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State ‘Pure Michigan’ Agency Refuses to Debate Ad Program's Cost Effectiveness

Think tank's independent research suggests taxpayers get back $2 for every $100 Pure Michigan spends

The government agency in charge of Michigan’s business subsidy programs, the Michigan Economic Development Corporation, has declined an invitation from a free-market think tank to debate in public the validity and effectiveness of the “Pure Michigan” tourism marketing campaign run by the agency.

The debate challenge was triggered by findings from an independent peer-reviewed study of the marketing program by the Mackinac Center for Public Policy, a longtime critic of taxpayer-funded business subsidies.

Documents obtained in a Freedom of Information Act request reveal internal discussions between MEDC officials and agency vendors about the Mackinac Center’s study prior to its final release. One of the topics: how to “discredit findings” unfavorable to the MEDC and state government spending on tourism ads.

The Pure Michigan campaign is intended to draw enough extra tourism dollars from other states that it pays for itself through larger tax collections from the lodging industry and others that benefit from more visitors. Money for the program comes out of regular state tax revenues and has cost $295 million since 2006. Legislators authorized spending $34 million on the program in the current fiscal year.

The Mackinac Center study released in November found that similar programs in other states do not have an economic payoff. It found instead that “for every $1 million in additional spending by a state on tourism promotion, there was an associated increase of $20,000 in additional economic activity shared by the entire accommodations industry in that state.” That translates into a negative 98 percent return on the money spent.

The Mackinac Center has also accused the MEDC and its paid consultants of all but making up the highly favorable return-on-investment figures it has given to state lawmakers and reporters, using methods “steeped in secrecy.”

In November, the Mackinac study’s two co-authors issued their challenge to MEDC officials to debate the effectiveness of Pure Michigan.

Dave Lorenz, who directs the MEDC bureau that manages the campaign, declined the invitation in a letter to LaFaive and Hicks, saying “there is already an extensive public record on the matter.”

“We stand by our research, which was conducted by an industry leader,” Lorenz wrote, referring to a Canadian company called Longwoods International. The firm has been called out by the Mackinac Center for the return-on-spending figures it generated under no-bid MEDC contracts.

“We are always willing to have an open dialogue and conversations about the Pure Michigan campaign,” Lorenz continued. “But as your letter and previous posts on the topic clearly illustrate, this invitation is not about expanding knowledge, but rather providing a platform to push a specific position and agenda.”

The MEDC discussions about “discrediting” the Mackinac Center’s findings, which took place before the final study was released, appear to have been suggested by another agency vendor, a public relations firm. The topic first appeared in an email sent by MEDC staffer Lori Langone, under the heading “Advice from our public relations firm.” The email was obtained in response to a Freedom of Information Act request.

”When the study does come out, see what points we can discredit and proactively talk to the media, create an op-ed and pitch to the media,” reads the June 2015 email.

Langone said one thing to point out was a claim that the state’s unemployment in 2014 would be 13.3 percent instead of 7.3 percent without tourism jobs.

In another email, Langone said Tom Curtis, senior vice president of Longwoods International, advised the MEDC not do anything and “hope that this challenge gets dropped quickly.”

Adam Sacks, president of Tourism Economics, another tourism consulting firm that gets MEDC business, replied to Langone’s email and said “the Mackinac study is spurious,” though he also admitted to not having read it. Speaking of it, he said, “It is simply not possible to estimate the impacts of an ongoing advertising campaign with a statistical (read: econometric) model.”

In contrast to the “very blunt tool used by Mackinac,” he said the Longwoods study had “a bottom up approach.” Writing of work his own firm did, Sacks said, “Our most accurate forecasts still have enough margin of error that disentangling the effect of the state’s marketing campaign from economic effects, new developments, private sector initiatives, and weather (not to mention a dozen other factors) is not possible.”

Speaking of the Mackinac Center study, he wrote, “It is clear to me without even reading it that the study started with its conclusion and worked backwards.”

The Mackinac Center’s study is titled “An Analysis of State-Funded Tourism Promotion.”

The Mackinac Center publishes Michigan Capitol Confidential.