Crain's Detroit Business, Oct. 26, 2015 issue by Crain's Detroit Business

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CRAIN’S Readers first for 30 Years

Gospel truth Religious broadcaster Kevin Adell takes aim at the FM dial, PAGE 3

DETROIT BUSINESS OCTOBER 26-NOVEMBER 1, 2015

HENRY FORD HEALTH SYSTEM

Could there be a Henry Ford-Kaiser deal? By Jay Greene jgreene@crain.com

Could there be some sort of affiliation deal underway between Detroit-based Henry Ford Health System and Kaiser Permanente , the nation’s largest nonprofit group health plan? Talk is circulating in health care circles in Southeast Michigan and nationally that the two systems are discussing a business arrangement. Several sources told Crain’s the affiliation could range from a nonasset transfer joint venture involving managed care and population health management services to a full merger with Henry Ford becoming Oakland,

Health care experts say a merger makes sense for both systems Calif.-based Kaiser’s eighth regional market. Based on conversations with knowledgeable officials connected with Kaiser and Henry Ford, the talks began earlier this year. Henry Ford officials, who have acknowledged they have been seeking a partner since a proposed merger with Beaumont Health System collapsed in 2013 because of cultural differences, are mum on whether they are talking with Kaiser or other systems.

Metro Detroit’s superstars of community service and philanthropy – Gail and Lois Warden, Paul and Carol Schaap and Betty Brooks – are among those to be honored Nov. 12 at Cobo Center at the National Philanthropy Day Dinner. For more details, see this week’s special Giving Guide supplement, polybagged with this issue. You’ll also find stories on highprofile entertainers and their giving strategies as well as profiles of 56 area nonprofits.

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Requests for interviews with Henry Ford CEO Nancy Schlichting and President Wright Lassiter III have been unsuccessful. Henry Ford officials issued a statement to Crain’s through Brenda Craig, the system’s director of media relations. “Henry Ford is continually engaged in discussions with health systems locally and nationally regarding opportunities to partner to improve quality, efficiency and the overall ex-

perience for our patients and members,” said the statement. “A major focus of our discussions is on learning, benchmarking and sharing best practices. We do not comment on specific organizations or rumors.” Kaiser spokesman Marc Brown declined an interview request. “A Kaiser partnership with Henry Ford would not surprise me,” said one of Crain’s sources. “It does seem like a natural fit compared to the other options that have been previously explored.” Sources told Crain’s a merger or business SEE MERGER, PAGE 21

“Many people say this is another Detroit bailout. ... I prefer to say this is the state actually bailing out the state.” John Rakolta Jr.,CEO ofDetroit-based Walbridge and co-chairman ofthe Coalition forthe Future ofDetroit Schoolchildren

Pension debt load could give DPS successor failing grades from start By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

LANSING — Even if Gov. Rick Snyder succeeds with his plan to spin off a new school district from the debt-laden Detroit Public Schools, the new district would have a structural funding problem before its first school bell rings. The new district, to be called De troit Community School District , would start operating as early as July 2016. But it would open its doors nearly $100 million in the red due to employee pensions. That’s because DPS has fallen behind in making payments to the Michigan Public School Employees Re tirement System — by a combined

$99.6 million since mid-2010, according to the state Office of Retire ment Services.

MPSERS, as it’s known, is the state’s pension plan for employees of K-12 schools, intermediate school districts, colleges, universities and some public libraries. The new Detroit school system also would have to assume declining student enrollment trends, at least in the near term. Snyder has proposed to give it $200 million in startup funding, half of which would be used to offset any perpupil revenue losses tied to fewer students. The district has lost nearly 100,000 students in the past decade, Snyder said. Enrollment was an estimated 47,000 students last year. DPS has not released its corrected fall student count numbers for this school year; those counts are due Nov. 18.

Taken together, the enrollment trends and the pension debt set the Detroit Community School District on a tenuous path. But Snyder and other restructuring advocates warn the problem will only get more expensive if the Legislature doesn’t approve the split.

Call for action Under Snyder’s plan, Detroit’s teachers, their contracts and all of their post-employment benefits — including any balances — would move to the new district. School reform advocates say taking action — soon — is key. “To do nothing is going to further encumber the state,” said John Rakolta Jr., CEO of Detroit construcSEE SCHOOLS, PAGE 19

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MICHIGAN

BRIEFS Dow Chemical in talks for Corning stake in Dow Corning Dow Chemical Co. is in talks to buy Corning Inc .’s stake in Dow Corning ,

the companies’ 72-year-old joint venture that produces silicones used in sealants and tires, Bloomberg reported. Dow Chemical CEO Andrew Liveris said last week that Dow Corning has become “a much more logical fit” after his company’s shift in focus to higher-value products, including materials used in electronics, construction and personal care. Dow and Dow Corning are based in Midland; Corning Inc. is in Corning, N.Y. Liveris has been reshaping Dow through divestitures, including this month’s sale of the chlorine business on which the company was founded 118 years ago. A Corning spokesman confirmed to Bloomberg that the company is in discussions to sell its stake to Dow.

Perrigo to cut workforce, buy back its own stock Perrigo Co. PLC will cut its workforce by 800 people and buy back

up to $2 billion of its own stock to ward off a hostile takeover by rival generic drug maker Mylan NV , MLive.com reported. Perrigo, primarily based in Allegan but incorporated in Ireland, also announced plans to sell its U.S. vitamins, minerals and supplements business to help improve operating margins. Perrigo Chairman and CEO Joseph Papa said the company “is positioned to create substantially more value than the Mylan offer.” The intent of the moves is to increase the value of the company’s stock and dissuade investors from accepting a buyout offer that Pittsburgh-based, Netherlands-incorporated Mylan has pitched to shareholders to merge the companies. Perrigo said the jobs cut will amount to about 6 percent of its worldwide workforce and is part of a plan to realize about $175 million in annualized benefits and savings.

MICH-CELLANEOUS Flint’s Uptown Reinvestment Co. will partner with the city’s most prominent arts facility, The Whiting, and the latter’s governing body, the

Flint Cultural Center Corp. , to relaunch the long-closed downtown Capitol Theatre, officials announced last week. Uptown will handle the redevelopment and restoration, and The Whiting will manage operations, programming and marketing, MLive.com reported. They plan to return the 87-year-old Capitol to operations by mid-2017. In the wake of the resolution of Flint’s water safety problems, a new independent advisory task force that includes experts in public health and medicine, water management and environmental protection will review the city’s water use and testing, The Associated Press reported. Gov. Rick Snyder’s office said the group also will offer recommendations for future guidelines to protect Michigan residents’ health and safety. If restaurateur Paul Lee has his way, you won’t leave a tip for service at his new Grand Rapids restaurant, set to open next spring, MLive.com reported. The owner of neighborhood restaurants Donkey Taqueria and The Winchester announced plans for the yet-unnamed new venture, at which no tipping will be allowed. No-tipping restaurants are increasing in popularity nationwide, and a large New York restaurant group, Union Square Hospitality, recently announced it would adopt a no-tipping business model. Described as “IHOP on steroids” by its co-founder, a North Carolina-based restaurant chain that serves breakfast, brunch and

lunch — and not dinner — is looking for space in West Michigan. Fa mous Toastery would like to open three units in the Grand Rapids area next year, the Grand Rapids Business Journal reported. Battle Creek-based FireKeepers Casino Hotel has replaced Detroit’s Quicken Loans Inc. as title sponsor of the June NASCAR Sprint Cup race at Michigan International Speedway. The deal is for three years, MIS said. Financial terms were not disclosed. Next year’s race, now called the FireKeepers Casino 400, is June 12. FireKeepers Casino Hotel, which opened in 2009, is owned by the Nottawaseppi Huron Band of the Potawatomi. A new corporate donation is bringing a major media collection to Michigan State University that includes more than 850,000 CDs, DVDs, Blu-rays and video games, The Associated Press reported. Santa Clara, Calif.-based Rovi Corp. said the Rovi Media Collection will be publicly available through the school’s library and interlibrary loan services. An MSU spokesman said

INSIDE THIS ISSUE BANKRUPTCIES . . . . . . . . . . . . . . . . . . 4 CALENDAR . . . . . . . . . . . . . . . . . . . . . . . 16 CLASSIFIED ADS . . . . . . . . . . . . . . . . 17 DEALS & DETAILS . . . . . . . . . . . . . . . 15 OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . 8 OTHER VOICES . . . . . . . . . . . . . . . . . . . 8 PEOPLE . . . . . . . . . . . . . . . . . . . . . . . . . 16 RUMBLINGS . . . . . . . . . . . . . . . . . . . . 22 WEEK ON THE WEB . . . . . . . . . . . . . . 22

COMPANY INDEX: SEE PAGE 21 the collection will enhance teaching curriculum and research. The Sault Ste. Marie International Bridge has marked the completion of a 16-month, $8.9 million toll plaza project, The AP reported. A new administration building and seven toll lanes replaced a 53-year-old building and five toll lanes built in 1962 as part of the original bridge project connecting Sault Ste. Marie, Mich., and Sault Ste. Marie, Ontario.

CORRECTIONS The editorial on Page 8 of the Oct. 19 issue, “Snyder must take lead on energy issues,” should have said that the $1.1 billion spent on energy efficiency programs between 2010-14 is expected to save Michigan energy customers $4.2 billion. The editorial gave an incorrect number for the expected savings. The University of Michigan received $294.5 million in distributions from its endowment in fiscal year 2015. The figure was mischaracterized in a Week on the Web item in the Oct. 19 issue.

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Adell aims to dial up FM deal Cumulus stations may be likely targets By Bill Shea bshea@crain.com

PHOTO COURTESY MIKE DOSCH

Mike Dosch, a certified registered nurse anesthetist for 25 years, works as part of what’s known in the industry as an anesthesia care team.

Proposed state bill has doctors, nurses

AT ODDS OVER ANESTHESIA CARE By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

LANSING — Once a week, Mike Dosch typically works out of an operating room at Dearborn’s Beaumont Hospital, formerly Oakwood Hospital , delivering anesthesia to his patients. Dosch, a certified registered nurse anesthetist for 25 years, works as part of what’s known in the industry as an anesthesia care team. A physician who supervises as many as four registered nurses will order an anesthetic, he said, and the nurse anesthetist will decide the best way to give it. “(Physicians) help start cases; they are

there available for consultation,” said Dosch, also chairman of, and an associate professor in, the nurse anesthesiology department at the University of Detroit Mercy. “Generally speaking, particularly with cases that are sort of routine, we don’t see them much during the day.” More than 30 miles away, in Ann Arbor, Kevin Tremper, M.D., manages a team of 150 faculty anesthesiologists, 140 anesthesiology residents and roughly 120 nurse anesthetists as chairman of the anesthesiology department at the University of Michigan. Doctors and nurses who give anesthesia care are battling over an important part of

the treatment — which member of the health care team should be delivering the medicine. A bill pending in the state Senate would remove Michigan’s requirement that physicians supervise nurse anesthetists, effectively allowing registered nurses to order and administer anesthesia on their own before, during and after surgery. The bill also would allow nurse anesthetists to practice independently during obstetrics and diagnostic procedures. The bill remains in the Senate’s Health Policy Committee; it has not come up for a SEE ANESTHETIST, PAGE 20

Religious broadcasting entrepreneur Kevin Adell is on the hunt for a second Detroit radio station to buy and convert into a gospel channel. Earlier this year, he acquired a local AM station to air spiritual content, but this time his Kevin Adell: target might be in Looking for another the middle of the Detroit radio station. FM dial. He declined to say which station he’s now targeting and had initial discussions about. Radio insiders say the likely choices are the two Detroit FM stations owned by struggling Cu mulus Media Inc. — adult contemporary station WDVD 96.3 FM and country outlet WDRQ 93.1 FM . Cumulus also owns news-talk WJR 760 AM. “I want to pick up an FM,” Adell said. “I don’t want another AM.” The thinking is that Atlanta-based Cumulus will need to sell stations to raise cash either to bolster profitability or through bankruptcy, and Adell said his strategy is to get a station for far SEE ADELL, PAGE 18

Ideas to repurpose 4 Detroit sites to get worldwide attention at Venice exhibition By Marti Benedetti mbenedetti@crain.com

A global spotlight will shine on ideas for repurposing four Detroit sites in an exhibit at the 2016 Architecture Biennale in Venice, Italy, next spring. The exhibition — called “The Architectural Imagination” — will feature the Packard Plant, the Dequindre Cut, the downtown U.S. Post Office building, and a vacant Detroit Public Works

Department yard at Vernor Highway and Livernois Avenue in southwest Detroit. The University of Michigan’s Taubman College of Architecture and Urban Planning applied to and was chosen by the U.S. State Department to represent the U.S. at the 2016 exhibition, which runs May 28-Nov. 27. Beyond cachet for Detroit, the event promises creative designs for public spaces and may raise interest from architects and investors. Since summer, 12 architectural

firms from throughout the country have been quietly meeting with community, government and business leaders in city churches and offices to gather information about the sites. Now they are at the drawing board creating plans for what these sites could be. What they produce will be exhibited in four rooms at the prestigious Venice exhibition. The sites and architects were chosen by a Detroit advisory board and two curators — Monica Ponce SEE VENICE, PAGE 19

The Dequindre Cut is one of four Detroit sites to be highlighted next year in Venice, Italy as part of an exhibit called “The Architectural Imagination.”

MUST READS OF THE WEEK Concrete outcome

Brewing deal

Tax law

$2 billion at stake

Cement silos’ defense didn’t last forever, Page 4

Why Michigan has less to fear from Big Beer, Page 17

Proposed carried-interest changes could weigh down deals, Page 11

How Obama veto could impact local defense programs, Page 6

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Room and a view

PHOTOS BY GLENN TRIEST

This was the view photographer Glenn Triest captured in 1985 looking east from the Renaissance Center. Last week, he took the above photo of the former silo location from the same vantage point as in 1985.

hirty years ago on Oct. 28, cement silos stood along the Detroit riverfront (photo left), east of the Renaissance Center. The owner of the silos, Huron Cement Co. , was hoping to keep them there despite the changing face of the area from industrial to residential, retail and office use. As part of that effort, National Gypsum Co. Cement Division, parent of Huron Cement Co., commissioned a study to show how its riverfront cement operation and its storage silos might blend in with their changing surroundings and prevent complaints from new, non-industrial neighbors, and also curb any thoughts by the city to take action against its operations. Riverfront developments that prompted National Gypsum to commission the study included Stroh River Place , Harbortown and a host of riverfront city parks. National Gypsum’s effort didn’t work in the long run. In 2006, the last of the three cement silos along the Detroit River was demolished to pave the way for a host of riverfront projects, including the expansion of TriCentennial State Park and Harbor — the first urban state park in Michigan’s history — and the city’s RiverWalk.

Workforce panel sets jobs goal By Chad Halcom

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chalcom@crain.com

A newly reconstituted Detroit Workforce

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Development

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would like to land jobs for 100,000 job-seeking or detached city residents, leaders of the local business community heard Friday — but that won’t happen overnight. New board co-chairs Cynthia Pasky, CEO of Strategic Staffing Solutions , and Jeff Meador, chief administrative officer of DTE Energy Corp., said no time frame is set on reaching that goal for the board, which governs the local workforce building and training efforts of Detroit Employment Solutions Corp.

