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What began as a plan to build a new home for the Detroit Red Wings has taken flight as an ambitious plan by the Ilitch family to create or revive five neighborhoods and unify downtown and Midtown. See Pages 20-26 DENNIS ALLAIN RENDERINGS
Private equity suppliers provide lesson on cash flow management BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS
Public automotive suppliers are meeting increased demand, expending capital and executing deals, thanks to a lesson learned from private equity in the market. Experts say the success and prevalence of private equity ownership among suppliers has pushed publicly traded ones to manage cash flow above quarterly earnings — a move that’s creating more cash and more deals. North American publicly held suppliers
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MICHIGAN BRIEFS Medical marijuana bills pass state Senate committee
Wolverine steps away from ‘green’ line, closes stores
A bill that would allow medical marijuana dispensaries to operate legally in the communities that want them and a bill that would allow patients to use edible forms of the drug were approved by a Senate committee last week. House Bills 4271 and 5104 are meant to clarify the 2008 voter-approved law that opened the door for medical marijuana in the state. Last year, the Supreme Court banned dispensaries in the state, and since then dozens have been closed down by authorities. The bills now move to the Senate floor, where Senate Majority Leader Randy Richardville, R-Monroe, said he would vote against them in their current form.
Conflict over finances may send Flint into bankruptcy, EM says Flint may be Michigan’s second city (after Detroit, but you probably knew that already) to plunge into bankruptcy unless retirees accept cuts in health benefits that threaten to unravel a balanced budget, Emergency Manager Darnell Earley said in a Bloomberg News story. The specter intensifies the conflict over finances in Flint, which twice has been under state control. Without changes, retiree pension
Even as its profits grow, Wolverine Worldwide is planning to be a little less green. The Rockford-based footwear maker is ending its licensing agreement for Patagonia Footwear, part of the Patagonia clothing and equipment line started by fervent environmentalist and “green business” backer Yvon Chouinard. Wolverine announced the move last week, on the same day it said it would close 140 stores, mostly Stride Rite locations, in the next 18 months to increase profitability. Patagonia’s final line for Wolverine will be this fall, CFO Don Grimes said. Patagonia wasn’t a money-maker for a company that saw profits grow by 50 percent in the second quarter. “Although a wonderful brand, Patagonia ... generand health expenses would consume 32 percent of the $55 million general fund, Earley said. “If Flint were to go to bankruptcy, that would highlight that this legacy-cost problem has to be addressed more globally,” said Eric Scorsone, a Michigan State University economist. “Flint’s at the forefront, but a lot of cities are on the same train, and that train is headed for the cliff.”
MICH-CELLANEOUS 䡲 E-cigarette maker Electronic Cigarettes International Group of Spring Lake signed an investment deal for up to $60 million with one
of the largest distributors of tobacco products throughout the Middle East and Africa. ECIG said Man FinCo Ltd., the investment arm of the Mansour Group, will provide it up to $60 million of equity capital, with $20 million invested initially and an additional option to invest $40 million, the Grand Rapids Business Journal reported. 䡲 Medbio, a contract manufacturer for the medical device and biotechnology industries, is planning a 20,000-square-foot expansion to its 45,000-square-foot plant to add up to 45 jobs in Cascade Charter Township near Grand Rapids. The project will be a $3.39 million investment, the Grand Rapids Business
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ates a relatively small amount of revenue and profit for Wolverine,” Grimes said in an MLive.com story. Patagonia has no plans to produce the shoe line in-house or with another contract, said Adam Fetcher, its global communications director. Wolverine embraced Patagonia’s environmentally friendly ideals when the publicly traded company entered into the licensing agreement with Chouinard’s California-based private firm in 2006. That meant donating 1 percent of profits — Chouinard’s “Earth tax” for using planetary resources — to environmental causes; designing more shoes with renewable, biogradable and recycled materials; and shrinking the carbon footprint of its headquarters by using energyefficient lights and biodegradable cafeteria utensils.
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Journal reported. Medbio said hiring will be ongoing over three years. 䡲 Spectrum Health Medical Group’s new East Beltline facility in Grand Rapids is to open today, but nearly 1,300 visitors got a sneak peak of the new $48 million medical center last week following its ribbon cutting and dedication, MLive reported. Spectrum’s Integrated Care Campus will combine several Grand Rapids-area offices under one roof to provide care to patients. 䡲 Citing growing sales, Lansingbased roaster Paramount Coffee plans to invest $3.5 million into local operations in part by opening a new distribution center near Capital Region International Airport by Aug. 1,
the Lansing State Journal reported. Paramount expects to open the 58,000-square-foot building in Clinton County’s Watertown Township as its central shipping and distribution point, but will keep its production facility near Cooley Law School Stadium, with plans to add 20,000 more square feet next door. 䡲 Private equity investors put $6.7 billion into 50 Michigan-based companies last year, according to the Washington, D.C-based Private Equity Growth Capital Council, MiBiz reported. Investments in the state in 2013 were fairly diverse, and private equity investing remains in good shape, said Bronwyn Bailey, council vice president of research. 䡲 Michigan moved up 21 spots, to No. 18, on a list of the most probusiness states and was named the most improved state for 2014, according to a report from the American Economic Development Institute and Pollina Corporate Real Estate Inc. 䡲 The Mackinac Bridge Authority delayed its next planned toll increase until at least 2016, keeping the rate at $4 for passenger vehicles, The Associated Press reported. So your next trip to the U.P. will be a little cheaper for a while. Find business news from around the state at crainsdetroit .com/crainsmichiganbusiness. Sign up for the Crain’s Michigan Morning e-newsletter at crainsdetroit.com/emailsignup.
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CRAIN’S DETROIT BUSINESS
July 21, 2014
Field & Stream to open store
If you want a “candidate, you have to move very quickly.
Oakland Mall 1st state site
”
GLENN TRIEST
SPECIAL TO CRAIN’S DETROIT BUSINESS
he competition to hire CPAs in metro Detroit has heated up, and accounting professionals are in enough demand that in some instances, salaries are rising and sign-on bonuses are possible.
T
Some accounting firms, including Plante Moran, pay referral bonuses to current staff of up to $5,000 to help lure a CPA, and others use senior managers to wine and dine top candidates, tour them around beautiful neighborhoods or take to sporting events. The best new accounting graduates and experienced profession-
als both may expect multiple job offers — sometimes before they officially start to look for a new job. “We have so many openings, it’s crazy,” said Jennifer Killingback, an executive recruiter with d.Diversified SerKillingback vices who places accountants, and other professional and administrative staff, at accounting firms and auto suppliers. “We’ve had to be creative.” Engineers are hard to find, accountants are hard to find, and most of the candidates are being lured away from jobs they’ve
Company index These companies have significant mention in this week’s Crain’s Detroit Business: Beaumont Health System . . . . . . . . . . . . . . . . . . . 12 Blue Care Network . . . . . . . . . . . . . . . . . . . . . . . . 14 Botsford Health Care . . . . . . . . . . . . . . . . . . . . . . 12
See Accountants, Page 7
See Field & Stream, Page 5
Demand for accountants brings rising salaries, signing bonuses
Taking the pulse of health systems, Page 11
BY SHERRI WELCH
been in for five or six years, since the recession. “It’s a candidate-short market. If you want a candidate, you have to move very quickly,” said Robin Ankton, regional vice president at Robert Half International, who works from Southfield and oversees four Southeast Michigan offices. Accounting “is very, very hot,” she said, and sometimes companies attempt to lure accountants from their competition or another employer. The toughest jobs to fill, recruiters and accounting types say, are tax managers and experienced auditors, those with three to five or more years of experience. Staff accountants and financial analysts also are heavily
Numbers that count
Focus: Health care
CRAIN’S DETROIT BUSINESS
Michigan’s penchant for outdoor activities is bringing yet another national outdoor sporting goods store to the state. Field & Stream is coming to a former Circuit City site at Oakland Mall in Troy and is expected to open in March. Field & Stream stores are owned by Pittsburgh-based Dick’s Sporting Goods (NYSE:DKS) and not affiliated with the magazine of the same name. The Oakland Mall site is one of several Field & Stream stores in the works. In its annual report for the fiscal year ended Feb. 1, Dick’s said it plans to open about eight more stores this year. Last week, it announced stores in Columbus, Ohio, and Cary, N.C., both set to open Sept. 5. They will join stores in Cranberry Township and Erie, Pa.; and Crescent Springs, Ky. Dick’s Sporting Goods did not return calls seeking comment. Through Oakland Mall’s property manager, Chicago-based Urban Retail Properties LLC, the retailer last week declined to comment on what it will invest to build the 49,591-square-foot store or the number of jobs it is expected to
Robin Ankton, regional vice president at Robert Half International in Southfield, says companies trying to recruit candidates for hot industries like accounting need to move fast because candidates are scooped up quickly.
BY VICKIE ELMER
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Cascade Partners . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Crittenton Hospital and Medical Center . . . . . . . . 11 d.Diversified Services . . . . . . . . . . . . . . . . . . . . . . . 3 Deloitte . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Detroit Downtown Development Authority . . . . 20, 26 Detroit Economic Growth . . . . . . . . . . . . . . . . . . . 26 Detroit Pistons . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Detroit Red Wings . . . . . . . . . . . . . . . . . . . . . . 20, 26 Eastern Market . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Field & Stream . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Garden City Hospital . . . . . . . . . . . . . . . . . . . . . . . 11 Gibbs Planning Group . . . . . . . . . . . . . . . . . . . . . . 29 Harley Ellis Devereaux . . . . . . . . . . . . . . . . . . . . . 29 Henry Ford Health System . . . . . . . . . . . . . . . . 10, 11 Honigman Miller . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Ilitch Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Loomis Sayles . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 McLaren Health Care . . . . . . . . . . . . . . . . . . . . . . 12 Michigan Association of Health Plans . . . . . . . . . . 14 Michigan Campaign Finance Network . . . . . . . . . . 16 Michigan Department of Community Health . . . . . . 14 Michigan Economic Development . . . . . . . . . . . . . 26 Oakwood Healthcare . . . . . . . . . . . . . . . . . . . . . . 12 Olympia Development of Michigan . . . . . . . . . . 20, 26 Plante Moran . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Raise Michigan . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Robert Half International . . . . . . . . . . . . . . . . . . . . 3 St. John Providence Health System . . . . . . . . . . . . 13 University of Michigan Hospitals . . . . . . . . . . . . . . 13 Valeo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Wright & Filippis . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Yeo & Yeo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Department index BANKRUPTCIES . . . . . . . . . . . . . . . . . . 5 CAPITOL BRIEFINGS. . . . . . . . . . . . . . 16 CLASSIFIED ADS . . . . . . . . . . . . . . . . 19 KEITH CRAIN . . . . . . . . . . . . . . . . . . . . 8
Next battle in minimum wage fight looms in Lansing BY CHRIS GAUTZ CAPITOL CORRESPONDENT
The fight over raising the minimum wage in Michigan is not over, despite Gov. Rick Snyder signing an increase into law in May. That new law will raise the state’s minimum wage from $7.40 to $9.25 an hour by 2018. The law was rushed through the Legislature in an attempt to pre-empt a
ballot initiative put forward by Raise Michigan that would ask voters to amend the state’s minimum wage law and raise it eventually to $10.10 an hour. Since the new law Snyder signed repeals the law the proposal is seeking to amend, opponents say the ballot question has been rendered moot. But Raise Michigan, the group of unions, nonprofits and liberal advocacy groups supportive of the ballot
THIS WEEK @ WWW.CRAINSDETROIT.COM
measure, disagrees and will make its case in Lansing this week. “The coalition wants this on the ballot,” said Raise Michigan attorney Mark Brewer at Southfieldbased Goodman Acker PC. The Board of State Canvassers will meet at the Capitol on Thursday to decide whether the Raise Michigan ballot language collected a sufficient number of signatures to appear on the November ballot. The group had to submit 258,088
valid signatures, and it filed about 320,000. Those opposed to the ballot measure want the board to deny its certification for the ballot, rather than just consider whether there are sufficient signatures. The reasoning is spelled out in a 160-page filing by attorneys John Pirich and Andrea Hansen, with Detroit-based Honigman Miller See Minimum wage, Page 5
Getting to the heart of a new hospital DMC’s $78 million Heart Hospital won’t officially open until month’s end, but reporter Jay Greene took a special walking tour. Go along at crainsdetroit.com/section/blogJayGreene
LETTERS . . . . . . . . . . . . . . . . . . . . . . . 8 MARY KRAMER . . . . . . . . . . . . . . . . . . 8 OPINION . . . . . . . . . . . . . . . . . . . . . . . 8 OTHER VOICES . . . . . . . . . . . . . . . . . . 9 RUMBLINGS . . . . . . . . . . . . . . . . . . . 27 WEEK ON THE WEB . . . . . . . . . . . . . . 27
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Valeo exec talks North American expansion, sales growth French supplier Valeo basis, so we need to inSA is hiring hundreds of crease our presence in engineers in North AmerNorth America. ica and opening an office in Silicon Valley. The How many engineers does company expects espeValeo have in North America? cially strong sales growth Today, about 1,000, in lighting, powertrain which is 10 percent of our components and connect(North American) emed-car technology. ployees. Our hiring target Francoise Colpron, 43, for the next year is about president of Valeo’s 200 people. We’ve reinNorth American operaforced our HR team with tion, spelled out her exfull-time recruiters. And pansion plans in a June Francoise Colpron, we are using social me20 interview in Troy, dia, which is new for me. Valeo with Special Correspondent David Sedgwick. Which technologies are your top priorities? Valeo is developing new technology I would say it’s C02 emissions refor better fuel economy, lighting and duction, and also intuitive driving cockpit controls. Will you beef up (cockpit controls). Autonomous veNorth American R&D to support these hicles are a big topic, and also fuel products? economy and powertrain compoWe want to reinforce our R&D nents. presence, so that we are not only a global company with a European Valeo is opening an office in Silicon center, but also a local company. Valley this year, correct? We want to better serve our North We already have someone in American customers on a global place now. She is recruiting. We
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Will Valeo invest in technology startups? I can’t talk about acquisitions, although we are always open to potential partnerships. We want to be there to seek talent, in terms of partnerships, suppliers and team members. So it’s really a little bit experimental. We are taking the pulse (of Silicon Valley) and we are trying to find opportunities. Will Valeo’s Silicon Valley team focus on infotainment technology? The person we are sending comes from that business group. So it can be connectivity or the human-machine interface, and it could be autonomous driving. Valeo has four business groups: powertrain, thermal systems, driving assistance and lighting. Which is generating the most growth in sales? They are all growing faster than the market. Our lighting group’s global sales grew 20 percent last year. So that’s a nice increase.
