Economic Impact Study Complete
Economic Impact Study Complete
CHAPTER ONE
PURPOSE AND FORMAT
MISSION
Legislation is pending in the Michigan legislature to modify the present
mandatory motorcycle helmet law. The mission of this report is to consider a
sometimes ignored aspect of law modification---the economic impacts that
potentially will be created by the increases in sales and tourism.
The document analyzes the likely increases in motorcycle registrations, sales
and ownership, retention of tourism dollars of Michigan motorcycle enthusiasts,
and attraction of visitors from other states. The analysis is based upon Michigan
data, results in other states, and discussions with those involved with
motorcycle events and sales.
The report places the proposed modifications to the Michigan law in its proper
context compared to other states. As the narrative discusses, the impetus to
modify the Michigan law follows a national trend. Even though at one time
during the past thirty-five years essentially all states had some form of
mandatory helmet legislation on the books, at present Michigan is one of only
nineteen that still do. All of the states bordering Michigan, Ohio, Indiana,
Wisconsin, plus Illinois no longer have mandatory helmet requirements for
adults. Even if passed, by requiring helmet usage by those under twenty-one,
and by those without recent training and experience, the Michigan law will still
be more restrictive than many if not most states.
PREVIOUS FOCUS ON OTHER ASPECTS
In the past, advocates for modifying the law have focused their position on the
rights or freedom of choice of adult motorcycle operators. Advocates have
also argued that better training of motorcycle and automotive drivers would
have a higher impact on safety than any helmet law mandate. Some supporters
of helmet freedom of choice question the actual safety benefits of helmets and
believe that the results of state helmet laws are less than clear when all factors
of usage, training and operator age are considered.
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The arguments and debates are often passionate, and have been the subject of
a wealth of previous legislative testimony in Michigan and at the national level.
Even though the rights, and training and safety issues will continue to be key
elements of the position of law modification advocates, the economic impact
issues also merit inclusion in the discussion.
This document, for the purposes of proper context, also provides summary
information on other elements of the overall debate, but the primary focus of the
material and findings is the economic impacts.
FORMAT
Section One describes the mission and identifies the past focus of helmet law
modification advocates.
Section Two provides an overview of the modifications being proposed, and
reviews the trends in others states.
Section Three is the heart of the document, analyzing and estimating the
economic impacts from increased sales and tourism that will likely ensue from a
modification to the present law.
Section Four offers brief summaries of the other issues that in the past been the
dominant elements of the helmet law modification. The summaries are provided
solely for context. Other studies and legislative testimony address those
concerns in much greater detail.
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SECTION TWO
HISTORICAL PERSPECTIVE AND
OVERVIEW OF PROPOSED LEGISLATION
MICHIGAN SITUATION
How Michigan compares to other states is seen as vital information. Michigan
is now in the minority of states that mandate helmet usage by adults.
None of the three states with land bordering Michigan (Ohio, Indiana,
Wisconsin) require helmet usage by adults (neither do Illinois or
Minnesota).
The reality that Michigan has very restrictive helmet usage laws, while the
national trend has been to allow adult choice, has several ramifications for this
study. It means that data from states with similar geographic and demographics
can be used for statistical analysis of modifications to the existing law. It also
means that there are direct differences in the attractiveness of states for
motorcycle tourism.
Understanding Michigan in the national context also places the modification
issue into one of reasonableness. It is fair to suggest that helmet law
modification advocates of two decades ago were not always taken seriously in
Lansing, regardless of the legitimacy of their positions. This may have been due
to the colorful characterization that was placed upon them by outsiders, or
even sought after by the enthusiasts themselves. Regardless, the reality is that
adult choice for helmet usage is now the common position of the majority of
states, and that the average age and income of motorcycle owners has been
steadily increasing. Motorcycle users come from all age, income, and education
attainment levels. Simply put, the views of the individuals who actually
operate motorcycles, many for decades, merit valid consideration.
NATIONAL TREND
The impetus for the original passage of mandatory usage in most states,
including Michigan, was created in 1966 when the United States Department of
Transportation threatened that federal highway funds would be withheld from
states that did not enact such legislation. Michigan, along with forty-eight
additional states (the exception at the time was California) relatively soon had
some form of helmet usage requirement enacted into law.
