Crain's Detroit Business, Dec. 16, 2019 issue by Crain's Detroit Business

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Inside a hulking three-story warehouse near I-275 and I-96 in Livonia, the towering shelves built to store two-thirds of Michigan’s liquor supply reveal something that may not have been evident on the barren shelves of package liquor stores last month. Every shelf in Republic National Distributing Co.’s new $85 million super warehouse is jam-packed with pallet loads of popular brands such as Jameson Irish whiskey and Hennessey cognac and hard-to-find rare hooch like a bottle of 25-year-old O.F.C. Vintage bourbon. “As you can see, there’s not a liquor shortage in Michigan,” said Joe Gigliotti, region president of control states for Republic National, a multistate alcohol broker and distributor. But there has been a liquor inven-

 Distribution snafu shows vulnerabilities of state liquor ‘monopoly’ Page 18  Opinion: Michigan’s system gives all brands equal market access Page 19  Opinion: Open liquor market to more than one distributor Page 19  Opinion: Liquor shortages don’t rate changing liquor law Page 20

tory shortage on the shelves of Republic National’s 13,000 retail customers this fall that was triggered by major computer glitches and “bugs” in the warehouse management system the company’s contractors built inside the new 515,000-square-foot distribution center. See LIQUOR on Page 24

NEED TO KNOW

KICKING UP

THE WEEK IN REVIEW, WITH AN EYE ON WHAT’S NEXT WAYNE STATE BOARD CHAIR LEAVES; STANCATO TAKES SPOT THE NEWS: Wayne State University board Chairwoman Kim Trent has stepped down to join Gov. Gretchen Whitmer’s administration and will be replaced on the board by former New Detroit Inc. CEO Shirley Stancato, the governor’s office said. Trent, senior vice president of corporate and civic engagement for Compass Strategies LLC in Detroit, is going to join the Department of Labor Economic Opportunity leadership team starting in January. WHY IT MATTERS: The eight-member board has been riven by opposing four-member factions. One bloc led by Michael Busuito, M.D., has been pressing for the firing of WSU President M. Roy Wilson, M.D., for the past year. Trent has been one of Wilson’s most ardent supporters and three other members have joined her in backing Wilson. Stancato praised Wilson’s tenure in a press release issued by Wayne State.

SPORTS, ONLINE BETTING PASSED BY LEGISLATURE THE NEWS: Michigan’s Legislature voted Wednesday to legalize sports betting and internet gambling, expanding options for gamblers in a state with three commercial casinos in Detroit and two-dozen tribal casinos elsewhere, the Associated Press reported. The bills

reflect a compromise with Gov. Gretchen Whitmer after lawmakers agreed to a higher tax on i-gambling than was initially proposed.

before it can be advanced to Gov. Gretchen Whitmer’s desk. WHY IT MATTERS: The bills grew controversial because they carve out an exemption for a project that already received tax breaks. The bills are expected to reduce revenue for the local schools by at least $242,000 annually.

REGULATORS ORDER CLEANUP OF RIVER SPILL WHY IT MATTERS: The bills, which Whitmer is expected to sign, would offer potential new revenue streams to casinos in the state and hold the potential to increase gambling tax revenue for the state. How much is unclear, because it’s not known how much the change would cannibalize existing spending on lottery tickets and other gambling.

HOUSE PASSES ADDITIONAL SWITCH TAX BREAK THE NEWS: Large corporations that house their computer backup servers on a server farm in suburban Grand Rapids will be exempt from paying any personal property taxes on that equipment under legislation that narrowly cleared the Michigan House on Wednesday. The House voted 55-53 on a controversial bill sought by Nevada data center giant Switch Inc. after the company got hit with unexpected local school tax bills. The amended bill now goes back to the Senate for a final vote

THE NEWS: Michigan environmental regulators have ordered a company to clean up limestone and other materials that its tenant spilled into the Detroit River last month. The state Department of Environment, Great Lakes and Energy sent a violation notice Wednesday to Erickson’s Inc., the owner of the riverside property leased by Detroit Bulk Storage. WHY IT MATTERS: A dock at the site collapsed Nov. 26, discharging an unknown amount of crushed limestone into the river, along with asphalt and contaminated soils. The department said testing determined that contaminant levels in the water were not detectable or well below quality standards.

DETROIT TOPS LIST OF HARD-TO-COUNT CITIES THE NEWS: When the U.S. Census Bu-

Detroit, Pontiac join professional soccer ranks Detroit officially has a professional soccer team, Detroit City FC announced last week, after U.S. Soccer approval of its pro status. And so does Pontiac. The team based at Keyworth Stadium in Hamtramck said in August that it would enter the National Independent Soccer Association, but it required a green light from the sport’s national governing body. Also approved by U.S. Soccer’s board of directors are Pontiac-based Michigan Stars FC, Chattanooga FC in Tennessee and Oakland Roots SC in California. League play starts in the spring. 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. GETTY IMAGES/ISTOCKPHOTO

reau starts counting people next year in Detroit, obstacles are bound to arise: The city has tens of thousands of vacant houses, sparse internet access and high poverty — factors that will make it the toughest community to tally. About 86 percent of Detroit’s population lives in hard-to-count neighborhoods, by far the largest proportion of any major U.S. city, the AP analysis found.

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WHY IT MATTERS: The census is important to countless government-funded programs and other matters and directly affects the finances of many entities and nonprofits. Obtaining an accurate count is critical because the census determines the allocation of $1.5 trillion in federal spending and decides which states gain or lose congressional seats.

REAL ESTATE

Baker College plans campus on site in Royal Oak

HEALTH CARE

BENDING THE COST CURVE

School working on deal for funeral home site

GETTY IMAGES | ISTOCKPHOTO

BY KIRK PINHO

Blue Cross deals aim to improve affordability, quality BY JAY GREENE

Deals between Blue Cross Blue Shield of Michigan and seven major local health organizations are aiming to wring out costs from the health care system while also ramping up quality. The health systems and physician organizations have agreed to contract with Blue Cross in January under “value-based” contracts that share risk and could provide additional revenue if they lower costs and improve quality. The new contracts — under the banner “Blueprint for Affordability” — also could force provider organizations to pay money back to Blue Cross if annual expenses for covered patients exceed targets, of-

ficials announced Wednesday. To receive extra payments, health care organizations also must meet all of more than a dozen agreed-upon quality metrics. The contracts also limit the amount provider organizations can earn or lose from the program. “Blueprint for Affordability is a transformative shift in the way we approach the management of health care costs,” Daniel Loepp, Blue Cross’ president and CEO, said in a statement. “This first wave of provider partners are true leaders in their industry — and courageous for stepping up and joining us in this bold new approach to promote quality and affordability.” Loepp said the Blueprint program seeks to “permanently

change the trajectory of health care costs in Michigan and make health care more affordable for people and employers.” The four participating health systems are Ascension Health, Warren; Trinity Health, Livonia; Henry Ford Health System, Detroit; and Michigan Medicine, Ann Arbor. The three physician organizations are United Physicians, Bingham Farms; the Physician Alliance, St. Clair Shores; and Oakland Southfield Physicians. The scale of the participants in the program, coupled with Blue Cross’ dominance of health coverage in Michigan, promises changes in how providers approach patient care. See BLUE CROSS on Page 26

Daniel Loepp, Blue Cross’ president and CEO

Baker College is targeting downtown Royal Oak for its new consolidated campus as it attempts to wedge a large new building onto a small site. After abandoning a plan to build a new flagship campus in downtown Ferndale due to a parking issue in April, the not-for-profit school is now working on a deal that would involve buying and then tearing down Kinsey-Garrett Funeral Home Inc. at 420 S. Lafayette Ave. at West Fifth Street and constructing a new building on the roughly 0.45-acre site. Multiple sources said that Baker, through an entity tied to a Bloomfield Hills-based developer, is looking to acquire the property and has it under contract, although Steve Garrett, owner/funeral director of Kinsey-Garrett, said there is “nothing to discuss” and that it’s “business as usual” at the nearly 84-yearold funeral home. He declined further comment. A deal for the site is not finalized. It would be a tight squeeze for the 75,000-square-foot building, which would rise seven stories and have two levels of underground parking, sources said. The school seems all but certain to blow through a self-imposed deadline for moving into its new campus as it had intended by the start of the fall 2020 semester. It marks another shift in plans, however, for Baker after originally considering putting its new campus in a 100,000-square-foot building proposed at Main and Sixth streets downtown. Plans for that building collapsed this summer when the city commission opted against extending a development agreement for a city-owned 1.2-acre surface parking lot at 600 S. Main St. See BAKER on Page 26

CRAIN’S NEWS

A note to our readers This is the last regular print issue of Crain’s for 2019. Please check Crainsdetroit.com through the end of the year for regularly updated breaking news and analysis. You can sign up for free for our breaking news updates and newsletters so that you don’t miss a beat. Just click “Newsletters” on the top right hand side of the page. Our annual Book of Lists compendium of data on metro Detroit businesses, institutions and people will be published Dec. 30, and the next regular issue will be published Jan. 6. DECEMBER 16, 2019 | CRAIN’S DETROIT BUSINESS | 3

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M-Brew, a popular spot to grab drinks and bar food in Ferndale, has been put up for sale by owner Dean Bach, who is asking $1.725 million for the property and business. | GOOGLE MAPS

Dino’s, M-Brew restaurants in Ferndale for sale again for $3.45M Dino’s Lounge and M-Brew are again for sale, this time for a combined $3.45 million, or $1.725 million each. It marks the second time in a Kirk year that the PINHO downtown Ferndale hot spots have hit the market. A year ago, co-owner Dean Bach listed it for $2.35 million, along with M-Brew, which he also owns, for another $2.35 million for a total of $4.7 million. Bach nixed those plans two months later. But now a combination of a scrapped plan for a Baker College campus downtown and his business partner, Duke Taylor, wanting to cash out as he nears retirement led to the decision to relist the businesses, real estate and liquor licenses about two months ago, co-owner Bach said Tuesday morning. “We thought that this Baker College thing was such a no-brainer for the city of Ferndale, where it would put us in a position where we could get our number or work with a management company where business would increase dramatically,” Bach said. The campus, which fell victim to a parking challenge, would have been two blocks south of M-Brew on Nine Mile Road east of Woodward Avenue, and a block north of Dino’s. In addition to Dino’s and M-Brew, which opened in 2002 and 2014, respectively, Taylor’s 50 percent ownership interest in the pair’s Belle Iron Grille in Gaylord is up for sale. Bach said he is “less interested” in selling his own interest in Belle Iron Grille because he is moving up to the area, but would entertain offers. Taylor is also a 50 percent owner in Dino’s and M-Brew, Bach said. Taylor, through Bach, declined comment. An offering memorandum says the Dino’s property is 4,500 square feet and can seat 137; M-Brew is 6,500 square feet and seats 120. Bach said that although the list price is $1.725 million for each Ferndale restaurant, he’s flexible, currently entertaining a $1.5 million offer for

The Dino’s property in Ferndale is 4,500 square feet and can seat 137.

It’s now at least $1,000 per month for an apartment

tate Investment Services Inc., a national real estate company with a local office in Southfield, predicted that the effective monthly rent, which is rent minus tenant concessions, in metro Detroit would be above $1,000 per month for the first time ever by the end of this year. Marcus & Millichap says in a new report that its prediction was correct, with the average effective rent hitting $1,001 per month in the third quarter in the region overall. Some submarkets were well north of that: Troy/Rochester Hills ($1,132); Southfield ($1,121); Novi/Livingston County ($1,064) and Sterling Heights/Shelby Township ($1,008) all cracked the four-digit threshold in the previous three months. For landlords, those are welcomed numbers. Tenants, no doubt, will be less pleased about forking over more of their income in rent. Some other takeaways from the Marcus & Millichap third-quarter report: ` 1,400 apartments are expected to be completed this year, compared to 800 last year. This is the second-highest completion level in 16 years, according to the firm. ` Vacancy is down 0.2 percentage points to 3.2 percent, it’s lowest rate since 2000. ` Rent is up overall 4.6 percent.

In this space 10 months ago, I noted that Marcus & Millichap Real Es-

Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB

“I’M TRYING TO FIND PEOPLE THAT WANT TO DO THE RIGHT THING AND KEEP THEM ON. ANYBODY THAT WANTS TO COME ALONG AND PARTNER OR PURCHASE THESE PLACES WOULD BE VERY LUCKY TO HAVE THESE STAFFS.” — Dean Bach, business co-owner

one of them, which he declined to identify, with him staying on as a partner for a period of two to 10 years. “We are willing to negotiate,” he said. Bach said there are about 30 employees between the two Ferndale restaurants and they have been notified of the listings. “I’m trying to find people that want to do the right thing and keep them on. Anybody that wants to come along and partner or purchase these places would be very lucky to have these staffs,” he said.

COURTS

The former Visteon Village development in Van Buren Township was renamed the Grace Lake Corporate Center.

Van Buren Township back in court in Visteon headquarters bond battle Lawsuit seeks to collect on shortfall tied to corporate campus BY DUSTIN WALSH AND ANNALISE FRANK

Van Buren Township is returning to court in its yearslong bond dispute against its largest corporate resident, Visteon Corp. The township filed suit against the auto supplier last week in Wayne County Circuit Court to collect on a bond shortfall tied to the construction of its 263-acre campus near Ecorse Road and I-275, according to a news release and publicly filed complaint. The township originally sued four years ago, but the case was dismissed. It is trying again now that the gap between bond payments and tax revenue from the corporate headquarters isn’t just theoretical: The first shortfall payment came to pass this fall. The small, rural township originally filed suit in 2015 alleging the multinational auto supplier breached its contract over bonds used to construct its campus. The township claimed Visteon (NASDAQ: VC) was legally obligated to cover the shortfall, which is now projected at $28 million. In the original lawsuit, the shortfall was projected at $29 million by 2019 and city services and residential taxes were at stake, Linda Combs, then-township supervisor, previously told Crain’s. The township has since restructured its bond agreement to shrink the shortfall. Visteon has contended it isn’t obligated to cover it. A circuit judge dismissed the case in February 2016, saying the township cannot sue for an injury, or shortfall, that it had not yet realized. The appeals court agreed in 2017 and the Michigan Supreme Court dismissed the case in March. However, all three courts said the western Wayne County township could refile the complaint when a shortfall occurred. The first shortfall occurred Oct. 1, according to the township’s attorney, Kaveh Kashef of Detroit-based Butzel Long PC, and the complaint filed Monday. It totaled nearly $619,000. The township directed taxpayer dollars through its development finance au-

thority to make the bond payment. That money, operating cash, would otherwise have been for township services. The next semiannual payment will be this spring. “Our expectation is that the court is going to interpret ... that Visteon has an obligation to assist the township,” Kashef told Crain’s. “Visteon was the beneficiary of massive tax breaks ... We expect the court to honor Visteon’s promise now that the shortfall has occurred ... and help avoid the township from having to pull all that cash away from township services.” Van Buren Township Supervisor Kevin McNamara said in the release that Visteon is “still stonewalling us” and allegedly “leaving taxpayers to pick up the tab.” The complaint says that Visteon allegedly agreed to help with a shortfall

“OUR EXPECTATION IS THAT THE COURT IS GOING TO INTERPRET ... THAT VISTEON HAS AN OBLIGATION TO ASSIST THE TOWNSHIP.” —Kaveh Kashef, attorney, Butzel Long PC

both parties knew would occur when the township assisted Visteon in bankruptcy in 2009-10 by reducing the headquarters campus’s taxable value by $105 million to $30 million. A Visteon representative said the company declined to speak on pending litigation. In an Oct. 8 letter from Visteon’s counsel, J. Benjamin Dolan of Dickinson Wright, to Kashef, Dolan wrote that Visteon’s position had not changed. The letter was included as an exhibit with Monday’s complaint. The township had in the past acknowledged “the weakness of its interpretation of the (2010) agreement,” Dolan wrote, adding that Visteon was not given enough information on the calculation of the shortfall and that the calculation didn’t seem to comply with the agreement.

Hot commodity The lakeside Visteon development opened in 2004. When the Visteon Village campus was envisioned, it wasn’t known that Visteon would ultimately end up in bankruptcy court or that the commercial real estate market would deteriorate after the national financial meltdown of 2007-09. Visteon was a hot commodity for local economic development managers following its spinoff from parent company Ford Motor Co. in 2000. Communities were eager to lure the automotive supplier in hopes of securing a windfall in property taxes. Van Buren Township agreed to pay $22 million toward the project using proceeds from 30-year tax increment financing bonds. The total bonds issued for the project were $29 million. On its end, Visteon agreed to spend $270 million toward the Visteon Village buildout. The company initially expected Visteon Village to be home to more than 4,000 employees. Visteon currently employs fewer than 1,000 at the site. The township projected the assessed value of the property to be $300 million with a taxable value of $150 million. But by 2006, tax revenue from the property was already failing to meet bond payments. Further complicating the matter, Visteon sold its headquarters in 2012 to the New York real estate firm Sovereign Partners LLC for $81.1 million. Visteon remains a tenant at the site. In September 2013, Van Buren Township asked Visteon to begin negotiations toward a shortfall payment. The shortfall payment, the paymentin-lieu-of-tax the company ultimately offered, was just $6,125.06. Further negotiations failed to produce an agreement, leading to the 2015 lawsuit. In 2018, Visteon reported net income of $162 million on revenue of $3 billion. Contact: afrank@crain.com; (313) 446-0416; @annalise_frank Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh

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An approximately 43,000-square-foot Meijer store planned at 1475 E. Jefferson Ave. will not have a residential component due to rising construction costs. | KIRK PINHO/CRAIN’S DETROIT BUSINESS

We’re on it.