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The exceptionally cold and snowy winter pushed street and infrastructure repairs in Eastern Market into summer – prime months for restaurants and retailers in the district. Now, the work is further behind schedule due to unforeseen problems involving sewers, power lines and natural gas feeds. Though inconvenient to shoppers and proprietors , the end result will be an Eastern Market that is more pedestrian-friendly and better connected to other neighborhoods, officials say. The construction is part of the city of Detroit’s $24.5 million Link Detroit infrastructure improvement program. Funding behind the project includes a $10 million grant from the U.S. Department of Transportation. Dan Carmody, Eastern Market Corp. president, said the work — which includes improvements on Russell Street from East Fisher Service Drive to Wilkins Street — was supposed to begin in March. Enduring winter weather pushed the project into May, an inconvenient time for crews to start tearing up the sidewalks as proprietors geared up for the 2014 season, which runs from June 17 to Oct. 28. In addition, in mid-June, crews began ripping up the 120-space parking lot at the corner of Russell Street and East Fisher Service Drive. The lot is scheduled to be complete by mid-August; the remaining road and sidewalk repair is expected to continue into 2015. The contractor is Warren-based Angelo Iafrate Construction Co. David Hall
And the lighting unit is generating similar growth in North America? Correct. The lighting display at your office includes a Cadillac Escalade. Is Valeo getting North American contracts for LED headlights? Yes. The Cadillac has full LED headlights. It reduces electricity consumption, and it’s also a piece of art. It’s a beautiful headlamp. Valeo’s North American sales last year rose 17 percent. Did that include revenue generated by Ford’s HVAC operation, which Valeo purchased in 2012? It was organic growth. We don’t count the HVAC operation (as part of North American sales), because we are a 49 percent owner of that joint venture. So Valeo is growing nicely. Recently Valeo expanded its Mexican plant. We doubled its size. That’s where we make radars and sensors, and maybe eventually more complex systems. How close to full capacity are Valeo’s North American plants running? We don’t disclose our capacity plant by plant. We still have opportunities to expand. We’ve expanded not only our Mexican plant, but almost every other site. We added 500,000 square feet of production floor space. We made sure that our plants are not landlocked, in case
we need to expand. Valeo also opened a plant in Ontario. We just opened a site in Alliston to assemble front-end modules. It’s linked to one customer, but there are opportunities for growth. Let’s return to HVAC. Is Valeo still North America’s biggest HVAC supplier, behind Denso? We don’t disclose our rank, but worldwide we are always the biggest or second-biggest (in Valeo’s product segments). Can you give us a progress report on Valeo’s HVAC joint venture with V. Johnson Enterprises? We are very happy with the partnership. This year, the venture is moving HVAC production from Ford’s plant in Plymouth Township to a new plant in Romulus. How is that going? We’ve had staggered product launches (in Romulus) since the beginning of the year. Any final thoughts? I think it’s really important to attract the best possible talent. We have world-class benefits, compensation, training and skills development. It’s also interesting to join a company that is growing. Valeo means, “I am doing well.� From Automotive News
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Field & Stream: Troy is a prime location for its first Mich. store ■ From Page 3
create. Dick’s/Field & Stream hasn’t told Troy officials how much it is investing to build the new store or how many jobs they believe it will create, said Glenn Lapin, economic development specialist for Troy. No local incentives are on the table. One of the outdoor retailer’s Pennsylvania stores created about 130 jobs when it opened last month, he said. “Field & Stream has a huge following and will have a great presence in the Oakland Mall area and along I-75,” Lapin said. The retailer’s decision to locate its first Michigan store in Troy speaks to the strong local business
community and customers located within the region, he said. Its site in the city also “has fabulous visibility, and that’s a huge thing,” Lapin said. The new store will be on the east side of I-75 north of 14 Mile Road on an outlot owned by Oakland Mall. It will offer outdoor equipment, accessories and services for hunting, fishing, archery, camping and other outdoor activities. In preparation for construction, the mall took down a former Circuit City building on the site in late spring. It’s currently installing sewers and utilities, said Paul Featherston, chief building official at Safebuilt Inc., a building depart-
ment services contractor that does plan review for the city of Troy. The Troy Planning Commission approved the preliminary site plan for the store in late June. Construction is expected to begin in August, Featherstone said. Field & Stream may not yet be talking about the new store, but it’s already seeking a store manager through a job posting on its website at fieldandstreamshop.com. The number of outdoor gear retailers in Michigan has increased in recent years. Sidney, Neb.-based Cabela’s (NYSE:CAB) last year opened a scaled-down location, Cabela’s Outpost, in Kochville Township near Saginaw, and a full-size store
on the state’s west side in Grandville, adding to its first Michigan store in Dundee. And St. Paul, Minn.-based Gander Mountain Co. Inc. operates 13 stores in Michigan, including three in Southeast Michigan, in Novi, Taylor and Utica —where its first store in the state opened 20 years ago. “It’s no secret that Michigan is an outdoors paradise, where traditions like hunting, fishing, hiking, boating, archery and other pursuits are handed down from generation to generation,” said Jess Myers, a spokesman for Gander Mountain. “From Marquette to our metro Detroit stores, we’ve found Michi-
gan to be a perfect fit for our business.” The chain’s Michigan stores are doing very well, with recent fullscale remodeling completed or ongoing in several markets, Myers said. Gander Mountain has seen “notable growth” companywide and opened or announced 20 new stores across the country for 2014, he said. “While at this time we have not announced any new stores in Michigan, we expect more new store announcements soon,” Myers said. Sherri Welch: (313) 446-1694, swelch@crain.com. Twitter: @sherriwelch
Minimum wage: Battle over pay to resume in Lansing this week ■ From Page 3
Schwartz and Cohn LLP. They argue that the board must deny certification, because by putting it on the ballot, voters would be asked to amend a law that no longer exists. Snyder signed the lesser minimum wage increase into law less than 24 hours before Raise Michigan turned in its signatures to place its larger increase on the ballot. Brewer said the issue is not moot and that he has “sound legal reasoning” to make his case, but he declined to elaborate. Brewer will be at Thursday’s meeting to make his case and said the board should certify the ballot question so long as there are enough valid signatures. He argues the board is only supposed to look at whether there are enough valid signatures, but Pirich and Hansen argue in their filing that there is precedent that gives the board the ability to factor in other issues, such as the validity of the ballot initiative itself. Longtime attorney and campaign law expert Richard McLellan, who has served as an adviser to several previous Republican governors, told Crain’s in May that all the Board of Canvassers can do is decide if there are enough valid signatures. The board does not make value judgments, he said. Whether any of these legal arguments will be considered by the canvassers board Thursday is unknown. Department of State spokesman Fred Woodhams said the department’s view is that it is the board’s
BANKRUPTCIES The following business filed for protection in U.S. Bankruptcy Court in Detroit July 10-17. Under Chapter 11, a company files for reorganization. Chapter 7 involves total liquidation. Lakeside Divisions Inc., 1990 Bagley St., Detroit; voluntary Chapter 11. Assets and liabilities not available. — Natalie Broda
responsibility to review the petitions for sufficient signatures. It’s possible the board, made up of two Democrats and two Republicans, could deadlock on the issue. Then, both sides would be off to court to fight it out. Pirich and Hansen made their filing with the canvassers board on behalf of a group called People Protecting Michigan Jobs. That
group was formed on the day Raise Michigan submitted its signatures to the state and is headquartered at the office of the Lansing-based Michigan Restaurant Association, which opposes the ballot initiative. A message seeking comment from the restaurant association was not returned. The restaurant association, as
well as most business groups, opposed the ballot measure to increase the minimum wage, because it did so not just for hourly workers, but would also raise it to $10.10 an hour for tipped workers. That would devastate restaurants in Michigan, the state’s restaurant association has said. It worked with Republican lawmakers and the Snyder adminis-
tration to come up with the law Snyder eventually signed that raises the wage for tipped workers from $2.65 an hour to $3.52 by 2018. The law was approved by an overwhelming bipartisan majority in the House and Senate. Chris Gautz: (517) 403-4403, cgautz@crain.com. Twitter: @chrisgautz
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Cash flow: Suppliers learn and adapt ■ From Page 1
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suppliers are doing better because most of the tier-ones performed corrective action,” Kingma, co-author of the study, told Crain’s. “Typically, we’ve seen organizations manage to quarterly expectations, but that doesn’t help longterm cash flow; that’s changing due to the prevalence of private equity in the market, where mature public companies are benchmarking themselves against the PEs who focus on improving cash flow.” Cash flow discipline is helping the supply base meet the rising new vehicle demand by expanding operations and new tooling, said Raj Kothari, managing director of Southfield-based investment banking and private investment firm Cascade Partners LLC. “Suppliers have learned stronger working capital works for them strategically,” Kothari said. “Cash flow is really important for new investments, new tools, etc.” For example, Livonia-based TRW Automotive Holdings Corp. increased capital expenditures in 2013 to $735 million from $623 million in 2012. Auburn Hills-based BorgWarner Inc. increased expenditures to $417.8 million last year from $407.4 million in 2012. Kingma said, in years past, many executives didn’t understand managing the benefit of managing the balance sheet, but have since learned from the success of private equity-owned suppliers. “That’s the benefit of the private equity discourse,” Kingma said. “Sophisticated (publicly held) companies are now driving improvements through processes, logistics, etc. to improve long-term cash flow.” Having visibility of cash flow throughout an organization on a longer timeline is also boosting organizations’ ability to successfully perform merger and acquisition activity, said David Sowerby, portfolio manager in the Bloomfield Hills office of investment firm Loomis Sayles & Co. LP. “Any time I sit across the table from a CEO or CFO and they say their focus is on cash flow, that’s a story I want to keep listening to,” Sowerby said. “This phenomenon began in the dotcom bubble but has intensified in automotive since the recession and recovery. Public suppliers are generating EBITDA (earnings before interest, taxes, depreciation and amortization) faster, and we’re seeing cash flow growth of 10 percent to 15 percent, which makes it an attractive environment (for deals).” Last week, German supplier ZF Friedrichshafen AG made an unsolicited takeover bid for Livoniabased TRW Automotive Holdings Corp. ZF could finance a cash bid of $13 billion for TRW, Bloomberg reported. However, while the cash conversion cycle has been improving for larger suppliers, the smaller peers in the base haven’t fared as well. In 2013, large North American auto suppliers’ cash conversion cycle was 30 percent quicker than smaller suppliers in the market, according to the EY study. This figure has grown from 7 percent in
Moving payment “terms from 30 days to 90 days could absolutely wipe out a lot of companies.
”
Raj Kothari, Cascade Partners LLC
2007. Larger suppliers have more leverage to combat pricing pressure from automakers, negotiate more favorable terms and drive greater efficiency in manufacturing and procurement, the study said. Kothari said increased demand from automakers could cripple the base of smaller suppliers if they don’t take action to improve their working capital. “While OEMs are a little more understanding, the increased demands have huge implications to the supply base,” Kothari said. “Moving payment terms from 30 days to 90 days could absolutely wipe out a lot of companies right now because they can’t manage the float.” However, Kingma said, automakers and larger tier-one suppliers have recognized the gap and are working more collaboratively to improve cash flow through the
supply chain. “This is a much more collaborative environment, and it will improve the balance sheet for everybody,” Kingma said. “There’s room to grow, certainly, but it’s very important to the supply base to have real visibility of the cash flow coming in the door and everyone is managing the process to solve the problem.” As the pace of production continues to escalate — production volume in the U.S. is expected to exceed pre-recession levels this year — it’s become even more critical to continue efficiency initiatives, the study said. The top 50 global automotive suppliers have as much as $51 billion tied up in working capital, an improved figure, according to the study. That represents nearly 10 percent of their combined revenue. Suppliers will need to create more efficient billing and cash collection systems, expand shared services and reduce complexity in processes, among other initiatives, to further reduce the cash conversion cycle, the study said. “It’s a capital-intensive industry, and its ability to manage its balance sheet has never been more critical,” Kingma said. “The future depends on it.” Dustin Walsh: (313) 446-6042, dwalsh@crain.com. Twitter: @dustinpwalsh
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Accountants: Demand, pay growing
7KH URDG WR WKH FRUQHU RIÀFH
■ From Page 3
recruited, Killingback added. But the candidate’s background and expertise need to match the opening, so someone with a banking background may not be chosen for an auto accounting job, she said. Now “everybody wants a senior accountant. Even if you don’t have an opening and you find a great senior accountant, they’ll make room,” said Ankton. Nationwide, accounting and finance staffs were among the 10 occupations that are hardest to fill, according to Manpower Group, with hiring managers saying they’re harder to find than engineers. The reason is simple: Companies are growing again and need more financial types to audit their operations and tally finances. “Companies are beginning to focus more on growth, hiring and investment,” Arleen R. Thomas, senior vice president of management accounting and global markets for the American Institute of Certified Public Accountants, said in a statement. The CPA organization’s survey of executives in accounting roles found that availability of skilled staff moved up to third on their list of top challenges, from sixth at the end of 2013. The demand has intensified in the last 18 months or so along with overall economic activity. Sign-on bonuses are booming, with 74 percent of North American companies offering them, up from 54 percent in 2010, according to a WorldatWork report on bonuses. For professionals such as accountants, that increases to 89 percent, and the average sign-on bonus would be $5,000 to $9,999. (Four percent received $25,000 or more.) At Yeo & Yeo, an accounting and computer consulting firm with five Michigan offices, signing bonuses “happen quite frequently,” said Kymberly Hess, the firm’s human resources director. “It’s hard for us to compete with the signing bonuses of big firms” such as Deloitte and Ernst & Young, which could be as high as $15,000. “We’re trying to sway them” to join the firm, she said. So Yeo & Yeo offers a few perks not generally offered by its peers: Even though accountants are salaried professionals, “we pay an overtime bonus for working overtime hours,” she said. Staff members may choose whether they want the money or time off, or some of both. Other firms have discovered they need to offer an extra week or two of vacation time to experienced accountants and financial professionals, said Killingback. “Give them a raise and give them a bonus after 90 days, and maybe an extra week of vacation. Clients tend to be very eager to accommodate for the right person,” she noted. Many candidates are looking for a higher salary plus a move into a management job. “They want to reduce the travel time,” said Killingback, who has worked in recruiting and HR for about 20 years. “They’re looking for positions where they’re home four nights a week versus two nights a week.” Sometimes she calls a candidate about a great job that requires 50 percent travel and hears: “No, call me when it’s 20
percent.” “A good candidate doesn’t have just one opportunity,” said Ankton at Robert Half. He or she will get two or three, plus a counteroffer from his or her current firm. Salaries are going up as a result, she and others said. After years of fairly flat pay for most jobs, finance and accounting salaries for new hires are expected to rise 3.4 percent this year nationwide, according to Robert Half’s salary survey. Others say the salaries may go up for exceptional candidates, but it is not widespread. What is widespread is hiring on college campuses, first for interns, then later for entry-level accountants. This gets intense in the fall, when both accounting firms and big businesses such as Ford and some suppliers are recruiting soon-to-graduate seniors. At Plante Moran and Deloitte, current staff will take out-of-state candidates and their spouses around Detroit. “We give them a firsthand look at what it’s like to live and work in Southeast Michigan,” said Hollis Griffin, Plante Moran’s recruiting director. Sometimes they help the partner land a job here, too, tapping their networks and introducing them to companies in their field. Candidates may be taken to Detroit Tigers or Detroit Red Wings games, museums or restaurants, said Mark Davidoff, managing
partner of Deloitte’s Detroit office. They meet professionals and potential co-workers in the Renaissance Center and start to understand what Deloitte offers. “Whether they’re from New York or New Delhi, we give them a good Detroit experience,” said Davidoff, who oversees about 900 professionals. When he was at the Mackinac Policy Conference, Davidoff listened to some of the five-minute pitches of veterans talking about themselves. (He was pretty busy as an officer in the Detroit Regional Chamber and next year’s chair of the policy conference.) One woman really impressed him, yet he couldn’t find her later. So afterward, he found her contact information and invited her to visit Deloitte’s Renaissance Center offices. “I met her and gave her an introduction to the firm,” he said. Now she’s going to interview for a job opening. Having a consulting arm and a huge educational facility called Deloitte University helps to recruit and retain staff. So does the size: Deloitte has close to 1,200 accountants, tax and other staffers at three Michigan offices. Yet Davidoff spends 5 percent to 10 percent of his time, depending on the season, on recruiting and hiring. In the competitive world of landing financial and accounting professionals, recruiting is a yearround, everywhere task. “It takes a bit of a village,” he said.
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OPINION
Evans top choice for Wayne exec leven names are on the Democratic primary ballot for Wayne County executive. It seems incredible that incumbent Bob Ficano would be among them, given his administration’s sorry record for corruption (at worst) and inept financial administration (at best). The unfinished Gratiot Avenue jail site speaks for itself. So do convictions of four former county managers. Ficano has not been charged with anything, but voters may instead find him guilty of hubris for running. Two candidates are worth voters’ consideration: Westland Mayor William Wild and former Wayne County Sheriff and Detroit Police Chief Warren Evans. Wild, owner of a family business, has earned many endorsements, including the Detroit Regional Chamber and Ford Motor Co. Chairman Bill Ford Jr. He has a good business sense. Example: He did his own analysis of financials on the failed jail project and proposes using unspent bond money to finance improvements at the existing jail and 36th District Court. But in the crowded pack, Warren Evans is our top choice. He pledges to focus on basics — public safety, roads and some human services. Plus, he’s already had experience with large budgets and has important allies: Detroit Mayor Mike Duggan and Wayne County Prosecutor Kym Worthy. Business leadership has often said the region suffers from splintered alliances and political squabbling. Elected leaders who work well together would help the region, perhaps by consolidating services or working together on joint contracts. It’s time for the county to take these important steps. We support Warren Evans. To review Evans’ and other candidates’ stances on the issues, and for highlights of other primaries of interest, see our election report on Pages 16-18.
E
Open primary best for state The crowded field of primary election candidates for Wayne County executive is a good platform to push another election reform: a better runoff system. Michigan should eliminate the traditional party primary and replace it with an open primary, as many other states have now. How it works: The two top vote-getters in the primary would vie in November, regardless of their party affiliation. You could vote for a candidate from each major party or two candidates from the same party. In either case, they are the candidates who rank highly among voters in primary contests. Too often, November elections are decided in August primaries that have tiny voter turnouts. This model produces higher-quality choices for voters.
MARY KRAMER Cohesion keeps city growing Who could imagine a year ago that Detroit — still in bankruptcy — would see the kinds of announcements we’ve seen in the past seven days? A handful of companies last week pledged more than $26 million to the Detroit Institute of Art’s $100 million bogey for the “grand bargain” that could enable the DIA to be spun out of city ownership and protect its collection from a bankruptcy fire sale. Leading the pack was Penske Corp. with $10 million, followed by two $5 million gifts from Rock Ventures/Quicken Loans and DTE Energy Foundation, the largest single grant ever made by DTE’s charitable arm. Earlier in the week, Crain’s was part of a business leadership announcement about The Detroit Homecoming initiative to draw successful “expatriates” of metro Detroit back to the city in September for a 48-hour immersion that could lead to new investments. The effort is supported financially
by many of the same institutions who backed the DIA. And today, we report on the gamechanging plans for a new hockey arena that will create a vital link between downtown and Midtown. The Ilitch family is thinking big on this, and the entire city will benefit. Patriarch Mike Ilitch and his wife and business partner, Marian, also announced an $8.5 million gift to Wayne State University’s School of Medicine that likely will pave the way for new surgical products and procedures. The arena plans are remarkable. And it is as though the Ilitches are saying to Detroit — and the world — hey, there’s more than one billionaire helping to make things happen in this town. Dan Gilbert’s $1.5 billion (and counting) invested since 2010 has created a tipping point. But admirers of the Ilitches want to make sure they get credit too for what they’re doing now and what they’ve done since they moved their Little Caesars pizza
headquarters to the Fox Theatre in 1988, a time when most of the moving trucks were still heading the other way. What a position for Detroit to be in if billionaires are now vying for ways to make commercial and philanthropic investments in the city. The key to this all is engagement: People with money, resources and influence working to make things happen. John Rakolta Jr., CEO of construction giant Walbridge, often has spoken about Michigan’s lack of “cohesion.” Because political and business interests are so often at odds, it costs the state — and the region — because companies don’t want to invest or expand where people are at odds. Regardless of who gets credit for what investment, it sure seems more “cohesive” these days. Mary Kramer is publisher of Crain's Detroit Business. Catch her take on business news at 6:10 a.m. Mondays on the Paul W. Smith show on WJR AM 760 and in her blog at www.crainsdetroit.com/kramer. E-mail her at mkramer@crain.com.
