Opinion: Should We Trust the Winery Math?

(Editor’s Note: This opinion piece is a combined effort from the non-profit group Friends of Old Mission Peninsula, asking whether residents of the Peninsula should trust the wineries’ math when it comes to recouping those lost profits of $203 million at the taxpayers’ expense. Read on for their thoughts. If you’ve got something to say about the winery lawsuit or anything related to the Old Mission Peninsula, write it up and send it to me, [email protected]. Note that you may only submit opinion pieces once every 30 days. -jb)

The stakes are high. The Wineries of Old Mission Peninsula (WOMP) are suing Peninsula Township and its residents for $203 million in damages in alleged lost profits for the five years prior to filing their lawsuit (one of which was COVID-19).

That amount would average more than $60,000 for each property owner on the Peninsula. (Each property owner can compute their own liability for free at the Friends of Old Mission Peninsula website here.)

WOMP is serious about damages. They hired (and presumably paid) a purported expert to testify about $203 million in lost profits, but then convinced the court to put that testimony’s exhibits under seal so no one could see them or check their work. (Read the expert’s narrative here.)

However, we have an option to assist public understanding of this important element and build comparable projections by applying publicly-available industry benchmarks. Doing so, we can take the number of events, their size and revenue generated, along with industry average profit levels, and determine the commercial activity level it would take to generate $203 million in lost profits.

This is a big challenge, but we have the benefit of an event business operating on the Old Mission Peninsula for the past 15 years — The Peninsula Room at Mission Table/Jolly Pumpkin. This venue hosts weddings, business meetings and other gatherings for up to 150 people (plus 60 in a nearby room), with a published price list, allowing anyone to do comparable math. View more here, and check out their event pricing here.

Below is snapshot of what we learned. In order to generate $203 million in lost profits, the wineries would need to:

• Generate revenue of $452,360,767 (Apply industry profitability ratios of about 45 percent to the $452 million revenue, and you get $203 million in profits.)
• Host 2.5 million guests over five years, each paying approximately $200 per person, i.e. a wedding (in order to generate $452 million in revenue)
• Build 11 new restaurants on the Old Mission Peninsula

The wineries would also need to build 11+ event center buildings averaging about 5,000+ square feet each. This includes guest space plus support space, comparable to the Peninsula Room holding 150 people. For more about calculating an event center’s space needs, click here.

On a yearly basis, this means:

• 500,000 guests per year
• 3,329 events (assuming each event center holds 150 people)
• 300 events per year for each winery, which equates to about 12 events per week during the 26-week peak season of May through October.

Events at this scale would bring 215,518 more cars onto the Old Mission Peninsula each year.

We know the conclusions reached through this exercise seem preposterous. It might seem unlikely a winery could actually host 12 events each week during peak season, each with more than 150 people spending $200 each … unless conditions change, and changing those conditions is what the WOMP lawsuit is all about.

If WOMP succeeds in blowing up Peninsula Township zoning as they propose, there could be more than 11 new venues, with each holding 150 people. And, just looking at WOMP’s projected sales revenue alone, it seems excessive compared to a 90+ percent booked Peninsula Room for 150 guests (their recent experience).

The sales projections for WOMP are nearly double (1.6 times greater) than that of The Peninsula Room — a long-established and sole OMP commercial events provider.

If past is prologue, WOMP and its supporters will criticize this projection analysis. Fair enough. As already stated, it is an estimate from publicly-available industry information. But, we were forced into this projection exercise by WOMP, because WOMP got the judge to seal the exhibits.

However, three things are beyond dispute:

• It will take a large increase in commercial activities on the Old Mission Peninsula to generate $203 million in “lost profits”;
• The wineries of WOMP have not released their financial records to the public; and
• WOMP can remove doubt about its math by releasing to the public the exhibits submitted to the court by their expert. By doing this, the public can read, understand and evaluate how they feel about the increased commercialization necessary to drive $203 million in lost profits, which would be paid by OMP property owners through higher taxes and assessments — if WOMP wins the lawsuit.

If the aforementioned numbers trouble you, check out suggested actions at the Friends website here. Please act promptly. Settlement talks are open, and a trial is scheduled for April.

–Friends of Old Mission Peninsula, a registered Michigan non-profit corporation (ID No. 803126298) whose purpose is to inform, to educate and to spark action.

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