Crain's Detroit Business, Jan. 11, 2016 issue by Crain's Detroit Business

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Flint downtown district unites health care, fresh food in wellness push, PAGE 11

JANUARY 11-17, 2016

CRNA moves continue outsourcing trend

Poll: SE, West Michigan biz split on economy By Tom Henderson thenderson@crain.com

West Michigan and Southeast Michigan are divided by most of the width of the Lower Peninsula — and divided on many of the issues of the day, according to a poll by Lansingbased EPIC-MRA. But they are united on some things — they think Gov. Rick Snyder is doing a better job than President Barack Obama, and they are united in their disdain for the state Legislature, with not one of the 400 respondents thinking it is doing an excellent job. Terrorism is barely a blip on the radar screen when it comes to issues business leaders thought would impact their firms. And, though it may seem counterintuitive,

leaders in both regions are generally satisfied with the business taxes they pay. The poll of business owners, officers and managers was conducted on behalf of Honigman Miller Schwartz and Cohn , Crain’s Detroit Business and MiBiz, a publication based in Grand Rapids, with 200 people polled in each region. Detroit-area business owners and executives are more optimistic than their West Michigan counterparts when it comes to the economy and the state’s business climate.For example: 䡲 When asked if Michigan’s economy will improve this year, get worse or remain the same, 62 percent in Southeast Michigan said it

Costs, efficiency drive Providence job cuts By Jay Greene jgreene@crain.com

The 66 nurse anesthetists who lost their jobs Dec. 31 at St. John Provi dence Health System hospitals in Southfield and Novi were caught up in a push by local hospitals to reduce costs and increase reimbursement potential by outsourcing support staff. Over the past couple of years, a number of hospitals in Southeast Michigan have signed contracts with regional or national anesthesiology groups that employ both CRNAs and anesthesiologists. That’s been driven by declining reimbursement for CRNA services and to improve surgical anesthesia staff scheduling. The outsourcing of hospital employees — also including housekeeping, food service, laundry, information technology, supply management and emergency services — is driven by the broader need to reduce costs and improve efficiencies because of federal and private payer reimbursement cuts stimulated by the Patient Protection and Affordable Care Act, or Obamacare.

SEE SURVEY, PAGE 21

SEE HOSPITALS, PAGE 22

In wake of staff exits, Detroit’s daily newspapers must decide how to use resources By Bill Shea bshea@crain.com

Detroit’s two daily newspapers entered 2016 with leaner newsrooms after a round of retirement buyouts at the end of last year saw nearly 30 senior journalists head for the exits. Management officials at The Detroit News and Detroit Free Press say they are planning to replace at least some of the departing veteran tal-

ent, which included columnists Tom Walsh and Laura Berman, while focusing on print and digital journalism they believe will serve reader needs. Shrinking newsrooms have been a fact of life for a decade as newspaper circulation and advertising revenue have plummeted, to the point where even editors and publishers seldom say they can do “more with

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less.” The latest round of departures adds to questions of what news won’t be covered. Online readership and revenue have risen as media companies invest in digital resources, but that has not offset the lucrative advertising that has vanished from print since online sources have gobbled up and dispersed readers and advertisers. But those on the ramparts of Detroit’s newsrooms — which were twice their current size a decade ago — say they’re doing what makes sense to get stories covered at a time when the public desperately needs

a watchdog amid crises such as the Flint water situation. “We are seeing a huge amount of talent leaving Michigan’s journalism ranks, willingly and unwillingly,

and I think we will miss them more than we can even imagine,” said Anna Clark, who writes about Midwestern media for Columbia SEE NEWS, PAGE 24

The technological leap from old-style print newspapers to the Internet and mobile devices hasn’t come with a corresponding leap in revenue to pay for news-gathering. NATALIE BRODA

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MICHIGAN

BRIEFS Snyder declares Flint water emergency; feds in probe Gov. Rick Snyder declared a state of emergency in Flint over problems with lead in the city’s drinking water as federal officials confirmed they were investigating the matter. Snyder’s action last week followed emergency declarations by the city and Genesee County, which requested help from the state, The Associated Press reported. Flint Mayor Karen Weaver welcomed the governor’s declaration, saying it’s what “Flint deserves.” The state initially downplayed concerns about possible dangers of lead contamination but ultimately committed $10.6 million to reconnect the Flint water system to Detroit last fall and to respond with filters, testing and other services. The city switched from Detroit’s system to Flint River water in a cost-cutting move in 2014 while under state financial management, in an intended temporary step while a pipeline was built from Lake Huron. The city’s request for a disaster declaration includes roughly $50 million in aid. Federal prosecutors said they are working with the U.S. Envi -

ronmental Protection Agency on an investigation, and a state official said efforts will be made to provide every Flint household with a water filter.

GR a nice place to visit, but maybe not for the money The travel section of The New York Times has declared Grand Rapids one of its “52 Places to Go in 2016.” The newspaper ranked the city 20th on its list of top worldwide destinations, citing its “confluence of urban revival and arts funding” — the latter meaning ArtPrize — plus its craft beer industry. Mexico City placed No. 1 on the list. Should you choose employment in Grand Rapids, the news may not be as good. According to the compensation data site Payscale, employees in the Grand RapidsWyoming area are among the worst-compensated workers in the 100 largest metropolitan areas in the U.S. The 69th-largest metro area, Grand Rapids-Wyoming came in at 93rd on the pay scale, with an overall median pay of $52,900. The Detroit-Warren-Livonia metro area, 12th-largest nationally, was No. 15 in pay, at $66,700.

Zeeland company’s rearview mirrors take tolls Gentex Corp. announced that its latest electronic rearview mirrors will automatically record toll collections on all U.S. toll roads. The Zeelandbased company will team up with Nashville, Tenn.-based TransCore to offer the Universal Toll Module, a vehicle-integrated system that will allow motorists to drive on all U.S. toll roads without requiring a traditional toll tag mounted on the windshield, MLive.com reported. With a UTM installed in the rearview mirror, motorists will no longer need multiple toll tags for different regions of the country or have to manage multiple toll accounts, the company said. The new device complies with a 2012 federal law that calls for the development of a nationally interoperable electronic toll collection system by October 2016.

rey, Mexico, company officials said. 䡲 Grand Rapids-based MLive Media Group announced it is cutting 29 jobs as part of a restructuring to include formation of new journalism teams and management changes. The positions are expected to be management roles and jobs related to newspaper production, the statewide digital and print news organization said in a statement. 䡲 The Bay City Commission approved a six-year tax incentive for a developer to spend $4.5 million and turn the historic Bay City Times building into a loft-style apartment complex, MLive.com reported. The project, called The Times Lofts , will consist of 31 rental units, ranging from smaller studio-sized apartments to larger, two-story units. 䡲 Growers and distributors are likely to see a cap on the amount of cherries they can sell this year, the Traverse City Record-Eagle reported. Michigan is one of seven states sub-

INSIDE THIS ISSUE BANKRUPTCIES . . . . . . . . . . . . . . . . . 24 CALENDAR . . . . . . . . . . . . . . . . . . . . . . . 19 CAPITOL BRIEFINGS . . . . . . . . . . . . . . 6 CLASSIFIED ADS . . . . . . . . . . . . . . . . 21 DEALS & DETAILS . . . . . . . . . . . . . . . 19 MARY KRAMER . . . . . . . . . . . . . . . . . . . 11 OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . 8 OTHER VOICES . . . . . . . . . . . . . . . . . . . 8 PEOPLE . . . . . . . . . . . . . . . . . . . . . . . . . 20 RUMBLINGS . . . . . . . . . . . . . . . . . . . . 26 STAGE TWO STRATEGIES . . . . . . . . 18 WEEK ON THE WEB . . . . . . . . . . . . . . 26

COMPANY INDEX: SEE PAGE 25 ject to a proposed rule that aims to regulate the supply of tart cherries for 2015-16. The Cherry Industry Administrative Board proposed to restrict sales on 20 percent of the cherry crop in the states this season to balance supply and demand. 䡲

MICH-CELLANEOUS

Corrections

䡲 Dematic executives told employees they are considering closing the company’s plant in Grand Rapids, possibly affecting as many as 300 workers during the next nine months, MLive.com reported. Atlanta-based Dematic, which designs and builds automated systems for warehouses, distribution centers and other sites with material-moving needs, would move the production to its facility in Monter-

䡲 The 2016 Book of Lists, published Dec. 28, 2015, listed Beaumont Health with a Crain’s estimate of 22,225 full-time Southeast Michigan employees as of July 2015. Beaumont Health has provided an updated figure of 27,392 full-time Southeast Michigan employees (7,988 in Wayne County; 19,115 in Oakland County; 281 in Macomb County; and 8 in Washtenaw, Livingston and Monroe counties). Beaumont Hospital, Oak wood Healthcare and Botsford Health Care combined operations into a new entity called Beaumont Health in September 2014. The July 2014 employee numbers are for Beaumont Health System only. 䡲 A profile of Akervall Technologies Inc. on Page 3 of the Jan. 4 issue should have said co-founders Sassa and Jan Akervall are natives of Sweden.

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Art of the deal Artists’ rights concerns could hinder investors in city real estate, attorneys say

DADA drops charity from preview, citing past troubles By Sherri Welch swelch@crain.com

There’s one less charity on the list of nonprofits benefiting from Friday’s Charity Preview of the 2016 North American International Auto Show. The show’s organizer, the Detroit Auto Dealers Association , dropped the Detroit Institute for Children from

LARRY PEPLIN

Katherine Craig (right) sued to protect her “Illuminated Mural” on a building on East Grand Boulevard.

By Kirk Pinho

“Building owners and buyers, beware.”

kpinho@crain.com

n obscure federal law could put up hurdles to real estate investment in some areas of Detroit that are most in need of it. The 26-year-old law that protects artists’ rights came into focus last week as a Bloomfield Township real estate company was sued by a Detroit muralist. Real estate attorneys say it may cause investors to think twice about purchasing and renovating the city’s expansive fleet of rundown buildings if they have murals or other art on them. But developers say that in a business fraught with risk and littered with the corpses of failed projects, the Visual Artists Rights Act of 1990 is just one more factor to consider in a complex real estate equation. Detroit has some 80,000 properties considered blighted, and a colorful mural is often seen as a way to perk up the landscape. But costs and delays associated with a protracted legal battle over VARA might be too much for developers to risk on some properties, attorneys said. “Building owners and buyers, beware,” said

AndreyTomkiw,managing partner ofTomkiw Mackewich PLC

Andrey Tomkiw, managing partner of Royal Oak-based law firm Tomkiw Mackewich PLC. “If at some point in time you don’t particularly care what happens to an abandoned building that you own and you don’t know about VARA, you may be caught in a quandary down the line.” VARA allows visual artists to protect their work from “any intentional distortion, mutilation or other modification of that work which would be prejudicial to his or her honor or reputation.” But Eric Larson, president and CEO of Bloomfield Hills-based Larson Realty Group and CEO of the Downtown Detroit Partnership, said the law is but one of many factors to weigh on a real estate project. “Anyone that is acquiring a building or looking to make alterations to a building needs to do appropriate due diligence, and this is just one of those things that needs to be on the SEE ART, PAGE 23

MUST READS OF THE WEEK Stocks and crowds

Auto show begins this week

The good news: Federal regulators finally issue rules allowing smaller companies to crowdfund online in exchange for stakes in the company.The bad news: The rules might not make it the right choice for many businesses, Page 15

Media days for the North American International Auto Show start Monday, the Charity Preview is on Friday, and the public show starts Saturday.Visit CrainsDetroit.com frequently to keep up with the latest.

