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Lansing — Republican lawmakers are feeling political heat from business groups and the tourism industry over House Speaker Kevin Cotter's plan to siphon money from the state's "Pure Michigan" advertising budget and tens of millions in economic development funds to fill potholes.

Business groups plan to step up their lobbying against this part of Cotter's road funding plan next week — starting Tuesday during a House committee hearing and continuing Wednesday when lawmakers arrive on Mackinac Island for the Detroit Regional Chamber's annual policy conference.

Cotter's $1.05 billion road funding plan relies on redirecting $75 million from a fund that pays for the Pure Michigan advertising campaign, and $60 million in revenue the state receives from tribal casinos that typically goes to support job creation.

"It would really decimate incentive programs for attracting jobs to the state," said Doug Rothwell, president and CEO of the Business Leaders of Michigan. "There's no doubt in my mind that other states are using this news against us."

Republican House members sponsoring Cotter's 12-bill road funding package were backpedaling this week after hearing from hotel owners and tourism industry officials that the plan would leave the $29 million Pure Michigan ad campaign without a secure funding source.

"What I'm hearing up north is that we're cutting Pure Michigan, which is the furthest from the truth," said Rep. Peter Pettalia, a Presque Isle County Republican who is sponsoring a bill to redirect economic development and tourism funding to road repairs. "There's no way we want to jeopardize that."

But according to an analysis from the nonpartisan House Fiscal Agency, Pettalia's House Bill 4607 would eliminate the funding source for Pure Michigan by redirecting tobacco settlement revenue that flows into the 21st Century Jobs Fund to state and local road repairs.

Since the 2012 fiscal year, the $75 million 21st Century Jobs Fund has been divvied up three ways: $28.8 million for business attraction grants, $17.2 million for supporting entrepreneurs and $29 million for the Pure Michigan campaign, according to the House Fiscal Agency.

Steve Arwood, chief executive officer of the Michigan Economic Development Corp., has said Cotter's plan "threatens to eliminate the entire Pure Michigan tourism effort." Arwood is expected to testify against bills that would tap his agency's funding for road repairs Tuesday during a hearing of the special House Roads and Economic Development Committee, which began its work Thursday.

"I truly think this was a hastily put-together proposed bill," said Brad Van Dommelen, president and CEO of the Traverse City Tourism convention and visitors bureau. "I don't think anybody in the tourism industry is saying roads aren't important. ... But affecting the Pure Michigan campaign and losing the economic activity and jobs that campaign generates for the state is just not the way to go."

'It's a producer, not a taker'

An economic impact study commissioned by the MEDC's Travel Michigan division found the Pure Michigan ad campaign generated $6.87 in tourism spending for every dollar spent on $12.4 million in out-of-state TV advertising.

Tim Hygh, executive director of the Mackinac Island Tourism Bureau, said the island's hoteliers and innkeepers have experienced an annual room revenue increase from $43 million in 2011 to $53 million last year — "a nice growth rate" they attribute, in part, to the Pure Michigan campaign.

"It's a producer, not a taker," Hygh said of the advertising campaign.

Petallia and other Republican lawmakers in tourism-heavy districts along lakes Huron and Michigan insisted they have no intention of cutting Pure Michigan.

"I don't think it's anybody's intention to gut the Pure Michigan campaign," said Rep. Al Pscholka, R-Stevensville, chairman of the House Appropriations Committee.

Pscholka and other Republican lawmakers said the MEDC could finance the Pure Michigan advertising campaign with other money in its budget, but none could point to specific funds that could be used instead of the 21st Century Jobs Fund.

"A cut to the 21st Century Jobs Fund is in no way an attempt to cut Pure Michigan funding," said Rep. Lee Chatfield, R-Levering. "It's important that Pure Michigan funding remains steady and this House plan does just that."

Chatfield is the sponsor of another part of Cotter's plan that is under fire by business groups.

Cotter proposes redirecting $60 million in revenue the state receives annually from a dozen Native American tribes in lieu of state taxes on tribal casino profits.

The tribal gaming compacts require the money to go toward economic development, said Rothwell, who argues it would be "extremely difficult" to legally raid the funds for road repairs.

"It's a compact between the governor and the tribes. It's not something the Legislature had a role in," said Rothwell, who chairs the MEDC's executive committee.

Chamber offers alternatives

Brad Williams, a lobbyist for the Detroit Regional Chamber, called Cotter's proposed shift of more than one-third of the Michigan Economic Development Corp.'s annual budget to roads "alarming."

"When you look at moving existing funds around, they're not guaranteeing a long-term solution," Williams said. "It's subject to the ever-changing winds of the Legislature."

Cotter's plan also nixes the MEDC's annual $50 million in subsidies for the film industry as part of an effort to "reprioritize" spending for roads instead. This year's contribution was trimmed to $38 million in a mid-year budget maneuver when revenue was lower than expected.

The Michigan Chamber of Commerce is more open to economic development programs being trimmed to free up money for repairing roads and bridges, CEO and President Rich Studley said Thursday. It backs eliminating the film subsidies.

"We expect lawmakers to look at programs and projects that business people are fond of. We expect to take our fair share of cuts," Studley said. "We expect to pay our fair share of any additional revenue. And it's fair to take a long, hard look at the MEDC and every other state agency."

clivengood@detroitnews.com

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