State top spender on tourism ads

Travel Michigan uses $15 million grant to kick off ads into Milwaukee, Cincinnati, Ontario.

July 4, 2006
Section: Business
Page: 10A

By Sarah Ryley
The Detroit News

Long operating on what many in the tourism industry considered to be a shoestring budget, Michigan's tourism agency now ranks No. 1 nationally in the amount of money it spends on advertising to lure U.S. travelers to the state.

Michigan's spending on U.S. advertising and promotions went from $4.7 million in 2004-05 to $12.7 million in 2005-06, ranking it tops in the nation, according to the Travel Industry Association of America's 2005-2006 Survey of U.S. State & Territory Tourism Office Budgets.

Providing the big boost was a $15 million grant to be spent over the next two years from the 21st Century Jobs Fund, a $2 billion public-private investment intended to create jobs, develop new technologies and diversify the state's economy.

The grant nearly doubled the state tourism office's overall operating budget, and Travel Michigan decided to spend the entire amount on radio, television and print ads to encourage travelers to spend money in the state.

Kirsten Borgstrom, a representative for Travel Michigan, said she was "pleasantly surprised" by the ranking, but pointed out that it was because of a one-time grant from the jobs fund. "Our goal is to be able to maintain at least that level (of funding), and really create a brand for the state," she said.

That is money well spent, according to George Zimmermann, vice president of Travel Michigan. For every dollar the state spends promoting tourism, it gets back $3.43, generally within the same year, he said.

"We are a destination state, no question, but we are a state that has failed to promote the great attributes that we do have to offer," said Brad Van Dommelen, president of Traverse City Convention and Visitors Bureau. "People just have no idea what we have."

Tourism ties with agriculture as the second-largest industry in Michigan, responsible for $17.5 billion in revenue and 193,000 jobs last year, according to Travel Michigan. Manufacturing is still the state's largest industry.

"Tourism is here, the jobs are here and they are not going to be exported. We don't have a product problem, we have a promotion problem," said Van Dommelen, referring to Michigan's dismal hotel occupancy ranking, 45th nationally, according to a Smith Travel Research report.

Travel Michigan used its bigger budget to kick off an advertise campaign in three new markets -- Milwaukee, Cincinnati and southern Ontario -- last month, and continues to advertise in Michigan, Cleveland, Indiana and Chicago.

Also in the tourism survey, Michigan ranked 14th nationally in its total operating budget of $15.7 million, up from 31st last year. Hawaii has the highest overall tourism office budget, at $69.2 million.

Top ad spending

Many in the tourism industry said Michigan was being out-spent by neighboring states in its effort to attract tourists. Here's how Michigan measures up now (in millions) in advertising spending on domestic advertising and promotions:

Michigan: $12.7
Texas: $11.9
Florida: $11.7
Arizona: $10
Utah: $9.6
New Jersey: $9.6
Illinois: $9.1
California: $8.9
Virginia: $7.2
Missouri: $7.2

Source: 2005-2006 Survey of U.S. State &Territory Tourism Office Budgets, Travel Industry Association of America

Selling Michigan

'Pure Michigan' campaign aims to buoy tourism

June 9, 2006
Section: Business
Page: 01C

By Sarah Ryley
The Detroit News

A long strip of sandy shoreline soaks up an orange sunset, a wave smashes against a jagged rock and a stone skips across a placid lake. These idyllic opening scenes in a $2.8 million "Pure Michigan" advertising campaign are intended to entice out-of-state travelers to the Great Lakes State.

"Water: we take our showers with it, we make our coffee with it, but we rarely tap into its true potential and let it be itself, flowing freely into clean lakes, clear streams and along more freshwater coastline than any other state in the country," says the familiar voice of Michigan actor Tim Allen as the narrator in the 30-second commercial.

"The Potential of Water," the first of three commercials developed by McCann Erickson Inc. North America in Birmingham, is airing in three new markets, Milwaukee, Cincinnati and southern Ontario. A second ad that includes Detroit and metropolitan attractions will begin airing in the same cities on Monday.

"The campaign is really meant to compel an emotional response," said George Zimmermann, vice president of Travel Michigan, the state's travel and tourism agency. "We want people to see the commercials and think, 'What an outstanding, magical place.'"

Tourism officials hope the new advertising campaign will bolster Michigan's $17.5-billion-a-year tourism industry by attracting more visitors from prospering states. Out-of-state visitors also spend twice as much as in-state travelers but make up only half the state's estimated 55 million tourists. Michigan's tourism industry has suffered recently because of the state's lackluster economy. Michigan, for instance, had the lowest hotel occupancy rate - 53 percent - in the country in 2005, according to Smith Travel Research, which tracks hotel performance.

"The Michigan tourism industry has lived on the in-state market for quite some time," Zimmermann said. "When the auto industry was booming, the Michigan tourism industry could live. But with the changes in the economy, that's just not possible. It's going to take bringing in more out-of-state visitors."

Taking in the sites

The "Pure Michigan" campaign debuted last week at the Detroit Regional Chamber's Mackinac Policy Conference. The first ad, "The Power of Water," began airing in May but will be remade to include more recognizable Michigan scenes.

The second commercial, "A Simple Sunrise," features the sun rising above Michigan landmarks, including the Detroit skyline and a locomotive at Greenfield Village in Dearborn and shining through the windows of the Detroit Institute of Arts.

"Trailheads," the final commercial, will "take a walk through the state, whether it be hiking in a forest or on a sand dune or, quite frankly, in the DIA," said Charlie Metzger, McCann's executive vice president and director of client and business services.

Although the scenes for "The Power of Water" and "Trailheads" are not finalized, "our goal is to cover as much ground (in Michigan) as possible in all three," Metzger said. All three commercials will be modified for radio and print.

