the future of the logistics industry. The state should revise its driver licensure laws to facilitate greater mobility for persons with disabilities or other personal mobility barriers The CFME recommends amending Michigan’s driver licensure laws in advance of the higher levels of automation to firmly establish the independent mobility solutions for those currently challenged or legally barred. Michiganders with disabilities are among the most hopeful advocates for automated technology. Current driver licensure laws, enacted decades before the new technology, legally block them from independent mobility based on an ability to safely operate a motor vehicle that, over time, has developed the ability to operate itself. While commercial use of vehicles with automation levels four and five is still in the future, it is not too soon to plan for it (the scale or levels of automation were established in SAE International J3016 “Taxonomy and definitions for Terms Related to On-road Motor Vehicle Automated Driving Systems”). More importantly, it is not too soon to reassure in state law that persons with disabilities will enjoy the freedom-giving technology when it becomes available instead of waiting for future revisions or “special add-ons” to the law. Driver licensure is a traditional regulatory role for states, and Michigan can set a clear signal and standard now that will benefit the state’s global mobility leadership status. 12
Part 03 Actions of the Council/Policy Recommendations Michigan should develop and implement development and tangible benefits for the motoring policies supporting the world’s first deployment public, the first responder community and road of a connected and autonomous vehicle (CAV) construction workers. CFME recommends MDOT corridor and OFME work with the mobility industry to develop systems for sharing construction zone The CFME recommends establishing policies data in real-time to enable the dynamic updating of and enacting laws to aid in the successful maps and using AI to keep construction workers development and deployment of the world’s and motorists safe. The CFME recognizes this first connected and automated vehicle (CAV) may require additional back office support staff to laneway. While the 40-mile Detroit to Ann Arbor operate ITS, which is accounted for in a previous CAV corridor is the first of its kind, it will not be recommendation to increase funding for state the last and Michigan has the opportunity to lead mobility offices and agencies. in developing state policies that will facilitate these smart infrastructure deployments. While Michigan should advocate to federal a myriad of policy considerations may arise over policymakers about C-V2X and the need for the lifespan of developing, building, and operating resources to states to upgrade and accelerate CAV smart infrastructure, the public policy deployment of connected infrastructure considerations known to be useful today include systems, as well as the need for additional creating CAV lane designation and dynamic road spectrum beyond the limited 30 MHz spectrum use charging authorization, permitting the use of that has been allocated for transportation safety CAV innovations in infrastructure design, and, most importantly, ensuring that CAV lanes are a safe and Since late 2019, the Federal Communication effective service to the public and our economy. Commission (FCC) has undertaken a regulatory To the extent that CAV lanes will present the process to revise the allocation of the 5.9GHz opportunity to both disrupt and create new jobs, a portion of the wireless spectrum. That portion jobs impact study should also be included as part of the spectrum had previously been dedicated of these statutory changes. to traffic safety applications. However, in FCC Docket No. 19-138, the FCC chose to reallocate State agencies should work with the mobility the spectrum to reduce the portion for traffic industry to develop systems for sharing of real- safety and allow it to be used by other interests. time construction zone data for dynamically The implications for traffic safety are to lose a updating maps and artificial intelligence (AI) and significant portion of that available spectrum, to addressing worker safety raise the possibility of signal interference from nearby users, and to saddle road agencies with Michigan must lead the way in providing dynamic costs of converting to new, compatible equipment. information on fast-changing situations like This is an especially important issue for Michigan construction zones. Road agencies struggle to keep and local road agencies who have recognized the the data for mobility technologies up to the precise value of ITS and connected vehicle technology and timely standards needed. MDOT and other and were early adopters. While the regulatory Michigan road agencies acknowledge the need process has reached its conclusion, hope remains and the challenges in doing so. Leadership in this that other portions of the spectrum might be area can lead to a huge breakthrough in technology identified for traffic safety, and that road agencies 13