Apartments scrapped from East Jefferson Meijer project Project now focuses on grocery store, parking BY KIRK PINHO

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around the city. The Meijer project, 1475 E. Jefferson It turns out you won’t be able to live Ave., was first revealed in October 2017 above the Meijer Inc. grocery store with the intent to have it open by now, planned for years on East Jefferson Av- but a tough labor market has driven up construction costs, sending developers enue after all. Dennis Archer Jr., one of the proj- back to architects and other contracect’s developers, told Crain’s that the tors to cut costs to fit within budgets 213 units that had been part of the orig- that in some cases were set more than inal plan for what at the time was a $60 a year in advance. Today, the 2.5-acre million development are no longer in site where the store and apartments the cards, meaning that only the ap- were to sit remains vacant at East Jefproximately 43,000-square-foot gro- ferson between Rivard and Riopelle cery store and parking is part of the vi- streets. Archer said the decision to abandon sion at this time. He said construction costs have ballooned by 30 percent but the apartment component came this summer. He says rents haven’t kept the plan is now pace, meaning “THE BOOM THAT IS “getting in the that the residenground in the tial wouldn’t be HAPPENING IN DETROIT IS as soon as financially viable. A POSITIVE ONE WITH ALL spring the weather “We are entrebreaks.” preneurs, and THE ACTIVITY, BUT ONE OF In an email, he while it is importsaid construction ant that we deliver THE BYPRODUCTS OF THAT is anticipated to a great grocery IS THE SUPPLY AND be complete by option for LafayJune 21, 2021. He ette Park and the DEMAND SHIFT IN THE declined to reveal broader area, as TRADES TO EXECUTE THIS the new cost of well as we would the development have loved to de- BUSINESS.” and the financing liver quality — Dennis Archer Jr., one of structure. apartment living, the project’s developers The project is a the increase in expense associated with ground-up de- joint venture between Archer Jr. and velopment at that scale in Detroit ... we Bloomfield Hills-based Lormax Stern saw pricing go up 30-plus percent and Development Co. LLC. Grand Rapunfortunately the numbers didn’t pen- ids-based Prime Development had cil with that increase,” Archer said. been a project partner but Archer did “The boom that is happening in Detroit not identify them as one in an email is a positive one with all the activity, but this weekend, although it is still feaone of the byproducts of that is the sup- tured on the Prime Development webply and demand shift in the trades to site. A voicemail was left with Marcel execute this business. You’ve seen Burgler, head of Prime Development, multiple projects either placed on hold seeking comment. Archer said in an email that Bingor permanently shelved and it’s important to us to deliver as much of the ham Farms-based Rogvoy Architects PC is the project architect while Lorvision as possible.” It’s the most recent Detroit develop- max Stern is the general contractor/ ment to be restructured or reimagined, construction manager. Previously, Defollowing the tabling of condos in the troit-based Neumann Smith ArchitecTechTown neighborhood by De- ture was the project architect while troit-based The Platform LLC; a Brush Detroit-based Clark Construction Co. Park mixed-use project by John Rhea was the general contractor. The project has been in the works for and Schostak Bros. & Co. with hundreds of residences being dropped; an- about six years and would bring the other scrapping of condos in lieu of a city its third Meijer, after a pair of fullCambria Hotel by the Means Group sized locations opened at Eight Mile Inc. and Holdwick Land Development Road and Woodward Avenue in 2013 LLC; a fluctuating design vision for the and Grand River Avenue and West site of the former J.L. Hudson’s depart- McNichols in 2015. Those supercenter locations are ment store and a redesign of the Monroe Blocks project, both by Dan Gil- substantially larger than the planned East Jefferson store, which is expected bert. Many others have faced delays to only sell groceries.

NONPROFITS

City of Detroit, Quicken Loans fund aim to simplify permit, inspection processes Response to demand for business licenses, commercial building permits BY ANNALISE FRANK

Business owners looking to set up in Detroit used to be required to put down their address more than 70 times across various forms. Now, that’s down to three. Quicken Loans Inc.’s philanthropic arm has helped Detroit’s building department adapt its notoriously difficult permitting and inspection processes to speed up and simplify construction and opening a business. The Quicken Loans Community Fund and Buildings, Safety Engineering and Environmental Department announced the public-private partnership Thursday afternoon. The city and Quicken Loans say the changes include making municipal offices easier to navigate, creating a “Quick Start Permitting Guide,” improving online capabilities and redesigning forms to make them less laborious. Around 80 percent-90 percent of businesses’ work can now be done online, department Director David Bell said at the event. “All these things put together will make Detroit stand out in getting customers to the finish line,” Bell said. The city wants to respond to increasingly high demand for new business licenses and commercial building permits as more people want to set up shop in Detroit. BSEED has issued 22,000 business licenses and 3,000 commercial building permits since the beginning of 2015, according to a news release. Business owners often malign city approval processes for slowing their opening timelines. Quicken Loans and real estate mogul Dan Gilbert’s portfolio of companies know how to navigate city processes — Gilbert’s Bedrock is the city’s most dominant landlord and its four biggest, current development projects are publicly pegged at more than $2 billion. The Quicken Loans fund, however, gets complaints of confusion from the entrepreneurs it works with, according to fund Vice President Laura Grannemann. The fund approached the city, which had already begun reforms, according to Bell. The Quicken Loans Community Fund, part of Gilbert’s portfolio, has invested more than $200 million in various causes including tax foreclosure, unemployment, and entrepreneurship-boosting efforts such as Quicken Loans Detroit Demo Day and the holiday-season Downtown Detroit Markets. For this latest project, the fund has contributed $90,000 in funding and in-kind services, and an undisclosed number of person-hours over three years. Work is nearly complete. The philanthropic arm hired Alex Johnston, founder of Detroit-based civic design consultancy Cities Reimagined, to make the process “human-centered,” Grannemann said. They did that by following businesses through the process and assessing what went wrong. The changes include: ` Updating the design of the building department’s offices with color-coded “wayfinding” signage and directional pathways painted onto the floor. ` Redesigning forms, aiming to mak-

ing them quicker to complete. For example, the number of forms a business needs to fill out in order to open is down from 85 to around 35. And they need to write their names once. ` Making a “Quick Start Permitting Guide” that describes steps required to open. ` Creating a new online platform that “has a very TurboTax feel to it,” with more common language and less jargon, Johnston said.

` Employing Open Counter, a tech company whose platform walks users through the permitting process steps and estimates fees; this saved the department 400 staff hours in the last two months, Johnston said. ` Giving in-the-field inspectors mobile devices so they can more quickly manage inspection results. Contact: afrank@crain.com; (313) 446-0416; @annalise_frank

The building department’s offices have been updated with color-coded signage and directional pathways to guide business owners to the right counter or office. | ANNALISE FRANK/CRAIN’S DETROIT BUSINESS

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COMMENTARY

LARRY PEPLIN FOR CRAIN’S DETROIT BUSINESS

Enact solutions to prevent repeat of budget debacle

Gov. Gretchen Whitmer

Whitmer back to drawing board on road funding LANSING — Democratic Gov. Gretchen Whitmer is working on a new long-term road funding plan she plans to unveil next month after her 45-cents-per-gallon fuel tax proposal flamed out in a Republican-controlled Legislature that never publicly proposed an alternative solution to the state’s crumbling roads. Whitmer said last week that she’s gathering input from transportation experts to put forward “a thoughtful plan” in January in a bid to restart negotiations. “I will be moving forward with some new ways to address the problem after the first of the year,” Whitmer told Crain’s. The governor declined to say whether the new plan would include some form of bonding for road improvements. As a candidate for governor in 2018, Whitmer floated a plan to issue up to $20 billion over 10 years in new state debt to fund road improvements to draw $10 billion in federal funds. Whitmer also con“I WILL BE tinued to defend her MOVING decision to veto $375 FORWARD WITH million in one-time funds Republicans SOME NEW WAYS wanted to use to fill TO ADDRESS THE potholes and rebuild four crumbling bridgPROBLEM AFTER es she toured this year, including the DepresTHE FIRST OF sion-era Miller Road THE YEAR.” bridge in Dearborn. “That was a gim— Gov. Gretchen mick,” Whitmer said. Whitmer “It was the same kind of gimmick that has been played here in Lansing for decades — and it’s exactly why we have the infrastructure crisis that we have.” Like her 2018 campaign slogan vowing to “fix the damn roads,” Whitmer’s first year in office has largely been defined by her pursuit of a long-term solution to stopping the rapid deterioration of state and local roadways. Whitmer’s first budget plan banked on getting a $2.5 billion fuel tax hike to put $1.9 billion more annually into roads and generate additional funding for K-12 schools, public universities and skills-training programs.

Chad

LIVENGOOD

Lawmakers largely nixed Whitmer’s priorities, resulting in the standoff that culminated with the governor’s sweeping $941 million in line-item vetoes and $625 million in transfers. The Legislature last week restored $574 million of the vetoed funds for a wide range of programs, including payments to rural hospitals, county sheriffs for jails and patrols, private college scholarships and charter schools. On Wednesday, the House and Senate appropriations committees reversed $82.3 million of Whitmer’s budget transfers as part of a deal over her use of the State Administrative Board, a panel that operated in obscurity until Whitmer used it to rewrite budgets. The supplemental budget deal, which includes some new budgetary oversight powers for the Legislature, ends the testy rhetoric that has defined the standoff. “I think the governor gets a functioning budget,” said Sen. Curtis Hertel Jr., a East Lansing Democrat who helped negotiate the truce. What didn’t get restored last week was the $375 million for roads. Funding for the Pure Michigan campaign and Going Pro skilledtrades training program also remains at zero. Senate Majority Leader Mike Shirkey, R-Clarklake, appears to be not yet ready to commit to additional budget restorations, much less a road-funding deal after negotiations with Whitmer broke down this summer when she refused GOP proposals that included refinancing teacher pension payments. “I’m happy with where we’re at right now,” Shirkey told reporters. “And then I can start to think about what I’m going to get my wife for Christmas, and I’m not going to think about the next supplemental between now and January.” Contact: clivengood@crain.com; (313) 446-1654; @ChadLivengood

Michiganders have resoundingly opposed the governor’s proposed $2.8 billion tax increase on Michigan drivers, families, seniors, and small businesses. For months, the Sen. Aric Nesbitt governor pushed these massive tax increases, and represents the 26th state Senate for months, it was rejected by lawmakers as well — District, which includes Allegan including those in the govand Van Buren ernor’s own party. The counties, as well House Democratic leader as the city of even called the governor’s Kentwood and tax increase proposal “exGaines treme.” Township in As discussions continKent County. ued, it became more and more apparent that such a drastic tax increase was not going to happen. The governor reacted by refusing to negotiate and threatened to veto any budget the Legislature sent to her. She then walked away from the negotiating table during the final two weeks of the budget’s formulation and prohibited her departments from communicating with legislators as budgets were being finalized. As if this didn’t burden the budget process enough, she ultimately issued a historic number of vetoes, then took it a step further by transferring $625 million in additional funding away from state programs as she saw fit. In other words: Your money was moved without you having a say in where it goes. Your voice, through your elected officials, was ignored. I joined my colleagues in voting to restore a

LETTER TO THE EDITOR

At SCORE, small business matters TO THE EDITOR: As Don Jones of the New Economy Initiative reminded us in a Letter to the Editor in the Dec. 8 issue of Crain’s Detroit Business, small businesses in Detroit’s neighborhoods are growing steadily thanks to the dedicated efforts of organizations such as the Osborn Neighborhood Alliance, Grandmont Rosedale Development Corporation and TechTown, among others. These Detroit-based organizations are among the many that leverage the resources of SCORE Detroit, which is committed to creating a robust small business economy within the city of Detroit and across southeast Michigan by connecting aspiring entrepreneurs and established small businesses with skilled mentors and subject matter experts. SCORE Detroit’s unique — and free — mentorship program matches accomplished business executives with entrepreneurs to guide them in acquiring the skills and knowledge they need to be successful. SCORE Detroit has been serving southeast Michigan for decades, with a significant focus on Detroit neighborhoods. In

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited for length or clarity. Send letters to Crain’s Detroit Business, 1155 Gratiot Ave, Detroit, MI 48207, or email crainsdetroit@crain.com. Please include your complete name, city from which you are writing and a phone number for fact-checking purposes. 8 | CRAIN’S DETROIT BUSINESS | DECEMBER 16, 2019

total of $573.5 million of the governor’s vetoed funding and administrative transfers. While we didn’t restore all of the vetoes and transfers, the legislation we passed focuses on restoring funding to the most important state services. The bills would restore funding to treat Alzheimer’s, autism and opioid addiction. Cuts to sheriff road patrols that aid local police departments and rural and critical care hospitals would also be restored, and charter and rural schools would receive the payments they were expecting. The Senate also approved measures that would limit any governor’s ability to unilaterally move money and set in statute a deadline of July 1 for the Legislature to present a budget to the governor. Thankfully, the threat of huge tax increases has been stopped and the budget is now on a good track to be finalized — with much of the vetoed or transferred funding being restored. As we move forward, we need to consider a few solutions that I think will help prevent what we have seen this year from happening again: `One: Enact balanced budgets early that fund our priorities. This occurred for eight years in a row, until this year with our new governor. `Two: Stop trying to raise taxes on the hardworking people of Michigan. The governor’s proposed gas tax hikes would hit low and middle-income families the hardest, and the governor’s small business tax increase would slow our economy and destroy jobs. `Three: Require that funds appropriated in the state budget actually go to the intended purpose. For any governor to simply shift tax dollars to their favorite projects, overriding the law passed by the people’s elected representatives, is wrong. It creates distrust and certainly doesn’t set the stage for successful negotiations.

addition to providing mentors, the nonprofit regularly hosts sold-out workshops at 16 locations across southeast Michigan. SCORE Detroit’s regular CEO Roundtable sessions also offer insights on a variety of business topics from the area’s business leaders, along with networking opportunities for small business owners to share best practices with one another. We invite anyone looking to establish or grow a small business here in southeast Michigan to take advantage of the many business resources available through SCORE Detroit starting with detroit.score.org. And, because there are so many clients to serve, SCORE Detroit is always looking to recruit business professionals interested in giving back. Donna Hover–Ojeda SCORE Detroit co-chair

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.

Sound off: Crain’s considers longer opinion pieces from guest writers on issues of interest to business readers. Email ideas to Managing Editor Michael Lee at malee@crain.com.

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OTHER VOICES

Leasing The Boulevard next test of Detroit’s housing turnaround BY DAVID GUENTHER

The Boulevard, a 231‐unit housing development, opened in early December in Detroit and marked the first new apartment building in New Center David Guenther in 30 years. While many reworks in commercial real joiced, citing the event as further estate investment sales proof of Detroit’s and is founder of progress, far more the Detroit: City important to the city’s trajectory is Resurgent blog, how ownership, a where he writes group known as about local The Platform, development, fares over the urbanism and coming months. politics. Having completed construction, ownership will now turn their attention to leasing and, in this case, it will be no small feat. Despite a market occupancy of 98 percent in Midtown, 231 units represents a significant amount of supply being dumped into a comparatively small, low‐velocity market. Per CBRE, as of 2019Q1, downtown Detroit’s entire apartment stock consisted of just 8,609 units, only 1,509 of which were considered “Class A," representing the highest quality unit. The Boulevard fits this distinction, meaning that its arrival will mark a 15 percent increase in total Class A supply. The speed at which The Platform completes leasing will be a meaningful bellwether of the strength of the market; quick lease‐up with few concessions would signal unsatiated demand and the need for additional development. Alternatively, persistently low occupancy hampered by generous free rent offerings will likely indicate the end of housing construction for this economic cycle. Per Yardi Matrix, 53 of the units at The Boulevard were pre‐leased and currently it remains just 23 percent occupied. Ownership’s success during the upcoming spring‐summer leasing season will be crucial and is something prospective developers will be watching closely. Looking ahead, after lease‐up has concluded, the next, and potentially final, step of their involvement will be exploring the capital markets. Upon stabilization, ownership has two choices: selling the property entirely or refinancing out of their construction loan with long‐term, low‐ interest permanent financing. While this sell vs. hold decision might seem inconsequential, in reality most real estate developers are not proficient at managing completed assets and choose to do so only if they fail to receive adequate bids during the sale process. Given the number of projects The Platform is undertaking, they might be content to hold long term, but for most groups, deals are successful only if they exit on time and achieve their forecast pricing. This is where the Detroit multifamily market faces its biggest test. According to Crain’s, The Boulevard cost $60 million to build, or nearly $260,000/unit. Going back to 2001 though, the highest price paid for a multifamily asset in Detroit is

This uncertainty casts an enorjust $218,000/unit, per research from mous shadow over future construcReal Capital Analytics. In order to be made whole, owner- tion in Detroit. Without a track record ship will need to at least cover its ba- of sales to reference, institutional sis in a sale and, given the risk inIF NEW APARTMENTS ARE TO herent to ground‐up de- PROLIFERATE IN DETROIT, A CRUCIAL velopment, will likely be seeking STEP TO COMBATING GENTRIFICATION, a 20 percent-plus THE POOL OF ACTIVE PLAYERS MUST BE return on investment. Add up the EXPANDED TO INCLUDE GROUPS HAILING numbers and FROM OUTSIDE THE REGION. you get upward of a 40 percent premium over the buyers will struggle to convince their highest sale in the city’s recent histo- investment committees to sign off on acquisitions while local developers ry.

will labor to get financing for projects as their capital partners opt for proven markets like Chicago. For years these same issues have also plagued Detroit homeowners seeking residential mortgage comps. For an example of this dilemma, look down Woodward to The Scott at Brush Park. Built for $65 million ($326,000/unit), owner Broder & Sachse listed the asset for sale in 2018. After presumably failing to secure sufficient pricing, ownership opted to re‐finance in early 2019 and are now holding it. While The Platform and Broder & Sachse are active local operators with the capabilities to keep projects, most

ACCELERATING TOWARD A CLEANER FUTURE

developers will hesitate to plant their flag in Detroit if they don’t believe they can exit. Looking ahead, if new apartments are to proliferate in Detroit, a crucial step to combating gentrification, the pool of active players must be expanded to include groups hailing from outside the region. With the option to pick any domestic market, national investors need to be comfortable that if they commit money to the city, they are going to get it back in measured time. At least for now, the successful lease‐up and disposition of The Boulevard remains the best signal the city could send.

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reduction goal, cutting emissions in half by 2030, and by 80% a decade earlier than planned. And we’re doing it while providing affordable and reliable energy. Together, we can speed Michigan toward its cleaner energy future.

Learn how you can get involved at journeyto80.com DECEMBER 16, 2019 | CRAIN’S DETROIT BUSINESS | 9

C to

OUTLOOK 2020

A peek into the future

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Local leaders offer a view of what they see for 2020

hat will happen in the future is anyone’s guess, but some people make better guesses than others. We asked a handful of the region’s most interesting people to tell us what to watch for in the year ahead — and the choices we must make to ensure a bright future for everyone.

