Mackinac Center for Public Policy


Posted: Tuesday, July 13, 2004

Cities that Cry Poverty Should Sell Their Money-Losing Ski Areas

By John R. La Plante

In the last few years, the state government, as well as local governments across Michigan, have blamed budgetary shortfalls on a weak economy, loss of sales-tax revenue to the Internet, and policy decisions at other levels of government.

Rather than point the finger elsewhere, however, government officials ought to look first at some of their own unnecessary spending.

A bad example of public priorities – and a good example of the need to reorder them – comes from the northwestern town of Traverse City. It is currently dealing with a $994,700 budget shortfall.

Nearly 9 percent of that deficit, or $84,594, can be found on the slopes of the Hickory Hills ski area, a city-owned facility. The ski area’s loss has come even with the financial help of the Grand Traverse Ski Club, a private group that has provided funds towards snowmaking and lighting equipment.

The city’s parks and recreation commission has explored various ways of closing the budget gap, including raising prices or cutting services, to save $20,000 a year. Even so, local officials hope to spend $3 million to purchase a 117-acre parcel next to the ski area, which might give the money-losing operation a chance to expand. Or it might be an investment in another money-losing city operation.

BELOW-MARKET RATES

One reason for the red ink is the below-market rates charged for this non-essential government service. During the 2003-2004 season, an adult season pass cost $90; city residents paid $85. The maximum daily rate was $12.

By contrast, adult daily passes at nearby private slopes bring in more money. An adult daily pass at Boyne Mountain cost $37 in the late season, when prices are already discounted. At Caberfae, the maximum daily rate for the 2003-2004 season was $38. A similar difference can be found by comparing Hickory Hills to other, privately-owned ski areas throughout northern Michigan.

Even non-profit Mt. Holiday Inc., which also operates a ski area in the Grand Traverse area, charges more than Hickory Hills. But it does not enjoy the luxury of passing along its debts to taxpayers. During the last season, a daily lift ticket for adults cost $30 at peak times. Adult season passes cost $261 to $290, depending on the date of purchase.

One reason often given by proponents of government ownership of recreational facilities is that it is needed to bring sporting opportunities to youth and as low-income people. But profit-seeking companies already have incentives to attract new customers, and non-profit Mt. Holiday offers scholarships to the financially needy. According to federal reports available through Guidestar, Mt. Holiday Inc., does this without accepting government money.

DIVEST UNNECESSARY BUSINESSES

Owning and operating recreational facilities is at best a low priority of government. This is doubly so in a region, such as northern Michigan, with a wealth of facilities already offered by private sector businesses and the civil society.

A partial but long-lasting solution to Traverse City’s budget woes – and indeed, of any government – is cease money-losing, unnecessary, and inappropriate functions. The state Department of Natural Resources last year contracted out management of a state-owned ski resort, The Porkies, to save taxpayers an estimated $200,000 this year.

The sale or privatization of the city’s Hickory Hills ski area provides a sterling opportunity for the city to begin to get its financial house back in order.

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John R. LaPlante is an adjunct scholar with the Mackinac Center for Public Policy and the Taxpayers League of Minnesota. He has written for the Mackinac Center on contracting out state-owned ski resorts, and contributed to the center’s study on Balancing Michigan’s State Budget. A snow-sports enthusiast, he is the publisher of GraysOnTrays, a web site for adult snowboarders. Legislation regarding appropriations and public spending can be tracked at MichiganVotes.org.


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