LETTERS Police caution on liquor laws Editor: Regarding the article “Politics, power bottle up efforts to alter liquor laws,” Page 1, June 29: Since 2011, law enforcement officials throughout Michigan have raised concerns about efforts that were underway to make major changes to Michigan’s system of alcohol regulations. Police chiefs joined public health and substance abuse prevention advocates to urge Gov. Snyder and the Legislature to make public health a priority when they revised alcohol regulations. Our message was simple: Michigan’s current system of alcohol safeguards strikes the right balance between protecting public safety and promoting moderation,
Crain’s Detroit Business welcomes letters to the editor. All letters will be considered for publication, provided they are signed and do not defame individuals or organizations. Letters may be edited for length and clarity. Write: Editor, Crain’s Detroit Business, 1155 Gratiot Ave., Detroit, MI 48207-2997. Email: cgoodaker@crain.com while encouraging business growth and expanding consumer choice. The system works well and the proof is the fact that Michigan is considered one of the best craft beer states in the nation, even
globally. At the same time, key public health indicators, such as overconsumption, underage drinking and drunken driving continue on a downward trend in Michigan. While distributors were our partners in opposing wrongheaded policies to weaken Michigan’s alcohol safeguards, we must point out that the real factor that sank the proposals was the justifiable and common-sense-driven concerns of families, nurses, faith leaders, police, counselors and ordinary people who care more about public health than alcohol profits. Robert Stevenson Executive director Michigan Association of Chiefs of Police
KEITH CRAIN: Don’t count your chickens on votes … yet I am sure that it’s a good idea for political candidates to hire survey firms to find out how they are doing and what issues their particular voter bloc is interested in learning. I would imagine that voters have different issues all across the state, and for local candidates, it’s going to be quite different than statewide candidates for offices in Lansing and Washington. There is a lot of noise being made about the results of these surveys. Most of the surveys still ignore the simple fact that a large
percentage of the electorate only has cellphones and this group of voters is not being, for the most part, included in any survey. It doesn’t make for very accurate results. It would also seem very different for candidates who are battling in a primary versus candidates who aren’t worrying about a primary but are already concentrating on the November election.
There are plenty of candidates, both Republican and Democrat, who are fighting hard to get in the ring and do battle in the general election. Your candidate is not always the one who is going to win the primary or even be in the right party. We have ourselves a few statewide races, and already the polls are being released to tell us what’s going on in their campaigns.
I’m not sure any voter really cares about survey results that take place around the Fourth of July as if they are going to mirror the opinions of the voters in November. The numbers are usually too small and still don’t include cellphone owners, who seem to be strong voters in general elections. Whatever the survey results are in July, let’s not get too excited. Whoever you are in favor of in the general election, it’s a very long way away and anything can and probably will happen. The last time I looked, the gener-
al election is over three months away. In politics, three months is a lifetime. The best advice to anyone who has an election three months away is: “Don’t count your chickens before they’re hatched.” It’s going to be an interesting primary in just a few days, and the next few months will probably include a lot of mudslinging. That seems to be the norm these days. It’s always interesting to watch sausage being made. It’s not nice, but it sure beats any other way to elect our representatives.
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OTHER VOICES: Proposal 1 vote vital to Mich. reinvention replace estimated PPT When Michigan business revenue lost for local serowners invest in equipvices and create a fundment, whether it be highing source that commutech machinery or a new ofnities can count on. fice chair, they have to pay Proposal 1 solves two the personal property tax. problems — without a They pay the PPT repeatedtax increase: ly, every single year they 䡲 It keeps in place the own the equipment. With Michigan Legislature’s the margin for success so bipartisan work to end slim, particularly for small Sandy Baruah the antiquated, unfair businesses, that’s the difdouble tax on personal ference between hanging a “We’re hiring” sign and putting a padlock property paid by local small businesses. on the front door. 䡲 It stabilizes local communiThat’s the lunacy of the PPT: Paying hard-earned money to be ties by providing dedicated fundless competitive. Michigan busi- ing for 100 percent of the estimatnesses pay an unfair double tax that puts them at a competitive disadvantage with businesses in neighboring states that don’t charge the tax. The PPT also siphons money they could instead put into creating jobs. That will continue unless voters pass Proposal 1 on Aug. 5. Passing Proposal 1 is the next important step in Michigan’s reinvention and will impact every business and community in the state. It’s estimated that eliminating the PPT would create up to 15,000 new jobs in Michigan and bring in $450 million in additional business investment. At the same time, Michigan’s local communities have struggled for years with the wild revenue fluctuations the PPT produces, negatively impacting services they provide daily. Proposal 1 will fully
NOMINATIONS SOUGHT FOR NONPROFIT CONTEST This year’s Crain’s Best-Managed Nonprofit Contest is focused on good management practices of nonprofits. Applicants are asked to give examples of how they deploy their mission and resources, among other information. Applications are due Aug. 25. Finalists will be interviewed in person by judges the morning of Nov. 10. Applicants for the award must be a 501(c)(3) with headquarters in Wayne, Washtenaw, Oakland, Macomb or Livingston counties. Applications must include an entry form, a copy of the organization’s code of ethics, a copy of the most recent audited financial statement and a copy of the most recent IRS 990 form. Previous first-place winners are not eligible; neither are hospitals, HMOs, medical clinics, business and professional organizations, schools, churches or foundations. The winners will be profiled in the Dec. 1 issue, receive a special “best-managed” logo from Crain’s for use in promotional material and will be recognized at the Crain’s Newsmaker of the Year lunch early next year. For an application form, please email YahNica Crawford at ycrawford@crain.com or visit www.crainsdetroit.com/nonprofit contest. For information about the contest itself, email Executive Editor Cindy Goodaker at cgoodaker@crain.com or call (313) 446-0460.
ed PPT revenue lost for important local services like police, fire, schools, jails, roads and libraries. Furthermore, Proposal 1 is not a tax increase for anyone. It is paid for by eliminating special corporate tax breaks and establishing a statewide essential services assessment paid only by manufacturers receiving a PPT reduction. Proposal 1 has broad statewide support. Michigan Citizens for Strong and Safe Communities, a bipartisan coalition supporting Proposal 1, includes tens of thousands of members representing police, fire, education, local govern-
ment, small business, labor and agriculture groups. The Detroit Regional Chamber is a member, as are Business Leaders for Michigan, Michigan Chamber of Commerce, Small Business Association of Michigan, Michigan Manufacturers Association and local chambers from across the state. There is also strong local government support, including the Michigan Municipal League, Michigan Association of Counties and Michigan Townships Association. Over the last three years, Michigan has been on a path of reinvention. Our state, compa-
nies and employees have become more competitive in the global marketplace. The results are clear: Our population is growing, our economy is expanding and our unemployment rate is dropping faster than the national average. All of this is because of the decisions that have been made to better position Michigan in the 21st century. Eliminating the PPT on Aug. 5 with a “yes” vote on Proposal 1 is one of the easy decisions Michigan needs to continue our progress. Sandy Baruah is president and CEO of the Detroit Regional Chamber.
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CRAIN’S DETROIT BUSINESS
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Wright & Filippis narrows focus with sale of home medical equipment biz BY JAY GREENE CRAIN’S DETROIT BUSINESS
Wright & Filippis Inc. of Rochester Hills is going back to its roots of providing clinical services with the sale of its home medical equipment business last month to Clearwater, Fla.-based Lincare Holdings, said CEO A.J. Filippis. The family-owned company, with 450 employees, will focus on expanding four core areas: prosthetics, orthotics, complex rehabilitation, and home accessibility and personal mobility products, Filippis said. “This has been a year-and-ahalf-long process where we looked at the change in reimbursement with Medicare and all the payers and decided on a new strategic direction,” Filippis said. “We feel (payers) are looking at us as commodities. We are focusing now more on clinical care.” Over the past two years, the durable medical equipment industry, including Wright & Filippis and many hospital-based companies, has been in the midst of a shakeout as the Centers for Medicare and Medicaid Services moved to a cost-cutting competitive bidding process that has decimated smaller competitors. Last year, several Southeast Michigan-based hospital-owned home equipment product companies and an affiliate of Center Line-based Binson’s Home Health Centers merged into Grand Rapidsbased Hart Medical Equipment Co. to cope with the Medicare pricing changes. Home equipment companies owned by Flint-based McLaren Health Care and Grand Rapidsbased Genesys, one of five regional systems owned by Ascension Health Michigan, initially joined Hart. Henry Ford Health System recently decided to merge its Henry Ford Health Products into Hart Medical, said CEO Nancy Schlichting. Henry Ford will own a 35 percent investment share of the company. “Very few health system programs have been successful in that space,” Schlichting said. “National players have more scale and they have the ability to un-
derprice” home health products to Medicare. Like Henry Ford, Filippis said his 70-year-old company found itself with no choice but to sell its durable medical equipment product line, which includes hospital beds, standard wheelchairs and oxygen supplies, after 35 years in the business. “We had been operating for a year with 40 percent to 45 percent reimbursement cuts. Even with our size, we are one of the largest independent (DME) providers, we couldn’t continue,” Filippis said. Of Wright & Filippis’ $113 million in 2013 projected net revenue, the Lincare sale represents 31 percent, or $35 million in annual sales, Filippis said. Projected revenue for 2015 is $50 million to $75 million, he said. The sale price was not disclosed. Under Lincare, Filippis said, former Wright & Filippis customers will be well served. “The good news is Lincare is going to operate out of the majority of our locations (in Michigan and Ohio). We will not be displacing these patients,” he said. Of some 37 Wright & Filippis offices, Lincare will share space in 30, he said. Lincare, which has offices in 48 states, specializes in prosthetics, orthotics, respiratory care and home medical equipment. In 2012, Lincare was acquired by Linde AG of Germany for $3.8 billion. “This will also help provide for patients when they travel,” Filippis said. “When they leave Michigan, go to Florida, we had to make arrangements with another provider in another state. Now, they can go practically anywhere in country and have access to a Lincare location.” Filippis said the company is eyeing several acquisitions to expand its renewed focus on clinical care products and services. “We plan on growing our business significantly over the next four years,” Filippis said. Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene
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Join Crain’s Detroit Business in its 2014 Salute to Entrepreneurs, 7:30-10 a.m. July 24 at The Henry, Autograph Collection, Dearborn. Every year, Crain’s recognizes entrepreneurs for their innovation, problemsolving abilities or sheer relentlessness. In addition to the awards ceremony, hear firsthand accounts from business executives who find ways to compete against larger rivals. Featuring Eoin Commerford, CEO, Moosejaw Mountaineering; Marc Gardner, founder, North American Bancard LLC and PayAnywhere LLC; and Lydia Gutierrez, president and CEO, Hacienda Mexican Foods. Roundtable discussions will provide in-person advice from the experts featured in the Crain’s Small Business Strategies webinar series. Preregistration has closed. Walk-in registration is $65 per person. For ticket information, call Kacey Anderson at (313) 446-0300, email her at cdbevents@crain.com, or visit crainsdetroit.com/events. Join the conversation with #cdbsalute.
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HEALTH PLANS LOOK AHEAD 2014 shows promise after struggles of last year, according to study, Page 14
People Ella Kazerooni, professor of radiology, associate chair for clinical affairs and director of cardiothoracic radiology at the University of Michigan, has been awarded a gold medal from the American Roentgen Ray Society for Kazerooni distinguished service to radiology. She was also given the inaugural President’s Inspiration Award for Leadership from the Society of Thoracic Radiology. Hayley Thompson, associate professor of oncology for the Wayne State School of Medicine and the population studies and disparities research program at the Barbara Ann Karmanos Cancer Institute, will serve as a member of the Societal and Ethical Issues in research study Thompson section at the Center for Scientific Review of the National Institutes of Health. Ananda Prasad, M.D., professor of internal medicine at Wayne State University, has been honored by the American College of Nutrition with its 2014 Alexander and Mildred Seelig Magnesium Award. The award recognizes contributions defining the role of metals in nutrition. Michael Embry, president of Comprehensive Benefits Inc., Chesterfield Township, has been elected to the National Association of Health Underwriters board of trustees as secretary. Gov. Rick Snyder made the following appointments: Laura Marcero of Grosse Pointe Farms, managing director of restructuring and turnaround practice, Huron Consulting Group Inc., to the Board of Osteopathic Medicine and Surgery; Jeff Marcero Beutner, Michigan territory manager for J&B Medical Supply Inc. in Wixom, to the Board of Nursing Home Administrators; Zeeshan Husain, D.P.M., a partner with Rochester Center for Foot and Ankle Surgery and the assistant residency director of the Detroit Medical Center podiatric medicine and surgery residency program, and Nathan Tallman, director of corporate development for Metro Wire and Cable Corp. in Sterling Heights, to the Board of Podiatric Medicine; and Kurt Tech, a commercial credit analyst for Talmer Bank and Trust in Troy, to the Board of Optometry.
The health of health systems Revenue’s a challenge, but investment income helps keep systems in black BY JAY GREENE CRAIN’S DETROIT BUSINESS
M
edicare payment cutbacks, hospital readmission penalties, rising bad debt from high-deductible plans, information technology investments and reduced inpatient demand all took their toll last year on local health systems. Revenue declined at four of the region’s nine health systems and hospitals surveyed by Crain’s, increased less ATTLING BACK than 1 percent for three Henry Ford Health systems and rose above 9 System works to percent for two systems. increase revenue, Despite the financial Page 13 challenges, most of the reporting health systems and independent hospitals earned positive bottom lines in 2013 thanks to investment income, except for Crittenton Hospital and Medical Center in Rochester Hills, which lost $22.2 million on operations and is now shopping for buyers. For 2013, Garden City Hospital and Detroitbased Henry Ford Health System also lost money on operations, $5.4 million and $12 million, respectively, but investment income helped to bolster bottom lines. Nationally, the average operating margin in 2013 for 179 systems surveyed by Modern Healthcare, a sister
B
See Health Systems, Page 12
GLENN TRIEST
Regina Doxtader, CFO of Botsford Hospital, said her organization “had to work pretty hard on expense control” in 2013 as health systems in general balanced a variety of challenges.