RADIO82/ISTOCKPHOTO ILLUSTRATIONS BY CRAIN’S DETROIT BUSINESS

TONYA ALLEN PRESIDENT AND CEO, SKILLMAN FOUNDATION

All Michigan schools should be winners BY SHERRI WELCH

new state law requiring schools in Michigan to hold back third-graders who aren’t reading at grade level is set to take effect at the end of the 20192020 academic year in June. The looming law has brought new urgency to the issue over the past couple of years, both in Detroit — where just 16 percent of third-graders are reading at grade level — and statewide, where less than 45 percent are. Efforts involving foundations, nonprofit tutoring and literacy service providers, public and business leaders have taken shape over the last year or two to identify ways to help the large number of struggling students. The Detroit-based Skillman Foundation has been at the fore-

front of them. Third grade reading literacy has been a main area of focus for Skillman for the past five years, President and CEO Tonya Allen said. That’s because the foundation sees literacy as a bellwether on whether education is improving, both in Detroit and statewide, said Allen, who co-chairs the steering committee of Launch Michigan, a coalition of businesses, educators, parents, labor, philanthropy and civic leaders focused on improving education. “This year, as the third grade law comes into effect ... you will see the state lower the bar by changing the cut score. That’s good in one sense because we don’t want to ... have students penalized because schools aren’t delivering high-quality education ... but it (could) take pressure

10 | CRAIN’S DETROIT BUSINESS | DECEMBER 16, 2019

“ONE OF THE THINGS THESE RECOMMENDATIONS WILL DO IS FOCUS ON ALL SCHOOLS BEING WINNERS … WE NEED TO HAVE STATE POLICY AND FUNDING ALIGNED FOR THAT TO BECOME REALITY.” — Tonya Allen, president and CEO, Skillman Foundation

off schools at getting stronger and better. (Advocates) will be working on making sure early childhood education is available to kids ... to increase student attendance ... (and) to make sure we have literacy embedded in community ... in after-school and summer programs. “Over the last few years, lots of people are piloting programs to help schools get better at literacy instruction. Now you’ll see (efforts) to scale that work in school and in youth programming ... The state has designed public policy to shame low-performing schools and not support them. Launch Michigan will have recommendations coming out in December. One of the things these recommendations will do is focus on all schools being winners … we need to have state policy and funding aligned for that to become reality.”

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FOCUS | OUTLOOK 2020 WAYNE BROWN, PRESIDENT AND CEO, MICHIGAN OPERA THEATRE

Cultural groups must continue to focus on inclusivity, accessibility BY SHERRI WELCH

“MAKING SURE AUDIENCES FEEL ATTRACTED, ENGAGED, WELCOMED IS SOMETHING WE MUST DEVOTE OUR TIME AND ATTENTION TO (TO) REMAIN RELEVANT.”

iversity, equity and inclusion have been core to the Michigan Opera Theatre since its early days under late founder David DiChiera. They’ve also been a focus of MOT President and CEO Wayne Brown since his early career when he helped the Detroit Symphony Orchestra launch its first Classical Roots concert. More recently, they’ve become a financial imperative — as well as a mission imperative — for all cultural groups to ensure they are inclusive and accessible, from their boards, staff and volunteers to their programs and where they stage performances and exhibitions. The charge to be inclusive and accessible will continue in the coming year for arts and culture groups, for sure, but other nonprofits, as well, Brown said. It will require an ongoing investment “in all of our work, whether the opera company, a local church or the local community center,” he said. “Broadly, it’s devoting more attention to making sure our programs resonate with audiences ... that we can align our work with the resurgence that’s currently underway in our community ... It’s a continuing evolution of how we invest in arts and culture as well as what steps are being taken to ... make sure what we present, what we do connects with our audience within our immediate circle and beyond. It’s deepening our commitment, expanding our reach, devoting more time and attention (and) providing context for our audience ... for a production. Making sure audiences feel attracted, engaged, welcomed is something we must devote our time and attention to (to) remain relevant. By remaining relevant, it enables us to attract audience, subscribers, donors, to inspire young people … and to provide a level of satisfaction and entertainment. That’s part of our mission.”

Norman A. Yatooma ATTORNEY AT LAW

• • •

NYA won MI’s largest judgment in 2018. NYA won MI’s largest legal malpractice judgment of all time. NYA won the largest franchise settlement in MI’s history.

—Wayne Brown, MOT President and CEO

For Help Minding Your Own Business, Contact Us for a Free Consultation. (248) 481-2000 | normanyatooma.com Sources: Thompson Reuters Westlaw Edge Case Evaluator Report for Largest Legal Awards and Lexis Nexis Settlement and Verdict Analyzer

DAVID COULTER, OAKLAND COUNTY EXECUTIVE

Rethinking Oakland County for an aging population “WE HAVE A LOT OF GREAT PROGRAMS... BUT WHAT WE HAVEN’T DONE IS LOOKED AT THE OVERARCHING GOALS, STRATEGIES AND MEASURES.” — David Coulter, Oakland County executive

BY KIRK PINHO

t’s the day before Thanksgiving and David Coulter is noshing on some salad and pizza at Como’s in downtown Ferndale. The new Democratic Oakland County executive came to power after an unexpected circus of events that started after the death of his Republican predecessor, L. Brooks Patterson, in August from pancreatic cancer. It’s been a decade that has seen the county’s political winds shift decidedly Democratic after it was a reliable Republican stronghold for years, and promises a new decade of challenges that include how to deal with an aging population. “By 2030, a quarter of Oakland County’s residents will be 65 or older,” Coulter said. “That’s going to require us to change things that we are doing in a way that we are just sort of beginning to grapple with ... That’s going to change the types of services we need to provide. It makes it even more important for transit and other mobility options.” But first things first: In order to be at the helm implementing those changes, Coulter first needs to be elected. After a few months weighing whether he would seek a full four-year term as CEO, he decided to throw his hat in the ring against Treasurer Andy Meisner, who declared his candidacy early this year and to date has a large fundraising advantage that Coulter feels he’ll be able to overcome. Coulter will kick off 2020 with his first — and, if he loses, only — State of the County address in February, during which he anticipates discussing, among other issues and priorities, the contours of an economic development strategic plan for the county. “We have a lot of great programs — Medical Main Street, (Main Street Oakland County) — but what we haven’t done is looked at the overarching goals, strategies and measures. If we are successful in our economic development, what does that look like in terms of numbers, in terms of jobs, things that we bring into the county? Interestingly, that doesn’t really exist today.” DECEMBER 16, 2019 | CRAIN’S DETROIT BUSINESS | 11

FOCUS | OUTLOOK 2020 KENNETH HARRIS PRESIDENT AND CEO, NATIONAL BUSINESS LEAGUE

KEV

Business community must be inclusive to be competitive BY ANNALISE FRANK

ighty percent of black business owners feel excluded from Detroit’s wave of economic growth. That’s according to a 2019 survey from the Detroit Coalition for Economic Inclusion, a group under the National Business League that’s pushing to give black-owned companies more representation in a city whose residents are roughly 80 percent black. Kenneth Harris, president and CEO of the National Business League, sees those results from 100 “leading” black-owned businesses as a final, not-so-subtle nudge that will push Detroit and Michigan’s leaders to prioritize inclusion in the coming year. The U.S. will be a minority-white country by 2045, Census projections indicate. Harris cites that prediction to argue that right now, Detroit and Michigan need to seize the opportunity to truly funnel attention toward black- and minority-owned enterprises. Harris, who co-founded the Michigan Black Chamber that has been folded into the 120-year-old NBL, says now the NBL and others are using more data to prove the need for structural change in hiring, contracting, corporate responsibility and philanthropy, inclusion on boards and more. The NBL has more than 100,000 members and operates 365 local leagues. In February it will launch a new membership drive called the

Million Black Business Movement, to target the U.S.’s approximately 2.9 million black businesses. “The results of (the DCEI survey) were pretty demoralizing and startling. Now that we have notified (Gov. Gretchen Whitmer, Mayor Mike Duggan and Wayne County Executive Warren Evans) that we have a lot of work to do, I predict that is going to be a primary focus. “I think we’ve received positive responses from (government officials) that they are going to do what they can ... Next year we’ll be highlighting the problems and calling together all key stakeholders ... to have a real discussion in Detroit and Michigan regarding inclusive policies that eliminate barriers to entry. “The narrative and framework for the discussion ... is going to come from the actual community (of black business owners), as opposed to institutions that have not done a very good job in terms of inclusion and equity. Black businesses have to be at the table, as in the next 20-30 years, the majority of this country will be black and brown. If Detroit and Michigan are to remain competitive, (they) must have an inclusive and diverse pool of business owners. “Now we are actually measuring black business participation and equity. The future process will definitely be data-driven and evidence-based. It’s important that you have a scientific approach to eliminate the lack of inclusion. And that’s how we’re going to move the needle in the future.”

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“IT’S IMPORTANT THAT YOU HAVE A SCIENTIFIC APPROACH TO ELIMINATE THE LACK OF INCLUSION. AND THAT’S HOW WE’RE GOING TO MOVE THE NEEDLE IN THE FUTURE.” —Kenneth Harris, president and CEO of the National Business League

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RICHARD CZUBA, OWNER, GLENGARIFF GROUP INC.

Keeping an eye on voter motivation in 2020 BY CHAD LIVENGOOD

hile everyone is focused on head-to-head matchups in the 2020 presidential election, Richard Czuba’s eyes are glued to polling data about Republican and Democratic voters’ motivation to actually get out and vote next November. Czuba, owner of the Lansing-based polling firm Glengariff Group Inc., asks respondents in his surveys to rank their motivation to vote on a scale of 1-10, with the 10 being the highest. In his most recent polling work for private clients, Czuba said voters who identify as strong Democrats are clocking in at 9.8 and strong Republican voters registered 9.6 on his voter motivation scale. “Everybody’s jacked,” he said. “Even independents are jacked.” Czuba predicts the 2020 general election will break Michigan’s previous record turnout of 5 million votes cast set in 2008, when a surge of new voters helped make Barack Obama the nation’s first black president. 12 | CRAIN’S DETROIT BUSINESS | DECEMBER 16, 2019

“WHAT I’M KEEPING MY EYE ON IS WHEN THE DEMOCRATS CHOOSE THEIR NOMINEE, DO THEY RETAIN THAT MOTIVATION TO VOTE? ” — Richard Czuba, owner, Glengariff Group Inc.

The overarching factor in 2020 is President Donald Trump. With Democrats having an advantage over the GOP in total potential voters, how motivated they remain throughout 2020 to unseat the incumbent Republican president will decide who wins Michigan’s 16 electoral votes next year, Czuba said. “What I’m keeping my eye on is when the Democrats choose their nominee, do they retain that motivation to vote? Because if that motivation to vote begins to slouch, if it starts to fall, that’s when the door gets opened to Trump winning Michigan again. That’s how it happened in 2016. … This election, and everyone’s visceral reaction for or against Donald Trump, is what’s motivating every voter. (But) what do we start to see in motivation numbers once the Democrats choose their nominee? Do they unite? Democrats control all of the cards. You vote, you win. You start to slack off, you start to say, ‘Oh, I don’t like that person,’ that opens the door to Trump.”

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KEVIN JOHNSON, PRESIDENT AND CEO, DETROIT ECONOMIC GROWTH CORP.

Expect skilled trades market to open up BY KIRK PINHO

labor shortage has scuttled development projects around the city and forced developers back to the drawing board as construction costs have risen. But Kevin Johnson, president and CEO of the Detroit Economic Growth Corp., says that in 2020, construction trades training programs should start bearing fruit as some of those trainees start entering the labor market. If that happens, that should help ease the upward pressure on construction costs. Time will tell, though. And it will have been too late for some. The shortage this year alone has made victims of residential and other developments around the city worth hundreds of millions of dollars. In the TechTown neighborhood, a condo project by The Platform LLC has been shelved. Another downtown condominium project by Means Group Inc. and Holdwick Land Development LLC was converted into a hotel. Apartments in Brush Park by John Rhea and Schostak Bros. & Co. were scrapped. The residential component of a new Meijer Inc. grocery store has been scrubbed from the project programming by Dennis Archer Jr. and Lormax Stern Development Co. LLC. Two of Dan Gilbert’s signature developments have been in a state of design flux for a variety of reasons, including the labor shortage driving up costs. “The developments that haven’t happened, it’s not uncommon in an urban market like that, to have those kind of projects” that are delayed, Johnson said. “None of those projects are what I call microwave projects, meaning that you announce them and 12 months later they are up. These are slow cooker projects.” Skilled trades have been battered for years as the 2008 recession ground construction to a halt, causing workers to seek employment elsewhere or in different fields. And a decades-long emphasis on two- and four-year college degrees has kept a generation of students from considering a career in the skilled trades. But Johnson is optimistic about the near-term future.

“NONE OF THOSE PROJECTS ARE WHAT I CALL MICROWAVE PROJECTS...” — Kevin Johnson, president and CEO, Detroit Economic Growth Corp.

“What we’re hoping is that the output that comes through the training of those trades and that workforce begins to make itself available to those who need those skilled trades, and I think we’ll see more of that happen in 2020. “There are programs that had been activated within the last two years where the training itself was over six, nine months and those folks are beginning to graduate out of those systems.”

MARTIN MANNA, PRESIDENT, CHALDEAN AMERICAN CHAMBER OF COMMERCE

Making sure Chaldeans count in Census “THE NEXT GENERATION IS NOT JUST YOUR CORNER GROCERY STORE.” — Martin Manna, president, Chaldean American Chamber of Commerce

BY KURT NAGL

he Chaldean community in metro Detroit has grown into the largest outside of Iraq, its war-torn native land from where hundreds of thousands have fled since the early 2000s. In metro Detroit, the community faces unique challenges, from deportation and accurate representation in the upcoming U.S. Census to the vaping bans hurting Chaldean-owned smoke shops, said Martin Manna, president of the Chaldean American Chamber of Commerce. Manna said the Chaldean community has changed drastically over the past decade and is poised to play an increasingly important role in the region’s business sector. One of his goals in 2020 is to make people realize it. Manna said most independent supermarkets, liquor stores and smoke shops in metro Detroit are owned by Chaldeans, as are most hotels and mobile phone stores in the state. “It’s a growing, vibrant community,” he said. “When we first started the chamber (in 2003), we were just small merchants. The next generation is not just your corner grocery store.” The 2010 Census counted around 35,000 Chaldean residents in metro Detroit. A survey commissioned by the chamber in 2017 found the number to be around 160,000, with an annual economic impact of $10.7 billion. Manna said he is mobilizing outreach efforts and coordinating with churches and community organizations to ensure an accurate count for Census 2020. It won’t be easy. “Coming from a Middle East country where there was no trust of government, often times people would not want to participate in surveys or provide any personal information. “People need to understand the significant contributions that the Chaldean community is making here at the state and federal level. It helps with education and the fear of immigrants and refugee phobia. It helps to dispel the negative stereotypes that permeate.”

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DECEMBER 16, 2019 | CRAIN’S DETROIT BUSINESS | 13

FOCUS | OUTLOOK 2020 NICOLE SHERARD-FREEMAN, EXECUTIVE DIRECTOR — WORKFORCE DEVELOPMENT, CITY OF DETROIT

Detroit’s labor market could attract more business in coming year

BY CHAD LIVENGOOD

ayor Mike Duggan’s administration has made gradual progress in recent years in redesigning Detroit’s workforce pipeline to connect employers with talent. In 2019, the Detroit at Work program faced its first major test when Fiat Chrysler Automobiles announced plans to expand Jeep SUV manufacturing in the city and bring 5,000 new jobs to the east side by the end of 2020. As part of a community benefits agreement, FCA agreed to give Detroiters a head start in the hiring process for positions at Jefferson North Assembly Plant and the new Mack Avenue assembly plant. To help improve the chances Detroiters will get a majority of the new jobs, the city-run Detroit Employment Services Corp. developed a new mass recruitment program that had never been tried before, said Nicole Sherard-Freeman, the mayor’s executive director of workforce development who previously ran the DESC. In advertising the jobs, the city made contact with 39,000 residents

WE’RE GRITTY IN DETROIT. YOU KNOW? WE WORK HARD, WE’RE PERSISTENT AND WE NEVER GIVE UP. SO WE’RE POSITIONING THAT AS A LABOR MARKET ADVANTAGE NATIONALLY — AND IT’S WORKING.” — Nicole Sherard-Freeman, executive director — workforce development, City of Detroit

M. ROY WILSON, PRESIDENT, WAYNE STATE UNIVERSITY

— M. Roy Wilson, President, Wayne State University

Michigan needs more college graduates BY JAY GREENE

nvesting in higher education meets the needs of employers for growth and positions students for successful and rewarding lives. But Wayne State University is Michigan’s only public, urban research university not to have its state funding level restored to 2011 levels and is still down $1.8 million, said WSU President M. Roy Wilson, M.D. Adjusted for inflation, WSU is down $1 billion a year in funding based on fiscal year 2002, he said. “Our students” and the university are negatively affected, said Wilson. “The reality is, if we are going to meet the needs of employers, we need more four-year college graduates.” Wilson said he is optimistic that Gov. Gretchen Whitmer understands the importance of long-term support of higher education. She announced a statewide goal of 60 percent of Michiganders earning a postsecondary degree or certificate by 2030. Wilson said students have stepped up in various ways to help inner-city residents. For example, medical students volunteer at Street Medicine Detroit, a free

14 | CRAIN’S DETROIT BUSINESS | DECEMBER 16, 2019

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who were interested in the jobs, 12,500 of which attended a series of public events to learn more, Sherard-Freeman said. About 5,000 Detroit residents completed an application and 3,500 have been invited to interviews that began in mid-December, Sherard-Freeman said. Sherard-Freeman thinks the FCA recruitment model can be replicated in 2020 for other employers that want to be geographically closer to a larger labor pool. “I do expect that more employers outside of automotive manufacturing are going to come to grips with this whole notion of having better access to a local labor market. So we’ve seen it with a couple of manufacturing operations that are not tied to the automotive (industry) at all, that are considering and already setting up shop in Detroit because we have a reputation nationally for having a talent market that works hard. We’re gritty in Detroit. You know? We work hard, we’re persistent and we never give up. So we’re positioning that as a labor market advantage nationally — and it’s working.”

