Crain's Detroit Business, Aug. 19, 2019 issue by Crain's Detroit Business

Monica Wheat founded nonprofit to create tech opportunities for girls

AUGUST 19 - 25, 2019 | crainsdetroit.com EMPLOYMENT

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Rainy spring causes headaches for food nonprofits Page 3 REAL ESTATE

A BILL IN THE HAND...

Market-rate housing: Affordability solution?

Companies offer workers option to ditch the wait for payday with new ‘early-pay’ services

Fixing Detroit’s housing problem requires blend of approaches, city says

By Dustin Walsh dwalsh@crain.com

he often agonizing wait between pay periods, usually two weeks or more, is no longer a reality for the more than 4,000 employees at Bloomfield Hills-based Wireless Vision. The T-Mobile retail partner launched in April a payment mobile app that allows all employees at its 665 retail outlets and its corporate headquarters to access their pay at any time for hours they’ve already worked, not just when payroll issues checks. A competitive labor market and growing numbers of millennials and Generation Zs dominating the workforce — those currently aged 38 years old and younger are expected to make up 75 percent of the workforce by 2022 — have given rise to instant-earnings payout services. Human resources executives and experts say the rise of these services is partly driven by new generations predisposed to instant gratification and need as more and more U.S. workers live paycheck to paycheck. Wireless Vision joins a growing list of employers, including Walmart Inc., The Kroger Co. and Boston Market Corp., using “early pay” services. Experts believe these services will proliferate across most employers in the country, particularly in the service sector.

By Kirk Pinho kpinho@crain.com

A new study from Kalamazoo-based W.E. Upjohn Institute for Employment Research says that every 100 units of market-rate housing built results in more housing available for lower- and middle-income people as some people move into the pricier new units from the older, less expensive ones. But while that may generally hold true in the dozen cities and nearly new 700 apartment buildings the nonpartisan think tank studied over 18 months, it’s far more complex in Detroit, where rampant poverty remains a pervasive issue with a median household income of just shy of $28,000 per year. New market-rate housing alone won’t ease the affordable housing pressures the city faces, said Mayor Mike Duggan’s administration. Here, it requires a blend of approaches that include housing subsidies, developer incentives and inclusionary zoning, where a minimum number of affordable units are required in new developments and redevelopments of cityowned assets. “The underlying economics of what is being said (in the study) are accurate,” said Arthur Jemison, chief of services and infrastructure for the city and an affordable housing expert. “But we have other unique conditions here that mean that, while the economics are still true, they don’t necessarily produce the amount of affordable housing we need here.” But that doesn’t mean the new market-rate housing wouldn’t have an effect in Detroit, even on people who don’t live in the units.

SEE PAYDAY, PAGE 20

Early pay services at a glance JJPromoted as a stopgap for financial emergencies JJFee-based system, not loans JJCompanies report reduced turnover

ISTOCK

SEE HOUSING, PAGE 20

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MICHIGAN BRIEFS

INSIDE

From staff and wire reports. Find the full stories at crainsdetroit.com

Short’s, Green Peak team up Michigan’s largest marijuana company signed a licensing agreement with Short’s Brewery Co. to produce a line of beer-inspired edibles and vaporizers. Green Peak Innovations, headquartered outside Lansing in Dimondale, announced the deal with Short’s last Thursday at the Benzinga Cannabis Capital Conference held at the Westin Book Cadillac in Detroit. The marijuana company will produce products that mimic the flavors of Short’s most popular brews, such as Soft Parade-flavored gummies or Huma Lupa Licious-flavored vape pens, CEO Jeff Radway said in a news release. “THC and cannabis products have been part of our innovation development discussions for years,” Joe Short, president of Short’s, said in the release. “We’re stoked to be working with the team at Green Peak so we can bring some of our next level products and concepts to the market.” Sales of the edibles are expected by the end of 2019. The two companies will also create a joint venture to produce marijuana-infused beverages. Short’s is developing a line of these infused drinks including cold-brew coffee,

seltzers, teas and lemonades. Michigan law currently bans adding THC, the chemical that causes users to get high, to alcoholic products. Molson Coors CEO Mark Hunter has projected cannabis-infused nonalcoholic beverages will account for up to 30 percent of all cannabis sales. Molson Coors acquired a controlling stake last year in Canadian marijuana grower Hexo. Anheuser-Busch Inbev Inc. invested $50 million in a joint venture with Canadian marijuana company Tilray. Constellation Brands took the biggest lead, acquiring a 38 percent stake Canada’s biggest pot producer Canopy Growth for $4 billion.

Shake-up at SpartanNash

Grand Rapids-based grocery store chain SpartanNash Co. has parted ways with its leader and is ceasing its Fresh Kitchen business. CEO and President Dave Staples is replaced by Chairman and former CEO Dennis Eidson, who took the helm on an interim basis, according to a news release. Staples assumed the role of CEO in late May 2017, when Eidson retired. “The board remains confident in the company’s strategic direction and its ability to generate top line growth; however, execution has fallen short of our expectations and we believe that now is the time for a

GREEN PEAK INNOVATIONS

Short’s Brewing will partner with Green Peak Innovations, the state’s current largest producer of marijuana with a 25-acre, 57,000-square-foot grow house in Dimondale.

leadership change,” Douglas Hacker, lead independent director of the board, said in a release. The company also announced its decision to end its Indianapolis-based Fresh Kitchen operations by the end of the fiscal year. The exit is part of an effort to improve its operating earnings in its food distribution segment, as it seeks to redirect its focus to produce distri-

bution and its Fresh Cut operations, which the company describes as the “hallmark” of its Caito Foods business, the release said.

Niowave wins $15M grant agreement

Lansing-based Niowave Inc. plans to double employee count and ramp up production of a key medical isotope after a $30 million deal with the

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U.S. Department of Energy. The company plans to invest $15 million in its Lansing plants, with $15 million in matching federal grants, over the next three years, said Niowave spokesman Jerry Hollister. The cooperative agreement was finalized in late July. The company employs around 65 is hiring more scientists and engineers. The federal award is part of the government’s initiative to start the domestic production of molybdenum-99 (Mo-99) without using highly enriched uranium. The Niowave deal is one of four agreements with different companies that involves dollar-for-dollar federal matching up to $30 million, according to a news release. Niowave operates at three facilities in Lansing totaling around 75,000 square feet. It was founded in 2005 and develops superconducting accelerators. The privately held company has contracted with private companies, such as Boeing Co., in the past. The deal to create Mo-99 represents more than 75 percent of its business.

One firm’s hard lessons of success and transition planning By Ron Fournier Albert P. Herzog III, CFP®, MBA, ChFC, gives financial advice for a living. As founder and co-director of Brighton-based Executive Wealth Management, Herzog and his team lead a tight-knit team of advisers who use a fee-based, proprietary approach to managing people’s money and being their personal financial coach. Among the challenges they help clients navigate: succession and transition planning.

Albert P. Herzog III.

It’s a topic he mastered the hard way, the best way — through failure. Twice in his career, Herzog attempted to create a growth-andsuccession plan. His first effort to share power collapsed under the weight of a new partner’s divorce. The second, the merger of a similarly sized firm, came together too quickly and unwound due to a lack of familiarity. “That’s when I learned the value of a long dating period,” Herzog laughed.

He had invited me to his wellappointed offices just off main drag in Brighton to introduce his team — Adam R. Kulesza, CFP®, MBA, ChFC, CLU; Michael Lay, CFP®; Gregory J. Barber; Kyrstin Ritsema; and Michael R. Chechel, Jr., who among others, help lead a company carefully rebuilt to grow and outlast its founder. “The third time’s a charm,” Herzog smiled. Around a polished wood conference table, the Executive Wealth Management team recounted an agonizing 30-month process that turned a loose confederacy of financial advisers who worked out of Herzog’s offices into a powerhouse company that shares clients, proprietary information, and equity. Before the associates could become partners, they had to hammer the tough details of a succession and transition plan. Small things like the value of each other’s stake, and sacrifice for the betterment of the entire team of over 40 employees. A lot of emotion went into the transformation of a company that was rooted nearly 35 years earlier. There were learning moments. A lifetime of lessons learned the hard way that Herzog and his colleagues now share with their clients. Among them: Don’t procrastinate. Herzog said one of his biggest regrets is dragging his feet along with his future partners. “We talked about doing this

for five or 10 years before we finally got on with it.” Know the unknowns. “Everybody is worried about the unknowns, things you can’t predict,” Herzog said. “If you get those unknowns down on a piece of paper, it makes it much easier to have the hard discussions, and when you take the step of hiring a consultant, the process is easier.” Diversify. “We tell our clients you can’t have all your eggs in one basket. You need to spread your risk,” Herzog said. “With this process, your biggest risk is a car accident or something like that, and if you haven’t addressed succession and transition, you’re in a world of hurt.” Creative financing. Herzog and his new partners quickly realized that traditional lenders would not give them a good deal on the loans they needed to finance their partnership. So they went to Lake Trust Credit Union, “and were very pleased by the results.” They also refinanced the Brighton office building to fund the buyout. Don’t overload. Herzog is now sharing burdens he once carried alone. Chechel now serves as the Managing Director, Lay as Chief Operating Officer, Kulesza oversees our advisor lead programs, and Barber uses his CPA background to serve in a CFO type role. “Now I can focus on what I do best, which is bring in new business and service my clients.”

The Executive Wealth Management team at a recent company event.

Hire a consultant. With the help of consultant David Stanislaw, Herzog and his future partners hashed out issues that tend to sour succession plans. “The consultant let us get core problems off our chest. There was a lot of emotion, but we finally came to an agreement.” The most contentious issues were the value of what had been several independent businesses, and the cost of everybody’s share. “There were guys who didn’t want to sacrifice, or weren’t able to see past certain issues to allow them to do so,” Herzog said, “and having David there helped us to be humbled and deal with the personal and financial issues that were holding us back.” Take time to fight. Herzog admits he was holding out for a price that was a tad high. “My price was way up here and theirs was way down

here” he said. “Getting us to an agreement took two-and-a-half years. Ultimately, we all made the decision that we were better together than apart, and no price difference was going to get in the way of the direction we wanted to head together. That was building a firm based on our core values of trust, compassion and community, and exercising those values in all we do. Now we’re golden.” Ron Fournier is president of Truscott Rossman, a public relations firm with offices in Detroit. He wrote this sponsored column for Herzog, who made the winning bid at an Autism Alliance of Michigan gala fundraiser. CONTENT POWERED BY:

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Legal fight starts in Epicurean disintegration By Annalise Frank afrank@crain.com

A lawsuit has emerged out of a battle over the operations and dissolution of Epicurean Group, the collection of metro Detroit hospitality companies that sold in early 2019 and then suddenly laid off all employees last month. Ryan Moore bought the businesses from Stanley Dickson Jr. in January, and is now suing Dickson, seeking to reverse the deal and get his money back plus more than $25,000 in damages for alleged breach of contract, fraud and misrepresentation. The purchase price was more than $1 million. Moore and his company, Conlan Abu, allege in a complaint filed July 26 that Dickson failed to uphold part of the agreement and did not deliver on a pledge to provide the promised encouraging financial data after the deal’s closing.

Need to know

 Recent Epicurean Group buyer sues former owner  Repayment, damages sought on allegations of breach of contract, fraud and misrepresentation  Metro Detroit restaurant management company folded, employees received layoff notices six months after it changed hands

U.S. Department of Agriculture Farm Service Agency trade mitigation subsidies for frozen and shelf-stable food put in place to help farmers in the wake of federal tariffs are helping offset the produce declines. But there’s no indication of how long those subsidies will continue or what the coming weeks will hold for Michigan’s agricultural sector, given the recent hot, dry weather, the late planting of some crops and lack of planting fields that were wet too long to plant and give crops enough days to mature. “We are hearing troublesome news on many fronts for our farmers,” Knight said. “When we get to the fall … we don’t think the yields will be as high for the crops that were planted.”

The lawsuit sheds more light on the murky breakdown of Epicurean Group, the restaurant operator born out of turmoil in 2012 from the remains of serial restaurateur Matt Prentice’s group. Epicurean publicly folded early the morning of July 21, when Moore sent out a layoff notice to employees and ended contracts with partners. Moore said in the email he was transitioning management back to the previous owner, Dickson, while Dickson himself told media that he did not accept responsibility for the companies — he had sold them off and intended to retire. The status of the company and its ownership was unclear. Epicurean Group operated restaurants based on service, catering and lease agreements with hotels and other facilities. Those organizations made a mad dash after the layoffs and stayed open, preserving nearly all jobs, they told Crain’s last month. Detroit-based Epicurean’s operations had comprised the Nomad Grill in the Best Western Premier Detroit Southfield Hotel, the No.VI Chop at the Four Points Sheraton in Novi, Soul Cafe under Friendship Circle’s umbrella in West Bloomfield, catering businesses and a cafe in the Michigan Design Center in Troy. After the news was reported last month, Moore told Crain’s that “we are happy to share the facts of what actually occurred and will do so very soon.” He declined to elaborate then. But the recently filed complaint provides a narrative of the deal from his side.

SEE FOOD, PAGE 21

SEE EPICUREAN, PAGE 19

David Kullmann (left), Kyle Richardson and Zaher Basha plant cabbage seedlings last week at the rear of a tractor driven by farm manager Mike Yancho at Forgotten Harvest Ore Creek Farm in Fenton. LARRY PEPLIN FOR CRAIN’S

Rainy spring comes home to roost for food nonprofits By Sherri Welch swelch@crain.com

Crop shortages brought on by this year’s cool, rainy spring — one of the wettest on record — are taking a toll on the amount of fresh produce available to help feed the hungry in Michigan. The full extent of the shortages won’t be clear for another few weeks, but the state’s food banks and rescues are already seeing declines in the pipeline of donated and low-cost produce available for them to purchase. And grim projections for the amounts, size and quality of produce yet to be harvested given the hot, dry midsummer could mean even more shortages, said Phillip Knight, executive director of the Food Bank Council of Michigan. “Everybody is praying for a nice, long fall, so we can harvest as much as we can.”

GLEANERS

The size and quality of produce this year is inconsistent. Early cabbages coming from Michigan farms, for example, are ranging from the typical basketball-sized to softball-sized.

Last year, the seven members of the Food Bank Council of Michigan distributed 205 million pounds of food to hungry people across the state. Of that, 80 million pounds, or 39 percent, was fresh produce, Knight said. And nearly all of that produce was donated

from Michigan farmers or purchased from them. The amount of produce it has distributed to the state’s seven food banks and rescues so far this year is down 31 percent, said Kath Clark, director of food programs for the Food Bank Council.

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Construction on the first phase of the Monroe Blocks project on 3.66 acres is now expected to start in the early part of next year following what Bedrock LLC executives are calling an “extended design period.”