Mustang tally Huron Capital revs into 2016 with purchase of company that makes replacement parts for pony cars, old SUVs, Page 5

the list of benefiting charities this year, citing concerns over the agency’s closure of four clinics in June 2014, and the reduced number of children it was expected to serve as a result. It’s the first time the beneficiary list has changed since two charities were dropped in 2011. While DADA discussed the likely removal of the institute from the beneficiaries following the clinic closings in 2014, it delayed the cut until this year to give the institute more notice, said Rod Alberts, executive director of NAIAS and the DADA. And, for decades, the roster of benefiting charities has ebbed and flowed just as it might for any private nonprofit that distributes funds. Since its earlier turmoil, though, Detroit Institute for Children has Rod Alberts: stabilized its DADA delayed its budget and is cutting of charity. serving more children now than it was when it operated the clinics. CEO Marge Resmer LaRuffa believed she would be given a chance to share with DADA more details on its shift to serve children exclusively through schools instead of through clinics and metrics to show it’s serving more children, not fewer. But she says she never got the chance. “We had been doing the services in schools for 35 years and in the clinics for even longer,” she said. “By providing the services in schools where students (were) already going to be, it was less disruptive to the child and family and more cost-efficient.” When the DADA did its research on the institute and what occurred a year and a half ago, the nonprofit had its challenges, Alberts said. “Any time you start closing clinics and you have fewer patients, you question the program to some degree and have to make decisions accordingly,” he said. SEE CHARITY, PAGE 25

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“Three things stood out about Ambassador. One, they clearly had a great product. Two, sales were being driven by people finding them. Three, they were cash-efficient.” - Patrick Meenan, Ambassador Software investor

Ambassador Software builds business on referral marketing By Tom Henderson thenderson@crain.com

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Helping businesses turn their employees and customers into their ambassadors has put Royal Oakbased Ambassador Software on the fast track. Ambassador makes off-the-shelf and custom software for what is called referral marketing, in which businesses set up reward programs for customers who refer their friends and social networks. In April, just after closing on a first investment round of $2.35 million, Ambassador moved into 7,000 square feet of newly renovated space on West Fourth Street — classic tech startup space with hardwood floors, the requisite table tennis, and huge murals blown up from scenes from the movies “Indiana Jones and the Temple of Doom,” “The Lord of the Rings,” “Star Wars” and “The Matrix.” At the time, the company had 20 employees and had brought in $1 million of revenue in 2014. CEO Jeff Epstein says the company was cash-flow positive throughout 2015 and was to approach $3.5 million in revenue and have about 50 employees by the end of the year. Customers include such wellknown brands as P a y P a l , S p o t i f y , HughesNet , Progresso , Reliant Ener gy and the A m e r i c a n M a r k e t i n g Association . And not-so-well-known brands are hoping Ambassador will help them get the word out on what they do, such as San Francisco-based Circle Media Inc., a startup whose product — a small white device called Circle that sits in a child’s room and is programmed by parents to wirelessly control their children’s access to websites and TV channels across all their devices. Parents can create unique profiles for each child and even choose a bedtime shutoff for all access. Jelani Memory, Circle Media’s president and co-founder, said Ambassador has been crucial in helping his company, which was founded in 2013 and began selling its first product a month ago, get off to a quick start. Memory said he did due diligence on a variety of marketing companies. “Ambassador stood out. It’s easy to use, and their support has been off the charts,” he said. He said Circle Media, through Ambassador, has been reaching out to family-focused bloggers and other targeted groups on social media — who are linked to what he said were tens of millions of potential customers — offering them incentives to try its product and rewarding them if they recommend it

AMBASSADOR SOFTWARE

Custom software maker Ambassador Software and ChiefTechnology Officer Chase Lee (left) and CEO Jeff Epstein moved into new space in downtown Royal Oak last spring. to their friends and contacts. Memory said almost 1,000 people signed up for an incentive program put together by Ambassador, which pays them $10 for every one of their friends who buys the $99 product. “It worked so well, we sold out of our initial inventory before we even got it into the warehouse,” he said. A program Ambassador set up for another customer, Olark , a San Francisco company with an office in Ann Arbor that offers customer sales support, gives those who refer someone who becomes an Olark customer 25 percent of the subsequent revenue. Ann Arbor-based Amplifinity Inc. is another fast-growing referral marketing company. It raised a VC round of $2.7 million in March 2014 to fund growth, had 35 employees at the end of 2014 and has about 50 now, according to CEO Larry Angeli. “We’re going great. All our metrics are tracking well, and our investors are pleased by our growth,” Angeli said. He said Ambassador’s ability to raise equity capital, and its growth curve, are validation for the marketing segment they share. “Our market is getting hot, and the reason it’s hot is that referral marketing grows both top-line and bottom-line revenue,” he said. “It’s interesting that two companies here are in the same customer space,” he said. “The fact is, more companies in the space is always a good thing, because it shows the development of a clear market category. And the fact that there’s continuing investor interest also shows validation for what we are all doing.” Ambassador’s A round was led by Fargo, N.D.-based Arthur Ven tures , and joined by Detroit-based L u d l o w V e n t u r e s , New York Citybased Zelkova Ventures, Minneapolis-based Matchstick Ventures , San Francisco-based Social Starts and

local angel investor Andy Basile. Patrick Meenan, a partner at Arthur Ventures, said he heard of Ambassador from some of his portfolio companies, who told him how well Ambassador’s referral programs were working to drive revenue. “Three things stood out about Ambassador,” he said. “One, they clearly had a great product. Two, sales were being driven by people finding them. Three, they were cash-efficient. Jeff is the X factor. He’s the sort of person you want to back.” Ambassador was founded as Zferral Inc. in 2009. Jonathon Triest of Ludlow was the first investor of what ended up as a $400,000 seed round. That is still the official legal name, with Ambassador a DBA. Epstein had gone to West Bloom field High School , graduated from Michigan State University, then went to Chicago-Kent Law School at the Illinois Institute of Technology. A serial entrepreneur, Epstein decided after passing the bar in 2007 that the law held no interest. In 2000, while still at MSU, he launched eSparty.com with the goal of becoming the unofficial home page of MSU students. It was a tough go in the days of dial-up Internet, and the plug was pulled in 2003. In 2005, he founded Finest Affili ates LLC , an Internet marketing company he sold a year later to pay off half his student debt. “I learned then how word of mouth can drive business,” he said. In 2011, Epstein went through the Techstars incubator program in New York. Ambassador’s chief technology officer, Chase Lee, went through the Boston Techstars program in 2012 with Fetchnotes, a software company that simplified note-taking and list-making. It raised almost $450,000 before being sold. 䡲 Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2

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“It could be sales, it could be R&D, but part of the growth strategy is having a presence in Detroit.”

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The Ford Mustang has long been a favorite among carenthusiasts. Drake Automotive claims to be the largest makerofparts forMustangs in the world,with a product range ofsome 9,000 parts. Scott Drake began his business afterrestoring Mustangs as a kid with his father.

Huron Capital has Detroit strategy with Drake Automotive purchase By Tom Henderson thenderson@crain.com

Huron Capital Partners LLC, which finished last year with a flurry of deals, is off to a fast start in 2016. The Detroit-based private equity company was expected to announce Monday that it has bought Drake Automotive Group , a Henderson, Nev.-based maker of parts for classic Mustangs and other cars. Drake focuses on the classic car, off-road and late-model muscle car markets, particularly Ford Mustangs and Broncos. The company claims to be the largest maker of parts for Mustangs in the world, with a product range of some 9,000 parts. Huron plans to expand Drake’s presence to the Detroit area and to use the company as a platform to grow a much larger company through acquisitions and expanded product offerings. “The timing is coincidental, but it’s nice to be able to announce this with the auto show here,” Brian Demkowicz, Huron’s managing partner, told Crain’s. “There will be a lot of people in town who are familiar with the Drake name and its products. “This is part of a buy-and-build strategy, and there’s a lot of runway to do that,” said Demkowicz. “We’ve been looking for a company in the automotive aftermarket. We’ve had companies in the aftermarket segment before, and we like it.” According to the Specialty Equip ment Market Association ’s 2015 re-

port, the automotive restoration aftermarket parts business is a $1.4 billion industry. Demkowicz said that while Drake will continue to be headquartered in Henderson, there will be a Detroit-area presence. “It could be sales, it could be R&D, but part of the growth strategy is having a presence in Detroit,” he said. “We want to make inroads in the Detroit community. We’re excited about this.” Demkowicz said current Drake management, including founder and CEO Scott Drake, will remain, though Huron will bring on other executives. The company currently Scott Drake: employs about Excited to work 50. with Huron Capital. Demkowicz said Huron’s due diligence showed that customers considered Drake a premier brand that caters to a passionate group of car enthusiasts. Terms of the deal were not disclosed, but Demkowicz said the deal fit in with Huron’s typical deal parameters of investing between $20 million and $200 million in companies with between $20 million and $200 million in revenue. “Drake’s revenue would be on the lower end of that,” he said. Drake was founded in 1988 as an outgrowth of a high school shop

project. As a kid, Scott Drake had gotten into restoring Mustangs with his father. For a shop project at Reseda High School near Los Angeles, he designed and built a weather strip for the trunk of his teacher’s 1965 Mustang. The teacher liked it so much, and Drake liked the process so much, that he and his girlfriend immediately started a business, first just making weather strips for Mustang enthusiasts and then branching out to other products. “Suzanne was my high-school sweetheart and now she’s my wife. We’ve been living the dream,” said Drake. Thirty years later, after he’d built up his successful aftermarket accessories business, Drake restored an old Mustang and gave it to his former shop teacher, Bela Palagyi, in a tearful reunion. “I’m excited to work with Huron Partners and start the growth initiatives we’ve been discussing,” said Drake. “I’d taken the business as far as I could.” Huron, generally the most active private equity firm in the state, made 19 acquisitions in 2015, in 13 states and two Canadian provinces. It sold its stake in four companies. Founded in 1999, Huron has raised more than $1.1 billion in four funds. This investment was from the fourth and largest fund of $500 million. 䡲 Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2

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Municipal leaders want repeal of ban on ballot proposal mailings LANSING — Chris Hackbarth of the Michigan Municipal League spent portions of last week fielding questions from cities across the state that are running ballot proposals during the March 8 presidential primary. That’s because of ambiguity over a newly signed law. Municipalities, school districts, libraries and other

public entities are now prohibited from using taxpayer dollars to send mass mailings about ballot proposals to voters. A state law signed last week by Gov. Rick Snyder forbids the practice within 60 days of an election. Hackbarth, state affairs director for the municipal league, said one city manager told him a flier with

LINDSAY VANHULLE Capitol Briefings lvanhulle@crain.com Twitter: @LindsayVanHulle information about a recreational authority ballot proposal is printed and ready to go in the mail. Hackbarth is not an attorney, he told Crain’s, but he is suggesting that communities talk to one — including their own counsel — to make sure any mailings meet legal requirements before they’re sent. “There’s a lot of confusion right now,” Hackbarth said of Senate Bill 571, which Snyder signed Wednesday and has united local government leaders in opposition since the Legislature adopted it last month. The municipal league is calling for full repeal of the provision, as are several other statewide associations that lobby on behalf of counties, townships, the road construction industry, and school administrators and board members. Snyder sent a letter to the Legislature last week, calling on the House

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and Senate to quickly adopt clarifying legislation to address many of the municipalities’ concerns. Aides to House Speaker Kevin Cotter and Senate Majority Leader Arlan Meekhof say both plan to consider it. In his letter, Snyder said he believes the law’s intent is to prevent public communications meant to sway voters on a particular issue. It doesn’t preclude municipal or school leaders from holding town halls or debates, or from sharing their opinions on their own time, Snyder wrote.

Last-minute bill changes The legislation started off as a campaign finance bill dealing with contributions. Introduced by Sen. Mike Kowall, R-White Lake Township, it passed the Senate unanimously in November. But the House inserted language late on Dec. 16, the last day of session before holiday recess, that prevents any public entity from communicating with voters via mass mailing, prerecorded telephone call, radio or television in the two months before an election. It was done without the opportunity for public testimony, and some lawmakers who voted for the bill reportedly didn’t know all of what it contained. The GOP-led Legislature pushed through other election law changes at the end of 2015.