Milwaukee, Cincinnati and Southern Ontario were chosen because "they had the best potential," said Zimmermann. "Research showed some travel (to Michigan) from those markets already without any advertising efforts."

Travel Michigan chose McCann because of the emotional response the agency's crisp images generated among focus groups, Zimmermann said. Funding for the effort came from the state's 21st Century Jobs Fund; Travel Michigan received $15 million to be used over the next two years.

Nearby states are targets

The state's previous $5.7 million tourism advertising budget had been awarded to Brogan & Partners. Their efforts were geared at enticing in-state residents to spend money in Michigan and to lure travelers from Chicago, Cleveland and Indianapolis. Come fall, McCann will handle those markets as well, Zimmermann said.

With the former campaign, Travel Michigan promoted southeast Michigan in Cleveland, and Michigan's west coast in Chicago and Indianapolis. Market research showed Cleveland travelers tended to be "couples without children who come for the sporting events, night life, casinos and cultural attractions," said Zimmermann.

About half the Chicago travelers were families seeking small-town amenities, beach towns, bed and breakfast inns, wineries and art galleries, he said. Similar attractions are featured in ads appearing in Indianapolis.

Zimmermann deemed that campaign successful, noting the $3.4 million spent in advertising promotions last year generated $165 million in tourism dollars and added $11 million to the state coffers. The statistics are based on research that surveyed travelers in out-of-state markets who saw the ads and then visited Michigan. The same method of market research will be used to determine the effectiveness of the "Pure Michigan" campaign, he said.

Are the lakes enough?

While viewers at the Detroit Regional Chamber's conference were enthusiastic about the first commercial, there was some concern the ad was too generic.

"Obviously, Michigan is not the only Great Lakes state," said Rajeev Batra, a professor of advertising at the University of Michigan's School of Business, adding that a marketing plan relying heavily on glossy images of water might not be specific enough to draw visitors to Michigan, since other states and Ontario also border the Great Lakes"I'm not sure that is going to be a significant enough draw," Batra said. "Also, (the ads) don't depict family fun by the water, but merely the water by itself, placid and quiet."

Metzger said the final version of "The Power of "Water" ad will feature more people.

Still, Batra said the pilot ad was "distinctive and stands out." He said it was a clever move by the agency to use the voice of Allen, a well-known Michigan actor who starred in the popular TV sitcom "Home Improvement," set in Royal Oak.

Metzger said the themes in each commercial are used as "metaphors for some of the things that are important in life." After seeing the ads, viewers in the out-of-state markets will want to "get away from the sameness that (they) have in life by exploring the unique attractions that Michigan has to offer," he said.

Passport law could threaten border business

Lawmakers try to balance commerce, safety

August 15, 2006
Section: Business
Page: 01C

By Sarah Ryley
The Detroit News

DETROIT - It's standing-room only on both floors of the Mexican Town Restaurant on a Monday evening, and nearly everyone is Canadian. Customers wait a good two hours to eat what they say is the best Mexican food around, and to take advantage of the southwest Detroit restaurant's weekly promotion that accepts Canadian money on par with the American dollar.

The happening social scene doesn't hurt, either. "Oh my Gaaaawd!" screeches Sarah Coutts, 21, a regular patron, as she recognizes a friend who is heading out the door.

"She comes here every week," friend Tiffany Desjarlays, 20, says smiling. "I come here maybe once a month to eat and shop, mainly at Great Lakes Crossing."

Coutts and Desjarleys are typical Canadian "day-trippers," the type that make spontaneous trips to Metro Detroit and spend an estimated $322 million each year on food, retail, concerts, sporting events and lodging, according to the Detroit Regional Chamber. That haul could drop by an estimated 30 to 40 percent if a new law requiring a passport to cross any U.S. land border takes effect Jan. 1, 2008.

The law - called the Western Hemisphere Travel Initiative - was passed in 2004 to tighten border security by limiting the number of documents U.S. Customs agents can accept. But many in both the Detroit and Windsor business communities are calling for a compromise, saying they can't afford for people to be turned away.

Members of Congress are responding by crafting amendments that would delay implementation of the law until at least June 2009, allow travelers to use a cheaper, high-tech version of a passport under development called a PASS card, and waive requirements for minors.

Otherwise, by 2008 an American family of four would have to spend $358 on passports, good for five or 10 years depending on the applicant's age, to cross the border.

"People don't want to spend more money out of pocket, especially when they're used to crossing for free," says Lisa Katz, the Detroit Regional Chamber's director of government relations.

Nascent 9-11 recovery

Critics on both sides of the Detroit River say more stringent document requirements will only slow border crossings. Wait times at Metro Detroit's three land crossways have often exceeded one hour since early August, when officials beefed up security after a federal report divulged that investigators were able to breeze by border agents by using fake identification or none at all. Security remains vigilant in the wake of last week's foiled terrorist attacks, says Ron Smith, chief public affairs officer for the Detroit field office of U.S. Customs and Border Protection.

After the September 11 attacks, it took trucks more than 12 or 13 hours to cross the Ambassador Bridge. But the process has been expedited since with new technology - machine readable passports and commuter passes with a radio signal that pull up the driver's information before the car even reaches the booth.

"We can clear those cars in 15 to 20 seconds," Smith says. Even so, the number of vehicles that cross the Ambassador Bridge and the Detroit-Windsor Tunnel - the two busiest international crossways in North America, respectively - has dropped 27 percent since 2000, to 15.2 million last year. Mexican Town Restaurant owner Colleen DiMattia says business has only begun to recover since September 11, but if the passport legislation becomes law, "I'm sure initially it would hurt us."

She estimates that on any given night, 70 percent of her customers are Canadian.

Jim Townsend, executive director of Detroit's Tourism Economic Development Council, says marketing the Motor City's lineup of festivals and cultural attractions to Metro Windsor "is not an opportunity we're going to take advantage of if it's really cumbersome to get across the border."