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Why Bedrock’s Monroe Blocks brokerage decision is key The recent news that the building going on the former J.L. Hudson’s department store site downtown may not end up being the tallest KIRK in the state after PINHO all was easily the big takeaway from a media briefing that I and other reporters attended. No dispute there. But from a commercial real estate perspective, the following was also big news that shouldn’t be glossed over: Dan Gilbert’s Bedrock LLC is looking to hire a national or international brokerage firm with a local presence to market the office space of the Monroe Blocks’ first phase for lease. OK, so perhaps few outside of commercial real estate give two rips about that, and that’s fine. But hear me out. First, it gives a clue about the type of tenants that Bedrock is seeking for the more than 800,000 square feet of office space slated for the first phase of what most recently was estimated as an $830 million project overall, which has been delayed. The project has entered what Bedrock executives are referring to as an “extended design period” after having a December groundbreaking ceremony but not yet starting construction eight months later; foundations were originally expected to start being installed this summer with the office tower structure starting this fall. We reported on the delays in the Monroe project in May. “Between all these different brokerage firms, they probably represent the vast majority of the Fortune 500,” Jennifer Skiba, vice president of leasing for Bedrock, told me Monday during an interview. “To give us a seat at the table internationally is critical here. These firms can help us educate the world that Detroit is a robust, dynamic market with access to some of the country’s best talent, a great quality of life and a low cost of living.”

Skiba said Bedrock put out a request for proposals on the matter. Among the large national and international firms in the region with a local presence are CBRE Inc., Colliers International Inc., JLL and Cushman & Wakefield; they would probably be in the mix as possible landlord reps. It also means that Bedrock and what Skiba called its “relatively small (leasing) team” have not been successful securing one or more office users for the building. In the grand scheme of things, Bedrock has brought new office users from the suburbs to downtown. Among them: Microsoft Corp. (Southfield), Fifth Third Bank of Eastern Michigan (Southfield), IBM (Southfield), International Bancard Corp. (Clawson), Coyote Logistics LLC (Ann Arbor) and others. It has also filled a lot of the office space it owns in and around downtown with the 17,000-plus people in its parent company, Rock Ventures LLC, which includes mortgage giant Quicken Loans Inc. “The national guys really know what’s going on across the market, and they are the ones that are able to bring us the large clients that reach out to them on a daily basis looking for space,” Joe Guziewicz, vice president of construction for Bedrock, said last week. Another question becomes: Why not seek out an office broker for both Monroe and the Hudson’s project, which also has several hundred thousand square feet of office space? I asked Skiba if that means Bedrock already has a tenant in mind or identified — perhaps just filling it one of Gilbert’s dozens of companies? — but she declined to answer. “Nothing specific on it at this point,” she said. Finally, it’s certainly one of the first, if not the first time that Bedrock has used an outside brokerage firm to lease out its Detroit properties. In the last eight years, the company has cobbled together a real estate portfolio in and around downtown consisting of more than 100 properties, including high-rises and mid-rises, parking decks and vacant land.

The Kellogg Foundation’s lease The Battle Creek-based W.K. Kellogg Foundation’s 8,800-square-foot lease at the Fisher Building in the New Center area is quite the eye-catcher, mostly because it means that each of the eight people working in there — seven for Kellogg, one for New York City-based the Ford Foundation — would have on average 1,100 square feet. According to the Los Angeles-based global commercial real estate giant CBRE Inc.’s Nonprofit Practice Group, the average amount of space per employee for nonprofits with 19 or fewer employees has fallen substantially from 591 square feet in 2007 to 475 square feet in 2017. “Our new suite of offices in the Fisher Building will better accommodate our growing team,” Faye Nelson, Kellogg’s director of Michigan programs, said in an emailed statement. “And because our community work on behalf of children and their families is so collaborative, the larger space will make it easier to invite grantees and partners into meetings with staff.” For comparison, let’s say that instead of 1,100 square feet per office user, Kellogg had the average 475 square feet. That would mean a 3,800-square-foot office instead of 8,800 square feet. At the estimated $18-21 per square foot per year that the Fisher Building leases for, according to real estate information service CoStar Group Inc., based in Washington, D.C., that would put one year of leased space at $68,400 ($5,700 per month) to $79,800 ($6,650 per month). Compare that to $158,400 ($13,200 per month) to $184,800 ($15,400 per month) at 8,800 square feet. So per year, the foundation would be saving $90,000 to $105,000 per year, or $630,000 to $735,000 over the term of the seven-year lease. — Crain’s Senior Reporter Sherri Welch contributed to this report. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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Bertram L. Marks, Esq. YOUR CORPORATE RESPONSIBILITY AND DIVERSITY LEGAL EXPERT Former Michigan Civil Rights Commissioner

The Detroit RiverWalk attracts nearly 3 million annual visitors and hosts more than 100 events. Visitors spend an estimated $43.7 million along the RiverWalk annually, according to a study.

Study: Watershed restoration’s economic benefits outweigh costs By Dustin Walsh dwalsh@crain.com

Public and private efforts to restore the watersheds around the Great Lakes prove to be a smart investment, according to a study released Tuesday by the International Association of Great Lakes Research in Ann Arbor. The study inspected the economic outputs of investing in habitat restoration, contamination cleanup and overall watershed improvements in 10 waterways in the Great Lakes region, including the rehab of the Detroit River, Muskegon Lake and the River Raisin in Monroe. In 1969, the Rouge River — a 127mile tributary of the Detroit River — burned as a consequence of the city’s manufacturing might. Oil, phosphorous and other Motor City-contaminated byproduct from surrounding automotive plants meandered southeast, directly into the Detroit River, choking oxygen flow and destroying vital aquatic plants and wildlife from the watershed. But the heavy flow of conservation efforts and an environmentally educated populace reversed the destruction by the mid-1980s. Now, more than 30 years of investment in the River and its riverfront real estate have transformed the area, resulting in an impressive return on investment, according to a study released Tuesday by the International Association of Great Lakes Research in Ann Arbor. The study concludes that remediation of the Detroit River led to more than $1 billion in public and private investment on the Detroit riverfront and added new annual tax revenue of $4.5 million annually between 2003 and 2013. The Detroit RiverWalk attracts nearly 3 million annual visitors and hosts more than 100 events, includ-

Need to know

30 years of conservation efforts reversed historic destruction 



Added new tax revenue

 Increased annual visitors to local waterways

“This cleanup of the Detroit River has resulted in one of the most remarkable ecological recovery stories in North America.” International Association of Great Lakes Research study

ing the popular annual River Days Festival. Visitors spend an estimated $43.7 million along the RiverWalk annually, according to the study. This is the result of environmental improvements that since 1985 have reduced oil releases into the river by 97 percent, decreased phosphorous discharges by 98 percent and led to a 95 percent reduction in untreated waste water discharges, an 85 percent reduction in mercury found in the fish population and remediation of 1 million cubic yards of contaminated sentiment. “Without this early focus on cleaning up the river and improving water quality, this transformation of the river’s edge would not have been possible,“ Mark Wallace, president and CEO of the Detroit Riverfront Conservancy, the nonprofit in charge of managing the riverfront in Detroit, said in the study. Some of the other improvements include the $3.75 million construc-

tion of three fish spawning reefs, $500,000 restoration of the bottomland habitat off Belle Isle’s South Fishing Pier, the more than $16 million habitat restoration around Celeron Island and Stony Island and the $1.43 million restoration of Blue Heron Lagoon on Belle Isle. “This cleanup of the Detroit River has resulted in one of the most remarkable ecological recovery stories in North America,” the study said. “Today, bald eagles, peregrine falcons, osprey, lake sturgeon, and lake whitefish are reproducing again, beavers have returned, common terns are back on Belle Isle, and the Detroit River is now considered part of the ‘Walleye Capital of the World.’” The $10 million restoration of Muskegon Lake is expected to generate nearly $60 million of economic benefits over 20 years, including a $12 million increase in property values. The cleanup is also attributed to an additional 65,000 visitors to the lake annually. The River Raisin in Monroe, notorious for its heavy metals contamination, is in the midst of a $90 million restoration. But the project, which included acquiring and maintaining land, sediment cleanup, among other restoration efforts, is expected to generate nearly $32 million annually to the state including nearly $22 million locally, according to the study. The study was researched and written by John Hartig, University of Windsor; Gail Krantzberg of McMaster University; John Austin, The Brookings Institution; and Paula McIntyre, IAGLR. It was funded by the Fred A. and Barbara M. Erb Family Foundation in Royal Oak. Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

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Consumers Energy proposes settlement for solar developers By Jay Greene jgreene@crain.com

A major backlog of commercial solar developments in Michigan could be relieved if the Michigan Public Service Commission approves a proposed settlement on contracts between Consumers Energy and 20 independent power producers. Over the next four years, Consumers has proposed to contract with nearly a dozen solar development companies, including Cypress Creek Renewables and Geronimo Energy, for up to 584 megawatts of renewable power, averaging about 150 megawatts per year, according to the settlement filed with the MPSC Aug. 8. Officials with the Solar Energy Industry Association, which helped negotiate the settlement, and Consumers Energy said they hope the MPSC will rule on the settlement sometime this fall. Some solar developments in the late stages could be connected to the grid by next spring, they said. “It breaks the logjam (of interconnection applications) and allows nearly 600 megawatts of projects to be paid at sustainable rates,” Sean Gallagher, vice president of state affairs for the Solar Energy Industries Association, said in an interview with Crain’s. Brandon Hofmeister, senior vice president of governmental, regulatory and public affairs with Consumers Energy, said the Jackson-based utility plans to add additional solar capacity of 300 to 400 megawatts per

Consumers Energy has proposed to contract with nearly a dozen solar development companies.

Need to know

Settlement covers 584 megawatts of solar development with about 20 companies 

 Consumers promises to contract with developers for about 150 megawatts per year the next three years  Future commercial solar projects will be paid at rate 40 percent lower than in settlement

hour per year starting in 2022, which is beyond the agreed-upon 150 MWH per year. He said Consumers will issue a request for proposals this fall. However, Hofmeister said the solar rates per MWH for those projects will be based on regional wholesale rates, which would be about 40 percent

lower than the rates agreed upon in the settlement. The lower rates were approved by the MPSC in a June settlement with Consumers. “The commission reset avoided costs (renewable prices) going forward based on the cost of competitively bid rates,” Hofmeister said. Companies have an “equal opportunity to bid on solar development (projects) over the next three years when we go into service” in fall of 2022. The settlement is intended to resolve a year-long dispute with solar developers that have proposed contracts with Consumers under the federal Public Utility Regulatory Policy Act, or PURPA, but were delayed for various reasons. The 1978 law requires regulated

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utilities to purchase power from qualified renewable power generators under 20 megawatts. The MPSC derives its authority to set rates from the act. Utilities must pay the price equivalent to the “avoided costs” to generate the same amount of power used in the current standard power-generation source, which used to be a coalfired plant but now more commonly is considered to be a hybrid combined natural gas cycle power plant. Consumers was granted “avoided costs” based on solar power costs because it plans to replace shuttered coal plants with solar rather than natural gas plants. Under the proposed agreement, Consumers pledged to use “commercially reasonable efforts” to intercon-

nect 584 MWH of solar by Sept. 1, 2023. “The settlement demonstrates Consumers Energy’s commitment to clean, affordable and reliable energy for Michigan,” Katie Carey, a Consumers spokesman, said in a statement. Over the past two years, Consumers and DTE Energy Co. have seen an unprecedented number of interconnection requests as the MPSC approved a rate structure that would pay solar developers about $95 per megawatt hour. The higher-than-expected rates led to a stampede of proposals from solar developers, utility officials said. As a result, Consumers alone has more than 3,500 MWH of projects in the “interconnection queue,” which means they are in various stages of development. In Consumer’s Clean Energy Plan, the utility has proposed to install 6,000 megawatts of solar to its energy portfolio by 2040 to replace a similar amount of coal-fired electricity capacity. The proposal was part of its recently approved “integrated resource plan,” which lays out a utility’s plan to provide electricity to customers over a five-year period. Michigan has more than 153 megawatts of solar capacity in 2019, accounting for only 0.21 percent of total electricity produced, but up from 27 MW in 2014, said SEIA. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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‘DETROIT RISING’

MICHIGAN THROUGH

INNOVATION & COLLABORATION

COURTESY OF VENTURE FOR AMERICA

Sam LaSota, a Venture for America fellow, works on a team-building exercise focused on making Detroit more walkable during a training session in July at Wayne State University. More than 200 VFA fellows spent a month in Detroit preparing for their two-year fellowships. LaSota is working for Evertrak in St. Louis, a company developing railroad ties made of glass fiber reinforced recycled polyolefin plastic.

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Venture for America’s program for entrepreneurship taking root in Detroit Venture for America, the entrepreneurship-focused fellowship for young professionals founded by Democratic presidential candidate AnCHAD drew Yang, LIVENGOOD dispatched 205 new fellows this month to companies in Detroit and four other U.S. cities. The 2019 class of fellows spent the month of July in Detroit, getting trained at Wayne State University and preparing for their two-year assignments working in Detroit startups such as the video marketing firm Waymark, human resources software firm Sift LLC and The Outloud Group, a brand marketing firm. The 29 fellows working in Detroit companies will be the largest class ever since Venture for America started its fellowship program in the city in 2012, said Sarah Craft, VFA’s Detroit director. In seven years, VFA has had 151 fellows working in Detroit companies that include jewelry maker Rebel Nell and urban furniture maker Floyd, said Amy Nelson, CEO of Venture for America. “We think one of the best ways to really practice to become an entrepreneur is to apprentice to an existing entrepreneur — go to work for a startup and learn firsthand how decisions get made. See the successes and failures. And then when it’s time for you to launch your own business, you’ll have that in your back pocket,” Nelson said in an interview for the Crain’s “Detroit Rising” podcast. VFA’s goal is to generate more entrepreneurs in Detroit and other cities such as Baltimore, Cleveland, New Orleans and Birmingham, Ala., that have struggled economically. The New York City-based nonprofit’s alumni have 80 active companies that include Banza chickpea pasta company founder and CEO Brian Rudolph and Steven Mazur and Eric Huang, the co-founders of the Ash &

‘Detroit Rising’ podcast and more You can hear this interview and all Crain’s audio by subscribing to our podcast channel. Search “Crain’s Detroit” on ITunes, Apple Podcasts, Google Play or wherever you get your podcasts and subscribe to the “Crain’s Detroit Business” podcast.