CHICAGO

and is one of 16 Michigan Works agencies statewide. But that can be tackled in various ways, said Jeff Donofrio, former governmental affairs manager

for Ford Motor Co. who started as director of workforce development at the city this week. Those include connecting Detroiters with existing job openings across the region, closing a skills gap for workers with incomplete education, and through economic development or business attraction efforts. Meador and Pasky said they have been coordinating with Mayor Mike Duggan and Thomas Lewand, the city’s group executive for jobs and growth, for about six months to help build the new team of board members. Also composing the new board are CEOs of about 20 mainly Detroit-based companies. 䡲 Chad Halcom: (313) 446-6796 Twitter: @chadhalcom

BANKRUPTCIES The following businesses filed for protection in U.S. Bankruptcy Court in Detroit Oct. 16-22. Under Chapter 11, a company files for reorganization. Chapter 7 involves total liquidation. 䡲 Patroske Enterprises Inc., 6600 Allen Road, Allen Park, voluntary Chapter 11. Assets and liabilities not available. 䡲 The Red Fawn Banquets Inc. , 6600 Allen Road, Allen Park, voluntary Chapter 11. Assets and liabilities not available. 䡲 Construction Loan One LLC , 24 Frank Lloyd Wright Drive, Suite H2200, P.O. Box 502, Ann Arbor, voluntary Chapter 11. Assets and liabilities not available. 䡲 ITA Inc., 38666 Jefferson Ave., Harrison Township, voluntary Chapter 11. Assets and liabilities not available. Natalie Broda

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Obama veto could impact local defense programs By Chad Halcom chalcom@crain.com

At least $2 billion worth of programs for Southeast Michigan defense contractors, their suppliers and local military bases are at stake following a rare presidential veto of the National Defense Authorization Act. The defense policy bill, which authorizes certain agencies for defense missions and sets mandates for how defense money can be spent, was sent to President Barack Obama from Congress last week. He vetoed it Thursday.

The annual bill had been vetoed only four times since 1961, by presidents Jimmy Carter, Ronald Reagan, Bill Clinton and George W. Bush. The Obama White House voiced concerns that this fiscal year’s bill uses a special subset of the defense budget to boost military spending without a matching domestic spending increase. Among the line items in the fiscal 2016 Authorization bill was $314 million in procurement for “lethality upgrades” to the Stryker armored troop carrier, made by Sterling

Heights-based General Dynamics Land Systems . The Army has been seeking a fast-track program to refit dozens of Strykers in Europe and elsewhere with a heavier 30 mm cannon after Russia’s incursion into the Crimea, as Crain’s reported in August. U.S. Rep. Candice Miller, R-Harrison Township, vice chairwoman of the House Homeland Security Committee, said in a statement late Thursday she expects Congress to work on building support for an override on Capitol Hill. “The NDAA passed by Congress

provides the necessary funding for our military to invest in new technologies, like unmanned aircraft. It also safeguards the proven and relied-upon weapons systems that our military has come to depend on, like the A-10 fleet out of Selfridge Air National Guard Base currently deployed to the Middle East in the fight against (the Islamic State),” she said. The Obama administration expressed confidence that the veto would be upheld in Congress and hopes that enough Republican defense hawks would persuade their

Candice Miller: NDAA provides for military to invest in new technologies.

colleagues to give ground on the broader budget battle, The Washington Post reported. In all, the vetoed bill would have appropriated about $569.3 million in various program funds for

the Stryker. Other allocations to defense programs in the bill with a Michigan connection included: 䡲 $407.9 million for the Abrams main battle tank, also of General Dynamics Land Systems, about $40 million more than the president’s original request. Suppliers to GDLS on the Abrams program have included Loc Performance Products Inc. in Plymouth. 䡲 $181.9 million to various vehicle research programs overseen by the Tank-Automotive Research, Development and Engineering Center , a part of the U.S. Army De troit Arsenal in Warren.

䡲 $334 million for the Family of Medium Tactical Vehicles, a class of military trucks and trailers produced by Wisconsin-based Oshkosh Defense , which has local offices in Warren. Troy-based Meritor Inc. and AAR Mobility Systems Inc. in Cadillac have been suppliers to Oshkosh on the FMTV contract. 䡲 $27.5 million for the Family of Heavy Tactical Vehicles. MTU De troit Diesel is an engine supplier to Oshkosh for FHTV. 䡲 $225 million for the Bradley Fighting Vehicle, a program of BAE Systems Inc. , which houses much of its program support and engineering work in Sterling Heights. Subcontractor L-3 Com munications also has assembled transmissions for the Bradley in Muskegon. 䡲 $273.8 million in procurement and more than $100 million in research funds related to the Paladin Integrated Management, also a BAE program and a variant of its M109 self-propelled howitzer. A federal defense acquisition board in 2013 authorized low-rate initial production on the Paladin. 䡲 Possibly $20 million or more as a local piece of the total $428 million-plus in global funding that the authorization bill preserves for the A-10 aircraft fleet. The U.S. Air Force has tried to retire the A-10 fleet in several past budgets, only to have its deployment and funding reinstated each year by Congress. Some 18 planes, or more than 6 percent of all A-10s still in service, are stationed at Selfridge in Harrison Township. 䡲 Chad Halcom: (313) 446-6796 Twitter: @chadhalcom

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Senate to review House’s roads plan

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LANSING — Passage of $1.2 billion road improvement legislation remains in doubt despite the House’s narrow approval of a new plan to pair higher vehicle registration fees and fuel taxes with spending and income-tax cuts. The Senate will review the bills starting this week. The Republicanled House passed them in a surprise party-line move Wednesday. “I’m just really grateful that they sent something over. My caucus has a lot of work to do on it and look at it and understand it,” GOP Senate Majority Leader Arlan Meekhof said Thursday. In May, voters defeated a sales tax increase that would have triggered more money for roads, education and municipalities. Republicans then passed competing proposals in the House and Senate, but talks among legislative leaders and Gov. Rick Snyder hit an impasse this month. The new alternative — which concerns the GOP governor and still lacks bipartisan support after parts passed in close 55-51 and 5650 votes — includes hiking gas and diesel taxes to roughly 22 cents per gallon and a 40 percent increase in license plate fees to raise $600 million a year by 2018-19. The rest, $600 million annually in 2020-21 and less before then, would come from the $9.9 billion general fund. General fund revenue would be reduced by $200 million more because of an expansion of the homestead property tax credit. And starting in 2019, individuals also could see an income tax cut, depending on state revenue. “It’s a pretty major step backward. It’s not financially responsible for the long run,” Senate Minority Leader Jim Ananich said. Before the closed-door negotiations broke down last week, leaders had detailed spending cuts and addressed other budget pressures to account for $400 million general fund diversions every year, Ananich said. That plan was “so close” and should be revisited, he said. It included $400 million more in fuel taxes, $400 million more in vehicle fees and talk of a tax credit. But Senate Appropriations Committee Chairman Dave Hildenbrand, R-Lowell, said though it would be “challenging” but “doable” to adjust generalfund spending significantly. “When we’re gone, the new legislators will have to look at what we did and they can make changes,” Hildenbrand said. 䡲

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CRAIN’S DETROIT BUSINESS

OPINION To fix school woes, focus on children ov. Rick Snyder announced his long-anticipated plan last week to split Detroit Public Schools into two: a legacy district to pay down debt and a new district to educate students. A key piece of Snyder’s reform is an education commission that would hold schools — charters and traditional public — to performance standards. The commission would have the power to authorize schools to open — and the power to close them if the results aren’t serving children. Neither traditional public schools nor charter schools have been held to quality standards. Both types of schools need to be able to have management replaced or be closed if necessary. Charters in Detroit — and elsewhere — have been able to cherry-pick locations. Detroit Mayor Mike Duggan has forcefully made the case that the result is that some areas of the city have too many schools for the number of students, which has weakened all of them, while other areas remain underserved. Michigan needs to be to be able to easily strip poor-performing operators of their charters and regulate where schools are located. The bottom line is that the long-term challenges of Detroit public education won’t be fixed until the interests of children are served.

Time to address ed board transparency A joint resolution that would require public universities to be more transparent has been languishing in the House of Representatives since June. It deserves attention. House Joint Resolution O would amend the state constitution to specify that the records of the governing boards of state universities are open to public inspection. Most meetings also would be open as required by the Open Meetings Act, not just formal sessions. Formal sessions often consist of little more than unanimous votes with little or no discussion because the real deliberation is done out of public view. For example, a Free Press analysis of 14 months of University of Michigan board of regents meetings that showed 116 matters were voted on, but only a dozen featured board discussions. The resolution was sponsored by Rep. Martin Howrylak, RTroy, and requires a two-thirds vote in both houses to go before voters. Howrylak was a co-sponsor on a similar resolution that died in the House in 2014. A June Court of Claims decision against the Free Press in a lawsuit based on its analysis said that forcing UM to follow the Open Meetings Act “runs afoul” of its constitutional autonomy to run its operations. Why would university boards be different from other public bodies? If Howrylak’s resolution passes, it would be up to voters to decide how open university boards need to be. 䡲

Fairness, reliability, affordability issues must guide energy policy for Michigan C

rain’s Oct. 18 editorial on energy policy, “Snyder must take lead on energy issues,” highlights the complexity of these issues. We share your concern for finding solutions that equitably balance the interests of multiple stakeholders. The guiding principles for crafting sound energy policy should be affordability, fairness, reliability and environmental protection. Looking at Michigan’s energy policy through this framework, we disagree with some of the positions outlined in your editorial.

Deregulation Your editorial correctly concludes that expanding deregulation would be unwise and that everyone should pay their fair share of infrastructure costs. But then you call for excluding local governments, school districts and universities from the cap on deregulation. This would substantially increase the scope of retail open access and increase unfair subsidies for infrastructure. Since 2009, Michigan’s regulated utility customers have subsidized retail access customers by nearly $1.7 billion for reliability, at a rate of about $300 million a year. Opening retail access to schools, universities and local governments would expand deregulation and increase the subsidies paid by 99 percent of Michigan families and businesses to $540 million per year. This subsidy is really a hidden tax that falls heavily on senior citizens, low-income families, and small businesses.

OTHER VOICES: Steven Kurmas The writer is president and COO of DTE Energy. In addition, schools and public institutions on retail access could see reliability issues and more volatile prices in the coming years. Retail energy marketers have historically relied on excess generating capacity and have abandoned customers in Michigan and other states when markets get tight. With nine coal unit retirements planned for next year in Michigan alone, and many more to come over the next 15 years, the excess generating capacity that retail marketers have relied on will be disappearing.

Renewables A flexible generation planning process — as supported by the governor and as outlined in House and Senate legislation — will allow utilities to adapt to evolving technological and market conditions and ensure cost-effective investments in the right mix of generating resources, including renewables. To account for changing technology and market conditions, energy policy should not prioritize one clean energy source over another. A

Editor: This is about Detroit’s parking meters by Wayne State. It seems like the people responsible for them are either clueless or hate people who are students at Wayne or who attend shows while parking on the street. There is no way to add time to one’s two-hour limit, yet classes are three hours and shows are longer than two. One also is unable to add time in a zone for a place in that same zone. Hence, one must walk out of a class, lab or performance exactly at two hours so as not to chance a ticket. I’m thumbing this on my phone email while wasting half an hour before my two-hour session for the same reason. City officials, please address this. Nathaniel Warshay Oak Park

Send your letters: Crain’s will consider for publication all signed letters to the editor that do not defame individuals or organizations. Email: cgoodaker@crain.com

Energy efficiency DTE Energy’s energy efficiency programs have helped approximately 750,000 electric and 450,000 gas customers realize more than $500 million in energy savings in their homes and businesses since 2009. Energy efficiency will play an increasing role in Michigan’s energy future because it makes sense financially and environmentally. DTE supports a continued commitment to energy efficiency while creating a generation planning process that provides a solid framework to transform Michigan’s generation fleet and reliably serve customers with clean and affordable power today, tomorrow and in the future. 䡲

TALK ON THE WEB

LETTERS

Not enough time for parking

flexible generation planning process will enable Michigan utilities to choose the most cost-effective technologies at the right time to minimize the financial impact for our customers while meeting environmental objectives. Overlaying state mandates on top of federal requirements places affordability at risk for our customers. The Integrated Resource Planning process proposed in the House and Senate bills would provide transparency by bringing all stakeholders to the table, where they would weigh the costs and benefits of the various options. It would make the selection of particular generating options an open and public process. And it would establish an ongoing review to ensure that utilities are fulfilling the commitments contained in their approved resource plans.

Re: Drew Lane out at WMGC after contract talks break down Sadly, it was only a matter of time as even Drew Lane couldn’t save this station. The only reason 97.1 keeps its base is because it holds three of the four railroads in this Monopoly game. D Jacks

Lane

I’ve been listening to Drew for well over 20

years and I can’t believe he’s gone from the radio, again! Hopefully he’s back on ASAP. Drew and Marc were the best show by far on Detroit radio for the past two years. Not sure what to listen to now in the afternoon. Felko

Re: Michigan House OKs roads plan with gas tax, fee hikes Seriously, a 40 percent increase

Reader responses to stories and blogs that appeared on Crain’s website. Comments may be edited for length and clarity.

in registration fees? Good luck keep ing your jobs after that one. Jon

Republicans have had control of the House, the Senate and the governor for six years now, and they still cannot effectively run the government. If they need more funding, then they have to vote for some kind of tax increase. At some point, they have to put their responsibilities above their personal political ambitions. Rock & Roll 35

Re: Snyder plan to fix Detroit schools could cost state $715M Detroit schools, as are most large school districts in the nation, are inefficient and corrupt. What needs to happen in Detroit is a voucher system where parents can decide where to send their child. Justin Thompson

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Lawmakers should keep Michigan’s energy standards strong hen the Michigan Legislature enacted energy legislation in 2008, a bipartisan group of lawmakers agreed to include strong standards for energy efficiency and renewable energy, and with good reason. These standards provide certainty to businesses making investments and balance the interests of ratepayers, including commercial and industrial businesses, with the interests of utility shareholders. Moreover, these standards have proven to help deliver energy to Michigan homes and businesses at a fraction of the projected cost. Fast forward seven years, and state lawmakers are on the brink of rewriting energy legislation yet again. The good news is that lawmakers have seven years of experience in directing what the energy landscape will look like in the years to come. The bad news is that some lawmakers appear indifferent to what history has taught us when it comes to energy policy. Bills introduced in the House and Senate would eliminate the requirement for energy optimization programs and freeze the renewal portfolio standard at its current level. Such an approach ignores available information and would undo the success Michigan has experienced over the past seven years. The discussion about energy legislation needs to be data-driven, and Gov. Rick Snyder deserves credit for launching such a process with a yearlong information gathering exercise in 2013 that culminated in four comprehensive reports titled Readying Michigan to Make Good Energy Decisions. Here is what recent history has shown. According to the Michigan Public Service Commission, energy optimization programs have saved customers money every year since 2009. Overall program expenditures of $1.1 billion from 2010 to 2014 are estimated to achieve lifetime savings to all customers of $4.2 billion, and investments made in 2014 will generate $4.38 in savings for every dollar spent. According to another report, this one commissioned by the Michigan Conservative Energy Forum, simply maintaining current energy optimization programs will generate $8.1 billion in economic activity through 2023. Finally, an analysis by the nonprofit Institute for Energy Innovation has found that expanding energy efficiency is key to costeffectively meeting Michigan’s energy challenges. There is also strong historical data when it comes to renewable energy. The MPSC estimates that the development of wind, solar, biomass and other renewable technologies has spurred $2.9 billion in investment since 2009. As a result of advances in technology and rapid cost declines for wind and solar, we’ve seen this investment at a fraction of the costs projected in 2008. Indeed, the state’s largest utilities — DTE Energy and Consumers Energy — have eliminat-

The writer is president of the Michigan Energy Innovation Business Council, an industry trade group that advocates for Michigan’s advanced energy companies, and is a co-founder and principal with 5 Lakes Energy, a Michigan-based clean energy and sustainability consulting firm.