In Windsor, the hassles of border crossings - coupled with Ontario's smoking ban - have already hurt gambling at Casino Windsor and the city's once-popular bingo halls.

At Great Lakes Crossing in Auburn Hills, Melissa Morange, marketing and sponsorship director, is more optimistic. "We're an attraction that people come to spend the entire day at, so I would hope they would continue to visit us," she says.

How it would work Because Canada accounts for 60 percent of Michigan's international trade, and is by far the United States' top trading partner, Rep. Thaddeus McCotter, R-Livonia, is proposing that the northern border be regulated differently than the U.S.-Mexican border.

"In the south, we're trying to stop people from illegally coming across, in the north, we're trying to facilitate people to legally come across," he says.

But supporters of the Western Hemisphere Travel Initiative contend that it is focused mainly on U.S. and Canadian citizens because most Mexican citizens are already required to present secure documentation at the border, such as a visa or U.S. issued border crossing card.

Customs agents at the U.S.-Canadian border, on the other hand, accept up to 8,000 different documents - often a birth certificate and driver's licenses - that are prone to counterfeiting, said Department of Homeland Security spokesman Jarrod Agen.

The fewer forms of identification accepted, the faster agents can verify their legitimacy, he says.

The PASS card would be wallet-size, cost travelers $55 and take four weeks to process. The Department of Homeland Security would like the card to contain embedded technology that would quickly link to national databases and pull up the driver's information via radio signal as the car approaches the customs booth.

Amendments in the House and Senate would reduce that cost to between $20 and $34, which could limit the technological capabilities of the card.

"Whatever is done should be convenient and not too costly," says Sen. Debbie Stabenow, D- Mich., who helped pass amendments to the initiative in the Senate.

Hassle cuts border traffic

On a recent night, a majority of U.S. and Canadian citizens hanging out in southwest Detroit, Greektown or the Windsor Casino expressed apathy about the legislation.

But the steady drop in border crossings seems to suggest differently. Katz says many people avoid crossing the border because of the "perceived hassle." Mattie Burks of Detroit is one of those people.

"It's just too much of a hassle, I don't like getting harassed and I don't like all the questions," says Burks, 57, who used to go to Casino Windsor, but since September 11 only goes to the one in Greektown.

Asked if she would buy a passport or PASS card to cross the border if required, she responds, "Why do I have to spend the extra money?"

Border by the numbers

$321.7 million is pumped into southeast Michigan's economy every year by Canadian tourists.

147,000 jobs in Michigan are supported by U.S. - Canadian trade.

27 percent of U.S. citizens and 30 percent of Canadians have passports.

$800 per vehicle: The additional cost due to increased documentation, inventory delays and cross-border processing
time since September 11.

Sources: Detroit Regional Chamber, Canadian/American Border Trade Alliance, U.S. Customs and Border Protection,
Homeland Security

Fear in the fields

Two of Michigan's largest industries -- agriculture and tourism -- worry
about their livelihoods as the immigration debate unfolds.


July 11, 2006
Section: Front
Page: 01A

By Sarah Ryley
The Detroit News


TRAVERSE CITY -- It's just past the crack of dawn, and already a few dozen farm workers are fanned out in the field, backs bent or squatting as they pick strawberries from plants just a few inches off the ground. They move quickly down the rows, standing upright only to rush their full pails to a flatbed truck at the edge of the crop, then hurry back to fill another one.

The cool air from Lake Michigan weighs on the rolling green hills of the Leelanau Peninsula, with the gnats biting at legs until the sun comes out in full force. When vacationers and retirees start traipsing out to the beaches, these migrant workers will still be picking strawberries at Bardenhagen Berries farm, and they won't stop until at least 5 or 6 p.m.

At least 40,000 migrant farm workers come to Michigan every year in search of a paycheck, mostly during the warm months. As the first of this summer's public hearings on the immigration debate gets under way across the nation, Michigan farmers say their crops are on the line because American workers won't harvest them.

Numerous Michigan farm owners pleaded their case during congressional hearings in Washington, D.C., earlier this year, telling lawmakers that they need an expanded, more efficient guest worker program. They say the current H-2A program, which regulates visas for guest workers in the agricultural industry, is costly and time consuming, and often fails to send skilled workers in time for harvest.

They support Senate legislation that would double the number of immigrants allowed into the country each year to 2 million and raise the caps on guest workers. And they oppose House legislation that would deport all illegal immigrants and keep guest worker programs the way they are.

Lawmakers are trying to hammer out a compromise that will have major implications for Michigan's farm industry.

"Our goal is to have a 100 percent legal work force," says Josh Wunsch, owner of Wunsch Farms in Traverse City. He estimates that he lost $50,000 worth of fresh product last year when H-2A, operated by Homeland Security, failed to send him workers three weeks into his harvest, after he spent 120 hours and $10,000 on the application process.

"Every time we go to Congress, they say, 'You guys quit crying, there is a guest worker program,' says Wunsch, also vice president of the Michigan Farm Bureau, who was among those to lobby in Washington. "Well, I used it, and it didn't work."

Unemployment rate cited

Opponents of an expanded visa program say the country needs to think first about national security and the weak economy, which has left a large number of workers unemployed.

Estimates vary of the percentage of migrant workers in Michigan who are undocumented. The Pew Hispanic Center says 24 percent, The Michigan Department of Labor and Economic Development estimates 50 percent, and workers asked say it's closer to 80 percent.


"I'm trying to be sensitive to the plight of farmers -- there are a lot of them in my district," says U.S. Rep. Candice Miller, R-Shelby Township, who voted for the tough House bill. "But I would say that the majority of people want our immigration laws enforced."

Thaddeus Kaczor Jr. of Wyandotte is one of those people. He says illegal immigrants who demand less from their employers negatively affect everyone. "Allowing in a large influx of people that are willing to work for such ridiculously low wages drives down wages to the point where Americans don't even want the jobs."