“I want us to be like a Stanford business school quality network of future entrepreneurs — with none of the debt that you’re going to get if you go to Stanford.” Amy Nelson

Erie Inc. clothing retailer for shorter men. “I want us to be like a Stanford business school quality network of future entrepreneurs — with none of the debt that you’re going to get if you go to Stanford,” Nelson said. “But that same level of social capital, that same level of ambition, hustle. So we have to keep the community strong and together so that we’ll go from 80 companies to 800 10 years from now.” VFA’s leaders stress the fellows are not coffee-fetching interns. “These are technically entry-level jobs, but they’re not entry-level candidates,” Craft said. The organization’s handpicked fellows are often a few years removed from college or graduate school and looking to work in a fast-growing company with all of the business challenges facing startups and early stage growth companies. VFA is selective of the companies it pairs with its fellows, though “industry agnostic,” Nelson said. “If they just want to slot them over in the corner as Coder No. 4 or Salesperson No. 10, that’s not going to be a fit for us,” Nelson said. “If you’re small busi-

ness and you really want to stay at your scale, that’s great. But our fellows are really looking for growth opportunities where their ceiling is going to continue rising as the company continues to grow. That’s our litmus test.” Lauren Kase, a San Francisco native, moved to Detroit in 2014 to work as a VFA fellow at Floyd LLC when the company was in its early stages of selling minimalistic home furnishings online. Six years later, she’s now the Detroit-based e-commerce company’s head of brand marketing and communications. “I was really, really excited about the idea of building something,” said Kase, who studied business organization and systems at the University of Michigan. “... That gave me a great toolkit of how to solve lots of different problems in lots of different ways.” Businesses participating in the program pay VFA $5,000 of the $30,000 administrative cost to recruit, select, place, train and provide two years of support to the fellow. The rest of the cost is funded by philanthropic and corporate donors, including the Quicken Loans Community Fund, the William Davidson Foundation and the New Economy Initiative, Nelson said. Companies that hire VFA fellows are required to pay them a minimum annual salary of $38,000 plus provide health insurance. Yang founded VFA in 2011 and resigned as CEO in 2017 before launching his upstart White House campaign, which has centered on providing every American with $1,000-a-month “Freedom Dividend” to counter income inequality. During the July 31 Democratic presidential debate at the Fox Theatre, Yang referenced Venture for America’s work spurring business activity in Detroit. “I spent seven years running a nonprofit that helped create thousands of jobs, including hundreds right here in Detroit, as well as Baltimore, Cleveland, New Orleans,” Yang said. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

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OPINION COMMENTARY

How Oakland succession could have been less of a circus

ast week, an oily mess was found in the chambers of Oakland County’s Board of Commissioners. It wasn’t residue from the messy process to pick a replacement for the late county Executive L. Brooks Patterson. The sheriff’s office told the Detroit Free Press that a county board staff member, distressed by the negativity surrounding the Board of Commissioners’ selection process, had sprayed the chairs, door handles and doorways with what she said was olive oil. The spraying was apparently intended by the employee to “scrub the bad energy” from that part of the county building, the Free Press said — a sort of exorcism by anointing. This may be the most sensible thing that has happened in the whole saga, which was marked by obvious backroom dealing and fumbles that amounted to political malpractice. It got even more confusing late last week when it came out — just a couple of hours before Patterson’s funeral — that Dave Woodward was withdrawing his application for the executive job and seeking to return to his post as chair of the Board of Commissioners — a move that was almost immediately the subject of threatened court ac-

MICHAEL LEE malee@crain.com

tion. Then, out of nowhere, Democrats floated the idea of naming Ferndale Mayor Dave Coulter to the job. And another faction emerged: Patterson’s former deputies, several of whom said they would quit immediately if that happened. The board voted Coulter in; the fallout among the current administration was still unclear at press time. But there was always a simple solution. When it was already apparent that the process had gotten away from everybody involved, commissioners could have called time-out and taken politics and ambition out of the equation and followed the lead of countless university boards when trying to fill a top executive role.

They could have plucked some respected, recently retired CEO from the private sector to oversee the county, someone with a track record of executive experience and no further political ambitions, to serve in a caretaker role for a year or so. Such a move would have offered a cooling-down period after such a fraught replacement process, provided stability for the county’s residents and workers, and put the selection of Patterson’s more permanent replacement directly in the hands of voters in 2020. It would have been less fun for those who view politics as entertainment, but it would have made a lot more sense — and maybe would have obviated the need for a ceremonial oiling. Michael Lee is the managing editor of Crain’s Detroit Business

MORE ON WJR Listen to Crain’s Group Publisher Mary Kramer and Managing Editor Michael Lee talk about the week’s stories every Monday morning at 6:15 a.m. Mondays on WJR 760 AM’s Paul W. Smith Show.

LETTERS

Understand the power of your vote To the editor: I recently joined a crowd of over 700 people to celebrate the induction of 50 new African Americans into the Michigan Chronicle’s Men of Excellence. The Michigan Chronicle’s Men of Excellence and Women of Excellence comprise nearly 1,300 talented, gifted, professional and outstanding men and women. My remarks to an overflow ballroom noted the rising racial tension regarding blacks and Hispanics, and reminded the talent in the room of the need to support quality high school and post-high school education, diversity and inclusion, and business development opportunities for employment and new business. I reminded everyone how exercising the right to vote has become a very important imperative. The current president of the United States put Michigan in the spotlight by winning Michigan by just over 11,000 votes in 2016. In that election, women of color outvoted men, and 72,000 people who were able to cast a ballot did not bother to vote. The conversations regarding the 2016 election and the upcoming 2020 election have laid bare that many blacks believe their vote doesn’t matter. The failure to vote revealed the thinking that if they would not personally benefit from voting, why vote at all. These conversations are cur-

rently taking place in barber and beauty shops, backyards, street corners, in neighborhood parks, living rooms and on front and back porches. I asked everyone present in the ballroom to take the time to remind everyone that their vote matters. Their vote will help re-elect an official they believe is doing a good job. If they don’t like the job an elected person is doing, they can vote for another person they believe will do a better job. I asked them to consider U.S. Sen. and Majority Leader Mitch McConnell of Kentucky. In the Hay Adams hotel after then U.S. Sen. Barack Obama was elected president, McConnell vowed he would do all he could to make Obama a one-term president. McConnell would not advance an infrastructure bill in the Senate that would have created 11 million new jobs and would have repaired our roads, bridges and airport runways. He would not allow President Obama’s nominee for the United States Supreme Court to have a hearing before the Senate Judiciary Committee. His argument then was that because it was a presidential election year, the newly elected president should have the right to appoint a new justice. Now, just four years later, he was asked how he would respond if a vacancy should occur on the United States Supreme Court, and he said he would get that person confirmed. The U.S. House of Representatives,

led by Speaker Nancy Pelosi, has passed gun control legislation, legislation making voting more fair and other helpful bills, but McConnell will not bring them to a vote in the U.S. Senate. Now, if you like what he has done and you live in Kentucky, you could vote to re-elect him, and if you don’t like what he has done, you could vote against him. But if you, like me, live in Michigan and disagree with McConnell, you can still make your voice heard by voting for a U.S. senator in Michigan who will oppose the actions of McConnell. For the 2020 election, Michigan needs the leaders of spiritual organizations, individual churches, parishes, mosques, synagogues, temples and all church leaders, the NAACP and other civil rights organizations and bar associations who want to reduce and ease the racial tensions against blacks and Hispanics and who believe in the right to vote, to work together. We must get people registered, and then everyone must vote. Let’s have our city, county, region and state turn out a massive vote for the candidates and the party of their choice. We must make sure everyone understands the power of their vote. When they understand and they vote, we all will win. Dennis W. Archer Chairman and CEO Dennis W. Archer PLLC Former member of the Michigan Supreme Court Former mayor, City of Detroit

BLOOMBERG

Cannabis is legal in Michigan. Is it safe?

Michigan citizen-initiated move legalized the adult use of marijuana and derivatives in the state, making Michigan the first in the Midwest to have both medical and recreational cannabis available. We practicing physicians have the ethical and professional duty to seek the distribution of up-to-date information about this substance to the public. We already learned the lessons of failure to do so, from the years it took to inform the community of the adverse health events associated with tobacco smoking and its effects on minors, adolescents and long-term users. “Legal” does not mean “safe,” most especially for certain at-risk groups such as women planning a pregnancy, already pregnant or lactating, or males of reproductive age, the group that is the major user of marijuana. We learned that the use of cannabis is associated with the effects of its predominant cannabinoid, the delta 9 tetra hydroxy cannabinol (THC) — the psychoactive drug — and cannabidiol (CBD) the so-called “non-intoxicating” compound that has alleged multiple medical benefits. The marketers have told their version of the story well. Users can smoke it for a quick, rewarding “high,” dab it, sip it, spritz it, use it as a lotion, rub it on the skin, put it under the tongue, bake it into brownies, gummies, capsules to swallow, or add it to gelato, a latte or chicken marsala for a delayed reward, sometimes even more intense if the user overindulges, and anywhere in between. Less prominent in the marketing pitches as our state legalizes are the risks involved, about which we don’t know enough: J Unaware children or non-users are at danger of inadvertent ingestion. J We learned that cannabis disrupts the normal course of fetal nervous system development, as reported by McLemore and Richardson in 2016. The result is a potential reduction in cognitive and emotional functions and behavioral deficiencies; following early and repeated exposure there are demonstrable effects in older children, adolescents and young adults. J Early exposure during fetal life leads to the demonstration, by 6 years of age,

OTHER VOICES

Federico Mariona, M.D.

of lower verbal scores, deficits in shortterm memory and lesser quantitative intelligence scores. J The same group of children by age 10 showed lower tests scores on school achievement, along with increased hyperactivity, impulsivity, inattention problems and significant increase in rates of child depression. This is followed by significant prediction of difficulties with executive functioning and delinquency by age 14, issues that place these children at a disadvantage for long-term success in school, in the community and in the work place, as reported by Diamond and Lee in 2011. Here’s an alarming, and related, fact: In our own practice, limited to the care of pregnant women, the number of cannabis users has practically doubled since last November. The Michigan voters’ decision to legalize marijuana must include the responsibility to demand statewide programs of public education. Every location where any form of cannabis is “dispensed” must have highly visible posted warnings regarding marijuana use during pregnancy and lactation, including the concentration of the various cannabinoids in any product. Industry demands a well-educated team, employers will hire learned individuals, hopefully from Michigan, to fill their needs. The next generation of the Michigan workforce should be free from the adverse effects of any drug use. Federico Mariona, M.D., is founding director, division of Maternal Fetal Medicine, and clinical professor, Department of Obstetrics & Gynecology, Wayne State University School of Medicine; and co-director, maternal fetal medicine at Beaumont Health Dearborn.

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Anesthesia Associates sues Trinity for trying to hire providers By Jay Greene jgreene@crain.com

Anesthesia Associates of Ann Arbor PLLC, the largest anesthesiology and pain-management medical group in Michigan, has sued Trinity Health Michigan in Washtenaw County Circuit Court over an allegation the 13-hospital health system improperly tried to hire away some of its providers. The lawsuit contends Trinity has “chosen to ignore (Anesthesia Associates’) valid non-competes and its own non-solicitation obligations and has recently attempted to recruit our certified registered nurse anesthetists,” according to a statement to Crain’s from Anesthesia Associates, also known as A4. “Trinity’s conduct is contentious and certainly does not represent the values of the health care system which include justice, stewardship and integrity,” A4 CEO Gregory Bock said in a statement. “Now, the issue must be handled by the courts as this is the only way that A4 can protect its physicians and CRNAs and continue to serve patients and remain focused on exceptional anesthetic care.” Trinity Health Michigan had no immediate comment on the lawsuit. CEO Rob Casalou addressed some of the issues Trinity has with A4 in an Aug. 9 letter to Bock and Traci Coffman, M.D., president of A4 Management Co. in Ann Arbor. “We have heard that large numbers of A4 physicians at multiple locations are upset that we withdrew offers because they had hoped to be employed by Trinity,” Casalou wrote. “Leadership at our hospitals have heard that many of the A4 physicians are very unhappy with A4, and that if A4 remains in charge, they will look elsewhere for employment.” Casalou said if anesthesiologists leave A4, it would interfere with surgery and anesthesia services at Trinity hospitals and “put A4 in breach of its staffing requirements, particularly in light of the shortage of anesthesiologists nationally.” Anesthesia Associates, which employs about 120 anesthesiologists and 50 CRNAs, provides services to six Trinity Health hospitals in Michigan, four Beaumont Health hospitals in Wayne, Dearborn, Trenton and Taylor, and another small hospital in Ypsilanti. It also has contracts with six ambulatory surgery centers and four chronic-pain-management clinics. On July 23, Trinity Health sued Anesthesia Associates of Ann Arbor after the group terminated its contract with Blue Cross Blue Shield of Michigan, Priority Health other payers over contract disputes. A4 said it has signed new contracts with Blue Cross, Priority, Health Alliance Plan, Aetna and UnitedHealthcare. However, A4 has remained upset with the reimbursement deals. “The insurance rates for anesthesia services from these large insurance companies are some of the lowest in the country and have not increased in over six years,” Bock said. Despite reaching an agreement, Priority Health and Blue Cross refused to negotiate new agreements at reasonable rates, Bock said. He said they instead chose to retain a larger share of rising patient premi-

Bock

Casalou

ums for increasing profits and executive compensation. A4 has suggested it could terminate its participation agreements with Blue Cross and Priority, Trinity said in a lawsuit it filed in federal district court in Detroit Wednesday.