OTHER VOICES: Liesl Eichler Clark ed the renewable energy surcharges from customer bills, highlighting the fact that renewable energy is now cost-competitive with traditional energy sources.

A stable policy framework has also helped grow advanced energy manufacturing, which is now a $7.2 billion industry in Michigan — larger than natural resources and mining, twice as large as furniture manufacturing, and more

than 70 times larger than the state’s oil and gas extraction industry. Given this success, it is little wonder that state voters overwhelmingly support renewable energy and energy efficiency. A poll commissioned by the Christian Coalition of Michigan earlier this year found that 90 percent and 84 percent of Michigan voters, respectively, support requiring utilities to implement energy optimization programs and an expansion of the RPS requirement that utilities obtain 10 percent of

their energy from renewable resources — a requirement that has already been met. While there are merits to discussing how to improve existing energy legislation, it would be a mistake to revoke clear standards that have provided certainty for investors and the market, resulted in billions of dollars of investment, saved Michigan families and businesses money on their utility bills, and helped to grow the manufacturing sector, especially when those standards enjoy broad, bipartisan public support. 䡲

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Crain’s names Snell to cover city, politics beats CARE LTHPD HEAEF AT E IT U BEN

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Robert Snell, who was The Detroit News’ lead reporter for its Detroit bankruptcy coverage and who now covers federal courts and agencies, will become the city of Detroit and regional politics reporter for Crain’s Detroit Business startRobert Snell: ing Nov. 9. Snell, 43, also Newest Crain’s covered U.S. Dis- reporter trict Court and federal agencies in Detroit, including the Department of Justice , FBI and Drug Enforcement Administra tion. He previously served as a beat reporter covering General Motors and led coverage of the automaker’s historic bankruptcy. The Detroit chapter of the Society

Professional

Journalists

named Snell its 2014 Journalist of the Year. He also won a 2010 award from the Society of American Business Editors and Writers for his breaking news coverage of the GM bankruptcy. “Robert is a modern watchdog reporter,” said Crain’s Editor Jen-

nette Smith. “He will help us find new angles, new ways of presenting data, and new ways to present our big enterprise projects across platforms.”

Walsh named senior reporter, expands role Dustin Walsh becomes senior reporter, effective immediately. Walsh will have an expanded role in coordinating the production of Crain’s Lists and data products with Data Editor Sonya Hill. Walsh also covers manufacturing, auto suppliers, steel and the business of law. Walsh, 34, has been a reporter at Crain’s since 2009.

Halcom adds education to coverage topics Chad Halcom adds the education beat to his coverage focus areas, which also include litigation and the defense industry. He also specializes in data-driven enterprise reporting. Halcom, 43, has been a reporter at Crain’s since 2007. He has previously covered Oakland and Macomb counties and manufacturing.

Empower Dr. Amara

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TO L E A R N MOR E A B O U T F I R S T M E R I T P R I VA T E B A N K , C O N T A C T : Ken Duetsch II, Senior Vice President,

at 248-430-1255 or ken.duetsch@firstmerit.com. *Dr. Amara reflects a composite of clients with whom we’ve worked; she does not represent any one person. Non-deposit trust products are not insured by the FDIC; are not deposits or obligations of FirstMerit Bank, N.A, or any of its affiliates; are not guaranteed by FirstMerit Bank, N.A or any of its affiliates; and are subject to investment risk, including possible loss of principal invested.

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SPECIAL REPORT: CHAD HALCOM chalcom@crain.com Twitter: @chadhalcom

Fast-food case could have impact locally ruling making it easier for unions to organize employees of fast-food chains and other franchisors could have a local impact sooner than expected, via an unfair labor practice case against McDonald’s Corp. The National Labor Relations Board found in August that Browning-Ferris Industries of California is a joint employer of workers hired by a contractor at a recycling center. That company is not a franchise, but the decision could extend to franchisors and affect litigation against McDonald’s and its franchisees. Patrick Rorai, attorney at Southfield-based McKnight, McClow, Canzano, Smith & Radtke PC representing the Michigan Workers Organizing Committee, said a dispute over a corporate-owned McDonald’s in Pontiac is one of many on hold pending an administrative law judge ruling in a New York case. But the labor board is also trying for a global settlement with the company, ever since the Browning Ferris decision and an unfavorable judicial ruling for McDonald’s this summer. General Counsel Richard Griffin of NLRB claims McDonald’s is a joint employer with franchisees in various states, and may be liable for practices like retaliating against workers who organize or gather to protest work conditions. A key issue is whether McDonald’s exercises control of franchisee labor practices. Past rulings have held a parent company must exercise some degree of control, but the BFI ruling essentially says the company only has to have control — regardless of whether it is used. “In McDonald’s case, the company would send in business consultants who made sure that franchises complied with corporate policies,” Rorai said. McKnight McClow handles other unfair labor practice cases against local restaurant chains, including franchisee EYM King of Michigan LLC. That case made headlines when a judge ruled the owner of 22 local Burger King locations set illegal loitering and soliciting rules on employees in Ferndale, and sent a prounion employee home from work as punishment for not placing four pickles in a square on a burger. Rorai said the McDonald’s proceedings have been on hold in hopes of a settlement. “And certainly the Browning-Ferris case will be appealed, so this is far from over,” he said. 䡲

TAX LAW

Carried interest Proposed tax law could weigh down outlook for deals By Dustin Walsh dwalsh@crain.com

A debate in Congress centered on a loophole in the federal tax code is viewed as a potential black hole when it comes to local dealmaking. Michigan Rep. Sander Levin in June introduced the Carried Interest Fairness Act of 2015, a bill that would close the perceived “carried interest loophole.” Levin is joined by presidential candidates Hillary Clinton and Donald Trump in calling for an end to the practice. Carried interest is a rule in the tax code that allows managers of funds — private equity, hedge fund, venture capital, real estate, etc. — to pay a lower tax rate on their share of the profit following a transaction involving a portfolio company. Specifically, carried

interest is taxed as a capital gain at 23.8 percent, instead of as ordinary income at 38.6 percent, which legislators and candidates say is an unfair practice designed to make the rich richer. What’s driving the action? Washington is taking aim at East Coast private equity fund managers and favorable tax rates on profits from mergers, sales and initial public offerings. Local middle-market fund managers and venture capitalists say they are caught in the crosshairs and are worried about what the change would mean to the climate for M&A transactions and other deals.

Philosophical debate A change in that tax code could create a ripple effect, local experts say, jeopardizing potential Southeast Michigan deals and de-

Rite of frustration:

velopments in the name of reining in earnings by the Wall Street elite. “This is one of the greatest philosophical questions of tax law: Should different types of income be taxed differently?” said Eric Nemeth, partner and tax practice head at law firm Varnum LLP in Novi. “In political circles, (private equity and hedge funds) is a growing area of our economy that is receiving favorable tax rates and is distorting our economy.” The way carried interest works for investment fund managers is that each manager buys into the partnership representing a total of 1 percent to 5 percent of the fund, which is used as part of a fund alongside investors to acquire a company. The managers SEE INTEREST, PAGE 12

Annual congressional delays in extending tax breaks leave businesses in a bind when they try to plan investments in equipment, R&D. Page 13

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SPECIAL REPORT: TAX LAW

INTEREST FROM PAGE 11

then receive a management fee, usually 2 percent, to manage business. The fund has a target rate of return annually based on past performance of the firm, generally ranging from 6 percent to 9 percent. When the firm sells or otherwise gets its payout from the portfolio company, that rate of return is paid back to investors. Anything exceeding that rate of return is then distributed to investors, but 20 percent of that return is given to the fund managers. That portion is, through carried-interest tax law, taxed as a capital gain. For example, if a local PE firm acquires a local auto supplier for $100 million, then sells that company for $200 million and, assuming a target return rate of 8 percent, investors get back $8 million. Then the remaining $92 million would be distributed to the investors minus the 20 percent, or $18.4 million, claimed by the fundâ&#x20AC;&#x2122;s managers. That $18.4 million is taxed as a capital gain, where the government claims tax revenue of $4.38 million. If Congress successfully changes the carried interest to be taxed at regular income, the government could, theoretically, charge a tax of $7.1 million. â&#x20AC;&#x153;This score further highlights just how much inequality exists in our nationâ&#x20AC;&#x2122;s tax code,â&#x20AC;? Levin said in a statement in September after proposing the newest version of his bill. â&#x20AC;&#x153;When an auto assembly line worker and a fund manager pay

drastically different tax rates on their income, we know we have a serious problem. â&#x20AC;&#x153;Thankfully, closing the carried interest loophole has gathered more bipartisan support in recent months, joining our push â&#x20AC;&#x201D; through this legislation â&#x20AC;&#x201D; so all Americans can be treated fairly under the law.â&#x20AC;?

â&#x20AC;&#x153;This is one of the greatest philosophical questions of tax law: Should different types of income be taxed differently?â&#x20AC;? Eric Nemeth,partnerand tax practice head at Varnum LLP

Ripple effect? Tim Peterson, managing director of Ann Arbor-based venture capital firm Arboretum Ventures LLC , said the issue of whatâ&#x20AC;&#x2122;s fair under tax law is murky. â&#x20AC;&#x153;Explain why renters arenâ&#x20AC;&#x2122;t allowed to deduct rent from their income taxes and homeowners can deduct their mortgage?â&#x20AC;? Peterson said. â&#x20AC;&#x153;Someone in Congress decided it was a good thing to incentivize, but thatâ&#x20AC;&#x2122;s not fair to renters. Itâ&#x20AC;&#x2122;s the same for venture capitalists. We are incentivized to grind it out and make investments in new companies that create jobs.â&#x20AC;? Peterson pointed to companies like Google Inc., which was supported by venture capital in its early years and now employs 57,000. Mac Gerlach, managing director for Southfield-based investment bank and private equity firm Cas cade Partners LLC, said changing the current tax benefit would likely alter the way PE firms invest. The payout that goes beyond recouping the initial investment would be taxed differently. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re putting capital at risk with an investment, so we get capital gains treatment; the reason is to

stimulate investment and compensate us for the risk,â&#x20AC;? Gerlach said. â&#x20AC;&#x153;If they change the tax code, theyâ&#x20AC;&#x2122;re not encouraging investment, and I do think private equity firms will be more cautious about their investments if thereâ&#x20AC;&#x2122;s no upside.â&#x20AC;? Cascade manages a $50 million fund, generally investing or acquiring lower midmarket companies with cash flow of $1 million to $5 million. For Gerlach, the potential raise in taxes for Cascadeâ&#x20AC;&#x2122;s managers hits home too. â&#x20AC;&#x153;Look, weâ&#x20AC;&#x2122;re not struggling to put food on the table, but weâ&#x20AC;&#x2122;re all very middle-class,â&#x20AC;? Gerlach said. â&#x20AC;&#x153;There are far more midmarket PE firms and very fewer of the mega funds Congress wants to target. The focus is on the home runs we (PE firms) hit, but no one talks about the deals where we lose our ass.â&#x20AC;? Peterson said he doesnâ&#x20AC;&#x2122;t believe a change in the code would influence most venture capital deals. â&#x20AC;&#x153;I donâ&#x20AC;&#x2122;t see everybody abandoning the VC business if this passes, but it will affect deals on the edges,â&#x20AC;? Peterson said. â&#x20AC;&#x153;It is our livelihood, but we do it because we enjoy building companies â&#x20AC;Ś most days.â&#x20AC;?

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The legislation is also expected to affect large real estate developments, where the developer uses carried interest while a project is under construction. â&#x20AC;&#x153;Developers and sponsors of developments will definitely be looking at their after-tax return and whether this legislation is going to create a greater tax burden,â&#x20AC;? said Alex Domenicucci, partner in the tax practice at Southfield-based Maddin, Hauser, Roth and Heller PC . â&#x20AC;&#x153;They are going to have to determine whether the reduced amount is worth putting a deal together â&#x20AC;Ś and in some cases, itâ&#x20AC;&#x2122;s probably not.â&#x20AC;? Peterson said resentment of Wall Street left over from the recession is gaining steam as income and wealth inequality are becoming more prominent policy issues, but he worries the wrong part of the financial industry is being targeted. Levinâ&#x20AC;&#x2122;s bill largely avoids raising taxes on the managers of large U.S. hedge funds. Most hedge funds rarely use the carried interest loophole, The New York Times reported, investing and selling in securities, bonds and derivatives, rather than buying companies outright. A great portion of those investments are short-term, less than one year, therefore are taxed as regular income and not the long-term investment that triggers carried interest. Unlike PE firms, hedge funds rarely take controlling stakes in companies, but hedge trading positions to benefit from market fluctuations. The top 25 hedge fund managers earned more than $21 billion

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in 2013, the Times reported. The U.S. Congress Joint Committee on Taxation estimated in a September memorandum that Levinâ&#x20AC;&#x2122;s bill could generate additional tax revenue of $15.6 billion between 2016 and 2025, though private sector experts predict a higher figure. However, estimating that potential tax revenue is very difficult to project, said Jeffrey Freeman, president and partner at Birminghambased tax law firm Freeman Tax Law. â&#x20AC;&#x153;You simply canâ&#x20AC;&#x2122;t determine the present value of future profits, especially since much of that is driven by the economy,â&#x20AC;? Freeman said. â&#x20AC;&#x153;We know investment managers are making money, but how much will be made in the future is just not certain, and that affects how much the government will get in taxes.â&#x20AC;? Nemeth said adjusting carried interest from the capital gains tax rate to the regular income rate will change the behavior of investment managers, which wonâ&#x20AC;&#x2122;t necessarily equal a net positive for the government. â&#x20AC;&#x153;Raising the tax too high could very well change the way these firms structure their investments,â&#x20AC;? Nemeth said. Nemeth said government should be working to find the â&#x20AC;&#x153;political sweet spot,â&#x20AC;? where itâ&#x20AC;&#x2122;s able to tax carried interest at a higher rate without forcing these firms from changing their structure, which would likely negate the tax revenue benefit to the government. â&#x20AC;&#x153;The amazing thing about the American economic system is that itâ&#x20AC;&#x2122;s innovative,â&#x20AC;? Nemeth said. â&#x20AC;&#x153;The investment market is always looking for innovation, and the tax code is trying to catch up. We have a known tax code and there are entire professions trying to get the best possible tax rate because our system incentivizes this behavior, and they are always coming up with new ways to pool money for a tax benefit â&#x20AC;Ś and thatâ&#x20AC;&#x2122;s not going to stop.â&#x20AC;? äĄ˛