Wages vs. price tag

Tony Picelo, 31, a migrant worker on the Bardenhagen Berries farm whoswam across the Rio Grande River with his family when he was 13, says the money, though low by American standards, is worth the risk. "In Mexico, there's a lot of work, too, but we don't get paid that much," said Picelo, who says he has a temporary visa.

The workers at Bardenhagen get $2.70 for every pail of strawberries they carry back to the flatbed truck. That works out to about $10 an hour for a skilled harvester.

An unskilled worker, or one that's not willing to work hard and fast, won't harvest enough in an hour to equal the state's minimum hourly wage, set to increase from $5.15 to $6.96 in October. But no matter the workers' productivity, the farmers have to pay the minimum, which they say cuts into their already thin profit margins.

If farmers charge more for their product to make up for higher wages, cheap foreign produce would take over the market and put local farmers out of business, says Jim Bardenhagen, who works closely with growers and migrant workers as director of the MSU Extension Center for Leelanau County.

Not necessarily, argues John Keeley, director of communications for the Center for Immigration Studies, and a supporter of tough immigration measures. He points to Australia's robust agricultural industry, which relies on mechanized harvesting and higher wages to avoid a heavy influx of illegal immigration.

"The growers in this country have never been put in that position," Keeley said. "They've basically become addicted to cheap labor." He says the farm industry can attract American workers by raising wages without a noticeable price difference at the market. "If Americans are willing to descend into the coal mines, which is very tough and dangerous work, they'd be willing to harvest crops for the right price."

Many work 60 hours a week

Al Steimel is the general manager of Leelanau Fruit Co., where some of the strawberries harvested earlier in the day are being processed by dozens of workers along a maze-like assembly line.

"In 1984, when I started, I had (only) one family of migrant workers, and now it's just the opposite. I only have a handful of local people," Steimel says. The local residents who used to work at his plant prefer summer jobs in restaurants or on boats, he says, and don't want to work the long hours a robust harvest season sometimes requires.

"When we tell (the migrant workers) that we have to work overtime or through the weekend, they don't complain, they cheer. They're here to make money."


He says employees start at $6.35 an hour and get paid overtime, but most make more hourly because they come back year after year. Most migrant workers average 50 to 60 hours a week, says Daniel Inquilla, managing attorney of Farm Worker Legal Services, which handles about 1,000 complaints a year. Most are about wages.

Inquilla says most farmers and plant managers follow regulations and treat their workers fairly, "but just like in any industry, there are a few bad apples."

Schools reach out to kids

Kim Sanchez, 18, is a first-generation American. Her parents migrated from Mexico to California, where she was born, and settled in Suttons Bay 11 years ago. She works on the assembly line, while her mother, Julia Rivas, 38, inspects fruit after it's packaged. In the winter, Sanchez works with her father pruning apple and cherry trees.

Sanchez says she plans to go to college in the fall through a program that funds the first year of college for students who are migrant workers or the children of migrant workers.

"I know my dad works for a living." She pauses, then looks at her mother sitting next to her, also dressed in white with an apron tied around her waist. "I don't take things for granted. I don't ask for too much. I know what my parents can give me."

Robert Collier, director of the summer migrant school for Leelanau and Benzie counties, tries to help close the gaps in education for migrant students, who often attend three to six schools a year. But that doesn't matter: The law requires that every child under 17 attend school.

"What we see is that their families are frightened, yet wanting to make a living and willing to risk a lot to make a better life. So they are very diligent in getting an education for their children."

But the cost of that education and other social services -- health care, welfare, food stamps and housing -- is another big reason the nation should tighten immigration laws, Rep. Miller contends.

"It may be inexpensive labor for (the farmer), but let me tell you, it is not free
for the American taxpayer," she says. Supporters of loosening the laws note that immigrant workers -- legal or not --
pay taxes that help fund those services.

But many won't use any services out of fear of getting caught, says Rick Olivarez, state monitor of the migrant worker program for the Michigan Department of Labor and Economic Development.

"These workers, they don't want a free hand; they come here to work for their money."

Hunt Heats Up For Natural Gas

Drilling permits increase with soaring fuel prices

July 14, 2006
Section: Business
Page: 01C

By Sarah Ryley
The Detroit News

TRAVERSE CITY -- High oil and gas prices are driving up interest in drilling in some of the state's most pristine lands, particularly four counties in northern Michigan that sit over a natural gas reserve.

Thousands of sites in that area are being looked at for drilling operations over the next few years, some of which have gotten the attention of environmentalists concerned about preserving the land in its natural state.

As energy costs have skyrocketed (the price of natural gas has doubled since 2000), the number of oil and gas drilling permits issued by the state has increased, too -- 529 permits have been approved in the first half of this year, compared to 812 all of last year and 589 in 2004, according to the Michigan Department of Environmental Quality (MDEQ).

Michigan produces roughly 25 percent of the natural gas it consumes, so it's a hot commodity in the state, said Hal Fitch, assistant supervisor of the MDEQ Office of Geological survey.

The bulk of the new drilling permits are for natural gas trapped in Antrim Shale formations stretching from Elk Rapids to Alpena. The gas is so profitable -- because of cheap exploration costs and the 90 percent chance that it will get extracted -- that energy companies such as Traverse City-based Aurora Oil & Gas Corp. are making its exploration among their top priorities in the state, said Jeffrey Deneau, head of investor relations for the company.

In a state where environmental issues rank among residents' top concerns, especially in northern Michigan, oil and gas drilling-related proposals routinely attract protests and court fights.

Three proposed Antrim Shale drilling-related projects in northern Michigan are either in the courts or may wind up there.