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The Republican majority in both chambers approved ending the practice of straight-party voting and prevented voters from overturning it by including $5 million for clerks to buy election equipment. Much like the ban on municipal voter mailings, Snyder signed the ban on straight-party voting into law, but not without reservations. He urged the Legislature to follow up by passing a bill that allows so-called “no-reason” absentee voting. The March election will be the first real test of the ban on municipal voter mailings. Michigan law already made it illegal for cities, school districts and other public bodies to advocate a position on a ballot issue. The bill Snyder signed also rules out the sending of factual information. And that’s what has municipal leaders so concerned. “Try explaining a non-homestead exemption or a charter amendment that talks about some intricate administrative component or function,” said Rochester Hills Mayor Bryan Barnett, adding that ballot language can be complicated to interpret because of carefully crafted legal language. “If Lansing feels that this is so important,” Barnett said, “then why not have a full discussion on it and not pass it at the 11th hour in the middle of the night?” Said Gideon D’Assandro, Cotter’s spokesman: “I can tell you that we did talk about the direction that (Senate Bill) 571 was moving for a couple days before the vote.” But that was among the House Republican caucus. D’Assandro said Rep. Lisa Posthumus Lyons, a Republican from Kent County who introduced the substitute bill, made herself available to answer any lawmaker questions. “At the time, everybody seemed to understand what was being done,” D’Assandro said. “We’re looking to kind of eliminate a loophole that schools and local governments were using to spend these taxpayer dollars.” He said some governments have skirted the law, particularly the closer it gets to Election Day, and lawmakers wanted to ensure taxpayers’ money “is spent in the classroom and not on politics.” Supporters, including Snyder in his letter, say municipal and school governments could enlist the help of private political committees or associations that don’t use public dollars on campaigns. Critics, including Barnett, say it’s unrealistic to expect a private entity to bankroll a local charter proposal. Opponents point to a number of proposals that don’t directly involve taxes — charter amendments, public land sales that include legal property descriptions in the ballot language, even operating millages for public school districts that are levied on non-primary residences. “Local governments and schools should still be allowed to distribute basic information about an election,” Hackbarth said. 䡲

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kpinho@crain.com

Robert Elmes made a splash in Detroit a little over a year ago when he made known that his Brooklynbased Galapagos Art Space was fleeing the Big Apple in favor of the Motor City and its significantly cheaper real estate. Now he’s looking to sell one of the nine buildings totaling 600,000 square feet as he consolidates the Galapagos plan for a sprawling artists’ area into Highland Park. A 138,000-square-foot building he owns near Corktown is now on the market for $6.25 million, according to A.J. Weiner, managing director of the Royal Oak office of Jones Lang LaSalle, which is marketing the building for sale. Elmes purchased the building at 1800 18th St. in December 2013 for $500,000, according to CoStar Group Inc., a Washington, D.C.-based real estate information service. The purchase price was about $3.62 per square foot, while the asking price is about $45.29 per square foot. Weiner said the industrial building is being marketed as a redevelopment opportunity for multifamily units or for a corporate user. He said he “would be surprised” if a sale doesn’t occur by the summer. A portion of the building is occupied by Apac Paper, Weiner said. “While it’s true that the expanding market in downtown and Corktown/southwest Detroit is significantly stronger than Highland Park at the moment, we feel like this is a great time to let someone else take 18th Street forward while we increase our investment in Highland Park and continue to build on the relationships and momentum we’ve established there,” Elmes said. Galapagos’ space will be used for things like art shows, theater, dance, film, and science productions, plus some other unique uses. Elmes owns eight buildings in Highland Park totaling about 460,000 square feet, including five buildings totaling 300,000 square feet that were a former school that he bought for $18,000 from the Highland Park School District. The school, located at 109 Glendale St., “is a real gem,” Elmes said. He said buildings have been sealed and roofs have been repaired as needed. Galapagos had about $2 million in revenue in 2014, its most recent year of operation, Elmes said. 䡲

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CRAIN’S DETROIT BUSINESS

OPINION Start registry in Flint to track lead issues T

he Flint water mess is, well, a mess. The simple thing most of us take for granted — clean drinking water — was absent in that city for more than a year. And the current water quality is still a concern. But the damage has been done. So now what? As Publisher Mary Kramer notes on Page 11, the state has experienced a serious contamination threat before — the PBB crisis in the 1970s. And in that experience, Testing might be a Michiganians began getting good place to tested for high levels of the chemical that has been start. ... linked to cancer in test aniCompanies that mals, but not clearly to huhad used the mans. A PBB health registry water for drinking of Michigan residents and should make sure their descendants continues at Emory University. their employees Testing might be a good know how and place to start. A registry that where to be tracks Flint residents and tested. evidence of lead in their systems could help the state and the city create plans to counter the effects of lead. Companies that had used the water for drinking should make sure their employees know how and where to be tested. The trick is that because of lead paint in aging structures — and other issues — urban lead levels may be higher than the norm. How big is the human health threat? Only when people are tested can anyone know for sure. That’s the first step and could be a way to cut through the hysteria.

Use good sense with new law The leaders of local communities in Michigan are collectively scratching their heads over a new state election law that was tacked on to legislation passed in December over campaign finance rules. The new piece speaks to whether a public entity can use taxpayer dollars to send mass mailings about ballot proposals. Reading between the lines, the legislation smells of political horse trading initiated by GOP leaders in the Legislature. It was an add-on to the significant election law changes that were passed in late December. We’ve all seen the full gamut of these mailings. Some are presented in a fairly neutral/informative way; others are blatant propaganda. Gov. Rick Snyder signed the law, explaining that it doesn’t preclude government or school leaders from holding town halls or sharing their opinions on their own time. Let’s just urge that common sense prevails when it comes to the law’s enforcement. We don’t need to see political action groups forming over hyperlocal issues that could be efficiently handled with a nonpartisan communication from a local city or township manager.

Staff changes show pressures on local media ressure on news providers has

P never been greater. As Bill Shea

reports on Page 1, Detroit’s two daily newspapers are in a staff churn period, as some talent says “yes” to parent company buyout offers and overall newsroom headcounts decline. MLive announced 29 staff reductions last week as well. It’s important as we report on local media to acknowledge just how rapidly the industry is changing. Crain’s started life in 1985 as an ink-on-paper weekly newspaper, but we’ve grown to a 24-hour resource with twice-daily e-newsletters. We face some of the same challenges as daily newspapers when it comes to employee workload, reporters who have more good ideas than time to report them, and the collective push and pull to provide content across multiple platforms — digital, print, events and more. It’s a challenging, fast-paced environment that isn’t for the faint of heart. But it’s also tremendously rewarding. This is an era in the news busi-

JENNETTE SMITH Editor ness where experimentation is welcome, creative new ways of presenting stories are emerging — and new advancements in getting stories out to more people are helping some niche and mainstream media products thrive or find new revenue streams. I say “some,” because, sadly, many daily and community newspapers across the country haven’t figured out a way to thrive, and good journalists are losing their jobs. It’s definitely a time where many journalists, including me, have mixed emotions. One day, or perhaps several days in the same week, we hear about friends and former colleagues who were

caught up in layoffs. On the other hand, some of the work we’re all producing is as good as it’s ever been. There also seems to be a welcome mindset shift at least among some news consumers that great content (anything from amazing long-form narrative writing to proprietary data analysis to quick news summaries) is worth paying for. As for Crain’s, we are privileged to have an audience that is growing, and work for a company that is actively adding new products and investing in its future. Last month, Crain’s Detroit Business reported more than 1 million page views. That’s our new monthly benchmark. Last year, we had more than 226,000 registered users to our website, and nearly 5,000 new digital subscriptions. News that you cannot get anywhere else, news that helps you run your business or navigate your career, comes at a cost to you, to be sure. But consider the cost of its absence. Professional journalism is worth paying for. 䡲

A challenge: Resolve to hire veterans in 2016 World War II, many F ollowing veterans found the transition to civilian life much less complicated. Often, when a veteran started looking for a job, the companies he or she applied to already had several veterans working for them, and they knew the value of hiring more. Today, that’s not always the case, as fewer men and women enlist in the armed forces — in World War II, 9 percent of Americans wore the uniform, compared to less than 1 percent of the U.S. population now — and fewer companies have experience hiring veterans. Veterans are strong leaders, quick thinkers and good problem solvers. They are comfortable in uncomfortable situations and apply the discipline, motivation and hard work learned in the military to their civilian careers. And once companies understand the skills and experience veterans can add to their workforce, they are eager to add more. Hiring veterans is a sound busi-

OTHER VOICES Jeff Barnes Jeff Barnes is director of the Michigan Veterans Affairs Agency. ness decision, one that will benefit businesses well into the future. This is why the Michigan Veterans Affairs Agency is challenging organizations to resolve to hire more veterans in 2016. Over the next five years, nearly 50,000 veterans are expected to transition out of the military and call Michigan home. From engineering to manufacturing, from cybersecurity and IT services to construction and the skilled trades, from logistics to communication and marketing, veterans possess a

wide range of skills and experience that will benefit every industry in the state. For this reason, MVAA created the Veteran-Friendly Employer program, which recognizes employers committed to military veteran recruitment, training and retention practices. Nearly 40 employers have been identified through this program — including Michigan-based, goldlevel employers General Motors, Quicken Loans and Whirlpool Corp. — and together, these companies have committed to filling nearly 1,000 jobs with former service members. For those companies not yet involved in the program, MVAA urges them to consider the value of hiring veterans. We also want them to know we are here to support their efforts. To join the companies that have resolved to hire more veterans in 2016: MichiganVeterans.com or (800) 642-4838. 䡲

LETTERS

Editorial on gun violence misses point on causes Editor: The editorial on gun crime in Detroit misses the point regarding the real cause of the problem (“Gun data should help form smarter policy,” Jan. 4). We do not have a gun problem. We have a morality problem. The incident regarding the shooting of Chanell Berry is a good example. Someone fired multiple gunshots into a Detroit home reportedly

Send your letters: Crain’s Detroit

Business will consider for publication all signed letters to the editor that do not defame individuals or organizations. Letters may be edited for length and clarity. Email: jhsmith@crain.com

as a result of a dispute between two women. Nothing can justify killing a young girl because someone lost

their temper. Also, comparing automobile accidents to shootings is not a valid comparison. People generally do not intentionally try to kill people with automobiles. Until we are ready to address the real causes of violence in our society, we are merely rearranging the chairs on the deck of the Titanic. Randy Gillary Law Offices of Randall J. Gillary Troy

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Vacant Mexicantown buildings part of larger rebuilding plan By Marti Benedetti mbenedetti@crain.com

