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CRAIN’S Readers first for 30 Years
DETROIT BUSINESS
Creating a winter wonderland also creates big businesses, PAGE 8
DECEMBER 14-20, 2015
Wilbur Ross: The king of fixing distressed companies will speak Feb. 16 at Crain’s Biggest Deals event.
Ross molds trash into treasure
When ALICE’s problems become your problem Daily struggles of low-wage workers turn into headaches — and costs — for employers
By Tom Henderson thenderson@crain.com
By Lindsay VanHulle
Wilbur Ross Jr. buys failing companies in failing industries in failing locations — and he comes naturally by his success in doing so. Beginning in 1976, Ross spent 24 years at Chicago-based Rothschild Investment Corp., a worldwide investment bank, first running its bankruptcy business and then running that firm’s private equity fund, which he bought in 2000 to launch New York Citybased W.L. Ross & Co. LLC with $440 million in assets under management. Wilbur Ross Jr. will be In 2010, dekeynote speaker for the spite having Crain’s Biggest Deals event, proved his a showcase of the biggest contrarian M&A deals of 2015. model, Ross When: 5-9 p.m. Feb. 16 raised eyebrows, if not Where: The Roostertail, 100 Marquette Drive, Detroit derisive chortling, Cost: $125 when, with the Register: www.crainsdetroit. Great Recescom/events sion’s effects still reverberating, he became the biggest investor in a single-branch bank in Troy called, grandly enough, First Michigan Bank. “Is Wilbur Ross crazy?” read the headline of an article in BusinessWeek in 2003, just after he had bought a sprawling, nearly idled steel plant in Cleveland and longstruggling Bethlehem Steel.
Crain’s Detroit Business/Bridge Magazine
t a car wash this past summer, a young man noticed Tanya Allen’s hat bearing the LongHorn Steakhouse logo and asked her if she knew anyone who worked at the restaurant chain. She told him she owned one. Allen is a partner with a joint venture between Atlanta-based Hojeij Branded Foods and its Detroit partner, AP United LLC. The venture owns nine restaurants inside the McNamara Terminal at Detroit Metropolitan Airport. “I’d like to work,” Allen recalls the man saying. But once she told him where the restaurant was located, she said, he dropped his head. He didn’t have transportation to get there.
A
Where is ALICE? Where the working poor live, Page 18 The high cost of employee turnover, Page 18 Income-constrained workers “make it stretch,” Page 19 Supplier aims to give parolees new opportunities, Page 20
Detroit Chassis helps pay for Goodwill caseworker Keith Bennett to help workers like Randy Baker.
© Entire contents copyright 2015 by Crain Communications Inc. All rights reserved.
NEWSPAPER
SEE ALICE, PAGE 18
INSIDE:
SEE ROSS, PAGE 22
crainsdetroit.com Vol. 31 No 51
Reliable transportation. Medical challenges. Child care gaps. These are some of the barriers that separate low-income workers from opportunities to move forward in career paths and ultimately increase their incomes. Nearly 1 million households in Michigan fit this profile. What does it mean for employers? Rampant turnover by this workforce population gets expensive — and quickly, to the tune of $3,400 or more per position. The challenges posed by this group of workers, nicknamed ALICE (for “asset-limited, income-constrained, employed”), even have caused some Michigan companies to rethink their recruitment and retention strategies. In some cases, employers are offering community resource-type services, all part of an
$2 a copy. $59 a year.
GR firm helped create employer resource network By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine
In the early 1990s, Fred Keller asked a machine operator at his Grand Rapids-area engineering firm who had a background in social work if it was possible to hire local homeless residents or welfare recipients. At the time, Cascade Engineering Inc. wasn’t facing a labor shortage. Keller, the company’s founder and chairman, says he was motivated more by a desire to demonstrate that business could be part of a solution to lift people out of poverty. A van pool was deployed to pick up a half dozen people from Grand Rapids’ Heartside neighborhood, just south of downtown, and bring them to Keller’s firm several miles away in Kent County’s Cascade Township. But within a few months, virtually all of the new hires were gone. “We weren’t prepared to receive them,” Keller says, “and they weren’t prepared to work.” In some ways, Keller’s early vision laid the foundation for what today is called an employer resource network, a regional partnership of companies that provides wraparound services to vulnerable workSEE RESOURCE, PAGE 20
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MICHIGAN
BRIEFS Will there be enough energy for proposed data center? Amid highly publicized tax law challenges, another potential complication of Switch Communications Group LLC ’s proposed move to Michigan is how the energy-intensive company would secure a reliable electricity supply for its proposed data center near Grand Rapids. That’s particularly the case if Las Vegas-based Switch wants to power its data center with renewable sources, as it does with its Nevada operations, MiBiz reported. In state Senate committee hearing testimony, Jason Mendenhall, executive vice president of the cloud at Switch, said the company had “established relations” with the power provider of the site in Kent County’s Gaines Township. Representatives from Jackson-based utility Consumers Energy , which serves the territory, declined to comment to MiBiz, citing a nondisclosure agreement. Switch’s project, in the former Steelcase Inc. pyramid, would be coming online at a time when major
utilities are closing coal plants and have ramped up warnings of a statewide capacity shortfall. Mendenhall told the Senate committee that climate was one of the reasons Switch was attracted to the area, noting it would cost less to cool the data center given the average temperatures in the region. “Michigan has a built-in advantage because it’s cold,” he said.
Study: GR market nation’s hottest in housing for ’16 Affordable housing, home-buying millennials and a strong economy have helped make Grand Rapids the nation’s hottest housing market for 2016, says a study by Trulia, a national real estate research firm. According to MLive.com, the study also measured the online activity of persons searching for homes and the number of vacant homes in a community. Charleston, S.C., was ranked second, and Austin, Texas, was third. Meanwhile, the Warren-Troy-Farmington Hills area was 51st and Detroit 87th. Meanwhile, in almost-as-good
news, the Grand Rapids market was ranked No. 5 in the U.S. for its winter jobs outlook in a new survey by ManpowerGroup , a Milwaukeebased workforce services company.
MICH-CELLANEOUS 䡲 A $45 million project will update security screening and make other improvements at Gerald R. Ford International Airport in Grand Rapids, MLive.com reported. Construction is scheduled to begin this week on the Gateway Transformation project, which will include consolidation of passenger security checkpoints, the construction of an area where people may watch passengers depart for flights, and improvements to ticketing, baggage screening and baggage claim areas. 䡲 Kellogg Co. said it plans to cut greenhouse gas emissions by 65 percent across its operations by 2050, the Battle Creek Enquirer reported. The Battle Creek company, citing an interest in global sustainability goals, announced the plans at the New York Times Energy for Tomorrow Conference in Paris. 䡲 Map-N-Tour, a Midland-based company that develops 3-D interactive maps and other virtual experience applications for web, mobile and tablet devices, was awarded $11,600 in business accelerator funds through the Macomb-OU INCubator , the Midland Daily News reported. This award will allow Map-
N-Tour (www.mapntour.com) to develop a sales and marketing plan. 䡲 The local representing UAW members who walked off the job from a Nexteer Automotive manufacturing complex near Saginaw said it reached a tentative agreement with the automotive steering company, The Associated Press reported. The union said workers would return to their jobs during the ratification process. Nexteer has roughly 3,000 union employees at the site.
䡲
Performance Fabricating LLC
plans to construct a 100,000-squarefoot corporate headquarters and manufacturing plant in Fenton Township near Flint, creating an expected 52 jobs. The $9.1 million facility will be supported by a $150,000 performance-based grant from the Michigan Strategic Fund, said the Michigan Economic Development Corp.
Performance Fabricating has outgrown its leased facility in Fenton. 䡲 Michigan continues to be ranked in the bottom half of states in a national study on state health system performance, according to the latest Commonwealth Fund ’s “Aiming Higher” report. The state ranked 31st in the report, which evaluated 42 indicators in 2013 and 2014 in five categories that ranged from obesity rates to high levels of ethnic disparity of deaths for treatable conditions. The 2014 Commonwealth report, covering 2010 to 2012, ranked Michigan 29th. In a separate report, the United Health
INSIDE THIS ISSUE BANKRUPTCIES . . . . . . . . . . . . . . . . . . 5 CLASSIFIED ADS . . . . . . . . . . . . . . . . 17 MARY KRAMER . . . . . . . . . . . . . . . . . . . 8 OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . 6 OTHER VOICES . . . . . . . . . . . . . . . . . . . 6 PEOPLE . . . . . . . . . . . . . . . . . . . . . . . . . 16 RUMBLINGS . . . . . . . . . . . . . . . . . . . . 23 STAGE TWO STRATEGIES . . . . . . . . 16 WEEK ON THE WEB . . . . . . . . . . . . . . 23
COMPANY INDEX: SEE PAGE 17 Foundation ranked Michigan 35th among the states in overall health. 䡲 A $1 million gift to Michigan State University ’s Eli Broad College of Business has created an endowed professorship in management, The Associated Press reported. The gift is from Al and Nancy Gambrel; Al Gambrel, who earned a bachelor’s degree in business from MSU in 1976, is senior vice president of human resources at Oak Brook, Ill.based TreeHouse Foods. 䡲 Bah, humbug? A new report finds Michigan as the seventh-leastcharitable state in the nation, Michigan Radio reported. According to the “Charity Calculator” at the financial website Wallet Hub , the state ranked 44th in an analysis of key metrics that included volunteer rate, percentage of population donating time and money, and the median contribution to charity. 䡲
Self-Funded Michigan Businesses Can Recover Fraudulent Health Care Charges “Blue Cross Liable for Self-Dealing After Charging ‘Hidden’ Fees, Court Rules” Bloomberg, 9/11/12
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Lear targets I-94 site for FOOD FOR THOUGHT Eastern Market looks to grow borders Detroit plant
LOOKING BACK: Thirty years ago this month, Crain’s reported on the increased demand for warehouse space in Detroit’s Eastern Market. Lately, development efforts in the district have not matched those of nearby areas, but the necessity for Eastern Market tenants to expand may speed those plans. More at crainsdetroit.com/30
By Gary Anglebrandt
By Dustin Walsh
Special to Crain’s Detroit Business
dwalsh@crain.com
astern Market gets hot,” read the front page of the Dec. 23, 1985, issue of Crain’s Detroit Business. The story was about a spike in demand for properties as food companies built more warehouse space. It’s a headline that would work just as well now. Retailers regularly announce shop openings in the district. The Saturday public market has grown under the management of Eastern Market Corp., the nonprofit established by the city in 2006. When TV advertisers co-opt the gritty Detroit comeback narrative, they never fail to include a shot of an Eastern Market shed. Now, Eastern Market wants to make itself bigger by stretching the district’s boundaries. President Dan Carmody said about 25 companies — mostly food wholesalers, processors and distributors that already operate in Eastern Market — want to expand but have run out of room. Wolverine Packing Co., E.W. Grobbel Sons Inc. and Baratta Broth ers Inc., which does business as Fairway Packing Co., are among them. “If we don’t find space for those companies, some of them are going to have to go somewhere else,” Carmody said. The district is bounded roughly by Mack Avenue to the north, I-75 to the west, St. Aubin Street to the east and Gratiot Avenue to the south. A large wall map in the nonprofit’s offices shows new boundaries extending eastward two blocks to Chene Street and enveloping areas south of Gratiot. Carmody would not confirm these as the final boundaries, saying those lines are tentative; the boundary could end up being a little east or west of Chene. A second phase could see the northern edge moved beyond Mack. These plans would fall under the purview of a new entity Eastern Market wants to establish in the first quarter of next year to promote development. The nonprofit entity
Lear Corp. plans to double down on its investment in Detroit by establishing a new manufacturing plant in the next two years, joining a city-led effort to create a hub with at least four other automotive suppliers. The push, supported by the Detroit 3 automakers — seeks to restore manufacturing capacity — and jobs — at the I-94 Industrial Park near the junction of I-94 and I75 near the American Axle & Manufacturing Holdings Inc. headquarters. The city, working with Los Angeles-based advisory firm AECOM, has assembled 147 acres in and near the industrial park for the project, said F. Thomas Lewand, group executive for jobs and economic development for the city. Lewand said the city is in active discussions with suppliers about establishing manufacturing opera-
E
SEE MARKET, PAGE 17
tions at the park. He expects the first commitment to be announced by the second quarter of next year. Lewand declined to name the other suppliers in negotiations. He did confirm that American Axle is in negotiations to contract space from its largely unused Detroit-Hamtramck plant near the industrial park to two other suppliers. David Dauch, chairman, president and CEO of American Axle, did not respond to calls on the topic. Matt Simoncini, president and CEO of Southfield-based Lear, said now is the right time to expand the footprint in the city where Lear was founded nearly 100 years ago. “The way I see it, Lear has never been in a better position to expand here,” Simoncini said. “We think we can create something bigger, like a supplier park with manufacturing space that supports the wishes of our customers while creating good SEE LEAR, PAGE 22
Comerica Park refi highlights Ilitch financial maneuvers By Robert Snell and Bill Shea Crain’s Detroit Business
MICHAEL LEWIS II
Workers have been cleaning up the exterior of this former slaughterhouse, now owned by developer Dennis Kefallinos.The northern extension of the Dequindre Cut greenway, still under construction, runs next to the other side of this building.There are no firm usage plans for this site.
A complex series of financial moves by Mike Ilitch last year included a previously unreported refinancing of Comerica Park and culminated in the pizza mogul tapping his portfolio of assets to financially backstop the new Detroit Red Wings hockey arena, Crain’s Detroit Business has learned. Public records and interviews illustrate how Ilitch, 86, pledged pieces of his family’s $5.5 billion empire to build the hockey arena and capitalized on the soaring value of the Detroit Tigers , his other pro-
fessional sports team, to refinance the baseball stadium’s remaining private construction debt. The Ilitch organization did not disclose how much Comerica Park debt was refinanced, or how much savings was realized by the refinancing through Comerica Bank. The initial loan in 1997 was $140 million. A source familiar with the matter, who spoke only on the condition of anonymity, said the collateralization terms of the refinance were the same as the original construction loan, and the deal was done solely to take advantage of a better interest SEE ILITCH, PAGE 21
MUST READS OF THE WEEK Uncertain chemistry Dow-DuPont merger’s effects on Michigan unclear, but stakes are high, Page 4
Affordable Care scare Increases in health costs for small businesses under health overhaul haven’t met worst fears, Page 12
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Impact of Dow-DuPont merger on state certain, extent unclear By Dustin Walsh dwalsh@crain.com
The merger of Midland-based Dow Chemical Co. and Wilmington, Del.-based DuPont Co. will inevitably
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impact the Michigan economy, though experts don’t agree on the extent. The merger, which will create a new company called DowDuPont with a $130 billion market value, allows the two chemical makers to streamline operations and, likely, cut costs across product lines, such as agriculture, plastics and other chemicals. The stakes are high for Michigan. Dow employs roughly 6,000 people in the state and is the largest employer and dominant economic force in its hometown of Midland. Dow and DuPont declined to comment directly for this story. “This transaction is a gamechanger for our industry and reflects the culmination of a vision we have had for more than a decade to bring together these two powerful innovation and material science leaders,” Dow CEO Andrew Liveris said in a statement. Dow is synonymous with Midland and is the primary reason that city has avoided the decline of many midsized Michigan industrial towns. The mid-Michigan community of roughly 42,000 people is well educated and more prosperous than the state averages. More than 94 percent of Midland residents have a high school diploma and more than 42 percent earned a bachelor’s degree or higher, compared with the state average of 86 percent and 29 percent, respectively, according to 2014 U.S. Census Bureau data. Per capita income is also higher at $30,715, compared to the state average of $28,555. The presence of Dow, founded by Canadian immigrant Herbert Dow in 1890 to manufacture bleach, has shaped Midland’s business community and cultural life. The influence is clear at the chemical-themed H Hotel; Dow Diamond, where the Great Lakes Loons minor league baseball team plays; and the Grace A. Dow Memorial Library. All were funded by the company. Herbert Dow also created Dow Gardens , the city’s 110-acre botanical garden locale. In a conference call Friday, Liveris and DuPont CEO Ed Breen confirmed that the companies’ headquarters will remain as a combined entity. Under the reorganized DowDuPont, Liveris will serve as executive chairman and Breen will become CEO. But restructuring will occur and that could lead to job losses, said David Jaffe, special situations counsel for his own Birmingham firm, Jaffe Counsel PLC, and former general counsel for Guardian In dustries Inc.
