Before an audience of more than 50 area residents, business owners, and ferry line employees, two waterfront parcels owned by Shepler's Mackinac Island Ferry in Mackinaw City were rezoned for general business (B2) by the village council Thursday, September 4. The least restrictive zoning designation in the village, B2 allows hotels, motels, and retail operations. The zoning change will be finalized after a second reading and adoption at the Thursday, September 18, council meeting.

Council voted 6-1 to place Shepler's two village parcels in the B2 district. Village President Ron Wallin voted against the proposal.

To accommodate the crowd that attended, the meeting took place in the multi-purpose room at Mackinaw City Public School.

The decision addresses a controversy regarding how to ensure economic vitality in Mackinaw City. Some believe that allowing hotels and motels will eventually lead to a blocked view of the Straits of Mackinac in the village's busiest business district, reducing tourist interest in the municipality.

Others believe that restricting use of the parcels would devalue Shepler's property, put the company out of business, reduce year-around and seasonal jobs, and cut income to the village.

To operate its ferry service to Mackinac Island, Shepler's leases the village dock for $130,000 a year.

To remain competitive with Star Line Mackinac Island Ferry and Arnold Transit Company, Shepler's must have parcels on the waterfront for customer parking, said owner Bill Shepler.

The council's decision opposed the planning commission's recommendation to place the parcels in the more restrictive marina commercial (MC) district. Mr. Wallin made a formal motion to vote on the planning commission's recommendation but it failed for lack of support and no vote was taken on it.

The planning commission also recommended that two villageowned properties adjacent to Shepler's be placed in the MC district. After placing Shepler's properties in the B2 district, council voted to send the village-owned property issue back to city planners for reconsideration.

Owners Chris Shepler, Bill Shepler, and their lawyers said placing the parcels in the MC district would have put Shepler's Mackinac Island Ferry out of business, because MC does not allow hotels or motels. Even if the company does not build hotels or motels, the option to do so on that property increases the property value, they contended.

In contrast, MC has been cited by citizens and planning commission members in recent months as the proper zoning, because it prevents hotels or motels from being built and blocking the waterfront view, which they believe is favored by tourists and would help ensure the long-term prosperity of the village.

Before the vote, Council addressed several letters written in support of both MC and B2 designations for Shepler's property.

At Thursday's meeting, and previous meetings, residents and business owners on both sides of the issue cited sections of the village master plan to support their positions. The master plan calls for more open waterfront and also economic development.

Village Manager Jeff Lawson, lawyers for the Shepler company, and Bill Shepler presented histories of the parcels Thursday.

In the 1980s, an alleged computer error on a revised village zoning map left out a designation for Shepler's parcels and the two village owned parcels along the waterfront. All are downtown, near the corner of Central and Huron avenues.

Attorney Michael Stack, who made a presentation on behalf of the Shepler company, presented a portion of a letter, dated July 28, from First Community Bank. It was written to Bill Shepler.

It read, "We have seen declines in real estate values around northern Michigan and do have a concern about the final valuations of updated appraisals as it pertains to your property. We understand that the city council in Mackinaw City is about to vote rezone your property to marina commercial. [A local appraiser]....did say that it will have a definite negative impact on the final valuation, although he cannot begin to tell us how much of an impact at this time."

"If the new appraisals do not fully support the current [value] on your debt to First Community Bank, we may be forced to restructure prior to renewal. This could include, but not be limited to, requiring a principal reduction of your term loan prior to renewal, reducing your line of credit available for 2009, or taking additional collateral..."

Chris Shepler explained that Shepler's Mackinac Island Ferry is responsible for three loans. One, valued at about $900,000, was taken out to dredge near the dock, enabling the company to continue operations there. Another loan was used to modernize the company's vessels. The third, taken out annually, enables the company to pay yeararound employees through the winter.

He said the company is paying the loans back steadily, "but you don't pay back millions of dollars overnight, and you certainly don't pay back millions of dollars in an economy that has lost 500,000 jobs in the State of Michigan in the last five years."

"Worse than jobs disappearing," he added, "is the fact that tens of thousands of residents are, too."

Locally, Mackinaw City's economy is down about 10% to 15%, he said. Ferry operations have decreased schedules in Mackinaw City and St. Ignace, he added.

Placing the company in the MC district would immediately eliminate the company's 38 year-around employees. Next year, the rest of the employees would be out of work, he added.

Mr. Stack said rezoning would adversely and critically affect property value. Attorney Joseph Kwiatkowski, who also spoke on behalf of Shepler's, said a major devaluation would require the village to compensate the company for its loss.

Mr. Wallin said, from his point of view, restricting the potential for hotels and motels to be built on the parcels helps ensure that the area will be maintained as a ferry boat operation.

"Clearly, Council has a vested interest in viable operations to Mackinac Island. It is critically important to Mackinaw City that we maintain our Island link. Arnold and Star could go out of business in a heartbeat, and we can lose those operations as departure points to Mackinac Island," Mr. Wallin said.

Arnold Transit Company and Star Line Mackinac Island Ferry, Shepler's competitors, are in a B2 zoning district. If their properties were to be sold, hotels and motels can be built there.

Chris Shepler insisted that his company's property will not be sold to a hotel or motel operation.

Seeking to dispel rumors that the family plans to sell the business, he said the company has hired a succession planner to help them determine how to share and run the business in the future.

The original vote by the planning commission to recommend MC zoning was tied. Later, Edward "Bo" Whipkey was added to the commission's roster and voted in favor of MC designation.

The planning commission "does have guidelines to develop communities," he said. "If you are familiar with uncontrolled development, it really makes a mess of a town, so the research that went into our decision wasn't shallow...If the property is zoned B2, it will be sold or it will be developed. It may not be today. It may not be tomorrow, but it is a guarantee."

"In the short term, helping the Shepler's would seem like a logical thing, but in the long term, from the planning commission [point of view], all of our guidelines look 20 to 30 years ahead," he said. "In the long term we're going to be scratching our heads saying, . . . 'We were just trying to help out the Sheplers . . . It made sense then, but in the long run, it's going to hurt everybody.'"

Before the vote, in a passionate speech, Bill Shepler described the development of his business from the beginning, citing cooperation between the company and the village for decades on a number of land issues and projects.

Addressing the village council and the public directly, he said, "I still think there is a partnership between you folks, you folks, and the little Shepler family down at the end of the street."