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SPECIAL REPORT: TAX LAW

A taxing situation: Extenders package again left hanging By Doug Henze Special to Crain’s Detroit Business

Across metro Detroit, tax planners and their corporate clients are stuck in a holding pattern — once again waiting for Congress to extend tax benefits that expire annually. Known as the “tax extenders” package, the legislation — aimed at spurring business investment — would renew everything from research tax credits to quicker depreciation on new equipment. But the tax breaks, approved by the U.S. Senate Finance Committee this summer, need authorization by the full Senate and then Congress as a whole before businesses can receive them for 2015. Last year, that took until December, leaving business decisions in limbo. “It makes it pretty challenging,” said Robert Nemzin, a shareholder with Detroit law firm Butzel Long PC, which helps clients develop tax strategies. “It’s hard to do tax planning — especially end-of-year planning — when we’re not sure it will pass.” Consider a business that’s on the fence about adding a $500,000 piece of equipment. Under a not-yet-extended por-

“Any delay you have is going to slow down the rate of investment. ... If there was a two-year extension, it would make it easier for businesses to plan.” James Combs,Honigman,Miller,Schwartzand Cohn LLP

tion of the Internal Revenue Service tax code that allows for a “bonus depreciation” incentive, that business could offset income with depreciation of $300,000 on that equipment in the first year. If Congress does not extend bonus depreciation, that business would have depreciation of only $100,000 in the first year. Last-minute action by Congress can put businesses in a bind, considering that acquiring and installing that equipment requires some lead time, said Carol Wright, principal with Troy certified public accounting firm Rehmann Robson . Businesses must put machinery in service to get the deduction. “It’s not enough to just get it in the door,” Wright said. “They have to actually be using it. That can take a couple of months.” So the business has to weigh the risk of making a large investment in equipment before it knows how

much of a benefit it will receive that year from the depreciation deduction. Also part of tax extenders legislation are credits for research and development. Although Congress put those credits in place 30 years ago, it never made them permanent, said James Combs, a partner and head of the tax practice group at Detroit-based law firm Honigman, Miller, Schwartz and Cohn LLP. “For something like the research credit, taxpayers have come to expect it will be passed,” Combs said. “(But) it’s like any legislative activity, it’s always fluid.” One reason for the government to do annual extensions, versus making tax benefits permanent, is more political than practical. “By having a tax credit that is to expire, they don’t project a budget impact long-term,” Combs said. Another reason to offer tax breaks that expire is to allow for experimentation. “You might have things like energy credits, and Congress might do a

trial run,” Combs said. If a given technology doesn’t yield significant energy savings, Congress isn’t locked into providing credits. But a system with annual renewals causes uncertainty for individual businesses and the overall economy. “Any delay you have is going to slow down the rate of investment,” Combs said. “It can make it difficult to do any tax planning. If there was a two-year extension, it would make it easier for businesses to plan.” Knowing that Congress does end-of-year tax benefit renewals, companies put suppliers on notice with product orders in case Congress extends benefits. But that simply moves the uncertainty down the supply chain. “Their suppliers are in limbo,” Nemzin said. “The whole chain is in limbo.” If there’s a “silver lining,” for tax planners, it’s that their clients understand uncertainty now is the norm, Nemzin said. “Clients are now used to this,” he said. But tax planners aren’t expecting Congress to make tax benefits permanent or extend them for longer cycles anytime soon. Working with annual extensions has become part of the culture. “I’ve been involved in extender packages since the mid-2000s, and I’m sure there were extender packages before that,” Combs said.

Added Nemzin: “I would not expect them to make them permanent this year. It’s a lot easier for Congress to do a patch.” Nemzin said he hopes there will be future discussion about making the tax benefits permanent. In the meantime, business will have to make decisions with the limited information they have. It’s up to tax planners to help their clients understand the risks. “For business owners, the strategy I use is let business decisions dictate,” Nemzin said. “If a business needs a piece of equipment, go ahead and buy it. Don’t let tax deductions get in the way of running your business.” However, different business owners have different risk tolerances. Congress puts tax incentives in place to spark investment that otherwise might not occur, Combs said. Delay defeats that strategy. “It’s really the person at the margin who is going to be affected,” Combs said. “They may decide not to put it in this year’s budget. It’s anybody’s guess when Congress will clear away doubts for 2015. “I don’t think anybody has a crystal ball,” Combs said. “There have been press reports all year and we’ve heard from lobbyists that there was movement, and then it tends to stall. I would expect something will happen in this late fall.” 䡲

Congratulations Ryan C. Plecha Thomas M. Cooley Law School Juris Doctor, 2008 Kalamazoo College Bachelor of Arts, Psychology, 2004

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Knight converts $2.5M loan into grant for Detroit fund By Sherri Welch swelch@crain.com

In a rare move, the John S. and James L. Knight Foundation is con-

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verting a $2.5 million low-interest loan made years ago to the Detroit Development Fund into a grant over the next three years. The move effectively forgives the loan, a program-related investment that dates to 2006. That will enable the fund to leverage other loans and increase the loans it’s making to small businesses and rehabilitation projects in the city, as well as the amount of technical assistance it can provide. It’s yet another example of how foundations — many of which have only in recent years begun to make program-related investments like low-interest loans and guarantees — are broadening their minds about the ways they can help nonprofits meet their missions. “Instead of having a loan that we owe ... it’s now a net asset grant, which strengthens our balance sheet tremendously,” said Ray Waters, president of the Detroit Development Fund. Following the conversion, the fund was able to attract a $3 million, low-interest loan from the W.K. Kel logg Foundation toward the $6.5 million Entrepreneurs of Color Fund, which was launched in September to boost economic opportunity for minority-owned businesses in Detroit, Waters said. The conversion “will also allow us to raise additional capital from other sources to continue to grow the lending program in Detroit,” he said. Additionally, as the small-business and rehab-project loans the Detroit Development Fund extended with the Knight loan are paid back, that will provide unrestricted money to fund additional technical assistance, such as helping startups develop business plans and financial statements. Knight forgave half of the $2.5 million loan to the fund in August, and the rest will be forgiven in two installments in April 2016 and April 2017, Waters said. “It’s highly unusual for a foundation to convert a PRI to a grant ... but because Knight has been so supportive of ... the work we’re doing in Detroit ... they were kind enough to do it,” he said. Knight decided to make the conversion, a first for the Miami-based foundation, “because we felt that this was a unique opportunity to double down on the momentum building in Detroit, and specifically the results that Detroit Development Fund has already obtained,” Knight’s Detroit program officer, Katy Locker, said in an emailed statement. “By converting the loan to a grant, Detroit Development Fund will be able to leverage this capital

into more loans at a time of great demand in Detroit” rather than reducing its lending to pay the foundation back, she said. The Detroit Development Fund has made $35 million in predevelopment loans for housing and commercial rehab projects and smallbusiness loans in the city since 2003, Waters said. Since 2004, that’s led to the creation and retention of about 1,500 jobs and, since 2008, the creation of 1,600 units of housing. The Troy-based Kresge Foundation, which also is increasingly using program-related investments as another way to help nonprofits, has never converted a loan to a grant, said Kimberlee Cornett, managing director for its social investment practice, in an emailed statement. Two years ago, however, Kresge partially wrote off $220,000 in zerointerest loans made in 2009 to recession-battered human-service agen-

cies in Chicago and Philadelphia. Kresge is one of several foundations exploring pay-for-success models, which provide performance incentives of various kinds and sometimes include loans to nonprofits, Cornett said. For example, most of the interest on a $3 million loan to the Colorado Coalition for the Homeless will be forgiven if certain social, health and housing outcomes are achieved. “Foundations are not conventional lenders,” she said, noting that Kresge tries to identify capital barriers in the sectors it funds and instances its grants and loans can make a difference. That approach “requires a high degree of creativity and risk tolerance but is what is required to make headway against complex social problems,” Cornett said. 䡲

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ACQUISITIONS & MERGERS Corrigan Moving Systems, Farm-

ington Hills, a relocation company and a United Van Lines agent, has acquired the Carney McNicholas Inc. office and 40,000-square-foot warehouse in Lorain, Ohio. The 30 employees at the former Carney McNicholas office will remain as Corrigan employees. Websites: corriganmoving.com, cmcn.com.

DEALS & DETAILS Blanc, to 2851 High Meadow Circle, Auburn Hills. Website: tajco.biz/en/north-america.

olina, Florida and Alabama. Website: tebis.com.

CONTRACTS iDashboards, Troy, a supplier of

business intelligence dashboards, has added Diné College, Tsaile, Ariz., a tribally owned college that services residents of the Navajo Nation, New Mexico, client base. Diné College’s dashboards will be used to display and measure general information, enrollment and graduation rate, faculty size, course evaluation, campuses, institutional resources, student advising support program and community. Websites: idashboards.com, dinecollege.edu. Toggled, Troy, a developer and

producer of lighting technology and a subsidiary of Altair Engineering Inc., announced the addition of Halco Lighting Technologies, Norcross, Ga., to its licensing program, giving Halco access to Toggled’s portfolio of more than 60 patents primarily related to LED replacements for fluorescent tubes. Websites: toggled.com, halcolighting.com.

Varnum LLP, Grand Rapids, has opened a downtown Detroit law office in the Federal Building, 160 W. Fort St. Website: varnumlaw.com. Starbucks Coffee Co., Seattle, has opened a coffee shop, operated by Compass Group USA Inc., Charlotte, N.C., in the hotel lobby of Greektown Casino-Hotel, 1200 St. Antoine, Detroit. Telephone: (313) 580-9736. Websites: greektowncasino.com, starbucks.com. Hennes & Mauritz AB, Stockholm, Sweden, has opened an H & M storeat Macomb Mall, 32233 Gratiot Ave., Roseville. Website: hm.com.

MOVES Tajco Group A/S, Vejle, Denmark, a manufacturer of stainless steel exhaust and bumper/fascia exhaust trims for vehicle manufacturers, has moved its North American sales office, Tajco North America Inc., from 7550 S. Saginaw St., Suite 1, Grand

Euro-Peds National Center for In tensive Pediatric Physical Therapy,

has moved its treatment center from Doctor’s Hospital of Michigan, 461 W. Huron St., Pontiac, to 3000 Centerpoint Parkway, Pontiac. Website: europeds.org.

NAME CHANGE Locations Real Estate and Investments Inc., has changed its name to Locations Commercial Real Estate Services LLC and has moved its head-

quarters from 26700 Lahser Road, Suite 400, Southfield, to 32000 Northwestern Highway, Suite 275, Farmington Hills. Telephone: (248) 516-7777. Website: locationsmi.com.

NEW PRODUCTS ZF TRW Automotive Inc., Livonia,

the active and passive safety technology division of ZF AG, has enhanced the capabilities of its electronic stability control system. The

Danlaw Inc., Novi, a global provider of connected vehicle telematics, automotive electronics and embedded engineering services, has named Emerasoft Srl, Torino, Italy, as a reseller for its Mx-Suite Embedded Software Test tool, designed to help automotive original equipment manufacturers and suppliers produce products more efficiently and with higher quality than traditional methods. Websites: danlawinc.com, emerasoft.com. Rubicon Genomics Inc., Ann Arbor, a developer and manufacturer of biological tools for genetic testing used in drug development and diagnosis, announced that its ThruPLEX Plasma-seq DNA test kit is now automated on Biomek FX(P) liquid handling workstation, Beckman Coulter Inc., life sciences division, Indianapolis. Websites: rubicongenomics.com, beckmancoulter.com. Norma Group SE, Maintal, Germany, anengineering joining technology firm, has selected AutoCom Associates, Bloomfield Hills, as its North American public relations agency of record. Websites: usauto com.com, normagroup.com.

EXPANSIONS Tebis America Inc., Troy, a soft-

ware company specializing in CAD/CAM systems for the tool, die, mold, aerospace and automotive manufacturing industries and part of Tebis AG Munich, Germany, has opened an office in Greenville, S.C., to support efforts in Tennessee, Georgia, North Carolina, South Car-

$1 Billion

technology can act as a “black-box” integration hub — to control automated driving, safety, chassis and drivetrain functions. Also, ZF TRW’s integrated brake control system is set to launch in high volume in 2018. Website: trw.com. Front Edge Publishing LLC, Ann Arbor, a software services company, has launched BookMog, an accessible software platform that enables organizations to become book publishers. It includes tools for editing, manuscript management, production, distribution and real-time sales tracking processes for digital and print platforms. Website: frontedgepublishing.com. Vari-Form Corp, Troy, a manufacturer of lightweight, hydroformed structural parts for pickup trucks, SUVs and light vehicles, has launched a new website with information on Vari-Form’s advanced hydroforming technologies and applications. Website: vari-form.com.

NEW SERVICES Emergency Physicians Medical Group PC, Ann Arbor, a physicianowned practice, and Infinity HealthCare Inc., Milwaukee, a group of

physicians providing health care services in the Midwest, launched CAREnQ, which enables patients to hold video conferences with a local emergency physician using a computer or mobile device. Websites: carenq.com, epmg.com, infinityhealthcare.com.

15 STARTUPS Kahn Center for Cardiac Longevity,

focusing on direct patient care, concierge medicine and prevention and reversal of heart disease, has opened locations at 114 Kercheval Ave., Grosse Pointe Farms, and 4050 W. Maple Road, Suite 108, Bloomfield Township. Telephone: (248) 885-8211. Website: kahnlongevitycenter.com. Airo Partners, which offers strategic planning, fundraising support and messaging for faith-based nonprofit organizations, has opened at 2000 Town Center, Suite 1750, Southfield. Telephone: (248) 8096162. Website: airopartners.com. Emmy’s Post, a teen-friendly boutique offering new and resale apparel items, has opened at 210 W. Sixth St., Royal Oak. Telephone: (248) 325-6023. Website: emmyspost.com. Laine Elizabeth Boutique, an upscale women’s apparel store, has opened at 470 Forest Ave., Suite 17, Plymouth. Telephone: (734) 4591522.

Deals & Details guidelines. Email cdbdepartments@crain.com. Use any Deals & Details item as a model for your release, and look for the appropriate category. Without complete information, your item will not run. Photos are welcome, but we cannot guarantee they will be used.

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16 THURSDAY OCT. 29

The Success Stories of Immigrant Entrepreneurs. 4-7 p.m. Automation

Alley. TiE Detroit, the College of Engineering, the James and Patricia Anderson Institute, Blackstone LaunchPad, Fakhoury Law Group, and Global Detroit present the immigrant entrepreneur speakers’ panel featuring three successful entrepreneurs: Vineet Katial, Bhushan Kulkarni and Avinash Rachmale. Wayne State University, Detroit. $20 members, $40 nonmembers, $30 walk-in members, $50 walk-in nonmembers. Contact: Sarah Myrand, (248) 2544043; email: sarahm@kyyba.com.