can be reimbursed for conversion costs to other is met to ensure the safety and traffic efficiency forms of connected infrastructure communication benefits are realized both now and in the future. devices (e.g. CV2X or cellular-vehicle-to-everything technologies). Michigan should also advocate federal policymakers about the need for a uniform, The CFME recommends the state, through national automated vehicle (AV) policy and legislative resolution and agency and political about revisions to the Manual on Uniform Traffic advocacy, educate federal policymakers about Control Devices (MUTCD) to include items that the need to provide the states reimbursement for facilitate AV deployment the costs associated with conversion of road-side units (RSU) to the newly endorsed technology Michigan must lead among the states in advocacy (C-V2X) and continue to encourage deployment to the federal government on the future of mobility of this technology through federal grants. Without and electrification. The CFME recommends such reimbursement, road agencies will essentially Michigan officials advocate and attempt to pay twice for the same safety benefit, effectively influence content and decisions on federal AV decelerating or even terminating deployments. policy and guiding documents. While states have Policy makers at the federal level should recognize a vital policy role in automated vehicles, there the importance of the situation and provide is a pressing need for a federal policy including reimbursement based on the cost of upgrading legislation. Important topics of traditional federal states’ connected systems as they existed when regulation in design, construction and performance the spectrum reallocation occurred. There will also of vehicles need policy direction and to start soon be a need for additional spectrum beyond rule making for important regulations at that the 30MHz that have been allocated as these level. Outside of legislation, Michigan should technologies transition both to 5G and then also get actively contribute to discussions on revisions to utilized for advanced use cases like AV’s. Various the Manual on Uniform Traffic Control Devices studies have suggested that an additional 40MHz (MUTCD) to ensure the promise of technology is of spectrum will ultimately be needed. The FCC properly reflected. should ensure that this additional spectrum need This report builds on the momentum Governor Whitmer started in creating the new Office of Future Mobility and Electrification and the Council on Future Mobility and Electrification. The pace and excitement of announcements in these fields in Michigan is building. This report and the work of the council will be key in bringing focus and energy to state efforts going forward. TREVOR PAWL | Chief Mobility Officer
Part 03 Actions of the Council/Policy Recommendations ECONOMIC DEVELOPMENT The CFME workgroup covering economic will assist in closing this gap and mitigate risks. To development issues was quick to identify that increase Michigan’s inventory of industrial sites and many of Michigan’s longstanding shortcomings in enhance those sites for business attraction and its economic development toolbox are the result growth opportunities, the state should capitalize of insufficient funding and budget prioritization. a large site development fund to acquire and These shortcomings were then exacerbated by create “ready” site properties for mobility business the COVID-19 pandemic. With the passage of the development and attraction. American Rescue Plan, the anticipated resources to be deployed by a federal infrastructure package Business development projects requiring and the American Jobs Plan, as well as the state’s substantial infrastructure modifications including own one-time budget surpluses due to increased water, sewer, wastewater treatment, electric power, consumer spending during the pandemic, natural gas, telecom, rail and/or road improvements Michigan has a generational budget opportunity present particularly strong challenges, especially to fund many of the mobility and electrification when working to address large enough parcels sector economic development tools that have to meet business needs. Michigan has a limited needed attention for years. The recommendations number of existing sites and facilities available to are designed to be transformational one-time support its expanding businesses and a limited investments that will translate into sustainable, number of sites 300 acres or larger, with full long-term growth and monumental leapfrog infrastructure in place. For projects requiring 1,000 opportunities that will keep Michigan in a global acres or more (megasites) Michigan can currently mobility and electrification sector leadership only offer two sites, neither of which are served position. with municipal water and sewer and both require substantial upgrades to other public and private Develop a better inventory of large sites infrastructure. By comparison, North Carolina currently has 10 megasites, including at least Site selection is the beginning of all project six known to have full infrastructure. The cost to lifecycles and is the most important factor of siting provide public infrastructure to sites can range a project in Michigan. The state’s current inventory from $2 million to $100 million or more for very large of “project read” sites is insufficient. Michigan projects and utility users. It is critical that the state needs such locations to continue to compete be able to offset these infrastructure connection effectively for attraction projects. Michigan has costs and develop new sites to expand its inventory lost many opportunities since 2008 because of build-ready sites, with a particular emphasis on Michigan’s sites were not “project ready.” Many of large sites that can support business development Michigan’s industrial properties are in underserved projects that can have a transformative impact on populations or townships. Communities need regions and workers substantially impacted by the financial and technical assistance to improve the COVID-19 pandemic and populations living below industrial properties in their region. We are years ALICE thresholds. behind the site preparedness strategies employed by Southern states, and an industrial sites program The CFME recommends the state capitalize a 15