Southwest Housing Solutions’ Vista Partnership is taking steps to redevelop vacant buildings along a 20block stretch of Mexicantown as part of a larger redevelopment plan. The Detroit-based nonprofit’s Vista Partnership seeks to engage local residents, organizations, public-sector partners and businesses to revitalize a southwest Detroit neighborhood with economic opportunity and social equity. It is funded primarily through grants from foundations such as the Skill man Foundation. The project got off to a slow start as it required creating a strategy and culling community feedback through meetings and a survey, said Dan Pederson, director of Vista Partnership and a former resident of the neighborhood for 20 years. Now that it has accomplished those steps, it can proceed to find developers and occupants for the vacated buildings. Pederson is approaching owners of vacant buildings to see if they would like assistance in redeveloping the property or if they would like to sell the property to Vista that would, in turn, redevelop it and find tenants beneficial to the neighborhood. Vista Partnership counted 400,000 square feet of building space in the blocks surrounded by Newark Street (near the empty Michigan Central Station) that curves east to north, with Bagley Avenue to the south and West Grand Boulevard to the west. Vernor Highway goes through the area. The partnership researched and found that 300,000 square feet of the buildings are occupied, which means 25 percent is vacant, Pederson said. “The goal of the partnership is to get access to these buildings and put them back into service,” he said, adding that the vacant square footage is concentrated in a few buildings such as Service Tire, a shop on West Vernor toward the former train station that has been vacant for years. “The plan is we get those activated in the next two years.” Southwest Housing Solutions, which oversees the partnership, wants to be the developer, a partner with a developer or find a developer who wants to repurpose the vacant buildings into an appropriate use for the neighborhood. A challenge has been getting real estate “speculators” who own the properties to sell or redevelop the property themselves. “People buy and sit on this stuff for four or five years,” said Pederson, adding that the owners of the former YMCA at Clark Park and the Service Tire building would be in that group. He said 30 percent of the undeveloped land in that area is vacant, but residents surveyed this fall indicated they wanted to see some of it continue as “wide open space” rather than be developed. Vista’s first project was the pur-

chase of the former St. Anthony Church at West Vernor Highway and 25th Street in 2013. It redeveloped it for fitness, recreational use and corporate meetings and opened it to the public in July. Southwest Housing Solutions has its office there. The former church hosts two Zumba classes a day, five days a week. It is not unusual to have a Spanish-speaking grandparent, mother and child at the class together, Pederson said. It provides an exercise venue but also a social outlet for neighborhood residents. When it opened, the goal was to have 4,000 people use it; it drew 7,000 in the first six months, Pederson added. He said plans also call for the Vernor viaduct, a dark and forbidding underpass on West Vernor Highway behind the former train depot, to be lighted and decorated with new murals. The Vista Partnership has been somewhat controversial since its start. Neighborhood residents worry it will compromise the affordability of the area and its Hispanic character, which goes back more than 100 years. Pederson acknowledged that the demographics of the 20 blocks is changing. “We are seeing an influx of young people from Brooklyn and other

places, and I see more people riding bikes than ever before. But part of the attractiveness here is how multicultural we are,” he said. Recent counts show the neighborhood is 85 percent Hispanic. “Southwest Detroit has always been an immigrant community, and it will continue to be that kind of area,” he said. Kathy Wendler, president of the Southwest Detroit Business Associa tion, said most business owners are

pleased to see new businesses coming into the area. One of those is The Huron Room , a restaurant and bar featuring Great Lakes fish and Michigan-made beer and wine. It was opened in mid-November by Jacques and Christine Driscoll, who also own the nearby Green Dot Sta bles and Johnny Noodle King. Others said southwest Detroit as a whole is seeing more development dollars come its way as property values rise in neighboring Corktown. Mike Odom, Southwest Detroit Business Association chairman and vice president at Farmington Hillsbased marketing firm Marx Layne , said there is “an uptick in demand” for commercial space along West Vernor Highway. “Kathy (Wendler) and I are talking about a number of vacant properties. The phone is ringing with

people who want to buy property. If folks want to invest in the city, this is a good place. We will have the new bridge (Gordie Howe International Bridge) in our backyard.” He pointed out that the association recently celebrated the $6.4 million West Vernor Streetscape Project, funded by a combination of public and private entities, including the Michigan Department of Transportation , the Southeast Michigan Council of Governments , The Kresge Foundation, the W.K. Kellogg Founda tion and others. The project, on 2.3 miles of West Vernor Highway, provided new sidewalks, local park improvements, flowers and streetlights. Southwest Housing is open to adding housing but wants a combination of market-rate and affordable housing so people aren’t priced out of the neighborhood, Pederson said. Sherri Saad, broker and owner of Re/Max Leading Edge in Detroit, said home prices in southwest Detroit are on the upswing. Housing that was priced at $10,000 to $15,000 is now $35,000 to $40,000, up about 40 percent from a few years ago. She stressed that in southwest Detroit, the value of a house depends on its street. Some streets are known for vandalism, gang activity

and foreclosures. “Depending on the street, a house can cost from $5,000 to $50,000,” she said. Pederson added that certain streets’ houses can command $100,000 or more. Saad, who has been selling houses in southwest Detroit, including Corktown, for 15 years, said in adjoining Corktown there are now no bargains and rarely a foreclosure. “There are bidding wars on houses,” she said. Houses of 1,000 to 1,500 square feet range from $129,000 to $189,000. She said Corktown’s prosperity is spilling into the Hubbard Farms neighborhood and may eventually move into Mexicantown, but that community is family-driven and slow to change. The Vista Partnership was started in 2011 by Dan Loacano of Southwest Housing Solutions in collaboration with the University of Detroit Mercy School of Architecture. Southwest Housing Solutions was created by Southwest Solutions in 1996 and is the largest multifamily developer in southwest Detroit. Through grants, donations and the fees for the redevelopment services it provides, it works to replace blight and abandonment with attractive residential and commercial buildings. 䡲

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SPECIAL REPORT: MICHIGAN MARY KRAMER Publisher mkramer@crain.com Twitter: @MKramerCrain

Botched PBB crisis a lesson for Snyder ead poisoning in Flint’s water supply recalls another Michigan disaster and another bungled state response. Which raises the question: How much have we learned? In 1973, a mid-Michigan chemical company mislabeled a fire retardant as a cattle feed supplement, setting off a chain reaction that affected millions of people who ate beef or drank contaminated milk. The chemical was polybrominated biphenyl, or PBB. A farm co-op mixed the supplement with feed. Soon, Michigan cows were getting sick and dying. Farmers called the Michigan Department of Agriculture for answers — and got some of the same bureaucratic reaction from regulators as folks who alerted the state to lead in Flint’s water. The ag folks pooh-poohed farmers’ complaints, blaming poor feeding methods or other problems. The poisoning went unchecked for months before 500 farms were quarantined and more than 30,000 cattle, swine and sheep destroyed, as well as 1.5 million chickens. Meanwhile, as many as 9 million people were exposed to the contamination. (I stopped drinking milk in 1974.) A long-term study of 4,000 Michigan residents with high exposure has grown to include their descendants; results show higher incidence of breast cancer in women and thyroid disease in men. The slow response was a blemish on the record of popular Gov. Bill Milliken, who at times seemed at odds with the Agriculture Department director over the disaster. But in reviewing news accounts, I couldn’t find a single bureaucrat who was fired. PBB happened before Rachel Maddow and 24/7 news. Hardly any media covered the story initially, in part, I think, because it was happening in the “hinterlands.” But my then-employer, The Grand Rapids Press, was on it early, thanks to outstanding coverage by a young reporter, Roy Howard Beck. Thinking of Roy’s stories, I feel the same pride as I got watching the film “Spotlight,” about The Boston Globe’s unmasking of negligence in the handling of pedophile priests. The watchdog role of media is important. Joyce Egginton wrote the book Poisoning of Michigan and covered PBB for The New York Times. In a 2010 interview I found on the website Great Lakes Echo, she said: “Here is the biggest recorded contamination alone in this country — one that affected 9 million people — and where have you read much about it?” Maybe Gov. Snyder should chat with Gov. Milliken. It would be interesting to hear Milliken’s private thoughts about what he would have done differently in 1973. 䡲

BUSINESS

In 2014, the Flint Farmers’Market moved downtown, expanding its size and more than doubling its inside vendors.

NATALIE BRODA

CHAIN OF CHANGE By Amy Lane Special to Crain’s Detroit Business

ven as Flint is embroiled in a state of emergency and federal investigation over its water quality, there are other, more encouraging reinvestments in health and wellness in the city. Case in point: When Hurley Med ical Center opened a children’s clinic in downtown Flint in August, it was significant for more than just for an expanded ability to serve patients. The location, above the recently relocated Flint Farmers’ Market , married health care with access to fresh food. And it marked one of the newest pieces of an emerging downtown Flint redevelopment —

a health and wellness district that has grown to three city blocks and some $36 million in investment. Some of the anticipated side benefits of the district include helping with health education and decreasing the number of local people with chronic diseases. And even as a U.S. attorney investigates concerns over lingering water-quality issues, there is plenty of evidence of fruitful public health investments by nonprofit, medical and educational sources. Once-vacant buildings now house medical students and faculty, researchers, loft dwellers, physicians and patients, and staff and seniors at a new elderly

New farmers market, medical school help turn section of Flint’s downtown into health, wellness district

care center — outcomes of projects propelled by Uptown Reinvestment Corp., a nonprofit formed in 1999 to redevelop downtown Flint. URC-commissioned studies of the downtown, and potential new uses for buildings that URC purchased, led to pieces of the district coming together, said URC President Tim Herman, who with Ridgway White of the Charles Stewart

Mott Foundation , has spearheaded the district redevelopment. The spinoff effect has exceeded expectations, said Herman, who is also CEO of the Flint & Genesee Chamber of Commerce. The farmers market, moving downtown in June 2014 from a location about a mile away by the Flint River, expanded in size and more than doubled its inside vendors. Foot traffic in its first year tripled, to some 750,000 visitors that included downtown professionals and college students, said White, on loan to URC for several years and now president at Mott, the SEE FLINT, PAGE 12

Health and wellness district details

Online: More photos of downtown Flint redevelopment at www.crainsdetroit.com/flint

LISA SAWYER

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SPECIAL REPORT: MICHIGAN BUSINESS

FLINT FROM PAGE 11

foundation begun by his great-grandfather. Above the market, 10,300 square feet attracted Hurley, which had been looking for more space for one of its three children’s clinics. The new center brought resident and supervising physicians and pediatric specialists downtown and will treat about 9,000 patients annually. And proximity to a bus station and the farmers market are key plusses, said Annette Napier, Hurley senior administrator for ambulatory services. Appointment no-show rates have dropped, Napier said, and patients can shop at the market, where vendors participate in programs like Double Up Food Bucks, which assists low-income consumers and doubles the value of federal nutrition assistance they spend. The market also houses classes for healthy eating and Flint Food Works, a commercial incubator kitchen operation. It’s the kind of activity that the state, whose community revitalization program assisted the redevelopment, hopes to see. “We’re trying to get multiple things to happen in areas, so that every dollar that we put in is leveraged four to five times and gets many more things and gets much more activity in an area,” said Mark Morante, senior vice

Tim Herman (left) and RidgwayWhite: Spearheaded health and wellness district redevelopment in downtown Flint. president of community development at the Michigan Economic Development Corp. “One thing leads to another. That’s why catalyst projects are so very important to get done.” The district’s footprint began with URC’s January 2012 purchases of The Flint Journal’s former printing building and the Journal’s headquarters, and the March 2013 purchase of the long-vacant, 19-story Genesee Towers office building. That paved the way for three projects: the $3 million demolition of Genesee Towers to create an urban plaza; the $7 million relocation of the farmers market to the Journal’s printing building; and the $22 million renovation of the Albert Kahn-designed Journal headquarters building to house a Michigan State University College of Human Medicine expansion and public health research operation. Backing the projects were multiple pieces of financing. They included about $10.7 million in grants from the