SOUTHEAST MICHIGAN HEALTH SYSTEMS 2013 FINANCIALS Beaumont Health System Henry Ford Health System Oakwood Healthcare Crittenton Hospital Botsford Health Care McLaren Health Care (9-30-13) Garden City Hospital (9-30-13) University of Michigan (6-30-14)* St. John Providence (6-30-14)*
Operating income 2013 2012 $6.7 $57.7 ($12.0) $28.4 $23.8 $21.3 ($22.2) ($16.1) $1.4 $9.8 $65.5 $60.2 ($5.4) ($2.2) $17.0 $2.7 $70.0 $59.4
Net income 2013 2012 $65.4 $108.5 $0.5 $34.4 $65.7 $39.6 ($1.4) ($3.1) $7.3 $12.3 $185.5 $243.4 $3.1 $2.0 NA $67.8 $164.4 $108.6
Investment income 2013 2012 $58.3 $59.5 $58.3 $66.8 $43.6 $26.7 $21.8 $13.9 $6.5 $5.6 $92.1 $94.0 $1.1 $1.6 NA $91.5 $63.8 $121.7
Total revenue 2013 2012 $2.27B $2.24B $4.52B $4.48B $1.16B $1.19B $226.5 $239.0 $331.5 $334.1 $2.49B $2.22B $127.0 $126.6 $2.5B $2.4B $1.93B $1.96B
Figures in millions, except where noted. All hospital systems fiscal year 2013 ended Dec. 31 unless noted. DMC is owned by for-profit Tenet Healthcare Corp., which only reports companywide numbers. Figures for St. Joseph Mercy, which has a fiscal year ended June 30, were not available. *Figures for 6-30-14 are projected. Source: Hospital systems audited financial statements and interviews
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After ‘tough years,’ Henry Ford to cut costs, install e-health records system BY JAY GREENE CRAIN’S DETROIT BUSINESS
Henry Ford Health System is battling back from a couple of years of near break-even profit margins and a recent bond rating downgrade, but CEO Nancy Schlichting said she’s confident that a major cost-cutting initiative and other moves will help reverse those trends. The Detroit-based system last month had $831 million of tax-exempt bonds downgraded to A3 from A2 by Moody’s Investor Service, primarily because it posted belowaverage operating results in 2013 and is in the midst of installing an expensive electronic health record system. “It is disappointing and from my standpoint doesn’t make sense because we have seen a nice lift from our cost reduction and strategic growth” plans, said Schlichting. Schlichting said the five-hospital system is beginning a major initiative over the next three years to reduce $300 million in costs. She said the system will focus on reducing administrative costs through efficiency gains and lowering supply and labor expenses. In 2013, Henry Ford posted an operational loss of $12 million on total revenue of $4.52 billion, a 1 percent increase from 2012. The system spent $65 million last year on an electronic health record system designed by Epic Systems Corp. of Wisconsin. It will spend a total of $356 million on capital and operating expenses when it is fully in-
We knew we were “ going to have two or three tough years. ” Nancy Schlichting
stalled in the next several years. Operating income also was dampened by $30 million in Medicare cuts, a 2 percent employee pay raise for the system’s 23,000 workers that cost $12 million and a $2.6 million, or 1.7 percent, increase in bad debt and charity care to $146 million. With investment income of $58.3 million and the sale of its interest in Dialysis Partners of Northwest Ohio for about $15 million, Henry Ford managed to stay in the black with $500,000 in net income. “We knew we were going to have two or three tough years for us with increasing uncompensated care, Medicare cuts and the Epic impact to us that caused productivity issues,” Schlichting said. In 2012, Henry Ford decided to scrap its homegrown system, CarePlus Next Generation, which it had projected to spend $100 million to upgrade. Instead, Henry Ford selected Epic. Many health systems in Southeast Michigan, including Beaumont Health System, Oakwood Healthcare and the University of Michigan Health System, also use Epic. “Epic is working for us now. It is an incredible tool to create more efficiency and reduce waste,” she
said. “We will easily get $50 million (in savings) out of it (this year).” Schlichting also expects revenue to grow steadily this year as more than 20,000 newly insured private and Medicaid patients enter the system through Health Alliance Plan and Midwest Health Plan, its two HMOs. “We are focusing more on nonpatient growth with our ambulatory care network,” she said, adding that Henry Ford Hospital has increased inpatient referrals from outside of Michigan by 38 percent since 2012. Last year, Henry Ford also ended negotiations to merge with Beaumont, which recently approved a deal to combine operations with Botsford Hospital and Oakwood. Moody’s cited that as another reason for downgrading. “There isn’t a whole lot left. We have limited opportunities,” Schlichting said of possible local merger partners. Schlichting said Henry Ford remains open to new models of affiliation, akin to the recent decision of Ascension Health and Trinity Health to form a third company for managed care contracting purposes or to form affiliations with multi-state health systems. “We are busy optimizing our model,” she said. “There are a lot of systems trying to emulate Henry Ford. Everybody is broadening their marketplace and aligning with physicians.” Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene
Health systems: Meeting challenges ■ From Page 11
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publication to Crain’s Detroit Business, was 3.1 percent, down from 3.6 percent in 2012. For Farmington Hills-based Botsford Hospital, 2013 was a tough year as revenue declined by 0.7 percent to $331.5 million, inpatient admissions dropped by 4 percent and outpatient visits fell by 5 percent, said CFO Regina Doxtader. As a result, Botsford’s operating income in 2013 dropped 85 percent to $1.4 million from $9.8 million. And despite investment income being up 16 percent to $6.5 million last year, net income declined 41 percent to $7.3 million last year from $12.3 million in 2012. “We had to work pretty hard on expense control to get to a 0.4 percent operating margin,” Doxtader said. Expenses only increased by 1.8 percent, a historically low percentage increase, she said. Botsford’s experience is not unusual. Health systems have been balancing a range of challenges. Last year, inpatient admissions declined about 3 percent in Southeast Michigan, mirroring national averages and dampening hospitals’ traditional source of revenue. Revenue growth declined for
many reasons. Medicare penalized hospitals millions of dollars for readmitting certain patients within 30 days. Private auditors, hired by Medicare to scrutinize inpatient claims, rejected millions of dollars in hospital payments. Private payers and Medicare also pressured hospitals into admitting a greater percentage of patients into lower-cost observation units, further reducing revenue. Moreover, the move by employers to encourage high-deductible health plans as a cost-containment device appears to be working. But hospital executives tell Crain’s they are seeing increases in bad debt from patients who have high-deductible health plans and are unable to pay their share of out-of-pocket costs. Executives say high-deductible plans also are working to dampen inpatient admissions — and revenue — because patients are avoiding some elective procedures, again due to out-of-pocket costs. And health systems continue to seek scale. Last month, Beaumont Health was formed by Royal Oak-based Beaumont Health System, Dearborn-
based Oakwood Healthcare Inc. and Farmington Hills-based Botsford Health Care. Pending regulatory approval this fall, the new system will control eight hospitals, 3,337 beds, 5,000 physicians, $3.8 billion in revenue and 30 percent of inpatient days, said the Michigan Health Market Review. Earlier this month, Garden City Hospital, which has seen net assets drop to a negative $500,000 from $33.5 million over the past five years, completed its sale to forprofit Prime Healthcare Services of Ontario, Calif., for about $90 million. Some $55 million of the sale proceeds will be used to retire bond debt, and another $35 million will be used on capital projects over the next five years. Here’s how some local health systems fared:
McLaren Health McLaren Health Care Corp., a Flint-based system with 12 hospitals, led the way with net income of $185.5 million on total revenue of $2.49 billion in fiscal 2013 for a 7.5 percent total margin. See Next Page
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Despite the banner year, profits were lower last year than in 2012, when McLaren earned $243.4 million on revenue of $2.22 billion for an 11.2 percent margin. McLaren’s operating profits edged up 8.8 percent to $65.5 million in 2013 from $60.2 million the year before. One local health care expert, who asked not to be named, said McLaren’s secret to high profitability is its “laser focus on expenses. The other systems talk about it. McLaren actually does it. They are a model for others.” Phil Incarnati, McLaren’s CEO, said McLaren has always focused on keeping expenses below industry and competitor averages. “We manage very closely on the expense side,” Incarnati said. “Our biggest single area where we saw improvements was in the supply chain. You look at the top line growing. Our supply costs are going down.” While revenue increased 14 percent last year, McLaren’s supply costs increased only 0.5 percent, or $2 million, to $374 million. Last fall, McLaren acquired Barbara Ann Karmanos Cancer Institute in a deal facing a court challenge by the Detroit Medical Center. McLaren also owns two hospitals in metro Detroit — McLaren Oakland in Pontiac and McLaren Macomb in Mt. Clemens. Incarnati said fiscal 2015, which begins Oct. 1, will include full-year Incarnati revenue for two newly added hospitals — Port Huron Hospital and Karmanos — and McLaren’s total revenue will hit $3.5 billion. For the first six months of fiscal 2014, ended March 31, McLaren recorded operating income of $23.7 million on $1.32 billion of revenue compared with operating income of $23.7 million on $1.22 total revenue for the same period in 2013. “We tend to be very conservative in how we state numbers in the first six months,” Incarnati said. “We like to have a better second half.” Incarnati said early data is showing lower levels of bad debt this year, compared with last year when McLaren absorbed $119 million of unpaid patient bills. “There is positive impact with Medicaid (and private insurance expansion),” he said. “The newly insured show up in the emergency department, and we are paid 35 percent of costs. That is better than nothing.”
Oakwood Healthcare Oakwood Healthcare, a four-hospital system, also posted the best results in its recent history. It has been improving operations through a combination of wise investing, cost cutting and efficiency gains, financial reports show. In 2013, Oakwood increased operating income 11.2 percent to $23.8 million from $21.3 million in 2012. With investment income of $43.6 million, net income increased 66 percent to $65.7 million last year from $39.6 million in 2012.
“We had pretty good back-toback years,” said Oakwood CFO John Keuten. “It was the first year that operating costs of 2013 were less than operating costs of 2012,” Keuten said, adding that lower supply, insurance, interest expenses and staffing costs led to a 1.6 percent reduction in total expenses to $1.15 billion last year. “Top-line net revenue has been difficult in the Southeast Michigan market for all systems,” Keuten said. “We are seeing inpatient volumes deteriorate from year to year as more insurance companies block patients from the inpatient unit and they go into observation status.” For 2014, Keuten said Oakwood projects a 1 percent operating margin, or about $14 million in operating income. “We will come pretty close to what we showed for the core business in 2013,” he said. Keuten said patient discharges were down 2.8 percent, although Keuten ambulatory and emergency department visits were up 2.4 percent and 3.6 percent, respectively. Rehabilitation stays were up 13 percent, and pulmonary admissions were up 1.2 percent. Over the past three years, Oakwood’s value-analysis teams, which include physicians, nurses and administrators, have worked to reduce costs and improve quality in several departments, Keuten said. For example, lower supply costs for orthopedic procedures helped to lower overall system expenses, he said. Overall, supply costs declined 3.9 percent to $171 million from $178 million. Insurance costs, which include medical malpractice, were cut by 41 percent to $16 million. “We worked hard with physicians to address the issues they have, and we more than adequately covered the amount of claims processed,” Keuten said.
Beaumont Health System At Beaumont Health System, CFO Nick Vitale said significant increases in bad debt — $93 million in 2013 from $72 million in 2012 — along with a 2.8 percent drop in admissions led to revenue growth of only 1.4 percent to $2.27 billion in 2013. Net income dropped 88 percent to $6.7 million. “We had a good year, not a great year,” said Vitale, noting that 2012 was a record year for Beaumont when it posted $108.5 million in net income. He said 2014 is expected to be almost as strong as 2012. Vitale said cold weather in the fourth quarter last year started to dampen patient volume. Lowerthan-expected reimbursements and shifting payer mix to self-pay and Medicaid accounts were other reasons for lower revenue. “Our bad debt is up 30 percent year over year,” Vitale said, saying that one factor is insured patients who can’t afford coinsurance and large deductibles. That group also hurts revenue because out-of-pocket costs reduce the
amount of care sought. Vitale also said readmission penalties, Medicare reimbursement cuts and “take-backs” from Medicare auditors that determine hospitals overcharged for services have had an effect. “Everybody is Vitale affected by that. (Private Medicare auditors) interpret the rules more aggressively than we expected,” Vitale said. “We are appealing and expect to receive a good portion back.”
Crittenton Hospital Crittenton Hospital, which last year hired a new CEO, Roy Powell, and contracted out its cancer center to St. John Providence Health System, projects a major turnaround and positive operating margin this year. The hospital’s operating loss of $22.2 million last year was primarily due to a decrease in patients and changeover to a new accounts receivables system, Powell said. “Strategic initiatives have been implemented with increased focus on physician recruitment, (collections on past due bills), payer contracting and expense control,” Powell said. Crittenton’s 5.2 percent drop in revenue to $226.5 million last year was the greatest drop of any local hospital. Revenue dePowell clines were due to lower surgical volume and debt write-offs, Powell said. But of the $12.5 million revenue drop, Crittenton Cancer Center only accounted for $2.5 million of the decline, financial statements show. One of the major revenue generators for the center was former Crittenton oncologist Farid Fata, M.D., who is accused by federal prosecutors of millions of dollars in Medicare fraud. He is awaiting trial later this year. But Powell said the major reason the cancer center faced declining revenue was the departure of primary radiation oncologist, V. Elayne Arterbery, M.D., who last year moved to the Detroit Medical Center after 10 years at Crittenton. In 2013, Crittenton also reported a potential Stark Law anti-kickback violation to the Centers for Medicare and Medicaid Services. “Crittenton voluntarily reported to CMS that monies had been loaned to members of the hospital’s medical staff,” Powell said in a statement. He noted the hospital believes the loans were allowable under federal law. Powell said Crittenton projects a positive operating margin in 2014. “The first five months are several million dollars better than last year at this time,” Powell said, attributing it to Crittenton’s strategy of being “the lowest-cost, highest-value hospital in the area.”
St. John Providence Officials at St. John Providence Health System are projecting operating income of $70 million for fis-
cal year 2014 ended June 30, a 17.8 percent increase over last year’s total of $59.4 million. “We had a pretty good year with operating income at $70 million for a 3.5 percent margin,” said CFO Patrick McGuire. “Our volume was soft and down a bit. We did well with our higher end (profitable services) and surgical volume, which is a major factor in how we get paid.” Net income is projected to rise to $164.4 million this year, up from $108.6 million last year. However, revenue is expected to decline 1.5 McGuire percent to $1.93 billion from $1.96 billion in fiscal 2013. McGuire said revenue declines are mainly due to increases in uncompensated care, Medicare cuts and flat patient volumes. However, St. John experienced large increases in newly insured Medicaid patients starting in April when the Healthy Michigan Medicaid expansion started. “We saw our self-pay volume get cut in half for the three-month period (April through June),” McGuire said. “Those people have always come to us. Now they have Medicaid, which is the lowest payer, but we were still paid something.” McGuire said focusing on patient safety has helped hold down costs. For example, St. John lowered
costs per acuity adjusted patient case by 0.77 percent. This means St. John cut the average treatment expense, adjusting for how sick the patients were. “Even with inflation and lower volume, this decrease, although it appears modest, is very significant and difficult to achieve,” he said.
University of Michigan T. Anthony Denton, COO of UM Hospitals and Health Centers, credited the system’s performance to more patients. UM’s patient care discharges and obstetric cases grew 5.1 percent and patient days increased by 3.8 percent for UM’s adult, children’s and women’s hospitals, Denton said. “We are still getting our referrals from all around the state. It is one of the enablers to grow discharges,” said Paul Castillo, CFO of UM Health System. This year, Denton said, UM Hospitals also has seen surgical cases grow. “We have had a 700-case increase so far through May.” Castillo projects $17 million in operating income, a 0.7 percent margin, for fiscal 2014 ended June 30, on revenue of $2.52 billion. Castillo also said UM Health is budgeting for a 3 percent operating margin, or $80 million in operating income, on projected revenue of $2.66 billion for fiscal 2015. Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene
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Health Care Select Michigan health plans by the numbers
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Blue Care Network & Blue Care Complete CoventryCares Harbor Health Plan* Health Alliance Plan & HAP Midwest Health Plan Health Plus McLaren Health Plan Meridian Health Plan Molina Healthcare Priority Health Total Health Care United Healthcare Total
Net income 2013
Net income 2012
Percent change
Profit margin 2013
Profit margin 2012
$109.6 million $4.4 million ($267,511)
$167.4 million $7.1 million ($66,540)
(35%) (38%) (302%)
4% 2.7% -3%
6.2% 4.1% -1%
$27.3 million $6 million ($174,146) $5.7 million $18.6 million $58.5 million ($6.3 million) ($3.2 million) $220.2 million
$28.9 million $10.6 million $14.8 million $5.2 million $9.4 million $64.7 million $264,458 $4.2 million $312.5 million
(6%) (43%) (101%) 10% 98% (10%) (2282%) (176%)
1.2% -0.8% 0% 0.5% 2.1% 2.8% -1.9% -0.4%
1.2% 1.5% 3.3% 0.5% 1.1% 3% 0.1% 0.5%
Source: Michigan Health Market Report, 2014. Allan Baumgarten *Formerly Pro Care Health Plan
Michigan health plans struggled in 2013, but see opportunity in 2014, study shows BY JAY GREENE CRAIN’S DETROIT BUSINESS
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Michigan’s 18 health plans notched a 1.8 percent profit margin in 2013, taking in $212.4 million in profits, a somewhat lower figure than in 2012 when the HMOs reported collective net income of $311 million for an average 2.6 percent margin, according to the 2014 Michigan Health Market Review. While HMO enrollment was slightly down in 2013 with 2.7 million members, Allan Baumgarten, the Minneapolis-based researcher who compiled the report, said 2014 has shown strong gains in enrollment from Medicaid expansion and private health insurance signups in the exchange under the Patient Protection and Affordable Care Act. Baumgarten said nearly 90,000 people purchased private health insurance during the first three months of this year. Another 322,022 enrolled in Medicaid expansion as of July 10, said the Baumgarten Michigan Department of Community Health. “This is a huge opportunity for Medicaid HMOs� that only averaged a 0.9 percent profit margin in 2013, Baumgarten said. Commercial HMOs averaged 2.2 percent. Baumgarten said there is uncertainty on medical expenses and profitability because there could be pent-up demand for care with previously uninsured people. Over the next couple of years, more than 477,000 Michigan residents are expected to join the already 1.9 million covered under Medicaid. Eventually, 25 percent of the state’s population will have Medicaid coverage, experts predict. Baumgarten also predicted another 180,000 people will purchase private health insurance this year, turning around commercial HMO enrollment losses over the last sev-
eral years. But HMO net income dropped by nearly $100 million last year due to lower investment income, inadequate Medicaid capitation payments to cover premature babies, and rising medical and administrative expenses, said Rick Murdock, executive director of the Michigan Association of Health Plans. Aside from rising expenses and $16 million in lower Medicaid HMO profits, another factor in the total profitability drop was Blue Care Network, which saw commercial underwriting net income decline 58 percent to $54.4 million last year from $132.3 million in 2012, Baumgarten said. “Blue Care had a huge commercial margin in 2012, but medical expenses went up 3 percent in 2013,� he said. In 2013, Blue Care, the largest HMO in Michigan, recorded a 4 percent margin on net income of $109.6 million, down from 2012’s $167.4 million in net income. Those figures also include Blue Cross Complete, a Medicaid HMO. Kevin Klobucar, Blue Care’s CEO, said Blue Care lowered average premiums in 2013 after determining it was managing its medical expenses. However, commercial administrative expenses increased significantly, primarily because of added costs from the Affordable Care Act, he said. Blue Care’s commercial administrative expenses rose 17 percent in 2013 to $55 per member per month from about $47 per member per month, according to the Michigan Health report. All HMOs averaged a 3.5 percent increase to $39.19, the report said. Murdock said health plan expenses have been slowly increasing over the past four years as medical claims and prescription drug prices have bumped up. On average, commercial medical expenses for HMOs ticked slightly upward in 2013 to 2.9 percent in 2013, or $315.43 per member per month, compared with 2012 when medical expenses grew 2.8 percent to $306.60 per member per month,
said the Michigan Health report. Medicaid medical expenses per member per month averaged $268.09 in 2013, up 10.6 percent from $242.48 in 2012, the report said. Competition to add new members from Medicaid expansion and privately insured patients through the federal health insurance exchange will work to dampen premium increases and moderate profit margins, Murdock said. Nationally, experts are predicting 6 percent to 8 percent premium increases in 2014. But Murdock believes those premium increases in Michigan will be lower because of competitive pressures. Murdock also said HMOs are bracing for contracting changes this year from ongoing consolidation of physician practices and hospital-based systems. For example, Beaumont Health System, Oakwood Healthcare and Botsford Hospital have agreed to merge into Beaumont Health. CHE Trinity Health and Ascension Health Michigan also agreed to form Together Health Care Network for joint managed care contracting. Hospitals and physicians “will be in a better position to negotiate price than previously,� Murdock said. For 2014, Murdock said, commercial HMOs’ margins declined to less than 2 percent, but Medicaid HMOs are expected to increase margins of 1 percent and 2 percent. “We think Medicaid margins are too low. We gave that message to the Legislature last year,� Murdock said. “Margins will be squeezed on the commercial side because of price competition. There will be a two- to three-year shakeout in the industry.� Murdock said 2014 is hard to predict because of rising specialty drug prices. Awaited here is a decision later this year from the Department of Community Health on the new hepatitis C drug, Sovaldi. “It is $1,000 per pill. Other specialty drugs have been approved, but only at a $40-$60-$80 per pill cost,� he said. “The state has to factor those costs into rates.�
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T
he Aug. 5 primary in Michigan is one that matters when it comes to power shifts in certain coveted districts. Will Thomas Stallworth, D-Detroit, currently a state representative in the 7th District, be rewarded with a state Senate slot for working to broker the “grand bargain” in the Detroit pension deal? Will Mike Kowall, R-White Lake, chairman of the Senate Economic Development Committee and noted for legislation that would have supported a new hospital for McLaren Health Care, earn another term? These are some of the races to watch, and this is your scorecard. Before you vote, review the race highlights in our coverage along with a guide to the major
Know the candidates with this scorecard candidates for Wayne County executive. This report does not include state or congressional races in which leading candidates are running unopposed in their political party. But getting past the primary is the first order of business for the candidates highlighted here. If you have a suggestion for our coverage leading up to the November general
election, contact Jennette Smith, managing editor, jhsmith@crain.com, or Chris Gautz, Lansing correspondent, cgautz@crain.com PAC spending up ... way up, this page The most interesting Senate primary outside Detroit involves — what else? — road funding, this page Wayne County executive: A grid is your guide,
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Term-limited reps look to lengthen Lansing lives in state Senate, Page 18 Congressional contests: A rundown of the primary races in the 8th, 11th and 14th Congressional Districts, Page 19
Fundraising for state’s 150 largest PACs up 44% over ’12 BY CHRIS GAUTZ CAPITOL CORRESPONDENT
This election season’s war chests are expected to be hefty, if the amount of money flooding into political action committees continues to grow as political analysts expect. A report by the Lansing-based Michigan Campaign Finance Network in April showed that the state’s 150 largest PACs had a 44 percent increase in fundraising hauls compared with the same point in the 2012 election cycle, an increase of $9.9 million. Those 150 PACs have raised a total of $32 million so far, and it will be clear how much larger PACs have grown when PACs and candidates for state office release new campaign finance data on July 25. So far this year, the PAC spending has been dominated, as usual, by the House and Senate campaign funds of both political parties and by business and union groups. The largest PAC in the state so far is the Republican Governors Association, which has more than $4 million in the bank to help support the re-election of Gov. Rick Snyder. The Democratic Governors Associa-
tion has just a little more than $9,000 in the bank as it supports former congressman Mark Schauer in his bid to unseat Snyder. The DGA has been running a series of ads lately in support of Schauer, so when its campaign finance filing is released later this month, it should reflect those expenses. T.J. Bucholz, president of Lansing-based Vanguard Public Affairs, said the election cycle so far has been “fairly sleepy,” with the open U.S. Senate race attracting most of the big money from outside groups. But that will change soon, he said. “I think some of the dollars haven’t been spent yet,” Bucholz said. “Once we hit Labor Day, you’ll really start to see money spent on television ads.” Here are some of the top political action committees in the state, and those backed by businesses and unions, as reported by the Michigan Secretary of State: Republican Governors Association: Raised from Feb. 11 through April 20: $0; raised from Jan. 1 through April 20: $0; spent between Feb. 11 through April 20: $37,305.10; cash on hand as of April 20: $4,368,330.46.