Blue Cross and Priority were not immediately available for comment. Sources told Crain’s that A4 asked Blue Cross and Priority for a substantial increase in reimbursement, which the payers refused, leading to the temporary contract termination. After A4 signed the new payer contracts, Trinity said it would drop its lawsuit. Casalou said Trinity was surprised to learn that A4 could terminate its contracts again with payers in an effort to garner higher rates. “This would be a serious, material breach of our agreements,” he wrote, adding: “We didn’t end our

recent dispute with A4, incur all the expense we did, and go through all the disruption and angst amount our patients, staff and communities only to face the same problem.” In his letter, Casalou raised new issues to A4. “The CRNAs at St. Joseph Mercy Oakland are even more upset,” Casalou wrote. “We have received communications predicting a mass exodus if the CRNAs cannot work for Trinity instead of A4. We understand that one of the CRNAs who criticized A4 was immediately fired last week in response.” Trinity gave A4 until Aug. 20 to

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agree to its terms or it would not renew A4’s contract at its Grand Rapids hospital, which expires Aug. 30, and also not renew contracts at its five other hospitals that expire in June 2020. Bock said in response that Trinity Health Michigan has overstepped its boundaries and “demanded A4 release its physicians and CRNAs from any non-competes unless A4 agrees to renegotiate a new agreement” that would essentially free its doctors and CRNAs to join Trinity or other hospitals. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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FOCUS

WOMEN IN LEADERSHIP

Building an equitable ecosystem Monica Wheat PHOTO BY ALI LAPETINA FOR CRAIN’S

Monica Wheat started nonprofit to increase tech opportunities for girls in Detroit By Rachelle Damico

The Wheat File

Growing up, Monica Wheat thought she’d be an engineer for a long time. As a student who excelled at math and science, she attended the Detroit Area Pre-College Engineering Program at the University of Michigan at 12 years old. At Southfield High School, her AP physics teacher and tech coach encouraged her to pursue engineering as a career. One of her first roles involved working for General Motors in Shanghai doing product engineering with Shanghai Automotive Industry Corp (Group). She worked her way up into management positions from there. “I loved being in Shanghai and working for GM, but I didn’t love the actual work,” Wheat said. “It was very cubicle, and I liked to talk.” Wheat shifted into a digital marketing career. While working for companies like Starcom and GTB, she was often tasked with assessing startup companies who were interested in selling their apps for use on GM and Ford’s website. “I saw people being innovative

Career ladder: Wheat began her career in the automotive industry, working in the engineering field for companies that include General Motors Co. and Ford Motor Co. She left the engineering field in 2007 to work as a manager in digital media analytics and branding for advertising firm Starcom MediaVest Group in Detroit, where she worked primarily on Starcom’s GM account. She next joined Dearborn-based advertising firm GTB (formerly Team Detroit) where she worked as a manager in web analytics and later ran the agency’s global social media platforms. Then, Wheat joined advertising agency Leo Burnett in 2014, where she worked in the Detroit office as a social strategist for the agency’s GMC and Buick accounts. She founded Pixel DSi LLC in 2010, a digital strategy consultancy that focused on digital

strategy, social media and analytics projects for corporate, nonprofit and academic groups. She started launching companies and initiatives in the venture capital space around 2012, transitioning to full-time roles in 2018.

and taking risks, and that seemed fascinating to me,” Wheat said. Those experiences motivated Wheat to pursue her own technology ventures. In 2011, Wheat and her sister, Adrienne Wheat, founded Digerati Girls, a nonprofit that aims to increase the number of

women, young girls and kids pursuing digital careers. The pair started advertising coding classes for girls at local libraries and schools. Now, the nonprofit, Digerati Girls and Digerati Kids, provides digital technology programs for more than 7,000 girls and boys.

Special to Crain's Detroit Business

Current role: Founder and executive director, Digerati Girls and Digerati Kids. Founder and managing director, Parallel Ventures. Professional development partner and affiliate, Code.org. City director and co-lead, Startup Boost. Lead of Detroit Startup Week at Techstars. Adviser and entrepreneur-in-residence, diversity and inclusion, Grand Circus. Executive director and co-founder, Venture Catalysts. Managing director, Backstage Capital, Detroit. Fun fact: Sleeps as little as 2-3 hours a night.

Google, an early investor, helped the nonprofit with the space, resources and volunteers to help execute the programs. Since founding Digerati Girls and Digerati Kids, Wheat’s work in technology entrepreneurship has expanded, and her list of gigs is long. She joined the venture capital world in 2014 as the founder of Parallel Ventures, a Detroit-based business incubator and consultancy. Wheat has been the co-lead and founding city director of Startup Boost since 2016. The Detroit-based global tech startup pre-accelerator works with early stage entrepreneurs to prepare them for accelerator programs, seed investment and revenue. She’s also the startup programs lead of Detroit accelerator Techstars, which she joined in 2012. Wheat currently lives in metro Detroit, where has served as an adviser and entrepreneur-in-residence for Detroit-based Grand Circus, a training center for tech careers, since 2017. Wheat advises the diversity and inclusion department at Grand Circus and helps

run coding bootcamps. She also co-founded Venture Catalysts in 2016, which seeds large-scale ecosystem building and focuses on programming, funding, strategy and business development for entrepreneurs. Most recently, she joined Detroit’s Backstage Capital, a venture capital fund dedicated to minority founders, as managing director in 2018. What inspired you to start Digerati Girls?

I started Digerati Girls for my niece, Olivia Snead. When I attended the pre-college engineering program at the UM, my username was Digerati14. Digerati means the elite of the computer industry. I went to many amazing programs at UM and Wayne State University that were for kids who were interested in computer science, but more often than not I was the only girl and person of color. It only made it that much harder for me. People often asked me if I was in the right place or questioned me along my path early in my career. SEE WHEAT, PAGE 11

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SPECIAL REPORT: WOMEN IN LEADERSHIP

WHEAT FROM PAGE 10

Those early programs helped give me confidence, exposure and access to opportunities. Olivia was interested in technology, and when I started bringing her to coding programs, she was experiencing the same things. The examples she saw in coding classes used things like baseball scoring apps, and if you don’t understand baseball you’re screwed. That was the norm in a lot of coding programs. I wanted a place where girls could come together, learn coding and tech, and gain access, exposure and confidence early on. Every class at Digerati girls has a female speaker from different industries who can say things like, “I started at Google, now I have my own company,” or “I’m a scientist, and I work with GM or Ford during the week working on electric cars.” We try to bring that exposure to them every time so they’re constantly pushed to redefine what they think normal is. That’s important to me. When did you first enter the venture capital world?

I was doing independent angel investment here in Detroit to help people start (and fund) their companies. We had some early strides with people who started apps and other technologies, but some of the people we invested in weren’t able to get their companies off the ground simply because we just didn’t have a strong

“I wanted a place where girls could come together, learn coding and tech, and gain access, exposure and confidence early on. Every class at Digerati girls has a female speaker from different industries who can say things like, ‘I started at Google, now I have my own company,’ or ‘I’m a scientist, and I work with GM or Ford during the week working on electric cars.’” — Monica Wheat

ecosystem here. We couldn’t get (larger investors) to take a risk on them or work with them. They may have needed another $25-50,000 to get them to the next level to continue their work. It was disheartening to see people with amazing ideas and traction not get follow-on capital. They have to have more than one (funding) round in order to be successful. In order to do that, there’s got to be people who think Detroit is

worth investing in. Most people don’t think of Detroit as a place where people can start anything in the startup space. They’ve got to know the stories of the founders that are here and the tech talent that’s here. We’re one of the largest tech talent areas outside of Silicon Valley. Did that perception of Detroit inspire you to start your own firm?

It wasn’t my goal to start my own firm, it was just the way it shaped up. I wanted to build opportunities in the Detroit area. I had various partners, assistants and team members. We were trying to figure out what our strengths were and build on things that made traditional tech, startup and venture capital ecosystems. We started different initiatives to be sustainable, such as Detroit Startup Week which is huge for us every year. We later organized Venture Catalysts as a 501(c)3 to allow us to apply for money once from larger entities and spread it across all of our initiatives without having to start from scratch with fundraising. Before, each program existed as a stand alone event with separate teams, budgets and strategies. Venture Catalysts allows us to fundraise for all programs at scale. It’s helped us be sustainable. We want to continue to grow as Detroit is growing and evolving. Why was it important to you to be a part of Backstage Capital, and how involved were you in bringing the venture capital fund to Detroit?

I’ve been following the founder of Backstage Capital for awhile, Arlan Hamilton. She was working at TechCrunch (an online publisher focusing on the tech industry) when she announced that Backstage Capital was launching a global accelerator. They had chosen Philadelphia, Los Angeles and London as the inaugural cities, but they were looking for a fourth city. They wanted it to be chosen by community vote. I reached out to our 10 biggest sponsors in Detroit asking for help on getting Backstage Capital here. That helped sway the tide for people to vote. We tapped into all of our networks and we won. Not only did we win the most votes, but Backstage said they had the most inquiries for Detroit before we were even selected as the winner. They saw all those as indicators as a good fit. Backstage Capital focuses on underrepresented founders, such as women, people of color and the LGBTQ community who traditionally get less than 2 percent of venture capital despite making up more than 50 percent of the population. I’ve always maintained a disciplined approach to making sure that our programs were inclusive and diverse, so it was an alignment of values. It’s been a great ride. We just finished a seven-member Detroit cohort in June, where we had more than 100 mentors from companies and venture capital firms throughout the city and over a dozen experts who taught one-on-one sessions to our cohort. We’ve chosen sev-

en companies to accelerate with us, and we’ve invested $100,000 into each of those (in exchange for a 5 percent equity stake). It’s monumental as far as the path that I’ve been on personally and that my team has been on for years, building the ecosystem here and being able to see something like Backstage Capital come to Detroit. Do you have any advice for women who are thinking about becoming venture capitalists?

Do your research on finding programs that are focused on helping women, because if nothing else that’s a network to tap into. There are many out there, including Pipeline Angels, an angel investment group that helps women learn about becoming an angel investor. With all honesty, it is a smaller space. Firms can have only 2-4 employees, unless they’re much bigger and pushing more than eight figures. It’s going to be difficult, but I think the more women gain confidence and build relationships, they’re able to prove themselves to folks who may doubt them out the gate. Women are just as capable in picking companies, which comes with a lot of risk, but that process is about building relationships. Women are innately better at that. It’s a lot of feeling people out and trying to figure out where (a company’s) strengths and weaknesses are. That’s a huge part of venture capital. Don’t be afraid. Be confident, go out there and get as many meaningful connections as you can to excel.

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Health Care summit features author Awdish, former Aetna CEO Bertolini Our health care system is beset by gaps — gaps among patients, providers and payers. There are gaps in information: understanding on all sides about health coverage, communication among providers, gaps among people in the social determinants of health. Crain’s 2019 Health Care Leadership Summit will focus on bridging these gaps in the effort to create a system that works for all sides of the health care equation, and results in better care for all. After all, everyone is a patient at some point. The keynote speaker for the event will be someone who knows that well: Henry Ford Health emergency room physician Rana Awdish, M.D. Her book “In Shock” recounts the story of her own experience as a patient with a life-threatening condition who then returned to medicine.

Awdish

Bertolini

Crain’s 2019 Health Care Leadership Summit will focus on bridging these gaps in the effort to create a system that works for all sides of the health care equation.

The New York Times’ review of the book noted, “It delivers the sobering message that being a physician does not confer upon you the ability to exist outside of life.” Another featured speaker at the summit helped put together a multibillion-dollar deal that promises to disrupt some of the gaps in our multilevel health care system: Former Aetna Inc. CEO Mark Bertolini, who oversaw the insurer’s sale to pharmacy company CVS Health Corp. The summit will also feature presentation of Crain’s Health Care Heroes awards, along with breakouts focused on specialty topics. The summit runs 8:30 a.m.-1:30 p.m. Oct. 28 at The Henry hotel at 300 Town Center Drive in Dearborn. Tickets are $185, or $2,000 for a table of 10 and are available at crainsdetroit.com/healthcaresummit.

DEALS & DETAILS EXPANSIONS

GRANTS

J 1-800-Self-Storage.com, developer and operator of self-storage facilities, has opened a new facility at 3846 Rochester Road, Troy. The four-story, climate-controlled structure includes a drive-thru for loading and unloading and varying sized units for residential and commercial storage. Phone: (248) 250-9697. Website: 1800selfstorage.com

J The Oakland Schools Education Foundation, a nonprofit supporting Oakland Schools programs, received a $86,000 grant from the Margaret Dunning Foundation, a foundation supporting the interests of the late Margaret Dunning, a business woman, philanthropist and civic booster, for high school career and technical education automotive technology programs in Oakland County. Web-

site: osedfoundation.org, margaretdunningfdn.org

NEW SERVICES J The Michigan Center for TMJ and Sleep Wellness, Troy, a sleep clinic, is now offering K-Laser therapy for temporomandibular joint disorders, a group of conditions that cause pain and dysfunction in the jaw joint and the muscles that control jaw movement. Website: michigantmjandsleep.com

CALENDAR UPCOMING EVENTS

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Army Futures Command: Forging the Future of Warfighting with Business Partners Big and Small. 11:30 a.m.-1:30 p.m. Sept. 5. Detroit Economic Club. Gen. John “Mike” Murray, commander of Army Futures Command, will discuss how the Army relies on collaborative partnerships Murray with industry leaders based on modernization priorities regardless of business size. The Masonic. $45 members, $55 guests of members. Website: econclub.org For the Health of America: A Vision for the Future of Health Care. 11:30 a.m.-1:30 p.m. Sept. 10. Detroit Economic Club. Blue Cross Blue Shield Association President and CEO Scott Serota shares insights on the challenges facing the health care system today — and the steps health insurers Serota and their part-

ners are taking to build a stronger health care system for the future. Ford Field. $45 members, $55 guests of members. Website: econclub.org Smart Cities: A Connected Way Forward. 11:30 a.m.-1:30 p.m. Sept. 12. Washtenaw Economic Club. Camilo Serna, vice president, corporate strategy at DTE Energy, discusses how the organization is working with cities in the Detroit area to create smart cities and what the longer-term vision is. $77.50 nonmembers. Washtenaw Community College. Phone: (734) 677-5060. Email: washtenaweconclub@ wccnet.edu Masterful Networking: A Workbook. 8-9:30 a.m. Sept. 17. Troy Chamber of Commerce. Barry Demp of Barry Demp Coaching LLC will discuss techniques to achieve successful networking connections. Topics include: Behavior and attitude, relationships and communication, building powerful networking habits, networking as part of a solid business plan and mapping out networking. Marsh & McLennan Agency, Troy. $15 members, $25 nonmembers. Website: troychamber.com/events September Economic Development Forum. 8-9:30 a.m. Sept. 18. Troy Chamber of Commerce. Topic: The Aerotropolis Advantage. The Detroit Region Aerotropolis is a four-community, two-county pub-

lic-private economic development partnership focused on driving corporate expansion and new investments. Rehmann, Troy. Free members, $15 nonmembers. Website: troychamber.com/events Top of Troy: Women of Influence. 8-9:30 a.m. Sept. 26. Troy Chamber of Commerce. Four female business leaders discuss the challenges they faced on their paths to success, the key tools they have used to remain focused along the way, the hard decisions they are faced with on a daily basis and how being a woman has affected the choices they made. Panel includes: Lara Dixon, principal, Troy Athens High School; Lenora Hardy-Foster, president and CEO, Judson Center; Angelique Strong Marks, director, general counsel, corporate secretary and compliance officer, Mahle Industries Inc. and Cheryl Yuran, group vice president and chief human resources officer, Plex Systems. Moceri Learning Center, Beaumont Hospital Troy. $15 members, $25 nonmembers. Website: troychamber.com/events To submit calendar items visit crainsdetroit.com and click “Events” near the top of the home page. Then, click “Submit Your Events” from the drop-down menu that will appear. Fill out the submission form, then click “Submit event” at the bottom of the page. More Calendar items can be found at crainsdetroit.com/events.

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FORUM

Livengood:

Bipartisan fear: Government has a revenue problem Page 15

AUGUST 2019

EDUCATION

ACADEMIC BEACHHEAD Is it time to send Michigan’s post-Labor Day school start law T on a permanent vacation?