Cost savings will come from elimi-
nating duplicated efforts in research and development, sales, purchasing and advertising, Jaffe said. “These are categories that are always under consideration in a deal like this,” he said. “There doesn’t appear to be a ton of direct overlap in the businesses, so consolidation becomes trickier.” Speculation on whether Dow Chemical could eventually abandon Midland remains high, but it’s too early to make any assumptions, Jaffe said. “Dow has a lot of capital expenditures in Michigan, so there definitely could be consolidation of manufacturing facilities and they could, in principle, combine headquarters elsewhere,” Jaffe said. “But Dow has always remained strong with its commitment to Midland, and it’s not like Wilmington is a storybook place to recruit talent.” Tim Nash, senior vice president of corporate and strategic alliances
and professor of economics and business at Northwood University in Midland, said Dow is the anchor of the bay region, which includes Bay City and Saginaw. Nash believes the merger will create more jobs and a larger scope for DowDuPont in Midland, despite initial fears. “If you look at the impact, there’s only about $4 billion in overlapping business between the two entities, and I don’t think we’ll see a lot of losses in Midland,” Nash said. “There may be some short-term disruptions, but my bet is that the midMichigan region and Dow will be larger and more prosperous for it. “We’ll see some sign changes, and some people in Midland will wear the DuPont oval instead of the Dow diamond, but I see a real opportunity to grow business here because of the combined entities.” SEE NEXT PAGE
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Last month, work began on Dow Chemical’s new six-story corporate center as part of the company’s 150acre corporate headquarters campus in Midland. It will include space for about 600 employees and contractors and is expected to be fully operational by mid-2017. In Southeast Michigan, both companies operate automotive units. Dow Automotive Systems employs about 250 in Auburn Hills with revenue of $2.8 billion in 2014. It’s unknown how many people DuPont Automotive employs in Troy; that unit generated revenue of $3.1 billion in 2014. It is not yet known whether consolidation or job cuts will occur with either company if and when the merger closes, but the companies have said they expect cost savings of $3 billion within 18-24 months of the business combination, and job cuts often accompany big acquisitions. DuPont reduced its presence in Southeast Michigan in 2012, when it sold its performance coatings business to private equity firm Carlyle Group LP for $4.9 billion. The unit, headquartered in Mt. Clemens, employed about 11,000 at 35 plants globally. The company, now called Axalta Coating Systems, employs about 500 at its Mt. Clemens plant. The eventual plan is to split the combined DowDuPont into three separate enterprises, focused on agriculture, materials and specialty chemicals, with Dow and DuPont owning a 50 percent stake in each. The materials science company will fold in the automotive units of both Dow and DuPont, as well as the companies’ performance materials divisions and Dow’s performance plastics, consumer care and infrastructure segments, to create a combined $50 billion unit, the company said in a Friday conference call. “By taking an integrated approach to customer-designed needs, we’re going to deliver enormous value to our customers …,” Liveris said in the conference call, pointing out that the companies’ specialties will allow it to provide more complete products to customers. Nash agrees. “Dow is one of the leaders in exteriors, and DuPont is really focused on the interiors now,” Nash said. “Dow will now have the ability to serve customers much broader with a one-stop shop for components, and that bodes well for Midland, Detroit and Michigan.” 䡲
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CRAIN’S DETROIT BUSINESS
OPINION A common-sense bill on security mid the rising hysteria about immigration, a bill sponsored by U.S. Rep. Candice Miller is taking a practical approach to increase security without objectionable — and probably unconstitutional — blanket bans on Muslim travelers to the U.S. The bill, which passed the House by a 407-19 vote on Dec. 8, gives the secretary of Homeland Security the ability under some circumstances to suspend or eliminate a country from a program that allows travelers from designated countries into the U.S. for up to 90 days without a visa. Currently, 38 countries participate in the program. They now would be required to continually share information with the U.S. on foreign travelers. Countries that fail to do so could be suspended from the program. Foreign travelers who have traveled to Syria or Iraq or are dual nationals cannot participate in the program. Some Michigan Democrats in Congress think the bill goes too far, but we applaud Miller for her efforts to create tools that enhance U.S. security without caving into the fear that produces ideas that are, well, un-American. We hope her common sense is contagious. Miller announced earlier this year that she won’t seek re-election in 2016. Michigan will miss her service.
A
Will Midland remain company town? There are a lot of questions around the impending merger of Dow Chemical and DuPont, but the big one in Michigan is this: What will happen to the company town? Dow was founded in Midland in 1897 and has maintained its headquarters there ever since. The company has invested heavily in the BLOOMBERG NEWS town of 42,000, funding many community amenities and adding to its corporate campus — plans for a new 150,000-square-foot building there were announced this summer. For these and many reasons, Dow has been a good corporate citizen. Will this merger change that? So far, both companies have said their headquarters will stay put, but how the combination will affect employment is as yet unknown. Dow has practical reasons to consider a merger — and even a new HQ location. Although Midland is deep in the company DNA — and vice versa — talent attraction is an issue. Top corporate talent often doesn’t want to live in a small town, so Dow’s spending on amenities has been key. If we’re lucky, the deal will produce as good a result for Midland — and Michigan — as the companies believe it will produce for themselves.
U.S. needs to tackle gun violence like other public health problems an Bernardino, Calif.; Colorado
SSprings, Colo.; Roseburg, Ore.;
Charleston, S.C.; Watertown, Conn.; Aurora, Colo.; Blacksburg, Va. Mass murder in the U.S. continues apace. The overall statistics may not show an increase in the number of Americans killed by firearms each year. But the horrific nature of recent mass slaughters reveals a tragic truth: The proliferation of guns in our society has been, and continues to be, one of the nation’s leading threats to public health. About the same number of people die each year from gunshot wounds — more than 32,000 — as die in car accidents. That’s an average of 88 deaths a day from homicides, suicides and unintentional gunshots. It’s the equivalent of an airplane falling out of the sky every day. No other country in the industrialized world even comes close to that level of preventable carnage. The societal costs are staggering — $174 billion a year for medical and mental health care, criminal justice costs, wage losses and the price of pain, suffering and lost quality of life, according to a recent study by the Children’s Safety Network. That works out to $645 every year for every gun in America. You can add to that the immeasurable costs of surviving family members’ pain and suffering; the post-traumatic stress suffered by health care workers; and the paralyzing dread that parents everywhere must face when contemplating the fact that their kids’ school might be next. Yet we do nothing. The National Rifle Association’s minions in Congress span the political spectrum. Sen. Bernie Sanders, the most leftwing candidate to run for president in nearly a century, joins the naysayers when it comes to many gun-control measures. The Republican-controlled Congress remains ideologically opposed to any form of government regulation on firearms. This isn’t about limiting individu-
outnumber the number of police officers killed on the job each year by a 3-to-1 margin. In the wake of previous mass shootings, the gun lobby and its supporters in Congress have focused public attention on mental illness, which does help explain some of the OTHER VOICES: mass killings. But most people with Merrill Goozner temporary or chronic mental health problems are nonviolent, and atMerrill Goozner is editor of Modern tempting to reduce gun violence by Healthcare, a sister publication of improving those people’s care — Crain’s Detroit Business. worthy as that is — will never get at the root of the epidemic. als’ cherished Second Amendment The problem is easy access to the rights. We didn’t take away people’s guns and ammunition that can be right to drive when outrage over used for mass slaughter. It is the skyrocketing highway deaths forced proliferation of guns that are poorly legislators to act. We passed laws designed, improperly cared for, or forcing auto manufacturers to in- serve no useful social or sporting stall seatbelts, purpose. airbags and safer “The pseudoThe least we designs. can do is require scientific idea, Earlier this registration and year, eight pro- propounded by background fessional groups, many gun checks for all gun ranging from the purchases, require American Acade- enthusiasts, that gun owners to my of Family there will be less carry liability inPhysicians to the surance (as we do American Bar violence when for drivers), and Association, de- everyone is force gun manumanded more facturers to install packing heat, extensive firearm digital technoloregulations as a defies common gies such as first step toward thumbprints for sense.” reducing gun viaccess and bullet olence in our so- Merrill Goozner,Modern Healthcare tracing. “We’ve ciety. They called been very sucfor extending background checks cessful in bringing down death and on the purchase of firearms to gun disability from cars,” said Dr. shows and individual transfers, Georges Benjamin, executive direcbanning individual ownership of tor of the American Public Health assault weapons and their high- Association. “We can do the exact volume ammunition magazines, same thing for firearms.” and ending gag laws that prevent The pseudo-scientific idea, prophysicians from discussing gun pounded by many gun enthusisafety with patients. asts, that there will be less violence That last request could help pre- when everyone is packing heat, vent some of the more than 60 per- defies common sense. If permacent of gunshot deaths by suicide. nently enshrined in public policy, And pediatricians might be able to that idea will signal to the world make gun owners more aware of that America has not only lost its the fact that accidental shooting ability to address pressing social deaths among preschool-age chil- problems, it has lost its moral dren playing with unsecured guns compass. 䡲
TALK ON THE WEB Re: Detroit police vote to extend contracts, get 4 percent raise Public safety is a key priority. Keep blocking and tackling, Mike Duggan. It will move the city forward and attract businesses and residents. You have to include the schools to have a viable city, though.
Reader responses to stories and blogs that appeared on Crain’s website. Comments may be edited for length and clarity.
That is good. Why go to the desert or some swamp to gamble and party? Detroit should eventually au-
This contract was never about the money and in fact, the 68 CRNAs
(promises to pay), I’d make a few strides too.
have agreed to a pay cut. This contract is about respect for our profession from the hospital administration in how they transition the employees to outside vendors. At no time were the stakeholders invited to the discussions, and the contract has 11 pages of onerous work rules greatly affecting the quality of life for these very strong and highly skilled 68 CRNAs. This was never about the money.
Robert Tupilo
CRNA
thorize two more casinos around the downtown area. Justin Thompson
Jeff Reid
Re: Casinos’ November revenue rises slightly from a year ago
Re: St. John Providence meets with nurse anesthetists
Re: Moody’s: Detroit advances after exiting bankruptcy If I could shed most of my debt
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CRNA outsourcing part of health care industry trend By Chad Halcom chalcom@crain.com
A contentious move to outsource certified registered nurse-anesthetists at St. John Health System is just part of a larger trend among health care providers, in Southeast Michigan and elsewhere, to contract the management of various specialists. Some 68 holdouts among the 74 certified registered nurse anesthetists at St. John Providence Hospi tal and Medical Center in Southfield and St. John Providence Park Hospital in Novi were still voting via email Thursday night whether to accept recent changes to a third-party employer contract that takes effect Jan. 1, their attorney confirmed. The group was previously told via email that the CRNAs who didn’t agree to join the newly formed PSJ Anesthesia PC could see their employment end by Dec. 31. But the Detroit Medical Center already agreed to contract the management of its anesthetic services along with active residency and CRNA training in August to Dallasbased NorthStar Anesthesia, and Florida-based Mednax Inc. took over its second anesthesia services practice in Michigan at Grand Blanc’s Genesys Regional Medical Center, when Mednax acquired Great Lakes Anes thesia Associates PC in early 2014. “There have been other hospitals in Michigan to do it, and it is part of a larger trend we are already seeing nationwide,” said Andrea Teitel, president of the Michigan Association of Nurse Anesthetists. Providence recently secured a contract with PSJ Anesthesia to provide CRNA services to the two hospitals starting in 2016, corporate public relations director Daniela Scholl confirmed last week. PSJ was formed earlier this year by anesthesiologist Dominick Lago of Northland Anesthesia Associates PC in Southfield, who is also affiliated with St. John. Teitel said the Michigan association takes no position in the Providence contract talks. The #Michigan68 social media campaign for the 68 CRNA holdouts has raised more than $50,000 for legal services and other support since Nov. 28 via a Gofundme account. But Teitel said hospital management sees contracting out CRNA services as a better deal than billing their services as staff employees. “Quite often the hospitals are not capturing the revenue that they could from billing for the expertise of CRNAs. And as such, they find it’s more beneficial to have an outside group that contracts for their services,” she said. “We are hopeful for an outcome where these CRNAs get compensation that’s fair.” Other health care sources told Crain’s that Michigan is slightly behind other states in the trend toward outsourcing or third-party management groups for professional groups, and St. John management likely approached Lago to suggest forming a new business to manage its CRNAs.
Lago and an attorney for PSJ, Carey Kalmowitz of The Health Law Partners PC , did not return phone calls seeking comment last week. Michigan accounts for more than 2,600 certified registered nurse anesthetists out of about 48,000 nationwide, who administer anesthesia during surgeries. Urban and suburban hospitals typically employ an anesthesiologist doctor and a small group of CRNAs as a team, although in rural communities about 70 percent of anesthesia is administered independently by CRNAs. Labor disputes in these groups
can affect core functions of critical care hospitals that rely on them to perform any surgeries. Scholl would not confirm any details about holdouts or ongoing employment talks. “CRNA associates who are currently employed by ProvidenceProvidence Park are given the opportunity to transition employment to the new company, effective Jan. 1, 2016, with comparable pay and benefits,” she said in a statement emailed to Crain’s. “It is a common practice for health systems to contract with business partners to pro-
vide certain services.” David Shea, managing partner of Shea Aiello PLLC in Southfield and an attorney retained by all of the Michigan 68, said last week that CRNAs have been asked to take a 35 percent cut in overall compensation, and were agreeable to making concessions in benefits, overtime and shift differential payments, Shea said. But the new employer had also sought “oppressive” terms before the November deadline, he said, such as accepting employment terms and conditions that PSJ could not yet supply for review, and possi-
ble noncompete agreements. After a meeting Wednesday, however, he indicated that the terms had changed considerably and the nurse anesthetists needed to vote on whether the agreement was more palatable. He would not elaborate on the new terms before the vote. Members of the Michigan 68 have said previously the arrangement was potentially disruptive to the group of specialists, some of whom have worked for the hospital for decades. 䡲 Chad Halcom: (313) 446-6796 Twitter: @ChadHalcom Jay Greene contributed to this report.