Senate Republican Campaign Committee: Raised from Feb. 11 through April 20: $509,136.68; raised from Jan. 1 through April 20: $509,136.68; spent between Feb. 11 through April 20: $81,716.67; cash on hand as of April 20: $1,998,386.08. House Republican Campaign Committee: Raised from Feb. 11 through April 20: $639,780; raised from Jan. 1 through April 20: $639,780; spent between Feb. 11 through April 20: $48,452.81; cash on hand as of April 20: $1,956,292.34. Michigan House Democratic Fund: Raised from Feb. 11 through April 20: $501,409.39; raised from Jan. 1 through April 20: $1,492,146.62; spent between Feb. 11 through April 20: $109,863.51; cash on hand as of April 20: $1,365,676.72. Michigan Senate Democratic Fund: Raised from Feb. 11 through April 20: $265,770.66; raised from Jan. 1 through April 20: $265,770.66; spent between Feb. 11 through April 20: $77,965.20; cash on hand as of April 20: $714,216.07. Michigan Education Association PAC: Raised from Feb. 11 through April 20: $184,100.90; raised from
Jan. 1 through April 20: $227,684.24; spent between Feb. 11 through April 20: $111,535.31; cash on hand as of April 20: $524,437,75. Blue Cross Blue Shield of Michigan PAC: Raised from Feb. 11 through April 20: $115,494.95; raised from Jan. 1 through April 20: $187,350.82; spent between Feb. 11 through April 20: $173,523.24; cash on hand as of April 20: $331,634.77. Business Leaders for Michigan PAC: Raised from Feb. 11 through April 20: $94,750; raised from Jan. 1 through April 20: $94,750; spent between Feb. 11 through April 20: $6,523.98; cash on hand as of April 20: $262,020.22. Michigan Chamber of Commerce PAC: Raised from Feb. 11 through April 20: $79.791.62; raised from Jan. 1 through April 20: $103,534.33; spent between Feb. 11 through April 20: $121,761.10; cash on hand as of April 20: $216,038.28. Michigan Chamber PAC III SuperPAC: Raised from Feb. 11 through April 20: $29,200; raised from Jan. 1 through April 20: $29,975; spent between Feb. 11 through April 20: $676.39; cash on hand as of April 20: $173,308.09.
Detroit Regional Chamber PAC: Raised from Feb. 11 through April 20: $14,904.05; raised from Jan. 1 through April 20: $16,446.48; spent between Feb. 11 through April 20: $7,890; cash on hand as of April 20: $20,489.54. Democratic Governors Association: Raised from Feb. 11 through April 20: $0; raised from Jan. 1 through April 20: $0; spent between Feb. 11 through April 20: $0; cash on hand as of April 20: $9,158.24. DTE Energy Co. PAC: Raised from Feb. 11 through April 20: $67,783.82; raised from Jan. 1 through April 20: $108,518.48; spent between Feb. 11 through April 20: $150,700; cash on hand as of April 20: $7,655.91. Turnaround Detroit Super PAC (Detroit Mayor Mike Duggan): Raised from Feb. 11 through April 20: $0; raised from Jan. 1 through April 20: $0; spent between Feb. 11 through April 20: $15,617.11; cash on hand as of April 20: $737.50. Crain’s reporter Kirk Pinho contributed to this report. Chris Gautz: (517) 403-4403, cgautz@crain.com. Twitter: @chrisgautz
Road funding at play in MacMaster-Schmidt race Easily the most interRepublicans have been esting and watched state unable to come up with Senate primary outside enough votes for some of Southeast Michigan is form of a tax increase one taking place among that will generate at the cherry trees in northleast $1.2 billion more ern Michigan. annually in revenue to But there’s more than fix state roads and one reason that people bridges. are watching this faceoff Among the Republibetween state Reps. Greg cans opposed to such a MacMaster, R-Kewadin, tax increase is MacMasand Wayne Schmidt, Rter, who has aligned himChris Gautz Traverse City. It’s not self with many Tea Party just about who will serve as the groups in the district and bills next state senator for the 37th Dis- himself as the true conservative in trict, but whether the outcome will the race. serve as a harbinger of a major He has said the $1.2 billion needdeal on road funding in the Legisla- ed for roads can be found with a reture. aligning of existing state reAs chairman of the Transporta- sources. tion Committee, Schmidt has been The business community, which the point person in the House dur- predominantly backs Schmidt, suping negotiations to find ways to in- ports the call for some type of tax crease revenue for the state’s increase. And business groups are roads. That is now being used putting financial resources behind against him by MacMaster. candidates like Schmidt who face Schmidt’s efforts, and those of opposition from Tea Party-aligned Gov. Rick Snyder, have failed as candidates like MacMaster. The
Capitol B r i e fi ng s
MacMaster
Schmidt
feeling is that if more members like MacMaster take office, it will make it harder to ever get a deal done on transportation because of their unwillingness to raise taxes. Schmidt has been endorsed by the Detroit Regional Chamber and the Michigan Chamber of Commerce, and MacMaster boasts a plethora of endorsements from local elected officials and individuals. MacMaster also has the backing of former congressman Pete Hoekstra, former state GOP chairman Saul Anuzis and controversial Republican National Committee member and former state lawmaker Dave Agema.
End-of-the-year campaign finance filings with the secretary of state show Schmidt with a sizable war chest. He ended the year with more than $93,000 in cash on hand, compared to just more than $4,000 for MacMaster. MacMaster’s funding has largely come from small donations from residents of the district, while about half of Schmidt’s funding came from what was left over from his House campaign, as well as several large checks from business groups and from district residents. But MacMaster has name recognition throughout the district from his years as a TV and radio weatherman. While some of his supporters have not shown they have strong financial resources, his Tea Party supporters are believed to be motivated and willing to work hard to get out the vote. In other races around the state and nation, candidates backed by Tea Party groups have shown they can out-hustle candidates backed by more establishment groups. For-
mer U.S. House Majority Leader Eric Cantor suffered a stunning defeat in Virginia last month to a relatively unknown primary opponent with little financial resources. But aside from the endorsements and financial edge Schmidt has, he also has voter population trends on his side. The Republican-leaning district stretches from Traverse City to Mackinac Island to Sault Ste. Marie, which should give an edge to Schmidt as he is from the more populous portion of the district. MacMaster and Schmidt are running to replace Sen. Howard Walker, R-Traverse City, who declined to run for a second term. Both camps have polling showing they have a considerable lead in the race, but the only polling that matters takes place on Aug. 5, which is why this primary race will be an important one to watch until the end. Chris Gautz: (517) 403-4403, cgautz@crain.com. Twitter: @chrisgautz
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July 21, 2014
Candidates for Wayne County executive, most recent job, campaign website*
Fred Bolden (R) Hewlett Packard consultant
The county ended the last fiscal year with a $175 million budget deficit. How would you shore up the county's finances?
What should the county do with its jail operations on Gratiot Avenue and the halfbuilt jail site?
State lawmaker, 10th District
Ideas for technology investments and new systems?
Endorsements
Audit all departments to make sure there are no more secret accounts. Would cut the number of executive appointments from 175 to 25. Would follow the county deficit plan that should be in place Oct. 1, but has finance reviewing for accuracy.
If nothing happens in the next few months, would review the current plans and make decision based on that. First instinct is to sell to Rock Financial group for the sheer development potential.
Would hire retainable workers. This can be achieved with managers identifying backgrounds, skills or personality characteristics employees have in common. You should plan careers, not fill roles, which has been done by the past two executives. Also would tackle underperformance issues. Invest in line managers.
Free countywide Wi-Fi. Also, the Bit Lab group at Michigan State University is doing multiple research projects in technology security and he is reviewing to county use.
Waiting until after the primary to get endorsements.
Still must tackle the structural deficit because county is on brink of having an emergency manager. Would focus first on funding constitutionally mandated core services. Would review the number of appointees to see how many are truly necessary.
County’s best option is to secure backing on the remaining $100 million bond issue and finish construction.
Each appointee should have a job description, assigned duties and held accountable to perform those duties at high standards. Progress reports would be required. No more blind oversight by the executive.
Ironically, three out of the four people now going to prison are from the county’s IT department, which shows strict oversight is needed. The various departments do not communicate because they were all established under different IT systems. Would unite the platforms and integrate systems.
Former Wayne County Prosecutor John O’Hair, Sir Michael Berry, former Attorney General Frank Kelley
Priorities are public safety, roads and select human services. If county focuses on core competencies, instead of dubious projects, budget will stabilize. Will conduct a forensic-style audit; meet stakeholders and share the real numbers; draft multi-year budgets based on realistic numbers; and adopt private-sector best practices.
The public, press and county commission do not yet have all the relevant numbers to make a decision.
Will recruit a top team and a culture of transparency and create a new ethical and performance code of conduct. Will search for best practices in public safety, road development and maintenance, and human services delivery. Will implement those practices while involving stakeholders such as unions and the county commission.
County is way behind on hardware and software investments. The former leader of the IT department is now in prison for taking bribes. Cannot commit to exact steps until we do a full desk audit of employees’ resources, the training and experience level, and the full extent of the deficit and available funds for investments.
Wayne County Prosecutor Kym Worthy, Detroit Mayor Mike Duggan, Dearborn Mayor Jack O’Reilly, Livonia City Council President Maureen Miller Brosnan, the Independent Business Association and the Government Administrators Association, Detroit Free Press
Deficit is primarily due to falling property tax collections and smaller state support. Major parts of deficit elimination plan have been implemented; $150 million from the delinquent tax fund boosted the general fund. Workforce has been reduced by about 1,400 since 2008. Efficiencies of more than $57million have been realized.
Commission is reviewing options presented by my administration. Complicated situation, with many competing factors. However, there remain $140 million in available bonds to complete a new jail. Moving the jail to Mound Road or finishing the downtown structure will lead to significant economic development.
Have been accountable for the few employees who betrayed the public trust. Cooperated with authorities, and four people were sent to prison. An executive’s responsibility is important, but so too is a person’s responsibility for behavior. Have put in place a new county ethics policy. County website shows detailed budget and other data.
County has invested in many improvements including wcCompass, (compass.waynecounty.com) to check snow plowing and road maintenance. For FY 2014-15, plans include: new network-based VoIP countywide phone system; increased capabilities for cybersecurity defenses; and improvements in customer services.
The support of many hundreds of individuals in the form of contributions to my campaign, as reflected in the campaign finance reports.
Voted against deficit elimination plan because it transfers $120 million of county debt onto the communities by forcing them to buy the Downriver Wastewater Treatment Plant they have invested in. Plans to work with communities to decide what services are needed, duplicated or not needed. Has identified at least $30 million in savings.
Visited two other states and saw jails with the same number of cells built for under $200 million. Why can’t we do that? Public deserves answers. Best case now is to keep the project site instead of wasting $140 million already spent until we can afford to finish the project.
Communities are calling for change largely because the captain of the ship wasn’t keeping an eye on what was happening below deck. Controls necessary to restore honesty in county government begin with fully using the ethics ordinance and ethics board, and financial transparency.
Need to better use resources in the Wayne County business community to improve technology, which will reduce cost of delivering services and improve service delivery. Need to be the model for using technology to better deliver services and translate that into use by the 43 municipalities.
Former Michigan Gov. Jennifer Granholm and 13th Congressional District Democratic Party, which represents more communities in Wayne County than any other district.
Bring together workers, their unions and local officials to find negotiated solutions. Be transparent, so everyone sees the need to match expenses to revenues. Cut from the top. In Westland, cut mayoral appointees by one-third; I made the same contributions to pension and health care we asked of employees. Consolidate and share services.
Counting bond sales and interest, county is actually on the hook for $560 million for the failed jail project. Would look at selling the project site and perhaps other county-owned properties at market value. Coupled with unspent bond proceeds, could finance major improvements to existing jail and 36th District Court.
Ethics 2.0 plan has five fixes to protect Wayne County taxpayers: full-time ethics officer; posting all county contracts at WayneCounty.com; empowering the ethics officer to file complaints; mandatory training for all executive appointees; public hearings for removal of ethics board members.
Priority will be open data platform, so citizens can track county contracts, public works projects and economic development initiatives. Primary investment would be to appoint county innovation officer, tasked with bringing transparency to government functions.
The Detroit News; Detroit Regional Chamber of Commerce; AFPD PAC; Bill Ford, chairman of Ford Motor Co.; Jim Nicholson, CEO of PVS Chemicals; Shelden Yellen, CEO of Belfor Restoration; Chuck Dardas, president and COO, Alpha Group.
Budget only for necessary mandated operations. Could comment more after 30 days into the term to establish the baseline of true accountability of the budget. Unable to determine current status due to lack of trust in current administration.
Need to see true costs before making a final decision. If jail operations are moved to Mound Road, then will not give away any property for a dime on the dollar.
Lead by example. Those who serve will be held accountable. Checks in the system so that there are another set of eyes. Transparency is key.
Current financial accounting system is laughed at. The baseline of technology is in the education and operation of any system. Wayne County will move into the 21st century.
Has not accepted any.
fredaboldenforwcexecutive. com
Phil Cavanagh (D)
The county has been a target of FBI probes and there are real and perceived lack of controls. What would you do to improve internal management?
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cavanagh4ceo.com
Warren Evans (D) Former Detroit police chief and sheriff of Wayne County
warrencevans2014.com
Robert Ficano (D) Wayne County executive
robertficano.com
Kevin McNamara (D) On Wayne County Commission, 11th District
mcnamarawayne.com
William Wild (D) Mayor of Westland
wild4waynecounty.com
Christopher Wojtowicz (D) Claims investigator for Wayne County Risk Management
cwojo4ceo.org * Candidate questionnaires were edited for conciseness while preserving main ideas.