Drilling devastates Big Wild

Those who are fighting the projects said they aren't opposed to natural gas exploration if it's done responsibly, but think that the energy companies are getting too greedy, and forgetting safety and stewardship concerns in the process.

"When managing state lands, we have to strike a proper balance -- as a society we need energy, but we also need recreational property," Fitch said. "The companies have drilled up some the most productive areas, now they're going to have to move more toward the edge of those (areas)."

To a devastating effect, said Calvin "Rusty" Gates, Jr., president of Anglers of the AuSable. He described the Pigeon River and the surrounding area, scattered with oil and gas wells, as "The Big Wild which no longer is. It used to be one of the last truly wild places in the state, and now there's not a single place in there that's more than a half a mile from a road.

"You need to fly over it to see how devastating it really is."

Brine and crude oil leaks

Kevin Sagasser, an environmental consultant who has a natural gas pipeline running through his Gaylord property, and other concerned citizens are prepared to take the MDEQ to court over the Michigan Oil and Gas Association's plan to install twin well heads on 3,202 existing wells in Otsego and Montmorency counties.

The Michigan Oil and Gas Association, a membership organization for the state's oil and gas companies, did not return phone calls for comment.

Fitch defended the DEQ's review and approval of the project.

"We did what we feel was environmentally right," he said. "We don't take these things lightly."

Sagasser is upset the MDEQ didn't require that the association conduct more engineering studies to ensure drilling is done correctly or require a committee to take residents' complaints.

Pipeline problems hit home with Sagasser, who noted that there have been at least five brine and crude oil leaks in his subdivision within the last year, including one on his property. He's afraid there will be more unless the MDEQ provides more oversight.

"It's kind of getting old up here," says Sagasser, pointing to recent photographs of a pool of brine, a mixture of salt water and chloride, oozing from his backyard pipeline and the tractor-sized hole dug up to fix the problem.

Protecting the AuSable River

In Otsego County, the Anglers of AuSable are fighting a MDEQ permit that allows Merit Energy to dump 1.15 million gallons of treated water from an oil and gas production facility formerly owned by Shell Oil Co. The water would be released into Kolke Creek, which feeds into the AuSable River, one of the state's premier fishing spots.

Between 1982-2003, 40 releases of crude oil, brine and toxins from the facility were reported, creating a massive plume in the groundwater sitting beneath Otsego County. Now, Merit Energy, which acquired Shell's holdings in 2004, is responsible for the cleanup.

Susan Topp, the environmental lawyer handling the case, contends the water will still be contaminated with trace amounts of brine and would change the temperature of the AuSable River.

Fitch said the treated water will be so clean, "you could drink from it. The amount of brine in the water is below (what's allowed by) drinking water standards."

Wells near protected areas

Aurora Oil & Gas Corp. may drill 19 new wells in the Pigeon River Country State Forest, just outside an area that is protected by a landmark 1970s court order prohibiting any new drilling.

Aurora's Deneau said the drilling will be done at or near existing wells to minimize the number of trees that will have to be bulldozed for the 20- to 30-foot pathways for trucks and pipelines.

Michael Brown, a Gaylord resident, opposes the project, along with other members of an advisory committee formed in the 1970s court order to oversee drilling in the protected area. But because the proposed project is outside of that area, they have little say.

Brown said if oil and gas prices continue to rise, he expects there will be a lot of pressure to open up drilling again. "They would love to get that thing opened up."

Cigarette tax singes poor, old

State slaps 3,500 more smokers with bills for buying cartons online

June 6, 2006
Section: Front
Page: 01A

By Sarah Ryley
The Detroit News

MOUNT CLEMENS -- When Marilyn Mostek, a senior living in a subsidized apartment, heard she could save $20 on a carton of cigarettes by ordering from an out-of-state Indian reservation, she thought she had found a clever way to save money.

Those savings went up in smoke on May 19 when she received a bill from the state of Michigan for $511 in unpaid cigarette taxes -- nearly half of her fixed monthly income. Her neighbor, Robert Stutsman, received a bill the same day for $744.

Mostek, 69, and Stutsman, 75, are among 11,000 Michigan residents who over the past year and a half have felt the pinch of a state crackdown on people who have avoided Michigan's cigarette tax by buying from out-of-state vendors online.

The bills, averaging $1,787, have hit the elderly and poor particularly hard.

To pay the debt, some have taken the state's payment plan option. Others have used credit cards or taken out bank loans. A number of people are just refusing to pay, hoping the problem will go away.


Higher rates of smoking among the poor only increase the likelihood that the tax is hurting them more than others. A 2004 state survey showed 35.7 percent of those making $20,000 a year are smokers, versus 14.3 percent of those earning more than $75,000.


Attached to Mostek's and Stutsman's bills were letters that told them to pay up by June 19 or face a 500 percent penalty.

"Now I'm going to have to borrow from the bank; I have no other way of paying it," Mostek said. Stutsman said he will get the money by postponing the purchase of an air conditioner for his one-bedroom apartment.

Within the past few weeks, 3,500 new bills have been mailed. The state's take since launching the effort in February 2005: nearly $8 million.

State officials aren't giving anyone a break. Even those on the installment plan must pay interest (the prime rate plus 1 percentage point).

The state decided to target scofflaw smokers after the cigarette tax jumped from $1.25 to $2 a pack in June 2004, sparking a huge increase in the number of people buying from out-of-state vendors, Department of Treasury spokesman Terry Stanton said.

The increase made Michigan's cigarette tax the fourth-highest in the nation. Other states have started similar pay-up programs.


Some refuse to pay


Some people are refusing to pay the back taxes, either because they think it's unfair or because they can't afford the
tab.


"They're going to have to throw me in jail before they get any money from me," said John Pearson, 51, of Livonia. He and his wife, Michele, 45, received bills for roughly $8,000 each last year for purchases made as far back as 2002, when they were buying eight cartons a week from DirtCheapCigs.com. Some of those cartons were for the couples' two children, also smokers, who lived at home.