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SPECIAL REPORT: MICHIGAN MARY KRAMER mkramer@crain.com Twitter: @mkramercrain
Target other schools,not EAA rotesters recently stormed a meeting of Eastern Michigan University’s Board of Regents, demanding that the board sever ties to the Education Achievement Authority for failing to serve its mostly black urban students. They were loud, they were angry. And they probably had the wrong target. When it comes to failing AfricanAmerican students, Grand Rapids, Lansing, Muskegon, Saginaw and Ypsilanti schools are all worse — yes, worse — in performance than Detroit Public Schools. Detroit’s worst schools were spun into the EAA. So where are the protests in those cities? A report released last week puts Michigan at nearly the bottom in the nation in the academic performance of African-American students. Just 10 percent of Michigan’s African-American students taking the test were hitting proficiency marks in fourth-grade math, 9 percent in fourth-grade reading, 5 percent in eighth-grade math and 9 percent in eighth-grade reading. Detroit is the worst big city in the country, but the other Michigan districts are worse yet, according to an analysis by Education Trust-Midwest. How to fix it? Florida focused on universal preschool and on training teachers to teach reading. Tennessee focused on effective teaching — with 5,000 trained evaluators doing on-site classroom evaluations and 700 of the highest-performing teachers now coaching their peers. Both states have far better results than Michigan. Michigan soon may require thirdgraders to be proficient in reading before moving to fourth grade. Training teachers, which seems like a nobrainer, is critical. We’ve seen other programs fail; recent test results speak for themselves. Who trains teachers and how should be a concern to the entire business community. So why are protesters obsessed with the EAA and not the crummy schools all over this state? Mostly union politics. But the EAA has not lived up to expectations. Early missteps include poor training of teachers, especially on technology, and lousy financial controls that led to an indictment last week of a former principal and two contractors. But it was EAA’s new leadership that blew the corruption whistle. And you don’t read it in the headlines, but three of the 15 terrible schools originally placed in the EAA have improved test scores, climbing out of the basement of “worst” schools. Question: How many other urban districts can say one-fifth of their schools made such progress in just three years? 䡲
BUSINESS
P
PHOTOS COURTESY BRONNER’S
Bronner’s Commercial Display counts Macomb Mall in Roseville (above) among customers in a business
that began in 1951 with painted signs in Clare (right).Below right is a Muskegon display in 1962 .
LIGHTING THE
HOLIDAYS Michigan businesses busy trimming streets, malls for festive season By Marti Benedetti mbenedetti@crain.com
he annual ritual of installing sparkly, colorful holiday decorations in the shopping centers and downtowns of Michigan cities often falls to a handful of Michigan companies, two multi-generationally owned and operated. The granddaddy of holiday decorating in the state is Frankenmuth-based Bronner’s Commercial Display , which got its start in 1945 when Christmas-loving Wally Bronner started painting signs and working on holiday display windows in Bay City. Family-owned Northville Township-based LeClerc Display Co. Inc. specializes in leasing dec-
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orations to cities and shopping malls and adorns primarily outdoor space. The company was started in 1964 by John LeClerc, who at a young age started decorating the interiors of a couple of J.C. Penney stores in the Detroit area. He went on to deck out Detroit-area malls before transitioning his business to outdoor trimming. Bronner’s first sale of commercial Christmas decorations was to the city of Clare in 1951, said Brian Goff, display consultant at Bronner’s Commercial Display. The well-known Bronner’s Christmas Wonderland store is a division of Bronner’s Commercial Display and sits adjacent to it on 27 acres. Billed as “the world’s largest Christmas store,” it opened in 1955 after the holiday display company, a fact that surprises most people, who think the store came first. In 1976, actor John Wayne placed a telephone order to the Bronner’s store for a Santa suit. In 1990, Wally and his store were featured
in People magazine, and it continues to be a media darling as the years pass. Today, the display part of the business has more than 1,000 customers annually and six and a half employees. Typically, once purchased, décor items are installed and removed by city workers, Goff said. Since 2009, Bronner’s Commerical Display has seen a 26 percent increase in revenue, though Goff would not reveal specific sales figures. Among the state municipalities Bronner’s counts as customers are Dearborn, Southfield, Taylor, Mackinaw City, Marquette, St. Ignace and Sault Ste. Marie. It also provides decorating plans and décor to the Detroit and Toledo zoos and theme parks such as Disney World, Disney land and Six Flags. Goff said he sits down with a city or company’s staff to hash out a decoration plan. Some cities use only décor items such as garland and lighted pole decorations; others prefer a brightSEE NEXT PAGE
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LED lights cost considerably more to purchase, however, so there is a greater initial investment. “Thirty-five years ago, people didn’t care about being green,” Maurer said. “Now it’s important.” Additionally, if a mall has 15 Christmas trees in a display with incandescent lighting, simply pulling out a bulb could shut the whole thing down,” he said. “This was a huge problem, especially for my type of clients.” Maurer said LED lights are difficult to disrupt, and the color intensity is more vibrant. Malls spend about $125,000 to $150,000 just for the holiday decorations (not including electricity and installation-takedown costs), compared with earlier years when it ranged from $300,000 to $400,000, Mauer said. Lower-cost LED lighting has helped meet budgets. Many also opt for traditional décor so it won’t go out of style. Maurer said malls are opting for more tasteful and simple decorations. He cited Southland Center in Taylor, which got new décor this year. Casinos typically just decorate the lobby and exterior of the building. “We can’t put much inside because it blocks security cameras,” he said. While the Detroit suburbs have varying degrees of festooned downtowns, Rochester puts on the Ritz with what it calls “The Big, Bright Light Show.” Every storefront along Main Street is blanketed with vertical colored lights. The light strings on the buildings are just 4 inches apart, which creates twinkling walls of color. The electrical bill for the ex-
travaganza, which attracts a lineup of hundreds of vehicles every night, is about $3,500. Shelby Township-based Dan’s Ex cavating has the behemoth task of coating the buildings with lights. Rob Hentkowski, vice president of Dan’s Excavating, said it takes 12 to 14 workers two months to do it. Removing them is much faster. The city’s pays Dan’s $225,000 annually to install and maintain the lights over the holidays. Replacement strands each year cost $15,000 to $20,000 more. “This is our third year doing the lights in Rochester, and it’s the only downtown lights we do,” Hentkowski said. The Big, Bright Light Show, now in its 10th year, is the brainchild of Kristi Trevarrow, executive director of the Rochester Downtown Develop ment Authority . She said the idea originated from what she saw at Disney World. Several years ago, Trevarrow and her husband attended the Osborne Family Spectacle of Dancing Lights at Disney and were “overwhelmed” when the lights went on. “It was the most beautiful thing I had ever seen,” she said. She and her husband looked carefully at how the 6.5 million lights were put together to create the show. They brought it back to the Rochester DDA board with a recommendation to duplicate it. “(Our downtown retail) can’t compete with the big-box stores, but maybe we can do something to make our city a standout,” she told the board. The Rochester show, which com-
prises 1.5 million lights, is a source of pride for residents and visitors. When the lights were switched on during a ceremony Nov. 23, Trevarrow said 40,000 to 50,000 people — the largest crowd she has seen — were there to oooh and ahhh. Trevarrow said the light show has economic, community and retail sales benefits. “I’ve had businesses call me wanting to locate here,” she said. Like many of the holiday displays, Rochester will have its lights glowing beyond the Christmas season. The lights will continue on weekends through January. Bailey said his company’s clients, including downtown Detroit, lean toward wanting a seasonal décor instead of a holiday one so it can be kept up longer to help people get through the drab winter months. Downtown decorations will be up through February. The bulk of LeClerc’s handiwork is glittery blue and white snowflakes on the poles along Jefferson Avenue and Woodward Avenue, but also includes Grand Circus Park, Broadway, Washington Boulevard, the Detroit Opera House and Music Hall and, new this year, Greektown. It decorated the poles in Campus Martius, but not the giant tree. Bailey predicted the redeveloping Capitol Park and Paradise Valley will likely join the list after they are wired for electricity. “Over the years, different streets’ (decorations) have come and gone depending on the focus,” he said. “The last five years, downtown has been amazing with all the renewed interest.” 䡲
IS EVERYTHING.
ly decorated Christmas tree with bulbs and lights. For cities that like to change it up every few years, decorations are leased. Bronner’s does much more business selling décor than leasing. Goff specializes in decorating cities’ downtowns, and Kevin Maurer, Bronner’s commercial sales manager, hones in on beautifying the interiors of malls, hotels and casinos. Downtown Grand Rapids uses a local company for decor. After doing its own outdoor decorations for years, it contracts with Christmas Décor by DeVries in Jenison. Bill Pringle, owner and president of Christmas Décor for five years, said his clients also include the Muskegon area, Grandville, Caledonia, and the Canadian Lakes Resort in central Michigan. “For Grand Rapids, we do lighting, pole décor, ornament clusters and ornamented garland” along a variety of downtown streets and at the Amway Grand Plaza Hotel, Pringle said. His company installs, removes, stores and repairs the decorations. One of the largest players in the
holiday decor industry is Marion, Ind.-based Winterland, which caters to the decorating needs of clients worldwide, including Michigan cities such as Traverse City, Kalamazoo and Benton Harbor. “We have sold to 200 cities in Michigan over 25 years,” said David Fred, Winterland founder and owner. Winterland’s work extends from installing the menagerie of lights for the Detroit Zoo ’s Zoolights to lighted Christmas trees in Dubai. LeClerc Display’s largest client is downtown Detroit. The company has seven full-time employees and bumps it up to 15 or so during the busy holiday season. It specializes in making, selling and leasing pole décor and ground displays. Sales fluctuate between $500,000 and $1 million, said Shawn Bailey, grandson of the founder and general manager of LeClerc. A midsized city usually pays $10,000 to $20,000 on decorating, depending on how elaborate the project is. Goff, Maurer and Bailey said the most significant trend in the last several years is LED lights, which cost about 80 percent less to operate than the incandescent variety.
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SPECIAL REPORT: MICHIGAN BUSINESS
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A popular Gaylord-area resort whose big-name owners include former Chrysler Corp. CEO Robert Eaton may be ready to seek new financing for improvements and growth after improving its balance sheet and unloading nearly $35 million in debt. Treetops Acquisition Co. LLC , owner of Treetops Resort and Spa in Otsego County’s Dover Township, has been modestly profitable since 2011 but had been saddled with years of debt from a 2002 acquisition, followed by eight years of operating losses and some facility improvements. But resort General Manager Barry Owens said the company hopes to have more appeal to lenders for financing future improvements, after settling with all but one of its creditors. In July, U.S. Bankruptcy Court Judge Daniel Opperman confirmed a reorganization plan in the company’s November 2014 bankruptcy, but a dispute with Otsego County Treasurer Diann Axford still lingers over past property taxes. The exit plan shed more than $30 million in debt and allowed six of its eight previous owners to gain full equity in the resort. “We’re thinking we’re more positioned for bank financing, and a lot of that would be for improvements to existing facilities and to update things,� Owens said. “There’s nothing in the plan as massive as a new golf course, but we may look at a few new amenities like zip lines or climbing walls — stuff like that.� The resort’s past struggles trace back to a 2002 acquisition by an investor group that included longtime golf pro Rick Smith of the Rick Smith Golf Academies at Oakland University and elsewhere. Smith, Robert Eaton, former DaimlerChrysler AG director and retired Illinois-Owens Inc. Chairman/
CEO Robert Lanigan and several others, put up $12 million in cash plus a $10 million bank loan toward the $26 million purchase. The group bought about 85 percent of the resort property, with the Melling family of Melling Tool Co . in Jackson and Melling Resorts Interna tional keeping the remaining share. But the resort reported eight straight operating losses through 2010, required more capital from the owners for improvements, became embroiled in a tax dispute with Otsego County over years of alleged delinquencies, refinanced amid bank pressure and struggled to keep up with interest. “We recognized there were serious (property) improvements that needed to be made, and we were fortunate that these owners had the wherewithal to make them and did not need to take cash out of the operation at the time,� Owens said. “Often in bankruptcy cases like this, there’s a receiver appointed, but we always stayed in management, it never affected our employment or reduced our hours, and we were able to continue to operate.� A majority of the resort owners in 2010 and 2011 bought out $14.3 million in acquisition debt then held by Citizens Bank, for $11.9 million, as members of a newly formed Treetops Acquisition Co. II or TAC II LLC . The bankruptcy exit plan allowed that entity to essentially convert the debt into Treetops equity. The TAC II owners — Eaton, Lanigan, CEO D. Scott Luttrell of investment firm LCM Group in Dallas, CFO Mark Ridenour of Heidtman Steel in Toledo, former Progressive Tool and Industries Co. shareholder Al Wisne and Mark Melling of the Melling companies — are now full owners of the Treetops business. Rick Smith and another Treetops Acquisition owner who was not a TAC II member, Bob Sierra of SB General Partners, were in a separate SEE NEXT PAGE
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class of owner-creditors and retain no stake in the resort. Smith is a well-known golf course designer and former golf operations director at Treetops. It was not clear how much of a stake they lost, but their businesses each held more than 10 percent equity, according to a corporate ownership statement in court. Smith’s attorney, Lynn Brimer at Strobl & Sharp PC in Bloomfield Hills, and Drew Carr of business manager Fidelity Sports Group in Orlando, Fla., would not comment for this story. Sierra and an executive at his Sierra Properties real estate company in Florida did not return phone calls. “There wasn’t any plan against anyone (in ownership). I don’t know why they didn’t participate in forming” the new entity, said Robert Mollhagen, partner at Varnum LLP and attorney for TAC II in the bankruptcy. “And it was all resolved amicably. A lot of objections get filed in court to preserve your rights, even though you’re really actively negotiating. This was a very successful bankruptcy, and from day one there was always an active negotiation.” The reorganization plan submitted in June essentially swaps the TAC II debt claim for all of the equity. The resort itself is on pace for nearly $13 million annual revenue, with varying monthly income but averaging a few percentage points above break-even, according to Owens and income statements for November 2014 through June.
Its debt was mostly related to the acquisition. Treetops owed its 20 largest unsecured creditors only a combined $1.3 million, and nearly half of that was to law firm Par menter O’Toole in Muskegon. The Otsego treasurer’s office contends Treetops owes about $590,000 in delinquent property taxes from 2007 to 2012, but the company contends it actually is owed a tax refund of about $41,000. While ski and golf tourism are two primary revenue streams, Owens said, the resort also is building revenue through weddings, corporate retreats and other events. “A lot of resorts like Treetops have a good product, but it’s still a very discretionary spend. People will be planning weddings and golf outings more at places like that as all boats keep rising” on Michigan’s economic recovery, said Ron Wilson, CEO of Hotel Investment Ser vices Inc. in Troy. “And as things get better downstate, there is more market upstate for tourist dollars. It’s also somewhat tied to real estate — people can recover and take a long weekend or a golf vacation a lot easier and sooner than they can recover and buy a cottage.” Like Treetops, Hotel Investment Services saw tourism suffer during the recession at its three managed properties on Mackinac Island — the Inn at Stonecliffe, Harbour View Inn and Harbour View Bed & Breakfast. But he also said business has improved each year since 2010 and that this year is the company’s best on the island since then. “And Mackinac is a little more in-
sulated than some other communities up north, because it gets also more regional play out of Michigan as a boating destination,” he said. “But the market as a whole is utterly dependent on the downstate economy.” Jason Bank, partner at Kerr Russell and Weber PLC in Detroit and attorney for Treetops Acquisition Co., said the next goal is to settle the tax dispute. Bank and Joseph Sgroi, a partner at Honigman Miller Schwartz and Cohn LLP and attorney for the creditors committee in bankruptcy court, both said the settlement for Treetops does not involve Sigma Alpha Mu and Sigma Delta Tau at the University of Michigan. The resort sued the Greek organizations and more than a dozen UM students after a Jan. 17-18 visit where guests allegedly destroyed nearly 50 resort rooms and caused more than $400,000 in damages. The lawsuit was later merged with the bankruptcy, but Opperman agreed in October to let it proceed separately again at Otsego County Circuit Court. Treetops has already received $25,000 from the local chapter of Sigma Alpha Mu — which has since been dissolved by the national organization — and about $200,000 from its insurer, Philadelphia Insur ance Co ., to go toward those damages. Sgroi said that any payments that result from the litigation will go to the current resort company and its owners. 䡲 Chad Halcom: (313) 446-6796 Twitter: @chadhalcom
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SPECIAL REPORT:
SECOND STAGE Company drops insurance, hopes to offer it again Once Frank Kadaf, president of Active Solutions Group Inc., lost the ability to hold onto his company’s health care plan, he and his employees scrambled to find other options. The insurer dropped the company’s group policy once the Affordable Care Act went into effect on Jan. 1, 2014. “It was kind of a mess,” Kadaf said. “It put us at a disadvantage that we had to cancel what we had in place, and myself and other employees had to make other arrangements.” Active Solutions has 11 employees. The Dearborn-based company reached $1.15 million in revenue last year and is expected to exceed $1.32 million this year. The company is a supplier of voice-over-Internet phone services. Kadaf was paying about $1,700 per month for his company’s group policy before it was canceled. Comparable plans now cost about 20 percent more. At that point, Kadaf decided it was more beneficial for himself and employees to start looking for health care policies on their own. Many looked to the healthcare.gov website. “Some weren’t happy about it,” said Kadaf. “They didn’t want to go through the marketplace or have to deal with the healthcare.gov website, especially with the issues that it was having.” Kadaf hired an insurance broker to SEE SOLUTIONS, PAGE 13
LARRY PEPLIN
Frank Kadaf, president of Active Solutions Group Inc., is still searching for a group health care plan.
