Small businesses blast Michigan fireworks proposal
Lansing — A bipartisan push to overhaul Michigan’s 2012 fireworks law is facing last-minute opposition from a coalition of small business owners who argue it could kill their roadside stands, tents and other temporary stores while benefiting large retailers.
House-approved legislation awaiting likely action this week in the Senate “seeks to regulate the death and demise of small businesses, plain and simple,” said Bob Horvath of Yellow Box Fireworks, which operates temporary summer stores out of retrofitted shipping containers.
The proposal would give local governments greater authority to limit late-night fireworks use, guaranteeing their legal use over 12 days each year — mostly around the Fourth of July and other holidays — instead of 30 days under current law.
Sponsoring Rep. Jim Lilly, R-Park Township, said the legislation would bring "rationality" to the 2012 fireworks law by curbing late-night explosions and empowering local governments to adopt unique regulations.
But Horvath called the changes a "Trojan horse" for a larger reform that could damage companies like his.
The legislation would require owners of temporary structures — but not permanent stores — to pay a $5,000 bond each year as collateral for future sales tax collections and fireworks safety fees. The proposal also would raise fees from $1,000 to $1,250 for permanent stores and from $600 to $1,000 for temporary stores.
“If the bond passes, that’s going to hurt me because I don’t have $5,000 to put up,” said Paul D’Luge, a special education teacher and coach in Detroit's public schools who runs two fireworks tents in the city each summer to supplement his income.
D’Luge said profit margins for his Sky-Hi Fireworks company have already shrunk as larger companies -- some from out of state -- have flooded the market with cheaper products.
“Once they get us out of the game, they’re going to jack the prices back up,” he predicted.
Lilly, who is shepherding the legislation through the Legislature, said there have been “some issues” with smaller operators not paying taxes or fees. “And so to that extent, I think requiring them to put money up ensures that those taxes, those fees, actually go where they’re supposed to go,” he said.
The legislation was developed over several years with input from a wide variety of stakeholders, including fireworks companies and local government groups now supporting the plan, Lilly said.
“There are a number of other small business owners involved in this from the industry side of things too, Michigan-based companies, that don’t seem to have any issue with putting the money up front, essentially because they believe they are in compliance with paying taxes," Lilly said.
The proposal is backed by Michigan-based Pro Fireworks and larger companies based in other states, some of which operate both permanent and temporary stores here.
The proposal is “only a technique to get rid of competition,” said Horvath, an attorney who lives in Ann Arbor and is spearheading a push to derail the lame-duck legislation. His company has operated as many as 20 shipping container stores in a summer and could be forced to pay tens of thousands of up-front bonds to continue doing so.
Pro Fireworks President Jim Stajos, who previously was with Big Fireworks, testified in support of the legislation last week and told lawmakers that industry support was contingent on approval of the entire package.
“There’s some things in here we absolutely love, and things we can live with,” Stajos said. “But at the end of the day, the industry is going to support these bills as they sit, 100 percent.”
Stojos on Tuesday called Horvath’s complaints a “misinformation campaign.” Operators who need to secure a $5,000 bond could do so through their insurer and pay much less up front, he said.
“The only guy that’s got to worry about it is the guy who doesn’t pay his sales taxes and safety fees,” Stojos told The News.
As of August, the state reported 260 active permits for permanent fireworks stores and 665 active permits for temporary structures. If a similar number operated next year, the new fees could generate $350,000 for state oversight and enforcement, according to the nonpartisan Senate Fiscal Agency.
The legislation would allow Detroit, Warren and Sterling Heights to adopt local ordinances regulating temporary fireworks stands. The option would only be available to local governments in municipalities with at least 100,000 residents based in counties with a population of 750,000 or more — essentially restricting it to the three largest cities across Macomb, Oakland and Wayne counties.
Sen. Marty Knollenberg, a Troy Republican who voted against the fireworks law in 2012, said he supports tighter local control provisions in the bill but has concerns about its impact on small business owners.
Knollenberg had prepared an amendment that would have reduced the proposed $5,000 bond but said Tuesday he won't introduce it for fear it would "kill" the package, which he described as an improvement over current law.
"I want to make sure there's a level playing field for everyone to participate, and I have concerns about that," Knollenberg said Tuesday, "but a lot of work has been done with it. I talked to (Lilly) this morning and I think it's a fair compromise."
The Michigan Department of Licensing and Regulatory Affairs, including State Fire Marshal Kevin Sehlmeyer, has voiced support for two of the three bills. Various firefighting associations also support the legislation.
The new package also would create civil fines — up to $40,000 for a third offense — for illegal fireworks sales, with proceeds going toward enforcement.
“In summer, we have a lot of folks that are not playing by the rules,” Sehlmeyer said in committee testimony. “They are not getting the certificates, so it’s very important we have the ability to make sure they’re not out there selling fireworks.”
But Horvath argued the new proposal could actually make the state less safe by creating an exemption to a mandatory fire sprinkler rule for expanding strip mall stores whose owners held a permit for the same location the prior year.
Lilly said he had not heard complaints from Horvath or other small business owners until now.
"What we've mostly heard is from people who appreciate the fact that we're actually addressing the days and times" in which fireworks can be shot "and bring some rationality to that," he said. "That's the vast majority of the feedback we get."