Part 03 Actions of the Council/Policy Recommendations strategic site development fund with $100 to $250 are: year-round programs with consistent funding million as a way of scaling or supplementing the and site awards are made year-round, a dedicated MEDC’s Build Ready Site Program. Based on funding source, a dedicated third party certification MEDC estimates this level of funding could develop (engineering firm or site consultant firm), buy- six large sites (300 acres or larger) and an additional in from the local communities, and continuous 30 smaller sites in less-populated areas of the marketing. state. This funding will allow smaller to medium sized businesses expand their companies as they Redesign economic-talent development tools position their operations to recover from impacts of to be smarter, more coordinated with talent the pandemic, and prepare for new Industry 4.0 and development goals other technology demands. Projected outcomes Tax incentives, P3 style investments, land options, are 8,529 in acreage development, $11.4 billion in and other forms of monetary, traditional economic private investment, 19,600 in new jobs created, and development tools are not alone going to help $10.1 million in public/private match funds. Michigan keep pace with business development Grants from the fund should be awarded to opportunities in the future of the automotive applications that: prioritize impact to geographically sector. We have already started to see an evolution disadvantaged areas and distressed communities; in the Requests for Information (RFI) to which demonstrate that site development will lead to a the state is being asked to respond and in the substantial number of pathway job opportunities types of questions and the strategic focus of the and equitable, high wage growth opportunities issuing companies. Relationships are important, for individuals; benefit target industry sectors and perhaps even more than financial incentives, (evaluated based on potential economic impact to companies want to know that the states they’re the local community, region and the state, including investing in are planning for their mutual, long-term but not limited to MEDC strategic sectors); result in success. Talent remains a significant interest, but green infrastructure and site design and positively companies want to know how states plan to supply address environmental justice communities; talent directly to their industry. Michigan needs to emphasize COVID-19 impact mitigation such as site solve for these factors to remain competitive in the development for specific end-users that have been automobility economic development space. impacted by the pandemic. The CFME recommends that the state refocus Michigan has lost several projects to Alabama and its economic development tools to be more Mississippi. Alabama began the site program in comprehensive. Through a more comprehensive 2008 and currently has 60 certified sites identified set of economic development tools the state can across the state. Mississippi’s site program has make its economic development investments go a matching grant of up to $50,000 for Ready Site further while still attracting more future mobility or $250,000 for Premier Site and MDA funds site companies, help solve for these same companies’ applications. Tennessee has the nation’s top site long term talent needs, establish more stickiness program and Georgia’s is ranked second. Both for those companies to remain in Michigan and programs have searchable real estate databases continue to make more investments. and provide funding to communities with industrial The state should review its current toolbox of property. The differences from Michigan’s program economic development incentives and, where 16
Part 03 Actions of the Council/Policy Recommendations and when it is strategically advantageous, aligns focused on holistic economic impact while still with both a target company’s vision and the local being primarily a jobs-driven activity. educational institution’s goals, the state should tie its incentives to requirements that the receiving The goal is to achieve an increase in Michigan’s company play a role in the local education, stickiness for the automotive sector through an workforce and talent development institutions. enhanced capacity of the sector’s talent pipeline. Generally, a ROI is anticipated, but without the The companies awarded enhanced talent data that would come as a result of attempting this economic development incentives should be sharpening of our economic development tools it is incented to engage in the local PK-12 system, tough to estimate what the percentage increase on community college, or university. Options could today’s economic development activity would be. include: An ancillary benefit of a change like this is the • sponsoring a FIRST Robotics team; potential for the state’s economic development • sponsoring a coding competition team or class; work to help provide a more attractive set of engineering, science, mathematics, art, and • supporting a STEAM program with equipment, technology educational offerings at local teacher externships, guest lecturing/teaching, educational institutions. projects and curriculum designs, or by offering real-world educational opportunities; • offering company space as an age-appropriate field trip site; This would make the entire • creating a high school internship or mentorship community more attractive program; to future residents and • creating a scholarship fund for the local community; positively impacting overall • creating a postsecondary internship or economic health of the area. mentorship program; and • having senior engineers as adjunct teachers