News Story

Bills Make It Easier For Private Marketing Bureaus To Force Dues on Businesses

Hotel owners say compelling payments to private tourism bureaus violates constitutional rights

A package of bills introduced in the Michigan Senate in December could make it more difficult for local hotel and motel owners to refuse to pay levies as high as 5 percent of their revenue to private marketing bureaus. The bills may be sent from committee to the full Senate as early as next week.

Each of the five bills in the package amend one of several laws that authorize the schemes, which empower nonprofit tourism marketing bureaus to levy assessments on local lodging facilities and spend the money on convention and tourism promotion. The Michigan Economic Development Corporation approves the bureaus, which can then collect the money from lodging establishments having a certain number of rooms.

In 2016 and 2017, the Mackinac Center Legal Foundation represented two business owners who filed lawsuits, arguing that compelling them to pay for a private entity’s marketing campaign violates their First Amendment right to free speech.

Both the Mackinac Center Legal Foundation and Michigan Capitol Confidential are projects of the Mackinac Center for Public Policy.

Senate Bills 703 through 707 seek to establish that the schemes do not violate free speech rights. They do so by asserting that the bureaus serve a governmental purpose — specifically, that tourism is “vital to the growth of the state’s economy,” and also generates tax revenue.

A summary of the package by the Senate Fiscal Agency suggests that unless the bills become law, the state could incur costs from having to defend lawsuits against the assessments by aggrieved motel owners. This suggests that by enacting a legislative “finding” about the value of tourism, the legislation would insulate agencies from complaints that they compel speech.

All five bills specifically state that the actions of the tourism boards should not be construed as requiring “any owner or participant to adopt any actual or symbolic speech.”

Derk Wilcox, senior attorney at the Mackinac Center Legal Foundation, said he believes the package will make it more difficult for lodging businesses to sue. That’s because, he said, it would let courts interpret the compulsory marketing campaigns as a form of government speech, which, unlike private speech cannot be challenged as unconstitutional.

The bill also specifies that government agencies would be more involved in the bureaus through increased oversight and by encouraging promotional campaigns that are consistent with the state’s own marketing plans.

David Gersenson owns two lodging facilities near Sleeping Bear Dunes National Lakeshore in Leelanau County and is one of the two business owners the Mackinac Center Legal Foundation has represented in lawsuits against private marketing bureaus.

Gersenson’s establishments lie within the area represented by the national lakeshore’s private marketing bureau. Before a circuit court judge dismissed the case after the local bureau stopped levying charges on Gersenson, he was expected to pay five percent of the amount charged for rooms, which went for advertising promoting Sleeping Bear Dunes.

Four of the seven lodging facilities that are within the bureau’s territory and have enough rooms to be subject to the assessment are owned by a single firm called the Homestead Resort.

When Gersenson launched his suit, the local marketing bureau’s secretary, Jamie Jewell, was also the Homestead’s vice president of sales, according to the Traverse City Record-Eagle. Jewell is no longer employed by either the bureau or the Homestead.

“I hope that they don’t get this bill passed, I don’t think it’s fair to business owners that don’t want to be a part of it,” Gersenson said.

He also said a number of other small hotel owners from throughout the state have told him they had similar problems.

Sen. Wayne Schmidt, R-Traverse City, is the primary sponsor of the bills. He could not be reached for comment by phone or email.

Sen. Ken Horn, R-Frankenmuth, co-sponsored the legislative package and declined to comment for this article.

In testimony for the Senate Commerce Committee, Jack Schripsema, president and CEO of Lansing’s private marketing bureau, said he believed the bill was about accountability as well as improved coordination between different bureaus and the state of Michigan. Schripsema is also president of the Michigan Association of Convention and Visitors Bureaus.

He was quoted in MIRS News saying, “We believe this is going to provide a little more accountability and certainly stronger coordination between the local destinations in the state of Michigan, and, all important - transparency.”

The Senate Commerce Committee held a hearing on the bills on Jan. 10, and a dozen private marketing bureaus submitted letters supporting them, often containing references to improving the economy and the image of Michigan in language similar to that used in the bills.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.