Mott Foundation; $5.9 million in federal New Market Tax Credits; a $5.6 million equity investment by the Michigan Strategic Fund, through the community revitalization program; $1.5 million from an anonymous donor; a $1 million loan from the Local Initiatives Support Corp. organization; and an $880,000 Flint community development block grant. MSU’s College of Human Medicine, which operates in seven community campuses through affiliations with local hospitals, physicians and other providers, had since the early 1970s been training third- and fourth-year medical students at Flint hospitals and outpatient clinics. But it had more student demand in Flint than available slots, said Aron Sousa, the college’s interim dean. The college, hospitals and physicians wanted to accommodate more students. That led to added faculty, expanded training, and MSU’s move into the former Journal building. “We were able to increase our teaching capacity. And some of that is having a building and places to teach, some of that is hospitals and physicians teaching more of the year … and some of that is more staff,” Sousa said. Medical student counts have doubled from about 50 to 100, and the approximately 40,000 square feet MSU occupies in its new downtown home includes classrooms, study space, clinical skills examina-

tion rooms, a lecture hall and and conference rooms. The building also houses a MSU public health research initiative that was seeded with $11.8 million from the Mott Foundation. A $2.8 million grant in 2011 provided funds for the college to conduct community outreach to determine the types of research seen as beneficial and to move the program forward, while a $9 million grant in 2014 helped create an endowment to support the program and salaries. Researchers will focus on healthy behaviors, behavioral health and chronic disease. So far, more than 25 faculty and staff and five researchers — the latter bringing with them $14 million in National Institutes of Health funding that Sousa said will support additional grant-related work and jobs — have moved into the building, which opened last January. MSU has also moved the administration and staff of its master of public health program from East Lansing. Eighty to 100 people will eventually work in the building, Sousa said. The renovation also included 16 loft apartments, now occupied and with a waiting list, said URC’s Herman. The district’s latest major piece has been the $3.9 million Program of All-Inclusive Care for the Elderly, or PACE, center operated by Genesys Health System. The center, which opened in August, provides compre-

hensive medical and social care for people ages 55 and older who are Medicare/Medicaid dual eligible and who qualify for skilled nursing home care but want to stay in their own homes. Genesys PACE picks people up at their homes and transports them to the center, where they can receive physician and nursing care; physical, occupational and recreational therapy; meals; nutritional counseling; and other services including assistance with basic needs like bathing and shaving. “It’s skilled care, but it’s skilled care provided in a way where the individual still has the ability to live at home,” said Nicholas Evans, Genesys Health System vice president of business and fund development. Genesys evaluated locations that would best serve potential PACE participants and meet other considerations, including Genesys’ desire to reuse a building rather than construct new. URC proposed the former International Institute of Flint building, sitting vacant in the block next to the farmers market. Evans said the center — which is expected to serve about 130 people daily and eventually employ 70 people — sends a strong message on two levels: Genesys’ commitment to meet the care needs of Genesee County’s senior population, and its support “for revitalization of Flint and the … district downtown.” 䡲

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Domino’s Pizza Inc. Based: Ann Arbor Operations: One store, in Milan

ITALY

ith a 2014 nominal GDP of $2.148 trillion, Italy is the 13thlargest economy in the world and the third-largest in the eurozone, according to the Milan CIA World Factbook. Turin The country’s northGenoa ern region is industrialized, while the southern Bologna region is more focused on agriculture. The economy is also partly sustained by high-quality consumer goods. Italy’s biggest exports are textiles and clothing, motor vehicles, engineering products, production machinery, transport equipment, chemicals, beverages, tobacco, minerals and nonferrous metals. Its Rome largest export partners are Germany (12.8 percent), France (10.7 percent), the U.S. (7.2 percent) and the United Kingdom (5.3 percent). Battipaglia Italy’s biggest imports are engineering products, texBrindisi tiles and clothing, food, beverages, tobacco, chemicals, energy products, transport equipment, minerals and nonferrous metals. Its largest import partners are Germany (16.1 percent), France (9 percent), China (7.3 percent) and the Netherlands (5.8 percent). Each World Watch features a different country. If you know of a Michigan company that exports, manufactures abroad or has facilities abroad, email Gary Piatek, senior editor, at gpiatek@crain.com. Coming up February: Canada March: China

Employees: 25 Products/Services: Pizza, chicken,

desserts, soft drinks and beer Top executive: Alessandro Lazzaroni, master franchisee Clients: Retail pizza customers More information: The Milan store, Domino’s first location in Italy, opened in October 2015.

FCA USA Based: Detroit Operations: Headquarters in

Turin; powertrain and vehicle production plants in Turin, Grugliasco,

Verrone, Cento, Atessa, Termoli, Cassino, Melfi, Pomigliano d’Arco and Pratola Serra Employees: 70,000 Products/Services: Designs, engineers, manufactures, distributes and sells vehicles for mass-market and premium buyers under the Fiat, Alfa Romeo, Lancia, Abarth, Fiat Professional, Jeep and Mopar brands Top executives: Sergio Marchionne, chairman and CEO of FCA Italy; Alfredo Altavilla, COO of FCA Italy More information: FCA Italy is 100 percent controlled by FCA N.V. SpA.

FORD MOTOR CO.

Ford Motor Co. has a national sales operation in Rome.

FCE Bank PLC (Ford Motor Credit Co.)

ices to support sales operations for the Ford brand Top executive: Keith Robinson, managing director Clients: Private customers, fleet and lease customers

Products/Services: Opel vehicle models, diesel engines and control systems that equip trucks for GM brands globally Top executives: Roberto Matteucci, managing director of Opel Italy; Pierpaolo Antonioli, managing director and global diesel sector executive director at GM Powertrain Clients: 121 Opel dealers, GM brands More information: GM operates through the Opel brand and General Motors Powertrain in Italy.

Federal-Mogul Corp.

Kelly Services

Based: Dearborn Operations: One branch location

in Rome Employees: 104 Products/Services: Financial serv-

Based: Southfield Operations: Manufacturing loca-

tions in Carpi, Chivasso, Cuorgne, Druento and Mondovi, and distribution center in Verona Employees: 1,000 Products/Services: Ignition products, sealing products, engine bearings, wipers and friction products Top executive: Gian Maria Olivetti, vice president and chief technology officer, Federal-Mogul Powertrain, and president, Federal-Mogul Italy

Ford Motor Co. Based: Dearborn Operations: One national sales

operation in Rome Employees: 123 Products/Services: Sales, marketing and after-sales for the Ford brand Top executive: Domenico Chianese, managing director Clients: Private customers, fleet and lease customers

General Motors Co. Based: Detroit Operations: Opel National Sales Co. facility in Rome and a General Motors Powertrain-Europe engineering

DOMINO’S PIZZA

Domino’s Pizza Inc. has one store, in Milan.

and development center in Turin Employees: 147 at Opel and 600 contractors at General Motors Powertrain

Based: Troy Operations: Headquarters in

Milan and facilities in Rome, Turin, Bologna, Genoa, Vicenza, Varese, Treviso, Bassano del Grappa, Cittadella, Thiene, Ferrara, Florence, Mirandola, Modena, Montebelluna, Parma and Piacenza Employees: 5,130 Products/Services: Temporary staffing in science, finance, IT and traditional, search and selection, outsourcing and consulting Top executive: Stefano Giorgetti, country general manager

TI Automotive Inc. Based: Auburn Hills Operations: Fluid carrying sys-

tems plants in Brindisi, Busalla and Melfi and one HVAC plant in Cisliano Employees: 400 Products: Brake pipes, HP diesel pipes, zinc-coated tubes, brake lines, clutch lines, power steering lines, and receiver driers and accumulators for air conditioning Top executives: Salvatore Aloisi, plant manager; Enrico Traversa, general manager; Maurizio Paesante; general manager Clients: Fiat SpA, General Motors Co., Ford Motor Co., Nissan Motor Co., Lamborghini SpA and BMW AG, among others Natalie Broda

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SECOND STAGE Rules of investment By Rachelle Damico Special to Crain’s Detroit Business

t was three years late, but the U.S. Se curities and Exchange Commission in October finally issued rules on securities crowdfunding. With securities crowdfunding, small-time investors can take part in the action normally reserved for Wall Street types, and entrepreneurs get access to a different, and larger, pool of investors by taking their pitches online. That’s the idea, anyway. The idea of securities crowdfunding, also called investment crowdfunding or equity crowdfunding, took hold in the wake of the Great Recession when credit was tight. These mechanisms let entrepreneurs raise capital by selling stocks and bonds through Internet-based platforms on which “nonaccredited” investors can participate. (An accredited investor is defined by the SEC as one whose annual income exceeds $200,000 or whose net worth is greater than $1 million.) This differs from “rewards crowdfunding” models such as Kickstarter , on which

Feds affirm securities crowdfunding, but will edicts hinder small biz? supporters usually receive products but no actual shares of the enterprise behind the product. The federal 2012 Jumpstart Our Business Startups Act mandated the SEC provide rules governing equity crowdfunding. This was no easy task: The act conflicted with federal regulations, most of them stemming from the Securities Act of 1933, that strictly limit securities transactions unless a company registers with the SEC. Registration triggers significant, costly public reporting requirements, such as quarterly financial disclosures of income and profit. The SEC failed to meet its 2012 deadline. When it finally did issue rules this past October, it sought to address several key questions: Who can invest, how much can be raised, can these securities be marketed publicly, and what reporting requirements are there?

Another major question is what use these mechanisms might be to secondstage companies, which typically require more capital to grow than startups need to get off the ground. Experts are not enthusiastic, given the significant limitations of the new rules. “You have to give some careful thought as to whether the practicalities of crowdfunding are going to be something that the company can live with and whether or not it’s really going to result in meaningful capital raised for the company,” said Patrick Haddad, a securities lawyer at the Detroit office of Kerr Russell & Weber PLC. While federal crowdfunding makes an investment available to many more people, “it will likely be more costly,” said Richard McDonald, a securities lawyer in the Bloomfield Hills office of Dykema Gossett PLLC. This area of finance is still so murky that several local transactions attorneys and investors didn’t know enough to offer comment. It remains to be seen how things will play out once the new rules go in effect May 16. (The SEC says it will issue more guidance as that date approaches.) In the meantime, here’s how the key issues break down, along with some advice on whether crowdfunding is worth exploring for more established second-stage companies. SEE RULES, PAGE 16

Businesses can choose state or federal codes n 2013, Michigan enacted the Michigan Invests Locally Exemption, which allows non-accredited investors to buy crowdfunded securities. MILE allows Michigan businesses to raise up to $1 million every 12 months. If the issuer is willing to supply audited financial statements, it can raise up to $2 million. Non-accredited investors can invest up to $10,000 a year. There is no limit to how much an accredited investor can invest. Now that the U.S. Securities and Ex change Commission has issued federal crowdfunding rules, a Michigan company contemplating an offering through crowdfunding can choose to follow either the federal crowdfunding rules or the state rules. Only a small number of businesses have used MILE — two, according to the Michigan Department of Licensing and Regulatory Affairs — but there are some benefits compared to the federal crowdfunding rules, said Richard McDonald, a securities lawyer in the Bloomfield Hills office of Dykema Gos sett PLLC. “The MILE act has slightly higher investment caps on the amount that you can raise or the amount that any one individual can invest,” said McDonald. Reporting and disclosure requirements are also required under the MILE act, but McDonald said they are less strict than the federal rules. “The filings you have to make aren’t as significant or time-consuming as they might be for the federal,” said McDonald. But MILE is limited in that it requires the issuer to be based in the state. Buyers of securities also must be state residents. “The federal crowdfunding rules could potentially impact or weaken the effectiveness of the MILE law because under the federal crowdfunding rules you’re not limited to getting investment from people only within the state,” said Thompson. An issuer must also obtain at least 80 percent of its income from within the state and use at least 80 percent of the proceeds from the securities within the state. 䡲

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RULES

Do the homework on funding portals

FROM PAGE 15

$1 million limit Companies (known as “issuers,” in the parlance) using securities crowdfunding are limited to raising a maximum of $1 million per year. Dana Thompson, a University of Michigan law professor who studies crowdfunding and works with entrepreneurs, believes the limit is too low for the cost and time companies will have to spend working out the limitations. “I don’t know if it would be worth the amount of investment that it will take from the company to set up all of these things just to raise $1 million,” said Thompson. “Maybe once it gets streamlined over time it will be worth it, but that’s just something we’ll have to see once more of these deals are done.” For second-stage companies — loosely defined as those with $1 million to $50 million in revenue and up to 100 employees — this limit is likely to be a nonstarter. An amount of $1 million might work for a small neighborhood business but is unlikely to cut it for more established ones planning a strategic acquisition or major expansion. “It will be primarily small startup companies that will utilize this, and more seeded companies would choose other alternatives because the funding limits are just too low,” McDonald said.