UPCOMING EVENTS Release of 2015 Michigan Women’s Leadership Index. 11:30 a.m.-1:30 p.m. Nov. 3. Inforum Center for

Leadership. Inforum publishes the Michigan Women’s Leadership Index, a snapshot of the leadership role of women in Michigan’s top 100 public companies. Ruby Sharma, a principal with EY Center for Board Matters, will lead the conversation. Marriott Renaissance Center,

CALENDAR Detroit. $40 Inforum members, $60 nonmembers, $25 students, $800 table sponsor for table of 10. Website: inforummichigan.org. Executive of the Year Luncheon. 11:30 a.m.-1:30 p.m. Nov. 5. Detroit Executives Association. Crain’s Detroit Business Group Publisher Mary Kramer will be honored as executive of the year. Detroit Athletic Club, Detroit. $50 individuals, $320 table of eight, $390 table of 10. Registration deadline is Oct. 30. Contact: June Cox, (226) 783-1565; email: execdir@detroitexecs.com. Disrupting the Competitive Landscape Through Operations. 8 a.m.-5 p.m. Nov. 5. Tauber Institute

for Global Operations, University of Michigan. Conference brings together global leaders in industry and academia to share, debate and strategize. Ross School of Business, University of Michigan, Ann Arbor. $100 industry, $50 alumni, $20 students. Contact: Theresa Ceccarelli, (734) 6470308; email: tceccare@umich.edu.

100 Years in Business — How Companies Survived and Thrived in Detroit. 7:30-9 a.m. Nov. 5.

Turnaround Management Association, Detroit chapter. What does it take to make it to the century mark in business? Listen to leaders of three local businesses describe how their companies have made it — from the early days of the automobile to today’s social media world. Panel includes Jason Grobbel, president, E.W. Grobbel Sons Inc.; David Lubin, president, MJS Packaging; Mike Medici, president, SmithGroupJJR; and moderator Tim Weed, partner, Plante Moran. Oakland Hills Country Club. $35 members, $55 guests. Contact: Sharon Kimble, (734) 757-4689; email: detroit@turnaround.org. Calendar guidelines. Visit crainsdetroit.com and click “Events” near the top of the home page.Click “Submit Your Events” from the dropdown menu that will appear.Fill out the submission form,then click “Submit event” at the bottom of the page. More Calendar items can be found at crainsdetroit.com/events.

Crain’s 2015 Health Care Leadership Summit Join Crain’s for this annual event that provides opportunities to learn about the everchanging landscape of the health care industry, plus make the professional contacts to help navigate these changes. Held at the Marriott Renaissance Center from 7:30 a.m.-1 p.m. Oct. 28, the Health Care Leadership Summit includes keynote speaker Leah Binder, CEO of The Leapfrog Group; roundtable discussions; and the Health Care Heroes awards. Can Michigan provide consumers and employers the data needed to make smart decisions in health care? Network with local business leaders and health care providers and discuss the latest in innovative health care strategies for 2015 and beyond. Although preregistration has closed, walk-in registrations at $140 per person will be available. For more information, contact Kacey Anderson, (313) 446-0300, or email cdbevents@crain.com. 䡲

ADVERTISING SECTION

PEOPLE: SPOTLIGHT Here are some of last week’s executive appointments reported by Crain’s:

Fred Yaffe leaving firm he founded in 1960 Metro Detroit advertising industry veteran Fred Yaffe is stepping aside as CEO of Southfield-based Yaffe Group Inc., the modern iteration of the company he founded in 1960. Yaffe, 82, will remain executive chairman and continue to work with clients. Current Yaffe CFO John Cassidy beYaffe comes president and CEO. Yaffe Group is the parent of several component companies, including Yaffe Direct, a communications database management firm, and Yaffe & Co., a marketing firm. Michael Morin, a longtime Yaffe executive vice president, becomes president of Yaffe Direct.

DEGC names Turay EVP Crain’s has moved its complete list of appointments and promotions to www.crainsdetroit.com/peopleonthemove. Brief online listings for management-level positions are available at no cost, at editor’s discretion. Guaranteed print placement in this promotional feature can be purchased at the website above.

ACCOUNTING

TECHNOLOGY Dean Norton Chief Operating Officer Macprofessionals

George Grzywacz and Jack Tracy Doeren Mayhew Doeren Mayhew proudly announces Jack Tracy and George Grzywacz have been promoted to join the ranks of the firm’s shareholders. Promotions will take effect January 1, 2016. Garnering more than 15 years of public and private tax experience, George Grzywacz, CPA, JD assists a wide variety of the firm’s clients with their individual and business tax needs. With a specialized focus in performing domestic,cross-border and complex corporate tax services, he uses his in-depth knowledge and expertise to deliver insight to the firm’s clients on all their tax matters. George can be reached at (248) 244-3415 or via email at grzywacz@doeren.com As a 10-year veteran of the firm’s Financial institutions Group, Jack Tracy, CPA focuses his efforts on assisting credit unions, community banks, CUSOs and mortgage services. Specializing in audit and assurance services, Tracy provides valuable insight into financial institutions’ financial and operational positions. Jack can be reached at (248) 244-3189 or via email attracy@doeren.com.

Dean will be restructuring his team and continuing improvements in operations and service delivery, Dean will be focusing on developing existing corporate partnerships and building new relationships. Chief Technology Officer; Dean is a graduate of Michigan State University and a 15-year veteran of Macprofessionals. He has played an instrumental role in the day-to-day operations of the company. Dean has proven to be a successful and trusted leader.

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Moddie Turay has been named executive vice president of real estate and finance for the Detroit Economic Growth Corp. Turay, 38, replaces Brian Holdwick, DEGC’s

executive vice president of business development, Turay who announced in June he would be leaving the DEGC to start his own company, Holdwick Development Group. Turay was president of Moddie Turay Co., a Washington, D.C.-based real estate company with a focus on mixed-use residential, retail, office and hotel developments. He founded the company in 2007.

Eisenhart new A123 COO Livonia-based lithium-ion battery maker A123 Systems LLC announced the hiring of Chris Eisenhart as COO. Eisenhart, 47, replaces Ed Kopkowski, who left A123 in May to become the COO of Elkhart, Ind.based Dexter Axle Co. Eisenhart Eisenhart will lead A123’s global manufacturing, quality and supply chain functions. 䡲

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Pending Busch-Miller deal brews statewide interest By Dustin Walsh dwalsh@crain.com

Anheuser-Busch InBev NV ’s brewing $106 billion acquisition of SAB Miller plc is reverberating through the beer community. Michigan beer distributors and brewers are keeping close watch on the pending deal, which could allow the combined company to control nearly a third of the global beer market but requires a raft of global regulatory approvals. But they’re not particularly worried, because Michigan’s retail beer market is insulated by regulations from big moves by major brewers, drinkers’ tastes are shifting away from mega-brews, and other global markets are more key to the deal than the U.S. While Belgium-based beer giant InBev is consolidating beer distributors by acquiring them in some states, Michigan’s distributors remain off limits. Michigan, like many other states, operates under a three-tiered distribution system intended to keep large brewers like InBev from controlling the market. Under that system, beer makers, distributors and retailers are required to be separate entities. Therefore, InBev can’t rig the market to its advantage by controlling which beer distributors wholesale to retailers like bars and liquor stores. “The system was designed to avoid monopolies of the industry like in the days of Al Capone,” said Gary Thompson, COO of Orion Townshipbased Powers Distributing Co. Inc. Powers distributes more than 5 million cases of beer, including MillerCoors products, totaling about $100 million in beer and aluminum (from recycling returnables), Thompson said. Sydney Ross, co-owner of Highland Park-based Great Lakes Wine & Spirits, said there is consolidation among local distributors, but not due to pressure from large brewers. “Consolidation concerning our industry is more of a natural event from those in family-owned houses wanting to get out of the business,” Ross said. Great Lakes distributes 2 million cases of beer annually, including InBev and MillerCoors, as well as 4 million cases of wine and 3 million cases of spirits. Other states, including California and New Jersey, do not operate in a tiered system. That theoretically could marginally impact Michigan’s growing craft brewers as they try to expand distribution nationally. Some craft brewers are concerned that moves to consolidate distributors could help big brewers muscle their smaller competitors. “We, as a craft beer industry, must be even more conscious of these transactions and make sure

Help salute 40 under 40 Every year, Crain’s 40 under 40 awards program honors high achievers who have made an impact as executives, managers, entrepreneurs and community leaders. This year’s honorees will be recognized at a special event Nov. 19 at the Detroit Marriott Renaissance Center. This year’s winners launched successful companies, grew estab-

lished firms, took on high-pressure projects and more. Individual tickets for the event, scheduled from 5-9 p.m., cost $80. Tickets for groups of 10 or more are $75 each. For past 40 under 40 winners, the cost is $40 per ticket. A strolling dinner and drinks are included. To register for the event, go to crainsdetroit.com/events or call (313) 446-0300.

JOB FRONT POSITIONS AVAILABLE

û EXECUTIVE DIRECTOR POSITION û For a South East Michigan Business Trade Association Located in South East Michigan Seeking a person with Business Administration skills and political interest. Some familiarity with the Construction Industry is helpful. The position is full-time and for a career minded person. The pay is salaried based on experience and includes vacation pay, health insurance, 401K and vehicle mileage. Serves as the Executive Officer, responsible for the effective conduct of the affairs of the Association. Supervises staff members. Recommends and participates in Board formulation of association mission, goals and objectives and related policies. Within that framework plans, organizes, coordinates, controls, and directs the staff, programs and activities of the association. Works at generating new members and retaining existing members. Interested persons please forward a resume, references and pay requirements to:

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that our customers can still receive access to a variety of options,” said Mark Rieth, president and CEO of Atwater Brewing Co.

Only days before the InBev-SABMiller proposed deal was announced, reports surfaced that the U.S. Department of Justice was investigating InBev’s practice of acquiring California distributors to curb competition from craft brewers. Over the summer, InBev had acquired five distributors in three states, Reuters reported. Caroline Levy, a beverage analyst for Hong Kong investment firm CLSA Ltd., said the distribution angle for InBev is a losing battle, because drinkers are demanding variety. “Despite the best offers of A-B to say you shouldn’t carry craft brewers, distributors are mostly independent businesses, and they’ll put the most in-demand beers on their trucks,” Levy said. InBev is making the play for London-based SABMiller predominantly to tap into beer drinkers outside of North America. The deal could net InBev SABMiller’s international brands Pilsner Urquell and Peroni Nastro Azzurro and allow the Belgian beer maker to expand brands like

Budweiser and Corona into emerging markets, according to reports. Nick Petrillio, an industry analyst for research firm IBISWorld in New York City, said the deal signifies a win for North American craft brewers. InBev is losing share in the U.S., its largest market, largely due to the rise of craft brewing. InBev has seen beer volumes drop 11 percent in the U.S. since it bought AnheuserBusch in 2008, The Wall Street Journal reported. “This is sort of an admission of defeat by InBev and SABMiller, recognizing that North America isn’t a place for macro beers to grow,” Petrillo said. “Even if it’s a success, these large brewers grow very slowly, and their margins are going to continue to be eroded by craft brewers like those in Michigan.” Craft beer volume in the U.S. grew 17.6 percent in 2014, according to the Colorado-based Brewers Association. In Michigan, craft beer volumes rose nearly 38 percent year-over-year in 2014. “Big brands are simply losing their firepower in the U.S.,” Levy said. 䡲 Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

A progressive multi-office Federally Qualified Health Center is looking for a full time Financial Account Executive. The Financial Account Executive is a working management position requiring advanced professional expertise in the areas of finance, data analysis, and project management to provide services to the organization both internally as well as externally contracted services to its healthcare partners. The position would include a learning environment in preparation to a fully functional leadership role in FQHC finance, government reporting and compliance, billing/revenue cycle operations; IT management, business development along with the experience of client/vendor relationships. The qualified candidate will have experience with NextGen software. A minimum of a Bachelor’s degree in accounting or finance required, a Master’s degree is preferred and at least 5 years of work experience as a CPA preferred. Competitive wage and excellent benefit package offered. EOE.

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ADELL FROM PAGE 3

less than what it would cost under normal circumstances. Cumulus did not respond to requests for comment last week. “If you buy it right, that’s the key,” Adell said, adding that he may also buy a second Disney station in Chicago if a deal there with another buyer falls through. Adell in January paid The Walt Disney Co. ’s Burbank, Calif.-based Dis ney Radio Group LLC $3 million for its Farmington Hills-based WFDF AM 910 , and uses the station’s 50,000watt signal to simulcast audio from The Word Network , his Southfieldbased religious television broadcaster whose programs are largely aimed at an African-American audience. Picking up WDVD or WDRQ is predicated on Cumulus’ financial decisions in coming weeks and months. Cumulus (NASDAQ: CMLS) is the second-largest radio broadcaster in the U.S. with 460 AM and FM radio stations in 90 markets. It also owns content syndication service

Westwood One and has put money into a streaming music service, Rdio, which competes with Spotify and Pandora. The company, founded in 1997, has been the target of intense scrutiny and criticism because of its $2.5 billion debt load and an 84 percent decline in share price since the start of the year. It shook up its top management in September with co-founder Lewis Dickey stepping down as president in favor of Mary Berner, a longtime magazine executive who took Reader’s Digest Association through a prearranged Chapter 11 bankruptcy in 2009-10. She started Oct. 13, and most recently worked at The Association of Magazine Media. There is speculation Cumulus will end up in bankruptcy, but the New York Post on Oct. 3 reported that company Chairman Jeffrey Marcus, who is Cumulus’ largest shareholder, has told radio industry insiders that bankruptcy isn’t the plan. Berner has billed her mission as a turnaround rather than destined for bankruptcy. But the financials that suggest bankruptcy is coming are stark: Cumulus last year had just $11.8 mil-

