If you were to ask Michigan citizens to rank the various functions and duties of their state government, they probably would be surprised to find "owning and operating a ski resort" on the list at all. Yes, the state does, in fact, own and operate the Porcupine Mountains Downhill Ski Area, located inside the Porcupine Mountains Wilderness State Park. The state has no business in snow business, and should instead sell off the facility or contract out its operation.
The "Porkies" offer skiers 15 downhill runs, served by four lifts, on a ski slope area of 100 acres. With a history that goes back to 1940, the Porkies were one of the first alpine ski areas in the Midwest. It is one of four downhill ski areas in the western half of Michigan's Upper Peninsula, and the only one directly subsidized by Michigan taxpayers. Its low lift ticket prices ($28 for adults during peak periods, compared with $36 elsewhere) and generous children's policy (children under 12 ski free; other areas charge once a child is 7), give it an advantage - some would say an unfair advantage - over nearby privately owned ski areas. The pricing policies also leave Michigan taxpayers - skiers and nonskiers alike - holding the bag. Last season, the state spent nearly $375,000 operating the area, and showed a $140,000 loss. The money came from taxpayers-including the owners and employees of privately owned ski areas.
The mountains in the area get over 200 to 300 inches of snow a year, and some have earned high praise from ski enthusiasts. Private, for-profit Big Powderhorn, near Bessemer, for example, was ranked No. 8 overall in the Midwest by readers of Ski magazine, and nearby Indianhead Mountain Resort snatched a No. 9 ranking.
You would think, with its lower prices, skiers would flock to the Porkies, but they don't- at least not compared to the neighboring privately run resorts. Brett Stangeland, managing partner of Indianhead, estimates that the four privately owned resorts in the area, (Indianhead, Big Powderhorn, Blackjack and Whitecap, just over the border in Wisconsin) together receive 300,000 skier visits per year. That's an average of 75,000 visits per year, each. By contrast, Porcupine has averaged approximately 17,000 visits per year.
Why? Because it needs improvements that private entrepreneurs have the best incentive to make. It does not have snowmaking equipment, for example, which helps create a solid base, and is essential in seasons when the snow is late to arrive. In addition, the Porkies could use better lifts to whisk skiers to the top of the slope. Ski enthusiasts, writing on the web site goski.com, approved of the Porkies' unbelievable views, good snow, and variety of runs. But they lamented the slow lifts: "Bring a book," said one reader. High-speed lifts would help a Michigan-based resort compensate for its relative lack of steep and long runs (generally 400-600 feet, compared with 2,000-3000 feet in the Rockies).
Owners of private-sector ski areas pay property taxes to state and local governments, while the Porcupine ski area does not. The most recent numbers show that Indianhead paid over $66,000, and Big Powderhorn paid over $64,000. That represents yet another way in which the state is operating a business in unfair competition with the private sector. Why? Because the Porkies need not compensate local units of government in the same way mandated for private, profit-making institutions, even though the Porkies uses its share of local services.
In short, the Porcupine ski area operates at an unfair advantage against its private-sector competitors, and even then is unable to operate in the black, lacking the all-important incentive of a "bottom line." The taxpayers of Michigan are paying for a second-rate ski resort. Of course, operating a well-managed resort takes specialized expertise and investment capital, neither of which governments have.
Michigan lawmakers looking for an example of what can be done under such circumstances should look at the city of Denver, which recently turned management of Winter Park Ski Resort over to the private sector. Winter Park opened in the late 1930s. By 1950, however, it was clear that the city could not, on its own, make the necessary investments that the area required to be competitive. It made some changes, and continued to operate the area. Earlier this year, however, city officials acknowledged that they need private capital to upgrade the resort. After receiving six proposals, the city chose Intrawest, an industry leader, to manage the park under a 50-year contract. The city of Denver will receive $3 million at contract approval, and a percentage of gross revenue. No government money will be used.
If Michigan were to contract out the operation of the Porkies ski area, there are plenty of homegrown companies that could handle the job. Boyne USA, for example, has been honored by readers of Ski magazine for its operation of Boyne Highlands and Boyne Mountain. Ski industry insiders Peter Shelton and Ed Chauner spoke favorably of Boyne's operation at Big Sky, Montana, in their book "The Unofficial Guide to Skiing in the West," a review of the best ski areas in western North America. Of course, one of the companies that currently own resorts in the western UP may also step in. It's not unusual for a company to own or operate several resorts in one area. Such is the case with the Aspen Company, which operates four resorts in and near Aspen, and Vail Resorts, which operates resorts in Vail and Beaver Creek.
Here in Michigan, privatization is hardly a new concept. In 1999, businessman Scott Holman bought government-owned Granite Island, a small island near Marquette that features a lighthouse, and, like the Porcupine Ski area, was underused. In Hamtramck, state-appointed Emergency Financial Manager Lou Schimmel contracted out much of the work of the city's Department of Public Works (DPW), to the benefit of the city's residents. Even an element of the criminal justice system - the Michigan Youth Correctional Facility - is run by a private enterprise.
If a government duty as fundamental as criminal justice can incorporate private enterprise to the benefit of Michigan citizens, there is no reason why the state shouldn't be looking at options for selling its ski resort. The state of Michigan simply has no business in snow business.
John La Plante has authored fiscal policy research articles for the Thomas Jefferson Institute in Virginia and the Oklahoma Council of Public Affairs. He is a graduate of Kalamazoo College in Kalamazoo.