By Chad Livengood |

clivengood@crain.com

raverse City’s convention and visitors bureau chose next weekend to hold an Ironman Triathlon race through bucolic Benzie, Grand Traverse and Leelanau counties because a record number of public schools are starting classes before Labor Day this month. In a business move aimed at replacing the dwindling number of Michigan families with school-age children vacationing in late August, northern Michigan’s tourism mecca is using the Aug. 25 race to lure in affluent participants and childless fans of the grueling race of swimming, biking and running. That declining in-state customer base is driven by a steadily increasing number of school districts asking the Michigan Department of Education for permission each year to sidestep a state law mandating that public schools start the school year after Labor Day. “It’s a way we’re responding to the change,” said Trevor Tkach, president and CEO of Traverse City Tourism. “This is a real thing. Northern Michigan — Traverse City — is losing business because more schools have waivers.” The 2005 law mandating the post-Labor Day school start has increasingly become irrelevant as the state has granted waivers to school districts that adopt so-called balanced calendars for more yearround education or start early for another academic reason, such as aligning its calendar with middle college programs or community college dual-enrollment classes for high school students. SEE START LAW, PAGE 16

FERGS ILLUSTRATION FOR CRAIN’S DETROIT BUSINESS

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CRAIN’S FORUM | AUGUST 2019

TOURISM | EDUCATIONAL VIEW

Measure the school year in days, not hotel stays

tore shelves are stocked with school supplies, but hundreds of thousands of Michigan students won’t be in school for another two weeks due to the state’s law requiring a post-Labor Day start. Check In Michigan stated in a 2016 press release that earlier start dates “rob students of the opportunity to gain valuable work experience in Michigan’s hospitality and tourism industry.”

If our students don’t get the necessary knowledge and skills learned in school to be successful in life, there will be fewer qualified applicants for those jobs each summer. Is that what’s best for kids? While it may provide additional time for students PETER to work summer jobs, this SPADAFORE delayed start to the school year is negatively impacting our students. According to the National Summer Learning

Association, students lose as much as three months of math and reading skills during the summer — known as the summer slide or summer brain drain. Those losses are larger among lower-income students. Without equitable access to summer learning opportunities, an arbitrary start date created to benefit the hotel industry won’t do anything to combat the

When school starts should be an educator decision — whether it’s before or after Labor Day.

summer slide among our students. It’s clear that our schools see the impact that this law has on our students. The law allows school districts to apply for a waiver to start before Labor Day, and this year, waivers have been issued that cover more than 200 school districts. I expect more communities to embrace the opportunity to start the school year earlier if the state removes the bureaucratic hurdle to make the start of the school year a local decision. It just makes sense — students involved in extracurricular activities such as athletics or band come back to campus as early as the first week of August. Students enrolled in early college and dual-enrollment courses also are back in school earlier in the summer as higher education institutions start before Labor Day. Also, this is Michigan. It snows — a lot. In the 2018-19 school year, because of snow and the polar vortex, our schools were forced to close up to 21 days. The governor called a State of Emergency, resulting in four snow days for-

given, but many school districts still had to make up lost instruction days well into June. We know that days added at the end of the school year are not as beneficial as some students graduate or leave for vacation with their families. Starting school in August would create a more balanced calendar, with more impactful learning, and the school year may actually end “on time.” Educators are in our communities working with these students every day. Educators know what the research says about summer learning loss. Educators know what makes the most sense for their communities, and for their kids. When school starts should be an educator decision — whether it’s before or after Labor Day. Children need to be in school 180 days. Let’s leave it to the local district to decide when to use them, not the hotel industry. Peter Spadafore is associate executive director of the Michigan Association of Superintendents & Administrators, a Lansing-based advocacy organization.

TOURISM | EMPLOYERS’ VIEW

Teenage summer jobs critical to workforce development T hirty-five years in the hospitality profession has provided me with an insight or two when it comes to the high school youth of our communities. Balance in work, play and the classroom for our Michigan high school students is the key to a healthy, productive and successful future. “Education” happens in many forums and formats. For high school students, working in the restaurant business can be a great asset to their personal and professional development, independence and success as they work in a team-oriented environ- STEVE ment that teaches owner- LOFTIS ship of one’s actions, critical thinking, responsibility, accountability and the dignity and satisfaction of earning a paycheck with their name on it. My concern today is that our decades of work success and balance with students and parents is at risk as formal education strategies are now focusing on a “quantity strategy” of education that will place students in the classroom from mid-August to possibly year-round in Michigan. This move is already impacting our ability to employ our high school students as we cannot teach and train effectively for our positions with only a

What’s being lost in the pre-Labor Day school start conversation is the great and proven value of summer “workplace education.”

three- to four-week student summer window. As much as we highly value our high school student workers, our dilemma now is: Where is our summer employment group going to come from? The answer we are faced with is replacing our youth jobs with college students and high school graduates with an interest in hospitality. As small business educators we take great pride in teaching and mentoring our students and helping them to be better prepared and more mature when they go back to school after the summer break. The post-Labor Day school start enacted by the Legislature in 2005 was designed not only for economic issues relating Michigan’s overall economy, but to also allow for a healthy partnership between student and employers to give quality time to train, learn and earn.

With the renewed push for starting school before Labor Day, there is a real and present danger of diminishing high school employment and the highly valued skill sets taught in the summer workplace. What’s being lost in the pre-Labor Day school start conversation is the great and proven value of summer “workplace education.” We educate our high school students in different and meaningful ways while working to complement the work our high school teachers do. We aspire as hospitality professionals to help create a balance between work, play and formal education for our students. This is done by partnering with students, parents and classroom teachers as to what best prepares our students for life beyond the classroom and into their personal and professional avocations, interests, livelihoods and passions for the future. As hospitality professionals, we need a seat at the table when it comes to discussing and challenging the idea that more of something is better than a quality focus on balance. My fundamental issue is that our efforts to employ and educate our youth in hospitality are sometimes lost in the economics of the conversation. With fewer summer weeks available to us as well as to students, how will we continue to employ, train and educate them to a proficiency needed that allows them to be productive, focused and ac-

countable to our guests, staff and employer? We need more than a few intermittent weeks to allow for workplace efficiencies and positive contributions from our student employees. The educational benefits we provide in the hospitality industry are equal in every sense to the standard educational process and complement the efforts of our high school teachers in every way. As for year-round school or starting in August from a “quantity over quality” equational proposition for success, there is little quantifiable data to support this idea that more time in the high school classroom will better prepare students for long-term personal and professional success. On the other hand, the hospitality industry has hard data that speaks to the successful partnerships we have enjoyed with students throughout many years of working together to create and enhance their probability of future success and preparation for working effectively and proficiently in the real world. Viable and productive summer employment is just as critical to the student as it is to the employer. Michigan’s post-Labor Day school start law works for all. Let’s keep it in place and viable for our high school students’ sake. Steve Loftis is the owner of Harbor Restaurants, a group of five restaurants in Grand Haven.

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C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 1 9 , 2 0 1 9

CRAIN’S FORUM | AUGUST 2019 POLITICS | PAYING FOR IT ALL

Growing bipartisan consensus: State has a revenue problem T

he willingness of Republican legislative leaders to consider borrowing $10 billion and pumping the cash into the public-school employees’ pension fund is driven by an alarming projection that the state’s contribution to the retirement system will soar by a staggering $1.5 billion within five years.

ISTOCK

TOURISM | INDUSTRY VIEW

Prove starting school before Labor Day improves educational outcomes T

he tourism industry in Michigan secured a monumental victory in 2005 when former Gov. Jennifer Granholm signed Public Act 144, requiring public schools to begin after Labor Day. The legislation worked in tandem with the nascent Pure Michigan campaign to bolster Michigan’s ailing economy during our one-state recession in the early 2000s and girded against a more severe downturn during the ensuing Great Recession. It has become easy to take all of this for granted, as if this infrastructure always existed, but let me try to put the scope of the industry in perspective. Michigan’s travel and tourism inimportant soft skills that they will dustry grew much faster than the carry with them the rest of their overall economy over the past delives. cade and is now responsible for Finally, polling has consistently more than $22 billion in annual shown that voters support the law spending and nearly $4 billion in requiring schools to start after Latax receipts to the state. bor Day. An independent poll comThe 200,000 jobs the industry missioned in 2018 by Check In provides make it the seventh-largMichigan demonstrated that 65 JUSTIN percent supported retaining the est state travel industry by employWINSLOW ment in the nation. Michigan’s unlaw as it is and an overwhelming 72 employment rate would practically percent prefer giving local voters, double in the absence of tourism. not school administrators, the choice to deAnd yet one of the fundamental catalysts cide when their schools should start. for the success story of Michigan’s tourism inGiven the overall popularity of the law and dustry is being eroded, nearly the sizable impact the tourto the point of no return. At August represents ism industry has on the overthe publication of this col- what Black Friday all health of Michigan’s umn, more than 200 school is to retail — the economy, we would advodistricts have taken advantage difference between cate for a 24-month moratoof a loophole in the law allow- profitability and rium on the waiver process to assess its overall impact. ing them to secure a waiver to ending the season If, as school administrators start classes before Labor Day in the red. weekend. often claim, starting school As the waivers mount, they are beginning in August leads to better educational outto have a noticeable impact on the tourism comes, let’s study that. industry. August became the top-revenue I have three young children, and the qualiproducing month for Michigan’s travel indus- ty of their education is paramount to me as a try after the law passed, but that growth is parent. If an empirical review of school disnow in jeopardy. For many resorts and hospi- tricts that have claimed the waiver can clearly tality businesses, August represents what illustrate improved educational outcomes as Black Friday is to retail — the difference be- a result of that decision, the industry and the tween profitability and ending the season in education community should quickly come to the table to find a viable solution. the red. But let’s not stifle our thriving travel and Moreover, the tourism industry plays a critical role in providing many individuals with tourism industry in the name of a better edutheir first job. It is important to remember cation until we can demonstrate beyond a that not all education occurs in the classroom shadow of a doubt that a causal link actually and more than one in three people working in exists. It’s just not the Pure Michigan way. any capacity today got their start in the hospitality industry. A shorter summer season Justin Winslow is president & CEO doesn’t just impact operators, it diminishes of the Michigan Restaurant & Lodging opportunities for Michigan’s youth to learn Association.

GOP leaders and a conservative comes due in five years during a rebusiness group pushing the plan say cession, it will plunge the state into a action must be taken now to shore major budget crisis. up the Michigan Public School EmBut instead of looking deeply at how public education is financed in ployees’ Retirement System because Michigan, legislative leaders are fothe state’s School Aid Fund can’t shoulder the fast-approaching pencused on refinancing the existing long-term debt. Most people in busision fiscal cliff in 2024 without leganess would consider this an act of cy costs consuming additional diCHAD kicking the proverbial can down the rect aid for classroom instruction. road. “Most people in the state don’t real- LIVENGOOD But that day of reckoning is fast apize that the first $3.5 billion that we give to the School Aid Fund goes to pen- The proaching. The next economic downsions,” House Speaker Lee Chatfield stagnantly turn will inevitably bring new pain to told me in a recent interview. “And that growing cities and public school districts, number will quickly rise to $5 billion state of which rely heavily on growth in propper year unless we address that issue.” erty taxes and consumer spending Michigan is Chatfield’s argument for legislative going broke. (sales tax) for sustained funding. intervention now to slow the growth There will be more Inksters, Bueof these retirement costs is the first tacit acknowl- na Vistas and Benton Harbors that pile up opedgment by Republicans in charge of the Legis- erating debts that can’t plausibly be repaid, lature’s purse strings for the past decade that resulting in defaults and destabilization. state government indeed has a revenue problem. Not many of Lansing’s current leaders are This pension-bonding scheme from the West considering what happens in the next recesMichigan Policy Forum has inadvertently ex- sion. Their time in office is so short, it’s hard to posed a truth neither Democrats and teachers take the long view. unions nor Republicans and big businesses in In fact, not a single current Republican or this state can continue ignoring: The stagnantly Democratic legislative leader was in the Legisgrowing state of Michigan is going broke. lature during the 2008-2009 Great Recession — Michigan is underfunding roads. a reflection of both Michigan’s short term limits It is underfunding schools, according to too and the long decade of economic expansion. many studies to count, and it will only get But the short view is what gave Michigan moworse when those pension costs escalate. torists the worst roads in America, underfundAnd Michigan is certainly shortchanging cit- ed pensions for school retirees, a growing talent ies, which have seen $8.6 billion in revenue-shar- shortage and K-12 educational outcomes in the ing vanish over a decade of disinvestment, ac- bottom 10 states instead of the long-desired stratosphere of Top 10 State status. cording to the Michigan Municipal League. Barton Malow Enterprises Chairman Doug Those are just the basic responsibilities of government Michigan’s existing tax sources Maibach, who was part of the one of the most recent studies of education underfunding, are falling short of supporting. The underlying goal of this pension-bond- said lawmakers should consider both bonding ing scheme is to free up nearly $900 million in to shore up the teacher pension and issuing existing revenue by refinancing the “mort- bonds to frontload roads and infrastructure gage” of pension liabilities from the 20-year improvements. “Roads are long overdue, and the pension payment plan former Gov. Rick Snyder set up to a 30-year payment schedule. (It’s sort of funding is a ticking bomb,” Maibach said in an breathtaking to see how quickly Republicans email. “The retirement commitments that have moved to undo Snyder’s fiscal prudence.) have been made in the past are not sustainable Democrats, teachers unions and the school in a low growth state like Michigan.” With no deal in sight on road funding belobby are railing against tinkering with their pensions, and yet neither have offered a plan tween Shirkey, Chatfield and Whitmer, the for shoring up a pension system that’s $30 bil- next two weeks are seen as critical to getting a lion underfunded. deal before September, when the 30-day budRepublican legislative leaders have been getary clock starts ticking. entertaining this pension-funding idea, in The Republican leaders and Democratic part, because they want that $900 million in governor have mutually agreed to a goal of annual savings to redirect it to the roads to $1.5 billion more, according to three sources achieve Chatfield’s goal of removing the sales familiar with their ongoing negotiations. tax on gasoline. “In some ways it’s easier to agree on the tarThey also like the idea of imposing fiscal dis- get and then figure out how to hit it than it is to cipline on Democratic Gov. Gretchen Whitmer build an agreement piece by piece,” said Rich so she can’t skip pension payments like former Studley, president and CEO of the Michigan Gov. Jennifer Granholm did when the state Chamber of Commerce. “We think the closer was mired in a single-state recession. they get to $2 billion the better, the more posiBut this budgetary gymnastics is all de- tive impact it will have.” signed to avoid raising taxes — which would The state chamber is pushing for a long-view risk angering voters in the next election, in solution on roads. which neither Chatfield nor Senate Majority Business leaders like Maibach want longLeader Mike Shirkey will be on the ballot be- view solutions on roads and pensions that can cause they’re term-limited. weather the next recession. By Chatfield’s own admission, the state The next few weeks will reveal which elected can’t afford the forthcoming pension bill. leaders in Lansing are still taking the short view That’s because over the past 20 years, the on the state’s future and its revenue problem. School Aid Fund’s annual tax revenue growth has been $1 billion under inflation. The under- Chad Livengood: (313) 446-1654 lying fear is if the $1.5 billion pension bill Twitter: @ChadLivengood

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CRAIN’S FORUM | AUGUST 2019

START LAW FROM PAGE 13

“If a school district asks for a waiver, they almost always get them,” said David Lorenz, vice president of Travel Michigan, the state agency that runs the Pure Michigan advertising campaign. “The law that was put together is somewhat feckless.”