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CRAIN’S DETROIT BUSINESS
Term-limited reps pursue new life in state Senate 2nd District 䡲 In the 2nd District, which is heavily Democratic, Rep. John Olumba, Detroit, is challenging state Sen. Bert Johnson, Detroit, 40, who is seeking a second and final fouryear term. Olumba ran against Mayor Mike Duggan in Johnson the 2013 primary election, finishing sixth. He came under fire this year over questions about his residency. Olumba, 33, announced last year that he was leaving the DeOlumba mocratic Caucus to form the Independent Urban Democracy Caucus. He is the vice president of the homeless shelter and warming center Shelters of Love Inc. and a graduate of the University of Michigan and the Northern Illinois University College of Law. Other Democrats in the race are Georgia Lemmons, retired teacher and wife of Detroit Public Schools Board of Education President LaMar Lemmons, and Taras Nykoriak of Hamtramck.
4th District 䡲 Two Detroit Democrats are locked in one of the most heated Senate primary battles — and one where divisions over the New International Trade Crossing bridge project could be a factor. Sen. Virgil Smith is seeking a second term in the solidly Democratic seat, but he is facing a stiff challenge from term-limited state Rep. Rashida Tlaib. The oddly shaped district stretches from the north along Eight Mile Road from just east of
the Lodge to Van Dyke and then in a narrow band south through the city before cutting between Dearborn and River Rouge, and encompassing Lincoln Park Smith and Southgate. While the two Democrats agree on most topics, one area where they have clashed is over a community benefits package for the residents of the DelTlaib ray neighborhood, many of whom would lose their homes if NITC is built. Both candidates previously expressed support for the bridge tied to assistance for the Delray community. But Smith told The Detroit News in a July 10 story that community assistance was an issue he “could really care less about” because he is from northwest Detroit. The benefits as Tlaib envisions them would include assurances that local residents would be offered jobs to build the bridge and that air quality and other health protections are in place to protect residents from diesel pollution from trucks using the bridge. Tlaib has repeatedly clashed with Manuel Moroun, owner of the Ambassador Bridge, who opposes NITC. Smith, 40, has the backing of the Detroit Regional Chamber, as well as a number of unions. Before entering politics, he ran several small businesses. His father, Virgil Smith Jr., represented Detroit in the Legislature for more than 20 years. Tlaib, 37, the first female Muslim lawmaker in state history, has a law degree and worked at several nonprofits before being elected to
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5th District
Stallworth
Nathan
Knezek
Jackson
䡲 The race to replace term-limited Sen. Tupac Hunter, Detroit, has a trio of current state representatives vying for a four-year term in the upper chamber’s heavily Democratic 5th District. Reps. Thomas Stallworth, Detroit; David Knezek, Dearborn Heights; and David Nathan, Detroit, join former state Rep. Shanelle Jackson of Detroit and Frank Tomcsik of Redford Township as candidates vying for the Democratic nomination. Hunter was a state representative from 2003 to 2006. Stallworth, 61, was instrumental in brokering the Detroit “grand bargain” legislation in Lansing this summer with state Rep. John Walsh, R-Livonia. Knezek, 27, a U.S. Marine who served two tours in Iraq, is a graduate of the University of MichiganDearborn and former substitute teacher. Nathan, 42. and his wife own Detroit-based Nathan’s Choice Realty PC. Jackson, 34, was elected to the House in 2006 and served on the appropriations committee. Carrie O’Connor of Redford Township is also running as a Democrat. The district covers northwest Detroit, Dearborn Heights and Inkster.
11th District
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䡲 This predominantly Democratic district in South Oakland County features a competitive three-way primary with an odd dynamic. State Reps. Ellen Cogen Lipton,
Huntington Woods, and Vicki Barnett, Farmington Hills, both term-limited, jumped into the race early when State Sen. Vincent Gregory announced he would not seek a Gregory second term because he instead planned to run for Congress. But Gregory’s congressional bid and the necessary fundraising did not go well, and he decided to get back into the Senate race. If he hadn’t tested the congressional waters, it’s likely neither woman would have challenged him, but both stayed in when Gregory returned. So rather than cruise to a second term, Gregory is faced with a tough primary challenge against two well-known and respected House members. Gregory, 66, is a retired detective with the Wayne County Sheriff’s office and served 10 years on the Oakland County Commission. Lipton, 47, is a patent attorney, and Barnett, 60, is the former Farmington Hills mayor and financial consultant with LPL Financial in Farmington Hills.
Imperium Logistics LLC and has run for the U.S. Senate and U.S. House. Political analysts say his previous exposure on the ballot could give him a leg up in name identification since he has campaigned in large portions of this Senate district. Political newcomer Baker previously worked for President Ronald Reagan after his time in the Oval Office as well as for Tom Gores’ California-based private equity firm Platinum Equity LLC, where he worked on real estate projects. The GOP primary winner will face Republican-turned-Democrat attorney Ryan Fishman, with Southfield-based Fishman Group PC, or former Clawson school board member Cyndi Peltonen, who works in the music department at the International Academy in Bloomfield Hills.
15th District
Kowall
䡲
13th District
Knollenberg
Moss
Raczkowski
Baker
䡲
This open Senate seat in the Republican-leaning district along the eastern edge of Oakland County features a five-way GOP primary with four viable candidates. The race features term-limited state Rep. Marty Knollenberg, Troy; former Republican state Reps. Chuck Moss and Andrew Raczkowski; and attorney Ethan Baker. Republican Al Gui is also in the race, but he filed paperwork with the state indicating he will not raise more than $1,000 for his campaign. The candidates are seeking to replace Sen. John Pappageorge, RTroy, who cannot run again due to term limits. Knollenberg, 50, is the only current office holder running. Prior to politics, he owned an insurance company in Troy. Moss, 60, the former House Appropriations chairman, has the backing of the Detroit Regional Chamber. Raczkowski, 45, a veteran, owns
Maddock
Sen. Mike Kowall, R-White Lake Township, squares off in his quest for a second term against Milford Township-based A-1 Bail Bonds Agency Inc. President Matt Maddock, a tea party favorite. Kowall, 62, was elected to the Senate in 2010 after serving as White Lake Township supervisor since 2004 and, prior to that, a state representative beginning in 1998. He is chairman of the Economic Development Committee and was president of his father’s White Lake Township company, Accurate Woodworking Inc., from 1985 to 2002. He sponsored legislation sought by McLaren Health Care that would have established an eight-mile radius to relocate unused beds in Pontiac to a new hospital in Independence Township, instead of the two-mile radius currently allowed. That bill died in the lame-duck legislative session in December. In addition, he has championed legislation that Gov. Rick Snyder signed last year allowing testing of autonomous vehicles, and a bill to increase activities allowed in business improvement districts. Kowall said he has been endorsed by the National Federation of Independent Business, the Small Business Association of Michigan and the Detroit Regional Chamber. He said the top issue in the primary campaign will be road funding. Maddock, 48, said he is a licensed private detective. He said on his website that he “will never vote with the Democrats like my incumbent opponent.” The Lakes Area Tea Party has endorsed Maddock, but he said he is not seeking business group endorsements. His top issues are roads and jobs. Others in the race are Republican Ron Molnar and Democrats Tom Crawford and Michael Smith. — Stories by Chris Gautz and Kirk Pinho
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July 21, 2014
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Congress pitch: GOP rival’s record too taxing One term in, and Bentivolio challenged BY KIRK PINHO CRAIN’S DETROIT BUSINESS
First-term U.S. Rep. Kerry Bentivolio, Milford, a Tea Party favorite, faces a challenge in the Aug. 5 Republican primary by David Trott, chairman and CEO of Farmington Hills-based Trott & Trott PC. Trott also owns Attorneys Title Agency LLC and co-owns Dietz Trott Sports & Entertainment. Bentivolio, who shocked the Southeast Michigan political establishment two years ago when he won the 11th District Republican primary following incumbent Thaddeus McCotter’s petition scandal, is a Vietnam and Iraq war veteran. He also owns a reindeer farm in Milford and is a former teacher of English, history, social studies and computeraided design. He also has experience in automotive design. Trott, 53, a Commerce Township resident, said he has picked up endorsements from the Michigan Chamber of Commerce, the Detroit Regional Chamber and the U.S. Chamber of Commerce, as well as the Michigan Farm Bureau. Trott said he got into the race because the district needs better representation. He said Bentivolio, 62, is the wrong man for the job, refuses to debate Trott in person and doesn’t hold town hall meetings for district residents. Bentivolio’s campaign did not respond to an interview request. In the private sector, Trott and his wife made millions through his law firm and related companies that are involved in nearly every aspect of the home foreclosure process — from NDeX to Attorneys Title and other title companies to a small stake in Detroit Legal News Publishing LLC. “I am proud of the companies I have built and the 1,800 jobs that
Trott
Bentivolio
I have created and saved,” Trott told Crain’s. “I run my companies with honesty, integrity and have invested in technologies that have improved the industries I am involved in.” The congressional seat, which covers southwest Oakland County and northwest Wayne County, leans Republican, but Democrats believe they have a shot, given some of the controversies in which Bentivolio has found himself, including comments last summer about wanting to impeach President Barack Obama. However, political analysts say Trott’s line of work in the foreclosure industry makes him a hard sell to some voters. Democratic candidates vying for the party nomination are: 䡲 Bloomfield Hills surgeon Anil Kumar, 63, owner of the Kumar Surgical Center LLC, Rochester Hills and Metropolitan Urology Associates PC, Waterford Township. 䡲 Bobby McKenzie, Canton Township, most recently a senior adviser in the U.S. Department of State Bureau of Counterterrorism. 䡲 Bill Roberts, Livonia, a LaRouche Democrat who also ran in the 2012 primary. 䡲 Nancy Skinner, Birmingham, former chief of staff to former first gentleman Daniel Mulhern and 2006 9th District nominee against former GOP congressman Joe Knollenberg.
Two Oakland County Republicans hoping to fill the open seat in the 8th Congressional District have spent the past few months trashing each other’s records in the state Legislature as the means to do so. Former state Senate Majority Leader Mike Bishop of Rochester and state Rep. Tom McMillin of Rochester Hills seek to replace U.S. Rep. Mike Rogers. The two have sparred often in the short campaign as McMillin has renamed the Michigan Business Tax as the “Mike Bishop Tax” in one of his ads and notes Bishop helped create that much-maligned tax that McMillin voted to end. Bishop has fired back, pointing out McMillin voted for a 2011 tax change that no longer allows pen-
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McMillin
sions to be totally deductible from the state income tax for seniors born after 1946. Bishop, borrowing a Democratic attack line, refers to it as the “pension tax increase.” Bishop’s campaign also created a website, McMillinforBishop.com, that features old video clips of McMillin heaping praise on Bishop
3 Dems look to fill void left by Peters’ Senate run The seat in the 14th District is a wide-open opportunity for candidates looking to replace U.S. Rep. Gary Peters, who is taking a run at the U.S. Senate. State Rep. Rudy Hobbs, D-Southfield, got in the race early and scored a number of key endorsements. Hobbs, 39, has been backed by the United Auto Workers, the Michigan Education Association, the Michigan State AFL-CIO, the Detroit Regional Chamber, U.S. Sen. Carl Levin and former Gov. Jennifer Granholm. But Southfield Mayor Brenda Lawrence, a former Democrat lieutenant governor candidate, has strong name identification in the district, and some early polling from a national firm showed her
Hobbs
Lawrence
with the lead, with some suggesting she may be the front-runner. Lawrence, 59, is backed by Detroit City Council President Brenda Jones, the National Association of Realtors and Lansing Mayor Virg Bernero, whose gubernatorial ticket she ran on in 2010.
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before they were opponents. Rogers, who is leaving Congress to pursue a national radio career, is endorsing Bishop. Bishop also has the backing of the Detroit Regional Chamber. Bishop, 47, is an attorney who lost his race for Oakland County prosecutor in 2012. He is the chief legal officer for Clawson-based International Bancard Corp. McMillin, 49, a CPA, is in his final term in the state House. He is a former Oakland County commissioner and Auburn Hills mayor. Endorsements include U.S. Rep. Justin Amash, R-Cascade Township. The winner will face one of four Democratic candidates in the Republican-leaning district in November. — Chris Gautz
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We think the impact on our community will be exponential if it’s all done at once. Chris Ilitch
WHY THE ILITCHES CHOSE TO WING IT
”
BY BILL SHEA | CRAIN'S DETROIT BUSINESS
A
This is the city’s entertainment district, super-sized. Planned is a gargantuan threeyear construction project to create five new neighborhoods intended to stitch together the city where it’s divided by the trench-like Fisher Freeway underneath Woodward Avenue. The 650,000-square-foot hockey and events center and the new neighborhoods — including hundreds of apartments to be built both outside Comerica Park and the new hockey arena — are scheduled to be ready by summer 2017. A 2013 deal between the Ilitches, through their Olympia Development of Michigan, and the city’s Downtown Development Authority to build the arena at the largely vacant and blighted area of Woodward at I-75 obligated the family to spend at least $200 million in ancillary development within five years of the venue’s opening. But the Ilitches are accelerating
From a new home to a new hometown ...
said. Additionally, the Ilitches are now promising to spend “tens of millions” more for infrastructure improvements in the district, The Ilitch plan comprises five mainly around Cass Park west of neighborhoods and a host of the arena site to create mixed-use neighborhoods, Ilitch said, but he development in addition to the declined to specify a total. arena. On the following pages, “This is not part of our agreement with anyone. We’re just doread about how these changes it,” he said, adding that will roll out and alter the face of ing Olympia has been in talks with Detroit. the mayor’s office on the necesthat timeline, and upping the ante. sary approvals. The Ilitches, the Little Caesars The additional spending will be pizza chain founders who have used to fix roads, streetlights, owned the hockey team since 1982, Video: Chris Ilitch talks design: landscaping and other aesthetic told Crain’s last week that their work within a 45-block area aimed Why he wants the new arena to construction timeline has been at creating a clean, desirable slate radically moved forward so the inbe the “baddest bowl” from which to build five neighborvestment can have a maximum hoods with unique identities. catalytic impact for the city. Wings history in pictures and “It frees the city up to spend its “We think the impact on our video: A timeline resources on other priorities,” Ilcommunity will be exponential if itch said. it’s all done at once,” said Chris IlChat live with Bill Shea: Business DTE Energy Co. and other utilities itch, president and CEO of Ilitch will be asked to make any fixes or of sports reporter will take Holdings and son of Red Wings upgrades in the area while owners Mike and Marian Ilitch. questions from 1-2 p.m. July 21. Olympia has the streets “This project takes on a much bigtorn up, he said. ger scale. There is nothing “This is an investor’s like this going on in our playground,” Ilitch said. country.” All together, the area Ilitch said cost isn’t the stretches from Charlotte first consideration as the See how development plans will change Street, the street north of planning has evolved for a the entertainment district landscape Temple Street, south to project with a very large Grand Circus Park, east to vision for the whole enterCrainsdetroit.com/arena the existing stadiums and to tainment district. a northwestern boundary “This is more than a deabutting MotorCity Casino Hotel, velopment; this is our passion,” he
dramatic transformation of the heart of Detroit will begin in September, when the Ilitch family breaks ground on the construction of a $450 million Detroit Red Wings arena concurrently with another $200 million in apartments, restaurants, office buildings, parks and shops over 45 blocks.
At crainsdetroit.com/arena
Drone’s-eye view
owned by Marian Ilitch. The plan is to simultaneously reinvigorate the whole area, but the centerpiece is the new arena.
The arena Planning and land acquisition for the yet-unnamed arena began in the 1990s, and it will be a “deconstructed” design that pulls the glass-roofed concourse, offices and other elements in separate buildings outside the arena to make its restaurants and retail available all the time, even when the venue isn’t being used for hockey or events. “We’re in love with the detached structure concept,” Ilitch said, calling the design “revolutionary” and saying it may influence arena design in the future. Olympia and Red Wings team offices will be connected to the arena, as will apartments, restaurants, retail, parking garages and other to-be-decided development. Concessions will be under a glasscovered ceiling around the venue, and a special emphasis in restaurant planning is a push for up-andcoming local chefs, including minority chefs. The lower seating bowl and playing surface will be 32-34 feet below street level (Comerica Park is 27 feet below grade), which also means the building will not be a See Next Page
A cross section of the new Red Wings arena shows the below-street-level playing surface and concessions under a glass-covered ceiling around the venue. DENNIS ALLAIN RENDERINGS
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Neighborhood development 1
Cass Park Village
4
Eclectic, and primarily residential with restaurants and some retail.
2
Home to the new Red Wings hockey arena and freestanding buildings with apartments and retail.
3
A hub for pro sports and entertainment, anchored by Ford Field and Comerica Park.
5
New Arena Area
Wildcat Corner
Columbia Park New contemporarily designed neighborhood including public park space.
Columbia Street Maps and detailed neighborhood descriptions continue on the following pages
Densely developed entertainment destination including restaurants, nightlife and new office space.