Reporting requirements A company will have to share financial statements and information from income tax returns with both the SEC and investors annually — including revenue and profit figures. A funded company will have to make annual disclosures with both the SEC and investors including information about the company, officers, directors and individuals who own 20 percent or more of the business. A business will also have to disclose the price of the Haddad: Some securities to be companies could be sold, as well as at a disadvantage. factors that would make investment in the business speculative or risky, much as a public company does. A company will also have to give a description of any related-party transactions. All of this information will be available on both the SEC website and the crowdfunding portal being used, said Haddad, who has been working in securities for over 25 years. “The type of information that a company pursuing a crowdfunding offering that has to be disclosed to a non-accredited investor is typically going to be less than what would have to be disclosed during a conventional offering,” he said. “For an emerging company, that

If you intend to find investors for your business through new crowdfunding rules, know that all transactions will be required to take place through an intermediary that’s registered with the U.S. Securities and Exchange Commission. An intermediary is a broker-dealer or a funding portal required to register with the SEC. “Federal crowdfunding makes the investment available to a lot more people, but it will likely be more costly because you have to go through one of these funding portals,” which charge fees, said securities attorney Richard McDonald.. Information on registered broker-dealers will be available on an SEC website. Companies will also be able to look for information on FINRA.org, the Financial Industry Regulatory Authority’s website. “Since this is relatively new, it’s probably going to be hard to find someone with much of an established track record, so that would be another issue,” said Patrick Haddad, a securities lawyer with Kerr Russell & Weber PLC. 䡲

information is going to be publicly available, so that potentially could put them at some disadvantage with competitors being able to know their business plan,” Haddad said. Compiling those reports will naturally cost money. And there will also be ongoing filing costs with the SEC, although the fees have yet to be announced. “I’m not sure how much it will cost for crowdfunding, but a typical venture capital investment — a lower seed investment — is probably going to cost $10,000 in legal fees,” said McDonald. Such reports will have to pass through certain processes before being passed on to the public. A company’s CEO can review financial statements if a company’s offering is $100,000 or less. For offerings of $100,000-$500,000, an accountant can review financial statements. If a company is offering is more than $500,000, statements must be audited. “Audited financials are pricey,” Thompson said. “They can be in the high tens of thousands of dollars or more.”

Investor pool Long-held federal rules on accredited and non-accredited investors are intended to protect unsophisticated investors from taking stakes in riskier companies that provide less information to investors than public companies. The new SEC rules try to loosen things up a little in this regard, but they do not allow the wide-open participation that regular rewardsbased crowdfunding platforms do. Investors with an annual income or net worth of less than $100,000 can invest, in any one 12-month period, the greater of $2,000 or 5 percent of the lesser of the individual’s annual income or net worth. Individuals who have both an annual income and a net worth equal or greater than $100,000 during any 12-month period are permitted to invest up to 10 percent of the lesser of their annual income or net worth, up to a maximum of $100,000 in one year. This is likely to greatly increase the number of investors needed to hit a fairly low capital target — which is largely the point of crowd-

funding, but becomes less attractive when the other limitations are taken into account. “I don’t know if it would be worth the amount of investment that it will take from the company to set up all of these things just to raise $1 million,” said Thompson. “Maybe once it gets streamlined over time it will be worth it, but that’s just something we’ll have to see once more of these deals are done.” There’s also a question of liquidity on the shareholder side. “These shares of stock are not going to be readily tradable. I believe you have to hold on to the shares for a minimum of one year,” said Haddad, who also chairs a securities regulations committee for the State Bar of Michigan. This would tie investor hands and make it harder to find willing participants. With companies likely needing to get several hundred or more investors to meet fundraising goals, this could be a problem. Companies also should consider the effects of crowdfunding on subsequent potential pools of investors. As a business grows and seeks to raise more money through larger fundraising rounds, it might find venture investors are turned off. More investors mean more people have a say in a company, which could be a concern for venture capital firms. “I think (venture investors) might be concerned about the impact of having all of these investors involved, and that might complicate things,” said Thompson. Such later-stage investors might want to know specifics about the individual investors already involved. Portals will need to be able to provide this information readily or else a lot of paperwork will ensue.

Advertising Securities traditionally are not allowed to be advertised. This is why drivers don’t see billboards for Apple and General Motors stocks on their way to work. An Internet platform lends itself to trouble in this regard because it’s open to the public, and issuers then have to be careful about how they describe themselves. Under the new rules, companies are limited to public announcements that can inSEE NEXT PAGE

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clude: äĄ˛ A statement that the company is conducting an offering. äĄ˛ The name of the intermediary being used in the offering and a link to that website platform. äĄ˛ The terms of the offering, such as the amount being offered, and the price and closing date. äĄ˛ Factual information about business and its legal identity, including the companyâ&#x20AC;&#x2122;s name, address and description of what it does. Social media posts can be used to spread this basic information, but encouraging people to participate in a fundraising campaign is offlimits. That means GoFundMe -style Facebook entreaties to support a cause are out. McDonald believes the advertising limitations may push companies to choose platforms that exclude non-accredited investors entirely (and which have existed for years now). â&#x20AC;&#x153;Accredited crowdfunding is much more flexible; thereâ&#x20AC;&#x2122;s no limits on the amounts that you can raise or invest and you can advertise anywhere you want to,â&#x20AC;? said McDonald.

Bottom line The expense and time make securities crowdfunding a tough sell, especially for second-stage businesses. â&#x20AC;&#x153;More mature companies probably are looking at raising more than the $1 million limit in a 12-month period, so they are probably are not going to be looking to use a crowdfunding methodology,â&#x20AC;? said Haddad. Businesses have to find the investors, set up a portal or a registered broker, and allow time for annual reporting â&#x20AC;&#x201D; activities small businesses may not have the resources to do. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s just more cumbersome and time-consuming,â&#x20AC;? said Thompson. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re just going to have to see how things work out with all of these reporting requirements and whether companies are going to be able to fulfill these things.â&#x20AC;? Another option would be to go with a different regulatory framework, known as Rule 506(c) of Regulation D, that limits crowdfunding only to accredited investors but comes with the benefit of having no limit on the amount that can be raised. Then there are the long-standing â&#x20AC;&#x153;private placementâ&#x20AC;? rules that have made way for venture capitalists and angel investors for many years. These have nothing to do with online fundraising, but since raising capital is the goal, whatever the medium, this more traditional route is something businesses should consider before jumping into crowdfunding. â&#x20AC;&#x153;People will continue to use the more traditional ways of raising money through private placement or through accredited investor crowdfunding because there are less rules and less costs involved than federal crowdfunding looks like it would be,â&#x20AC;? McDonald said. äĄ˛

Crowdfunding advice from a portal founder Niles Heron, co-founder of Crowdfund Finance Inc., established an equity crowdfunding platform operating under the Michigan Invest Locally Exemption, which allows Michigan business owners to sell securities or issue debt to Michigan residents regardless of income. Founded in 2014, the MichiganFunders.com platform helps investors and entrepreneurs comply with state crowdfunding laws. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re strictly a marketing portal for your crowdfunding campaign,â&#x20AC;? said Niles. â&#x20AC;&#x153;If you come to me and say you want to raise X amount of money, I can tell you the things you need to do and the documents youâ&#x20AC;&#x2122;ll need to prepare.â&#x20AC;? Heron, who was a 2015 Crainâ&#x20AC;&#x2122;s 20 in their 20s honoree, and his partners also followed MILE rules themselves when they raised $100,000 through a small friends-and-family round to fund the platform. Here are five tips Heron offered for those interested in exploring equity crowdfunding.

1. Consult with an attorney and a broker Talk with an attorney who is knowledgeable about crowdfunding laws. Also talk to a broker who specializes in these sorts of offerings. Work through someone who will help you understand the laws and keep you protected. The last thing you want is to get a letter telling you that youâ&#x20AC;&#x2122;re not only being asked to â&#x20AC;&#x153;cease and desist,â&#x20AC;? but also pay a fine. I know from experience.

2. Know your investors You have to know the investors youâ&#x20AC;&#x2122;re targeting to raise capital â&#x20AC;&#x201D; who cares and how much do they care? The geography and demographics of investors determine the terms you offer. Crowdfunding is an experiment. It will be you validating your assumptions about your target audience and saying: â&#x20AC;&#x153;I think these people will invest this much money. Letâ&#x20AC;&#x2122;s go find out.â&#x20AC;?

3. Understand how your business interacts with its community Are you a B2B where youâ&#x20AC;&#x2122;re going to be looking for people who are in your industry and believe in your business? If youâ&#x20AC;&#x2122;re an industry consultant launching a service for a Realtor, you should look to Realtors and real estate people to be your investors.

4. Know it will take time

5. Expect challenges

Expect money in your account six to eight months after you decide to pursue crowdfunding. It depends on how hard you want to hustle. People arenâ&#x20AC;&#x2122;t sitting behind their computers clicking refresh waiting for opportunities to give their money away. Youâ&#x20AC;&#x2122;re going to have to go to and hold events, meet with potential investors and network. Crowdfunding takes as long as it takes you to get your investors together.

We ran into some challenges with the Michigan Department of Licensing and Regulatory Affairs with the

way we were conducting crowdfunding and had to go back and ask how it needed to look. There were no active raises for about six months because we had to work through the legal implications and circumstances caused by the difference of vantage point in terms of how we thought things needed to look according to the law.

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Video production company adds interns to cast of employees Heather Zara left her job as a reporter and anchor for WDIV-Channel 4 to bring her production and storytelling skills to a different audience. Zara Creative, launched in early 2012, makes professional-grade videos for businesses, nonprofits and individuals. Projects range from television commercials to wedding productions. Customers have inNeu cluded mann/Smith Architecture , The Empowerment Plan, Bell’s Brewery Inc. and The Kresge Foundation.

A recently added customer HeatherZara: is Fuel Leadership LLC, the leaderUsed interns to ship event busibuild a team. ness launched last year by entrepreneur and ePrize founder Josh Linkner. Problem: Just over a year into the business, at a time when Zara still just had two full-time employees (and a roster of freelancers), it became time to get serious about building a team. But Detroit is far from Hollywood. While the metro area does have cinematographers and video editors, they are not in great abundance.

Those who do possess the necessary skills tend to leave for bigger markets. People with a lot of professional experience are in even shorter supply. That leaves Zara in a bind when it comes to finding people with advanced cinematography skills who also have a knack for storytelling. “Anyone can push buttons. To teach creativity is a unique challenge,” Zara said. Solution: Zara got in touch with a counselor at her alma mater, Michi gan State University, to see about internships. Her plan was to build her own pool of talent by getting to know students early in their schooling, at the sophomore and junior levels. She contacted many other schools besides MSU, including the University of Michigan, Central Michigan University , Western Michigan University, Oakland University and Henry Ford College. Zara also heavily used social media to generate interest for internships, and continues to do so. She also contacted her lawyer to make sure she stayed in line with laws governing the employment of interns. After a few weeks, she had a group of candidates, and a few weeks later she’d hired two.Reaching the right

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on interns, looking for signs that they’d likely be good matches for the company to hire down the road. “We pretty much tell them before the end of the internship that we plan to offer an opportunity at the end of graduation,” Zara said. Managers tell these interns to let Zara know of any job offers that come along in the meantime. “Then we can evaluate how we can make it work,” she said. Five of the company’s current 13 staff employees are former interns. Risks and considerations: If a company has an immediate hole in its workforce, spending years cultivating student talent won’t work. “It’s definitely a long-term solution. It’s setting you up for the future,” Zara said. And, as with any situation involving people, things don’t always work out. Zara’s second round of hiring two interns ended up with both of them getting fired. “If you’re making more work for me, if you’re not invested, how can we be invested? So that semester we just didn’t have any interns,” she said. Zara also noted that businesses in other industries, such as finance, may have to offer paid internships to get high-quality candidates.