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The past federal pressure as the impetus for mandatory helmet laws is a
valuable historical note. The attitudes and reasoning of legislators over twentyfive years ago cannot be viewed with certainty. Yet, there obviously is reason
to believe that the pressures for the Michigan law stemmed to a
significant degree from the federal funding requirement, rather than any
perceived safety analysis. It was also part of a national trend, one that has
since gone in the opposite direction.
Even though the federal Department of Transportation never reduced funding to
any states dues to the policy, the power do to so was challenged by several
states as well as motorcycle groups. By 1976, the United States Congress took
action to formally invalidate any power the DOT had to hold back funds. Since
that time, a majority of states have significantly modified or repealed their
mandatory helmet use laws. At present, Michigan is one of only 19 states that
mandate helmet usage by adults. None of the four states bordering Michigan
mandate helmet usage by adults.
Pennsylvania was the most recent state to modify their motorcycle helmet law,
with the change becoming effective in September, 2003.
KEY PARTS OF THE LEGISLATION AS NOW PROPOSED
Other documents are available that detail the proposed legislation. Obviously,
the specifics of the actual language under consideration in legislative
committee, and perhaps eventually for a vote of the legislature, may go through
a series of refinements. The legislation being supported by ABATE (American
Bikers Aiming Toward Education) of Michigan incorporates the following
primary characteristics.
Operators 20 years of age or younger would be required to wear
helmets.
Operators of any age with limited experience would need to wear
helmets.
Operators 21 years of age or older with experience would have
freedom of choice regarding helmet usage.
It is important to note that if passed as proposed, Michigan would still
have more restrictions than over one-half of the states.
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Given the national increase in income from 1998 and 2003 the median income
of motorcyclists today very possibly exceeds $50,000 annually.
Michigan
In 2002, the State reported total motorcycle registrations of 197,735. Even a
modest growth of 6% for the entire period covering 2003 and 2004 will bring the
total to approximately 209,600 for the year 2004. This number serves as a base
to calculate potential growth induced if the law is modified. The MIC estimates
that in 1998 the motorcycle population in Michigan 266,700, with 203,200 being
used on-highway (at some time) and 82,000 being used off-highway at some
time.
A survey sponsored by the MIC estimated that in 2002 there were 528
motorcycle retail outlets in Michigan, with 5,624 employees. Of the outlets, 256
were classified as franchised and 272 were classified as non-franchised.
The total payroll at motorcycle outlets in 1998 was estimated to exceed $138.9
million annually in Michigan and over $3.55 billion nationally.
Even these substantial figures do not include the economic activity generated at
multi-purpose retail and automotive supply stores that sell motorcycle related
fluids, parts, cleaning materials, tools, and other products.
Michigan usage compared to other states
After the State of Florida eased their helmet restrictions a significant increase in
total registrations quickly occurred. ABATE of Florida, using state data; found
that a 20.4% increase in total registrations occurred over the previous year.
Would such an increase happen in Michigan?
Total registrations in Michigan can be compared on a per capita basis with the
other Great Lakes states. As noted, Michigan is the only one of these six states
to require helmet usage by adults.
Table A provides comparisons for registrations and population for the six
states.
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TABLE A
COMPARISONS OF REGISTRATIONS IN GREAT LAKES STATES
2000 motorcycle
registrations
2000 population
Illinois
196,000
12,419,293
15.78
Indiana
118,000
6,080,485
19.41
Minnesota
143,000
4,919,479
29.07
Ohio
255,000
11,353,140
22.46
Wisconsin
180,000
5,363,675
33.56
5 state total
892,000
40,136,072
22.22*
Michigan
184,000
9,938,444
18.51
State
Registration per
1,000 residents
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SECTION THREE
DISCUSSION AND ESTIMATION OF ECONOMIC IMPACTS
INTRODUCTION
This Section utilizes the potential impact of a 20% increase in registrations and
generates estimates of the economic impact within the states. Tourism impacts
are then calculated, including both the retention within Michigan of the tourism
spending of Michigan motorcycle enthusiasts, and the attraction of motorcycle
tourism to Michigan. The overall totals are presented in terms of economic
activity, payroll, direct and indirect jobs, and state revenues.