“THE STATE WILL BENEFIT AS THESE STUDENTS GRADUATE AND MEET FUTURE TALENT DEMANDS THAT WILL KEEP MICHIGAN COMPETITIVE AND GROWING.”

BY T

health clinic for the city’s homeless. This year Wayne State expects to complete several construction projects, including the STEM Innovation Learning Center, which will bring all of WSU’s science, technology, engineering and math programs into one building. “The state will benefit as these students graduate and meet future talent demands that will keep Michigan competitive and growing,” Wilson said. “The project also offers opportunities to expose K-12 students from the Detroit area to hands-on learning situations that can ignite their interest in science and technology and inspire them to pursue STEM-related careers.” Since Wilson took office in 2013, Wayne State has nearly doubled its graduation rate to 47 percent from 26 percent. The achievement was recognized in 2018 by the Association of Public and Land-grant Universities’ prestigious Degree Completion Award. “I am extremely proud of this accomplishment ... (but) we are not resting on our laurels. We are working hard to further reduce educational disparities and improve graduation rates. I am confident that we will reach a 50 percent graduation rate before 2021.”

BY D

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CHRIS RIZIK, CEO AND FUND MANAGER, RENAISSANCE VENTURE CAPITAL

Michigan’s advantage over California BY TOM HENDERSON

lawyer who helped entrepreneurs incorporate, Chris Rizik wanted to become an entrepreneur, too. In 1997, Rick Snyder engaged Rizik, then a partner at Dickinson Wright PLLC, to incorporate Avalon Investments, a venture-capital firm in Ann Arbor. He joined Snyder as his partner in 1999, and in 2000, they formed Ardesta LLC to invest in microtechnologies spinning out from universities and national labs. That year, Rizik was named to Crain’s 40 under 40. In 2008, Rizik launched Ann Arbor-based Renaissance Venture Capital Fund, a fund-of-funds affiliated with Business Leaders for Michigan that has raised more than $200 million in three funds that invest in local and national VC firms willing to do deals here. He sees opportunity in the year to come for the Michigan startup community to set itself apart from Silicon Valley. “For years, California startups have been audacious and aggressive, and they became magnets for entrepreneurial young talent from around the world. On the other hand, Midwest startups, like Midwesterners themselves, were more understated — sometimes too understated —

“OUR STARTUP COMMUNITY HAS BECOME MORE ASSERTIVE AND AMBITIOUS.” — Chris Rizik, CEO and Fund Manager, Renaissance Venture Capital

making it tougher to attract the talent and capital needed to succeed. “But a funny thing has happened over the past few years: Silicon Valley’s aggressiveness has developed into occasional recklessness, with competition for top companies and rockstar CEOs leading to historic valuation inflation, a shameful lack of corporate governance, and ultimately the embarrassments at companies like Theranos, Uber and recently, WeWork.

“Meanwhile our startup community has become more assertive and ambitious. We’ve seen game-changing successes like Duo Security and Esperion Therapeutics and a blossoming of venture-capital investment in Michigan — as of June 30, this was already our biggest year ever. Our challenge as we look to the next decade is: Can we continue to build on our successes without the baggage and excesses of Silicon Valley?”

be productive. be SW

ROBIN SCHNEIDER, EXECUTIVE DIRECTOR, MICHIGAN CANNABIS INDUSTRY ASSOCIATION

Tough row to hoe for pot businesses BY DUSTIN WALSH

“WE SHOULD BE MUCH FURTHER ALONG IN OUR INDUSTRY THAN WE ARE, BUT THE STATE BOTCHED THIS ROLLOUT. “

n activist who dedicated a decade to legalizing cannabis in Michigan isn’t happy with the rollout. After working on several political campaigns, including the unsuccessful 2002 gubernatorial campaign of Dick Posthumus, Robin Schneider was tapped by the National Patients Rights Association to be the legislative liaison to aid in legalizing medical marijuana in Michigan. After that bill passed in 2008, she set her sights on legalizing recreational cannabis as the finance director for the Coalition to Regulate Marijuana Like Alcohol ballot initiative, which was voted into law in 2018. Schneider now leads an industry association focused on protecting and lobbying for 200 of the state’s marijuana businesses. Recreational sales began on Dec. 1. Schneider, who has family members who have been impacted by strict federal and state marijuana laws, is trying to keep the victory of legalization in mind. In the long term, she sees a slow but steady build toward “a billion-dollar industry creating thousands of jobs and stimulating Michigan’s economy.” But she has concerns about what’s next in the short term. “I keep reminding myself that we’ve already won. We’ve stopped the raids. We’ve stopped people from going to prison for petty marijuana charges. But I wish I could put a positive spin on the rollout. We should be much further along in our industry than we are, but the state botched this rollout. We have lots of retail locations all over the state and not even close to enough

Birmingham, we’re

In Your Corner.

— Robin Schneider, executive director, Michigan Cannabis Industry Association

260 East Brown Street Suite 150 Birmingham, MI 48009 Main 248/567-7800 | Fax 248/567-7423

grows (licensed marijuana growers) to supply market demand. Over the next year, we’re going to see a lot of small businesses shutter because we don’t have enough inventory to keep their doors open. The reality is the

state is in desperate need of investment. It feels weird, since I spent much of my life fighting to legalize cannabis, but the state rushed to get the industry off the ground and it’s done us no favors.”

www.varnumlaw.com

August 2019

DECEMBER 16, 2019 | CRAIN’S DETROIT BUSINESS | 15

WOMEN IN LEADERSHIP

ALI LAPETINA FOR CRAIN’S DETROIT BUSINESS

THE ENTIRE PICTURE

Pamela Alexander

Pamela Alexander wants women to put themselves in the middle of the frame BY RACHELLE DAMICO

Pamela Alexander was brought up to believe she had a responsibility to make a difference in the world. “My mother was widowed when I was adopted as an infant, so I had this very strong female role model from the beginning,” Alexander said. “I knew I wanted to do something to help people, to give back, and to change the world because that was ingrained in me.” As community development director of Ford Fund, Alexander has accomplished that goal. In her role, Alexander handles the majority of the Ford Fund’s grants in the U.S. She’s responsible for implementing Ford Fund’s community development and outreach initiatives and programs with communities and organizations throughout the U.S. 16 | CRAIN’S DETROIT BUSINESS | DECEMBER 16, 2019

Alexander directs Ford Fund’s grants related to safe driving, women’s and veterans initiatives, education and community development programs. One of those programs is “Ford Driving Skills for Life,” which started in the U.S. more than 15 years ago and aims to educate newly licensed drivers about common mistakes made behind the wheel. The program has trained more than a million teenagers around the country in all 50 states and has expanded to almost 50 countries around the world. Alexander spearheaded a civil rights exhibit called “Freedom’s Sisters,” a collaboration between Ford, the Smithsonian Institution and the Cincinnati Museum Center which celebrated the lives of 20 women who fought for equality. It opened in 2008. She was also instrumental in creating Ford’s first Resource and Engagement Center, which opened in 2013

in Mexicantown Mercado in southwest Detroit. The center has helped more than 85,000 people with food distribution, tax return preparation, education and job initiatives, legal assistance and other programs. A second center opened in 2017 at Fisher Magnet Upper Academy in eastern Detroit, which provides services and opportunities to residents through education, workforce development and job training. “For everything that we’re doing, I’m always looking at it with a lens of how it’s moving the needle for the people who are receiving the service, and how it’s helping them to get opportunities and access to things that they need to make their lives better,” Alexander said. Since 1949, the fund has invested close to $2 billion globally. Last year, the company invested $67.7 million in global community programs. See ALEXANDER on Page 17

“FOR EVERYTHING THAT WE’RE DOING, I’M ALWAYS LOOKING AT IT WITH A LENS OF HOW IT’S MOVING THE NEEDLE FOR THE PEOPLE WHO ARE RECEIVING THE SERVICE, AND HOW IT’S HELPING THEM TO GET OPPORTUNITIES AND ACCESS TO THINGS THAT THEY NEED TO MAKE THEIR LIVES BETTER.” — Pamela Alexander

FOCUS | WOMEN IN LEADERSHIP

ALEXANDER

Smithsonian put together the Freedomâ&#x20AC;&#x2122;s Sisters exhibit, which honored 20 women from the civil rights era for their accomplishments. It was supposed to tour for three years, but it was such a popular exhibit we ended up extending it to four. It was also on display at the National Civil Rights Museum for an additional two years after that. From a female perspective, it was really cool to see people from around the world and the country recognize the women for their achievements. Then, everywhere the exhibit went Ford honored local women who were doing similar things. Now we have this community of Freedomâ&#x20AC;&#x2122;s Sisters around the country.

From Page 16

` How did your studies play into your career? When I went to Georgetown, I found my sociology classes extremely interesting because it was all about how people and societies relate. That was always in my head: how do people interact in a way that makes people better, and whatâ&#x20AC;&#x2122;s the nature of personal interaction? Growing up in Detroit, I was very interested in urban development. My senior thesis at Georgetown was all about the city of Detroit and how it came to be. I was always interested in why communities are the way they are, why people are the way they are, and what kind of tools are out there to help make them successful. While studying public policy at Columbia, I worked for the mayorâ&#x20AC;&#x2122;s office in NYC doing government affairs, and thatâ&#x20AC;&#x2122;s where I caught the bug. I knew my love for some type of community affairs or community relations work was what I wanted to do. My experience in finance combined with my experience in government affairs opened the door for me at Ford. Now I always tell my mentees, you have to consider the entire picture. You may not realize it at the time, but an experience can open another door for you thatâ&#x20AC;&#x2122;s completely different in life. ` What leadership lessons have you learned in your career? To be your own advocate and to develop strong relationships early on. That helped to enable my transition from finance over to government affairs. Also, finding that work-life balance. I have three kids. My youngest is a junior in high school. When my kids were younger, I was still in finance at the time, but I slowed down my career a bit because at that point, my kids were young and I wanted to be home with them. I wasnâ&#x20AC;&#x2122;t in a position where I could work until 8 or 9 oâ&#x20AC;&#x2122;clock every night. If I had, I wouldnâ&#x20AC;&#x2122;t have seen my children. I had to adjust what I was doing professionally to meet the goal that I had at that time. People say they canâ&#x20AC;&#x2122;t have it all, but you can. You just canâ&#x20AC;&#x2122;t have it all at the same time. ` Tell me about your role now. Whatâ&#x20AC;&#x2122;s your average day-to-day like? There isnâ&#x20AC;&#x2122;t an average day. As community development director, Iâ&#x20AC;&#x2122;m responsible for the majority of our community investments in the United States. I handle which of our organizations will receive grants and what those grants consist of. Itâ&#x20AC;&#x2122;s not just about writing checks, itâ&#x20AC;&#x2122;s about investing and developing in programs. On any given day, Iâ&#x20AC;&#x2122;m out in the community â&#x20AC;&#x201D; whether itâ&#x20AC;&#x2122;s here or out of state â&#x20AC;&#x201D; meeting with partners and implementing programs. As an example, this week I flew to Oklahoma City for a challenge competition where we asked Historically Black Colleges and Universities to submit proposals for mobility solutions that would help their college and their community. Thereâ&#x20AC;&#x2122;s an HBCU outside of Oklahoma City, Langston University, which is a smaller school located in an area where there isnâ&#x20AC;&#x2122;t a lot around it. The school put together a proposal to provide 30 bikes that would provide students access to the community and around campus. I come to support Fordâ&#x20AC;&#x2122;s program every year called â&#x20AC;&#x153;Midnight Breakfast,â&#x20AC;? where during study week for finals, faculty and administration serves food to the students at midnight. It was really cool, we had a DJ and I was there serving up eggs and breakfast foods to the students with the president of the

Pamela Alexander admired civil rights leaders Dorothy Height pictured here with African American leaders after a meeting in 1965 in New York. From left: Morris Dosewell, American Labor Council; Height, National Committee Negro Women; Alexander Allen, Urban League; Basil Paterson, NAACP and Bayard Rustin, director of the Philips Randolph Institute. | ASSOCIATED PRESS

university and the dean of academic affairs. There, we presented the students with the 30 bikes. Already, kids were saying, â&#x20AC;&#x153;wow, how do we use these bikes to get back and forth to class and to the city?â&#x20AC;? This role requires a lot of traveling, so itâ&#x20AC;&#x2122;s not uncommon for me to fly to California, have meetings, spend the whole day there, and then fly back that night on the red eye. The difference in being a foundation that just writes a check and one thatâ&#x20AC;&#x2122;s invested in programs is that when the programs happen, you need to be there. We engage the way we do because we want to make sure that weâ&#x20AC;&#x2122;re having an impact. Thatâ&#x20AC;&#x2122;s something thatâ&#x20AC;&#x2122;s important to me personally. ` Why do you think itâ&#x20AC;&#x2122;s important that companies give back to the community? How does that play into their success? These programs are about social mobility. Economically in this country, if youâ&#x20AC;&#x2122;re born in the bottom 20 percent, regardless of your race, gender, or where you live, your chances of making it to the top 20 percent are 4 percent. To me, thatâ&#x20AC;&#x2122;s not acceptable. A child shouldnâ&#x20AC;&#x2122;t be limited in their opportunities simply because of the economics theyâ&#x20AC;&#x2122;re born into. What we do is say: how can we invest in programs and insert ourselves into communities in a way that changes that 4 percent? Itâ&#x20AC;&#x2122;s something Iâ&#x20AC;&#x2122;m very passionate about and itâ&#x20AC;&#x2122;s a continuum â&#x20AC;&#x201D; basic needs, economic growth and quality of life. The first thing we need to do is take care of basic needs. We support a lot of hunger programs, including a program in the Pacific Northwest where we fill kidsâ&#x20AC;&#x2122; backpacks with food that they can take home with them over the weekend. We work with our dealers to do a peanut butter drive because we learned that peanut butter is high in calories and protein and it doesnâ&#x20AC;&#x2122;t need to be refrigerated. If a kid is hungry, they canâ&#x20AC;&#x2122;t learn. You have to start with the basic needs, and then you can get into growth and job training. Henry Ford said that a company that makes nothing but money is a poor business. To me, that means as a company we have a responsibility to the communities and to humanity.

` Tell me about the Freedomâ&#x20AC;&#x2122;s Sisters exhibit you spearheaded. How did the idea come about? I was sitting in Atlanta at Coretta Scott Kingâ&#x20AC;&#x2122;s funeral service (in 2006) and they brought up Dorothy Height. She was in her 90s at the time, and you had this feeling from everyone in the room that we were so glad sheâ&#x20AC;&#x2122;s still with us. It occurred to me while I was sitting there that weâ&#x20AC;&#x2122;ve never done anything to recognize the role of women in the civil rights movement. Ford and the

` Dorothy Height was a mentor of yours. Whatâ&#x20AC;&#x2122;s something you learned from her? Dr. Height was around 98 and towards the end of her life when we opened the Freedomâ&#x20AC;&#x2122;s Sisters exhibit. (Height died in 2010.) She thought it was so important. She said when she was a member of the Big Six with Dr. (Martin Luther) King and all the leaders of the civil rights movement, she was pretty much the only woman at the table. She told me once that when she would take a picture with them, she learned if she stood on the end of the row of five, sheâ&#x20AC;&#x2122;d always get cropped out of the picture by the publication. She learned to wait until right before the photographer took the picture, and then sheâ&#x20AC;&#x2122;d hop in the middle of the frame. One of the pictures of her in the exhibit is her with Dr. King and all of these guys and sheâ&#x20AC;&#x2122;s dead center in the middle of the picture. Both literally and from a theoretical and a meaningful perspective, thatâ&#x20AC;&#x2122;s something thatâ&#x20AC;&#x2122;s always in my head. I always tell my mentees that story, especially my female ones. You have to be able to put yourself in a position where youâ&#x20AC;&#x2122;re not allowing someone to be able to crop you out of the picture.

The Alexander File Education: Bachelorâ&#x20AC;&#x2122;s degree in sociology with a concentration in economics, Georgetown University. Masterâ&#x20AC;&#x2122;s degree in public policy, Columbia University. Career ladder: While attending graduate school, Alexander worked for the administration of former New York City Mayor Ed Koch in the government relations department of the NYC Public Development Corp. In her role, she wrote speeches and statements and supported key development projects in the city. Alexander began her career with Ford Motor Co. in 1990 working in Fordâ&#x20AC;&#x2122;s controllerâ&#x20AC;&#x2122;s office, where she held various finance positions in marketing and sales, product development and corporate finance. She remained in Fordâ&#x20AC;&#x2122;s finance arm for nearly seven years. She then worked in Fordâ&#x20AC;&#x2122;s government affairs office from roughly 1998-2003, where she worked on policy development and acted as a state lobbyist for Ford. She joined Ford Fund, the philanthropic arm of Ford, around 2004. She has remained there since, and was named Fordâ&#x20AC;&#x2122;s community development director in 2005. Current role: Community development director, Ford Fund Notable mentors: Dorothy Height, a leader in the civil rights movement, who Alexander met through Ford. Susan Skerker, Alexanderâ&#x20AC;&#x2122;s former boss, who had worked as the executive director of Public Policy in Fordâ&#x20AC;&#x2122;s Government Affairs department. Alexanderâ&#x20AC;&#x2122;s mother, Alma Alexander. â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;ve been lucky that Iâ&#x20AC;&#x2122;ve had a lot of outstanding mentors starting with my mother all the way through college, as well as professional mentors,â&#x20AC;? Alexander said.

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INSIDE: Retailers, competing liquor distributor, beer and wine trade group weigh in on how the state regulates liquor distribution. PAGES 19-20 ONLINE: Take a look inside massive new warehouse at center of problem. CRAINSDETROIT.COM/CRAINSFORUM

COM

REGULATION

A BOTTLENECK?

Joe C pres Imp a Ka base and dist

CHAD LIVENGOOD

RET

Frank Mansoor, owner of Telegraph Party Store in Taylor, stands in front of his half-empty liquor shelves Nov. 29. He said during the prior two weeks, he had not gotten a liquor delivery from Republic National.

