Index of Issues

Non-Compete Clause Elimination
Pure Michigan Advertising Funding
Sales Tax Expansion to Advertising
Public Notice Publication Reform
Michigan Lottery Advertising
Governor's FY 2010-11 Budget Proposal
Right of Publicity
Performance Tax
Spectrum Reallocation

Non-Compete Clause Elimination

The Issue: The American Federation of Radio and Television Artists (AFTRA) is continuing their nationwide legislative effort to remove broadcasters’ ability to incorporate non-compete clauses in personal service contracts. Once again, their cause has found a sympathetic sponsor in the Michigan legislature. House Bill 5750, sponsored by Representative Fred Miller (D-Mt. Clemens) and Senate Bill 1068, sponsored by Senator Ray Basham (D-Taylor) are identical bills that were introduced in January. The bills exclusively eliminate a broadcaster’s ability to negotiate non-compete clauses in personnel service contracts with on-air talent.

History: AFTRA had spearheaded a similar attempt during the final day of the lame duck session in 2008. Representative Andy Meisner (D-Royal Oak) authored HB 6695 of 2008 and immediately gave it a hearing, as chairman, in the House Commerce Committee. The MAB offered testimony in opposition to the bill and it ultimately was not brought to a vote.Since 1985, Michigan has had a strong statute on the books, strictly regulating the terms of non-compete clauses. State law not only requires the terms of the agreement to be reasonable, but also gives the courts discretion in amending the terms of the contract to make them reasonable.

Legislative Action: The bills were both introduced in January of this year. House Bill 5750 has 18 co-sponsors, while Senate Bill 1068 has one. The MAB caught wind of the legislation prior to introduction and has been working with Representative Miller since October 2009. The legislature has not taken any formal action, and the MAB is working with House and Senate leadership to ensure no action is taken.

Industry Views: The current statutory provisions provide a fair and equitable system for resolution for both the broadcast station and its employees. Government interference with the terms of private contract agreements has dangerous consequences, and its effects on Michigan’s broadcast industry would be devastating. Non-Compete clauses help protect a station’s substantial and unique investment in its employees. Earning a communy’s confidence does not happen by accident. Local broadcasters invest millions of dollars each year in branding and promoting on-air personalities in an effort to ensure the viewing public is familiar with those responsible for disseminating vital news and information in times of crisis.

Pure Michigan Advertising Funding

The Issue: To address the lack of funding, legislation was introduced to provide a permanent, dedicated funding source. The bill package (House Bills 5017, 5018, 5088, 5089) would establish a $2.50 per day transaction fee on rental vehicles that are rented within 2.5 miles of an airport. The proceeds from the fee would go into a newly created Michigan Promotion Fund, where 75 percent would be dedicated to tourism promotion and 25 to business development.

History: Due to severe state budget cuts brought on by record deficits, the Legislature was forced to drastically cut funding for tourism and business development advertising in the Fiscal Year 2010 budget. If the Legislature does not come up with a permanent dedicated funding mechanism, Pure Michigan and business promotion spending will remain 80 percent under previous appropriations. Prior to the cuts funding level had peaked at $30 million. Currently, the funding remains less than $6 million dollars.

Legislative Action: The House of Representatives passed three of the four bills in the package to create and finance the Michigan Promotion Fund on December 17, 2009. Governor Jennifer Granholm, in her State of the State address, called on the Legislature to pass the funding reforms necessary to fully fund the Pure Michigan advertising campaign.

The package was recently passed by the Senate Finance Committee and if passed by the Senate, the legislation would provide an expected $8 million to be used in tourism promotion. The language also calls for a study on the state’s return on investment starting in 2013 and commencing every three years thereafter. The bills are now in the Senate for consideration. However, the bill that would have assessed a $2.50 tax on rental cars was excluded from consideration by the House.

Industry Views: For the first time since beginning the campaign in 2004, the return on investment shot up to nearly double its return in the regional markets. It is now at $5.34 in taxes for every dollar spent, compared to an annual average of $2.86 from 2004 to 2008. The study also concludes the state also received a $2.23 return for its national television promotions.

Sales Tax Expansion to Advertising

The Issue: The state continues to look for new revenue streams in light of an estimated $1.7 billion shortfall for Fiscal year 2010-11. While there is little appetite for tax increases in this election year, the Governor, in her State of the State address outlined her plan to cut the rate of the state sales tax to 5.5 percent, while broadening the base of taxable items to include services.

History: Expansion of the sales tax is not a new idea. Several states (most recently Arizona, Iowa and Florida) have extended their sales taxes to advertising. In each case, the tax was later repealed. This debate isn’t new to Michigan. The legislature also looked at sales tax on services previously. The ensuing fight over business-to-business transactions being liable for this new tax eventually crushed the proposal under its own weight.

Legislative Action: The Governor seems to recognize the importance of exempting business-to-business transactions, as her proposal excludes business transactions. A recently published Senate Fiscal Agency Analysis offers a more detailed look at sales tax reform and specifically notes that marketing and advertising would be exempt as a business-to-business transaction.

Industry Views: While the debate is in its infancy, it is questionable as to whether legislators, who face election this year, are willing to discuss increasing revenue. If the debate does go forward, it appears broadcasters are in a good position. Regardless, MAB will continue working with legislative members to ensure they understand the importance of advertising as the life-blood of a growing economy.

Public Notice Publication Reform

The Issue: Much like state government, school districts and local units of government are thinking creatively in devising new ways to save dollars. Legislation is being pursued that would offer options for utilizing different media platforms to disseminate official public notices.

History: From the beginning, print media has been the exclusive method of publishing statutorily required public notices. State and local government pay to publish these items, and have had no other method available to them other than traditional daily newspapers. The Michigan Association of Broadcasters has joined the Municipal League, the Michigan Association of Counties and others looking to make statutory changes that would save units of government money by ending print media’s monopoly on publishing public notices.

Legislative Action: Representative Pam Byrnes (D-Lyndon Township) introduced House Bills 5828, 5826 and 5827. While the bill package seeks to address the issue, work remains to ensure all citizens have access to the public information. Additionally, a six bill, bi-partisan package has been announced that promises not only to save communities money, but also open up the options to other media platforms, such as broadcasting.

Industry Views: Free, over-the-air television and radio broadcasters reach every citizen in Michigan. With numerous newspapers around the state no longer operating, citizens are in danger of losing access to important public information. State statute should be brought up-to-date, recognizing the value and cost-savings of new platforms of reliable media. The legislative work being done is a chance for the legislature to save the taxpayer money, while creating greater transparency in government.

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