Tourists and beach-goers flock to Grand Haven State Park to enjoy the sunny days of summer before school resumes. DALE G. YOUNG FOR CRAIN’S

A ‘slow’ death In 2005, Michigan became one of just three states to direct taxpayer-funded public schools to start after the first Monday in September. The law also granted the state superintendent of public instruction the ability to grant waivers for districts that could make an academic case for opting out — a loophole that’s widened in recent years. The state education department has granted 196 public school districts and charter schools permission to open their doors this month, up from 154 districts and charters last year. Of those 196, 47 are intermediate school districts, creating countywide waivers in more than half of Michigan’s counties for all local districts within the ISD’s boundaries. The state does not track how many school districts within each ISD are opening before Labor Day. “As more school districts have received waivers to start prior to Labor Day ... it’s been death by a thousand paper cuts,” Tkach said. “It didn’t turn on 200 all at once. It’s just been a slow and painful reality.” The number of schools opting out has nearly tripled since 2014, with districts in Clarkston,

“It’s a tough situation. We don’t want to see local businesses lose revenue. But ultimately our goal is to graduate students who’ve had an optimal learning experience.” — Scott Reynolds, superintendent of the AlpenaMontmorency-Alcona Educational Service District

Boosting tourism Education advocacy groups and their allies have long been critical of the post-Labor Day school start mandate on grounds that it was imposed by former Democratic Gov. Jennifer Granholm and a Republican-controlled Legislature during Michigan’s early 2000s decade-long recession with the stated public policy goal of boosting the bottom lines of hotels, restaurants and tourist attractions across both peninsulas.

Hotel occupancy bounces back

Michigan’s statewide hotel occupancy rates in August and September have steadily risen since the Great Recession ended in 2009. Tourism industry officials attribute the 2005 law requiring public schools to start after the Labor Day holiday weekend to helping boost hotel stays in August. Hotel occupancy rates began leveling off after 2014 when dozens of school districts began seeking waivers from the Michigan Department of Education. This month, more than 200 school districts and charter schools are starting their school years before Labor Day. 80%

August

September

70%

Statewide hotel occupancy rates

Dearborn, Jackson, Kalamazoo, Lake Orion, Saline, Troy, Warren and even the vacation destinations of Holland, Houghton Lake and Suttons Bay opting to start school before the Labor Day holiday. Some school districts in northern Michigan tourism towns are starting school in August to hold classes Tuesday through Thursday in order to knock out a few of the 180 days they’re legally required to be instructing schoolchildren annually. In other cases, they’re hedging against unpredictable snow days, like the ones that piled up for school districts last winter during the sub-zero polar vortex. “It should be a local decision. In some communities, it might be quite contrary to do a pre-Labor Day start,” said Scott Reynolds, superintendent of the Alpena-Montmorency-Alcona Educational Service District, a three-county ISD in the northeast Lower Peninsula. Last year, the district obtained a blanket waiver for its four local school districts to start early to align its middle college program with Alpena Community College’s calendar. “It’s a tough situation. We don’t want to see local businesses lose revenue,” Reynolds said. “But ultimately our goal is to graduate students who’ve had an optimal learning experience.”

60% 50% 40% 30% 20% 10% 0

’05

’06

’07

’08

’09

’10

’11

’12

’13

’14

’15

’16

’17

’18

SOURCE: STR, Inc.; Michigan Economic Development Corp.

Granholm said at the time the mandate was needed to give a “jump-start to a segment of our economy that badly needed a boost.” “I recall being just appalled that the whole conversation was what was in the best interest of tourism,” said Gov. Gretchen Whitmer, a Democrat who voted against the legislation in 2005 as a member of the state House of Representatives. “There was very little conversation or consideration about what it meant for the education of our kids,” Whitmer said in a recent interview. “And that should have been front and center and, frankly, the only thing that was impacting our decision.”

There is some evidence that the post-Labor Day mandate spurred the tourism business as policymakers intended — and not just Up North. A 2016 study conducted by the East Lansing-based Anderson Economic Group found hotel room stays in Michigan rose by between 40,000 to 44,000 in 2007 — the first full year the school calendar law too effect. That resulted in a $4.5 million to $5.2 million increase in tourism spending, according to Anderson Economic Group, which conducted the study for the Michigan Lodging and Tourism Association. The statewide hotel occupancy rate rose to

68.5 percent in August 2007 compared with 66.4 percent the previous year and 66 percent in August 2005, according to the hotel industry data-tracking firm STR Inc. The law may matter less now. Last year, hoteliers across Michigan as a whole had their best months of August and September in at least 14

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otebest t 14

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CRAIN’S FORUM | AUGUST 2019 “We don’t have the population to support all of the customers,” he said. High school workers ages 15 to 18 fill a gap in the workforce, particularly in early August when college students leave to go back to school, said Steve Loftis, owner of Harbor Restaurants, a group of five restaurants in Grand Haven. But summer jobs also fill a gap in the educational experiences young people need to learn basic skills, such as communicating with customers, teamwork and meeting deadlines, Loftis said. “We’re educators as well,” said Loftis, who owns Snug Harbor, Jelly’s, Dee-Lite Bar & Grill, Theatre Bar and the Grand Seafood & Oyster Bar in Grand Haven. “We help educate kids on the other side of the equation. And to diminish the idea that we’re not educators is a mistake.”

Change the law? Whitmer said she favors repealing the 2005 law and having “a serious conversation” statewide about adopting balanced calendars, where students would get a six-week summer break from late June to early August. “Balanced calendars are things that are really staving off the education loss that happens over the summer, and that’s disproportionately felt by kids in poverty,” the governor said. State Rep. Triston Cole, R-Mancelona, represents a five-county district in the northern Lower Peninsula that includes the vacation hot spots of Torch and Elk lakes in Antrim County and Boyne Mountain Resort and Lake Charlevoix in Charlevoix County. He doesn’t see a need to change the law given the flexibility of the waiver system.

“We’re educators as well. We help educate kids on the other side of the equation. And to diminish the idea that we’re not educators is a mistake.” — Steve Loftis, owner of Harbor Restaurants, a group of five restaurants in Grand Haven

Boaters enjoy the waters of Lake Michigan in August. The Grand Haven Light and South Pier are in the background. DALE G. YOUNG FOR CRAIN’S

years, with statewide occupancy rates of 75.5 percent and 70 percent, respectively, according to STR’s tracking data. Room sales data analyzed by Anderson Economic Group revealed the biggest beneficiary in the two weeks leading up to Labor Day was southeast Michigan, which captured at least 40

percent of the additional room nights. The northern Lower Peninsula and southwest Michigan followed, with at least 20 percent and 10 percent of the room extra nights. “There’s more at stake here than I think people are giving credit,” Tkach said. “This decision was made clearly to try to spur economic activ-

ity not only in northern Michigan, but throughout the state.” There’s a workforce factor at play, too. Teenage workers are “critical to our economy,” Tkach said, especially when the overall workforce is crimped by labor shortages in skilled professions.

“Every time this topic comes up, I get an outpouring of support for the way it currently exists with starting school after Labor Day,” Cole told Crain’s. “It’s like clockwork — the conversation fires up, I get the outpouring of communications coming primarily from my small businesses.” Reynolds said the law should be changed to grant locally elected school boards the power to set their own calendars — and get rid of the burdensome paperwork involved in applying for a waiver from the Department of Education. “Are we creating a structure that’s unnecessary and inefficient?” Reynolds asked rhetorically. “That would be the argument I would raise.” Lorenz, the state’s top tourism official, suggests the school year could stretch further into June, leaving the two warmest months of the year — July and August — unencumbered for summer travel. “Families tell our industry that they want July and August free of the need to be home for school time,” Lorenz said. “Like this year, May and June were not too good weather-wise — cold, rainy, pretty bad actually.” At Traverse City’s tourism bureau, the organization is changing its marketing campaign to focus on selling childless millennials, singles and empty nesters on vacationing in late August or the first few weeks of September before the cooler fall sweeps in from Lake Michigan. “We’re casting our net wider to a specific audience that we think we can convert,” Tkach said. “I’ve kind of accepted the fact that whether the law changes or not, whoever wants this waiver is going to get it. So we’ve got to do business differently.” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

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REAL ESTATE

Plante Moran

District Capital, LLC

Plante Moran Partner Michelle Watterworth has been named vice chair of the American Institute of CPAs’ State and Local Governments Expert Panel. In this role, Watterworth will address accounting and auditing issues at the national level, frequently working directly with the Governmental Accounting Standards Board. The panel protects the public interest by bringing together knowledgeable parties in the state and local government industry to deliberate and build consensus on key issues.

Neil Gorosh is thrilled to be reunited with his former colleagues who have formed District Capital, LLC, a full service commercial mortgage banking firm located in Midtown Detroit. Neil will act in the capacity of Managing Director and General Counsel. With over 25 years of experience in mortgage banking, Neil also has a Law Degree from Wayne State University Law School. Neil is fully dedicated to growing District Capital into the preeminent commercial mortgage banking firm in the State of Michigan. District Capital is excited to add him as part of the team.

NONPROFITS

Junior Achievement of Southeastern Michigan Junior Achievement of Southeast Michigan (JASEM) has named Jason D. Lee, President & CEO. JASEM provides Financial Literacy, Work Readiness, and Entrepreneurship programming to 60,000+ students annually. Lee joins JASEM from Detroit Employment Solutions Corporation, where he was Executive Director of Grow Detroit’s Young Talent. He is responsible for organizational leadership, K-12 district & community partnerships, fundraising and volunteer engagement for JASEM’s 11-county program service area.

Tom Leonard nominated for U.S. attorney post in Western Michigan

President Donald Trump has nominated former House Speaker Tom Leonard to be the top federal prosecutor in west Michigan. The nomination of Leonard to be the Grand Rapids-based U.S. attorney in the Western District of Michigan comes nine months after Leonard lost a race for Michigan Leonard attorney general to Democrat Dana Nessel. “It is an incredible honor to be considered by President Trump to be the United States Attorney for Michigan’s Western District,” Leonard said in a statement. Leonard, a Republican from DeWitt, served as House speaker from 2017 through 2018, leaving the House at the end of his third term and losing the AG’s race to Nessel by 115,000 votes. Earlier this year, Leonard launched a legislative consulting business, with Detroit billionaire businessman Dan Gilbert and Quicken Loans Inc. becoming Leonard’s first and primary client. Leonard, 38, was tasked by Gilbert with devising a legislative strategy for securing the votes needed to overhaul Michigan’s nofault auto insurance law — a reform Leonard could not achieve during his one term as House speaker.

GDYT hires new leader

The Detroit Employment Solutions Corp. has tapped a Ford Motor Co. manager to lead Detroit’s largest youth employment program. Hocker Marie Hocker started as executive director of Grow Detroit’s Young Talent on Aug. 5, according to a news release. She replaces Jason Lee, who left the role in July to become president and CEO of Junior Achievement of Southeast Michigan, a nonprofit based in Detroit. Lee served at the helm of Grow Detroit’s Young Talent for a year and a half after a similar-length stint as CEO for Detroit-based nonprofit Focus: Hope. Hocker, a native of Detroit, comes to the program after 10 years at Ford. Most recently, she was based in Washington, D.C., as manager of U.S. government relations for the automaker. Her responsibilities included workforce development planning and working on multimillion-dollar training grants. She earned a bachelor’s degree in economics from Wayne State University.

Calvin Johnson joins pot board

Former Detroit Lions star Calvin Johnson has joined the Michigan Cannabis Industry Association’s board of directors, the association announced last Thursday.

Johnson, who played wide receiver for the Lions from 2007 through the 2015 season, has turned to the medical marijuana industry since retiring from football. He has Johnson touted the healing capabilities of cannabis for treating chronic pain in his postNFL life. He and his business partner, former Lions guard Rob Sims, received approval earlier this year for a medical marijuana dispensary in Michigan. Johnson and Sims are launching “several licensed cannabis facilities across the state” under the name Primitive, according to a new release from the association. “The Michigan Cannabis Industry Association is a winning team that has established itself as the leading voice for licensed cannabis businesses in the state,” Johnson said in the release.

Ann Arbor Symphony Orchestra seeks director, conductor

The Ann Arbor Symphony Orchestra has opened applications to fill the role of music director and conductor as it also looks to replace its executive director of 25 years, Mary Steffek Blaske. Music director and conductor Arie Lipsky resigned in June after serving in the position since 2000. The nonprofit is accepting applications until Nov. 15.

NEW HIRE? PROMOTION? BOARD APPOINTMENT?

Crain’s People on the Move showcases industry achievers and their companies to the Detroit business community. Contact: Debora Stein at dstein@crain.com

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Advertising Section

CLASSIFIEDS To place your listing, contact Suzanne Janik at 313-446-0455 or email sjanik@crain.com www.crainsdetroit.com/classifieds 2,280 ACRES

AUCTIONS

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REAL ESTATE AUCTION

Industrial/Warehouse Building

DOUBLE EAGLE RANCH North Central Michigan TheDoubleEagleRanch.com Call Kyle: 248-444-6262 BIG RED ORCHARD

Ryan Moore had moved back to the region from California last summer and purchased Big Red Orchard in Washington Township last fall.