at While some states, like Illinois, have established the local postsecondary institution. partnerships between the state, an automobility The MEDC, the target company, and the local company, and a community college to create a educational institution would need to develop the direct-to-company talent pipeline, the CFME is not location-specific plan that works for all involved, aware of any state that ties economic development with the primary focus being on the experience and incentives in the way being proposed here. This learning opportunities for students. initiative would help make Michigan stand out from other states as a place that is willing to implement The proposal is not to simply spend more dollars unique business attraction efforts, and indicates on economic development, but to make the current the state government intends to have long-lasting, economic development tools more robust, and symbiotic relationships with the sector. perhaps adjust the state’s ROI formula to be more 17
Part 03 Actions of the Council/Policy Recommendations The comprehensive economic-talent development vehicle, a daily commute may involve different bus tools could be developed and tested at a pilot level systems, different fares and different acceptance with a predetermined education institution that of payments. Commuters and employers alike are desires this sort of relationship. frustrated at the lack of seamless connections and the likelihood of gaps and delays in timely Create a “mobility wallet” travel. Additionally, a tool developed with a The CFME recommends the state spend $2 million specific consideration for those without access to create a centralized platform to systematically to traditional financial services (unbanked launch and scale mobility solutions statewide. This Michiganders) will help drive greater equity in platform would work to remove transit barriers our transportation system. MDOT is beginning and provide critical, post-pandemic solutions important groundwork in creating harmonized like contactless fares, common transit fares and payments and transactional management to speed parking payment processing across the state, and smooth the movement from one provider to reward programs, dynamic pricing and routing and another. Residents and workers should be able goods delivery. Transit and shared, multi-modal to use the current services and others such as mobility are essential to moving large numbers transportation network companies so that new of workers, commuters and the general public. innovations can serve them without the stumbling Increasingly, new modes of micromobility such as block of uncoordinated payment. electric scooters and e-bicycles can also play a Establish and capitalize a startup resiliency fund role. However, riders are challenged in moving from one provider or mode to another. While bus service Michigan is innovative, but could commercialize may be available to someone lacking a personal more of the innovations developed here. In the 18
Part 03 Actions of the Council/Policy Recommendations United States, Michigan is 7th in academic R&D from $514 million in 2019 to $25 million in 2020. and 5th in business R&D (% of GDP nationally) “MVCA survey respondents estimate that $1.2 and generates the 12th most patents per capita. billion of additional venture capital will be required Young companies drive job creation in the US, to adequately fund the growth of Michigan’s 165 but Michigan has a lower share of them in our startup companies in the next two years.” economy. These dollars are lifelines to young companies that drive job creation. Michigan is the The initiative will be targeted exclusively towards second highest receiver of automotive venture Michigan start-ups that faced documented capital (VC) funds, but is still just 1/10th the scale COVID-19 impacts, and will specifically target of California. Unlike other regions, the majority of support for entrepreneurs of color, women owned automotive VC funding in Michigan is focused on businesses, and businesses located in geographies hardware, with just 6% of investment in software. whose economies were disproportionally impacted Even in hardware technologies, VC funding in by COVID. California surpasses Michigan The Initiative’s three lever approach is designed to By being more competitive and having a better diversify risk and drive returns across three core ecosystem for VC and private equity funding objectives: Michigan will be able to help identify and develop more mobility startups and associated jobs from 1 gain broad exposure to growth and value the creation of intellectual property (IP). creation in Michigan-based businesses in sectors that have been harmed by COVID; The CFME recommends that in order to attract more venture capital investments to Michigan’s increase investment capital in Michigan, 2 mobility ecosystem, the state should establish a particularly in communities that have $200 million startup resiliency fund. The fund would been most harmed by COVID or that have seek to fill a gap by targeting underserved and lacked traditional access to investment underrepresented entrepreneurs. opportunities; This fund would be a budget investment with 3 produce financial returns that can be administrative operations. The fund would contain reinvested into hard-hit communities. three main parts: as a targeted form of small business support, the state would provide equity investments ($140 million), grants ($5 million), in- The immediate action for setting up the fund would kind services, and technical assistance to start-ups involve: ($10 million). • establishing a State Benchmarking Exercise and Start-ups are worthy of a dedicated program: Advisory Committee; According to Michigan Venture Capital Association, • setting up and engaging In-State, Global Advisory “Capital available for new investments in 2020 was Committees; and $503 million, a decrease of 44% over the last five • implement fund structure. years.” Venture capital activity in Michigan dropped 19