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www.zhangfinancial.com Assets under custody of LPL Financial and TD Ameritrade. *As reported in Barron’s February 23, 2015. Factors included in the rankings: assets under management, revenue and the quality of the advisors’ practices, and other factors. Minimum investment requirement: $1,000,000

lion in net income on $1.26 billion in revenue. Bankruptcy or a turnaround plan could both involve shedding single or groups of stations. “Considering the current financial state of Cumulus, anything is possible, including the group selling off individual stations within particular markets such as Detroit,” said Don Tanner, a partner in Farmington Hills-based Tanner Friedman Strategic Communications and radio industry insider who wrote the radio and music industry text No Static at All. “Should Adell opt to purchase one of the FMs here and take it gospel, he would set an interesting precedent for pushing that format middle of the dial. When you look at markets similar to Detroit, you just don’t see it.” The likeliest choice would be WDVD, which airs current non-rap hits such as music by Taylor Swift, Ed Sheeran and Rihanna. WDVD, which has a 20,000-watt signal, already has a strong revenue stream: $9.45 million last year, according to data from Chantilly, Va.based radio industry analysts BIA/Kelsey . That ranks 10th among Detroit stations. The channel is anchored by its morning show hosted by Blaine Fowler. Sister station WDRQ, part of Cumulus’ “Nash” brand of country stations, ranked 21st in Detroit radio with $1.2 million in 2014 revenue, BIA/Kelsey data shows, while WJR is near the top of the market in revenue with $15.7 million. CBS Radio Inc. -owned news-talk station WWJ 950 AM is the market leader in revenue with $16.8 million last year, according to BIA/Kelsey. The Cumulus stations’ revenue reflects their ratings: WWJ is fourth in the Detroit market with a 6.0 rating, according to September’s monthly data from Columbia, Md.based radio audience tracker Nielsen Audio, while WDVD is 13th (4.2) and WDRQ is 16th (3.0). Cumulus acquired its three Detroit stations in 2011 when it bought Las Vegas-based Citadel Broadcasting Corp. ’s 225 radio stations in a $2.4

billion deal. There is limited competition locally for religious listeners. Detroit’s only other FM urban gospel station is WPZR 102.7 FM , which bills itself as “Praise 102.7” and “Detroit’s Inspiration Station.” It’s owned by Silver Springs, Md.based Radio One, the largest African American-owned U.S. broadcaster with 55 stations in 16 markets. Radio One has owned the station since 1999, and converted it after several format changes to gospel on Oct. 31, 2011. WPZR was 18th in the most recent Nielsen Audio audience rankings with a 2.5 overall station rating. Adell’s WFDF wasn’t listed among the top 30 stations, whose ratings go as low as a 0.1 in the market’s pool of 3.8 million potential listeners age 12-plus. Adding a second FM gospel station in Detroit could be lucrative. “It would seem to be a niche, but it could be a very viral niche. For audiences that are underserved, a station that acknowledges and caters to them can reap great benefits,” said Fred Jacobs, president of Southfield-based Jacobs Media Inc. , which does marketing and consulting for radio stations. Adell, who said he looked in the recent past at buying WGPR and WXYT, has a proven track record in targeting African-Americans with religious programming. The Word Network, which Adell launched with his father in 2000, is available in more than 200 countries via 12 satellites and has 87 million domestic viewers, according to data provided by the broadcaster. About 200 pastors pay for airtime on the network. With a new FM station, Adell said his plan is to use a syndicated gospel music content service and some of the music shows already aired on his Word Network to fill airtime on whatever station he buys. “We do it better than anyone,” he said. “I have talent I can put on. My overhead is nothing. I don’t have to buy a building; I just take one of our rooms and make it a studio.” Advertising likely would be sold

to attorneys, trade schools and auto dealers. “If anyone can do it, it would be Adell. He’s not afraid to market and promote, which is definitely what commercial radio is lacking in general,” Tanner said. “It will also be interesting to see, should it happen, where he would take the format in terms of mixing music and religious talk. Contemporary Christian music continues to rise in popularity, and WPZR does that well already with long-standing, talented live drive-time personalities. Adell either takes a different approach or hits (WPZR) head on.” Adell’s ownership and development of The Word has garnered him business allies that include the Rev. Jesse Jackson and Louis Farrakhan. Jackson is aiding Adell’s effort to persuade New York City-based Sirius XM Radio to carry WFDF as a national satellite station, a move Adell said could boost the station’s overall value by as much as $25 million. Adell provided a July 3 letter from Jackson to Sirius CEO James Meyer asking the satellite provider to reconsider a past decision to not carry Adell’s radio station. Adell said he and Jackson will meet with Sirius executives in the next few weeks. Thirty billboards touting available advertising space on WFDF went live in metro Detroit last week, Adell said. He said two advertisers have signed on, and 30 more are interested. Adell has other broadcast moves in the works: He intends to sell the Clinton Township-based independent WADL TV-38 , which he and his father launched for $3 million in 1989. The F e d e r a l C o m m u n i c a t i o n s C o m m i s s i o n in early 2016 will auction portions of the powerful 600MHz UHF over-the-air broadcast spectrum from TV stations to mobile wireless providers that need more airwaves bandwidth to satisfy customer demand. Adell could reap as much as $380 million for WADL’s signal space, according to estimates created on behalf of the government. 䡲 Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

Report: Rising health costs could hurt jobs, wages By Jay Greene jgreene@crain.com

A new report says if rising health care costs aren’t contained in Michigan, employers will struggle to create jobs and increase wages, said the Economic Alliance for Michigan. In Southeast Michigan, health care spending rose 59 percent between 2007 and 2013 while wages grew only 0.4 percent, according to the U.S. Bureau of Labor Statistics. In contrast, spending on household furnishings grew 4 percent and spending on apparel and services declined 15 percent, the Economic Alliance report said in a report expected to be issued Monday. “The findings suggest that unless health care costs are contained, Michigan employers will struggle to create jobs and increase wages,

leaving Michigan’s working middleclass families struggling for years to come,” said Bret Jackson, the alliance’s president. The report compiles government data and the findings of more than two-dozen economic studies to document the cause and impact of rising health care costs. The Economic Alliance report said several factors are driving up health insurance premiums and prices in Michigan. Factors include the following: 䡲 New medical technology that accounts for 38 percent to 65 percent of spending increases. Jackson said some new technology purchased by hospitals and doctors only adds to costs without corresponding increases in quality or value. 䡲 Consolidation in the health in-

surance and hospital industries, and mergers of physician groups. Consolidated groups demand higher prices from insurers, which has driven premium growth of 30 percent from 2008 to 2013. 䡲 Waste in the health care industry accounts for 30 percent of medical spending, according to a report by the Institute of Medicine. Waste includes inappropriate and unnecessary procedures, defensive medicine and medical errors. 䡲 Aging population, increase in obesity and chronic diseases drives costs up. 䡲 Lack of health care price transparency, specialty drugs and increased use of palliative drugs rather than curative also increases costs. 䡲 Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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SCHOOLS

What’s MPSERs?

FROM PAGE 1

The Michigan Public School Employees Retirement System is a $46.8 billion pension system for K-12 schools, intermediate school districts, colleges and universities and some public libraries. It had an additional $4 billion in health benefit assets as of Sept. 30, 2014.

tion firm Walbridge Aldinger Co. and a co-chairman of the Coalition for the Future of Detroit Schoolchildren , which earlier this year recommended reforms for the district. Many wound up in Snyder’s proposal. “Many people say this is another Detroit bailout. That would be fair to say if the DPS and the local authorities had been in control of this for the last 15 years, but the reality is, they haven’t,” Rakolta said. “I prefer to say this is the state actually bailing out the state. Rightfully they should, and the sooner the better, because it’ll save all the taxpayers in the state of Michigan a lot of money. “If they don’t do this, the structural deficit won’t be addressed.” The coalition includes a spectrum of reform advocates, from Tonya Allen, president and CEO of the Detroit-based Skillman Founda tion , to Rakolta, to David Hecker, president of the AFT Michigan/AFLCIO.

Managing costs The Detroit Community School District would continue to pay employees’ pension obligations, Snyder said. That’s a fairness issue, he said: Michigan districts pay a capped 20.96 percent of payroll expenses toward the state retirement system’s unfunded accrued liability, while the state covers any additional balance with School Aid Fund dollars. “We believe they can manage those costs,” Snyder said of the new Detroit district. The House school aid appropriations subcommittee scheduled a hearing this week on Detroit Public Schools’ budget. One of the first issues to tackle is finding the money to pay down the $100 million pension balance. Detroit Public Schools is the largest among a few Michigan school dis-

Michigan school districts pay a capped 20.96 percent toward the system’s unfunded accrued liability, while the state pays any additional balance from the School Aid Fund. This year, that was roughly 7.6 percent of districts’ payroll that is reported for retirement benefits. The pension system was 59.6 percent funded in 2013, according to its most recent comprehensive annual financial report. That’s down from a high of 88.7 percent in 2007. The state said the MPSERS system experienced investment losses during the recession of 2008-09 and the effects only recently were realized because the office “smooths” returns over five years to account for annual volatility. The state said recent investment returns have been in the double digits and those gains will show up in future results. The state expects the unfunded accrued liability will be 100 percent funded by 2038. Detroit Public Schools owed $99.6 million into the MPSERS system as of Oct. 6. Source: Michigan Office of Retirement Services

tricts to miss monthly payments. And it owes the most. Revenue losses caused by sliding enrollment have been another significant factor, said Kerrie Vanden Bosch, interim director of the state retirement office. In 2004, DPS alone made up 7.8 percent of the $46.8 billion state pension system with 24,918 employees, by far the largest district in the system. That’s according to MPSERS’ financial report for the fiscal year that ended Sept. 30, 2014. By 2013, employment had fallen to 9,118, and Detroit made up just 4.2 percent of the retirement system as the district shed employees. Yet it still holds the biggest piece of the state retirement pie. That means Detroit Public Schools’ financial problems could fall on the backs of the rest of Michigan’s public school districts, particularly if a solution calls for Detroit’s teachers to take the unprecedented move of leaving the system — and other districts are forced to take on the city’s total $1.5 billion school retirement liability. “That’s why you see lots of different opinions over in the Legislature about how this should be handled,”

VENICE FROM PAGE 3

de Leon, dean of the Taubman College and founding principal of MPdL Studio in Ann Arbor; and Cynthia Davidson, executive director of New York City nonprofit Anyone Corp. “It is very prestigious, but also puts UM (and Detroit) in the center of the conversation about architecture and 21st century cities,” Ponce de Leon said. In the summer, Ponce de Leon, Davidson and the board came up with 20 Detroit sites, gradually reducing them to four. Ponce de Leon said they wanted to be sure to choose sites that would have global interest. “Detroit can help create models that can be helpful to cities worldwide,” she said. More than 250 architectural firms submitted portfolios to work on the project. “We reviewed these carefully to ensure diversity and multiple points of view,” Ponce de Leon said. From there, they narrowed it to 12 firms, two of which are in Michigan.

Monica Ponce de Leon (left) and Cynthia Davidson helped choose the four

Detroit sites featured in the Venice exhibit. V. Mitch McEwen and Marcelo Lopez-Dinardi of A(n) Office in Detroit and New York is one of the firms. An assistant professor at the Taubman College, McEwen also works out of a space in TechTown. Lopez-Dinardi and McEwen were assigned the DPW yard. “It’s not just architecture we are tasked with but the activities that could happen there,” McEwen said. “It’s a daunting exercise, but I’m hoping the design ... can be useful for conversations moving forward.” Thom Moran of T+E+A+M in Ann Arbor and his three partners were

said Kurt Weiss, a spokesman for the state budget office.

Other options Not everyone agrees Snyder’s plan will work. Already, there is talk of revisiting Proposal A, the state’s 20year-old school funding mechanism that relies on property taxes. Some opponents want the state to adopt a voucher system, which is controversial because it allows parents to use dollars meant for public schools to pay for private or parochial tuition. “I’m on record that I’m not a big fan of the governor’s plan,” said Rep. Tim Kelly, R-Saginaw Township, chairman of the House Appropriations School Aid Subcommittee and a member of the House Education Committee. “I think it’s all about dollars and adults and not as much about kids and academics.” Snyder’s $715 million plan calls for spinning off the Detroit Community School District to educate the city’s kids going forward, while phasing out the current DPS under an “old company” and “new company” model. But that’s after DPS pays down an estimated $515 million in operating debt.

given the Packard Plant for their assignment. “Our ambition is to trade a new image that helps people imagine Detroit architecture not as ruins, but as material resources for building a new future,” Moran said. Moran said the plant was “cuttingedge at the time it was built — a testing ground for using reinforced concrete.” Now, he said, the architects would like to use some of the materials on site to “translate them into a new way to do construction.” Each Detroit site will have a room in the exhibition, which will consist of 3-D models and drawings and video animation. “Detroit has captured the imagination of a lot of folks,” said Mark Wallace, president and CEO of the Detroit RiverFront Conservancy and a member of the exhibition’s Detroit Advisory Board. Other board members include Maurice Cox, Detroit planning director; Dan Kinkead, acting executive director of Detroit Future City; Thomas Sherry, principal of 313Creative; and Lawrence Williamson, real estate manager for Midtown Detroit Inc. 䡲

The existing district would keep a $70 million millage from taxpayers for debt service over an estimated 10 years, while the state’s School Aid Fund would contribute $70 million per year to the new district for its perpupil funding. It’s equivalent to $50 per student statewide. The legislation, expected to be introduced within weeks, also would create a new Detroit Education Commission to oversee the new Detroit school district, charter public schools and the Education Achievement Authority. The commission would hire a chief education officer in charge of academics, including authority to close low-performing schools. When a company or other entity is split into two for debt reasons, typically it means taking the old entity through bankruptcy or other out-ofcourt restructuring where creditors are paid pennies on the dollar, said Brian Connors, managing director with financial restructuring firm Conway Mackenzie Inc. in Birmingham. With Detroit’s schools, though, “there’s no talk of restructuring the debt … because it’s a domino effect, it’s a state-run pension system,” Connors said. Plus, the state has a conflict of interest as both a creditor and the trigger on whether DPS files for bankruptcy, he said. Bankruptcy is not a realistic first option. But the state could use the split as leverage to renegotiate old debt to get some relief, Connors said.

19 Kelly, the school aid appropriations subcommittee chairman, said he doesn’t support Snyder’s plan as drafted and said he believes school vouchers should be on the table. “If you don’t have … some sort of plan about the quality of academics, all you’re going to do is restart the debt clock,” Kelly said. “This new district will start on a deficit watch list. Why would you want to start any entity in that situation?” Snyder says his plan — particularly inclusion of a chief education officer — will begin to address the district’s academic performance. He believes the new Detroit district has the best shot at doing so if it doesn’t need to spend a portion of its perpupil revenue on debt payments. “That’s something we’d like to see — better results in the classroom and more resources to go with that,” Snyder said. That conversation could someday include reforming school funding statewide. Snyder told Crain’s he is open to the discussion. Rakolta said Proposal A is “totally broken” and the state’s K-12 education system was not designed to meet 21st century needs. But that’s a conversation for later, he said, once the issue of fixing DPS is resolved. “We need to get out of triage, and that’s what we’re working on right now,” Rakolta said. “The patient is almost dead.” 䡲 Lindsay VanHulle: (517) 657-2204 Twitter: @LindsayVan Hulle

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“We work as an integrated team. It’s two people, four hands.” Kevin Tremper,M.D., anesthesiology department chairman,University ofMichigan Supporters, including the Michigan nurse anesthetists association, say that’s one of the main reasons they’re pushing the bill. Anesthetists are less expensive. (See box, this page.) “Limited access to anesthesia services in rural areas has been an ongoing issue for many hospitals across the state,” the Michigan

ANESTHETIST FROM PAGE 3

vote since testimony was heard in May. The issue is framed in questions about access versus safety, especially in rural areas. Doctors say their more extensive training makes them the most-qualified providers of anesthesia care. Nurses say they’re crucial to lowering medical costs at a time when health care systems face pressure to do so. Physician anesthesiologists like Tremper review patients’ medical histories, work up anesthesia plans for the surgical procedure the patients will receive, and supervise nurse anesthetists as they start and finish administering an anesthetic. Sometimes, he said, the CRNA will insert a breathing tube to manage the patient’s airway while a U-M faculty member gives the drugs, while at other times they switch roles. “We work as an integrated team,” Tremper said. “It’s two people, four hands, there for the takeoff and the landing. You might have the pilot and co-pilot go back and forth during the flight, but they’re both behind the controls.” This is not the first time the issue has been raised in Michigan, nor is it the only state to have entertained the debate. Expanding the authority of such advanced practice nurses, though, is a political football of an issue without clear-cut evidence on either side. Depending on whom you ask, Michigan is either one of few or one of many states with a supervision requirement. And several of the academic studies circulating as part of the debate were partially funded or supported by groups with a vested interest in the outcome. Advocates, including nurse anesthetists and the Michigan Health and Hospital Association , say the law change would modernize Michigan’s health care delivery — particularly in rural areas, which they say have a harder time attracting or affording physician anesthesiologists and often rely on nurses to deliver anesthesia. Anesthesiologists, who are leading the opposition charge, favor the use of teams, which include nurse anesthetists but are led by doctors with deeper medical training. Some even have gone so far as to say that allowing nurse anesthetists to operate without doctor supervision will lead to more people who can prescribe opiates for post-operative pain management, which could lead to more prescription drug abuse — although little proof has been presented to back up the claim. “Anybody that even brings up the opiate issue, that’s borderline ludicrous,” said Sen. Mike Kowall, R-White Lake Township, who sponsored the bill. “They’re only allowed

Health and Hospital Association

Infographics by Lisa Sawyer, Crain’s Detroit Business

to practice in the immediate area in the OR. It’s not like, ‘Here’s a handful of whatever, have a nice day.’ ” Instead, Kowall said, his bill intends to allow nurse anesthetists to work to the full extent of their training, which includes a master’s degree and thousands of hours of study. Requirement ‘on paper’?