EPICUREAN FROM PAGE 3

Allegations revealed “We believe strongly in our case and we intend to pursue all legal remedies available under the circumstances,” said an attorney representing Moore, Christopher Cataldo of Jaffe Raitt Heuer & Weiss PC in Southfield. Both Moore and Dickson declined to comment on the litigation. Dickson declined to make a lawyer available. The complaint argues Conlan Abu — a holding company registered near Los Angeles to Moore — should be paid back for what it bought, because Dickson and his business entities allegedly misled the company, lied and failed to perform on the deal. Dickson did not transfer over all the service agreements and contracts that were part of the purchase agreement, the document alleges. It says they were needed because they gave Conlan Abu the right to operate the Epicurean-managed restaurants. “Conlan Abu cannot legally operate the restaurant, catering, food and service operations without them,” the complaint said. It said Dickson promised he would deliver the contract assignments after the deal closed. However, it claims, Dickson’s son said after the closing that he and his father knew it would be difficult to get consent from operating partners to assign the contracts to Conlan Abu. The other major issue raised in the complaint is that Dickson allegedly told the plaintiffs he had prepared financial statements and projections showing the restaurants had been and would remain profitable. Dickson said he would provide those after the deal was finalized, too, according to the complaint, and Conlan Abu agreed. But in the end, the lawsuit argues, what Dickson later delivered was “false” and didn’t accurately portray the restaurants’ finances. “Diligence, in general, is a part of any M&A transaction,” said Elliot Vilders, an attorney with Royal Oakbased law firm Howard & Howard. He spoke generally about M&A, and did not review the specific case. He said that to the extent a buyer has “time and resources,” it would want to look at financials, a list of customers, contracts impacting the business and other considerations be-

“In my experience, you would want to review financial information prior to closing to ensure that what you’re buying is what you think it is.” Elliot Vilders

fore finalizing a deal. “In my experience, you would want to review financial information prior to closing to ensure that what you’re buying is what you think it is,” Vilders said. “The financial information of the target is some of the most important information.”

Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

Thursday, September 19, 2019

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Done deal? Moore’s company agreed to the deal and then bought the Epicurean Group entities Jan. 1. The metro Detroit native had moved back to the region from California the previous summer and purchased Big Red Orchard in Washington Township that fall. His plan was to fold Big Red and Epicurean together, transforming them into a regional farm-to-table force, with restaurants serving produce grown on orchard grounds. For Epicurean, he agreed to pay $1 million — $550,000 up front and $450,000 in a promissory note agreement with monthly payments, according to the documents. They also said that the purchase price balance in the promissory note was later bumped up to $750,000, plus interest, to reflect the value of inventory and deposits. By July, Moore’s company still didn’t have the assigned contracts to operate the restaurants, the complaint said. It reached out to the defendants, and received two out of the seven. Conlan Abu, according to the complaint, then invoked its “right” to rescind the deal, tendering back to Dickson the assets it acquired and “keys to the restaurants.” That kicked off the late July scramble in which Moore shed responsibility for Epicurean’s around 150 employees. Business connections, management takeovers and volunteerism combined to keep the restaurants running. The defendants must respond to the complaint or request an extension by this week.

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C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 1 9 , 2 0 1 9

HOUSING FROM PAGE 1

“New market-rate housing development won’t do much to help people who need deep subsidies to afford any housing, and this is a larger group in Detroit than in other cities,” said Evan Mast, the Upjohn Institute economist who conducted the study released last month called “The Effect of New Market-Rate Housing Construction on the Low-Income Housing Market.” “However, I would add that there is also a large group of people in the city that would be helped, including many working class and lower-income families that may struggle to afford housing but not qualify for subsidies,” he said. Mast also noted that new market-rate housing in Detroit would have an effect on suburban housing, where more working- and middle-class families live as well. According to the city, about 78 percent of the population is at or below the area median income of $48,100 for one person, $54,900 for two people or $68,600 for four people.

Escalating housing costs Nationwide, there has been a debate about how to address escalating housing costs, particularly in coastal markets like Seattle, San Francisco and New York City, where things like single-family zoning have been targeted for elimination (it’s been scrapped in Minneapolis). Mark Zuckerberg is attempting to raise $500 million to address the affordable housing crisis around his Facebook headquarters. Cost increases in cities across the U.S. have made many of them increasingly unaffordable to average workers. The conversations haven’t been limited to the coasts, however. Six months ago, the National Low Income Housing Coalition found that there is no state, metropolitan statistical area or county where “a worker earning the federal minimum wage or prevailing state minimum wage (can) afford a decent two-bedroom rental home at fair market rent by working a standard 40-hour week.” In the Detroit-Warren-Livonia MSA, which includes the higher-in-

PAYDAY FROM PAGE 1

For employers like Wireless Vision, building and retaining a workforce is paramount — turnover costs up to $4,500 per employee who leaves, said Layla Muhammad, vice president of human resources for Wireless Vision. “When you’re trying to attract a very trendy, techy Gen-Z employee, these types of solutions differentiate you,” Muhammad said. “We did this whole compensation and benefits analysis and we realized our employees don’t always put more money at the top of the list, they want what meets their daily needs and this is a really effective way to do that.” Wireless Vision uses the services of New York City-based DailyPay. The service connects their app to the company’s external payroll vendor and allows Wireless Vision’s employees to get paid for hours they’ve already worked at any time, for a fee. The fee is $2.99 for instant access to those funds and $1.99 to get access the following day. Most companies pass the fee onto the employee, said Jeanniey Mullen, chief marketing officer of DailyPay. Muhammad said

CRAIN’S FILE

A project slated for North Corktown and aimed at families that make too much to qualify for low-income housing subsidies but not enough to afford market rates, is the type of development that will help the city bridge the affordable housing gap.

come Detroit suburbs, a full-time job at an hourly wage of $18.60 ($38,688 per year) is needed to afford a fair market rate ($967 per month) two-bedroom apartment spending the recommended 30 percent of income on housing, according to the housing coalition. At the current minimum wage of $9.45 per hour, two full-time jobs are needed. In cities like Detroit itself, where a crush of new, young workers in its downtown core and an increased interest in urban living among millennials and younger generations have resulted in heightened residential developer interest and rents increasing to levels that, just 10 or 15 years ago, would have been seen as fantasy. It’s not uncommon for one-bedroom apartments to cost $1,500 to $2,000 a month in some properties. From 2005 to 2016, the city says rents in the 7.2 square miles of greater downtown have increased from $746 per month to $1,020 per month, a rise of 37 percent, while Detroit rents overall climbed 26 percent from $650 to $820 per month. Although the average rent is confew employees complain about the fee because it’s often cheaper than most ATM fees. Since launching in April, more than 50 percent of Wireless Vision’s 4,000 employees have used the DailyPay service, transferring more than $8.6 million to their accounts as of last week, Muhammad said. The company is covering the first two transactions for every employee, or currently about $12,000. Roughly 500,000 employees at 120 companies in the U.S. use DailyPay, including SMR Automotive in Marysville. DailyPay fronts the cost of the instant payments, allowing traditional payroll companies like Automatic Data Processing Inc., the largest payroll processor in the country, to operate as usual by paying out what is owed to employees on the traditional pay schedule. ADP earns interest on the money it holds between paydays. For the 2018 fiscal year, ADP held an average of $24.3 billion transmitted by companies but not yet paid to employees or tax authorities, reported the Wall Street Journal. Holding the payments allowed ADP to generate $466.5 million of interest. DailyPay and others work directly with ADP to become a payee for the company they are servicing.

siderably lower than other cities like Chicago (37 percent), Philadelphia (25 percent) and Pittsburgh (11 percent), 57 percent of Detroit renters — more than the national average of 52 percent — spent more than 30 percent of household income on housing, the city says. To boot, about two-thirds of city renters deemed “extremely low-income” (one person making $14,450 per year, a two-person household making $16,500 or a four-person family making $24,600) paid more than half of the household income on housing costs. “So much of our population in city does need housing that’s deeply subsidized,” Jemison said. And because of that, the creation

of new market-rate housing doesn’t ultimately result in housing that’s “marked down to the level where people’s incomes are,” Jemison said.

‘Migration chain’ impact

— Arthur Jemison, Detroit’s chief of services and infrastructure

Mast said his study was a year and a half in the making, starting with his time in graduate school at Stanford University in the Bay Area. “What I could afford was so pathetic, and what my friends who have real jobs could afford is just unreasonably bad,” he said. To conduct the study, Mast looked at what he described as 686 “large, new, market-rate multifamily buildings” built since 2009 in a dozen cities — New York City, Chicago, Dallas, Houston, Washington, D.C., Philadelphia, Atlanta, Boston, San Francisco/Oakland, Denver, Seattle and Minneapolis — and tracked 52,432 residents to their previous addresses using data from Oakbrook Terrace, Ill.-based Infutor Data Solutions. What he found is that through what’s called the “migration chain,” in which people across the income

Mullen said employee engagement varies by company, but from 30 percent to 75 percent of employees with access to the service use it. “From an industry standpoint, we’re seeing this take off in areas where there is a struggle to find enough qualified workers,” Mullen said. “It’s a competitive advantage for our clients. We don’t ask companies to provide the payment. There is no change to the payroll process. It’s really transparent and we’ve seen a lot of growth, especially in health care and home health workers.” Singh Senior Living, which operates seven retirement and assisted living centers in Southeast Michigan, instituted a similar service called OnShift Wallet to its 1,500 hourly employees a year ago. OnShift Wallet charges a $5 fee, good for 48 hours, that allows employees to access half of their earnings up to $400 immediately. Employees have transferred more than $700,000 since the company launched the service in July 2018, said Aaron Fenberg, director of human resources for Singh Senior Living and its parent company Singh Development Co. “Our workforce definitely needs

and wants this,” Fenberg said. “Our associates use it time and time again. We’re seeing some use it seven, eight or 10 times. Our workforce definitely wants to get paid differently than they did 10 or 20 years ago.” Troy-based Emagine Entertainment LLC, operator of 20 movie theaters in the Midwest, including 10 in Michigan, is currently assessing whether to sign on with the instant pay service Branch for its roughly 1,500 employees. Shelby Langenstein, chief people officer for the theater company, said today’s workforce and labor environment require her to look outside the box for retention ideas. “In the world we live in today, everyone wants some sort of instantaneous gratification,” Langenstein said. “Trying to get 1,500 high school (aged) employees to show up to work every day can be like herding cats. I do believe a service like this would boost our engagement and lower turnover. Having a company say, ‘Here’s the money you earned today’ and giving them access to those funds, there’s a lot of value in that.” Muhammad said employee retention for its hourly sales staff is up 20 percent year-over-year since launch-

“We have other unique conditions here that ... don’t necessarily produce the amount of affordable housing we need here.”

spectrum ultimately move into more expensive housing, 100 new market-rate housing units ultimately open up to 70 units in more affordable neighborhoods with below-median income tracts and up to 39 in tracts in the bottom 20 percent of income, generally within five years of the new units’ completion. “Prior research has shown that new housing depreciates and ‘filters’ to become affordable over the course of decades, but little is known about shorter timeframes of, say, three to five years — a horizon that is quite relevant to the acute housing crunch in the center of the current debate,” Mast writes. “Some households who would have otherwise occupied cheaper units move into new units, reducing demand and lowering prices for the units they leave vacant. The process iterates when a second round of households moves into the units the first round left vacant. This ripple effect spreads out further and further, eventually reducing prices in the middle- or low-income areas. However, if different parts of the housing market (like new construction and low-income neighborhoods) are strongly separated, with little cross-migration, the chain may never actually reach areas in most need.” He notes that he does not estimate effects on housing prices, and the migration chain could be suddenly stopped — through things like a move out of a market, or someone purchasing a unit as a second home, for example — before it reaches those most in need. In addition, it may not be able to reduce costs. “Census tracts in the bottom quintile (20 percent) of median household income and the top quintile of rent burden have an average vacancy rate of 12.8 percent, compared to 8.1 in the rest of my sample,” Mast writes. “Given that rents are generally already low in such neighborhoods, this suggests that reducing demand through the migration chain mechanism is unlikely to lower costs further, perhaps because rents have reached the minimum cost of housing.” Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB ing DailyPay. Don Leith, Great Lakes regional leader of the HR and benefits technology consulting practice at insurance brokerage and risk advisory firm Arthur J. Gallagher & Co., said clients are increasingly pushing to incorporate these services. “The feedback from our clients varies, but the majority indicate that they have experienced improved retention in their workforce since implementing a daily pay solution,” Leith said. “Many of those organizations also indicated helping their employees reduce payday lending usage as a goal while decreasing absenteeism and improving productivity when an employee is faced with financial challenges. The feedback so far has been overwhelmingly positive, especially from the workforces.” Muhammad said instituting an early pay option has also reduced employee theft. “No one wants to steal from their job, but if it comes down to family eating, you’re going to steal,” Muhammad said. “Giving them access to funds, we’ve found, is not putting them in these compromising positions.” Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 1 9 , 2 0 1 9

Gleaners to pilot new fresh market pantry concept By Sherri Welch swelch@crain.com

Most people who shop for milk or fresh vegetables pick those things up during weekly shopping trips or on the way home from work. That option hasn’t been available to those who rely on emergency food assistance. But a new “retail pantry” concept planned for Oakland County could change that. Gleaners Community Food Bank of Southeastern Michigan is developing the concept, which will look a lot like a small produce market but only be open to low-income people who qualify for emergency food assistance. Produce and dairy are top things requested by food-insecure families who don’t know where their next meal is coming from without assistance, Gleaners COO Julie Beamer said. The market pantry would provide a new model for getting more of those healthy foods to people when they need it. “If we want to encourage consumption of healthy fresh produce, folks have to have access to it. That’s what this concept is about,” she said. Gleaners studied a similar concept

FOOD FROM PAGE 3

The crop shortages could also impact future dairy donations, because food shortages could affect milk production. Milk and cheese subsidies have been buoyed significantly this year by the trade mitigation program, but there’s no saying how long that will remain in place, Clark said. “The ability to grow enough feed for our dairy industry will be ... a setback for our industry if they’re not able to do that,” Knight said. According to a USDA report released last week, farmers nationally were unable to plant crops on more than 19.4 million acres of land around the country, due to this year’s wet spring. That was up from just under 2 million acres last year. Almost three-quarters of the land that couldn’t be planted is in 12 Midwestern states, where heavy rainfall and flooding this year prevented many agricultural producers from planting mostly corn, soybeans and wheat, the USDA said. In Michigan, 17.3 percent of farmland was not planted this year, compared with the national average of 7 percent, Joel Johnson, the state executive director of the U.S. Department of Agriculture Farm Service Agency, told a joint panel of the House and Senate Agriculture committees last week, according to a Gongwer News Service report. Detroit-based Gleaners Community Food Bank of Southeastern Michigan — the largest food bank in the state by the number of people served — depends heavily on produce donations from farmers in Michigan and surrounding Midwest states, said COO Julie Beamer. About 43 percent of the 1.4 million Michigan residents who don’t know where their next meal is coming from live in Southeast Michigan, according to the Food Bank Council. Last year, operating on a $20 million budget, Gleaners distributed 43 million pounds of food, including almost 19 million pounds of produce. About 6.6 million pounds of the vegetables and fruits was donated by or purchased at low rates from Michigan

crainsdetroit.com

GLEANERS

Gleaners is developing a concept that will look a lot like a small produce market but be open only to low-income people who qualify for emergency food assistance.