Affordable Care SCARE Stories by Rachelle Damico
he arrival of the Affordable Care Act had many businesses owners worrying about the impact it would bring. Worries about high insurance rates, cutting or laying off employees and terminating medical plans seemed to pour in faster than the rules themselves. The law itself has been subject to post-enactment changes, leaving a lot of business owners seeking answers and scrambling to meet new deadlines. “We have to give it time to work out,” Leon Richardson, president of Southfield-based ChemicoMays LLC told Crain’s one year ago. “We may in the long run pay less. I’m just not sure, I don’t think anyone is.” There is truth to that statement: Despite concerns that the ACA would lead to greatly increased insurance costs, midsize businesses are seeing increases that average 3 percent after making plan changes. That’s the lowest rate in more than 10 years, according to a new survey by Troy-based Marsh & McLennan Agency LLC. “That’s a positive message for this year,” said Rebecca McLaughlan, vice president of Marsh & McLennan. “I predict 2016 will be the same or possibly even lower.” Only 5 percent of Michigan employers in-
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tend to terminate medical plans within the next five years and send employees to the public health exchange to seek coverage, according to a new survey by Mercer, a human resource consulting firm based in New York. To end this year’s coverage of secondstage businesses, we revisited a few owners who shared stories of management challenges and lessons learned over the past 12 months. We had just one question for them: Now that the ACA has been in effect for at least one full year for you, how have you dealt with it? Although Frank Kadaf, president of Dearborn-based Active Solutions Group Inc. , was forced to cancel his company health care plan after it became noncompliant with the ACA, he is still looking for a group plan even though he is not required to offer insurance. “There was a lot of fear the employers were going to drop their plans and send their employees off to the exchanges, and we just haven’t seen that,” said McLaughlan. In another Marsh & McLennan survey, 99 percent of mid-market employers said they likely will offer health coverage to full-time employees for at least two more years. McLaughlan said there have not been a significant number of businesses that have
fired, laid off or cut employee hours. Companies that have 100 or more employees who work more than 30 hours per week had to comply this year or face financial penalties of at least $2,000 and up to $3,000 a worker. Businesses with 50-99 employees also will be required to offer health care insurance to workers in 2016. The ACA also expanded rules under IRS tax code 105(h), which says businesses cannot discriminate based on classification of employees. The rules, which previously applied only to self-funded plans, expanded to include insured plans. (Guidance to enforce the rules has yet to be issued.) In Southfield-based Diversified Restaurant Holdings Inc. ’s case, the non-discrimination rules brought hard decisions over how to cover managers and the many hourly workers it employs at its restaurants. “There’s a cost to having more employees if you’re decreasing hours,” McLaughlan said. Vincent Salvia, president and CEO of Rochester Hills-based Generations Home Care Group, said that the first year was hard. “It was very stressful because every time the government made a change, I’d run through my business plan again,” Salvia said.
Four companies tell how they’re working through ACA. See story above left and Pages 13-15
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SPECIAL REPORT: SECOND STAGE “I wish we would have started earlier and dealt with a stronger broker that understood the process more.”
CEO sees ACA as positive so far At
Frank Kadaf,Active Solutions
the
end
of
last
year,
ChemicoMays LLC President and
SOLUTIONS FROM PAGE 12
help the company through the process and meet with individual employees to go over options. “People don’t want to have this type of change, especially when it comes to something that can be detrimental to the way they live,” said Kadaf. “If somebody has a lapse in insurance and something happens to them, think about what the consequences are financially.” Active Solutions worked with the broker over a period of 60-90 days before the Jan. 1, 2014, deadline. Kadaf said the process was a rush to fill out paperwork and was not without complications. “I wish we would have started earlier and dealt with a stronger broker that understood the process more and didn’t wait until the 11th hour to try and push something through,” said Kadaf. “There was a lot of openended information, and everyone did not know all the crystal-clear answers.” Even though Kadaf is not required to offer health insurance because his
employee count is under 50, he has been working with other brokers to see if the company can eventually go back on a group policy again. “You’re not going to get talent if you don’t have something as basic as health insurance,” Kadaf said. In the last year, he has interviewed about six people. For two of them, health care was a major factor in deciding not to take the job. “One of them was for sure out because they had a family and they needed insurance,” said Kadaf. “The other one, we tried to negotiate salary instead and we just couldn’t see eye-to-eye.” Although Kadaf believes the ACA ultimately is for the greater good, he said the process has been difficult and at times messy. “I feel like it came on very quickly,” said Kadaf. “There was not enough lead time for a small-business owner to make proper adjustments or get things right, especially since even the professionals in the business were still not comfortable with it or educated enough to make the right decisions.” Rachelle Damico
CEO Leon Richardson told Crain’s it was too early to jump to conclusions on the Affordable Care Act and that he might have a different opinion after another year. So a year later, we called him to see where his thoughts are. “It’s really been a positive so far,” said Leon Richardson: Richardson. “It’s ACA has been a plus adding value to for ChemicoMays. the lives of employees by giving health care access to those that may not have had it in the past.” ChemicoMays has 310 employees and is expected to reach $110 million in revenue this year. Last year’s revenue was $96 million. Before the ACA came into effect, ChemicoMays offered employees one health care plan option. Now, the Southfield-based company has three. Employees can choose plans starting at a cost of $15 every other week for a high-deductible health care plan and $101.28 every other
week for the lowest deductible plan. “It offers employees flexibility depending on what they can afford,” said Richardson. Since the ACA has come into force, ChemicoMays has paid more insurance costs due to a 20 percent increase in enrollment benefits. The company always has offered health care to all employees, but Richardson believes the enrollment increase is due to more lower-level employees signing up to avoid penalties under ACA. “It’s not that big of a financial contribution on our part,” said Richardson. “It’s been more of an expense, but not drastic.” ChemicoMays originally classified full-time employees as those who worked an average of 32 hours a week. To comply with the Affordable Care Act shared responsibility provision, the company now defines full-time workers as those who work 30 hours or more a week. “It allows other employees health care access, which is a good thing,” said Richardson. ChemicoMays arranged meetings with an insurance broker over an approximate two-month period to go over different insurance plans
and costs. “We feel employees are happier,” said ChemicoMays Human Resource Manager Shaleontyne Constantine. “The insurance we now offer is affordable to every level of employee.” Constantine said the biggest burden on the company has been form 1095-C, which requires businesses with at least 50 full-time employees report coverage information to both employees and the Internal Revenue Service. ChemicoMays had help from Roseland, N.J.based ADP LLC, the company’s payroll and human resource software provider. “It changed so frequently that at times we waited until something more permanent went into place,” said Constantine. Constantine said the company’s current focus is making sure the information provided to the IRS is captured and accurate. “We felt that it really wasn’t that difficult to us to adjust since we already had a fairly affordable plan for our employees,” said Constantine. “It didn’t have a significant impact on our business.” Rachelle Damico
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Firm finds ACA didn’t hurt bottom line as much as feared Owner Vincent Salvia at Rochester-Hills based Sage Holdings Group Ltd., which does business as Generations Home Care Group, feared the Affordable Care Act would have a major impact on profitability. That hasn’t come to pass, but that doesn’t mean Salvia or his top brass are happy with the new way of doing things. Salvia had been looking through financial statements since 2013, trying to predict outcomes.
“At the highest insurance projection, there was agony and stress,” he said. “I thought, why even stay in business if I have to give all of my money away?” Generations has 110 employees and is expected to reach $4.3 million in revenue this year. Its revenue last year was $3.5 million. Companies with 100 or more full-time workers, defined as employees who work more than 30 hours per week, had to comply this
year or face financial penalties of at least $2,000 and up to $3,000 per worker. “The penalty was crazy,” said Salvia. Businesses with 50-99 employees also will be required to offer health care insurance to workers in 2016. Salvia contemplated selling divisions of his company to keep his employee count at 50 people per division.
“It’s a horrible business plan,” said Salvia. “It was not fun looking at tearing down the business I’ve been building for 10 years.” He spent about three months meeting with Rochester Hills-based Human Capital LLC, which provides health care consulting. Human Capital has been handling Generations’ payroll, human resources and workers compensation for four years. “We found a package that just
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“It was much less of an impact financially.” Vincent Salvia, Sage Holdings Group Ltd.
barely meets the minimum requirements to keep it legal,” said Salvia. Salvia pays $40 a month per employee for a high-deductible health care plan he picked purely for price reasons. “I was relieved that I had a number that I could work into my budget to stay in business,” said Salvia. Before the Jan 1, 2014, government health care deadline, only Salvia’s top executives were on the company’s health care plan. “They’re complaining they had better insurance before,” said Salvia. “They were dissatisfied.” Salvia said the few managers who were willing to pay more to keep their previous insurance plans could not do so because the company did not satisfy minimum enrollment requirements. “They were very unhappy that they were forced to give up their good plan,” said Salvia. Since Generations began offering all employees health care, only 35 percent of them have participated. Salvia believes employees who aren’t participating are either paying the penalty for not having insurance or staying on spouses’ plans. The company went from insuring eight employees to 16. Salvia said the increase in insurance costs is less than 10 percent. “It was much less of an impact financially than I feared,” said Salvia. “The changes I had to make were minimal because we got such a low rate and most people didn’t sign up for it.” Salvia said several employees who formerly had no health insurance were thankful they had the plan. “It was nice to hear some people are happy to have what they have,” said Salvia. “There’s some good coming out of it.” Generations signed 2016 health care renewals last month. The price went down from $41 a month per employee to about $31 a month per employee. “It was just a godsend,” said Salvia. Salvia said although he is happy his rate went down, he does not like the fact that he is required by the government to offer insurance. “Providing insurance for people would be a nice thing, but instead we’re trying to avoid penalties from the government,” he said. “It’s the total wrong motivation.” Rachelle Damico
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Managers paid price when Diversified made ACA changes When Southfield-based Diversi fied Restaurant Holdings Inc. implemented changes in line with the Affordable Care Act in 2013, it was the company’s managers who were most affected. “They went from paying zero (premium) dollars to a significant amount,” said Michael Ansley, president and CEO of Diversified. “It really hurt our managers.” The holding company is the largest franchisee for Buffalo Wild Wings and owner of the Bagger Dave’s Burger Tavern chain. It reached $128 million in revenue last year and has about 4,500 employees. As a restaurant business with many part-time employees, Diversified faced a special dilemma. The ACA broadened tax rules that say employers cannot discriminate by offering different plans to different employees. This broadening affected Diversified’s health care plan, and as a result the company had to move managers to a new group policy plan that is shared with hourly employees. “We don’t like it, but we have to look for other ways and benefits that give us a competitive advantage,” said Ansley. The company now only offers health insurance to those who work 30 hours or more a week to allow full-time workers the financial flexibility of three different health care plan options. The employees’ current health care plans start at $92 a month for a higher-deductible health insurance plan and $172 a month for the lowest deductible plan. Ansley said less than 10 percent of employees have chosen to participate in the company’s current health care plan. He believes this is because many Diversified employees are age 26 and under, and may still be on their parents plans. “We informed them they can stay on their parents’ plan and spelled everything out to employees to let them know what their options are,” said Ansley. “And obviously, we’re an option.” Amy Lemon, director of Diversified’s team member relations, said the company has had an uptick in employee enrollment, which she believes is due to employees avoiding health care penalties. “The plan was designed to make sure that the company stayed compliant with requirements and that we were offering something that was affordable and deemed to be valuable to employees,” said Lemon. Diversified also switched to a
self-insured plan in preparation of the ACA. More companies have begun to self-insure as a way to avoid incurring new taxes resulting from ACA. With self-insuring, as opposed to paying an insurance company for coverage, employers are responsible for paying any claims that arise. This gives the employer more control over costs, but it is more of a gamble. “Our increases in the past have been higher than we were comfortable with so when you’re self-insured, you have a little bit more flexibility,” said Lemon. “It’s all about risk management.” Diversified used Kansas City, Mo.-based health insurance broker Lockton Inc. to assist with the insurance change. “We were in a better position than most,” said Ansley. “We were comfortable from the perspective that we already offered hourly employees health care.” Over the course of six to eight
GLENN TRIEST
Michael Ansley, president and CEO of Southfield-based Diversified Restaurant Holdings Inc., said complying with the Affordable
Care Act ended up hurting managers. months, Ansley also met with Diversified’s committee, which includes Ansley, the company’s CFO and controller, employees and other board members, to discuss insurance plans and how much costs such as co-pays and deductibles would be.
“We’ve seen considerable increases in the actual premiums the last three years, but we’ve been able to redesign the plan to some extent to mitigate that,” said Ansley. Ansley said Diversified is paying higher insurance rates, but the biggest adjustment has been the
impact on managers. “We were worried about how upset they were going to get,” said Ansley. “For the most part, it went over better than we expected, and they understood our hands were tied.” Rachelle Damico
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Petkey blessing: Wider customer net Losing primary client led company to hit road, find new biz Sometimes blessings come in disguise. That was the case with Petkey LLC in Wixom, a provider of microchips and registration services for pet owners to use in case they lose their pets. Problem: Early in Petkey’s life as a business, it relied on one national pet adoption organization for more than 90 percent of its business. In 2008, that customer pulled the plug as part of a program to make vendors compete for business. The revenue stream that once made up more than 90 percent of business dropped to 25 percent, sending Petkey into a tailspin. Revenue dropped from $2 million a year to under $1 million. The employee count fell from about 15 to seven. “Initially, we panicked and ran around with our heads cut off just like anyone would,” said President Nicholas Acosta. “We let some people go. Everyone took a haircut in pay,” including owners and top management. Solution : To grab new customers and diversify the customer base at the same time, Petkey’s top four executives went on the road. They hit the trade show circuit hard, going to dog shows, veterinarian shows, groomer shows and dog shelter shows. “You name it. If there was a show, I was at it,” Acosta said. “We
Petkey LLC Location: Wixom
Nicholas Acosta: Looked at every aspect of industry.
President: Nicholas Acosta Description: Pet recovery and behavior services Employees: 23 Revenue: $4.7 million in 2014
looked at every aspect within the industry of where people go to register microchips or get the services we provide.” The Petkey executives also saw an opportunity to gain an edge over competitors, who by and large were big pharmaceutical companies. At these shows, they could put a personal face on their small company. Acosta went as far as giving out his cellphone number to new customers, telling them to call him should they have any problems. At the same time, one employee spearheaded an effort to build an online sales presence. The employee, Blair Hulet, who now is executive vice president and CIO, took the responsibility to ask the questions and learn the technical nuances needed to make it happen. Customers, which include individual pet owners, can buy Petkey services directly through its website, which has a registry and also a lost-and-found database.