ECONOMIC IMPACTS OF SALES/REGISTRATION GROWTH
Increased sales and sales tax
Sales growth will mirror growth in registrations. If modification to the law creates
a 20% growth, this represents an increase in registrations of 41,920. This figure
is additive to whatever growth or decline would have otherwise occurred based
on such factor of the economy, aging of America, and consumer trends.
The national average sales price for an on-highway motorcycle in 2001 was
approximately $10,140. Given price inflation, and the likelihood that the new
cycle purchases induced by law modification would be in the higher engine
displacements, the price for the vehicle purchases induced by the law
modification in Michigan would probably average at least $11,000. Using the
$11,000 figure, the additional sales of new vehicles could represent $461
million in direct economic activity. The 6% sales tax on these vehicles could
total $27.7 million.
In addition to the new and used vehicle purchases, the increased number of
owners will result in increases in annual purchases of accessory items.
Nationally in 2001, Parts, Accessories, & Riding Apparel and Service labor
and Other Motorcycle Related Sales (excluding purchases of new and used
vehicle) averaged over $611 per operator. Former owners returning to
motorcycling may spend even more.
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For estimation purposes, a $625 per year average for the 41,920 new sales is
suggested as appropriate when the impact of the modification takes complete
effect and is responded to in the marketplace. This represents over $26.2
million in annual activity and over $1.5 million in state sales tax. These are
annually recurring items that will rise with inflation.
The increase in registrations and sales will also energize the resale market.
Firm figures from other states are not available, but it is prudent to assume that
a 20% increase in sales can result in at least a 10% increase in resales. This
would be a recurring item, and may further increase as the number of
registrations and existing vehicles increased. Using the existing base of
209,600, a 10% increase in resales, at an average price of $6,000, generates
an estimates direct impact of $125.8 million, and sales tax revenues of over
$7.54 million.
Even though not included in any monetary estimates, it is possible that the new
and used sales figures will be further heightened by more people from
neighboring states purchasing their vehicles in Michigan. Such sales are of
particular economic benefit by bringing out-of-state dollars into Michigan.
Employees and payroll
The increase in registration will create an increase in employment and payroll.
A factor of 15% is chosen, less than the 20% sales factor because the
management and facility system is reasonably well-established. An estimated
6,406 positions were involved in motorcycles retail sales and maintenance
during 2003. This does not include individuals involved with motorcycle services
that are listed in other employment categories or operate on a cash-only basis.
A 15% increase represents 961 direct jobs. Use of a conservative multiplier of
1.8 to represent induced jobs created by sequential rounds of spending by
individuals in the direct jobs increases the gross employment impact to 1,730
jobs. The direct total payroll would increase by over $20.8 million, with the
impact on the state income tax directly being $730,000, with the multiplier effect
further increasing the overall impact.
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TOURISM IMPACTS
Background
A variety of stories have appeared in the media pertaining to the incredible
popularity, and economic impact, of major motorcycle rallies in other states. It
cannot be predicted that in the near future Michigan will duplicate such success.
Yet, as long as the helmet law restrictions continue, it is certain that many
Michigan motorcyclists will decide to vacation in other states, and the full
potential of attracting motorcycle tourists to Michigan will be restricted.
A popular magazine of avid motorcyclists is Horse Backstreet Choppers. It is
published in Sterling Heights, Michigan.
They sponsor a motorcycle
rally/event each year---but never in Michigan. The most recent event, in
Salesbury, North Carolina, attracted over 30,000 individuals. The majority used
hotel/motel rooms in the area. The function has probably outgrown the area,
and new sites are being considered.
In an interview with the event sponsors, it was unequivocally stated that
Michigan locations would not be considered due to the present helmet
law. Simply put, a Michigan location would attract fewer people.
Some motorcycle rallies/events are held in Michigan each year, but nothing of
the magnitude of the major events held in other states. Typically, Michigan
events do not attract many motorcycle enthusiasts from others states. Meridian
Entertainment, organizers of an event in West Branch each year called the Hog
Rendezvous provided insight into the situation. In 2003, of 5,157 paying
attendees at the Hog Rendezvous, only 57 (or 1.1%) were from out-of-state.
The percentage was 1.25% in 2002 and 1.9% in 2001. The organizers strongly
believe that a modified helmet law allowing adult choice would significantly
increase the number of out-of-state visitors.