John Pearson throws out -- unopened -- any new letters that come from the state, and he won't sign for letters that come by certified mail. So he has no idea how much their bills have grown.

"We never looked at it as illegal or cheaper because we weren't paying the taxes," he said. "We thought they were cheaper because they were from Kentucky, where cigarettes come from.

"I wouldn't have had a problem with them saying it was illegal, we would have just stopped. But going back to 2002 kind of ticked me off."

Mostek and Stutsman said they would pay their tab on time, but they are doing so begrudgingly because their one-month deadline doesn't give them enough time to get legal assistance. "We're putting 'paying in protest' in the memo line," Mostek said.

State can force them to pay

Besides piling on fines, the state has other tools it can use to force smokers to pay. It can garnish wages, deduct the money from income tax refunds, or place liens on property. Stanton wouldn't say if the state has used any of those tools.

The state also could slap nonpayers with a misdemeanor or felony, depending on the number of cartons bought, but hasn't yet, Stanton said.

But officials won't back off, he pledged, saying the Department of Treasury is willing to pursue "any and all actions available to us to ensure payment."

Stanton doesn't buy the I-didn't-know-it-was-illegal argument.

He said he has personally sent out numerous press releases and given hundreds of interviews on the subject since it became illegal to buy unstamped, and therefore untaxed, cigarettes in 1998. He said it is ultimately the customer's responsibility to know the law.

"I would certainly hope the light bulb would go off over your head that would say, 'Wait a minute, aren't I still responsible for paying these taxes?'" Stanton said.

She didn't know it's illegal

For her part, Mostek, of Mount Clemens, swears she didn't know she was breaking the law.

"I just don't think it's right that they can go back that far, especially when we didn't even know what we were doing is illegal," said Mostek, who was billed for taxes on 24 cartons of Basic Ultra 100s that she bought from BuyCheapCigarettes.com starting in 2005.

"We just assumed that if there were taxes, they'd appear on the bill," said Marge Roehl, 61, who purchased four cartons from BuyCheap, but stopped when they would no longer take credit cards for payment. The state is likely to spare her a bill.

Stanton said there is a minimum purchase required before the state will send out a bill. He wouldn't disclose what that minimum was, "given that there could be some inference that purchasing less than the threshold is OK in some way."

The state's crackdown is far from over.

So far, only four of 13 out-of-state companies that were subpoenaed have given up their customer lists. Other companies have voluntarily complied with the state's request. Stanton wouldn't divulge which companies have complied and which haven't, saying that information is confidential.

The state also is contacting delivery companies, such as UPS, to get the addresses of online cigarette vendors, "because it is difficult to subpoena a Web site."


State aggressive in pursuit

Cigarette vendors haven't exactly rushed to let their customers know that state taxes aren't included in their prices and that states are aggressively pursuing collection of those taxes.

BuyCheapCigarettes.com, formerly Ron's Smoke Shop, just recently started noting on its mailers, in small print, that buyers are responsible for paying all taxes, and there is a link to each state's Web page in the company's "About Us" section. Other companies, like Cheap-Cig2.com in Europe, still claim that taxes are already included in the purchase price.


Representatives from each company did not return telephone calls.


Now that she's paying the full freight for cigarettes again, Mostek is trying to quit. Getting residents to kick the habit was one of the goals of the state's 2004 tax increase.


So far, though, she's been unsuccessful, still puffing a pack and half to two a day. "They call me the chimney," she said as she lit up another.


By the numbers

11,103
people got tax bills by May 30

4,471
of them have paid


$1,787
is the average bill

Source: Michigan Department of Treasury

The pay-up program

* Jenkins Act: Vendors who sell cigarettes via interstate commerce are required by federal law to report those sales to
the state of destination.


* Michigan Tobacco Products Tax Act: A person in possession of an untaxed, unstamped tobacco product is
responsible for the tax, plus a penalty of 500 percent of the amount of tax due, and could face other fines and
imprisonment.


* Penalty for not paying: 100 percent of the tax for purchases made on or before Dec 27, 2004; 500 percent of the tax
for purchases made on or after Dec. 28 2004; plus 25 percent of "use tax" (6 percent of total purchase price, with
cigarette taxes included).


* State cigarette tax: $1.25 per pack, or $12.50 per carton, between August 2002 and June 2004, $2 per pack, or $20
per carton, after June 2004


* To set up a payment plan: Call Tobacco Product Purchases Unit in the Discovery and Tax Enforcement Division at
(517) 636-4120

Source: Michigan Department of Treasury

By the numbers


Michigan's aggressive crackdown on collecting state cigarette taxes from online buyers began in February 2005.

$7,973,615
Collected in back taxes so far


$5,482,843
Is past due


2,186
People have missed the deadline


4
Companies have turned over information after a state subpoena; nine have not

Do visas hurt U.S. workers?

Thousands of skilled professionals from overseas work for less money in positions Americans want, critics say.

September 30, 2006
Section: Business
Page: 01B

By Sarah Ryley
The Detroit News

This year, thousands of people from around the world will come to Metro Detroit through the federal government's skilled worker visa program. Many are among the best in their fields, and will develop software used for automotive design, handle the financials of Fortune 500 companies or work in hospitals doing everything from saving lives to coaching children through surgery.

Others will take jobs at Michigan and India-based technical firms and earn three-quarters of the market wage for their profession. Critics of the program say these workers will take jobs away from Americans, during a time when thousands
of computer professionals are submitting resumes to the talent bank run by the Michigan Works! jobs agency.

As Congress considers increasing the annual cap of 85,000 visas for skilled workers, called H-1B visas, critics are citing recent studies that highlight the program's abuses, particularly in computer-related professions.