Liquor distribution snafu shows vulnerabilities of state ‘monopoly’ BY CHAD LIVENGOOD

At Telegraph Party Store in Taylor, owner Frank Mansoor orders three fifth-size bottles of Canadian LTD whisky and three fifths of Jim Beam bourbon weekly, knowing he’ll sell that many bottles in a week before he reorders. “I never overbuy,” said Mansoor, who bought the packaged liquor store on Telegraph Road in May. “I just stick with my payments.” Michigan’s unique liquor control law and privatized distribution system lets ma-and-pa liquor store owners like Mansoor order from the state-run wholesale business what’s known as “split case” without any additional charge. The custom-packed cases might contain one bottle of bourbon, two bottles of scotch, three bottles of tequila, four bottles of rum and two bottles of gin. 18 | CRAIN’S DETROIT BUSINESS | DECEMBER 16, 2019

“TO HAVE THIS ALL GOING THROUGH ONE BOTTLENECK IS REALLY KIND OF CRAZY. NO OTHER INDUSTRY WOULD PERMIT THIS. CERTAINLY NOT THE CAR INDUSTRY.” — Jim Storey, liquor license consultant and former state liquor control commissioner

In Ohio, Mansoor wouldn’t be allowed to split his case orders. In New York, he’d have to pay up to $2 more per bottle under a system that incentivizes buying whole cases in bulk. Under the 23-year-old law privatizing Michigan’s distribution of liquor, the three private companies the state pays to warehouse and deliver booze are required to ship a minimum of one 12-bottle case each week to more than 13,000 retail customers, while treating the Costco big-box store in Madison Heights with the same weekly service as the Bucksnort Saloon in Mesick and Ray’s Mug & Jug Party Store in Mio. This complex system is at the heart of Republic National Distributing Co.’s botched move to a single highly automated super warehouse in Livonia, where two-thirds of the state’s liquor supply flows through a human-and-robotic packaging

system meant to reduce the amount of human handling for custom case orders, while still creating any fathomable combination of distilled spirits and bottle sizes. Republic National’s troubles creating a just-in-time delivery system for liquor come during a period of great disruption in the liquor business that may not have been imagined in December 1996, when Gov. John Engler and the Legislature moved to privatize the warehousing and distribution end of the state government monopoly for wholesale liquor sales that was put in place in 1933 at the end of Prohibition. Before privatization, all liquor was sold to retailers through three large state-run warehouses and 63 small state liquor stores scattered across the two peninsulas. See LIQUOR on Page 20

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REGULATION

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m f . e e n -

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COMPETITOR VIEW

Michigan’s system gives all brands equal market access BY JOE CEKOLA

THERE ARE 10,600 SPIRITS ITEMS AVAILABLE IN THE STATE OF MICHIGAN, A VARIETY THAT IS MADE POSSIBLE BECAUSE OF THE CONTROLLED STATE MODEL, WHICH GIVES BOTH SMALLER CRAFT DISTILLERIES AND LARGER SUPPLIERS EQUAL ACCESS TO THE MARKET.

isolated incident involving one ADA, and in no way speak to the effectiveness of Michigan’s controlled state system. The other two ADAs have continued to deliver products on time, just as our customers and suppliers have come to expect. The requirements placed on an ADA are important to the strength of the controlled state model and benefit retailers, consumers, and suppliers alike. The controlled state model ensures a level playing field for all retailers and suppliers, regardless of their size, by promoting choice and competition. There are 10,600 spirits items available in the state of Michigan, a variety that is made possible because of the controlled state model, which gives both smaller craft distilleries and larger suppliers equal access to the market. At Imperial Beverage, we had our own major software change earlier this year which integrated with the Michigan Liquor Control Commission’s system.

We pushed our go live date back from October to February to avoid the busiest time of year. Before going live we vetted the system in a test environment for several months and then, once live, ran dual systems for six months to assure there wouldn’t be any interruptions to service for our retailers. There are, no doubt, lessons to be learned from the current situation. Software changes and warehouse moves should be timed to avoid the busy holiday season. Both types of changes should be run in a dual environment, and the MLCC should continue to provide oversight whenever any of their ADAs have major changes that could impact the system as a whole. The control system, where the state is the wholesaler of record, is as strong and effective now as it has ever been. It provides good service to retailers, variety, convenience and competitive prices to consumers and tax revenue to the state.

GETTY IMAGES|ISTOCKPHOTO

Joe Cekola is president of Imperial Beverage, a Kalamazoobased beer, wine and liquor distributor.

One of Michigan’s three Authorized Distribution Agents, or ADAs, has been having technical and logistical problems related to a warehouse move along with software and hardware problems that have left them struggling to fulfill orders. As one of Michigan’s ADAs, I assure you our controlled state system is a strong now as it ever has been despite the issues impacting Republican National Distributing Co. I also believe it is important to note that Michigan has two regulatory systems in place for the distribution of alcohol: the three-tier system for beer and wine and a controlled state model for distributing liquor. In the three-tier system, a supplier sells to a distributor who in turn sells to a retailer. In the controlled state model, the state of Michigan serves as the wholesaler for spirits and contracts ADAs to provide warehousing and delivery.

Imperial Beverage, which has been operating as a beer and wine distributor under the three-tier system since 1933, became the state’s third ADA in 2017 after beginning the process in 2011. It took us six years to perfect our systems and make sure they would integrate with the state of Michigan system without any issue. The issues impacting RNDC are an

CHAD LIVENGOOD

RETAIL VIEW

Open up wholesale liquor market to more than one distributor BY MARC VANDER VELDE

Marc Vander Velde is the owner of five Marathon Petroleum gas station convenience stores in the Grand Rapids area that are licensed to sell liquor.

By law, each and every bottle of liquor that a Michigan retailer sells in his or her store must be ordered through the state of Michigan. For the past several months liquor retailers in Michigan, including myself, have dealt with significant inventory shortages, late deliveries and inadequate customer service. What’s a customer to do? In all other areas of our business, we would switch to a new supplier — one with a steady inventory stream, on-time deliveries and responsive customer service. But for spirit orders, our hands are tied. In Michigan, we are simply forced to accept these missteps. Why is the state letting us, and ultimately our customers, down? Here’s some background: Following a 1996 law change, the state retained the wholesale rights to spirits, but delegated distribution to three authorized distribution agents. One significant fault in this law was that each spirit was assigned to only one ADA. As an example, Jack Daniels whiskey can only be supplied by one ADA. So when an issue arises at an ADA,

which is ultimately unavoidable, all retailers and customers suffer with out of stock situations or delivery delays. In addition to the one spirit/one ADA restriction, the state also awarded two-thirds of the entire market to one of the three ADAs. This ADA unfortunately has had numerous issues since this past summer, leading to the largest disruption in the liquor supply chain since the law passed 20 years ago. As retailers, we understand “stuff” happens. We all run businesses every day and understand the difficulty in hiring and retaining good people, keeping processes modern and up to date and trying to predict the unpredictable. That said, we also try to avoid those issues that are truly avoidable. In this case, there are many solutions ranging from minor to substantial that should be considered to elimi-

THE BEER AND WINE MODEL SERVES AS A GREAT EXAMPLE OF HOW REGIONAL DISTRIBUTION WORKS TO CREATE A MORE EFFICIENT MODEL...

nate the issues of the past six months. First, let’s tweak the current law to allow a spirit to be distributed by more than one ADA. It’s nonsensical in this day and age to be hamstrung by one distributor for products as ubiquitous as Captain Morgan, Fireball and Tito’s. As a convenience store retailer, I sell many products including tobacco, grocery and soda. If my tobacco distributor is out of Marlboros, I purchase them from another tobacco distributor. If my grocery distributor is out of Combos, I purchase them from another grocery distributor. If Coca-Cola is out of 2-liters, I make a run to Sam’s Club and pick some up. The point is I have options with all of these products in my store, but I have no options when liquor is unavailable from the state of Michigan. Second, and in step with the first recommendation, allow for the creation of several more ADAs by eliminating the requirement that an ADA is required to fulfill an order in any portion of the state as long as it’s a minimum of one full case. Many distribution companies would likely be interested in becoming a spirits distributor for the state if they weren’t required to fulfill an order for one case in

Iron Mountain and an order for 1,000 cases in Ann Arbor. The beer and wine model serves as a great example of how regional distribution works to create a more efficient model with warehousing and delivery services provided by several companies for these products. The most significant change would move the state of Michigan to a license state model, otherwise known as full privatization of the spirit distribution system. This would be the most optimal solution to the most recent distribution problems. By removing the state of Michigan from the distribution process, private entities would decide on how best to distribute spirits based upon what the marketplace demands within the state of Michigan. This does not imply the state has to modify the revenue they currently receive from the distribution of spirits in the state. As an example, the state currently derives significant revenue from beer, wine and tobacco without acting as a wholesaler for these products. I’m hopeful all stakeholders, the MLCC, the ADAs and the retailers could work together to improve the current state of liquor distribution in the state of Michigan. DECEMBER 16, 2019 | CRAIN’S DETROIT BUSINESS | 19

REGULATION RETAIL VIEW

Isolated liquor shortages don’t rate changing liquor law BY SPENCER NEVINS AND AUDAY ARABO

Spencer Nevins is president of the Michigan Beer & Wine Wholesalers Association.

Auday Arabo is president and CEO of the Midwest Independent Retailers Association.

Michigan’s controlled state model for liquor distribution is as strong and effective now as it has ever been. Recent sporadic liquor shortages in Michigan are the result of an unfortunate technical glitch at one Authorized Distributor Agent, or ADA, and in no way to speaks to the effectiveness of Michigan’s controlled state system. It’s also important to point out that Michigan operates two separate and distinct systems for distributing alcohol: A three-tier system for distributing beer and wine and a controlled state model for distributing liquor. The isolated incident impacting one ADA has had no impact whatsoever on the timely delivery of beer and wine throughout Michigan. The state’s remaining two ADAs have been making deliveries on time, just as their customers and suppliers have come to expect. We need to learn from the recent, sporadic liquor shortages. Moving forward, we encourage the state’s ADAs to work closely with the Michigan Liquor Control Commission and their retail partners when implementing new technology that could impact the timely delivery of spirits. To better understand the value of Michigan’s controlled state system, and why it’s arguably a model for other states looking for a hybrid system, it’s important to look at how far we’ve come. Michigan’s controlled state model was first instituted in 1997. At that time, there were roughly 600 kinds of liquor available at retailers across the state. Today, Michigan’s ADAs are transporting more than 10,000 different types of liquor to retailers in Monroe in the southeast corner of the state to Ironwood in the western Upper Peninsula — and all points in between. By removing barriers to entry for small distillers, Michigan has a burgeoning craft distilling industry boasting more than 60 distillers across the state. These spirit-makers bring home dozens of awards every year showing Michigan isn’t just about quantity when it comes to craft distilling — it’s about quality, too. Our state’s ADAs are proud to work hand-inglove with suppliers big and small, right here in Michigan, throughout the United States and around the world. Michigan’s system is unique in that it doesn’t force retailers to pay extra if they want to purchase just a few bottles of liquor, instead of a whole case. Allowing them to split cases without charging a fee ensures every retailer, no matter their size, has equal access to the same products. ADAs also deliver spirits weekly to retailers across the state, ensuring customers get what they need, when they need it. It’s abundantly clear: Michigan’s ADAs help local retailers large and small compete, grow and thrive on a level playing field through a controlled state model that promotes choice and competition.

MOVING FORWARD, WE ENCOURAGE THE STATE’S ADAS TO WORK CLOSELY WITH THE MICHIGAN LIQUOR CONTROL COMMISSION AND THEIR RETAIL PARTNERS WHEN IMPLEMENTING NEW TECHNOLOGY THAT COULD IMPACT THE TIMELY DELIVERY OF SPIRITS. 20 | CRAIN’S DETROIT BUSINESS | DECEMBER 16, 2019

LIQUOR

From Page 18

Bar and liquor store owners had to pay an additional fee for split cases, which were not allowed for top-selling brands. In the post-Prohibition system, retailers also had to pick up their own orders of liquor at a state store or pay a courier service to deliver it to their restaurant, bar or store. The 1996 law ensured free weekly delivery to licensed retailers — a cost the Michigan Liquor Control Commission has baked into the price of each bottle of hooch, which the state marks up 65 percent from what they pay the supplier. “That was part of the deal that they had to supply it that way. It’s very time-consuming and costly,” said David Jackson, chief operating officer of the National Alcohol Beverage Control Association, the Arlington, Va.-based trade group for control states — states that have a government-controlled monopoly over liquor wholesaling or retailing. Michigan is one of 19 control states. But Michigan’s privatized distribution system makes it a hybrid among states where state government reaps profits by acting as the middle-man wholesaler, while farming out the distribution work to private companies. “Michigan definitely has the most challenging” distribution law, Jackson said. Highland Park-based Great Lakes Wine & Spirits is Michigan’s other major authorized distribution agent with one-third of the market, delivering 2.6 million cases of liquor last year. Kalamazoo-based Imperial Beverage is the state’s third authorized distributor, but focuses on a niche market of craft-distilled spirits and delivered 27,349 cases in the 2019 fiscal year. Republic National, a Texas-based liquor broker, has blamed computer glitches in its new system for widespread delays and missed weekly deliveries this fall that have plagued bars and liquor stores like Telegraph Party Store, where one-third of the shelf space has been barren in recent weeks. Jim Storey, a former Republican member of the state liquor control commission appointed by Engler, said the system is “past its prime.” Republic National’s delivery problems point to a need for a more modern approach, he said. “You can order a car online and have it delivered to your house, yet we have a lot of regulations that prohibit the delivery of spirits, beer or wine to a house,” said Storey, a Holland-based liquor license consultant and chairman of the Allegan County Commission. “To have this all going through one bottleneck is really kind of crazy. No other industry would permit this. Certainly not the car industry.”

A trickier puzzle Part of Republic National’s troubles in automating processes in the repacking of more than 4 million cases of liquor for split-case orders stems from the ever-growing choice of spirits Michigan consumers have access to. Since 1996, Michigan has seen an explosion of growth in the different types of liquor available for consumers, growing from fewer than 1,000 different types of liquor and bottle sizes for sale to more than 10,600 stock-keeping units, a figure that has nearly doubled in the past decade alone. This is evidenced by ever-more-di-

The massive share of Michigan’s liquor industry that Republic National commands requires complex systems that have caused shortages for retailers and restaurants. larry peplin for crain’s

verse liquor store shelves stocked with trendy flavors such as peach-flavored Crown Royal Canadian whisky and the 20-plus flavors of Smirnoff vodka marketed by Diageo North America. “It’s the only monopoly I can think of where choice has increased,” said Justin Winslow, president and CEO of the Michigan Restaurant & Lodging Association. “Other than recent snafus, this has by and large worked well on the retail side of the equation. You probably wouldn’t see a massive outcry for change.” Michigan’s 10,600 different liquors and bottle sizes is the most of any liquor control state in the union, Jackson said. “Most suppliers really end up viewing Michigan as an open market because there is no limitation on their SKUs,” said Lew Cooper, co-CEO of Great Lakes Wine & Spirits. “When they come out with new items, they have immediate access to distribution.” Michigan also has an unusually large selection even compared with open states, where private distributors fill the role as the wholesaler between manufacturers and retailers. Since 2000, the total number of cases of booze sold annually in Michigan has increased 77 percent from 5.3 million to 9.3 million. “Of our 23 states, we deliver more bottles in the state of Michigan than the other 22 states combined,” said Joe Gigliotti, region president of control states for Republic National Distributing Co. The 1996 privatization law empowered the five-member Michigan Liquor Control Commission to certify authorized distribution agents as having the ability to deliver at least one case of liquor each week to all 13,000 retail customers. Through a series of consolidations within the brokerage level of the liquor industry, Republic National and Great Lakes Wine & Spirits have emerged as the two main companies, with 99.7 percent of the market. Those companies have exclusive control over individual liquor brands, meaning Jim Beam whiskeys are distributed solely by Republic National and Great Lakes is the only distributor of Jack Daniels brand whiskeys. The state pays the distributors $8.25 per case delivered, while the liquor manufacturers and importers pay the companies an additional $1.35 per case. Attorney General Dana Nessel’s office filed a complaint against Republic National last month over its delivery failures, seeking to dock the company 50 cents per case, which could amount to annual losses topping $3 million. Republic National, which partners in Michigan with National Wine & Spirits Inc., has steadily become the dominant distributor, rising from 58 percent of the market in 2011 to nearly 72 percent in fiscal year 2019, according to state data. The popular brands Republic National carries include Tito’s Handmade Vodka (the No. 1 best seller in the fifth and half-gallon bottles), Captain Morgan’s Spiced Rum (the No. 2 best-seller in the fifth or 750 ml bottle) and Fireball Cinnamon Whisky (the No. 1 best seller in the shot, two-shot and pintsize bottles). Even top-selling brands get broken up into split cases, adding repackaging and logistical costs for distributors. In 2011, National Wine & Spirits proposed that lawmakers prohibit split cases for the 50 best-selling liquors and levy fees on bars and stores that turn away orders they placed with the state. The proposal never gained any traction in

Where Michigan’s liquor revenue goes The Michigan Liquor Control Commission acts as the wholesaler in the sale of liquor in Michigan, buying from suppliers and marking up the price by 65 percent to cover the cost of distribution and discounting it for retailers. When liquor is sold to retailers, it’s assessed three taxes of 4 percent each that are divided up between the state’s general fund, school aid fund and convention facility development fund, which helps fund capital improvements for convention halls, such as TCF Center in Detroit. $500,000,000

Wholesale liquor profits

$400,000,000 Total: $315,383,938

Convention Facility Development Fund

Total: $342,702,348

School Aid Fund Total: $384,291,390

Total: $366,456,198

General Fund Total: $402,981,288

$300,000,000

$200,000,000

$100,000,000

2014 fiscal year

2015 fiscal year

2016 fiscal year

2017 fiscal year

2018 fiscal year

SOURCE: MICHIGAN HOUSE FISCAL AGENCY

Michigan’s 25 best-selling liquors Fireball Cinnamon Whisky in one-shot tiny bottles is the best-selling liquor in Michigan by number of units. The flavored whisky produced by New Orleans-based Sazerac Co. also is the second-best-seller in the pint size, the fifth-best overall seller in two-shot bottles and the eighth-best overall seller in the half-pint bottle. 1. Fireball Cinnamon Whisky 50ml (one shot) 2. Fireball Cinnamon Whisky 375ml (pint) 3. Hennessey VS cognac 375ml (pint) 4. Hennessey VS cognac 200ml (half-pint) 5. Fireball Cinnamon Whisky 100ml (two shots) 6. Platinum 7X vodka 50ml (one shot) 7. Tito’s Handmade Vodka 750ml (fifth) 8. Fireball Cinnamon Whisky 200ml (half-pint) 9. Smirnoff Vodka 50ml (one shot) 10. Tito’s Handmade Vodka 375ml (pint)

11. Smirnoff vodka 375ml (pint) 12. Smirnoff vodka 200ml (half-pint)

18. Captain Morgan Spiced Rum 375ml (pint) 19. Crown Royal whisky 50ml (one shot)

13. Seagram’s Canadian whisky 200ml (half-pint) 14. Tito’s Handmade Vodka half-gallon 15. Paul Masson Grande Amber brandy 50ml (one shot) 16. Arrow Peppermint Schnapps 200ml (half-pint) 17. Jack Daniels whiskey 50ml (one shot)

20. Popov vodka 200ml (half-pint) 21. Popov vodka 375ml (pint) 22. New Amsterdam vodka 200ml (half-pint) 23. Seagram’s Extra Smooth vodka 100ml (two shots) 24. Paul Masson Grande Amber brandy 100ml (two shots) 25. Captain Morgan Spiced Rum 750ml (fifth)

SOURCE: MICHIGAN LIQUOR CONTROL COMMISSION

the Legislature. “We’d certainly like to see a higher minimum (case order) going to account to make each stop profitable,” Gigliotti said. “We’d like to see fast-moving things like a Jameson (Irish whiskey) or a Fireball or things of that nature be full case — a Tito’s — because the volumes probably deserve it."