Tom Borg: Don’t wait to ask for employee ideas.
Online sales now make up 15 percent to 20 percent of revenue for the company. This concerted effort soaked up much of the executives’ time. “All four of us had to step up,” Acosta said. “I barely saw my family.” Money was funneled into paying for travel expenses. “Anything left over after keeping the lights on would be spent on new-customer acquisition,” Acosta said. After four years of this, things turned around. Volumes increased and Petkey began hiring again. Revenue is on track to hit $5 million this year, and the employee count is at 23. The original customer remains a customer of Petkey but now accounts for 10 percent of sales, Acosta said. The company has 360 accounts now. Was it then a blessing that the original big customer did what it did to Petkey? “We laugh about it all the time. It was the best thing that ever happened to us,” Acosta said. Risks and considerations : Petkey had no other option than the one it chose, Acosta said. Going after one large customer to replace the
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Thomas Amato, co-president of powertrain components supplier Metaldyne Performance Group Inc., will step down from the position at year’s end, the company said. Co-President Douglas Grimm has been named president and COO, and Russell Bradley was named executive vice presiThomas Amato dent of sales. Amato was named chairman and CEO of Metaldyne LLC in 2007, leading the company through a 2012 acquisition by American Securities LLC and a 2014 merger with Grede Holdings LLC and HHI Group Holdings LLC. The combined entity, Southfield-based MPG, was listed on the New York Stock Exchange in December 2014.
Budden named Priority Health president, CEO Joan Budden, chief marketing officer of Priority Health since 2009, will become its president and CEO next month. She will replace retiring CEO Mike Freed Jan. 1, the Grand Rapids-based company said. Budden came to Priority Health after holding various executive positions at Detroit-based Blue
Joan Budden
MANUFACTURING Paul Hundhammer,
CEO,
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Bellissimo has been appointed CEO of J.R. Thompson Company (JRT) and Competition Graphics (CG). A 29-year marketing and advertising industry veteran, he’ll manage all creative, business and financial aspects of JRT/CG, leading a combined staff of more than 100 people and focusing on building client relationships and driving long-term growth. Bellissimo previously worked at CampbellEwald, advancing to the position of President and Managing Director and serving as a member of the Board of Directors. He also founded and managed Campbell-Ewald’s 180person retail marketing agency, CE Retail.
Amato to step down as Metaldyne co-president
Gary Anglebrandt
Mark Bellissimo, JR Thompson and Competition Graphics
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first was clearly a bad idea. Operationally, there was the risk of executives being away from the office too much. They worked around this by making sure only two of the top four were on the road at any one time, even if all they were managing was the 25 percent of sales that remained after the big customer dropped Petkey. At least then, “our 25 percent can’t get down to 10-15 percent,” Acosta said. Expert opinion: Communication, both internal and external, is the way to avoid ending up in the situation that Petkey faced and to claw out of it if a company can’t avoid falling into it, said Tom Borg, a consultant based in Canton Township. Employee strategy sessions can churn up revenue-generating ideas, and there’s no reason to wait until disaster strikes to hold them. “Often, owners don’t listen to these folks because they think they know everything,” Borg said. New tools can help get this done without taking up too much time. SnapSuggest is one that Borg is evaluating; it’s an app that allows employees to anonymously suggest something and for others to chime in. Externally, owners can seek out others who have gone through the same experience. Even if those other owners are in different industries, they may have valuable lessons. “I’d call them up, buy them a cup of coffee. In a sense they’re experts,” Borg said.
PEOPLE: SPOTLIGHT
Carhartt, Inc. Hundhammer will lead the strategic account team and drive the overall strategic sales plan across all channels of distribution. His responsibilities will include expanding the business with current partners and explore future business opportunities. Prior to Carhartt, Hundhammer worked for Nike, Inc. in several strategic sales leadership roles including the Strategic Account Director for Foot Locker. Most recently, Paul served as the Senior Vice President of Sales for Event Network.
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They included stints in the individual consumer division, project management office and corporate strategy departments. Budden has been involved with Priority’s individual, group commercial and government programs.
Pflum elected to head Mich. Chemistry Council Greg Pflum, vice president and general manager of BASF Corp.’s Michigan operations, has been elected president of the Michigan Chemistry Council, a Lansing-based policy advocacy group. Pflum will serve a two-year term beginning in January for the organization, which represents the chemical industry’s interests to state legislators. Pflum oversees BASF’s operations in Wyandotte, Southfield and Fighting Island on the Detroit River and roughly 2,000 employees. He was an executive for German chemical and nutritional ingredient supplier Cognis Holding GmbH before it was acquired by BASF in 2011. 䡲
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would have its own board, filled with property development folks and community residents, Carmody said. It would seek a for-profit joint partner whose job would be to get land ready for development. The Troy-based Kresge Founda tion gave Eastern Market $550,000 to support the entity. Eastern Market, in its quest to preserve the authenticity of the market, has a bias for food businesses, and its new development entity would carry that same slant. But it also would make room for residential and retail, mirroring another responsibility of the corporation, that of balancing the interests of varying parties within the district. To that end, it has been looking into the possibility of developing Shed 4 as a mixed-use project with housing on top.
Terminal problem Regular business growth is pushing companies like Wolverine, a meat distributor, to expand. Another factor in play is the 2011 Food Safety Modernization Act, aimed at preventing contamination, particularly among produce companies. The U.S. Food and Drug Administration released guidelines last month. To meet them, many companies must revamp facilities or build new ones. Eastern Market itself within five years will have to build a refrigerated facility for its wholesale growers, something in the range of 20,00030,000 square feet, Carmody said. Facing the same pressures are the eight produce companies that run the 300,000-square-foot Detroit Pro duce Terminal, which sits on 26 acres on West Fort Street. The idea has come up to build something bigger — in an expanded Eastern Market district — to accommodate everyone. Eastern Market is spending $70,000 to look into it. The Detroit Produce Terminal would need to spend $15 million just to meet the new federal requirements, and in the end would still have a “1925 facility that isn’t energy efficient and is terrible with regard to materiel logistics,” Carmody said. “Nearly everyone in the wholesale distribution of fruits and vegetables in Southeast Michigan is
going through the same calculus.” Joseph Kuspa, vice chairman of Eastern Market’s board, said locations being considered for this are east of St. Aubin, outside current district borders.
Slow pace Wolverine Packing President Jim Bonahoom is all for expansion. The company has been using the I-75 service drive as a parking lot because it has run out of space to park trailers. Development “has been slower than we like,” Bonahoom said. To alleviate the problem, Wolverine this past summer bought a 3-acre parcel of city land between Rivard Street and the service drive to use as a staging area. The deal took two years to close, even though it was the city that first approached him. The lack of progress is frustrating for some. Eastern Market’s development efforts pale in comparison with those of Midtown Inc. , whose chief, Sue Mosey, has orchestrated a boom in construction, said Kimberly Hill, one of the owners of Mootown Ice Cream & Dessert Shoppe
on Russell Street. Hill was executive director of the coalition that was Eastern Market Corp.’s predecessor prior to 2006. “What development?” Hill said. “They still have not developed any pieces of city land.” Karen Brown has run her Eastern Market shop, Savvy Chic, for 17 years and is a board member of Eastern Market Corp. “People want to move here, but there’s nowhere to go, no new buildings,” Brown said. There were about 60 acres of cityowned land as of 2012, according to Eastern Market Corp.’s management agreement with the city. Eastern Market was unable to provide updated details. Kate Beebe was president of Eastern Market Corp. the first two years of its existence and came up with the plan eventually approved by Detroit City Council to form the nonprofit. She expected more resources to be put toward developing the areas surrounding the central market by now. “A lot of good things have been done for the market. I don’t think anything’s been done that puts us further behind with respect to real
INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: Active Solutions Group.................................... 12 AP United ............................................................. 1 Boydell Development ....................................... 17 Bronner’s Commercial Display ........................ 8 Cascade Engineering.......................................... 1 ChemicoMays .............................................. 12, 13 Christmas Decor by DeVries ............................ 9 Coastal Automotive ........................................ 18 Dan’s Excavating................................................ 9 Detroit Chassis ................................................. 19 Detroit Manufacturing Systems.................... 19 Detroit Red Wings.............................................. 3 Detroit Tigers...................................................... 3 Diversified Restaurant Holdings............... 12, 15 Dow Chemical..................................................... 4 Dupont................................................................. 4 Eastern Market Corp. ........................................ 3 Education Achievement Authority................. 8 Generations Home Care Group................. 12, 14
Goodwill Industries of Greater Detroit ........ 20 Hotel Investment Services .............................. 11 Lear....................................................................... 3 LeClerc Display ................................................... 8 Marsh & McLennan Agency ............................ 12 Michigan Association of Nurse Anesthetists .... 7 Michigan Department of Corrections .............. 20 Michigan Dept. of Health and Human Services 18 Petkey ................................................................ 16 Plunkett Cooney ............................................... 21 RochesterDowntown Development Authority ... 9 Sage Holdings Group ....................................... 14 St. John Health System ..................................... 7 Sakthi Automotive Group .............................. 20 Treetops Acquisition ....................................... 10 Talmer Bank and Trust .................................... 22 United Way ........................................................ 18 West Michigan TEAM ...................................... 20 Wolverine Packing.............................................. 3
estate development,” Beebe said. “It’s not too late.”
The Water Board building When it comes to missed development opportunities in Eastern Market, the first property that comes up is the old Detroit Water Board building, which has been empty since the 1990s. The 100,000square-foot property sits just east of Roma Cafe at Erskine and Orleans streets and has a history of plans that never got off the ground. Joseph Kuspa, former owner of Metro Produce Inc. and current vice chairman of the Eastern Market Corp. board (as well as mayor of Southgate), had plans for the property as far back as 1995, including one to install a canola oil processing plant there. Robert Heide, owner of the nearby FD Lofts on Russell and Erskine streets, also had various designs for the place, going back at least a decade. One of the more recent ones was a plan in 2011 for a mixeduse development targeted at creative entrepreneurs and food startups, a tilapia farm among them. Amid these various plans, a zoning dispute broke out when Kuspa sued the Detroit Board of Zoning Ap peals over its approval of a use for the site proposed by Heide. The zoning ultimately was upheld, but in 2007 the dispute almost reached the Michigan Supreme Court , which declined to hear it. Last year, Garden Fresh Gourmet’s founder and former owner, Jack Aronson, was working with Farmington Hills developer LoPatin & Co. to put a food business incubator in the building, but to no avail. Meanwhile, the building sits.
‘Delicate balance’ Why hasn’t more happened? Carmody said the years following Crain’s 1985 story were tough ones as the national food industry went through rounds of consolidation. That led to the closing of slaughterhouses and warehouses in the 1990s and early 2000s. Demand from food wholesalers and distributors has only arisen in the last two years, Carmody said. Before that, the glut of post-recession warehousing inventory was too easy to grab, even if it meant moving elsewhere, as Butcher & Packer Supply Co. did in 2010 when it moved to Macomb County. The two dozen or so companies that have come calling are “an altogether recent phenomenon of large companies wanting to stay near the market.” Kuspa has been on the nonprofit’s board since its inception and was a leading organizer of its predecessor. He said Eastern Market comes with special responsibilities that other neighborhoods don’t have to worry about: Maintaining the area’s authenticity as a center of food business, and managing the conflicting interests among retailers, vendors, wholesalers and residents. “It’s a delicate balance,” Kuspa said. “Development for the sake of development doesn’t do a lot for an area with the uniqueness of Eastern Market.” The nonprofit from its inception in 2006 had “three or four years to
17
shore up its core,” meaning the traditional market, and also needed to figure out who actually owned various parcels of land. While the nonprofit can’t force deals into existence on land it doesn’t own, it can bring parties together to make deals happen. “We have not been doing much of that for the past 10 years,” but the commitment is there now, Kuspa said. Carmody ticked off a handful of projects completed or started within the past year. There was Wolverine’s purchase this past summer. Pellerito Foods Inc. bought city property next to the company’s headquarters on Mack. Eastern Market is assisting with plans for both Milano Bakery & Cafe and the FD Lofts on Russell Street to expand into adjacent city property. As for the Water Board building, Carmody said the nonprofit is waiting for the right proposal. The building’s high ceilings, wide column bases and accessibility for trucks make it perfect for food distribution, and it “would be a sin to use it for housing or other smaller commercial uses,” he said. Carmody said Heide’s plans, or at least the ones with which he was familiar, were mixed-use projects not suitable for the building. Such uses are better placed elsewhere in the district, perhaps along the Dequindre Cut, which only recently became feasible for development, he said. One of those properties, poten-
tially, is a former slaughterhouse that sat vacant and blighted for years. Exterior work now is being done on the building by its owner, Dennis Kefallinos, who has converted many old Detroit industrial and commercial properties into lofts. But Chris Mihailovich, general manager of Kefallinos’ Boydell Development Corp., said Kefallinos has no firm plans for the property. The exterior work is being done to pretty it up for the extension of the Dequindre Cut from Gratiot to Mack, which runs right next to the structure. Eastern Market has been slow to join the crowd because cheaper space has been available on the outskirts of downtown and Midtown, Mihailovich said. While Eastern Market has properties and stability, prices remained higher throughout the recession years, adding to already high costs of renovating old properties. “Eastern Market is not overlooked,” but developers have put it on a longer schedule, he said. George Jackson, former head of the Detroit Economic Growth Corp. , was Eastern Market Corp.’s first chairman. He said development has only recently again become feasible as progress in nearby areas pushes demand outward. “Nothing in Detroit happens overnight,” Jackson said. “I didn’t think it was going to move as fast as Midtown.” 䡲
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WHY ALICE MATTERS
ALICE FROM PAGE 1
ALICE: What is it? The first ALICE report was conducted by the United Way of Northern New Jersey in 2009 in an effort to understand the financial constraints faced by a population often referred to as the working poor. The acronym ALICE stands for “asset-limited, income-constrained but employed.” The project since has expanded to the rest of New Jersey, as well as five other states — Michigan, Indiana, Florida, Connecticut and California. Michigan’s report was released in September 2014. Five more states — Iowa, Louisiana, Washington, Oregon and Idaho — are conducting their own ALICE reports now. The project attempts to define the income threshold needed for an ALICE worker to cover basic expenses (referred to as the Household Survival Budget) and cover expenses while maintaining some savings (called the Household Stability Budget). ALICE data show that more workers than only those who meet federal poverty income limits struggle to make ends meet. Read more at www.unitedwayalice.org.
The cost of turnover The loss of a single employee — and the expense of hiring a replacement — can cost companies more than $3,400, national estimates suggest. The Society for Human Resource Management
estimated last year that the average cost per hire nationally was $3,420 in 2014. That includes fees for thirdparty consultants or advertising agencies, job fairs and online job boards, employee referral bonuses, travel and relocation costs and recruiter compensation. Other acquisition costs could include training, uniforms and name badges, lost productivity and extra overtime for remaining employees. The group also estimated the national average time to fill a job last year was 42 days, and the average annual turnover rate was 18 percent of staff.
effort to reduce turnover rates. “We’re desperate for people right now. We’re getting ready to open up our 10th restaurant (this) month and, quite frankly, we’re scrambling to get really quality employees out there,” Allen said. “Because we don’t have a succinct mass transportation system, it’s very difficult for people who want to work to get out to that location.”
