LANSING – Pure Michigan ads depict vast lake scenes, woods afire in autumnal colors, serene winter landscapes, and have won awards and praise for helping restart Michigan’s tourism industry during one of its worst economic crisis. Yet, there is a small number of critics who charge the ads’ beauty belie a false government premise.
Led largely by the Mackinac Center for Public Policy, the critics contend the tourism industry should pay for the program itself and dispute research suggesting the program has boosted tourism spending in the state.
But at this point, support for the Pure Michigan program cuts across party lines. Attorney General Mike Cox, one of the favorites to become the next governor, has said the ad campaign has worked. Even Sen. Nancy Cassis (R-Novi), chair of the Senate Finance Committee, while philosophically questioning the role of government in the ads and sympathetic to the Mackinac Center’s views, supported a bill that cleared her committee this week pumping another $9.5 million into the program.
Gov. Jennifer Granholm drew legislative applause at her State of the State when she called on the Legislature to provide better funding for the program.
Business groups in tourism dependent areas also work hard for the program. The Charlevoix Chamber of Commerce, for example, regularly sends out email blasts urging members to contact their legislators in favor of the program.
A study conducted by Toronto-based Longwoods International has showed the Pure Michigan campaign has helped significantly boost tourism spending in the state.
And yet for as popular as the ad campaign has become, it has run into trouble in winning new funding. Lawmakers could have fully funded the program in the 2009-10 budget passed in October, but punted the issue. Now they are facing the reality of the campaign virtually going dark, but still the proposal to use sales tax revenue growth from tourism-related sales appears to have died in the Senate due to Cassis’ opposition.
This past week, Pure Michigan proponents lamented the Finance Committee’s approval of a bill that funds the highly successful advertising campaign at half of last year’s amount, claiming that the state’s tourism industry will crumble without at least $30 million to $40 million.
They will get no sympathy from Michael LaFaive at the Mackinac Center whose arguments have gotten traction with Cassis. He said Longwoods has done similar studies for tourism campaigns around the country and he hasn’t found a report relaying a negative return on investment.
The results he’s skeptical of? For the first time since beginning the campaign in 2004, the return on investment shot up to nearly double its return in the regional markets, now at $5.34 in taxes for every dollar spent, compared to an annual average of $2.86 from 2004 to 2008.
After interviewing 1,500 each of regional and national people who had recently visited Michigan, the study concluded the state also received a $2.23 return for its national television promotions.
Longwoods said in 2009, when the state spent nearly $4.43 million in nine regional markets – Chicago, Milwaukee, Indianapolis, Cleveland, Dayton, Columbus, St. Louis and Southern Ontario, it generated almost $23.7 million in taxes from the more than 1.2 million visitors to Michigan.
When the state launched its first national television campaign last year and added a winter season, reaching an estimated 60 million viewers, the report found that about $7.8 million spent brought back more than $17.47 million in taxes from over 681,000 visitors from across the country.
Longwoods did not include in its results the questions it asked or the margin of error or other methodology it used.
While LaFaive said he doesn’t want to “impugn motives” on Longwoods, he is suspicious without seeing the methods behind such repeatedly positive outcomes.
“I think it’s just implausible that taxing away money from one group can create a net benefit for jobs and in terms of the treasury. In all likelihood we’ll get back less than we give up. We have two decades of studies on our side that say that,” he said.
It’s not just the Mackinac Center, who has a well-known free enterprise approach, said LaFaive, others have said targeted incentive programs as faulty.
For example, John Crompton, a professor at Texas A&M in the Department of Recreation, Park, and Tourism Sciences, agrees with the Mackinac Center that “all too often consultants are hired to provide the predetermined position not to enlighten the world with new scholarship.”
“Most economic impact studies are commissioned to legitimize a political position rather than to search for economic truth,” said Crompton, in a 2006 paper titled Economic Impact Studies: Instruments For Political Shenanigans?
“Economic impact analyses have an obvious political mission,” he continued. “They invariably are commissioned by tourism entities and usually are driven by a desire to demonstrate their sponsors’ positive contribution to the economic prosperity of the jurisdiction that subsidizes their programs or projects. The intent of a study is to position tourism in the minds of elected officials and taxpayers as being a key element in the community’s economy.”
George Zimmermann, vice president of Travel Michigan, said the full Longwoods study isn’t due for 60 days from its original release in early February, but to question the motives of a highly respected and well-known firm is “preposterous.”
“Longwoods has been in the research business for a long time and they built their business on advertisement and investment studies for corporate and public entities,” he said.
Despite the intensity of the criticism in some quarters toward the Pure Michigan campaign, it isn’t very broad. On Thursday, prior to the Senate Finance Committee meeting, Sen. Jason Allen (R-Traverse City), one of the sponsors of the plan to use sales tax growth from tourism purchases to fund Pure Michigan, brought large pies to the Senate session with “Pure Michigan” on the pie crust.
Greg Main, president of the Michigan Economic Development Corporation, said the most recent budget process to fund the ads ended in frustration. “I thought we had a game plan in place that made sense in the spring,” he said.
Using the sales and use tax from tourism-related businesses to pay for tourism promotion had worked well in other states, Main said. But he also said it would have to be supplemented.
“It wasn’t going to solve the problem in the short term,” he said. “It will take three to four years to get up to where we need it to be.”
But he said they had expected the Legislature to also accept the proposal for a fee on rental cars to cover the interim funding (which Granholm has repeated in her budget proposal). “It was really aimed at people coming in here for business and tourism,” he said. “We thought that made sense and would meet the test; the Legislature would find it acceptable because it wasn’t residents paying it.”
Instead, Pure Michigan got lost in the shuffle. “We couldn’t get any traction on any of it,” he said. “It got caught up in the budget.”
To really get the funding moving, the industry is going to have to do more than tell the MEDC it supports the ad program, Main said. “It can’t be the MEDC that’s doing this. It has to be the industry, the folks that depend on the industry to make the sale,” he said.
Between the studies and the stories, Main said the program is working. “We’re not saying something people aren’t experiencing and feeling,” he said.
A tour boat captain at Sault Ste. Marie said his business had increased as much as 5 percent since the Pure Michigan ads began running.
With every $100,000 cut in tourism investment, the Michigan’s third largest industry, the state loses a job, said Jack Matthias, owner of Thunder Bay Golf and RV Res