Retail backlash Retailers have fumed at liquor control commission meetings this fall about the lack of backup options for restocking their shelves with the best-selling liquors. Republic National had fallen weeks behind in fulfilling orders, particularly in the weeks leading up to day before the Thanksgiving holiday, which is generally the best sales day of the year for bars and package liquor stores. “Why can I only buy Captain Morgan from one (distributor)?” asked Marc Vander Velde, owner of five Marathon Petroleum Corp. gas stations and convenience stores in the Grand Rapids area that sell liquor. Vander Velde spoke at the liquor control commission’s Dec. 4 meeting in Lansing, noting that, as a retailer, he can choose to buy the same brand of cigarettes from a different distributor. “Captain Morgan? Just you,” Vander Velde said, pointing at a row of Republic National executives in the audience. “Fireball? Same thing. Tito’s? Same thing. Svedka? Same thing.” “It’s our livelihood,” he added. At a Nov. 22 commission meeting, the co-owner of three Booze Barn li-

quor stores in Perry, Howell and Lansing, said Republic National’s delivery failures have done untold damage to the bottom lines of small businesses like his. “If this was a food service like Cisco, we would have fired (Republic National) months ago,” retailer Mike Mitchell said. “But we have nowhere else to go.” Under the liquor control act, bars and restaurants are permitted to buy a dozen fifth-size bottles of liquor each month from retail stores on an emergency basis to replenish supplies between deliveries. State Rep. Diana Farrington, R-Utica, introduced legislation earlier this month to eliminate the one-case-permonth cap and allow bars and restaurants to buy multiple cases from liquor retail stores. “These bars are not able to supply liquor to their consumers because they’re being shorted their supply,” Farrington said. “I’m hoping my bill will alleviate some of that so that they can purchase what they need.” But retailers don’t have a backup. The owners of United Custom Distribution in Southfield have lobbied the liquor control commission in recent years to let them become an authorized distribution agent. But despite having nine warehouses that supply grocery items, snacks, non-alcoholic beverages and cigarettes to more than 500 retailers across the state, United Custom Distribution couldn’t overcome one barrier to becoming a new competitor for Republic National and Great Lakes Wine & Spirits.

“They wanted me to deliver to Sault Ste. Marie, which means I’m not going to be able to become a (liquor distributor),” said Hani Mio, director of operations and a shareholder of the family-owned distribution business. Mio said Michigan needs to change its law to create alternative suppliers to the big distributors. His family operates a cash-and-carry liquor warehouse in suburban San Diego where restaurants, bars and small retailers buy small orders to replenish their stock. “I kind of love that model over there,” Mio said of California’s open-state system. “Everybody loses when it’s controlled.” Gigliotti said splitting up liquor brands among multiple distributors would generate “less investment” by companies like Republic National. The Great Lakes executive downplayed the troubles his main competitor has had in recent months. “It’s worked well for the last 20 years, and we have one ADA that’s having a little glitch that I’m sure they’ll get worked out,” Cooper said. Storey, the former liquor control commissioner, said he favors giving small retailers added choice for distributors of certain brands in light of the “bottleneck” exposed by Republic National’s delivery problems. “That would introduce an element of competition,” he said. “A system designed to help the small ma-and-pop operation has now really hurt them the most.” Contact: clivengood@crain.com; (313) 446-1654; @ChadLivengood

DECEMBER 16, 2019 | CRAIN’S DETROIT BUSINESS | 21

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Building Community Value, a Detroit-based institution for real estate training and technical assistance, is thrilled to announce Monique Becker has joined its team as Manager of Program Implementation. Through its “Better Building, Better Blocks” course, BCV teaches residents of Detroit, Hamtramck, and Highland Park the skills to successfully complete neighborhood real estate projects. A former educator, Monique brings a unique set of skills and experiences to the position after having worked on deals diverse in size, type, community, and funding source with The Platform and Shelborne Development. Monique is also Co-Founder & Partner of Mona Lisa Development, which provides development and construction services to likeminded developers.

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LOC Federal Credit Union The LOC Federal Credit Union Board of Directors is pleased to announce Stephen P. Grech as its new President/CEO beginning Feb. 3, 2020. He holds a Bachelor of Science degree in Business Administration from Wayne State University and has attended CEO Institute training sessions at several prestigious universities. Prior to joining LOC, Grech was the President/CEO of Monroe County Community Credit Union. He also served as senior executive with Credit Union ONE from 2002 to 2017. MARKETING / TECH / ANALYTICS

Phoenix Innovate Michael Spalding joins Phoenix Innovate as Chief Technology and Compliance Officer. With 30+ years of IT operations management, systems design, engineering, process implementation, security and compliance experience, Mike has managed IT professionals around the world, and is an expert in ISO, SAS70, PCI, SAE16 SOC1 and HIPAA certification and compliance. Mike will play an important role in maintaining the highest level of security for PI client data and will be leading PI’s HITRUST certification effort.

PROFESSIONAL SERVICES

BSI BSI, the business improvement company, welcomes Christopher Berenstern as its Territory Account Manager, covering the central corridor of the US. Chris has an extensive background in business improvement and performance, having been involved in commercial positions for the past 10 years. In this role, he will be responsible for growing BSI’s portfolio of clients around management system certification, training, and audit solutions in various sectors such as IT, Aerospace and Automotive.

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MARIJUANA

Holistic Industries to build $20 million medical marijuana grow, retail facility Firm to redevelop former bowling alley site in Madison Heights BY ANNALISE FRANK

A Washington, D.C.-area cannabis company, Holistic Industries, plans to build a $20 million Michigan headquarters in Madison Heights. The company aims to redevelop the vacant former Fairlanes Bowling hall property near 12 Mile Road and I-75, according to a news release, and build a 65,000-square-foot medical marijuana center for growing, processing and retail. It expects to take 12-18 months to finish, with demolition starting sometime this week. The shop selling Holistic’s products would open in summer 2020, the release said, and Holistic plans to supply other stores, as well. The facility would be built at 29600 Stephenson Highway. Holistic Industries also operates in California, Maryland, Massachusetts and Pennsylvania. Madison Heights’ mayor, Brian Hartwell, said in the release that Holistic’s decision to locate there comes as a boost as the city is ramping up its economic development. Michigan’s marijuana industry is “about to explode,” Hartwell said. “We’ve seen Holistic’s operating model in other locations and the positive impact they have on those communities, which is why we trust them to transform, beautify and revitalize a property that is currently a detriment to Madison Heights,” he

 UPCOMING EVENTS  2020 Michigan Economic Outlook. 11:30 a.m.-1:30 p.m. Jan. 7. Detroit Economic Club. Grant Thornton chief economist Diane Swonk and Jeff Donofrio, director of Michigan’s Labor and Economic Opportunity Department, discuss the 2020 Michigan Economic Outlook. MotorCity Casino Hotel. $45 members, $55 guests of members. Website: econclub.org  CEO Series: Mary Corrado. 8-9:30 a.m. Jan. 23. Troy Chamber of Commerce. Mary Corrado, American So-

the community,” Roslyn Grafstein, mayor pro tem of Madison Heights, said in the release. “From planting trees and other city beautification initiatives to providing cannabis education and community support, Holistic’s investment in our city is a giant step forward in the continued economic development of Madison Heights.”

ciety of Employers president and CEO, will lead a presentation on workplace flexibility topics and trends. DoubleTree By Hilton, Bloomfield Hills. $32 members. $40 nonmembers. Contact: Troy Chamber of Commerce, email: theteam@ troychamber.com; phone: (248) 6411606.

work underway, new ideas, opportunities and challenges that will define the next 10 years for the Detroit region. MotorCity Casino Hotel. $169 members; $245 nonmembers. Contact: Katy Palahang, phone: (313) 596-0384.

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 2020 Detroit Policy Conference. 8:30 a.m.-4:30 p.m. Jan. 29. Detroit Regional Chamber. The 2020 Detroit Policy Conference: Defining a Decade, will discuss Detroit’s path to economic sustainability. Local and national leaders will highlight the

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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said in the release. Holistic Industries said it would “emphasize” local hiring for its 50 jobs and establish an investment fund called Reaching New Heights to help finance community projects. It did not disclose the amount of the fund. “Through our partnership with Holistic Industries on the Reaching New Heights investment fund, we have a partner with whom we can address the most pressing needs in

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 Identity Marketing & Public Relations LLC, Bingham Farms, a public relations firm, has opened an office in Chicago as part of an agency expansion. Website: identitypr.com

Crain’s People on the Move showcases industry achievers 22 | CRAIN’S DETROIT BUSINESS | DECEMBER 16, 2019 and their companies to the Detroit business community.

Holistic Industries plans to demolish a former bowling alley in Madison Heights for a Michigan headquarters with grow and retail operations. | HOLISTIC INDUSTRIES

 M & M Home Care, Inc., Livonia,

provider of skilled and non-skilled home care and therapy services, has acquired Hearts & Hands Home Care, Milford, a home health care service. The deal will allow M & M Home Care to provide care to residents in Oakland, Macomb, Washtenaw, St. Clair, Livingston and Monroe counties through the Area Agency on Aging 1B. Website: MMHomeCare.com  Rockwell American, a subsidiary of DexKo Global Inc., Novi, manufacturer of trailer running gear, chassis assemblies and related components, has acquired Fenders N’ More, a trailer fender manufacturer, from C. Wolfe Industries Inc., Santa Fe Springs, Calif., supplier of precision stampings. Websites: dexko.com, fendersnmore. com, rockwellamerican.com

 Detroit-based private equity firm Huron Capital Partners LLC has a partnership with San Francisco-based Salt Creek Capital to jointly invest in Pacific Shoring, Santa Rosa, Calif., a manufacturer of underground and trench shoring assemblies and safety equipment. Websites: huroncapital. com, saltcreekcap.com, pacificshoring.com  The Macomb Group Inc., Sterling Heights, a pipe supplier, acquired the operations of Smith Metal & Supply Inc. dba Richburg Supply Company, Richburg, S.C., distributor of pipe, valves and fittings to industrial customers. Website: macombgroup.com Submit items for Deals & Details at cdbdepartments@crain.com

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LIQUOR

From Page 1

“You’re going to have glitches. It’s like buying a new house,” said Gigliotti, a Virginia-based executive who has been encamped in Michigan for weeks overseeing the company’s efforts to correct the breakdowns in its distribution business. Inside the massive facility, Republic National has designed a system for moving Kentucky bourbon from pallet load to bar top that conforms to Michigan’s unique liquor control law. The 1996 law provides consumers more choice in spirits products than most states while letting retailers order custom-packed split cases from a selection of 10,600 different liquor brands and bottle sizes. It’s the laborious hand-picking of 12 fifth-size bottles or 24 pint-size bottles for each split case that Republic National has been attempting to streamline to speed up the volume it can handle as consumer tastes have shifted to new flavors of vodka and whiskey that didn’t exist 23 years ago when Michigan privatized its distribution system. Last year, the Texas-based liquor broker distributed 6.7 million cases of liquor to Michigan restaurants, bars, gas stations, package liquor stores and big-box warehouses. Four million of those cases were split, underscoring the company’s need to cut labor and handling costs. “That’s why we’re trying to automate it,” Gigliotti said while giving Crain’s an exclusive tour of the facility. The Livonia warehouse was designed with three bottle-picking lines for workers to fulfill individual orders — the modern-day equivalent of Henry Ford’s automotive assembly line for boxing up alcoholic beverages (Ford, like other industrialists of his day, supported Prohibition, by the way). Two of the bottle-picking lines are for repackaging larger bottles — fifths and half-gallons — placing them into new 12-bottle cases that a machine mostly assembles. “Years ago, you’d go back to all of the liquor stores and you’d get all of the empty liquor cartons and you’d bring them back and you’d use them to deliver again the following day,” Gigliotti said. “Now, they’re all standard boxes that we produce to help make that more efficient. If we can reuse them, we do. But that’s rare.” The third line, referred to by employees as “the flasks,” is used to repackage split orders of pints and halfpint bottles (22 of the top 25 best-selling liquors by number of units come in bottles that are a pint or smaller, according to the Michigan Liquor Control Commission). Each split case contains 24 bottles, usually in some disparate combination, like pints of Crown Royal Canadian whiskey mixed with half-pints of Smirnoff vodka. Once the boxes are packed, they travel on conveyors to an automated shelving system known as “the shuttle.” It’s a towering 16-level enclosed shelving system with rolling surfaces, where robotic arms place completed split cases into individual bays — and take them out when they’re ready to be shipped to retailers. “If you don’t want to take up floor space, what do you do? You go vertical,” Gigliotti said as he pointed up at the caged shelving units. During the day, “the shuttle” is filled with custom split-case orders. At night, they’re taken out of the shelving system and sent to the loading docks, bound for trucks. But the automated shelves have

Workers in Republic National Distributing Co.’s Livonia liquor distribution warehouse pick bottles of liquor on an assembly line to fulfill split-case custom orders of different brands. Two-thirds of the 6.7 million cases Republic National ships annually to retailers are split-cases. | PHOTOGRAPHS BY LARRY PEPLIN FOR CRAIN’S

24 | CRAIN’S DETROIT BUSINESS | DECEMBER 16, 2019

been a choke point, hampering Republic National’s ability to fulfill justin-time deliveries in a system where there’s little room for error. Earlier this fall, there were periods where “the shuttle” malfunctioned and the cases got stuck inside and couldn’t be retrieved. “When it’s not working, it’s not like you can put men or people in there to start pulling cases — and therein lies the dilemma,” Gigliotti said. “You get glitches, you get bugs that come up and you fix them and you keep moving,” When the shuttle has been working correctly, the facility has been able to process up to 300,000 cases of liquor in a day, Gigliotti said. “When it’s working, it’s a beautiful thing,” he said. Republic National’s new facility has the capacity to warehouse 1.8 million cases of liquor at a time; its old warehouse in Brownstown Township topped out at 500,000, Gigliotti said. In response to problems with the automation system, Republic National moved part of its operation back to Brownstown Township. It’s unclear how long operations will continue there, Gigliotti said. The Eckles Road facility sits on 33 acres that was once the home to General Motors Co.’s Delco chassis plant. And though Republic National’s warehouse looks gigantic from aerial views, it’s actually still just half the size of the sprawling 1 millionsquare-foot Amazon distribution center next door on Amrhein Street. The building was designed to accommodate a 250,000-square-foot addition, signaling the company’s desire to potentially gain an even larger share of Michigan’s liquor distribution business. “We’re very bullish on Michigan — in all ways,” Gigliotti told Crain’s. Republic National’s automation troubles have given its main competitor pause. “I’ve yet to find a piece of equipment that takes a bottle out of a box and puts it into another box better than a human can,” Lew Cooper II, co-

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The Global Polymer Group is looking for a Business Development/Sales — Joe Gigliotti, region president of Associate who for willRepublic be expected to work with inactive accounts and new control states National prospects to pre-sell the brand with the objective to set up a meeting with the Regional Manager. They will work with the sales team to help establish relations to ensure a smooth transition of the account. The Business Development Associate will need to be able to effectively research and uncover new opportunities both endemic and nonCEO of Great Lakes Wine & Spirits, a understanding than they are in Octoendemic clients. Highland Park-based distributor. ber, November and December,” Gigliotti said. “And I understand that. I don’t blame them.” Brand exclusivity Visit crain.com/careers/ for more information Executives at Republic National and available positions. Republic National and the state’s and Great Lakes said they would welother main authorized distribution come more competitors that operate agent, Great Lakes Wine & Spirits, under the same rules requiring have exclusive control over the distri- weekly delivery of at least one split case of liquor to more than 13,000 rebution of individual brands. Smirnoff vodka is distributed only tail customers. Crain Communications is currently an acknowledges Accounts Receivable Gigliotti that his by Republic National, while Great seeking Specialist. position will report Accounts Receivable company’s private ownersManager wouldn’t Lakes is theThis exclusive distributor ofto the have been so inclined to invest in the Grey vodka. and Goose will be located in our downtown Detroit location. The ideal Livonia warehouse if they A thirdwilldistributor, Kalama- have candidate be highly motivated, an upbeat attitude andhad mustto zoo-based be a team Imperial player. Beverage, focus- compete with another distributor for es on lesser-known craft spirits and, delivery of individual liquor brands. “I think you’d find less investfor example, is the only distributor in Visit crain.com/careers/ for more information Michigan that delivers East Side Gin, ment,” he said. and available positions. produced by the Toledo Spirits Co. Justin Winslow, president and CEO Some retailers have criticized Mich- of the Michigan Restaurant & Lodging igan’s liquor control system for leaving Association, attended a ribbon-cutthem out of stock of popular brands ting ceremony this summer at Republike Fireball Cinnamon Whiskey and lic National’s new warehouse. Tito’s Handmade Vodka during ReHe was awed by the facility’s size Share your success public National’s monthslong delivery and capacity to handle the wine and custom will end up in the bars of snafus because there are no alternative liquor thatwith Reprints, his members’ diningE-prints establishments. distributors. “It’s an amazing, beautiful facility,” The timing of the breakdown in Reand more! public National’s delivery system Winslow said. “And when it’s fully will be amazingatto stretching well into the busy fall months functional, ContactitLaura Picariello watch lpicariello@crain.com in its full glory.” was “unfortunate,” Gigliotti said. “If you’re going through this in January, February, March, nobody’s Contact: clivengood@crain.com; going to like it, but they’re a lot more (313) 446-1654; @ChadLivengood