Estimation of tourism impacts
Increased tourism spending will occur through two interrelated aspects:
Retention of the spending of Michigan motorcyclists.
Attraction into Michigan of motorcycle tourists from other states.
Modest factors are utilized to estimate the economic impacts.
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Economic activity--direct
New sales .............................................................. $461.2 million
Resales increased.................................................... 124.8 million
Accessory sales increased ......................................... 27.7 million
Tourism ..................................................................... 53.9 million
Total direct ...................................................... $667.0 million
Impact including ripple effect ............................... $1.2 Billion
Sales tax direct ..................................................... $40.0 million
Employment
Direct (sales and tourism) jobs ............................. 1,500 new jobs
Total jobs, including from multiplier ........... 2,700 new jobs
A significant portion of the economic impacts will be annually recurring, as well
as the majority of the employment. As repeated several times, the actual
potential for motorcycle tourism is far higher than the modest figures used in
this report. Florida found that dramatic impacts occurred the first year
after the modifications in their law were enacted. The speed of the impacts
in Michigan may or may not differ, probably relating more to the regional
economy than the ultimate results. It is clear that the law is appealing to a
segment of the economy with disposal income and an interest in travel. It is
also a segment that is certain to grow due to the graying of the baby boom
generation.
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SECTION FOUR
NOTES ON RELATED CONCERNS
REITERATION OF MISSION
As stated at the beginning, the mission of this study is to analyze the economic
benefits of modification of the existing law that will stem from increased vehicle
sales and tourism. This beneficial impact has been an under-appreciated
element in past debates. It is not claimed that the economic benefits identified
in this report should be viewed as dominant considerations in the legislative
deliberations; but they merit inclusion in the discussions.
Given that other elements have usually been central to the debate, it is useful to
at least identify within this document those aspects in order to provide a context
for the economic impacts discussion. A wide variety of material and testimony
has previously been submitted by various groups and researchers pertaining to
these other aspects. The narrative below simply provides capsule summaries.
NOTES ON ADULT CHOICE
The past focus of modification proponents, at least as reported by the media,
has been that an adult should have the right to choose whether or not to use a
helmet. Even in states that allow adult choice, many still decide to use a helmet
at all times or during inclement weather. Some motorcyclists believe that their
vision is improved without a helmet, and thus are safer---while some will always
use helmets, seek out the best ones for their needs, and wear them correctly.
For most proponents of modification, it is not a matter of being anti-helmet, but
the fundamental right of an adult to choose.
It is important to repeat that even if the modifications are enacted, Michigan
would still be one of the more restrictive states in the nation. All operators
under the age of 21 would still need to use a helmet. Even adult operators
without experience (as proposed the length is two years) would need to use a
helmet. The law would also enhance training requirements.
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All Crashes
Fatal Crashes
1993
2,768
51
1994
2,982
66
1995
2,651
80
1996
2,468
61
1997
2,465
63
1998
2,931
52
1999
2,820
80
2000
3,180
82
2001
3,228
94
2002
3,030
81
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INFORMATION SOURCES
A wide variety of sources were reviewed during the preparation of this study.
Those of most direct relevance to the findings are identified below.
American Motorcycle Network, statement of Louisiana Governor Mike
Foster, October, 2003.
Bear Stearns & Co. Inc. America at Leisure, 2001.
Biker Rights Online, States and Helmet Laws (list).
Greater Milwaukee Convention and Visitors Bureau, website, information
on impacts of National Motorcycle Rally.
Michigan Department of Education, Traffic Safety Education Program,
2003.
Michigan State Police, Michigan Office of Highway Safety Planning, 2002
Michigan Traffic Crash Facts.
Michigan Secretary of State, Motorcycle License Information Website.
Motorcycle Industry Council, Statistical Annual 2002.
National Highway Traffic Safety Administration, Evaluation of the Repeal
of the Motorcycle Helmet Laws in Kentucky and Louisiana.
National Highway Traffic Safety Administration, National Center for
Statistics and Analysis, Vehicles, Crash Data Report, 1990-1999.
National Highway Traffic Safety Administration, National Center for
Statistics and Analysis, Motorcycles, Crash Data Report, 1990-1999.
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