Zara Creative LLC, Troy Founder and CEO: Heather Zara Description: Video production services Employees: 13 Revenue: $485,000 in 2014; $800,000 in 2015

people at schools was not difficult, and those people were easy to work with, she said. The company has gotten faster at getting candidates in the door. This has been useful as the company has gone through three office expansions and, in 2014, went from a staff of three to nine. Zara usually hires two interns each semester. The internships are not paid but instead qualify for college credit. Zara has to communicate carefully with school faculty to make sure the work will qualify. She recommends businesses contact schools months in advance to fit into schedules that are based on semesters. The company keeps a close eye

Expert opinion: Colleges are a great but underutilized source of help for entrepreneurs, said David Broner, a counselor with Score, an organization under the U.S. Small Business Administration that connects experienced former business executives, often retired, with entrepreneurs. There’s a misperception among owners of new small businesses that universities are only interested in working with large companies, but that’s far from the truth. “A lot of people wouldn’t have the gumption to solicit these universities,” Broner said. But professors are glad to help because they see a chance for students to get valuable real-world experiences. With small businesses comes the chance to work directly with the business owner. Schools can be a source of help beyond internships, too. Broner works with an entrepreneur whose product packaging needed some work. Broner encouraged him to reach out to MSU, where this entrepreneur had gone to school. A professor there got help from students who created 26 much better product packages to choose from. “The students loved it because it was real work,” Broner said. Gary Anglebrandt

TUESDAY, FEB. 16 5 - 9 p.m. Roostertail, Detroit

Join Crain’s as we reveal 25 of the biggest deals in 2015. Then meet the people behind them. Register at CrainsDetroit.com/events or call (313) 446-0300 OTE SPEAKER: KEYN

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One of the nation’s best-known private equity investors, he’s known for seeing things in deals that nobody else sees – until after the deal is done.

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DEALS & DETAILS ACQUISITIONS & MERGERS An affiliate of Stratford-Cambridge Group, Plymouth, a private investment firm, acquired Speedgrip Chuck Inc., Elkhart, Ind., a designer and manufacturer of engineered work-holding mechanisms. Charter Capital Partners, Grand Rapids, was exclusive financial adviser in the sale. Websites: speedgrip.com, stratfordcambridgegroup.com, chartercapitalpartners.com. Avian Enterprises Limited LLC, Jupiter, Fla., a division of Stone Soap Co. Inc.,

Sylvan Lake, and manufacturer of Avian Control bird repellent, has acquired Natural Forces LLC, Cornelius, N.C., and Ceannard Inc., Gastonia, N.C., makers of fungicides, herbicides and bird repellent products. Websites: stonesoap.com, aviancontrolinc.com. The Promanas Group, Ann Arbor, a commercial real estate properties investor, acquired the 79,052square-foot Oak Hollow Gateway office building in the Denso Office Park, Southfield, and the 130,455square-foot Laurel Park II office building, Livonia. Website: promanas.com.

CONTRACTS Morpace Inc., Farmington Hills, a marketing research and consulting firm, and Keller Fay Group LLC, New Brunswick, N.J., a marketing firm and an Engagement Labs Inc. company, have agreed to offer word-ofmouth advocacy and influencermarketing research and consulting services to the automotive sector. Websites: morpace.com, kellerfay.com. Jet’s America Inc., Sterling Heights, operator of Jet’s Pizza, has named Lerner Advertising Inc., Beverly Hills, as its agency of record. Lerner, with Media…Period Inc., West Bloomfield Township, a media planning and buying service, will handle the advertising and marketing for all of Jet’s corporate stores, as well as franchisees in the 26 states in which Jet’s operates. Websites: jetspizza. com, lerneradvertising.com, mediaperiod.com. Evans Distribution Systems, Melvin-

dale, a third-party logistics provider, is working with Girl Scouts of the USA, New York City, to ship more than 1 million packages of cookies placed via its newly enhanced Digital Cookie platform. Websites:

evansdist.com, girlscouts.org.

EXPANSIONS Regus Group Cos, Luxembourg,

and

provider of flexible workspaces, has opened a center at 3200 Greenfield Road, Suite 300, Dearborn. Website: regus.com.

MOVES Grady & Grady PC, a CPA firm, has

moved its office from 725 S. Adams Road, Suite 195, Birmingham, to 30200 Telegraph Road, Suite 401, Bingham Farms. Telephone: (248) 731-7634. Website: facebook.com/GradyGradyPC/. TI Automotive Ltd., a global supplier of automotive fluid systems technology, has moved its corporate offices from 1272 Doris Road, Auburn Hills, to the Fieldstone Industrial Complex, 2020 Taylor Road, Auburn Hills. Website: tiautomotive.com. DSM Engineering Plastics, a business group of Royal DSM, a developer and global supplier of polyamide engineering plastics, has moved its Americas headquarters from 735 Forest Ave., Suite 201, Birmingham, to 203 W. Big Beaver, Troy. Website: dsm.com.

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

Business Leaders Show Optimism Highlights of the survey can be found in this issue. View the full survey at honigman.com or crainsdetroit.com

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CALENDAR WEDNESDAY JAN. 13

Diversity, Inclusion & Equity for Nonprofits. 10 a.m.-noon. Michigan

Nonprofit Association. Speaker: Diana Kern, vice president of programs, NEW, Solutions for Nonprofits. Event includes small-group conversations. United Way for Southeastern Michigan, Detroit. $25 nonmembers; free MNA members. Contact: Sarah Pinder, (517) 492-2439; email: spinder@ mnaonline.org. Register at www.cvent.com.

THURSDAY JAN. 14

Multicultural media luncheon. 11 a.m.-

2 p.m. The Ajamu Group LLC. Honors ethnic groups for their achievements in the automotive industry. Keynote speaker is Heisman Trophy winner Tim Brown on “Managing Your Brand’s Image.” A portion of the proceeds benefits Orchards Children’s Services of Michigan and Project Medishare of Haiti. Westin Book Cadillac, Detroit. $75 general admission; $150 VIP admission includes reception with Brown after luncheon. Contact: Cheryl Ajamu, (248) 223-0904; email: cheryl.ajamu@ajamugroup.com; website: www.ajamugroup.com.

2016 Economic Forecast. 11 a.m.-2 p.m. CoreNet Michigan. Guests will hear from and have the opportunity to engage with two nationally recognized industry experts, Professor Sam Chandan of Chandan Economic and Eric Larson, CEO of the Downtown Detroit Partnership. Dearborn Inn. $65 members, $80 nonmembers. Contact: Paula Arwady, (248) 318-2588; email: paarwady@ comcast.net; websites: crewdetroit. org, michigan.corenetglobal.org. Women’s Automotive Association International’s Pearls of Wisdom. 5:30-8 p.m. Featuring keynote speaker Pat Schuch, author of the book Life in

the Middle Lane — Business and Life Lessons From the Auto Industry. Crowne Plaza Pontchartrain, Detroit. $65 admission, $45 WAAI members, $25 students. Contact: Lynn Wilhelm, (248) 390-4952.

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UPCOMING EVENTS The Big Four. 11:30 a.m.-1:30 p.m. Jan. 19. Detroit Economic Club. Fea-

turing Oakland County Executive L. Brooks Patterson, Detroit Mayor Mike Duggan, Wayne County Executive Warren Evans and Macomb County Executive Mark Hackel. Moderated by Carol Cain, senior producer and host of CBS 62’s “Michigan Matters” and Detroit Free Press columnist. Cobo Center, Detroit. $45 DEC members, $55 guests of members, $75 nonmembers. Telephone: (313) 963-8547; email: info@ econclub.org. Calendar guidelines. Visit crainsdetroit.com and click “Events” near the top of the home page. Then, click “Submit Your Events” from the drop-down menu that will appear. Fill out the submission form, then click “Submit event” at the bottom of the page. More Calendar items can be found at crainsdetroit.com/events.

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Leadership changes at WSU Physician Group By Jay Greene jgreene@crain.com

A leadership shakeup last week at the Wayne State University Physician Group and Wayne State School of Medicine is the latest move to stem losses that totaled $29 million in fiscal 2015. At least three executives resigned. They were Kenneth Lee, executive director of UPG and vice dean of the business affairs at the medical school; Omar Khan, M.D., CEO of UPG; and Mark Juzych, M.D., UPG’s chief medical officer. Jack Sobel, M.D., announced last week that Lisa Keane would be the new president and COO of UPG. “Lisa’s extensive leadership experience with prominent academic physician practice groups is essen-

tial to addressing the issues confronting (Wayne State medical school operations),” said Sobel in a statement. “She also will play a valuable role as dean of clinical affairs as we begin to reassess our contractual relationships with our hospital Lisa Keane partners.” A key contract that is expiring in March is with Detroit Medical Center, Wayne State’s main teaching hospital system. Officials for Wayne State said it is critical that the medical school increase payments for services rendered from DMC, which has been cut by more than half over the past eight

years to less than $50 million. In fiscal 2015 ending Sept. 30, Wayne State’s medical school reported a loss of $29 million that the university has been helping to cover. Of those losses, the medical group lost $9 million. The turnaround efforts began in earnest in November. Then, Sobel gave a 90-minute presentation to staff that outlined the dire straits for the medical school and physician group. “We have a critical and serious problem,” Sobel said in the Nov. 30 town hall meeting video. “Most (private) companies (in this situation) would declare bankruptcy. As a university, we can’t do that.” Last Thursday, the Wayne State medical school had another town hall meeting to discuss changes

and progress to erase a monthly deficit of $1.5 million, officials have said. At the town hall meeting, Sobel made several announcements, including that he was awarded a contract ending in July 2017. He has been dean for the past 14 months. Sobel also announced the medical school budget is nearly complete and the admissions office has been revamped with focus on diversity of incoming students. On top of the financial problems last year were a dozen accreditation violations cited by the Chicagobased Liaison Committee for Medical Education against the 1,200-student medical school. 䡲 Jay Greene: (313) 446-0325 Twitter: @jaybgreene

NEI promotes Lewis to director, succeeding Egner By Sherri Welch swelch@crain.com

The foundation-led New Economy Initiative has named Deputy Director Pamela Lewis as its next director. She succeeds David Egner, who left to become president and CEO of the Ralph C. Wilson Jr. Foundation on Jan. 1. Lewis, who joined the NEI in 2011, most recently led high-tech, high-growth initiatives. Among her responsibilities was assisting with oversight of $5 million grants for Invest Detroit, a nonprofit created by Business Leaders for Michigan that manages $110 million in funds and tax credits to support business expansion and real estate

development. Two grants made to the First Step Fund and the Detroit Innovate Fund are supporting investment in early stage companies, such as those in hightech. Lewis, 51, joined NEI as a Pamela Lewis senior program officer from the Kansas City, Mo.-based Kauffman Foundation , where she oversaw national entrepreneurial programs as a member of its Detroit team. At Kauffman, she led an NEI-funded

program to create hundreds of small businesses through training programs at Detroit’s TechTown. Before that, she was a senior program manager for NextEnergy , managing entrepreneurial programs focused on accelerating clean energy startups. Lewis began her career at DTE Energy Co. , spending 15 years in roles ranging from analyst to manager of process management and continuous improvement initiatives. She holds an engineering degree from Michigan State University and was recently named one of Crain’s top 25 women in technology in Michigan. “Pam is a highly talented eco-

nomic development expert who will bring important continuity to NEI’s work as well as the vision to guide the NEI team in defining a strategy for its next important phase,” NEI Chairman Steven Hamp said in a news release. In its eighth year of making grants and forging public-private partnerships to spur economic development, NEI is one of the country’s largest philanthropic collaborations. Managed by the Community Foundation for Southeast Michigan, it has helped create more than 17,000 jobs and 1,600 companies in the region. 䡲 Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

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Christine Galasso has been named Development Director for the Wins for Warriors Foundation. W4WF launched over two years ago by Detroit Tigers pitcher Justin Verlander which supports returning veterans with mental health disorders, including PTSD, traumatic brain injury and depression. Galasso will join Sandy Hudson (Executive Director for W4WF) to expand the foundation’s footprint locally and nationally. Galasso previously held an Account Executive position with Crain’s Detroit Business. Galasso can be reached at christine@winsforwarriors.org

Crain’s has moved its complete list of appointments and promotions to www.crainsdetroit.com/peopleonth emove. Guaranteed placement in print and online can be purchased at this website.