Meet ALICE Though named for a woman, ALICE is a composite of women and men, young adults and seniors, single households and families. The acronym was coined in 2009 by a United Way organization in New Jersey, which sought to identify barriers to employment that hold back low-income workers from achieving career success. More often, they’re referred to as the working poor, with incomes above the federal poverty limit but too small to be financially stable. Many have limited education or skills, small family support systems or little savings. ALICE advocates say some of today’s low-skilled workers grew up without role models who could demonstrate what it means to work full time or teach “soft skills” such as communication and problem-solving. Common industries that employ ALICE workers include manufacturing, hospitality, customer service and construction. ALICE workers have jobs, but their existence is fragile. One flat tire, an unexpected doctor’s visit or a sick babysitter could mean a missed shift and paycheck. That, in turn, could cost them their jobs: Absenteeism is one of the most common reasons ALICE workers are fired. National estimates peg the cost of losing a single employee at about $3,400, based on hiring and training a replacement, lost productivity and even extra overtime for workers who stay. To prevent turnover, many employers across the state are choosing to pool funds for the salary and benefits of a caseworker who meets with qualified employees at their work sites during work hours. The partnerships, known as employer resource networks, have helped workers access bus fare or gas money, child care services and help to prevent utility shutoffs. Employers say the networks also have dramatically increased retention. Advocates for ALICE and human resources consultants say business long has maintained that it’s not an employer’s responsibility to solve their employees’ personal problems. But what if they could? Companies that succeed at reducing turnover, they argue, are the ones that attempt to understand the challenges their employees bring to work each day — which
WHERE DOES ALICE LIVE? Nearly 1 million households — 930,503 — in Michigan are considered ALICE, an acronym used by United Way organizations across the country to represent people who are “asset-limited, income-constrained but employed.” When including people living in poverty, 1.5 million Michigan households, or 40 percent, don’t earn enough money to cover their necessary expenses. The five-county metro Detroit region is no exception. Below, find the municipalities that rank in the top 10 based on percentage of ALICE households within their borders. A note about Detroit: The city does not rank in the top 10 for ALICE — at 29 percent of households, it ties for 11th. But 38 percent of Detroit households are impoverished, ranking it second when measured by that statistic. Highland Park ranks first on both the percentage of households in poverty — 45 percent — and last in the percentage of households earning above the ALICE income threshold — just 26 percent. The enclave has the same percentage of ALICE households as Detroit, 29 percent.
SOURCE: UNITED WAY ALICE MICHIGAN REPORT
can become distractions to productivity — and recognize that a solution is not the sole job of government welfare programs or nonprofit human services agencies. “As cold-hearted as this may sound, if business doesn’t see return on their investment, they’re not going to do it,” said Duane Berger, chief deputy director and COO with the Michigan Department of Health and Human Services, who travels the state to promote employer resource networks. “It’s got to be a business solution,” Berger said. “If human capital’s stabilized at work, they’re probably stabilized in their family lives.”
Not enough income Data paint an eye-opening pic-
ture of the size of Michigan’s low-income workforce: Forty percent of the state’s households — 1.5 million — don’t make enough money to cover their bills, according to Michigan’s ALICE report, released in September 2014. Of them, 930,503 can be considered ALICE. Income varies by county and family size, but generally, ALICE households led by someone younger than 65 earn between $35,000 and $50,000 per year. Seniors generally earn $20,000 to $25,000 annually. That income is far short of what United Way’s findings estimate is needed just to cover basic expenses. For instance, researchers determined that a single-person ALICE household in Michigan would need
to earn $16,818 per year just to meet his or her expenses, or $8.41 per hour. A family of four would need to earn $50,345 — $12.59 per hour if both parents work, or $25.17 based on a 40-hour work week if only one parent is employed. In order to cover expenses and have money left aside to build a savings — in other words, to become financially stable — a four-person household would need to earn at least $92,409 annually, or 84 percent more than survival income alone. That larger figure accounts for saving $563 a month and having a little budget breathing room, such as funds for the family to eat out once a week. To reach that $92,409 figure, both parents would need to earn at least $25.17 per hour, or $46.20 per hour if only one parent works. A single ALICE employee, meanwhile, would need to earn an annual income of $24,430, or 45 percent more than needed to cover base expenses. That comes to $12.22 per hour. Yet achieving those incomes will be problematic in a state dominated by low-wage jobs, researchers suggest. In all, 63 percent of Michigan jobs pay an hourly wage below $20, they found. And the fastestgrowing expected job openings — in health care, retail, construction and food preparation — require little schooling and pay less than $15 per hour. In fact, the authors wrote, those openings are expected to grow at least twice as fast as jobs that require more skills. “Two hallmarks of the servicesector economy are that these jobs pay low wages and workers must be physically on-site; cashiers, nurses’ aides and security guards cannot telecommute or be outsourced,” they wrote. “This means that Michigan’s economy is dependent on jobs whose wages are so low that workers cannot afford to live near their jobs even though they are required to work on-site.” United Way leaders already are talking about updating the ALICE report to account for federal Affordable Care Act health insurance changes, a higher state minimum wage and cost-of-living increases, said Scott Dzurka, president and CEO of the Michigan Association of United Ways.
Expanding network When an employee at Coastal Automotive misses a day of work, he or she amasses “points,” or demerits. The Rochester Hills-based supplier of energy-absorbing vehicle materials says workers have called off a shift for such reasons as a friend’s car had a flat tire and they had no other ride. Company administrators are empathetic, but they say their hands are also tied, since they can’t award some employees preferential treatment over others. “So many people we lose because they don’t have a way to get to work,” said Victoria Roberts, Coastal’s human resources manager. SEE NEXT PAGE
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The supplier three years ago forged a $9.8 million program with the state called Community Ventures, which uses general fund dollars to match employers with human service providers that can help ex-offenders and workers on the state’s public assistance or Medicaid rolls hold on to jobs. That program, though, is limited only to employees who live in the city of Pontiac, since the state concentrates its dollars in four of the state’s most troubled urban centers — Detroit, Pontiac, Flint and Saginaw. That means a worker at Coastal who is struggling to make ends meet but lives a few miles away in Auburn Hills isn’t eligible to receive any services, such as gas cards or funds to prevent utility shutoffs. As a result, Coastal Automotive has committed to join a startup employer resource network that will serve workers who live in all of Oakland County, extending wraparound services to even more people. Oak land Livingston Human Service Agency
will be the network’s administrator. Coastal recently started a pilot program with ride-sharing service Uber, which arranges to drive employees to work. That program has helped at least one dedicated employee, who works as a team leader, drop off her two children and arrive on time for her shift at 6 a.m., said Wendel Martin, Coastal’s commercial director. Without it, he said, she likely would have lost her job due to transportation issues alone, regardless of her job performance. Since joining the Community Ventures program, Coastal Automotive’s retention rate has improved from about 40 percent over 12 months to roughly 67 percent, the state said.
Turnover cost Employers have a definite financial incentive to want to improve retention: The cost of turnover. Nationally, the average cost per hire was $3,420 last year, according to estimates from the Alexandria, Va.based Society for Human Resource Man-
agement, a U.S. membership organization for human resources professionals. That’s based on a number of onboarding costs, including fees paid to a third-party consultant or advertising agency, job fairs or online job boards; employee referral bonuses; travel and relocation costs; compensation for recruiters; and other talent acquisition expenses. Harder to estimate is the dollar value attributed to lost productivity, or impact of turnover on customer service quality, said Rick Guzzo, a partner with human resources consultant Mercer LLC who is based in Washington, D.C. Same with vacancy costs, such as maintaining an open desk or unused phone service. When an employer begins to experience a rash of turnover, C-suite executives could benefit from digging into the root causes, Guzzo said. Rarely is it any one factor in isolation. More likely, he said, absenteeism or job loss is the result of several factors at work — scheduling Tanya Allen: Becomplications, lieves resource net- low wages or work will pay off. transportation among them. “The work that we do with large employers is to help them understand: Of all the things that could be causing turnover, what’s actually most influential in their situation?” Guzzo said. “Those factors can differ greatly from one employment setting to another. It’s not always wages. It’s not always just schedule. It’s not always they hired the wrong people.”
‘Open up their eyes’ Advocates for ALICE say business has to buy into policy changes that emphasize people along with the bottom line. The state is transitioning away from a manufacturing-centric economy into one that values knowledge-based services and higher education. And a talent shortage in the
skilled trades is making it harder for some employers to find new workers to fill the pipeline. The ALICE report “has started to open up their eyes,” Dzurka said of employers. Companies that join an employer resource network spend money up front with the hope that they’ll reap a greater return on investment. Berger said participating employers repeatedly have noticed improvement in retention. Hiring a caseworker to handle solutions to social problems also frees up in-house human resources managers to focus on business needs, Berger said. “A lot of companies will say, ‘It’s not my job to solve social problems. It’s not my problem to worry about how they get to work. It’s not my problem to worry about their kids.’ And to some degree, that’s true,” Berger said. “More and more companies are recognizing, ‘Maybe it’s not my responsibility, but if I want business bottom line to be (the) best it can be, I’ve got to have good assets in my human capital.’” Employers who successfully boost retention don’t focus just on raising wages, said Guzzo, of Mercer. Instead, they have perfected a system of employment practices, from scheduling to skills training. For Tanya Allen, who operates restaurants at Detroit Metro for joint venture HBF APU JV LLC, that includes offering a work environment that is conducive to retention. HBF APU recently joined the Wayne County employer resource network, at a cost of $10,000 annually. She believes it will pay dividends in reducing turnover costs. Employees who are distracted by outside problems, especially in a customer-facing job, affect the quality of service given to customers, she said. And each time the company has to train a new worker, speed of service declines. “Pay it later or pay it now,” Allen said. “If you don’t invest in your employees now, you will pay later.” Lindsay VanHulle: (517) 657-2204 Twitter: @LindsayVanHulle
LARRY PEPLIN
Lori Ann Smith, an employee of P.F. Chang’s at Detroit Metropolitan Airport, along with Wassim Takriti, vice president of operations for HBF APU JV LLC at DTW.
Income-constrained workers must ‘make it stretch’ By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine
Before the recession, Randy Baker was a supervisor at a cleaning company in charge of maintaining two glass office towers in Southfield. His position was cut as the company downsized — partly, Baker says, because fewer office tenants were leasing space. A widowed father of a teenage son and daughter and now unemployed, Baker still had to keep up with mortgage payments on the family’s home in Eastpointe and other related bills. About 10 months ago, he found a job as a production worker at Detroit Chassis LLC , which makes motor home and RV frames as a subsidiary of Detroitbased SPECTRA LMP LLC . Baker earns $13.50 an hour on a 40hour work week to move chassis between assembly lines and install gas lines. His full-time schedule also earns him medical benefits. Yet Baker, 51, says he continues to find himself stretched thin financially. He is an example of ALICE — a phrase adopted by United Way organizations across the county to highlight the precarious financial existence of people who are “asset-limited, income-constrained but employed.” “I’m blessed to be making that and it helps tremendously, but it’s still a struggle,” Baker said of his current wage, which works out to gross annual earnings of about $28,080 on 40 hours per week. “We have to do with what we have and make it stretch.” A conundrum on low-income workers, according to Michigan’s ALICE report, is that they often are paid far less than what they need to make ends meet — and the state’s fastest-growing job openings are in low-skilled, lowwage industries, meaning no quick trajectory for earnings growth for many like Baker. Jeanine Dotson, who works a day shift on the line at Detroit Manufacturing Systems LLC , says her company’s membership in what’s known as an employer resource network — an entity that pools resources to help employees at multiple organizations navigate employee workforce issues — has allowed her to receive bus fare and, now that she bought a vehicle, a $50 gas card every two weeks for her roughly 20-minute commute. To resolve transportation issues — often the biggest reasons for absenteeism and turnover — Dotson said she also has received financial help to cover a portion
“We have to do with what we have and make it stretch.” Randy Baker,production worker, Detroit Chassis LLC
of vehicle repairs, work clothes and shoes. At $11 per hour for 40 hours of work, Dotson, 40, says she makes too much to qualify for state assistance but “it can be tricky” to live paycheck to paycheck. Her cable recently was shut off after she fell behind on bill payments. “You can see the money, but it’s still not enough,” said Dotson, a Detroit resident who is renting her own place for the first time after always splitting rent with roommates. Detroit Chassis, where Baker works, splits the cost of a caseworker with Detroit Manufacturing Systems and two other companies. Baker said he receives a gas card that lasts two weeks, as well as uniforms and boots for work. A financial coach told him he has good credit and encouraged him to pay extra on his mortgage per month in order to pay it off early. It’s a good idea, he said, but difficult to accomplish when most of his paycheck goes out immediately to other bills. “It just gives you a goal as far as, ‘This is what I can do when I start making more or get a second or a third job,’ ” said Baker, who added that the program helps him feel optimistic that he will be able to move up the financial ladder. His caseworkers make him believe it’s possible, too. “You can see it on their faces. You can see it on their actions,” Baker said. “They really care about the individual.” 䡲 Lindsay VanHulle: (517) 657-2204 Twitter: @LindsayVanHulle
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Supplier aims to give parolees new workplace opportunities By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine
One segment of the ALICE population is gaining a second chance in the workplace: Paroled prisoners. Sakthi Automotive Group USA Inc. is making headlines for its innovative approach to boosting its employee ranks — hiring ex-offenders amid a $60 million expansion of its southwest Detroit facility. The company, a subsidiary of India-based supplier Sakthi Group, is an example of the business-led support that ALICE advocates say is needed to help low-income workers not only keep their jobs but reduce the rate of turnover. CEO Lalit Verma says 25 convicted felons were hired within a six-month period this year, with a goal to employ at least 48 over the next two years. Verma said recently the company plans to hire “as many … good, capable people as we can find.” Most enter the company on the
EXPANDING:
shop floor as CNC operators, hi-lo drivers and maintenance workers, earning between $11 and $14 per hour, Verma said. A few parolees already have been promoted, some within a matter of months. They make up a workforce 280 strong, with a goal to hit 650 employees within a few years, Verma said. Sakthi makes aluminum castings for the automotive industry. Sakthi’s approach has statewide attention. The Michigan Department of Cor rections has worked with Sakthi and other employers to try to place convicted offenders in jobs upon their release from prison. This year, the department held a job fair in conjunction with U.S. Attorney Barbara McQuade’s office, representing the Eastern District of Michigan, that attracted nearly 800 paroled prisoners and nearly 20 employers, said Janella Robinson, a prison re-entry spe-
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cialist with the state corrections department. On a smaller scale, corrections staff members regularly focus on employers’ outreach, including making them aware of the types of education and training prisoners receive while incarcerated. They also offer employer tours inside prisons to see the work firsthand, Robinson said. The department often develops training programs based on the types of specialized skills employers need, such as welding, she said. The department uses several other tools to help ex-offenders transition back into employment,
including retention workshops with parole officers about the types of conditions the new hire might face on the job and wage subsidies for employers who want to give a parolee a tryout in a temporary position. “We are on a good path, but we have to continue what we’re doing, and I think that more employers have to become open to considering (them),” Robinson said. Verma said the benefits for Sakthi are twofold — his company is able to add skilled labor, especially as manufacturers worry about a looming talent shortage, while helping prisoners re-enter civilian life and
support themselves. Parolees know their felony conviction automatically disqualifies them from jobs at many companies, Verma said. Sakthi’s goal is to offer them a second chance. Experience so far has shown parolees, once re-acclimated to the workforce, to be dedicated employees. “I think they are sincere; they are willing to learn,” Verma said. Sakthi projects it will have revenue of $58 million this year, $150 million in 2016 and $450 million by 2020. 䡲
RESOURCE
a single worker at $3,400. Yet most companies don’t know their own turnover costs, Berger said. Nor do many know ALICE’s impact on their workforce, he said. Berger said an employer once said he didn’t have any workers fitting the ALICE description until he looked closer at starting wages. Employers sometimes say turnover is the cost of doing business, Berger said. He wants to show C-suite executives that the initial investment lowers costs. “You’re asking them to invest financially, and you would think they would balk at that, but they’re not,” said Keith Bennett, a program director with Goodwill Industries of Greater Detroit , who is starting a resource network in Wayne County.
hours to watch children of secondand third-shift manufacturing workers, said James Durian, director of the state’s Community Ventures program, which connects workers receiving public assistance with services and is involved with the Detroit-area resource networks. “We can only do that because these big companies came to the table,” Durian said.