Nurse anesthetists are registered nurses who have gone through advanced training in anesthesia care. They are licensed under Michigan’s public health code. A 1989 decision by then-Michigan Attorney General Frank Kelley further outlined the requirement that nurse anesthetists can give anesthesia under the delegation and supervision of a physician. That isn’t limited to anesthesiologists; surgeons or other doctors on staff are able to sign off on the treatment plan. “It’s really just a supervision requirement on paper,” said Anna Polyak, senior director of state government affairs for the American As -

sociation of Nurse Anesthetists. “Surgeons, they don’t like to be a supervising physician if they don’t have to be because, again, it’s not their area of expertise.” The Michigan Association of Nurse Anesthetists says it has 2,300 members, with another 150 students and 400 more registered nurse anesthetists in Michigan who don’t belong to the association. The U.S. Bureau of Labor Statistics , however, estimated 1,780 were working in Michigan as of May 2014, the most recent data available. Under Kowall’s bill, Senate Bill 320, nurse anesthetists would be allowed to develop a patient’s treatment plan; perform all tests and procedures related to treatment; order, prescribe and administer anesthesia, including prescription drugs or other controlled substances; and handle any patient emergencies that might arise during the procedure. Nurse anesthetists only would be allowed to give anesthesia in a licensed health facility or other medical setting during surgery, obstetrical or interventional procedures or for diagnostic imaging purposes. Those services would not include chronic pain management, although nurses could give anesthesia to manage pain if delegated the authority by a physician. Kowall said he plans to revise the bill to specifically exclude dental clinics from the list of facilities in which nurse anesthetists could practice without supervision. “They’re helping to keep the cost of health care down,” he said.

wrote in submitted testimony on the bill. Proponents say the law change would benefit not only rural areas, but also smaller private surgical centers and clinics. They say Michigan is an outlier, that 40 states and Washington, D.C., don’t have a requirement on the books that physicians supervise nurse anesthetists. That figure drops to 33 states when including the requirement in hospital licensing statutes or regulations. Anesthesiologists, however, claim that 46 states and Washington, D.C., have a requirement that physicians not only supervise, but collaborate, direct, consult or otherwise assist nurse anesthetists in practice. The National Conference of State Legislatures said it does not track individual state requirements specific to nurse anesthetists. No opt-out

One number readily available is 17 — the number of states that have opted out of a Medicare physician supervision requirement since 2001, when a federal rule change first gave states the choice. Minnesota and Wisconsin are the only neighboring states to have done so. Michigan can’t opt out of the Medicare requirement because the state’s definition of nursing practice doesn’t include nurses giving anesthesia independently, the state’s hospital association said in testimony. That would change if the bill becomes law, it said, although hospitals will continue to be able to adopt supervision requirements if they wish. In 2010, the Institute of Medicine, a unit of the National Academies of Sciences, Engineering, and Medicine , issued a report that called for nurses to play a larger role in the deliv-

ery of health care as the U.S. looks to lower costs and increase efficiency — all while its population grays. Requirements under the Affordable Care Act also mean more Americans now have health insurance, which adds to the potential patient load. A study that year in the journal Nursing Economics found that nurse anesthetists practicing without a doctor’s supervision was the most cost-effective form of care and “the only model likely to have positive net revenue in venues of low demand.” That study was paid for by the national nurse anesthetists’ association. Since they are capable of giving the same anesthesia services, including on complicated cardiac or pediatric cases, its authors wrote, “anesthesiologists and CRNAs are interchangeable.” The supervision requirement isn’t so much to dictate how the anesthesia is given, but to address other medical issues that arise, said Tom George, M.D., a physician anesthesiologist who practices in Kalamazoo and a past president of the Michigan Society of Anesthesiolo gists. What happens, George said, if a patient wakes up from surgery and his left arm is numb? The medical issues, he said, are outside the realm of the nurse anesthetist. Varying views

Whether anesthesia is safer when given by a nurse anesthetist or an anesthesiologist also depends on whom you ask — and who is funding the study. A 2010 study in the journal Health Affairs found no significant increase in patient risk when anesthesia was given by a nurse anesthetist working without supervision. That study was funded by the national nurse anesthetists’ group. Separately, a 2000 study found that both the 30-day mortality rate among patients and the mortality rate after complications arise were less when anesthesiologists led the treatment. That study was mostly funded by the researchers, they wrote, with grants from the Agency for Healthcare Research and Quality

and the American Board of Anesthesi ology in Raleigh, N.C. The Cochrane Library, a collection of databases specializing in health care research, concluded in a 2014 review of available research that no definitive answer is possible when it comes to which method of anesthesia delivery is best. Nurse anesthetists, said Tremper, are “the — by far — best-trained, most-skilled nurses, period.” “They do a great job,” he added. “We think working with us has been very effective in providing very safe care, and we think we have a lot of room to improve in improving postoperative outcomes, but just to avoid having a physician involved seems like not a good idea.” 䡲 Lindsay VanHulle: (517) 657-2204 Twitter: @LindsayVanHulle

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MERGER

Merger mania in Southeast Michigan since ACA

FROM PAGE 1

deal between the two systems is logical for a variety of reasons. First, Kaiser is flush with $3.1 billion in net income generated in 2014, a 15 percent increase from 2013. Second, Kaiser’s CEO, Bernard Tyson, is in expansion mode, said Jeff Goldsmith, president of Health Futures Inc. , a Charlottesville, Va.based consulting firm. “Kaiser is talking with everybody,” Goldsmith said. “They want to enter Washington, metro Seattle, with Group Health . They want to start a medical school in Southern California. Bernie wants to be everywhere.” John Fox, CEO of eight-hospital Beaumont Health in Southfield, said he also has heard Kaiser wants to expand outside its eight markets. “They are always looking to take their model elsewhere,” said Fox, who had experience competing against Kaiser in Georgia as CEO of Emory Healthcare in Atlanta. “It’s a great model and does a lot of good things. But they have never been able to build size and scale except in California” and in Denver, the company’s second-largest market, Fox said. Some 20 years ago, under former Henry Ford CEO Gail Warden, Kaiser also entertained a potential merger with Henry Ford, said Allan Baumgarten, a Minneapolis-based consultant and publisher of the Michigan Health Market Review. “Kaiser has talked with Henry Ford before,” Baumgarten said. “But what is the business case for doing it? I am not sure I have the answer.” Joe Spallina, a consultant with Arvina Group LLC in Ann Arbor, said a merger between the two organizations makes the most sense. But an affiliation in which Henry Ford has a vendor arrangement with Kaiser or a program management contract to buy services or hire Kaiser executives to run departments would be easier for the board to approve, Spallina said. “That type of affiliation would work,” he said. However, Spallina said Henry Ford has to ask the question: Could a contractual-based affiliation strategy generate enough clout in the market to successfully out-compete other systems in Southeast Michigan? “These looser strategic relationships that allow organizations to maintain control and independence have a cost,” Spallina said. “The im-

Since the Affordable Care Act was approved in 2010, hospitals and health insurers have been merging and combining in various ways at a pace not seen in 20 years, according to a recent report by Irving Levin and Associates, a Norwalk, Conn.-based consulting firm. Recently, hospital mergers have been driven by reduction in reimbursement rates, a shift to outpatient care and consolidation among health insurers. During the past five years in Southeast Michigan, at least 21 of the 42 hospitals in the market have joined or formed larger health systems. For example, Beaumont Health System , Oakwood Healthcare Inc. and Botsford Hospital joined in 2014 to form eight-hospital Beaumont Health, the largest system in metro Detroit based on market share. This year, Crittenton Hospital and Medical Center in Rochester joined Ascension Health Michigan, and Garden City Hospital and Port Huron Hospital were acquired by California-based Prime Healthcare. In 2011, Detroit Medical Center’s eight hospitals were acquired by Vanguard Health Systems , which later was absorbed by Dallas-based Tenet Health Corp. Chelsea Community Hospital joined St. Joseph Mercy Health System in 2009. Last year in a non-asset transfer combination, Trinity Health Michigan and Ascension Health Michigan joined forces to form a 25-hospital clinically integrated network, the largest in Michigan. Jay Greene

pact is not as great as a merger that brings in expertise, branding, scale and size, and capital investments.” If Henry Ford is seeking a capital infusion to build out its planned $500 million South Campus development and to expand health care operations, Baumgarten said, one option for Henry Ford is to sell 20 percent of its Health Alliance Plan and HAP Midwest Health Plan to Kaiser. “This could bring in capital of $300 (million) to $400 million. This has happened before with other systems that owned health plans and needed cash for growth,” Baumgarten said. But Baumgarten said if HAP Midwest loses its Medicaid contract appeal with the state for Southeast Michigan, the value of the health plan could drop by 15 percent. Two weeks ago, HAP Midwest, which primarily built its 100,000member plan in Wayne, Oakland and Macomb counties, was awarded the Michigan Thumb region, which has a much smaller Medicaid-eligible population, instead of Southeast Michigan. “That could affect their plans with Kaiser,” he said. If a deal is done, Spallina said, it would cement Henry Ford’s reputation as the state’s strongest integrated health system. “With the market moving away from fee for service, Kaiser has a significant level of expertise in population health and value-based com-

INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: Arboretum Ventures ........................................ 12 A(n) Office......................................................... 19 Arvina Group ..................................................... 21 Atwater Brewing ............................................... 17 Beaumont Health ............................................. 21 Beaumont Hospital ........................................... 3 Butzel Long ........................................................ 13 Cascade Partners ............................................. 12 Crain’s Detroit Business.................................. 10 Detroit Development Fund ............................. 14 Detroit Public Schools ....................................... 1 Economic Alliance for Michigan ..................... 18 Freeman Tax Law .............................................. 12 Great Lakes Wine & Spirits ............................... 17 HAP Midwest Health Plan............................... 21 Henry Ford Health System ................................ 1 Honigman, Miller, Schwartz and Cohn............ 13

Jacobs Media .................................................... 18 Kresge Foundation ........................................... 14 Maddin, Hauser, Roth and Heller ................... 12 McKnight, McClow, Canzano, Smith, Radtke.... 11 Mich. Public School Employees Retire. System... 1 Powers Distributing.......................................... 17 Rehmann Robson ............................................. 13 Tanner Friedman Strategic Communications . 18 T+E+A+M........................................................... 19 University of Detroit Mercy .............................. 3 University of Michigan....................................... 3 Varnum................................................................ 11 WDRQ 93.1 FM ................................................... 18 WDVD 96.3 FM ................................................. 18 WFDF AM 910...................................................... 3 WPZR 102.7 FM................................................... 18 The Word Network ............................................. 3

petencies,” Spallina said. Acquiring a health system like Henry Ford would be a first for Kaiser, which generally builds regional markets on its own, said Goldsmith. Kaiser’s model has been to enter a market by purchasing a health plan, staff it with its own physicians or by employing local physicians. Initially, Kaiser contracts with hospitals for inpatient services. “Their magic number is 400,000 (enrolled in their health plan),” Fox said. “Once they get to that size, they build hospitals.”

Why does Kaiser like Michigan? Kaiser is interested because of its historical ties with Henry Ford and the growth potential in Michigan, several sources told Crain’s. Kaiser also could be interested in Michigan to gain another toehold in the Midwest. Last year, Kaiser sold its Ohio managed care business in Cleveland because it could not grow sufficiently, Baumgarten said. In Southeast Michigan, Kaiser would have a ready-made regional partner with Henry Ford. HAP and HAP Midwest membership already is close to 700,000, and Henry Ford’s holdings include four acute-care hospitals, a psychiatric hospital and a 1,200-physician employed medical group. Kaiser also is especially keen on contracting with the United Auto Workers and major self-insured employers in Michigan, sources said. Detroit-based UAW Retiree Med ical Benefits Trust , which covers about 809,000 retired autoworkers, contracts with four HMOs in Michigan, including Henry Ford’s HAP. Sources said the trust is looking to lower its health care costs by direct contracting with providers and fewer HMOs. “Where is (Henry Ford) going to grow in care advantages on its own?” a source told Crain’s. “Everybody is moving to population health with accountable-care organizations and value-based payments. Even though Henry Ford has a medical group and HMO, (Kaiser) can help to accelerate that movement.” 䡲 Jay Greene: (313) 446-0325 Twitter: @jaybgreene

Saffer steps down at HAP Midwest By Jay Greene jgreene@crain.com

Mark Saffer, president of HAP Midwest Health Plan in Detroit, has resigned from the company he founded 22 years ago and sold four years ago to Henry Ford Health Sys tem, Crain’s has learned. Saffer, who told Crain’s last week he left HAP Midwest one year earlier than the terms of his original fiveyear contract, said he has no hard feelings toward Henry Ford. “Everything was ending next year anyway,” said Saffer, 74, a podiatric doctor. “We are still friends. I have the utmost respect for my partners and really have nothing bad to say about them. I stayed on (after selling Midwest to Henry Ford in 2011 for $70 million) to protect my employees.” Earlier this month, HAP Midwest learned a state department recommended it not be awarded a Medicaid contract in the Southeast Michigan counties of Wayne, Oakland and Macomb, where it built the bulk of its 100,000-member Medicaid-Medicare health plan. Officials for HAP Midwest last week lodged an appeal against the Michigan Department of Health and Human Services over the agency’s

recommendation to instead award HAP Midwest the counties of St. Clair, Lapeer, Genesee, Shiawassee, Sanilac, Tuscola and Huron. “I didn’t write the RFP (request

for proposal),” Saffer said. “I have no idea why they turned us down. We are a mega-player and serve a very diverse population.” In a statement, Henry Ford confirmed Saffer had resigned and ended his contractual relationship with the health system. Mary Ann Tournoux will serve as interim CEO of HAP Midwest, in addition to retaining her responsibilities as HAP’s chief marketing officer, Henry Ford said in a statement. Henry Ford officials declined further comment. HAP is a subsidiary of Henry Ford. Saffer said he still has a management contract for Midwest Health Center with Oakwood Healthcare Inc., now part of eight-hospital Beaumont Health. He sold Midwest Health Center, which is in the Dearborn Town Center, to Oakwood in 2009. “I am in the process of renewing that contract now,” Saffer said. On HAP Midwest, Saffer said he is proud of the plan he built from scratch. It was always profitable and scored high quality ratings with such organizations as the National Committee for Quality Assurance. In 2014, HAP Midwest posted net income of $19.1 million on revenue of $381.7 million, accounting for nearly half of Henry Ford’s net income, according to the Michigan De partment of Financial and Insurance Services. 䡲