From Previous Page
massive, foreboding facility that towers above everything else in the neighborhood, Ilitch said. The arena may stand no more than two or three stories tall, with the entrances funneling onto the concourse level. It won’t be imposing to its neighbors,” Ilitch said. Building a below-grade bowl is costly compared to an arena built from the ground up. “It’s much more expensive to build to the depth we’re talking here,” Ilitch said. “We’re not going to scrimp.” The lead designer is Kansas City-based 360 Architecture, which has worked on several major stadiums. A 360 Architecture spokes-
woman declined to comment. The designers are attempting to keep the loud and intimate atmosphere of city-owned Joe Louis Arena, the Red Wings’ home since it opened in 1979, but the new venue must follow the disability access and other laws that govern today’s facility designs, Ilitch said. “Internally, we’re referring to it as one of the ‘baddest bowls’ in the NHL,” he said. Ground will be broken this fall with light demolition and other preparatory work getting underway. Heavy earth-moving will begin in March with the goal of having the arena open by summer 2017. Southfield-based Barton Malow Co., Detroit-based White Construction and Indianapolis-based Hunt Construction Group have been joint-
ly hired to manage construction of the arena. Other firms involved with the rest of the project haven’t been disclosed, but Ilitch said they will be later this year. Lofts or apartments will be adjacent to the arena, but Ilitch didn’t have a count of how many. “The market will dictate that, not us,” he said. He said he expects such living to be attractive to millennials who want to live in the city, and noted that apartment demand outstrips supply in the central business district.
Flexible design The lighted roof will be capable of showing images. The renderings show the whole roof lit in red
with the Red Wings logo atop it. Ilitch said it’s too early to discuss whether naming rights to the arena will be sold or not. Under the agreement with the DDA, Olympia can sell the naming rights to the building, and keep all revenue from any such deal. The arena will seat about 20,000, rather than the 18,500 previously disclosed, Ilitch said. Joe Louis Arena seats 20,066, second in capacity in the 30-team National Hockey League only to the Bell Centre’s 21,273 in Montreal. The Wings, having made the playoffs for 22 consecutive years and won four of their 11 Stanley Cups under Ilitch ownership, have been among the league’s attendance leaders for many years.
Ilitch said the number of suites will be announced in the future. Joe Louis Arena has 86 suites, and some of the impetus behind relocating to a new arena is to derive new revenue from more modern suites and other venue amenities. The venue will have more concerts, shows and other events than it will hockey games, Ilitch said. The arena construction cost may exceed the previously disclosed $450 million estimate, Ilitch said, and if it does, the family will pay for it. “If it’s over, it’s on us,” he said. Joe Louis Arena eventually will be razed and the site redeveloped. The state has pledged to cover the $6 million demolition cost. See Next Page 22
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We’re not “ developing it all. We don’t own it all. ” Chris Ilitch, on the neighborhood property that comprises the entertainment district
From Previous Page
Mixed-use plans Surrounding the new arena area will be four other neighborhoods that the Ilitches will create or improve. Ilitch has dubbed the area that includes Comerica Park and Ford Field as the “Wildcat Corner” neighborhood. Olympia will concurrently build 300 apartments in two buildings on what currently are the surface parking lots between Comerica Park — home of the Ilitch-owned Detroit Tigers — and Woodward Avenue. Those units will have groundfloor retail and restaurants, and green spaces. Additionally, Ilitch said, the parking lost to the new apartments may be replaced via construction of a second garage adjacent to the current Tigers parking structure on Montcalm Street. A separate new building across Adams Street will provide additional bleacher seats for Tigers games, and possibly retail and bar space. Ilitch said they will work with the Detroit Lions to bring the Ford Field fan experience a block closer to Woodward, on Adams — which dead-ends at the main entrance to the football stadium. Facing the Comerica development, atop Columbia Street between the Fox Theatre, which houses Ilitch offices, and the Fillmore Theatre, Olympia will build a multistory 120,000-square-foot office building that will have ground-level restaurants and could be nightlife-oriented. They’re calling that area simply Columbia Street, and it’s used today mainly for parking and an outdoor day care that will be relocated. West of the Fox Theatre area is what is being Chris Ilitch: “Great parks are vitally important.”
called Columbia Park, a new and contemporarily designed neighborhood including new public park space. It will be a mix of existing and third-party investment. And west of the new hockey arena, north of the Fisher Freeway, will be Cass Park Village, with residential and retail elements. Ilitch said the area will be “funky, frontiering” and where much of the infrastructure work will take place. Olympia is adopting rundown Cass Park to rehabilitate the green space as a sort of anchor for the neighborhood. And it will build new green spaces in Columbia Park. “Great parks are vitally important,” Ilitch said. The neighborhood names are internal working names, and Olympia expects the public to de-
COURTESY OF ILITCH HOLDINGS
cide the names and how the areas develop. “We need to have a lot of discussions with the community,” Ilitch said. While the conceptual renderings are filled with busy, vibrant scenes of people and new construction in the neighborhoods, how it actually looks in the future is impossible to know. The final look and feel will develop organically over time, Ilitch said. “We’re not developing it all,” Ilitch said. “We don’t own it all.” Plans also include a hotel, but no details have been disclosed.
Acquisition Olympia has been approached by venture capital firms interested in the pro-
A basic conceptual drawing of the hockey arena design shows how elements that are usually housed in a “big box” development can be re-envisioned as separate structures. The bowl itself is at the center.
ject, and has had talks with other potential investors. Ilitch declined to name names, but did say all the talks have been initiated by those interested in the project. Negotiations with development partners and others will occur after construction is started and the project is further along. Ilitch wants to ensure the project takes off right; a lot of time and money is at stake. For starters, it has taken 14 years to acquire all the land needed because land speculators sat on properties in hopes of getting a big payday — something Ilitch termed “lottery tickets.” “We overpaid for a ton of real estate,” he said. “Quite frankly, some of them cashed in on that lottery ticket.” Through various entities, the Ilitches paid about $50 million for land. The city and DDA also ac-
quired land for the project. Some of the land was acquired by the Ilitches when the acreage for Comerica Park was bought in the 1990s, with the intent of eventually building a hockey arena. Doug Kuiper, vice president of corporate communications for Ilitch Holdings, said he had no knowledge of any tax breaks being provided for the neighborhood developments.
Creating links Ilitch said the construction and investment throughout the entertainment district will link downtown, where Dan Gilbert has been snapping up office buildings and other properties and renovating them, and Midtown, where Wayne State University and the Detroit Medical Center have been investing. See Next Page
NEW WINGS ARENA NUMBERS Cost: $450 million Team: Detroit Red Wings Seats: About 20,000 Opens: Summer 2017 Owner: Detroit Downtown Development Authority Naming rights: Olympia Development of Michigan retains the right to sell the name. No decision has been announced about when or if that will occur. How it will be built: 䡲 $450 million in Michigan Strategic Fund bonds, to be paid off by $262 million from the DDA and $188 million from Olympia, the real estate arm of Wings owners Mike and Marian Ilitch’s business holdings How it will operate: 䡲 Revenue: Red Wings keep all 䡲 Maintenance: Reserve fund funded by the state bonds 䡲 Lease: 35 years; 12 five-year options 䡲 Rent: $11.5 million concession fee paid to DDA, for bond retirement
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The neighborhood “ development ... is really important because you have the opportunity here to build something ... that is more consistent and sustainable.
”
Michael Cooper, Harley Ellis Devereaux
From Previous Page
“This is the only project that could bring this to the city,” Ilitch said. The creation of the Fisher Freeway/I-75 basically created a deep trench that stymied Detroit’s development, bifurcating the downtown and the rest of city’s spine — Woodward Avenue. This is something the Ilitch plan seeks to overcome. There also is intent to improve the Woodward/I-75 overpass in some to-be-determined way that would allow pedestrians to easily move between downtown and the arena district.
The benefits
DENNIS ALLAIN RENDERINGS
COMMUNITY INVESTMENT Previously discussed plans
Evolving plans
$200 million in new, private mixed-use development beyond funds committed to arena. Creation of an expected 8,300 construction jobs and 1,100 permanent post-construction jobs. At least $1.8 billion in economic impact for the city, region and state through new wages, materials, taxes and additional related spending. Self-funded security at the events center. Targets 30 percent participation by Detroitheadquartered businesses and 51 percent by Detroit resident workers. Continue after construction to aggressively recruit and include local businesses and entrepreneurs in the project. Ongoing meetings with a neighborhood advisory committee to work on issues important to neighbors and the community. Work with existing training and workforce organizations on Detroit resident training and hiring for the project. Identify or create opportunities for Detroit youths to participate in the project and other affiliated businesses. Adopt and improve Cass Park.
New private investment to occur in year one of the project versus by year eight, speeding job creation and economic impact. “Tens of millions” of dollars in new, near-term private investment in the district’s lighting, sidewalks, green spaces and streets. Offer city officials and others development, urban planning and related expertise to support the growth and revitalization of other key “main street” areas throughout Detroit neighborhoods. Explore ways to make affordable housing an important component of the city’s economic and development plans. Neighborhood-friendly arena design to integrate with new and existing development. Offer dedicated space in the district to support budding local and minority chefs and restaurateurs. Additional investments in at least two new green spaces in district neighborhoods. Offer committed space in the district to startup tech and innovation enterprises. Work with Cass Technical High School to define, establish and implement internship or work/study programs for students.
Olympia has touted the benefits the project will bring to the struggling city, which declared municipal bankruptcy a year ago. It predicts its work will create 8,300 construction jobs and 1,100 permanent post-construction jobs, along with at least $1.8 billion in economic impact for the city, region and state through new wages, materials, taxes and additional related spending. While these kinds of impact numbers are sometimes tough to quantify and are frequently disputed by economists, the Ilitch organization points to many specific community outreach efforts that are also part of the plans. New outreach includes a Cass Tech internship program, office space for local startups, and the support for local minority chefs and entrepreneurs. While the arena and neighborhoods are being built, construction of the $137 million, 3.3-mile M-1 Rail streetcar line on Woodward Avenue begins this month, and will include a stop by the hockey arena by the time the rail loop is operational in 2016. Olympia is a major investor in the streetcar line, Ilitch said.
Can it work? In spite of the project’s enormity, planning and architecture experts believe it is feasible. “Holy moly,” said Michael Cooper, managing principal of the Southfield office of architecture firm Harley Ellis Devereaux Corp., when told of its size. Cooper likened the plan to Chicago’s Wrigleyville, the residential neighborhood anchored by the Cubs’ stadium, Wrigley Field. “The neighborhood development that is going along with this is really important because you have the opportunity here to build something for the city that is more consistent and sustainable,” he said.
Beyond that, though, challenges include completing the project “without grinding the city to a halt” and finding enough skilled workers to fill the 8,300 expected construction jobs needed, Cooper said. “The arena itself is a big deal, but when you talk about five distinct districts … how do you keep the city open for business?” Robert Gibbs, managing principal of Birmingham-based Gibbs Planning Group Inc., said the plan’s retail element is strong. Detroit, he said, has only about 3 square feet of retail space per person, while in the suburbs it’s about 15. Nationally, it’s 22 square feet. “This site has 250,000 people living within five miles of it. That’s a hell of a lot of people, one-third of the city, plus you’ve got all the office workers and university students,” he said. There are 83,000 people within three miles of it, he said — four times as many as Birmingham.
Retail strategy Gibbs, who also teaches an urban retail course at Harvard University, said the development could support national junior department stores like a City Target, which is about half the size of a regular Target store; Kohl’s; TJ Maxx; and Dress Barn. He also said sporting goods and home improvement stores are good fits for the area. Olympia intends to seek primarily local stores and eateries for its project, Ilitch said, rather than national brands. And the focus is on finding the right kind of retail for current and future perceived demand for food, entertainment and hard and soft goods. He said he doesn’t want the kinds of commoditized stores typically found in a suburban shopping mall, for instance. “We don’t envision that here,” Ilitch said. “We want authentic Detroit. We want the hot concepts and up-and-coming entrepreneurs.” Detroit Mayor Mike Duggan and Gov. Rick Snyder have been briefed on the project’s specifics, and are enthusiastic backers, Ilitch said. “They are over the moon about it,” he said. Other downtown business and community leaders were briefed, or were scheduled to be, last week. So was singer Kid Rock and so was management of Fox Sports Detroit, which has the media rights contracts for the Red Wings and Tigers. Bill Shea: (313) 446-1626, bshea@crain.com. Twitter: @bill_shea19 Crain’s reporter Kirk Pinho contributed to this story.
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1926 Detroit Cougars Team founded, plays in Windsor while arena is built
1927 - Olympia Stadium opens
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Changing the n
1930-32 Detroit Falcons Name changed in 1930; shipping magnate James Norris buys financially troubled team in 1932
1932 Detroit Red Wings w logo g : New name, new logo: A winged wheell
1936 eyy First Stanley Cup win Wings sweep Maple Leafs in 4 games
䡲 Cass Park Village. This neighborhood is described as eclectic, and primarily residential with restaurants and some retail. Chris Ilitch used the phrase “funky and frontiering” to describe its character. This neighborhood includes the existing Cass Park historic district, is just west of the planned hockey arena area and includes plans for upgrades to Cass Park itself, which is at the center. Also in this area are Cass Tech High School and Masonic Temple.
1937-55 Six more Stanley Cups 1952 - Legend of the octopus Eight tentacles symbolize eight playoff wins
1979 - Joe Louis Arena The team moves into new riverfront home
1982 - Ilitches gs s buy Red Wings Norris family sells s team to Mike and Marian Ilitch for $8 million
1997 - Eighth h Stanley Cup win Wings end 42-year ar drought with first of four titles in 12 years
December 2012 New arena plan Ilitches announce they intend to build d new arena
July 2013 Arena funds State Strategic Fund nd d OKs sale of bonds to pay for public portion of construction
February 2014 Council approval Detroit City Council approves $450 million arena
䡲 New Arena Area. This area will be anchored by the new hockey arena, which is planned as a “deconstructed” structure with many of the elements of a sports complex as separate freestanding buildings connected by ground-level and overhead enclosed walkways to the main bowl. The hockey rink will be below grade to keep the above-ground profile to a few stories tall. A concourse area protected by a glass ceiling will house the concessions. Outside that perimeter, linked buildings will contain office space, including Red Wings offices, apartments and lofts, and year-round retail and restaurant offerings. Conceptual renderings for the arena depict a highly customizable roof that can be adapted to change color and promote events, such as a music concert, on nongame nights.
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e neighborhood 䡲 Columbia Street. Between the Fox Theatre and Fillmore Detroit, this is planned as the hub for upscale dining, ornate gas streetlamps, and nightlife — it’s envisioned as a densely developed entertainment destination. New office space with a modern design totaling 120,000 square feet also is planned. What’s there now is an existing street that operates as Fox office center parking space, a day care to be relocated, and a service and loading area.
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䡲 Wildcat Corner. This is the working name of the neighborhood anchored by Comerica Park and Ford Field. It’s slated for more development to unify the area as a hub for pro sports. The surface parking lots between the ballpark and Woodward Avenue will make way for 300 apartments and/or lofts; a second parking garage may be added next to the current Tigers garage on Montcalm Street, and a new out-building for Comerica Park will be built across Adams Street. The latter could have rooftop bleacher seats, office space and retail and bar/restaurant space on the first floor. It also would also be designed to begin the neighborhood’s tie-in to Ford Field a block farther west.
䡲 Columbia Park. This is described as a new, contemporarily designed neighborhood including new public park space. The area west of the Fox Theatre area is currently home to scattered bars and restaurants and surface lots; the Ilitch plan seeks to amp that up with a mix of busy streets and quiet green spaces.
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CRAIN’S DETROIT BUSINESS
The money, the players, the Pistons
New arena revives speculation about Pistons move to Detroit Mike Ilitch
Marian Ilitch
Chris Ilitch
BY BILL SHEA CRAIN’S DETROIT BUSINESS
The Ilitches Here are some of the key players in the Detroit Red Wings arena district project: 䡲 Mike Ilitch: Co-founded the Little Caesars pizza chain in 1959 in Garden City with wife Marian, and is chairman of Ilitch Holdings Inc., the family business holdings that had $3.1 billion in 2013 revenue. Bought the Detroit Red Wings in 1982 for $8 million from the Norris family and Detroit Tigers in 1992 from Tom Monaghan for $85 million. 䡲 Marian Ilitch: Vice chairwoman of Ilitch Holdings and co-founder of Little Caesars. Known for handling the financial oversight of the family’s business ventures. Owner, separately, since 2005 of MotorCity Casino Hotel. 䡲 Chris Ilitch: President and CEO of Ilitch Holdings, son of Mike and Marian. The day-to-day head of the family’s various business holdings and the face of the arena district project.
Deal includes ‘tens of millions’ for infrastructure How the new Detroit Red Wings arena will be paid for is known, but how the millions of dollars in concurrent private development will be financed hasn’t been disclosed. The Ilitch family has pledged to spend “tens of millions” of additional dollars on infrastructure work beyond what it agreed to pay as part of the $650 million arena district project. That newly disclosed spending will pay for new roads, lighting, sidewalks and green spaces near the arena. The family could simply start writing checks off Mike and Marian Ilitch’s $3.7 billion fortune, as estimated by Forbes.com, or seek debt financing via lenders, as it did to cover its portion of $326 million Comerica Park. Here is how the arena deal works: 䡲 The state Legislature in 2012 approved a deal in which the Michigan Strategic Fund will sell 30-year tax-exempt private activity bonds to cover construction of the $450 million arena. 䡲 In June 2013, Ilitch-owned Olympia Development of Michigan and Detroit’s Downtown Development Authority signed this agreement: Property and school taxes already captured in the DDA’s expanded district will repay $261.5 million (58 percent) of the building’s construction debt, while Olympia would provide $188.4 million (42 percent), according to details provided by the state. The city approved expanding the DDA tax district to encompass the arena site. The state reimburses the schools for the diverted money. 䡲 The arena will be owned by
How the financing works the DDA, a city agency staffed under a contract by the nonprofit Detroit Economic Growth Corp. The DEGC has been the primary lead on the new arena deal for the city. 䡲 Olympia will operate the arena under a 35-year concession agreement with the DDA. There are 12 five-year renewal options. Olympia keeps all revenue, including concessions and parking, and from any naming rights deal. 䡲 Olympia must spend — or induce other private investors to spend — at least $200 million in ancillary development in the expanded DDA district. That spending must begin no later than five years after the arena’s 2017 opening, but Olympia has promised to spend $100 million concurrently with the arena construction. 䡲 Olympia paid an estimated $50 million for half the land needed for the arena district, according to a Nov. 1 cost-benefit analysis provided to the Detroit City Council by its Legislative Policy Division. 䡲 Wayne County in November approved an inter-governmental agreement with the DDA that allocates 1.5 mills of new county property tax capture on increased property values in the expanded district to repayment of the arena bonds, said Bryce Kelley, director of the Wayne County Economic Development Growth Engine. 䡲 The DDA tax capture, on the books since the 1970s, can be used only for economic development within its district. It cannot be applied to debt, pensions or other bankruptcy-related issues.