More troubling to some is what the government does not know -- such as how many visa holders are in the country at any given time, where many of them ultimately end up working, or if the company applying for H-1B visas is really making an effort to hire Americans first, which the law requires.

The debate highlights a much broader dilemma, during a time when "outsourcing" has changed from a dirty word to a necessary business model: Should American companies have unbridled access to the worldwide talent pool and let that talent dictate the market wage or should the federal government place careful restrictions on immigration to protect the jobs of Americans.

"At this point, we have no idea how many people are in this country on an H-1B visa," said Sigurd Nilsen, director of a recent Government Accountability Office study that pointed out the lack of oversight in the program.

While firms are legally required to pay visa holders the prevailing wage, Nilsen said, it often turns out to be less than U.S. workers in the same state and profession expect. "Green cards and experienced workers can't compete on the open market fairly, it puts American workers at risk."

Outsourcing firms are not required to disclose their clients, and the clients often insist upon that, said Peter McLaughlin, public relations manager for Indian IT giant Infosys.

"The companies are worried about the public backlash. They don't want their workers to think they're going to be potentially offshored, and they don't want their customers finding out," said Ron Hira, a Rochester Institute of Technology professor.

Supporters of increasing the H-1B visa cap say the workers fill a need that will continue to grow, in a new era where even small businesses are IT-dependant.

"In the past five years, (IT outsourcing) has gone from a virtually unknown industry to where it's considered a bellwether industry in India. And there's still more IT jobs unfilled in the U.S. than at the height of the tech boom," McLaughlin said.

Contract hires proliferate Gena Alexander wishes she could land one of those unfilled jobs. An unemployed systems analyst in Oak Park with a degree from the University of Michigan and 10 years of experience in her field, Alexander has been looking for a job
since the small firm she was working for hit tough times six months ago and laid her off six months ago. Once earning a $75,000 a year, she now gets $362 a week in unemployment.

She said it's tough for her to find a job because most computer-related work is done through outsourcing firms, which tend to favor lower-paid H-1B workers.

"A lot of companies aren't doing the direct hiring anymore, they're doing things through contract," she said.

Health care costs, pensions and long-term employee liability are reasons major corporations are moving toward outsourcing, said Jack O'Reilly, executive director for the Southeast Michigan Community Alliance, which operates One Stop/Michigan Works! employment training centers in Wayne and Monroe counties.

While Alexander wonders if the H-1B program is hurting her chances to find work, Hovhannes Sadoyan, an Armenian H-1B visa holder with an impressive four-page resume, said the program has been good for him, and he thinks for America, too.

Sadoyan developed programs for DaimlerChrysler and the U-M Dearborn while earning his master's degree there. He is now part of a 15-member team working on a 3-D design application for one of the world's leading automotive design software firms.

He says he earns $65,000, a good wage for a 2005 graduate, and is treated well by his company. But he knows others who are here on H-1B visas who work for outsourcing firms and aren't treated as fairly.

"I stay away from those companies; they take part of your pay." But the program overall is a positive, he said, because it lets talented people like himself reach their full potential.

"There's a future here for those who have talent and are capable of bringing new things into this world."

Hiring right talent?

Robert Herta, a spokesman for General Motors Corp., agrees: "We're not doing this for the cost savings; we're doing this to expand our talent pool."

The company applied to fill 144 jobs in Michigan with H-1B visas last year, ranging from two financial analysts earning $48,000 a year to a senior administrator earning $130,500 a year Expanding the talent pool through the H-1B program also is important to the IT industry, said Mike McCabe, director of communications for Tata Incorporated USA. Tata is one of India's largest IT outsourcing and offshoring firms with a
specialized automotive center in Troy.

"Our position on talent in general is that we're a global economy. Talent is located around the globe, and the market, as with anything, should dictate how that talent is obtained."

McCabe said Tata plans to respond to client demands by adding 1,000 new local hires in the United States over the next year. He says it's not about hiring the more inexpensive talent, "it's about hiring the right talent."

Demand is high

Information about which companies get H-1B visas and how many is hard to come by. The Department of Homeland Security does not release that information, but it did provide The Detroit News with a list of the top 10 recipients of visas this year -- all were technical outsourcing firms, and received 10,698 of the 85,000 new visas granted.

While it's unclear how many visas were granted to Michigan companies, the growing demand for them is evident in the number of requests. The U.S. Department of Labor approved petitions to fill 53,799 jobs with H-1B visas in 2005, up from 27,651 in 2003. Roughly half of those petitions indicated that the actual worksite would be in another state.

Since the Department of Labor's approval is only a preliminary part of the process, the number of applications merely reflect companies' increasing interest in H-1B visas, particularly on the part of major outsourcing firms such as Michigan-based Syntel Inc. and Indian-based Infosys Technologies Ltd. Both lament in their annual SEC filings that the cap on visas is hindering their ability to increase profits.

The immigration legislation passed by the Senate in May would respond to that demand by raising the annual cap on H-1B visas from 85,000 to at least 135,000, and set it to increase by 20 percent each year that the cap is met. Sen. Debbie Stabenow, D-Mich., voted against the measure, saying it doesn't do enough to protect U.S. workers. Sen. Carl Levin, D-Mich., voted for it, but did not respond to requests for comment.

An H-1B visas increase is not expected to go over easily in the U.S. House of Representatives, which passed an immigration package last December that would step up border security and enforcement of immigration laws, but would not change any of the work visa programs. The House decided to have public hearings on the issue before trying to hammer out their differences with the Senate sometime this fall.

Controversy over pay

Besides disagreement over the number of H-1B visa holders, there's controversy, too, over how much those workers are paid. Critics say many IT companies hire H-1B workers simply so they can pay lower wages, which violates program regulations.

But the government isn't equipped to investigate such wrongdoing, according to a June 2006 Government Accountability Office report, which concluded that the Department of Labor doesn't have the capability to enforce immigration employment laws that would protect American workers by ensuring that H-1B visa holders are paid equal wages.