FROM PAGE 1
ers to boost retention rates. Cascade Engineering, which specializes in plastic injection molding, later would contract with a state caseworker who worked at the plant, Keller said. In the early 2000s, that project became the state’s first employer resource network, partly because other firms were interested in what Cascade was doing. The model has been replicated across the state — in Kalamazoo and Battle Creek, in Flint and Saginaw and now in Southeast Michigan. Companies jointly hire a caseworker who visits each participating workplace and meets confidentially with employees. It has proven successful at retaining workers, particularly in industries like manufacturing that pay lower wages and require less education. The program dovetails with the United Way’s ALICE report (See story, Page 1), released last year to identify barriers Michigan’s working poor face in meeting basic needs. At Cascade, monthly turnover fell from 40 percent to 3 percent in about four years, Keller said. Cascade pays about $30,000 per year to participate in the network. Typical employer contributions range from $5,000 to $20,000, depending on how many companies join, how many workers receive services and the types of services offered, said Duane Berger, chief deputy director and COO with the Michigan Department of Health and Human Services , who promotes the
networks statewide. “What we’re doing here is marketing best practices,” Berger said. “This is not a government solution. This is a business solution.” The human services caseworker, called a success coach, is the primary up-front cost at roughly $60,000, Berger said. Member employers decide locally what services to offer. They can include bus fare or gas cards, training, second-shift day care, budget counseling and even access to loans.
Workforce impact National human resources experts peg the average cost of losing
Attracting interest The Wayne County effort started coming together this past spring. So far, four employers have signed on — Detroit Manufacturing Systems LLC, a joint venture between Waynebased Rush Group and French auto supplier Faurecia SA; Integrated Manufacturing & Assembly in Detroit; De troit Chassis LLC; and HBF APU JV LLC, a joint venture between Atlantabased Hojeij Branded Foods and its Detroit partner, AP United LLC , that operates restaurants at Detroit Metropolitan Airport. The program has a $760,000 budget, Bennett said. He said he is in talks with as many as four other employers about joining. A social worker typically spends two days per week at each participating employer, he said. The goal: To help low-income workers, including ALICE, achieve financial stability and move up the career ladder. Organizers also want to change ALICE’s mindset toward work. If an employee starts a new job but much of the early paychecks go to pay overdue utility bills, Bennett said, “you don’t see the value of that job.” In Pontiac, the Oakland Livingston Human Service Agency is creating a similar employer resource network that will serve Oakland County. Coastal Automotive in Rochester Hills is committed. Organizers are recruiting more firms. In Saginaw, for instance, a day care provider agreed to stay open 24
Lindsay VanHulle: (517) 657-2204 Twitter: @LindsayVanHulle
Return on investment Organizers are studying the networks’ results as they prepare to take the concept to more cities. The W.E. Upjohn Institute for Em ployment Research in Kalamazoo received a five-year, $3 million federal grant to expand a Southwest Michigan employer resource network and evaluate its success. The grant will help the program grow from 10 companies to 35, said Scott Cubberly, a grant project manager with Upjohn and Michigan Works Southwest , which serves Branch, Calhoun, Kalamazoo and St. Joseph counties. The evaluation will quantify the program’s return on investment and use the results to expand the networks, he said.There is data to indicate some early success. Eight in 10 low-income workers who receive loans continue to save once the funds are repaid, said James Vander Hulst, president of West Michigan TEAM, a nonprofit that acts as the fiscal agent for west-side ERNs. Participating employers’ retention rate is 98 percent. The Source, the Grand Rapids resource network that includes Cascade Engineering, started in 2003 with seven employers, executive director Mindy Ysasi said. It now has 15 mostly small to medium-sized manufacturers. Keller, of Cascade Engineering, said his firm’s supervisors didn’t fully buy in until they were put through a poverty simulation. That dispelled misperceptions that lowincome workers are lazy. “When you’re in a middle-class environment, you’d kind of expect the folks to be able to handle that situation on their own,” he said. “What we learned is they needed some assistance in the early stages to learn what needed to be done.” 䡲
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rate. The team previously refinanced the 41,574-seat, $326 million ballpark in 2005 (using an 11-bank syndicate led by original stadium financier Sumitomo Mitsui Bank ) after failed attempts to do so in 2000 and 2001. Low attendance, fueled by poor play, contributed to the unsuccessful refinancing attempts, Sports Business Daily reported at the time. The source familiar with the refinancing said the team may have refinanced the stadium at least one time since 2005 and 2014. Because the Tigers have been a playoff team with a full stadium and loyal local television audience for the past decade, the value of the team has skyrocketed to $1.125 billion, according to Forbes’ most recent estimate. Major League Base ball ’s successful revenue-sharing model, built on enormous TV, digital and licensing deals, also has turned baseball teams into bankfriendly cash cows for owners. Forbes estimated the franchise’s value at $292 million in 2006. This year, the financial news site estimated the Tigers to be worth $1.125 billion, an increase of 285 percent. Ilitch bought the Tigers for $85 million in 1992 from Domino’s Pizza founder Tom Monaghan. Public records show that Ilitch, through one of his trusts, pledged rights to revenue from the team and the stadium to back the debt refinancing — now a standard practice for such a transaction, “If they have contractually obligated income streams from TV and sponsorships and other areas, there’s no reason they cannot use that as collateral,” said David Carter, executive director of the University of Southern California’s Marshall Sports Business Institute. “It makes sense they’d rely on that as security. These are collateralized known revenue streams he can quite literally take to the bank.” “From a lender’s perspective, you look at what assets are available to secure the debt because this is a significant undertaking with some risk,” said Douglas Bernstein, a banking and bankruptcy partner with Bloomfield Hills-based Plunkett Cooney PC. “You put a lien on the firstborn and then ask for more collateral.” The Tigers are known to collect $50 million annually from their local TV broadcast rights deal with Southfield-based Fox Sports Detroit, and ticket revenue and concession revenue remain among baseball’s best because of strong attendance. Ilitch has ensured busy turnstiles and a loyal TV audience by spending $1.5 billion on players, including several popular superstars that helped propel the team to World Series appearances in 2006 and 2012. Additionally, Dallas-based Comerica Bank is paying the team $2.2 million a year until 2028 as part of a 30-year, $66 million deal inked in 1998, before the stadium opened. The Ilitch family wealth has increased as the baseball team improved. Their business holdings had $3.3 billion in combined revenue last year — anchored by the Little
REFI INTEREST Detroit Tigers owner Mike Ilitch isn’t alone in taking advantage of better interest rates on Comerica Park.
The Detroit-Wayne County Stadium Authority owns the ballpark,which cost $326 million to build.The authority saved nearly $6 million in 2012 by refinancing the original $85.8 million in 30-yeartax-exempt bonds issued in 1997 to pay the public portion ofthe ballpark’s construction. The bonds are being paid offby rentalcarand hotel-room taxes approved by Wayne Countyvoters in the 1990s. An additional $40 million in construction financing came from the city’s Downtown Development Authority,and the Michigan Strategic Fund provided $55 million.Ilitch was responsible for$140 million ofthe cost. The stadium opened in 2000. Caesars pizza chain — and Forbes estimates Mike and wife Marian themselves to be worth $5.5 million. Marian Ilitch owns MotorCity Hotel Casino , and Mike Ilitch independently owns the Tigers because of Major League Baseball’s rules against casino cross-ownership. They jointly own the hockey team. They’re leveraging their various assets for a series of high-profile investments, including the arena; a $200 million-plus mixed-use redevelopment over 50 city blocks around the arena (with outside investors, too); a new Little Caesars headquarters next to their Fox Theatre offices; and $40 million for a new Wayne State University business school that will bear Mike Ilitch’s name.
The arena financing On the hockey front, Ilitch pledged assets held in a trust to back $200 million in bonds sold to finance part of the $627 million arena’s construction, according to a financing statements filed in Michigan and Delaware. In the deal with Detroit’s Down town Development Authority , which will own the hockey arena, one of his trusts ultimately backstops $11.5 million in annual bond debt repayments. The primary source of the bond repayments will be the revenue generated by the arena’s operations — Red Wings games and other events. Revenue already is trickling in ahead of the 20,000-seat arena’s debut for the 2017-18 hockey season. The arena’s 52 corporate suites and all but three of the 22 minisuites have been sold, the Ilitch organization said in November. Corporate suites lease for more than $300,000 a year and the leases are for seven to 10 years, which is at least $109 million in revenue. Trust assets would be used for repayment only if the arena weren’t generating $11.5 million in revenue, an unlikely scenario, barring a cataclysmic event. There is one scenario that could disrupt arena revenue: labor trouble. For example, the National Hockey League canceled the entire 2004-05 season because of collective bargaining strife between the owners and players. Games were also canceled in
the 1994-95 and 2012-13 seasons. However, sports industry insiders say the threat of a lockout or strike has diminished greatly since then because both sides know the financial harm is devastating. “The overall cost of disruption isn’t worth the potential gain,” said Wayne DeSarbo, executive director at the Center for Sports Business and Research at Penn State University. The new Red Wings arena is expected to have non-hockey events on more than 140 nights a year, helping ensure a steady revenue stream even if hockey was shelved for awhile. The public, via a special downtown property tax in Detroit mostly paid by major corporations, is financing $250 million of the arena’s construction. The two series of bonds totaling $450 million were floated in December 2014 by the Michigan Strategic Fund in a transaction authorized by the state Legislature to pay for the arena’s construction. Ilitch, through his Olympia Devel opment of Michigan real estate business, has pledged to pay for anything beyond $450 million, which so far has been $175 million in additional expected spending. Like the Tigers, the Red Wings show up in public records as having been tapped as collateral in Ilitch deals. In 2001, the team used its ticket revenue; money from television, cable and radio deals; merchandise agreements; concessions; and player contracts as collateral in a deal with Paris-based lender Société Générale S.A. , according to Wayne County records. The purpose of that deal was not disclosed.
Protecting assets The particular trust used to back the arena bonds does not contain the Tigers or Comerica Park — meaning that the baseball team’s fortunes are not jeopardized if the hockey arena project runs into trouble, according to the source familiar with the financing. The Ilitch organization declined to identify for Crain’s what assets are contained in the arena-backing trust. It’s normal business practice for a wealthy individual to have many trusts to protect major assets, and it is publicly known that Ilitch’s interest in the Tigers and Comerica Park concessions are entrusted together, according to financing statements filed with the Michigan Secretary of State. That trust was used in July 2014 to back the ballpark refinancing. Like hockey, baseball’s history includes season-killing labor troubles, but there hasn’t been a work stoppage since 1994. But if some other financial catastrophe unfolded, the Tigers are exposed to have their revenue used for debt repayment instead of, say, salaries. “If Armageddon occurred, that’s potentially less money to spend on free agents,” Plunkett Cooney’s Bernstein said. “This is way farfetched, but these things happen.” 䡲 Bill Shea: (313) 446-1626; Twitter: @Bill_Shea19 Robert Snell: (313) 446-1654; Twitter: @RobertSnellnews
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ROSS
in Michigan now that the rest of the country was in recession, too?
always agree, but there were no harsh words.
FROM PAGE 1
I’d been very friendly with the late Alfred Taubman and his wife, Judy, and he gave me very good insights into Michigan. He gave me the confidence to invest there. For years, we had New Year’s Eve dinner at their place in Palm Beach, and then the next day we’d go back to the Taubmans to bet on football and eat Kobe beef hot dogs. I ended up being quite familiar with Michigan. First of all, we’d been investing in an auto parts business in Michigan and had done quite well. We made 14 acquisitions, all distressed, for International Automotive Components Group, and now we have 27,000 employees in 17 countries. And at the time, we were also a large investor and I was on the board of Assured Guaranty, which guaranteed a lot of debt for the city of Detroit. Second, we’d spent some time with Gov. (Jennifer) Granholm and thought she was doing a pretty good job of trying to deal with the fundamental problems of the state. The most important part was we were convinced Michigan was not going to fall into Lake Michigan and become the Lost Continent of Atlantis.
Clearly the growth strategy worked. Did it surprise you how smoothly and how well?
That same sentiment was being asked seven years later after his foray into Michigan banking. “Ross is a collector of the junked, the unloved, the wretched refuse of an economy that has mostly given up making things in favor of buying them elsewhere,” read one passage in the BusinessWeek article. That refuse is gold now. Today, W.L. Ross & Co. has about $9 billion under management and Ross himself is listed by Forbes as having a net worth of $3 billion, ranking him No. 554 in the world and No. 194 in the U.S. Ross’ company committed almost $50 million of a $200 million capital raise for a bank that had about $100 million in assets. At the time, there was no industry more beleaguered than banking, and no state more beleaguered than Michigan. And despite his track record, a lot of national observers wondered, again, if he had any idea what he was getting into. Ross had the last laugh. First Michigan, subsequently renamed Talmer Bank and Trust, dramatically expanded its footprint in Michigan and into Wisconsin, Illinois and Ohio through the acquisition of the assets of troubled banks shut down by regulators. Talmer raised more than $200 million in an initial public offering in 2014 and today has about $6.5 billion in assets. Having agreed to appear at an M&A awards night Crain’s is holding in February, Ross talked with Crain’s reporter Tom Henderson about why he decided to invest in a tiny bank in Michigan and about a wide range of other issues. News that you were investing in a onebranch bank in Michigan took people here by surprise. We’d had our own one-state recession for years. We’d got beaten down, so the reaction was, why would this New York financier want to invest in a tiny bank
LEAR FROM PAGE 3
jobs in the city.” Simoncini said General Motors Co., Fiat Chrysler Automobiles NV and Ford Motor Co. are asking for their large suppliers to at least consider opening manufacturing plants in the city. The Detroit 3 are focused on creating more jobs for Detroiters, as several of their executives sit on the newly revived Detroit Workforce Development Board, which includes Simoncini and Dauch, Lewand said. “We are continually discussing potential business opportunities with our supplier partners, and are always open to new ideas if they offer sustainable, mutual benefits,” Mark Reuss, GM’s executive vice president of global product development and supply chain as well as a member of the workforce board, said in a statement. “Developing a local supply base results in better quality, true growth on an export/trade basis for the U.S. and, of course, the re-creation of Detroit’s tax base.” The workforce board convened in October with a goal to create 100,000
But why a small bank here?
We were already a pioneer in buying distressed banks. We’d done very well with Florida Bank. And we liked the two guys there (David Provost, CEO of Talmer Bancorp Inc. and Gary Torgow, chairman). They’d already built up a bank (the Bank of Bloomfield Hills) and sold it to the PrivateBank of Chicago. They had a very tiny, $100 million bank. But it was a clean bank, which was very smart. It provided them the entrance requirement with the FDIC to be qualified to bid on the assets of what was clearly going to be a lot of very distressed banks in Michigan. We agreed to be their biggest investor, and it worked out quite well. It turned out to be an excellent partnership. We didn’t have one harsh word with them. We didn’t
new jobs in the city, with the majority of which targeted at city residents, In 2014, Detroit had 258,807 jobs and a population of 706,663, according to an April report by the Corporation for a Skilled Workforce and funded by J.P. Morgan Chase & Co.
