Road salt bid bill could raise prices for Michigan
Lansing — A Kansas competitor of Detroit Salt Co. and state officials are agreeing that a plan to give Detroit Salt an edge on state road salt contracts could drive up prices.
A House panel heard testimony Tuesday on revised legislation to give Detroit Salt a 6 percent leg up over competitors like the Overland Park-based Compass Minerals on lucrative highway salt contracts with the state of Michigan.
The plan would “level the playing field” with nearby states such as Ohio, which has a similar policy, said Emmanuel Manos, the company’s president.
“This bill will protect hardworking Michigan employees, suppliers and vendors, truckers, who live and work in the state of Michigan. It will also protect Michigan’s resource – which is the salt,” Manos said.
“And that salt is only in a few states. Ohio happens to be one of them, and they have this protection for their resource with a preference bill, and they have the lowest prices in America for salt on state contracts.”
But Jon Schnieders, vice president of Compass Minerals’ salt division, speculated that the legislation – which would automatically increase out-of-state bids on road salt contracts by six percent – could lead to an annual $1.3 million to $3.1 million increase for the Michigan Department of Transportation.
“I would say any policy that reduces competitiveness always tends prices to go higher because it takes out competitive forces in the market. That’s what I believe this bill will do,” Schnieders said after the meeting.
“There are jobs at stake here,” he continued.
A version of the legislation last year would have given Detroit Salt an 8 percent edge over competitors.
Detroit Salt has about $20.1 million worth of contracts with Michigan, about one-fifth of the state’s total, according to a House Fiscal Agency analysis.
In 2016, Detroit got about $6 million of $17.9 million worth of salt deliveries split among four companies, the agency said. Michigan would lose about $480,000 per year if the prior legislation tacking on an 8 percent increase to out-of-state bids were enacted, according to the agency analysis.
In 2017, the state awarded nearly $16 million in contracts for 349,265 tons of salt. Detroit Salt Co. was awarded $4.4 million of that, while Compass Minerals was awarded $9.8 million, according to the DTMB. The remainder went to Morton Salt and Cargill.
More purchases are made by local governments, according to Caleb Buhs, a spokesman for the DTMB. State and local governments spent a combined $48.1 million on road salt in 2017.
Transportation and Department of Technology, Management and Budget officials agreed that the plan could lead to price increases, a worst-case scenario the state is planning for if the legislation moves forward.
Detroit Salt and other companies could raise their prices to match the higher prices of non-Michigan companies under the legislation, Schnieders and state officials said.
The Management and Budget department is neutral on the legislation, but officials said they have concerns about it possibly sparking across-the-board price hikes.
The House Commerce and Trade Committee did not hold a vote. State Rep. Holly Hughes, R-Montague, pledged to vote no on the bill, while others, such as Rep. Tim Greimel, D-Auburn Hills, said they have not made up their minds.
Greimel said after the hearing his main concern is whether the legislation would lead to more jobs in Michigan.
In committee, Greimel asked Detroit Salt’s Manos if the legislation would ensure salt mining jobs are more likely to stay in Michigan.
“I have mixed feelings about it, but I think the most important policy issue facing any level of government is the creation of more and better-paying jobs, and I’m trying to look at this legislation through that lens,” Greimel said.
Opponents said the proposal could hurt trucking and dock companies that currently ship Canadian or out-of-state salt to Michigan, which currently accepts the lowest price bid for a state contract regardless of the company’s location.
Rep. Klint Kesto, R-Commerce Township, said that while a price increase is possible, the legislation also might cut costs.
Detroit Salt is owned by the Kissner Group, a Canadian company of which it is a subsidiary. The company has owned and operated the state’s only salt mine since 1997, according to Detroit Salt.