Mackinac Island is one of the jewels of Michigan tourism and culture. Probably because of its unique history, state law gives the municipality some unusual regulatory powers. But not all of those powers are good. A proposed statute granting broad regulatory powers over transportation to and from the island would be costly and damaging to this favorite state destination.
Senate Bill 304, which was passed by the Michigan Senate July 1, would give the City of Mackinac Island authority to regulate parking rates and other business activities both on the island and on the surrounding mainland, including St. Ignace in the Upper Peninsula and Mackinaw City in the Lower Peninsula. The bill is currently before the state House of Representatives. We have seen this show before in other areas of transportation regulation, and the result has always been failure.
Mackinac Island already has an unusual regulatory power that other Michigan cities do not have. The City of Mackinac Island can regulate the fares of Mackinac Island ferries, similar to the way the Michigan Public Service Commission regulates electricity rates. The City now claims this regulatory power is insufficient, because the ferries operate paid parking lots on Mackinac Island, in St. Ignace, and in Mackinaw City. The ferries also charge for various services, including handling baggage, that they perform off the Island.
Senate Bill 304 would allow the City of Mackinac Island to “regulate all aspects of ferry service to and from the city, including ancillary fees and charges to consumers.” The City claims that this expansion of its regulatory power is necessary because the Mackinac Island ferries are a monopoly that is evading the price regulation power of the City by raising fees for parking and other services on ferry passengers.
The City of Mackinac Island previously claimed that it already has this regulatory power over all aspects of ferry service. But a federal court decided that is not the case and is allowing the current parking rates to remain in place for the 2025 season. Thus, Senate Bill 304, if signed into law, would terminate the current federal court injunction against the City regulating parking fees off-island.
For many years, Mackinac Island visitors had three ferry choices: Star Line, Arnold, and Shepler’s. Star Line acquired and merged with Arnold in 2016. Shepler’s was acquired by Hoffman Marine in 2022, and then Hoffman acquired Star Line in 2024, leaving Hoffman as the owner of all three ferry lines. Thus, the City is claiming the one remaining operator is monopolizing ferry traffic.
But does Hoffman really have monopoly power? That seems unlikely. There are more 15,000 ferries in operation globally, and they are designed to be movable. A monopolist ferry operator overcharging should attract entry from a company operating ferries somewhere else. The island city could also use its regulatory powers over ferry rates to encourage new entry and drive down prices. Because that hasn’t happened, the more likely explanation for the current dispute is that the city is not allowing the Hoffman-owned ferries to cover their costs, and the ferry operator is making up for it with higher parking fees at its mainland lots.
The proposed expansion of Mackinac Island regulatory powers brings to mind the dismal history of railroad and truck rate regulation in the United States. In 1887 the Interstate Commerce Commission was created to regulate railroad freight rates, based on the theory that railroads had monopoly power over their routes. Rate regulation was extended to trucks during the 1930s, out of a belief that railroads were evading rate regulation by combining their routes with truck routes. But trucking was far from a monopoly.
Eventually the whole system collapsed as railroads went bankrupt and truck companies were discouraged from making shipments. Rather than protect consumers and shippers, this regulatory structure left them with shipping bottlenecks and no incentive for railroads or truck lines to make more deliveries. Congress finally gave up, and in 1980 passed the Staggers Rail Act to end railroad rate regulation and the Motor Carrier Act to end truck rate regulation.
To protect ferry passengers, the City of Mackinac Island has better options. The fact that no other ferry companies came to Mackinac Island after Hoffman acquired the remaining competitors is evidence that something is wrong with the current regulatory structure. Rather than doubling down on failure, the legislature and the City of Mackinac Island should look into what they can do to make ferry operations more attractive for both Hoffman and anyone else who wants to serve the Mackinac Island ferry market.