CRAIN’S DETROIT BUSINESS www.crainsdetroit.com Editor-in-Chief Keith E. Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Associate Publisher Marla Wise, (313) 446-6032 or mwise@crain.com Editor Jennette Smith, (313) 446-1622 or jhsmith@crain.com Executive Editor Cindy Goodaker, (313) 446-0460 or cgoodaker@crain.com Director, Digital Strategy Nancy Hanus, (313) 446-1621 or nhanus@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@crain.com Managing Editor/Custom and Special Projects Daniel Duggan, (313) 446-0414 or dduggan@crain.com Assistant Managing Editor Kristin Bull, (313) 446-1608 or kbull@crain.com News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Senior Editor Gary Piatek, (313) 446-0357 or gpiatek@crain.com Research and Data Editor Sonya Hill,(313) 446-0402 orshill@crain.com Web Producer Norman Witte III, (313) 446-6059 or nwitte@crain.com Editorial Support (313) 446-0419; YahNica Crawford, (313) 446-0329 Newsroom (313) 446-0329, FAX (313) 446-1687 , TIP LINE (313) 446-6766

REPORTERS Jay Greene, senior reporter Covers health care, insurance, energy, utilities and the environment. (313) 446-0325 or jgreene@crain.com Chad Halcom Covers litigation and the defense industry. (313) 446-6796 or chalcom@crain.com Tom Henderson Covers banking, finance, technology and biotechnology. (313) 446-0337 or thenderson@crain.com Kirk Pinho Covers real estate, higher education, Oakland and Macomb counties. (313) 446-0412 or kpinho@crain.com Bill Shea, enterprise editor Covers media, advertising and marketing, the business of sports, and transportation. (313) 446-1626 or bshea@crain.com Lindsay VanHulle, Lansing reporter. (517) 6572204 or lvanhulle@crain.com Dustin Walsh, senior reporter Covers the business of law, auto suppliers, manufacturing and steel. (313) 446-6042 or dwalsh@crain.com Sherri Welch, senior reporter Covers nonprofits, services, retail and hospitality. (313) 446-1694 or swelch@crain.com ADVERTISING Sales Inquiries (313) 446-6032; FAX (313) 393-0997 Sales Manager Tammy Rokowski Senior Account Executive Matthew J. Langan Advertising Sales Christine Galasso, Catherine Grace, Joe Miller, Sarah Stachowicz Classified Sales Manager Angela Schutte, (313) 446-6051 Classified Sales Lynn Calcaterra, (313) 446-6086 Audience Development Director Eric Cedo Events Manager Kacey Anderson Creative Services Director Pierrette Templeton Senior Art Director Sylvia Kolaski Marketing Coordinator Ariel Black Special Projects Coordinator Keenan Covington Sales Support Suzanne Janik, YahNica Crawford Editorial Assistant Nancy Powers Production Manager Wendy Kobylarz Production Supervisor Andrew Spanos

CUSTOMER SERVICE Main Number: Call (877) 824-9374 or customerservice@crainsdetroit.com Subscriptions $59 one year, $98 two years. Out of state, $79 one year, $138 for two years. Outside U.S.A., add $48 per year to out-of-state rate for surface mail. Call (313) 446-0450 or (877) 824-9374. Single Copies (877) 824-9374 Reprints (212) 210-0750; or Krista Bora at kbora@crain.com To find a date a story was published (313) 4460406 or e-mail infocenter@crain.com Crain’s Detroit Business is published by Crain Communications Inc. Chairman Keith E. Crain President Rance Crain Treasurer Mary Kay Crain Executive Vice President/Operations William A. Morrow Executive Vice President/Director of Strategic Operations Chris Crain Executive Vice President/Director of Corporate Operations KC Crain Vice President/Production & Manufacturing Dave Kamis Chief Financial Officer Thomas Stevens Chief Information Officer Anthony DiPonio G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Editorial & Business Offices 1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000 Cable address: TWX 248-221-5122 AUTNEW DET CRAIN’S DETROIT BUSINESS ISSN # 0882-1992 is published weekly, except for a special issue the third week of November, and no issue the third week of December by Crain Communications Inc. at 1155 Gratiot Ave., Detroit MI 48207-2732. Periodicals postage paid at Detroit, MI and additional mailing offices. POSTMASTER: Send address changes to CRAIN’S DETROIT BUSINESS, Circulation Department, P.O. Box 07925, Detroit, MI 48207-9732. GST # 136760444. Printed in U.S.A. Entire contents copyright 2015 by Crain Communications Inc. All rights reserved. Reproduction or use of editorial content in any manner without permission is strictly prohibited.

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C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 2 6 , 2 0 1 5

WEEK

ON THE WEB OCT. 19-23

Companies reach Detroit Digits A numbers-focused look at last agreement on use week’s headlines: $90M of ‘Run Detroit’ The price tag for Ann Arbor-based

arrow & Wide Inc., an Oke-

mos-based running and athletic apparel retailer, and RunDetroit LLC in Detroit reached a tentative agreement that will allow both companies to use the trademarked “Run Detroit” name. Under the agreement, RunDetroit will pay Narrow & Wide, which was granted trademark registration for “Run Detroit” in June, $1 to license the name for 10 years, the companies said, noting that the expectation is to renew the agreement at that point. RunDetroit agreed to honor Narrow & Wide’s relationships with organizers of several local running events. In August, Narrow & Wide sued RunDetroit, claiming trademark infringement, false advertising, unfair competition and cybersquatting.

COMPANY NEWS 䡲 UAW-represented workers at FCA US LLC approved a new four-

year agreement with the Auburn Hills-based automaker after negotiators revised a rejected deal that did not provide a pathway for entry-level tier-two workers to achieve full pay, Automotive News reported. The final count was 77 percent in favor, the union said. The UAW said it will negotiate its next contract with Detroit-based General Motors Co. 䡲 Detroit-based General Motors Co. is adding a second shift of about 1,200 workers at its Detroit-Hamtramck plant to meet future demand for vehicles made there, Automotive News reported. In a separate move, GM confirmed it will lay off about 500 workers at its Orion Township assembly plant. 䡲 FCA US LLC bought the naming rights to the West Atrium at The Palace of Auburn Hills and to the Ivy Lounge at DTE Energy Music Theatre in Independence Township. Terms of the deal were not disclosed.

solid-state lithium-ion battery maker Sakti3 Inc., which was acquired by British vacuum cleaner manufacturer Dyson Ltd. Sakti3’s investors, including Beringea LLC and General Motors Ventures, were cashed out of the company as part of the deal.

15,000 The number of freeway lights in Wayne, Oakland and Macomb counties to be replaced with LED bulbs through a public-private partnership between the Michigan Department of Transportation and several infrastructure firms. MDOT said the 15-year contract is valued at $123 million.

$101.2M

The amount of restitution, fees and interest that U.S. District Court in Detroit ordered Alan James Watson, registered agent for Clinton Township-based Cash Flow Financial LLC, to pay for his role in a Ponzi scheme. Watson was also sentenced to 12 years in prison.

䡲 Farmington Hills-based Level One Bancorp Inc. reached a definitive agreement to buy Bank of Michigan, also headquartered in Farmington Hills, for $16.5 million. The deal is expected to close in the first quarter of 2016. 䡲 Detroit advertising agency Campbell Ewald is accusing the U.S. Navy of unfairly seeking the lowest price for its $457 million recruitment advertising contract that it awarded to a rival firm, according to a U.S. Court of Federal Claims action. 䡲 The Strand Theatre in Pontiac will get a new name — the Flagstar Strand Theatre for the Performing Arts — with a naming rights agreement and financial contribution toward its renovation from Flagstar Bancorp Inc. The 94-year-old facility

is slated to reopen next year following a $20 million renovation. 䡲 Southfield-based Universal Properties and Management Inc.

bought and is planning to revitalize Seven Mile Crossing, a 347,000square-foot office complex on the Schoolcraft College campus in Livonia. Sources close to the deal with Bethesda, Md.-based CW Capital said the purchase price was nearly $20 million. 䡲 A U.S. Court of Appeals panel ordered that the Manuel “Matty” Moroun-owned Detroit International Bridge Co. and the U.S. Coast Guard should either notify the court by Jan. 4 that a Coast Guard navigation permit has been issued for the DIBC’s proposed second bridge or explain why there isn’t a permit. The DIBC, which operates the Ambassador Bridge, has been trying to obtain a Coast Guard permit for a second span for more than a decade. 䡲 Detroit-based construction firm DMC Consultants Inc. faces fines of $265,200 for allegedly violating worker safety rules, the Michigan Occupational Safety and Health Administration said. The agency cited DMC

with 14 violations, mostly related to asbestos removal, after inspections at two Ypsilanti duplexes the contractor was renovating. DMC said it will challenge the findings.

OTHER NEWS 䡲 Civic and economic leaders celebrated the start of the construction of Orleans Landing on Detroit’s east riverfront. The first phase of the $65 million mixed-use development will add 278 residential units and 10,500 square feet of retail space once completed by 2017. 䡲 Curl Up & Dye in Detroit’s Midtown closed after nearly seven years to make way for a year-round, popup retail space. Business had been great for the nontoxic beauty and barber shop, but owner Jennifer Willemsen said the time was right to shift to a new concept. 䡲 Longtime Detroit radio personality Drew Lane went off the air at Greater Media Inc. sports station WMGC 105.1 FM after disagreements over show content and talent led to a breakdown in contract talks. 䡲 Michigan businesses are embracing new technologies to boost worker productivity but need help with training, said a new report from the Detroit-based Workforce Intelligence Network for Southeast Michigan. According to the survey,

DOMINO’S PIZZA INC.

Ann Arbor-based Domino’s Pizza Inc. announced the launch of the Domino’s DXP, a pizza delivery car that comes with a warming oven that can hold two pizza delivery bags, storage areas and plenty of Domino’s branding. Livonia-based Roush Enterprises Inc. developed the car and is delivering 100 of them to 25 U.S. markets, including Detroit.

75 percent of Michigan company leaders have implemented a new technology over the past year or tried a new way of doing business. 䡲 A misdemeanor charge of willful neglect of duty as a public official was dismissed in 36th District Court in Detroit against Bloomfield Hills builder Anthony Parlovecchio, a contractor on a Wayne County jail project that went millions of dollars over budget. Parlovecchio Building Inc. was accused of not fully informing officials about the project’s cost overruns. 䡲

RUMBLINGS Added health care cost: Now there’s a fee to park at DMC etroit Medical Center is now charging patients, families and visitors to park in its parking lot in downtown Detroit. The $4 self-park and $6 valet fee began July 2014. Tenet Healthcare, the Dallas-based investor-owned chain that owns DMC, responded in a statement about why the fees are now being charged: “The cost of parking will allow the DMC to provide parking lots that are safe and easily accessible for our patients and visitors without compromising quality of care.” Historically, most hospitals in Southeast Michigan have offered free parking to patients and visitors. But over the past several years, some have added fees for parking or valet services. Henry Ford Hospital in Detroit charges $2.50 to self-park and $4 for valet parking. There is free self-parking at Henry Ford West Bloomfield, Henry Ford Macomb and Henry Ford Wyandotte. Valet costs $3 to $4.

Barbara Ann Karmanos Cancer Center

on the DMC campus charges $5 for valet parking and $3 to self-park. St. Joseph Mercy Health System offers free parking at all its five hospitals with a variable fee for valet services. The University of Michigan Hospitals offers parking for $2 for the first four hours and no additional fee for those with validated ticket. Valet parking at UM is $5. Beaumont Hospital in Royal Oak also has free parking with $4 for valet.

Will Ford Field host college football title game? Ford Field is expected to know early next month whether it will host the 2019 college football national championship game “We are still tracking on a decision in early November — most likely on Nov. 4. All nine candidate communities that submitted responses back in late May remain in consideration,” said Michael Kelly, COO of the organization behind the title game, College Football Playoff, and former senior associate commissioner for the Atlantic Coast Conference. Kelly was part of a contingent that toured Ford Field and Detroit in July as part of a series of trips to cities vying for 2018-20 college football national championship games. The Detroit Lions and the nonprofit Detroit Sports Commission submitted a bid for consideration in May, and the title game’s executives looked at the 64,500-seat stadium and the downtown area to determine if the city and its facilities fit the game’s requirements. Other cities bidding on some or all of the years up for grabs include Minneapolis, New Orleans, Atlanta, Miami, San Antonio, Charlotte, N.C., and Houston.

CRAIN’S ARCHIVES

Lobster and other seafood will be on the menu at an upcoming University of Michigan tailgate.

Groups aim to make lobster a tailgate staple An event to introduce lobster tails and other Canadian and New England seafood as football tailgate staples along with hot dogs, hamburgers, brats, chicken and beer is scheduled for before the University of Michigan’s Nov. 7 game against Rutgers University in Ann Arbor. “Lobstertailgate & Salmon too!” will be held at Pioneer High School near Michigan Stadium. Fans are being invited to sample lobster and salmon dishes. Michael-Ann Rowe, host of the PBS show “Off the Beaten Palate,” will be among chefs and seafood industry experts cooking and answering questions. Canadian seafood firms Cooke Aquaculture and Paturel International, along with the province of New Brunswick’s Canada Fisheries Department, are the event sponsors. The goal is that those who participate or attend the event will become advocates for adding seafood to football events, said Tom Quinn, president of Dearborn-based TQ Marketing Services which has been inviting local seafood industry professionals to the event.

Documentary on Osborn neighborhood to debut The Detroit Institute of Arts’ Detroit Film Theatre on Tuesday will air the premiere of “Life in Osborn,” a documentary chronicling efforts in August to revitalize the neighborhood on Detroit’s upper east side. Led by Detroit nonprofit Life Remodeled, the project involved more than 9,500 corporate and community volunteers. The film was shot by Walter Marshall of Detroit-based Framed by Grace Films, which earned two Emmy awards last year for its film “Cody High: A Life Remodeled Project.” It’s set to be shown at later dates at locations around the area. Tickets for the premiere are $10, with all proceeds benefiting Life Remodeled. For more information, visit: liferemodeled.com/movie. 䡲

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But, as usual, the Book of Lists will be full of the data and rankings that serve as barometers of the region’s biggest players, such as the Private 200, the Largest Privately Held companies, Largest Employers and Largest Residential Brokers.

Contact Marla Wise for sponsorship information: (313) 446-6032, mwise@crain.com ISSUE DATE: Dec. 28, 2015 | CLOSE DATE EXTENDED: Nov. 9, 2015

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