“Our unemployment rate is down, but it’s still 14 percent; that’s still more than double the national average” of 5 percent, Lewand said. “Our board and major employers understand the importance of creating jobs for Detroiters.” As Crain’s reported 12 months ago, manufacturers are interested in the I94 Industrial Park because of its proximity to highways and existing infrastructure. “It’s a great location that has access to every major freeway,” Simoncini said. “The infrastructure is fantastic and the employees are available, and we could get components to every major plant in the region — even as far away as Lansing.” Detroit has many acres of vacant land, but it’s hard to find it in a concentrated chunk, said Dave MacDonald, executive vice president in the Royal Oak office of Jones Lang LaSalle.
It did. The rapidity with which they built that bank was faster than what I thought it would be. The other thing that turned out better than I thought it would was the economic turnaround in Michigan. Obviously Detroit was an accident waiting to happen, but what wasn’t obvious was how quickly it was going to happen. And how fast the city got to the other side. Considering the complexity of the problems in Detroit, it worked out so much faster than anyone could have thought. Do you know Mayor Mike Duggan?
I do. I’ve met him and Gov. Rick Snyder and I’m keen on both, though I know the governor a lot better. I think they’ve both done a great job. I was surprised, to tell you the truth, that Gov. Snyder didn’t throw his hat in the ring and run for president. The national M&A market has been extremely hot the last two or three years. Local investment bankers say that although sales multiples have gone through the roof, 2016 is going to be another strong year. Are you worried that things have got too frothy?
The leverage-buyout side of the business has got frothy. You look at the average multiple of EBIDTA (earnings before interest, depreciation, taxes and amortization) that is getting paid and it’s about 10 times. That’s a record. I come from the old school, where you paid six times and borrowed four times and thought you were quite leveraged. Now, people are paying 10 times and borrowing six to seven times. That’s a problem caused by these low interest rates. When interest rates get to a more normal level, these leveraged buyouts will not create the returns they were planning on, and they probably won’t be able to be refinanced. Private equity funds have a lot of money to invest, and corporations have record amounts of cash on hand. So how does that
He said amassing enough land for a supplier park would work only in spaces like the I-94 Industrial Park, land formerly owned by American Axle. Rehabbing of aging industrial space for modern manufacturing doesn’t make sense because of cost and difficulty, MacDonald said. Still, a substantial development is logical because none of the companies would be isolated in a remote portion of the city. “They like to be around one another,” he said. Simoncini said a successful industrial park will spur further manufacturing development in the city. “If we can prove the concept, others will follow,” he said. “Nothing breeds success like success.” The I-94 Industrial Park falls under the designation of the Next Michigan Development Corp., which the Legislature approved in January. As such a development, the site would be able to offer economic incentives to businesses that use multiple modes of transportation. Incentives include state and local incentives, tax increment financing and property tax abatements — as long as the business uses at least two of the four designated trans-
play out?
Strategic investors will more and more dominate the M&A field, because their cost of capital is much lower than leverage-buyout cost of capital. Most corporations are happy to make a 10 or 11 percent return on equity. LBOs need to return 20 percent, and their borrowing rate is several hundred basis points higher than corporations’. So it makes sense for corporations with strong balance sheets to pay higher multiples. You mentioned interest rates returning to normal. Everyone assumes the Fed will finally raise rates a quarter-percent off historic lows when it meets on Wednesday. I assume you’ll welcome at least a small start on the path to normal?
I’ll be disgusted if they don’t raise them. I not only think it’s a good thing, but I’m extremely disappointed it took them so long. This has been the world’s most tortured set of decisions on interest rates I’ve ever seen. It’s ridiculous it’s taken so long to go to 25 basis points. My concern, now, is they’ll raise rates so slowly that we’ll be … into the next recession before they’re done raising them, and they won’t have enough tools in the toolbox to respond with. But that points out the contradictory nature of the Fed’s two mandates — to have inflation at 2 percent and to create employment. These are contradictory mandates, and this Fed has been far more worried about jobs than inflation. They have disadvantaged savers in favor of borrowers, and that’s not good fiscal policy. The Fed has had such a preoccupation with an increase of 25 basis points, which is basically a rounding error, and now they have everyone so fixated on interest rates, there will probably be a lot of volatility next year when they keep raising them. They were worried about a recession. Well, if a rounding error is what stands in the way of a recovery, it’s not much of a recovery, is it? 䡲 Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2
portation modes: air, freight, rail or water. Lear made other investments in the city earlier this year. In July, Lear bought the 50,000-square-foot Hemmeter Building on Centre Street in Detroit for nearly $6 million. It will house employees from Lear’s shared services, information technology and administrative operations. Then in September, it acquired a building on State Street in Detroit’s Capital Park to house an innovation and design center. The building will house a gallery, a seat design studio and a software design center. Simoncini said the building’s proximity to Wayne State University and the College for Creative Studies make it a prime location to attract top design talent. “It’s a win-win and, frankly, I’m shocked more companies haven’t made moves (to Detroit),” Simoncini said. “Hell, yes, it’s a competitive advantage. You should see the resumes that are coming to us from our competitors.” 䡲 Crain’s reporter Kirk Pinho contributed to this report. Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh
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, Audience Development 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 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, the defense industry and education. (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, 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 Robert Snell, reporter Covers city of Detroit and regional politics. (313) 446-1654 or rsnell@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 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 DETROITBUSINESS ISSN # 0882-1992 is published weekly,except fora special issue the third weekof November,and no issue the third weekofDecemberby 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 DETROITBUSINESS,Circulation Department,P.O.Box07925,Detroit,MI 48207-9732. GST# 136760444.Printed in U.S.A. Entire contents copyright 2015 byCrain Communications Inc.All rights reserved.Reproduction oruse ofeditorial content in anymannerwithout permission is strictly prohibited.
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ON THE WEB DEC. 5-11
Detroit Digits Mental health A numbers-focused look at last board delays ICA week’s headlines: $1.3M pact decision The settlement amount Clinton he board of the Detroit-
T
Wayne Mental Health Authority voted 7-5 Friday to
suspend at least until Jan. 31 a decision this month by its CEO, Tom Watkins, to terminate a contract with Detroit-based developmental disability provider Integrated Care Alliance. Watkins contended ICA, which was recently acquired by Molina Healthcare of Michigan, is in violation of three contractual terms, and cited his authority as CEO to sever ICA’s $48 million contract with the authority, according to memos obtained by Crain’s.
COMPANY NEWS 䡲 Detroit Medical Center announced an unspecified number of layoffs, elimination of open positions and an overall 1 percent reduction in its workforce to reduce costs and improve efficiencies, officials told Crain’s. 䡲 United Kingdom-based Impellam Group PLC agreed to acquire Southfield-based Bartech Holding Corp. and its subsidiary Bartech Group Inc. for $120 million in cash and debt. Bartech, a global managed services provider, had been majority-owned by Sverica Capital Management LLC since 2012. 䡲 Clinton Township-based Tweddle Group Inc. opened an office in Detroit focused on connected car software. Thirty employees were moved into leased space in the Francis Palms Building in the Foxtown area. 䡲 The Michigan AIDS Coalition has merged into Matrix Human Services and is operating as the MAC Health program under the Matrix umbrella. Detroit-based Matrix is retaining the coalition’s leased location in Ferndale. 䡲 Detroit-based Huron Capital Partners LLC said it has sold its majority interest in Baltimore consulting firm Jensen Hughes Inc. to Gryphon Investors, a San Francisco private equity firm. Terms of the deal were not released. 䡲 Chelsea Milling Co., the Chelsea-based maker of Jiffy Mix baking mixes, is planning a $35 million expansion to help diversify the business, AP reported. 䡲 Detroit-based chickpea pasta manufacturer Banza LLC was named an Endeavor Entrepreneur by a panel of international business experts in Mexico City. 䡲 Detroit-based Fontinalis Partners has led an investment round of $3.5 million for Detroit-based Service.com, a startup that in conjunction with the funding has opened an office in Columbus, Ohio. Service.com has developed a smartphone app that helps
Township-based Adell Broadcasting Corp. will pay the estate of a former WADL-TV 38 employee who died last year while involved in litigation with the company over the loss of his health care benefits.
25
The approximate amount of jobs cut from Detroit advertising agency Campbell Ewald’s 500person staff. The layoffs come as a result of major client losses over the past five years.
$108.6M
The revenue reported for Detroit’s casinos in November, according to the Michigan Gaming Control Board. The amount is down 3.7 percent from October’s tally but up 1.8 percent from November 2014.
companies manage representatives in the field. 䡲 Troy’s Oakland Mall welcomed a new retailer, Swedish fashion retailer H&M. The store is the third H&M to open in metro Detroit in recent months, following openings in Livonia and Taylor. 䡲 Quicken Loans Inc.’s book of employee rules didn’t violate workers’ free-speech rights because it was irrelevant to daily operations and was largely ignored by staffers, an attorney for the Detroit company told an administrative law judge hearing a case brought by the National Labor Relations Board. 䡲 Visteon Corp., the Van Buren Township automotive electronics supplier, announced a $1.75 billion special cash distribution to shareholders and a stock buyback program of up to $500 million. 䡲 Peter Karmanos Jr., the retired co-founder of Detroit-based Compuware Corp., said he is not planning to move the Carolina Hurricanes, the National Hockey League franchise he owns, from Raleigh, N.C. Karmanos has indicated he wants to sell the team, the subject of relocation chatter. 䡲 The Troy-based Kresge Foundation said organizations in 12 U.S. cities will share nearly $8 million to help low-income communities deal with issues related to climate change, AP reported.
OTHER NEWS 䡲 Southeast Michigan’s economic growth is slowing amid long-term challenges regarding per-capita income and other key indicators, according to the Detroit Regional Chamber’s second annual regional report card. The report, released last week, said challenges, including being sur-
passed by Chicago as the top exporter to Canada, could impact the Detroit region’s economic growth. 䡲 Casino employees represented by union members of the Detroit Casino Council will receive lump-sum bonuses of $4,250, among other considerations, as part of tentative five-year contract settlements with Greektown Casino-Hotel, MGM Grand Detroit and MotorCity Casino Hotel. 䡲 The city of Detroit said three police unions have agreed to extend their contracts to 2020 in exchange for raises and other changes, AP reported. A 4 percent raise will take effect Jan. 1. 䡲 Detroit’s economic and fiscal health are stronger almost one year after exiting bankruptcy, but the city faces serious risks regarding future pension payments, New York-based Moody’s Investors Service Inc. said in an analysis. 䡲 A former principal in the Education Achievement Authority reform school district and two others were indicted by a federal grand jury on charges including bribery, conspiracy, money laundering and tax evasion. The indictment against ex-Mumford High School Principal Kenyetta Wilbourn Snapp and two contractors is the latest public corruption case following a years-long federal investigation of Detroit City Hall and Detroit Public Schools. 䡲 The Women’s City Club building in downtown Detroit has a new owner with a likely mixeduse conversion on the way, but new owner Eric Larson, president and CEO of Bloomfield Hillsbased Larson Realty Group, said he is still deciding how to use the 75,000-square-foot building. 䡲 Kim Schatzel, interim president of Eastern Michigan University, will leave the post she’s held since July to become president of Towson University in Maryland. 䡲 Daniel Ogden Kerber, the retired COO of the Wayne County Airport Authority, faces up to 20 years in prison after being charged in a fraud case for allegedly falsely obtaining hundreds of thousands of dollars from the beleaguered county retirement system. 䡲 Metro Detroit home and condominium sales slowed last month, dropping 4.2 percent yearover-year, said a report by Farmington Hills-based Realcomp Ltd. II. But median home and condo sale prices continued a positive upward swing, rising 5 percent last month from November 2014. 䡲 The Central Michigan University and University of Minnesota football teams were matched in the second Quick Lane Bowl Dec. 28 at Ford Field in Detroit.
OBITUARIES 䡲 Macomb County Treasurer Ted Wahby, a former Comerica Bank
executive and St. Clair Shores mayor, died Dec. 5. He was 84. 䡲
23
RUMBLINGS Points of Light seeks ideas for conference in Detroit oints of Light is looking for ideas for workshops at its annual national conference, which, the organization announced last week, will be held in Detroit next year. The Atlanta-based organization was founded by President George H.W. Bush to connect causes with volunteers. Its 2016 conference on volunteering and service is scheduled for June 27-29 at Cobo Center. The workshops are 90 minutes long and typically focus on ways to attract volunteers. Conference topics include education, disaster services, government, next-generation leaders and innovation. Full requirements to propose workshop ideas are on the conference website: volunteeringandservice.org. The conferences typically draw 4,000 to 5,000 people. This year’s event in Houston attracted 4,800 people, 48 percent of whom represented nonprofits. Another 18 percent represented businesses, and 11 percent came from colleges and universities. The cost to attend ranges from $200 to $750. The event entails about 200 events, including 150 workshops. There also is a service project for the host city. For Detroit, the project is likely to be aimed at workforce development and neighborhood rebuilding. The organization also is seeking local nonprofit and business leaders to work on the host committee. Interested parties can contact Jennifer Geckler at (404) 979-2900 or jgeckler@pointsoflight.org.
P
‘Catch the RocketRail at Woodward and Jefferson’ The above could become a commonly heard phrase in Detroit if a newly trademarked name is any indication. On Dec. 3, Quicken Loans Inc. trademarked the name RocketRail, describing it as being associated with “transportation of passengers via rail.” An M-1 Rail representative would not confirm the name as final. Quicken was supposed to announce the name in November but then postponed it. RocketRail is the latest in a series of rail-related trademark registrations by Quicken in the past 13 months. In November 2014, Quicken trademarked the names Quickline, Qlink and Qline, according to the trademark database. In February, Quicken trademarked the name Qride. RocketRail appears to be a play off a series of products tied to Gilbert-related ventures that use the words “rock” and “rocket,” such as Rocket Mortgage, Rock Ventures and Rocket Fiber. Quicken has invested $10 million
MICHAEL LEWIS II
The $137 million M-1 Rail streetcar project may be getting a new name soon. in the light rail project, making it the largest single corporate donor, and has purchased the naming rights.
Flint not alone among cities with lead problems While lead levels of the drinking water in Flint have caused a furor this year, it turns out many Michigan cities are no better off. In a report last week, Bridge Magazine showed a long list of Michigan cities have higher percentages of children with elevated blood lead levels than Flint’s — often much higher. Unlike Flint, the source of lead poisoning elsewhere isn’t necessarily the drinking water. In much of the state where lead is a problem, the source has been old lead paint on homes built before 1978, as well as lead residue in dust and soil. Among the cities with higher percentages than Flint’s 5 percent were Detroit, Grand Rapids, Jackson and Port Huron. In Detroit’s case, five ZIP codes had more than 700 children test positive in 2013, or nearly 15 percent of the 4,910 children tested. An interactive map and the full Bridge story can be found at crainsdetroit.com. The numbers won’t come as comfort for business leaders already concerned about education in Michigan. Lead poisoning affects the nervous systems of children, including their brains, causing cognitive problems that manifest in learning disabilities.
B-ham boxing comes to Eastern Market A bit of Birmingham has moved to downtown Detroit. Jabs Gym, a boxing and yoga business based in Birmingham, opened a location in Eastern Market last week. Among its offerings are “nightclub-style” classes where high-energy dance music accompanies boxing and kickboxing training. Jabs hopes to tap into the re-energized downtown world of office workers and apartment dwellers. Classes are offered as early as 7 a.m. during weekdays; after-work classes begin at 6 p.m. The Birmingham location has been open for three years. The Eastern Market location is the company’s second. 䡲
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