Benchmarking Exercise: LEO, Treasury and Fund Structure, Governance, Management and MEDC and a core group of in-state local partners Operations: A halo oversight structure will govern would conduct a series of interviews with state all three levers. Each lever will have a dedicated officials that have launched, or are launching, Fund Manager (individual or third-party firm). Fund similar fund constructs. Ohio and New York have Managers to be appointed by LEO, Treasury and operated successful funds of more than $100M for MEDC with counsel from the Advisory Committee. years to grow jobs in key industries. Ohio’s $150M The Fund Managers would have discretionary fund has invested in firms that have employed mandates over their respective capital allocations. ~3,000 people. Firms that received funds from But they would work closely together to ensure a the state of Ohio employed staff with 50% higher cohesive strategy and report to an oversight board wages than average in-state employees. And appointed by LEO, Treasury, and MEDC. LEO and Wisconsin has $100M allocated for a new fund this MEDC will work with fund managers to provide budget cycle. business development support to maximize the Fund’s ROI. Advisory Committee: A group of advisors will need to be assembled to help guide the fund creation Fund Structure Implementation and Investment process. This includes defining fund structure and Lever: Below are program design assumptions strategy, identifying potential fund managers, and based on a $140M allocation for Fund of Funds aligning potential co-investors. These advisors investments. With guidance from the Advisory will be a mix of local players and Michigan expats Committee a final recipient fund criteria, portfolio with deep experience and expertise in investment guidelines and selection process will all be strategy and fund management. determined.
Part 03 Actions of the Council/Policy Recommendations Programmatic Grant Lever: Below are program design assumptions based on a $50 million allocation for non-equity grant-based investments or co-investments. With guidance from the Advisory Committee, we will determine final criteria for companies or co-investors applying for grants. Technical Services Lever: With guidance from the The initiative will be targeted exclusively towards Advisory Committee, LEO, MEDC, and Treasury will Michigan start-ups that faced documented determine complementary technical services to COVID-19 impacts, and will specifically target help portfolio companies succeed. support for entrepreneurs of color, women owned businesses, and businesses located in geographies This fund would be revenue negative at first, but disproportionally economically impacted by COVID. the initiative is a one-time investment and would recycle capital from returns. There would be an Michigan is absolutely behind other states with estimated return on investment, though there are regards to policies and investments to develop a too many variables to accurately estimate values. robust venture capital market. Techniques used This fund is intended to operate with a required 1:1 have experienced success in other states and private match. countries around the world. Success would be helping unlock private investment into Michigan’s This initiative will catalyze economic diversification, entrepreneurship ecosystem, while creating the making our state more resilient and less environment for the long-term creation of good susceptible to future economic downturns. It will jobs. support more small business startups, and both grow demand for, and offer career options to a more high-skilled workforce. 21
Part 03 Actions of the Council/Policy Recommendations Create a Global Center of Excellence for both Venture capital funding for AI companies totaled Battery Innovation and Responsible Artificial $61 billion from 2010 to 2020, while funding Intelligence for battery storage, smart grid, and efficiency companies increased by 12% from 2019 to 2020, Universities are critical to building tech ecosystems. rising to $2.6 billion. The volume and pace of In Silicon Valley, Stanford University played an venture activity indicate that these areas are poised instrumental role in establishing the region as the to shape the world for decades to come, positioning global epicenter of technology innovation, in large Michigan as the leading tech ecosystem for urban part due to its robust R&D pipeline. Stanford’s role infrastructure, equitable mobility, and sustainable in catalyzing the Silicon Valley ecosystem can be transportation. This proposal recommends two traced to the creation of Stanford Industrial Park global centers of excellence for created to focus on in the 1950s. By establishing a physical center for responsible AI and emerging battery innovation. collaboration, Stanford sent a signal to the private sector that it was a committed partner in shaping Global Center of Excellence for Responsible the future of technology. From 1970 to 2010, Artificial Intelligence: The establishment of Stanford’s Office of Technology Licensing disclosed a multi-university partnership to research and 8,300 cumulative inventions and executed over apply responsible artificial intelligence (AI) to 3,500 licenses for companies, including Google. identify, analyze, and improve local transportation, The strength of Stanford’s research programs also cybersecurity, and logistics networks. This created stickiness