Shepler's Ferry Renews Mackinaw City Dock Lease $126,000-Per-Year Deal Debated
By Paul Gingras

An agreement between business owner Bill Shepler and the Mackinaw City Village Council will allow him to continue leasing a village-owned dock for approximately $126,000 a year for 10 years, pending approval of minor changes.

Mr. Shepler contends the lease is too high and objected to an annual increase of 1.5 percent to 5.0 percent, but studies done by the village confirmed that the popular staging point for ferries to Mackinac Island is among the most valuable docks in Michigan.

To determine the value of the lease, the village hired Terra Field Services, Inc., which assessed the land on which the dock stands at $1.8 million. The company also compared Shepler's lease to leases on other docks in northern Michigan, but "nothing else is truly comparable," said Village Manager Jeff Lawson.

Terra Field said that the Department of Natural Resources (DNR) leased a portion of the old state ferry dock in Mackinaw City to Arnold Transit Company for $46,815, beginning in 1997. In Traverse City, Bowers Harbor Marina estimated the value of its dock lease at $62,000 to $65,000, and the City of Charlevoix agreed to lease a small portion of its public dock system for $17,000 from 1998 to 2028. This probably does not include annual rate increases, Mr. Lawson added.

Regarding the Traverse City dock, Steve Nichols of Terra Fields said, "I don't know for the life of me why (the lease is) so low."

At a committee of the whole meeting Thursday, October 5, Mr. Shepler, owner of Shepler's Mackinac Island Ferry, which operates from the dock, hashed out the details of the new lease agreement with the council. The village included language to ensure that the dock will remain in use by another business, or revert to village control, if Mr. Shepler retires before the lease is due to expire in 2016. Mr. Shepler has not given the village cause to expect his retirement, but such matters are always considered in valuable lease agreements with long durations, Mr. Lawson said.

The village decided that Mr. Shepler's lease rate on the dock will increase 1.5 percent to 5.0 percent each year. This increase will be based on how much the three Mackinac Island ferry companies pay in franchise fees to the City of Mackinac Island. The fees are based on gross revenues for passenger service.

The Village of Mackinaw City monitors the fluctuation in boat line revenue reported by Mackinac Island. So if area boat companies report an income change of 1.5 percent or less on a given year, the Village of Mackinaw City will raise Mr. Shepler's lease rate the minimum of 1.5 percent.

If the Island reports a 1.5 to 5.0 percent increase in boat line revenue, the Village increases Mr. Shepler's lease rate on his Mackinaw City dock by the same percentage.

Increases on Shepler's dock lease rate are capped at five percent.

This is a switch from the past procedure, in which Shepler's dock lease increases were tied to inflation, based on the Consumer Price Index (CPI).

In 1996 when the last lease was signed, Mr. Shepler paid approximately $100,000. Annual increases based on inflation took to a rate to $121,153 in 2005. By 2006, the dock lease rate had increased to approximately $126,000.

Mr. Shepler offered to buy the dock at the October 5 meeting, but Council said the land was too valuable to sell. The lease contributes about 10 percent of the village's $1.2 million general fund budget. The city couldn't absorb the drop in revenue if the property were sold, Mr. Lawson explained, at least not right away.

The first areas of the city's budget to be affected by a revenue drop of that magnitude would be expenditures for city buildings and equipment, Mr. Lawson said. Later, it would become a political matter that could include cutting municipal jobs.

To ensure that the dock is properly maintained and its value fully realized, the village has included new lease language stating that Mr. Shepler must notify the village if he sells his business. Further, any new owner of the ferry business must have a viable operation on the dock within two years, or ownership of the dock will revert to the village.

Part of the reason for thisstipulation is to avoid a scenario in which a competitor buys the lease, deliberately leaves it vacant, and channels Mr. Shepler's former clientele to another dock, council members said.

Mr. Shepler's company is among the largest employers and most significant contributors to the tax base in Mackinaw City, pointed out Trustee Sandra Planisek.

The negotiations over the lease renewal took place in a congenial atmosphere. Mr. Shepler noted that he has sought to work as a partner with the village over the years, partly by providing gifts of land to help the city improve streets, and completing a $900,000 dredging project that not only helped his business, but also helped the municipal marina operations. The dredging took place in 1997 when the level of Lake Huron dropped approximately three feet, Mr. Lawson said.

The Village Council and Mr. Shepler expressed mutual respect for each other during the October 5 discussion, and Mr. Shepler left saying that, although he feels the lease is "way too high," he appreciated the "workmanship and camaraderie" of the board.