An analysis of the 960,000 applications for H-1B visas submitted to the Labor Department between 2002 and 2005 found nearly 4,500 that had wages listed below the prevailing wage for that profession or provided erroneous wage information.

Although the overall percentage is small, Nilsen points out that there is no cross-checking between the Department of Labor and the Department of Homeland Security, which ultimately grants the application, to ensure that the employees wage on the W-2 is the same as stated on the application, for example.

Since 1999, the department has issued 45 wage violations to companies in Michigan, amounting to $50,000 in fines and $2.8 million in back wages paid to 586 workers. U.S. Department of Labor spokesman

Brad Mitchell says at least 90 percent of the violations issued nationally are to technical outsourcing firms, which make up roughly a third of the H-1B visa recipients nationally.

A 2005 Center for Immigration Studies report based on H-1B petitions that firms made to the Department of Labor found wages listed on those applications for jobs in Michigan averaged $15,269 less than prevailing wage.

That proves that the H-1B program is frequently being abused by companies to hire cheap labor, not to recruit the world's best minds, contends Congressman Thaddeus McCotter, R-Livonia.

"I'm not going to expand a program that discriminates against American workers so that businesses can save a few bucks," McCotter said.

H-1B by the numbers

* H-1B visas comprise 48 percent of temporary workers , trainees and their families legally admitted in the United
States.

* 25 percent of the H-1B visas were awarded to Indians; Brits are the second largest group with 7.5 percent

* 31 percent of H-1B visa holders work in computer-related fields; 13 percent in nonresearch-based scientific, engineering and technical fields; and 11 percent work in colleges and universities.

* H-1B visa holders in computer-related professions who work in Michigan earn an average of $15,269 less than the average salary for that position, except for H-1B computer support specialists, who earn $24,102 more than average for their profession.

* Michigan ranks No. 10 nationally in the number of H-1B visa holders who work in the state, with roughly 2.7 percent.

Source: U.S. Department of Homeland Security Yearbook of Immigration Statistics 2003, 2005; "The bottom of the pay scale: Wages for H-1B computer programmers," published in 2005 by the Center for Immigration Studies.


1990
The H-1B program regulating visas of skilled workers is created by Congress. There is an annual cap of 65,000 new H-1B visas per year.

1991
Fashion models become eligible for H-1B visas.

1998
The H-1B cap is increased to 115,000 a year and the program now allows academic institutions to pay H-1B workers less than the prevailing wage

2000
The cap is increased to 195,000 a year, and the program exempts H-1B visas issued to universities and research laboratories from the annual quota.

2002
The program allows certain H-1B workers with pending permanent residency applications to remain in the country beyond the six-year limit

2003
The cap is decreased to 65,000 visas annually,

2004
The program allows 20,000 H-1B visas annually for people with graduate degrees from a U.S. institution

2006
Senate passes the Comprehensive Immigration Reform Act that would increase the annual cap on H-1B visas to 115,000 annually, remove the cap for H-1B visa workers with graduate degrees from a U.S. institution and add 20,000 H-1B visas for workers with advanced degrees from a non-U.S. institution.


Top applicants

Shown are the top 10 H-1B visas applicants for jobs in or originating in Michigan during fiscal year 2005. The number of workers the company actually received is likely a fraction of that amount.

1. Syntel Inc., Troy: Application represents 24,900 jobs. An IT outsourcing, offshoring and staffing firm, 79 percent of its 1,422 U.S. employees are on visas and receive wages $12,336 less than the industry average. Local clients include General Motors, Ford Motor Company and DiamlerChrysler Corp.

2. Infosys Technologies Ltd., Bangalore, India: 5,877 jobs. One of India's largest IT outsourcing firms, 87 percent of its 8,000 U.S. employees are here on visas and act as liaisons between clients and U.S. operations, offers H-1B wages $13,537 below industry average. Does not release client information.

3. Covansys Corp., Farmington Hills: 2,585 jobs. An IT staffing and outsourcing firm with 67 percent of its staff located in India, offers H-1B wages $9,760 below the industry average. Henry Ford Health System, Ford, Visteon Controls and GM are its largest local clients.

4. The Tata Group, Mumbai, India: 935 jobs. An outsourcing, offshoring and staffing firm with a specialized automotive center in Troy, offers H-1B wages $22,016 below industry average. One of its first U.S. jobs was archiving the crime database for the Detroit Police Department. Ford is one of its top local clients.

5. Wipro, Ltd., Bangalore, India: 610 jobs. An outsourcing firm with the majority of its U.S. workforce on visas earning wages $17,074 below industry average. Was one of six to receive a contract from General Motors this year.

6. University of Michigan, Ann Arbor: 451 jobs. Applications mainly for assistant and associate professors, assistant research scientists and research fellows.

7. Technosoft Corp., Southfield: 429 jobs. Primarily a staffing firm, offers H-1B wages $16,200 below industry average. Ford and DaimlerChrysler are its largest clients.

8. Insolexen, Novi: 355 jobs. Acquired by Ohio-based Perficient, a consulting and contracting firm that has Comerica as one of its local clients. Offers wages $26,288 below industry average.

9. Satyam Computer Services Ltd., Hyderabad, India: 341 jobs. A consulting, contracting and staffing firm that offers wages $15,235 below industry average.

10. Ved Software Services Inc., Farmington Hills: 315 jobs. An outsourcing and staffing firm that offers H1-B wages $23,984 below industry average. Amway Corp., DaimlerChrysler and Kelly Services are its largest local clients.

Sources: 2005 Labor Condition Application filings, company websites, 2005 and 2006 SEC filings, "The bottom of the pay scale: Wages for H-1B computer programmers," published in 2005 by the Center for Immigration Studies.