in the ecosystem, as spin-out would be in a way that propels cities and rural companies were incentivized to remain in Silicon areas into an equitable and sustainable future. Valley for evergreen access to skilled talent. At Selected universities would work together to Mountain View-based Google, for instance, 1 in develop artificial intelligence algorithms meant to 20 employees graduated from Stanford. More improve global infrastructure and transportation recently, the University of Texas at Austin has networks, starting in Michigan. The focus will be driven economic development through programs on addressing the question of how AI can best be like the Austin Technology Incubator, which used to enable and accelerate equitable mobility. resulted in the formation of 300 companies and generated a $3 billion economic impact in Texas. Global Center of Excellence for Battery Tech ecosystem growth in both Silicon Valley and Innovation: In parallel, a global center of excellence Austin has been intrinsically tied to – if not directly for emerging battery technologies would be catalyzed by – universities committed to cutting- launched, also as a multi-university partnership, edge, collaborative innovation. to reinforce Michigan’s leadership position in vehicle electrification and transition Michigan’s The CFME recognizes there is a compelling workforce to lead an electrified future across all opportunity to leverage Michigan’s network of modes of transportation. Batteries hold the key to research universities to advance the State’s transitioning away from fossil fuel dependence. mobility leadership goals and build a vibrant Cutting edge research and Innovation will be a ecosystem around two emerging areas: Artificial cornerstone for building a globally competitive intelligence (AI) and sustainable batteries. The battery industry in Michigan and positioning the CFME strongly recommends the state establish state to capture the massive economic opportunity these two Global Centers of Excellence with a $50 underlying the shift to battery-based mobility and million investment. energy systems. The growth in EV sales, in large 22
Part 03 Actions of the Council/Policy Recommendations part, is linked to reductions in cost, improved Once the official partnerships are in place, performance of lithium-ion batteries, and a technical implementation for the Global Center of commitment to the environment. The creation of Excellence for Responsible Artificial Intelligence research programs that: should focus on developing transparent AI models for mobile users. Due to the rapid adoption of digital • enable EV batteries that charge in less than 10 technologies, many applications that once treated minutes while maintaining at a ~300 mile range users as passive entities must now consider them (lasting for the life of a vehicle), as active participants. This is particularly the • develop batteries that achieve EV range and case for companies or utilities in the mobility or charge rate parity while halving the size of the infrastructure space that are tasked with optimizing battery cell, the performance of a system that people are • lead the development and application of new actively interacting with in real-time. To address manufacturing processes and more affordable these challenges, the center will focus on the materials, development of ‘glass box’ models that increase transparency, accountability, and trustworthiness • leading the development of new battery recycling without sacrificing learning performance. technologies, Cybersecurity would also be a focus. • dramatically improving safety (non-flammable), and The state-academic partnership should also focus on AI systems that balance efficiency and • halve battery pack costs. fairness. As companies or utilities leverage these Both Centers of Excellence can incorporate private, learned models, they typically focus exclusively federal, and local match requirements. These new on improving system efficiency. However, this in-state assets will position Michigan and multiple singular focus creates large discrepancies between universities and partners to better compete for individual user experiences. Unfortunately, this federal funds and private capital. type of approach can lead to large discrepancies in travel times that unfairly burden the poorest in our These two Global Center for Excellence could communities. To address this challenge, the center be implemented like other examples of the state will focus on technologies that help companies or partnering with universities on joint operations or utilities account for users’ economic hardship. projects through Memorandums of Understanding (MOU). Selected universities for the responsible AI The state-academic partnership should also excellence center must have experience in artificial conduct user-inspired research to better intelligence, next generation infrastructure and understand what drives innovation while enhancing transportation systems, and quantifying the impact safety. Each of these major research efforts will of technology in diverse communities. Likewise, build upon prior efforts around fare optimization, the university partners selected for the battery data driven decision-making that fits into the innovation excellence center must have experience larger context of transportation applications. The in battery materials, manufacturing, design properties of any developed AI algorithm will be research, and a strong history of collaborating with directly motivated by user-inspired research. Any industry partners. developed algorithms will need to be robust and verified to operate correctly since the safety risk 23
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