Accounts Receivable Specialist

YOU MADE NEWS IN CRAIN’S

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News, Business Executive, you will lead the strategy, Automotive development, andCrain’s execution of Publications, Modern Healthcare, Ad Molex, LLC seeks seeks Business Analysts forleveraging Rochester Hills, MI Molex, LLC Business Analysts for Rochester Hills, MI Age, Pensions & Investments, Polymer Group. By your focused audience plans via effective marketing practices with the goal of achieving Molex, LLC seeksinto Advanced Quality Planning Engineers to drive drive improvements improvements into productivity, capability & speed speed(AQP) throughout the divisiodivisioto productivity, capability & throughout the mindset and your experience as a modern, multi-channel revenue growth across six of CrainROI Communications’ core brands: for Rochester Hills, MI to work w/product devfield team+2yrs members devmarketer & mainnal product product dev. dev. Master’s in Ind Eng Eng or or related related field +2yrs exp or ortoBachelor’s Bachelor’s in nal Master’s in Ind exp in you’ll decide how best to engage audience members their tainEng quality plans of a global design center forSkills: electronic cable during assemblies. Automotive News, Crain’s Business Publications, Modern Healthcare, Ad Ind or related field +5yrs exp req’d. Req’d exp w/electronic connecInd Eng or related field +5yrs exp req’d. Req’d Skills: exp w/electronic connecMaster’s injourneys, Ind Eng/ and Quality/Risk Mgmt/related field +2yrs exp OR Bachelor’s customer how best to allocateprojects, resources. Position could be Age, Pensions & Investments, Polymer Group. leveraging your focused tors in inBy auto industry w/business improvement projects, setting up product dev auto industry w/business improvement setting up product intors Ind Eng/ Quality/Risk Mgmt/related fieldCity. +5yrs exp req’d. Req’d Skills: dev Qualin Detroit, Chicago, or New York processes, & project mgmt; PLM solutions (teamcenter, enovia, windchill), SAP, ROI mindset and your experience as abased modern, multi-channel marketer processes, & project mgmt; solutions (teamcenter, enovia, windchill),facility SAP, RESIDENTIAL PROPERTY ity eng w/ new product devPLM process w/electronic connector production JIRA, Agile, data problem modeling & visualization visualization dev using using Qlik, Power BI,analysis) Tableau); you’ll decide how best to engage Visit audience members during theirmethodologies JIRA, Agile, data modeling & dev Qlik, Power BI, Tableau); crain.com/careers/ for more information in auto industry, solving (8D, root cause & Sixaction Sigma. Send resume resume to: MLXjobs@kochind.com, Ref:GD&T, AJ Six Sigma. Send to: MLXjobs@kochind.com, Ref: AJ customer journeys, and how best to allocate resources. Position could be corrective implementation; Supply Chain, Risk Analysis, Supand available positions. RESIDENTIAL PROPERTY RESIDENTIAL PROPERTY 2,280 ACRES FOR SALE PROPERTY basedRESIDENTIAL in Detroit, Chicago, or New York port City.Environ Testing (Eng design/Design Validation/Process Validation), Process Improvement Coach, Change Mgmt, PFMEA/DFMEA, Control Plans, Visit crain.com/careers/ for more information DOUBLE EAGLE RANCH PPAP, APQP, Qualifying Suppliers using CPK, IATF, SPC, MSA, Poke-Yoke, 2,280 ACRES FOR SALE 2,280 2,280 ACRES ACRES FOR FOR SALE SALE North Central Michigan Six-Sigma, Minitab. 30% travel req’d. and available positions. Business Development Sales Associate

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The Global Polymer is looking for a Business Development/Sales Molex, LLC seeksGroup Business Analysts for Rochester Hills, MI

Business Development Associate Sales Associate who will beinto expected to work with &inactive accounts the anddivisionew to drive improvements productivity, capability speed throughout

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CRAIN’S READERS HAVE AN READERS AVERAGE HAVE AN AVERAGE ARKETNET LACE WORTH NET $1.6 Accounts ReceivableOF Specialist WORTH MILLION OF $1.6 Accounts Receivable Specialist MILLION Contact Suzanne Janik

nal product Master’s Ind Eng or related field +2yrs Bachelor’s in prospects todev. pre-sell theinbrand with the objective toexp setorup a meeting Ind Eng Regional or related field +5yrs exp req’d. with the Manager. They willReq’d workSkills: with exp the w/electronic sales teamconnecto help The Global Polymer Group is looking for a Business Development/Sales tors auto industry projects, of setting product dev establish relations tow/business ensure aimprovement smooth transition the up account. The Associate who will be expected to work withininactive accounts and new processes, & project mgmt; PLM solutions (teamcenter, enovia, windchill), SAP, FOLLOW US ON Business Development Associate will need to be able to effectively prospects to pre-sell the brand with the objective to set up a meeting FACEBOOK.COM/CRAINSDETROIT JIRA, Agile, data modeling & visualization dev using Qlik, Power BI, Tableau); and uncover new opportunities both endemic and nonwith the Regional Manager. They will research work withSix the sales teamresume to help Sigma. Send to: MLXjobs@kochind.com, Ref: AJ RESIDENTIAL PROPERTY establish relations to ensure a smooth transition of the account. The endemic clients. Business Development Associate will need to be able to effectively research and uncover opportunities both endemic and non2,280 ACRES FORnew SALE endemic clients. Visit crain.com/careers/ for more information Requests Proposals are and being accepted for: BIDS DOUBLEfor EAGLE RANCH BIDS WANTED WANTED available positions.

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and available positions.

* DESC, a non-profit corporation, A Michigan Works! Agency, in cooperation with the Mayor’s Workforce is currently an Accounts Receivable Development Board (MWDB) serves Crain as theCommunications fiscal and administrative entityseeking that provides public workforce * Specialist. This position will report the Accounts Receivable Manager development programs and services for the city of Detroit to employers and jobto seekers.

and will be located in our downtown Detroit location. The ideal DESCCommunications is seeking proposals qualified applicants to provide career and training services to job seekers with Crain is from currently seeking an will Accounts Receivable candidate be highly motivated, have an upbeat attitude and must criminal backgrounds (justice-involved) at Detroit at Work Career Centers embeddedat within the Detroit Reentry sjanik@crain.com Specialist. This position will report to the Accounts Receivable Manager be a team player. Center (DRC) and the Detroit Metro Parole Office (Lawton). The Michigan Department of Corrections (MDOC) will Contact or 313-446-0455 and will be Suzanne located in Janik our downtown Detroit location. The ideal provide DESC and its selected contractor(s) with access to space for program delivery. candidate will be highly motivated, have upbeat attitude and at sjanik@crain.com for details. Visitan crain.com/careers/ for must more information BIDS WANTED be a team player. More information on these opportunities are available at the following website: and available positions. or 313-446-0455

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Visit crain.com/careers/ for more information To request a full RFP package, please email DESC at procurement@detempsol.org. Qualified applicants must and available positions. submit the following information via email: Company Name, Address, Office Phone Number, Contact person’s name, Title, and Valid Email Address.

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BLUE CROSS

From Page 3

Doctors and health system executives said the model will be better for patients because doctors and hospitals would have more claims data to understand patient medical needs, especially chronically ill patients who run up large bills. Jerome Frankel, chief medical director for Oakland Southfield Physicians, said in the past doctors simply waited for patients to make appointments. Now, medical case managers can initiate calls to patients to get them in for preventive care appointments. Under value-based contracts like Blueprint, Frankel said, doctors will be paid for additional care and time spent talking with patients about flu shots or other recommended annual disease screenings.

AUTO SHOW

From Page 1

The revamped Charity Preview is in the same spirit as the auto show’s broader overhaul. Organizers announced last year that the show would be moved to June to boost attendance, please automakers and stay relevant in an industry undergoing fast change. Next year’s show runs June 9-20 and will break with the “static environment” attendees have come to expect, North said. The traditional side of the Charity Preview will be maintained. Festivities inside the usual TCF Center space start at 5 p.m. and conclude with a to-be-announced music act taking the stage at 10 p.m. Like this year, tickets cost $400 apiece or $750 for a pair. New next year is an outdoor component with live music, food trucks and a cash bar. Hart Plaza will be closed off from 6-11:30 p.m. for charity preview ticket holders. The $400 tickets are “all access” and allow attendees to enjoy every aspect of the preview, indoor and out. A new $200 ticket is being added in 2020. This ticket gives attendees access to Hart Plaza only, from 8 p.m. to 11:30 p.m. There will be a “more youthful-oriented” headline act at 10 p.m., North said. “Ticket number two will hopefully attract people we haven’t been able to get, with the express desire of trying to grow the event not only in year one, but long term,” he said. Tickets go on sale March 16. A dress code change is also in the

WORKFORCE

From Page 1

“I can still do 12 hours if I need to and my guys know that,” Hubacker said from his Cadillac en route to a meeting. “Some days it’s only three hours. But I’ve still got my health and my experience and I would like to continue to put that to good use. I can still make contributions with my significant experience. I still have something to offer.” He’s not alone. More than 265,000 Michiganders 65 years old and older were in the labor force in 2018. That’s up from just 160,000 in 2010 and 163,000 in 2005, according to data from the U.S. Bureau of Labor statistics. Next year, 26 percent of the U.S. workforce will be 55 years old and older, compared to only 14 percent in 2002. More so, labor force participation

For example, Frankel said physicians will know more frequently if a female patient hasn’t had a mammogram or a pap smear. He said a notification of “Doctor, you have not done this [and the physician organization] is going to be penalized,” will happen if practices neglect to follow best practices. “In my 45 years of practice, things have radically changed. It comes down to ‘What have you done for your patient that should have been done?’ If you’re not doing some of those things, you will be penalized,” Frankel said. Williams said flu shots, vaccine administration and other preventive care can help reduce emergency department visits or hospitalizations. “It will save significant dollars,” he said. Harpreet Cheema, Trinity’s vice president of payer strategy and product development, said Trinity will use additional Blue Cross claims data and works. Inside TCF, the preview will move from black tie to “creative black tie.” Organizers are still formulating exactly what that will look like but expect some sartorial liberties and a “little more color than in years past,” North said. Outside wear will be “summer chic,” or dressy but comfortable. The point is to make the dress, much like the overall event, a little less rigid, according to organizers. The cost to produce the new iteration of the Charity Preview is likely to be higher than previous years because of the expanded footprint. Much of the backdrop in Hart Plaza will already be in place, though, because the riverfront park will serve as the main outdoor area for the show. Alberts said the cost to produce the Charity Preview is typically no more than 20 percent of what the event raises. Opening the charity gala and auto show to the outdoors provides an opportunity to boost attendance and attract more sponsors, Alberts said. Detroit will be abuzz with activity around the time the show rolls out — the Belle Isle Grand Prix runs May 29-31, the Rocket Mortgage Classic is May 25-31 and the Ford Fireworks go off June 22. “Part of the reason for the date change has been to provide a better environment for our OEMs, our attendees and the public to have a better experience,” North said. “We’re providing more options for manufacturers and to the public to experience more and have more dynamic interaction with the products.”

is expected to grow the fastest through 2024 among workers aged 65-74 and those 75 and older, according to BLS. Local experts urge employers and the younger labor force to embrace older workers as a boost to the economy and to prevent the fallout of an aging country — which puts pressure on public services and the health care industry as well as pummels economic growth.

Lessons from Japan Japan is the oldest country in the world, with more than 26 percent of its resident 65 years old or older, compared to just 15 percent in the U.S. The result is steep population decline as its citizens die off in old age. Its population was estimated at 127 million in 2014 and expected to shrink below 100 million by 2049, according to the country’s National In-

26 | CRAIN’S DETROIT BUSINESS | DECEMBER 16, 2019

combine it with the health system’s electronic medical record system on patients it has treated to coordinate care more effectively with its hospitals and affiliated health centers and physicians. “We want to eliminate any waste, coordinate care and send (patients) to the right place” for treatments, said Cheema, adding that Trinity has sufficient workforce to handle the additional patients because it manages other performance-based risk contracts. “Blue Cross is in the top tier (of payers involved) with upside and downside risk contracts.” Executives of the provider organizations agreed that risk-based contracting is the wave of the future and that it promises to improve patient care and reduce health care costs. Cheema said Blue Cross’ Blueprint program is the next step toward achieving value for patients and employers.

BAKER

From Page 3

In addition to the development, the city also gave up an estimated $400,000 per year in revenue for 12 years from a proposed parking arrangement on the property, according to a document obtained by Crain’s. Kim Gibbs, a city commissioner and real estate attorney, said she was in favor of extending the development agreement for an entity tied to Bingham Farms-based developer Burton-Katzman LLC, but was in the minority. “The students are putting their time and effort, and they are going to get hungry and they are still going to have to go shopping for somebody’s birthday present right after class, and that’s good for Royal Oak’s downtown,” she said. Multiple messages were sent to Jacqui Spicer, COO for Baker College, seeking comment last week. Mayor Michael Fournier did not respond to emails seeking comment.

Building up, not out? Sources familiar with the matter said Baker College is now envisioning 75,000 square feet or so spread across perhaps seven stories, creating a building with roughly 11,000-square-foot floorplates, as well as two levels of underground parking. Requests for proposals have been sent to various local contractors, including Pontiac-based Auch Construction and Southfield-based Barton Malow Co., plus about a half-dozen more,

stitute of Population and Social Security Research. This also means Japan’s domestic workers are aging out of the workforce. By 2036, one in three people in Japan will be elderly. A reduction in workers and greater reliance on the public sector is threatening Japan’s economy and its government has taken radical action, by its standards, to rectify the problem. In 2015, Japan began admitting foreign construction workers to alleviate industry shortages as it rebuilt from the 2011 earthquake and tsunami and in preparation for the 2020 Olympics in Tokyo. It repeated the effort in 2017 for nurses and other health care workers. Japan plans on accepting an additional 340,000 foreign blue-collar workers into its labor force through 2020. But possibly Japan’s greatest success is in keeping older people on the job. In 2004, it began raising the so-

“We have demonstrated success (in Medicare’s risk-sharing programs) ... and have received dividends (from Blue Cross’ current value-based programs),” Cheema said. “We have comfort in that and the path of taking downside risk. ... We believe we can generate a fair return again.” Paul Castillo, Michigan Medicine’s CFO, said it is natural to have concerns with a new reimbursement system. “We have confidence to manage care for patients we serve” in this arrangement because of success in similar Medicare accountable-care organization contracts, he said. Mike Williams, president of United Physicians, said the more than 2,000 physicians who make up the independent physician organization do not have as deep of pockets as major hospital systems. “We don’t have the financial wherewithal to support huge sums of risk on the downside” if the one source said. Multiple sources have said that Baker is targeting the Kinsey-Garrett Funeral Home as the site of its consolidated campus, and that the property at 420 S. Lafayette Ave. is under contract. Kinsey-Garrett was started in 1936 as the Virgo E. Kinsey Funeral Home, which was bought in 1964 by Daniel Garrett and renamed the Kinsey-Garrett Funeral Home Inc. three years later, according to the funeral home’s website. A pair of entities, CE-420 S. Lafayette LLC and CE-420 S. Lafayette Developer LLC, were registered to Stephen Carson in Bloomfield Hills in October, according to Michigan business records. Sources identified him as the developer. He is the founder of Carson Equities LLC, which bills itself on its website as “a diversified real estate company” that “has completed over $800 million in acquisitions and dispositions with private and public companies.” Carson did not respond to repeated requests for comment last week. One source identified Ann Arbor-based Edge Design Associates Inc. as the architect on the project. When reached by phone last week, Daniel Mooney, principal for Edge Design, said he was unable to speak about it due to a nondisclosure agreement.

Main-Sixth project fizzles When the city declined to extend a development agreement for the Main and Sixth Street project this summer, it marked the end of the road for the planned mixed-use development by Downtown Royal Oak LLC, whose

cial security retirement age from 60 years old to 65 years old and required companies to raise or get rid of mandatory retirement age rules. It also encouraged companies to structure practices to hire retired workers. This has kept Japanese workers, particularly men, on the job well into their 60s and 70s. More than half of Japanese men aged 65-69 are employed, up from about 40 percent a decade ago, The Wall Street Journal reported. This has increased Japan’s labor force by 4.4 million since 2012, despite a decline in its prime-age working population (those aged 15-64) by 4.7 million. “Japan is a great example of why we need people to stay in the labor force longer,” said Betsey Stevenson, an economist at the University of Michigan. “The U.S. is entering the same problem (aging population)

Van Tol

Carrier

group fails to meet financial targets, he said. “We have been able to negotiate (successful) contracts” with Blue Cross and other payers in the past, said Williams, adding that the group feels comfortable with the new contract knowing that other health care organizations also are involved.

Driving down costs Todd Van Tol, Blue Cross’ senior vice

Kinsey-Garrett was started in 1936 as the Virgo E. Kinsey Funeral Home, which was bought in 1964 by Daniel Garrett and renamed the Kinsey-Garrett Funeral Home Inc. three years later. | COSTAR GROUP.

ownership team includes executives from Burton-Katzman and other investors. “I think the deal collapsed because the city wouldn’t grant us an extension in order to finish the construction drawings,” said Larry Goss, who was co-manager of Downtown Royal Oak

and if people are retiring around 64, we’re going to be carrying around a large number of people that are no longer able to produce. We have to maintain a dynamic workforce. The longer people work, the more they will earn, the more they will consume and the more jobs they will create for others. Dropping out of the labor force, that costs other jobs for people. It’s not just this static thing.”