Could the Detroit Pistons leave the Palace of Auburn Hills to play at the new Detroit Red Wings arena in downtown Detroit? The answer: Maybe, if it made sense. The owners of the teams and their associated entertainment organizations are business rivals, but on the Pistons’ end, it’s at least a theoretical possibility. “We have a beautiful arena in the Palace of Auburn Hills, and we have invested tens of millions of dollars over the past three years to modernize and improve that facility,” said Mark Barnhill, a spokesman and principal at owner
Pistons and downtown? Tom Gores’ Los Angeles-based Platinum Equity LCC, via email. “At the same time, we would never close the door on alternatives if they made good sense for our fans, for our team, for our business and for Michigan.” He declined to say if there have been conversations with the Ilitches about a move. The Ilitch organization declined comment. Mike Ilitch was interested in buying the team when it went up for sale in 2010, but it ended up being Gores that bought the Pistons, the arena, and Palace Sports and Entertainment in 2011 for $325 million.
He’s spent another $40 million since on improvements at the Palace, which opened in 1988 and remains a highly praised venue. Gores’ organization retains all revenue, such as concessions, ticket sales and parking. A move into the Red Wings facility likely would involve sharing revenue with the Ilitches, who will run the new venue. Still, Platinum has its eye on what’s happening in Detroit. “As an investor in Michigan, we’re excited about what’s happening in downtown Detroit,” Barnhill said. “There is a great turnaround story being written right now in the city and across Michigan. We applaud the efforts of everyone who is contributing to that story.”
Builders and architects
Companies involved in the arena district project Here are the companies known to be involved in the Ilitch family’s arena district project. Chris Ilitch, president and CEO of Ilitch Holdings Inc., said additional companies will be disclosed this fall. It was announced in April that a consortium called Barton MalowHunt-White was hired as the general contractor to handle construction. 䡲 Barton Malow Co.: The Southfield-based builder had $1.1 billion in 2013 revenue and most recently was in the news as being named the managing partner of a joint venture overseeing a four-year, $150 million renovation of the 91year-old Rose Bowl stadium in Pasadena, Calif. The company is owned by the Maibach family; Ben Maibach III is chairman and CEO. Its other high-profile sports work includes designing, building and financing the $55.7 million Pontiac Silverdome and the $30 million Joe Louis Arena in the 1970s, and more recently, the $24.5 million expansion of Spartan Stadium and the $226 million Michigan Stadium expansion and upgrade. It was hired last year to be construction manager for the $300 million redevelopment of Daytona International Speedway’s mile-long grandstand. Barton Malow has 1,500 employees and 13 offices. It also builds offices, schools, hospitals and factories. 䡲 White Construction: The Detroit-based firm owned by Bernard White had $31.3 million in 2012 revenue, and was part of the construction management team that built Comerica Park in 2000.
White also was part of a joint venture with St. Clair Shoresbased JM Olson Corp. that turned the old seven-story, 750,000-squarefoot J.L. Hudson Co. warehouse into commercial office space attached to Ford Field. The company last year was hired as a subcontractor for the $137 million private-public M-1 Rail streetcar project along Woodward Avenue, which will include a stop near the hockey arena. 䡲 Hunt Construction Group: The Indianapolis-based firm is one of the largest sports stadium and arena builders in the world. It has averaged $1.9 billion in revenue over the past five years. Hunt, launched in 1944, began building sports facilities in the early 1960s, and has done more than 100 venues since then. Aside from Ford Field, its project list includes the Barclays Center, Marlins Park, Citi Field, Lucas Oil Stadium, University of Phoenix Stadium, Miller Park, Heinz Field and Amway Center. It has 700 employees in nine offices nationwide. Hunt also builds airports, casinos, offices, performing arts venues, hospitals, convention centers and hotels. 䡲 360 Architecture: The Kansas City-based firm, founded in 2004 after a merger of two other companies, is a major designer of sports facilities, including the new Red Wings arena. Its other major work includes the 18,641-seat, $480 million Rogers Place for the NHL’s Edmonton Oilers now under construction, and the $1.2 billion, 71,000-seat retractableroof stadium for the Atlanta Falcons
that will open in 2017. Past pro sports venues include Nationwide Arena, American Airlines Arena, Safeco Field and MetLife Stadium. The firm reportedly had $34 million in 2012 revenue. 䡲 Street-Works: A White Plains, N.Y.-based firm that will lead the urban planning and design for the arena project, it works on mixeduse and commercial development, planning and financing. One of its major projects was creating the 42-acre, $750 million Santana Row urban village in San Jose, Calif., in the mid-2000s. 䡲 Olympia Development of Michigan: The real estate arm of the Ilitch family’s business holdings, formed in 1996, is responsible for management the arena project and ancillary development. 䡲 Ilitch Holdings Inc.: The Detroitbased management services company for Mike and Marian Ilitch’s various business enterprises is headquartered in the Fox Theatre, which was renovated by the family in the 1980s. Formed in 1999, the company said it had more than $3.1 billion in revenue last year, but doesn’t disclose details. The Ilitch businesses, under joint and single family members’ ownership, includes the Little Caesars pizza chain, the two sports teams, Olympia Development, Olympia Entertainment (including the Fox and City theaters and Hockeytown Café), Uptown Entertainment, Blue Line Foodservice Distribution, Champion Foods and MotorCity Casino Hotel. — Bill Shea
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CRAIN’S DETROIT BUSINESS
July 21, 2014
RUMBLINGS
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WEEK ON THE WEB FROM WWW.CRAINSDETROIT.COM, WEEK OF JULY 12-18
New distillery to offer ode to the mitten n abandoned Hazel Park lumber yard will be home to a vodka, rum, gin and whiskey distillery in a few short months. Thumb Knuckle Distillery LLC is expected to open in 12,000 square feet at 24310 John R Road north of East Woodward Heights Boulevard in October, said brewery founder Doug McElroy. Although he still needs licenses to distill the spirits and occupy the space, he’s moving full-steam ahead with at least $250,000 in renovations to the building, abanMcElroy doned for about seven years. The total investment is expected to be less than $1 million. The front of the building will be used for retail. There will also be a tasting room that also can be used for private events. A 750-milliliter bottle of Bear Knuckle Vodka will sell for around $30, and a 750-milliliter bottle of Thumb Knuckle Rum will sell for around $25. The next step is to make aged rum, followed by flavored vodkas using Michigan cherries, apples, blueberries, cranberries and honey. Gin will follow, and eventually whiskey — which takes a few years to distill. McElroy said he would like to use Thumb Knuckle Distillery as an incubator for distillers graduating from Michigan State University’s Artisan Distilling Program. Thumb Knuckle gets its name from the “two knuckles” of the thumb — Detroit and Port Sanilac in Sanilac County, where most products used to make the spirits are from.
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Want George Jackson’s job? Here’s how to land it You’ll need some serious economic development and business chops and strong managerial and negotiating skills to be the next Detroit Economic Growth Corp. president and CEO. The DEGC wants George Jackson’s replacement to have at least 10 years of economic development or business executive experience.
That’s according to a job description posted on the DEGC’s website. Jackson announced his resignation in January after 12 years at the helm. Calling the ideal candidate “charismatic” and “collaborative-minded,” the DEGC posting says the new president and CEO will be responsible for developing tax and job base broadening strategies, and local, state and federal outreach, and should have strong negotiating Jackson skills. The new DEGC chief will oversee a 45-person staff and prepare a $4 million annual budget. Robert Rossbach, a DEGC spokesman, said Jackson planned for April 1 to be his last day, but the DEGC board asked him to stay as it looked for his successor.
State’s VC quarter best in 14 years, report says Michigan had its best quarter for venture capital investing in 14 years and the second-best since records began to be kept in 1995, according to the quarterly Money Tree report issued by PricewaterhouseCoopers and the National Venture Capital Association, based on data compiled by Thomson Reuters. A total of $114.2 million was invested by venture capitalists in 11 Michigan companies, up sharply from the $37.6 million that was invested in 14 companies in the first quarter. That’s the highest total since $143 million was invested in 17 deals in the first quarter of 2000. The total was driven by the largest single VC investment round in a company in state history, the $59.5 million invested in Plymouth Township-based ProNAi Therapeutics Inc., which is developing drugs to fight cancer. CrowdRise LLC, a Royal Oak-based crowdfunding platform that raises money for charity, raised $23 million. Other disclosed deals include: $9.8 million for Grand River Aseptic Manufacturing Inc., Grand Rapids; $6.5 million, Atterocor Inc., Ann Arbor; $4.7 million, SirionLabs Inc., Troy; $3.4 million, Axo-
nia Medical Inc., Kalamazoo; $3 million, Algal Scientific Corp., Plymouth Township; $2 million, Histosonics Inc., Ann Arbor; $1.8 million, Are You a Human LLC, Detroit; and $902,000, Pixel Velocity Inc., Ann Arbor.
Cornerstone lands LPGA stars for fundraiser The Ladies Professional Golf Association plans to bring 23 of its golfers to play here in August to raise $1 million in scholarships for Detroit children to attend Cornerstone Schools. The Turning Point Invitational is set for Aug. 25 at the Country Club of Detroit in Grosse Pointe Farms. The money raised will support scholarships for Cornerstone’s Nevada campus in the city, where tuition runs $5,950 per child per year. Nancy Lopez, Meg Mallon, Beth Daniel, Juli Inkster and Mo Martin, who won the Women’s British Open this month, are among those scheduled to play. So how did Cornerstone land the fundraiser? One of its student mentors, Plymouth physician Ben Gilmore, mentioned Cornerstone schools to a connection at the LPGA. In March, Durant got a text from an LPGA rep asking to meet him. That led to conversations with commissioner Michael Whan, including an April dinner in Augusta, Ga., during the Masters, with fellow event co-chair Tony Earley, former chairman and CEO of DTE Energy Co. After hearing about Cornerstone, Whan was on board. LPGA fans and Cornerstone supporters can purchase gallery tickets for $500 each (or two for $800), with two-thirds of the price tax-deductible, by visiting cornerstoneschools.org. Clark Durant, Cornerstone’s founding chairman, said about 500 gallery tickets will be available. Want to get even closer? “Individuals or companies that give or raise $25,000 or more for the scholarship fund, we’re going to find a way for them to play,” Durant said.
BITS & PIECES Beaumont Health System announced the creation of the Harry N. Herkowitz, M.D., Distinguished Chair in Orthopedics. Herkowitz died June 7, 2013, at age 65. More than $2.2 million has been contributed to the fund. Margaret Williams, interim dean of the business school at Wayne State University, has left to become dean of the College of Business and Public Administration at the University of North Dakota.
UM approves plan for clinical research center niversity of Michigan regents approved a plan to build a $2.6 million clinical research center on the fifth floor of the original W.K. Kellogg Eye Center tower on Wall Street in Ann Arbor. The 5,100-square-foot center, adjacent to Kellogg’s new eight-story Brehm patient tower, will offer space for clinical trials, rooms for patient examinations and offices for clinical trial coordinators and faculty.
U
ON THE MOVE Craig Fahle, 47, an-
nounced he is leaving his WDET 101.9 FM weekday talk show to become director of public affairs and senior adviser for the Detroit Land Bank Authority. His final show will be Aug. 8. Dara Munson, 40, is leaving as president and CEO of Detroitbased Big Brothers Big Sisters of Metropolitan Detroit to become COO of Detroitbased Girl Scouts of Munson Southeastern Michigan, effective Aug. 1. Col. Dennis Strissel, commander of the Salvation Army Eastern Michigan Division, plans to retire Oct. 1 from the Southfield-based affiliate. Maj. John Turner, divisional leader of the Salvation Army Indiana Division, will replace him. Former Quicken Loans Inc. and Rock Ventures LLC public relations director Laura Biehl, 29, announced she started as Gov. Rick Snyder’s communications manager on July 7, replacing Dan Waun. Former Ford Motor Co. CEO Alan Mulally, 68, who retired June 30, joined the board of directors at California-based Google Inc. Eddie Munson, retired former managing partner of the Detroit office of KPMG LLC and longtime civic leader, was elected to the board of directors of Columbus, Ohio-based Huntington Bancshares Inc.
COMPANY NEWS HopCat, the bar and restaurant chain from Grand Rapids-based Barfly Ventures Inc., is slated to come to Ann Arbor, in the former Borders Group Inc. flagship store, by late January. Detroit-based Shinola/Detroit LLC signed a lease
for an 1,800-square-foot store in Chicago, where it will sell its watches, bicycles and leather goods starting in October, Crain’s Chicago Business reported. As part of its ongoing restructuring, Van Buren Township-based supplier Visteon Corp. agreed to transfer $350 million of its $1.1 billion pension obligations to Prudential Insurance Co. of America. New York City-based 601W Cos., new owner of the 2.2 million-square-foot Southfield Town Center, hired the Farmington Hills office of Houston-based Transwestern as leasing and management company for the fivebuilding complex. California-based call center company S&P Data Michigan LLC was awarded a $1 million performancebased grant to assist with its plans to bring 420 jobs to the 156,000-square-foot Troy Officentre complex starting in August. The Village of Rochester Hills retail plaza by spring 2015 will have welcomed Lululemon Athletica, Michael Symon’s B Spot, Paper Source, Lane Bryant, J. Barbaro Men’s Clothiers and Taylor & Colt Men’s BarberSpa. MGM Grand Detroit’s revenue rose to $49.7 million in June 2014, up 19 percent from the same month in 2013, while revenue at MotorCity Casino Hotel declined 4 percent to $34 million, and Greektown Casino-Hotel’s fell 3.4 percent to $25.3 million, according to the Michigan Gaming Control Board. Ann Arbor-based venture capital firm Plymouth Ventures finished raising its third and largest fund, surpassing its original target of $60 million and closing the fund at $61 million. Auburn Hills-based Continental Structural Plastics Inc. signed an agreement to acquire five North American plants from Magna International Inc. Terms weren’t disclosed. The plants are in Lenoir, Newton and Salisbury, N.C.; Grabill, Ind.; and Saltillo, Mexico.
OTHER NEWS The Detroit Institute of Arts received another $26.8 million in pledges from Michigan businesses, bringing it to 80 percent of its $100 million commitment to the deal meant to shore up city pension funds and protect museum artwork. U.S. Bankruptcy Judge Steven Rhodes said Detroit must pay $10,000 to cover the cost of recovering confidential documents it accidentally sent to creditors this year during its bankruptcy, AP reported. A bill co-sponsored by U.S. Rep. John Conyers, DDetroit, seeks to protect lo-
cal government workers in bankruptcy proceedings, Bloomberg reported. The Detroit Economic Development Corp. approved a memorandum of understanding that allows the Detroit Police Athletic League Inc. to build its headquarters and a youth baseball field at the former Tiger Stadium site. Mike and Marian Ilitch announced an $8.5 million grant to Wayne State University to develop innovative surgery technologies and create the Ilitch Chair for Surgical Innovation. The Detroit Historical Society raised more than $21.2 million — exceeding its goal by over $1 million — during its five-year Past>Forward campaign to fund projects at the Detroit Historical Museum, Dossin Great Lakes Museum and the society’s Collections Resource Center at Historic Fort Wayne. The Wayne County Commission gave final approval of the sale of the vacant Old Wayne County Building, as well as a 120-space countyowned parking lot at 400 E. Fort St. in downtown Detroit, from the county to a private New York investment group for $13.4 million. Oakland University trustees approved a threeyear contract for new President George Hynd that will pay $400,000 per year, effective Aug. 15. University of Michigan regents denied the athletic department’s proposal for fireworks displays during home football games against Miami University on Sept. 13 and Penn State University on Oct. 11, the Detroit Free Press reported. Detroit officials said eight houses in the Marygrove neighborhood were awarded to the Detroit Land Bank Authority under the city’s nuisance abatement program and will be offered at auction, AP reported. The Michigan Department of Environmental Quality rejected a request by Detroit Bulk Storage to store piles of petroleum coke at an open riverfront site in Detroit because the company failed to outline sufficient dust control measures. David Kircos and Hunter Rosenblume, interns at Detroit Venture Partners, won $5,000 in Automation Alley’s first 24-hour hackathon for their mobile app allowing Detroit Public Library users to search the library’s catalog and order e-books.
OBITUARIES Joy Hakanson Colby, the former Detroit News critic who covered the city’s art scene for 60 years, died July 2. She was 88. Elaine Stritch, the Detroit-born Emmy- and Tony Award-winning actress, died July 17. She was 89.
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