in Columbus, Ohio, in developing its market pantry concept, Beamer said. When open, it will offer fresh produce, dairy products like milk and cheese and eggs on a drop-in basis, operating five to six days each week, including Saturdays, with hours into the evening. The concept will differ from client choice pantries Gleaners operates in Howell and through a partner in Tay-

lor. While those locations look similar to a grocery store in their layout and allow low-income families to “shop” for the food they need, typically, clients come in monthly by appointment, Beamer said. At the new market pantry, “customers” will be able to stop in as frequently as they need, she said, with a projected 100-150 patrons each day and annual distribution of a half-million pounds of

produce and dairy from the location. Gleaners is talking with the county, health systems, nonprofit pantries and shelters and local stakeholders in Oakland County as it works to pick a 1,000-2,000-square-foot accessible location for the pilot fresh market, Beamer said.

farms. Produce normally harvested by this point, from peppers, melon and corn to cabbage and collards, is 10 days to two weeks behind, Beamer said. And the size and quality is inconsistent. Early cabbages coming from Michigan farms, for example, are ranging from the typical basketball-sized to softball-sized. The produce Gleaners was able to distribute between January and July this year was down 15 percent to 20 percent or 1.5 million pounds, Beamer said. That’s after an influx of 1.5 million pounds of food from the USDA’s trade mitigation program, which is buying up surplus from farmers affected by the trade war. “Had we not had those sources, distributed through Feeding America ... and others, we would have been down 3 million pounds,” she said. “So it’s helped alleviate things, but not filled the gap.” Beamer projects there will be less produce available for the rest of the season, since some fields were never sowed. That is putting more financial pressure on farmers, which is affecting their ability to donate produce, she said. That’s translating to tighter supply and higher prices, particularly later in the growing season. To make up for shortages, Gleaners is purchasing produce by the truckload from southern states and bringing it back to Michigan. The costs just to purchase the produce have added up to $225,000 so far this year, plus transportation costs, Beamer said. Produce and fresh dairy are the top requests from food-insecure families, she said, and need was already outstripping emergency-provider distribution even before the produce shortages, she said. “We are working to try and plug the gap as best we can, but we obviously have only so many resources.” To help fill the gap, Gleaners is appealing to its donors, with contributions made by Sept. 2 matched by the sponsors of its Hunger Free Summer campaign to ensure children from low-income families have food over the summer. Those sponsors include: Andiamo, Citizens Bank, Ford Motor Co., GalaxE Solutions, General Motors Co., Grand Traverse Pie Co. and Toni Wisne Sabina Foundation.

Forgotten Harvest

more of its produce all at once, he said. And it will be seeking volunteers later into the fall than normal to do it. “We don’t believe at this time, we’ll have a shortage,” Ivey said. Things will just come in later than they normally do. Feeding America West Michigan, a food bank serving all of west Michigan and the Upper Peninsula, sources the vast majority of its produce from Michigan farmers, said Mallory Weber, food acquisition manager. Last year, the Comstock Park-based food bank distributed 26 million pounds of food to about 900 nonprofit agencies, just under a third of it produce, Weber said. This year, its sourced produce is down 28 percent or about 1.26 million pounds so far, she said. “We get a lot of number twos, things they can’t sell at market, things that aren’t as pretty.” It’s not yet clear what will be available in the coming weeks, President and CEO Kenneth Estelle said. Like Gleaners, the west Michigan food bank has sourced some produce from other states at an additional cost of about $125,000 so far this year, Estelle said. Even donated produce comes at a cost. A truckload of donated produce from Alabama, Florida or Georgia would come at a cost of about $9,000$10,000, including freight fees and $4,000-$5,000, on average, in “pick and pack out” fees paid to farms. The same donated produce from Texas and Arizona runs about $10,000$12,000 a truckload, Estelle said, noting produce donations from California cost too much to make them viable. “We’ve done some of that ... but the freight costs are really high. And we’ve been able to fill in with some of the trade mitigated (food),” he said. The subsidized food aren’t apples to apples or the highly nutritious, fresh food sought during Michigan’s growing season. They’re apples to applesauce, largely made up of shelf-stable and frozen food. But they are helping fill the gap, Estelle said. “The timing is nice for a bit.”

Forgotten Harvest’s produce rescues and distributions were pacing 10 percent behind, year over year, between May and June, said Chris Ivey, director of marketing and communications. Last year, the food rescue distributed 41.5 million pounds of food last year to pantries, shelters and soup kitchens in the tri-county area. In addition to distributions through the Food Bank Council and rescues from grocery stores, it gets fresh vegetables and fruits from produce wholesalers like Mastronardi Produce near Leamington, Ontario; a handful of Michigan farms and its own farm. It’s less reliant on securing produce directly from farmers than Gleaners. “With our food rescue model, we are always having to adjust to availability of the goods we receive, and our food sourcing team works hard to ensure the food is as diverse and consistent as possible,” Ivey said. Mastronardi, the Ontario greenhouse that provides it with surplus produce, was impacted by a lack of sun early in the growing season, Ivey said. But it was able to source produce from other places, and Forgotten Harvest is still getting the surplus, Ivey said. Forgotten Harvest, which is operating an annual budget of about $9 million, has also grown its own produce since 2013. Ivey said that despite the wet spring — and thanks to drainage tiles in place on the property — it was able to plant nearly all of its 98 acres at Ore Creek Farm in Fenton, on land donated by Nora Moroun, the wife of Ambassador Bridge owner Manuel Moroun and a former director on Forgotten Harvest’s board. Crops this year include: potatoes, sweet potatoes, onions, collard greens, kale, mustard greens, broccoli, cabbage, turnips, sweet corn, hot peppers, Brussels sprouts, melons, eggplant and jalapenos. “We definitely were prevented from planting all of our crops according to our schedule, but our decision-making process is unaffected by consumer marketing, which gives us a little more flexibility,” farm manager Mike Yancho said in an emailed statement. Given the timing of its plantings, Forgotten Harvest will need to harvest

Sherri Welch: 313 (446-1694) Twitter: @SherriWelch

Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

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C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 1 9 , 2 0 1 9

THE WEEK ON THE WEB

RUMBLINGS

Detroit City FC to go pro

Competition targets female entrepreneurs

AUGUST 9-15 | For more, visit crainsdetroit.com

etroit City FC will officially turn professional next season when it enters the National Independent Soccer Association in early 2020, pending final U.S. Soccer approval, according to the league and DCFC co-owner Sean Mann. NISA is a Division III men’s professional soccer league planning its inaugural season after several years of stops and starts. DCFC has been in talks with the league since 2017. The league’s board of governors announced three new member clubs last Thursday, according to a news release, after a meeting last week in Los Angeles. The Hamtramck-based team joins Chattanooga FC in Tennessee and Oakland Roots SC in California. “These clubs truly represent their communities and are proof the open system for soccer is the best way forward. Each has built their support the correct way and that support will sustain them and NISA for years to come. Congratulations to each of them (owners, staff, players, and supporters) for taking that step to play professional soccer,” NISA Commissioner John Prutch said in the release. Mann said the players would have professional contracts. The team would not disclose salary figures. DCFC reorganized its ownership structure, but kept all the partners, to meet requirements for the league, he said. The team has not brought on any additional partners or investors, as had been considered. “This will be our home for the foreseeable future,” Mann said. The announcement comes after the abrupt dismantling of a hybrid tournament that was supposed to help the Hamtramck-based soccer team transition from semi-professional this fall. The six-team Founders Cup tournament under another league, the National Premier Soccer League, was designed to be the precursor to a new pro league, but is no longer happening. Its undoing came down to liability insurance, Mann previously said. Detroit City FC will still be able to deliver on its promise for an extended season this year through a new Members Cup with a different mix of teams. DCFC has had its sights on turning pro for several years. It averages nearly 6,000 fans per home game at Keyworth Stadium — the highest in its league. The team also commands strong corporate support from companies such as Stroh’s Brewing Co., Strategic Staffing Solutions, Henry Ford Health System and MotorCity Casino Hotel.

BUSINESS NEWS J Farmington Hills-based Level One Bancorp. is acquiring Ann Arbor Bancorp. in a deal valued at $67.8 million. The combined bank will operate as Level One (NASDAQ: LEVL) and be headed by Level One CEO Patrick Fehring. It will have $1.8 billion in assets, $1.4 billion in loans and $1.5 billion in deposits. J Several local foundations and corporations are kicking in support for a new fund to help small businesses

LARRY PEPLIN FOR CRAIN’S

Detroit City FC will officially turn professional next season when it enters the National Independent Soccer Association.

Detroit digits A numbers-focused look at last week’s headlines:

$1.4M

Cost of renovating Bowlero Lanes & Lounge in Royal Oak

$500,000

Sponsor support for 25th annual Woodward Dream Cruise

800

Number of reusable bags given away in Eastern Market for pilot program

struggling through construction on Detroit’s Livernois Avenue of Fashion. The city of Detroit and Detroit Economic Growth Corp. are set to roll out details this week. J A new Green Lantern Pizza restaurant and bar is pegged for Berkley in the former space of Sila Italian Dining & Pizza, which closed at the end of 2017. Green Lantern will open in the 5,200-square-foot space off 12 Mile Road as soon as early October following a $1.4 million buildout. Owners are also developing plans to franchise their carryout business. J With an eye for retro design and to compete with trendy cocktail bars, a team of owners is readying to reopen the old Bowlero bowling alley in Royal Oak later this week. Now called Bowlero Lanes & Lounge, the 16-lane venue is under new ownership after the longtime bowling alley closed a year ago. J A demolition crew began tearing down the Ilitch family-owned former Gold Dollar bar early last week. Heavily damaged in a July 22 fire, workers began razing at the rear of the property first and then moved on to its Cass Avenue frontage at Charlotte Street. A demolition order was issued the day after the fire. J The Ilitch family’s Olympia Development of Michigan plans to build a 200,000-square-foot office building in Farmington Hills for Mercedes-Benz Financial Services USA LLC. The Little Caesars Pizza owners still need city approvals for three-sto-

ry development on property at 36455 Corporate Drive that they have long owned and once considered for the pizza maker’s own headquarters. J As part of a pilot program aimed at improving environmental sustainability and reducing single-use bag waste, the Eastern Market Partnership handed out 800 sample reusable bags to customers at the Detroit market this weekend. The four-week pilot program is backed by a $50,000 grant from the Royal Oak-based Fred A. and Barbara M. Erb Family Foundation. J A dance-cardio fitness chain developed by celebrity trainer Anna Kaiser is stepping into the metro Detroit market with two studios set to open this fall. Franchisee Deanna Alfredo is shaping up plans to bring the Anna Kaiser Technique, or AKT, to the new Woodward Corners by Beaumont development in Royal Oak and in Rochester Hills. J German airline Lufthansa will offer nonstop flights from the Detroit Metropolitan Airport to Munich, Germany, starting next spring. The flights will be leaving Detroit Metro Airport five times per week on Mondays, Wednesdays, Thursdays, Fridays and Saturdays.

FOOD NEWS J Ima’s owner is planning a new Japanese-inspired restaurant in Midtown in the former space of Sweet Lorraine’s Fabulous Mac n’ Brewz. Ima Midtown is expected to open in the 3,700-square-foot building at 4870 Cass Ave. this fall as the largest restaurant yet for chef Mike Ransom, who also owns Ima locations in Corktown and Madison Heights. J Tech-savvy Domino’s Pizza Inc. is rolling out e-bike delivery with customized machines from Seattle-based Rad Power Bikes. It is expanding from pilot sites at corporate stores in Houston, Miami and New York to more locations in Miami, Salt Lake City, Baltimore and Houston this year. J There’s a new vision for a bar and eatery in Brush Park after the first one failed to catch on. The Brush Street Stadium Deli will replace Visions at 2458 Brush St., near Little Caesars Arena, and serve up Louisiana-style comfort food next starting next month.

Applications are open for a new pitch competition, which will provide $10,000 to one woman entrepreneur with a vision to benefit the city of Detroit. The Detroit-based nontoxic finishing salon and Austin-based women-focused social networking company have teamed up to host the competition, according to a news release. The deadline for the application is Aug. 21. It can be accessed through the Bumble app’s business networking section Bumble Bizz. To apply, entrepreneurs must download Bumble, fill out a Bizz Profile and click the networking section. The entrepreneurs then should start connecting with other Bumble Bizz users, but when they stumble across the Detroit Blows/Bumble Bizz card, users should either hit “enter now” to access the pitch competition application, or swipe right to match with the card. After matching with the card, users can go into their messages to

find a link to the 10-question application. “Detroit Blows is a social enterprise on a mission to provide an inclusive space for women seeking non-toxic beauty services at a fair and equitable price point, and we’re all about channeling our relationships and resources to enrich our local community,” Nia Batts, co-founder and CEO of Detroit Blows, said in a release. Three finalists will be given a chance to introduce their business at a private event on Aug. 25 at Detroit Blows where a winner will be selected. The award is funded by Bumble, which will be working with the salon’s philanthropic arm Detroit Grows. “We are most interested in women-led businesses that support and empower other women in the Detroit community, or a new entrepreneur who has a desire to start a new business,” Chelsea Maclin, Bumble’s vice president of marketing, said in an email.

Bell’s plans to release early next year its lower-calorie, lower-alcohol Light Hearted Ale. BELL’S BREWING VIA INSTAGRAM

Bell’s to release ‘light’ version of Two Hearted IPA B

ell’s Brewery Inc. is preparing to release its new Light Hearted Ale — a brew with about half the calories and half the alcohol of its widely acclaimed Two Hearted counterpart. Cans of Light Hearted Ale will hit shelves early next year, according to a Thursday Instagram post by the Comstock-based brewery. The wide release follows months of ingredient tinkering for the dialed-down IPA. Light Hearted will come in at 3.7 percent ABV and 110 calories, compared with Two Hearted’s 7 percent and 212 calories. Light Hearted will maintain “many of the characteristics of its namesake” as an all-malt, hoppy brew, the post said. The light cream-colored and orange can will also keep the signature trout image found on Two Hearted. Bell’s latest offering is a response to market demand for lower-calorie

alcoholic beverages as hard seltzers sweep the nation. It’s also a nod to IPA lovers who appreciate the hops but prefer a little less potency than 7 percent ABV. Founders Brewing Co. struck gold with its All Day IPA — a 4.7-percent, 147-calorie beer that came to be one of the company’s most popular after launching in 2013. It remains to be seen if Light Hearted will catch on like its bigger brother Two Hearted, which is the brewery’s best seller and consistently ranked among the best beers in the country. The brewery hasn’t said what the retail price will be for Light Hearted. Of course, for those braver souls, there is the Double Two Hearted Ale, a whopping 11-percent alcohol IPA expected to be released in bottles this month. The brewery is also busy crafting a “Leaves of Grass” series, featuring seven new beers inspired by poet Walt Whitman.

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