Gray highlights An aging workforce presents ample opportunities for business, said Marick Masters, interim chair of the department of finance at Wayne State University and professor of management. “Having an older workforce provides great opportunities for building institutional capital in the workplace,” Masters said. “Between great mentorship and the ability to experi-

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move providers away from higher-cost traditional fee-for-service reimbursement that rewards providers for higher utilization of services. National studies have shown that 30 percent of health care spending either is wasteful, duplicative or unnecessary. U.S. health care costs are projected to rise 6 percent in 2020, up from 5.7 increases in 2019 and 2018, said the PricewaterhouseCoopers Health Research Institute. Still, those numbers are far below the 12 percent increase in 2007 and 9 percent increase in 2010 before Obamacare was fully implemented. But because health care cost increases have failed to fall below the 5.5 percent low of 2017, employers and individuals feel more needs to be done to contain costs that far exceed salary inflation. Over the past few years, as payers have tried to use various methods to

contain costs, including utilization review, prior authorization and high-deductible health plans, hospitals and physician organizations have been preparing to accept payment schemes. Value-based care contracts are designed to reward providers for reducing hospital readmissions and unnecessary ER visits, eliminating duplicate and wasteful services and moving care to lower-cost outpatient settings, when appropriate. In 2011, Blue Cross began a value-based contracting program with hospitals and health systems that started its evolution toward rewarding providers for quality, positive patient outcomes and greater efficiencies. By 2017, Blue Cross had signed up 14 health systems and 75 hospitals in “performance-based health insurance contracts.” However, hospital executives complained that the Blues’ program didn’t meet their expectations

and it was difficult to achieve savings and additional revenue.

“THE STUDENTS ARE PUTTING THEIR TIME AND EFFORT, AND THEY ARE GOING TO GET HUNGRY AND THEY ARE STILL GOING TO HAVE TO GO SHOPPING FOR SOMEBODY’S BIRTHDAY PRESENT RIGHT AFTER CLASS, AND THAT’S GOOD FOR ROYAL OAK’S DOWNTOWN.”

LLC and partner at Burton-Katzman. Todd Fenton, economic development director for Royal Oak, said the city commission granted a six-month extension in January 2019. Minutes from a Dec. 17, 2018, city commission meeting say that within 30 days of the due diligence period expiring on July 9, 2019, the sale of the property was to have been completed and within 60 days, construction was to begin. “The first extension we made to them with the caveat there would not

be another, and (the city commission) stayed true to their word,” Fenton said. “They didn’t have a tenant signed up, so they weren’t in a position to do construction documents, which would have to be submitted to the city for permits to be issued.” A site plan for the project, which was to have 80,000 square feet of office space and 20,000 square feet of firstfloor retail, received planning commission approval in August 2017. The plan in a different form was unveiled in 2016.

From there, the developer had been in discussions with Henry Ford Health System as a tenant, but that fell through when the health system opted to have its outpatient medical center in a six-story, $70 million building in the Royal Oak City Center project that is expected to house more than 200 physicians, nurses and staff. That building is under construction currently, expected to be complete in the first part of 2021, said Ron Boji, the lead developer. A document obtained by Crain’s sent to Fournier, Mayor Pro Tem Sharlan Douglas and city commissioners says that under a proposed revised development agreement, the city would have received $4.8 million in revenue from a new 428-space parking deck to be built for $12 million as part of the 600 S. Main St. project. The document does not specify that Baker College was the planned user, but the user was described as “a 100-year-old, award-winning, fully accredited, Michigan-based college that wishes to consolidate its southeast Michigan administrative headquarters and classrooms.” According to the document, even though the building would be owned by the not-for-profit college, property taxes would be paid on the first floor of retail space. The college would have charged the city $1 annually for 25 years to lease the parking structure, as well as give it rights to collect all parking revenue if the college gets 273 of the 428 spaces. That would mean at least 155 spaces for public use during daytime hours Monday-Sunday, as well as additional spaces during nights and weekends.

“DON’T BE AFRAID OF OLDER WORKERS STAYING IN THE LABOR FORCE.”

der 50. That same study says workers aged 55 years and older are 5 percent more engaged at work than those under 55 years old, translating to a 3 percent growth in revenue. But Stevenson worries companies are not adjusting to the realities of an aging population and workforce. Roughly 41 percent of global companies surveyed by Deloitte Consulting in 2016 said they considered aging of their workforces a competitive disadvantage. And as more older workers put off retirement, younger workers are finding it harder to move up in their careers, according to a November USA Today/LinkedIn survey. Local experts, however, shrug off the concerns of the millennials and Gen Xers, instead urging employers to embrace our aging workforce as a boost to the local and national economy. “Age discrimination remains a real

president of health care value, said Blue Cross understands that health care costs too much for businesses and individuals. Health care costs “continue to consume more of our customers’ budgets and our members pocketbooks,” he said. Over the past 15 years, Blue Cross has used a variety of value-based reimbursement arrangements with hospitals and physicians to save customers more than $2.2 billion, Van Tol said. At the same time, quality and outcomes have improved, he said. But Van Tol said Blue Cross needs to “press the accelerator more rapidly” with hospitals and physicians “to change the underlying incentive model and reimbursement model in order to drive the change that we know we need and that our members deserve.” As encouraged by the Affordable Care Act of 2010, private and government payers have been attempting to

— Betsey Stevenson, an economist at the University of Michigan

ment with working arrangements, productivity is boosted.” Masters pointed out that younger generations, particularly millennials, demand flexibility as many have started families and want more time to work off site. Older workers, whose children are likely grown and out of the home, provide an ample stopgap in hours where younger workers may have other responsibilities. Employing older workers also reduces turnover rate. A 2015 AARP study showed a 29 percent turnover rate for workers older than 50, compared to 49 percent for workers un-

problem,” Stevenson said. “During the Great Recession, employers weren’t laying off their expensive 50-something workers, they were laying off their 20-somethings in droves. But data suggests those 20-somethings were able to find other jobs. Those 50-somethings that lost their jobs struggled to find another one. Employers seem to be less willing to take the gamble on an older worker. When they lose their job prematurely, their retirement is more of a struggle. Because we live longer, they will rely more on family members and government support, harming our economy. Don’t be afraid of older workers staying in the labor force.”

Aged, but educated America’s aging workforce, however, tends to look like Hubacker, working in high-wealth, white collar careers.

How Blueprint works The new Blueprint risk-based program will include Blue Cross’ PPO commercial members and Blue Cross’ Medicare Advantage PPO members, which represent 30 percent of the covered population in Southeast Michigan, or hundreds of thousands of members with more than $4 billion in total costs of care in the region. Blue Cross executives said additional systems and providers in Southeast Michigan are expected to be added in 2020 and a rollout in other parts of Michigan will begin later in the year. Contract providers can earn additional dollars in slightly different ways in the commercial and Medicare Advantage markets. In the commercial

— Kim Gibbs, a city commissioner and real estate attorney

The document says that the revenue from parking would be more than the property taxes received if a private company occupied a similar building on the site rather than a college. Baker would have paid for the parking deck construction.

On the move In January, Baker College revealed its plans for a new campus that would serve about 1,500 students and 50 staff. At the beginning of the year, the college said in a statement that its Flint Township campus would be shuttered by the beginning of the fall 2020 semester, with operations moving to Owosso. In addition, it said it would move operations from Allen Park, Auburn Hills and Clinton Township to a new campus. While the school didn’t say at the time to what municipality it would lo-

Older workers that remain in the labor force tend to be more educated, white and live near major metropolitan areas, according to a Pew Research Center study from July. About four in 10 baby boomers in the labor force had at least a bachelor’s degree, versus 27 percent of those not in the labor force, according to Pew. In addition, those were more likely to be non-Hispanic white, 72 percent versus 70 percent. Those workers are also living longer. Stevenson said this is representative of inequality baked into the U.S. economic system. “Who is staying in the workforce longer? For the most part it’s the people who are living longer. It’s not driven by financial need, but by life expectancy,” Stevenson

space, if the four hospital-based systems and three physician organizations hold down annual expenses in the commercial business below the statewide average of 4-5 percent in 2019, they share savings on a 50-50 basis with Blue Cross, company officials said. However, if costs exceed the statewide average, the health care organizations must pay back Blue Cross 50 percent of the excess amount, subject to loss caps. “If you’re a provider, that’s a scary concept to know I might have to pay something back,” said Steve Carrier, Blue Cross’ senior vice president of network management and provider partner innovation. “We have a rule of thumb and that rule of thumb is we want enough risk in the equation to make them pay attention. ... (but) not enough risk to put them out of business.” cate, it was eventually revealed that Ferndale was the destination, up until April, when the vision there collapsed amid public criticism from Ferndale residents and an inability to work out a parking arrangement. It had planned its campus at the northwest corner of East Nine Mile and Bermuda and an adjacent city-owned parking lot to the east of Como’s pizzeria. “Following extensive exploration and a thorough due diligence process, Baker College has elected not to move forward with the City of Ferndale as the location for our new metro-Detroit campus,” Spicer said in a statement emailed to Crain’s at the time. “Throughout the Ferndale negotiations, we maintained work on contingency plans, and we remain steadfast and are committed to serving our students and supporting the communities of SE Michigan.” Bloomfield Hills-based Acquest Realty Advisors had been the developer and Bloomfield Hills-based TMP Architecture Inc. was the architect, although neither are working on the new iteration. Baker had planned to start construction on the proposed three- or four-story Ferndale building by late summer, with completion in time for the fall 2020 semester. Given construction timeframes, it will be virtually impossible to meet that original target. It’s not known when Baker would open its new campus in downtown Royal Oak, if plans materialize as currently envisioned. Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB

said. “Growing inequality in the U.S. is evident as workers at the top end of the spectrum are in better health and are able to stay in the labor force longer.” Stevenson said educated workers and those in better health are also incentivized to work longer, which is good, but also a problem for the aging workers who are unable. “A lawyer who pays into Social Security can work until he’s 70 and draw more from the system,” Stevenson said. “Whereas an auto worker that may have a physical disability from the labor of the job is forced to retire early and has limitations on the budget and will likely die younger. The lawyer is rewarded for staying in the labor force so long and living to 95.” Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh

DECEMBER 16, 2019 | CRAIN’S DETROIT BUSINESS | 27

THE CONVERSATION

How Dr. William O’Neill’s plans for retirement changed, suddenly HENRY FORD HOSPITAL: William O’Neill, M.D., counseled hundreds of patients and family members facing difficult prognoses over his four-decade career as an interventional cardiologist in Southeast Michigan. Raised a Catholic, he had a spiritual outlook at an early age, one honed from the experiences he had saving or losing patients. But it hardly prepared him for the sudden news a little more than a year ago that Carol, his wife of 46 years, had been diagnosed with terminal brain cancer. She died six months before O’Neill planned to retire and keep a promise to Carol to step back from his demanding profession. | BY JAY GREENE ` Two years ago you planned to retire in August 2019 and travel with your wife, Carol. What happened? Carol and I bought a big Cadillac Escalade, and we were going to do road trips because she always wanted to see America. For 40 years, she kept saying, “When is going to be my time?” I finally said, “OK. It’s your turn. I’m going to retire and we’re going to start driving.” We made all these travel plans and then life happens. We had a plan that wasn’t meant to be. It slapped me to the core. I thought, now what? For three months I was paralyzed and just kind of going through the motions: getting up, getting shaved and going to work. Then I realized work was really therapeutic. One of the best ways to get past grief is to give up yourself, be selfless. Grief is very selfish. You get wrapped up in your core and you feel sorry for yourself. You have to get out of it. I found that coming in and helping people, making them feel better or saving their lives was even more empowering now than it was before Carol died. ` How did your training as a doctor help you? I wanted to become a world authority on the type of brain cancer she had, so I spent two months while she was going through radiation treatment … all the free time I had, looking at the literature and calling people literally around the world to see if there’s any other new potential breakthroughs that were available. The more I read and all the people I talked to the more ominous the prognosis was. There wasn’t a lot of hope, so I became a comforter. But what really got me through it the most was my spirituality, because I know that I will see her again. ` You believe in an afterlife? Totally. As a scientist, I’m convinced

there’s enough evidence for me to realize that there is another dimension, something else. Life continues. There’s not a lot of literature on something called near death experiences of people who have a cardiac arrest that are being resuscitated for 20 to 40 minutes. They come back and then they will have a lot of common recollections and experiences. We had a patient in his mid-80s who had a cardiac arrest and he was resuscitated and just spontaneously told me that he saw himself floating out of his body. I’ve seen hundreds of people participate in hundreds of cardiac arrest and resuscitations so I’m around (dying) a lot. People do see relatives or friends during their near death experience. That is a wonderful comfort. I’m faced with it so often that you can’t ignore it. ` How has Carol’s death and your increased spirituality changed how you approach your patients? Patients like to know that their doctors are spiritual. I think that gives them a lot of confidence. I don’t wear my religion on my sleeves. I’m trying to be helpful for patients. It’s not something that you actually talk about. It kind of naturally happens. I pray for wisdom before procedures and that has been a huge help and given me inspiration to do things, save lives, I never thought possible. ` You’ve received many awards in your career. Was there one that is most special to you? I received a Helping Hearts Lifetime Service Achievement award from the Society for Cardiovascular Angiography & Interventions. It was special because it was awarded to me two months after Carol’s death. The study I’m most proud of is the one that showed the use of angioplasty for treatment of heart attacks can save lives. It changed the

way that heart attacks are being treated around the world. ` What is your view of medical education and physician professionalism? I’m very discouraged because I think that medicine as a profession is dying or being killed. Doctors are being educated now as though they’re shift workers, nine to five, no weekends, no holidays. Patients don’t get sick nine to five. I think our professionalism is kind of being undercut by the medical education system. When I was trained, you didn’t go home until your patients were stable. Now it’s 5 o’clock and I’m going to turn this over to somebody else. That I think is a creeping problem that is really going to harm our profession. ` If you could change one thing in health care, what would it be? Patients complain that doctors don’t spend enough time with them. Doctors complain that they don’t have enough time with the patients. So if there’s one thing I could fix, it would be to give doctors more time to spend with patients. Everybody would be happier.

there.” As long as I feel I’m at the top of my game I’m going to continue to work. What I have enjoyed my whole career, but especially since Carol died, is mentoring young doctors. I spend a ton of my time being the wise old man and counseling them on how to go forward with their careers and their lives, how to balance those relationships, because all those things are so important. ... I also want to jump into 1000 percent of being the best grandfather I can be. I’ve got seven grandkids who need me. I want to be around for them more than I was for my own kids.

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William O’Neill, M.D., cardiologist

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` Do you have new retirement plans? What’s next? I love caring for patients. I want to help people as long as I can. My big worry is I don’t want to be the guy people says, “He’s a little off, his fastball just isn’t

READ THE ENTIRE INTERVIEW ON CRAINSDETROIT.COM/THECONVERSATION

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RUMBLINGS

Bobcat Bonnie’s headed to Partridge Creek THE OWNER OF BOBCAT BONNIE’S plans to expand the gastropub chain with its first spot in Macomb County and largest location yet. Bobcat Bonnie’s will take over the 5,800-square-foot Max & Erma’s restaurant space at the Mall at Partridge Creek and open sometime in February, owner Matt Buskard said. It would be the fifth Bobcat Bonnie’s in Buskard’s portfolio and another new tenant for the outdoor mall on Hall Road, which is set to welcome Detroit Axe this winter. Patrons can expect the same type of experience — the menu will be the same, “brunch and all,” Buskard said — as the Bobcat Bonnie’s locations in Corktown, Ferndale, Wyandotte and Ypsilanti. Buskard had been snooping around the area for more than a year

` LONGTIME VISITORS BUREAU EXECUTIVE TO RETIRE

Max & Erma’s at Partridge Creek

to find a new space. Owned by Denver-based American Blue Ribbon Holdings LLC, the Max & Erma’s restaurant chain closed nearly all its locations in Michigan in 2016. The Partridge Creek location, set to close Dec. 31, is its last standalone restaurant in the state. The company still operates one inside Detroit Metropolitan Airport.

28 | CRAIN’S DETROIT BUSINESS | DECEMBER 16, 2019

THE CHIEF OPERATING OFFICER of the Detroit Metro Convention & Visitors Bureau that markets the area as a destination for trade shows and travel is retiring. Michael O’Callaghan, also executive vice president, will leave at the end of the year, the Detroit-based not-for-profit group announced in a news release. He has helped lead the organization for 21 years, and now plans to travel and spend more time with family. O’Callaghan oversees the bureau’s more than $20 million yearly budget, as well as staff in human resources, finance, information technology, membership and customer service, the release said.

“His knowledge in customer service, operations and research has helped elevate the bureau to the successful organization it is today,” presiO’Callaghan dent and CEO Larry Alexander said in the release. O’Callaghan acted as vice chair of trustees for the 2017 beatification celebration for Solanus Casey at Ford Field. He is also on the board of the Southern Wayne County Regional Chamber, board chairman for St. John’s Complex for the Archdiocese of Detroit and a board member of the Michigan Hotel and Lodging Association.

Crain’s Detroit Business is published by Crain Communications Inc. Chairman Keith E. Crain Vice Chairman Mary Kay Crain President KC Crain Senior Executive Vice President Chris Crain Secretary Lexie Crain Armstrong Chief Financial Officer Robert Recchia G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Editorial & Business Offices 1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000 Cable address: TWX 248-221-5122 AUTNEW DET CRAIN’S DETROIT BUSINESS ISSN # 0882-1992 is published weekly, except the last issue in December, by Crain Communications Inc. at 1155 Gratiot Ave., Detroit MI 48207-2732. Periodicals postage paid at Detroit, MI and additional mailing offices. POSTMASTER: Send address changes to CRAIN’S DETROIT BUSINESS, Circulation Department, P.O. Box 07925, Detroit, MI 48207-9732. GST # 136760444. Printed in U.S.A. Contents copyright 2019 by Crain Communications Inc. All rights reserved. Reproduction or use of editorial content in any manner without permission is prohibited.

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