Former Lincoln Park manager to lead Matrix Detroit-based Matrix Human Services named Brad Coulter, the former emergency manager for Lincoln Park, as president and CEO. Coulter, 55, will succeed Marcella Wilson, who is stepping down in FebBrad Coulter ruary to lead the national expansion of the Matrix Transition to Success poverty model that she developed at Matrix during her tenure. In December, Coulter ended an 18-month term as the stateappointed emergency manager for Lincoln Park. He served as managing director with Bloomfield Hills-based O’Keefe & Associates and held various positions at Guardian Industries Inc.

Kenneth Cockrel Jr. takes Habitat post in Detroit Kenneth V. Cockrel Jr., the former Detroit mayor and longtime Detroit City Council member, was named executive director of Habitat for Humanity Detroit. Habitat

aims to provide low-income working families Kenneth Cockrel with affordable housing. Cockrel was on council for 16 years, including a seven-month stint as interim mayor in 2008-09. Most recently, he was executive director for the Detroit Future City implementation office.

Federal-Mogul names Halberg parts division SVP

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Southfield-based auto supplier Federal-Mogul Holdings Corp. named Philip Halberg to the new post of senior vice president of commercial strategy for North America of its parts division. He will lead a crossfunctional team to develop a commercial strategy for the Philip Halberg market for Federal-Mogul Motorparts, the company’s after-

market parts division. Halberg joined Federal-Mogul in 2011 as a director of business development for North America before being named vice president of strategic accounts in 2014. He was vice president of sales for Philadelphia parts remanufacturer Cardone Industries Inc. 䡲

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would be better and 5 percent said it would be worse, compared with 52 percent who saw improvement and 7 percent who saw deterioration on the west side. “I’m pretty satisfied with where the Michigan economy is heading,” said Tom Donnellon, a partner in Bloomfield Hills-based Maestro Media Print Solutions Group. “Overall, we’re progressing as well as could be expected.” Julie Cribley, the executive director of Recycle Livingston, a nonprofit recycling center in Howell, disagrees. “I’m making less now than I was 20 years ago,” she said. “Wages haven’t kept up with inflation. People aren’t doing better. The state hasn’t done enough to keep jobs here.” When asked about prospects for their own businesses over the course of this year, 54 percent in metro Detroit said they would improve, and only 3 percent said they would get worse, compared with 42 percent and 8 percent, respectively, in West Michigan. Asked when they thought the next downturn in their industry would be, Detroiters were less worried. Ten percent said it would come within the next year, and another 10 percent said it would be between 13 and 18 months from now. Fifteen percent of West Michigan respondents said a downturn would happen this year, and 14 percent said it would come in the six months after that. Forty percent of Detroiters do not anticipate a downturn in the foreseeable future, compared with 36 percent in West Michigan. And when asked to rate the state’s business tax climate, 3 per-

“People are worried about interest rates, about China, about the presidential election.” Donald Kunz ofHonigman MillerSchwartzand Cohn

cent in metro Detroit thought it was excellent and 42 percent thought it was pretty good, compared with 1 percent and 36 percent, respectively, on the west side. Each region agreed at 11 percent that it was poor. When asked about the taxes assessed against their businesses, 44 percent of respondents in West Michigan and 43 percent in metro Detroit said they were about right, with 1 and 3 percent, respectively, saying they were too low. Thirtyeight percent in each region thought they were much or somewhat too high, with 16 percent and 17 percent, respectively, undecided. Though Detroiters were more optimistic about the economy, fewer Detroit-area businesses plan to hire, and more might do layoffs. Thirtythree percent of metro Detroit respondents said they planned to hire this year, and 4 percent were considering layoffs, compared with 37 percent and 2 percent in West Michigan. “The survey results are consistent with what I hear from the clients I work with,” said Donald Kunz, chairman of the corporate department and leader of the insurance transaction practice group at Honigman. “My clients are cautiously optimistic, but definitely cautious. People are worried about interest rates, about China, about the presidential election. There are a lot of X factors out there.” Kunz said that while the auto industry “had a fabulous year in 2015” and he and clients expect 2016 to be another strong year, they know that

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because of the length of this economic recovery, a downturn is to be expected at some point. “We haven’t had a downturn in a long time, and anyone who has worked in Michigan for some time knows a downturn is coming,” he said. Couple the worries about an eventual downturn with the high multiples business owners are currently getting when they sell their businesses, and Kunz expects 2016 to be a busy year for M&A activity locally.

A political divide West and Southeast Michigan disagreed over the job being done by Obama. More than twice as many Detroit-area business leaders thought the president was doing an excellent job, though the percentage was still low, 11 percent compared to 5 percent in West Michigan. Twentyfive percent here thought he was doing pretty good, compared with 18 percent in West Michigan. Forty-one percent in metro Detroit rated Obama’s job performance as poor, compared with 47 percent in West Michigan. “He’s expanded government tremendously since he’s taken office. There is chaos and terrorism around the world, debt is mushrooming and the welfare state is expanding. And then there’s the unaffordable care act,” said Donnellon. “I’m watching him take on gun control as one the last things he wants to do. Something has to be done,” said Cribley, an acknowl-

edged fan of Obama. “I felt the same way about health care. It may not be perfect now, but it’s a start. He’s at least trying.” “The president is not pro-business, and that’s a problem,” said Patrick O’Keefe, president and CEO of Bloomfield Hills-based O’Keefe & Associates Consulting LLC. “One thing that’s very disappointing is they haven’t figured out how to get capital back into this country from companies who make profits overseas. They’re still taxed too heavily,” he said. O’Keefe said that while Democrats have a reputation for being for working men and women, Obama’s policies have hurt the middle class. “Can you have a strong democracy without a strong middle class?” he asked. More metro Detroiters also rated Snyder’s job performance as excellent, 22 percent compared with 17 percent. Add in those who thought his performance was pretty good, and the governor’s total positive rating was 68 percent here and 73 percent on the west side of the state. Only 6 percent here and 4 percent in West Michigan thought he was doing a poor job. “He’s doing a good job for business and for the Michigan economy,” said Donnellon. “He’s genuine, and he wants what’s best for the state.” “I have zero respect for him,” countered Cribley. “And the way he ignored Flint for so long when they knew there was high lead levels in the water was terrible.” Obama and Snyder came off as objects of adulation compared with the state Legislature, which got a total negative rating of 71 percent from metro Detroiters and 60 percent from West Michiganians. Not a single person polled in either part of the state gave the Legislature an excellent rating. Twenty per-

cent in the Detroit area said it was doing pretty good, 37 percent it was doing just fair and 34 percent said it was doing a poor job, compared with 28 percent in West Michigan who said it was doing a pretty good job, 34 percent who rated it just fair and 26 percent who rated it poor. “They’re not working to pass legislation favorable to their constituents. They’re worried about their re-elections,” said Donnellon. “You’d like to think with a majority in the House and Senate, they could move in lockstep toward reform, but they’ve been unable to do that,” said O’Keefe. One of the most high-profile acts by the Legislature in 2015 was the package of bills that will provide $1.2 billion in funding over the coming years to fix the state’s roads and bridges. Respondents were sharply divided over the bills. In metro Detroit, 20 percent said they strongly approved of what was passed, and 24 percent strongly disapproved. Thirty-four percent somewhat approved, and 10 percent somewhat disapproved. In West Michigan, 18 percent strongly approved, and 20 percent strongly disapproved. Thirty-seven percent somewhat approved, and 16 percent somewhat disapproved. When asked what the criticisms were of the roads package, 25 percent in metro Detroit opposed tax and fee increases, and 16 percent said improvements were going to take too long. In West Michigan, 22 percent opposed tax and fee increases, and 9 percent said improvements would take too long. “It’s too little, too late,” said O’Keefe. “It doesn’t generate the money needed for years, and here they are patting themselves on the back. It’s the emperor who has no clothes.” Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2

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The latest and most contentious example of outsourcing CRNAs occurred Jan. 1 at two local hospitals owned by Warren-based St. John Providence Health System, a fivehospital group owned by St. Louisbased Ascension Health, the nation’s largest nonprofit chain. While most CRNAs are outsourced without major protests, experts interviewed by Crain’s agreed that the process St. John Providence used was unusual and extremely quick, and it apparently backfired because only a handful of the CRNAs went along with the plan. After about two months of talks with PSJ Anesthesia PC — a newly formed CRNA company owned by a longtime St. John anesthesiologist, Dominick Lago, M.D. — 66 of the 74 CRNAs at Providence Hospital in Southfield and Providence Park Hos pital in Novi rejected the contract they were presented with in October. They lost their jobs Jan. 1. Lago is also a partner with Northland Anesthesia Associates , which has held an anesthesiology contract with the Providence hospitals for at least 40 years. Officials for Ascension Health declined interview requests for this story. However, Jean Meyer, CEO of St. John Providence, responded in an email that St. John explored “all options for management of anesthesia services in great detail, including looking at other external business partners.” Meyer said PSJ was formed by the anesthesiologists of Northland after it requested to submit a contract proposal. “The new business arrangement at (Providence hospitals) involves bringing the CRNAs under the management direction — in addition to the existing clinical supervision — of PSJ Anesthesia, ensuring better integration of the two groups of professionals, which we believe will lead to better experiences and outcomes for patients,” Meyer said in a statement. St. John Providence said PSJ is fully staffed with CRNAs, including 14 CRNAs from the Providence hospitals. It is unclear whether PSJ has as many CRNAs as the hospital had when it was employing them itself. (See sidebar, Page 23.) Vicki Myckowiak, a partner with Myckowiak and Associates in Southfield, said most hospitals are trying to unify doctors and CRNAs under one corporate umbrella for efficiency. In the Providence case, St. John helped set up PSJ Anesthesia, a separate company from Northland, sources told Crain’s. Hospitals now often want to contract with a single anesthesia company that employs both anesthesiologists and CRNAs, said Tom George, M.D., an anesthesiologist in Kalamazoo and former Michigan Senate health policy chair. Providence negotiated with its CRNAs for two months, but Myckowiak said most hospitals conduct the process more slowly and in a

Jean Meyer: St. John explored all options for CRNAs.

ST. JOHN PROVIDENCE HOSPITAL

Most of the certified registered nurse anesthetists at St. John Providence Hospital and Medical Center in Southfield and St. John Providence Park Hospital in Novi (pictured) lost their jobs Dec. 31, caught in a push by area hospitals to reduce costs by outsourcing.

collaborative manner that doesn’t end up with bad feelings. Myckowiak said what surprised her about the Providence contract situation was how PSJ and St. John offered the CRNAs “a take-it-orleave-it contract.” “St. John is willing to absorb the short-term higher costs to hire (temporary CRNAs), maybe have an interruption of coverage or have the anesthesiologists work harder” to maintain surgical volume in the hospitals’ operating rooms, she said. Ricardo Borrego, M.D., president of Dearborn-based Anesthesia Surgical Associates , which employs five doctors and 15 CRNAs, also said setting up a separate CRNA company is unusual, he said. “Hospitals that employ CRNAs now view them as an expense they can’t control. They are outsourcing them so they don’t have to deal with the revenue side to pay them,” said Borrego. “You displace 66 CRNAs and the slack (for surgeries) has to be picked up somewhere, by the anesthesiologists and other pricey alternatives,” Borrego said. However, Meyer said PSJ has not hired temporary CRNAs. She said there is an adequate supply of CRNAs in metro Detroit and PSJ hired experienced CRNAs that “are being paid in line with the base pay rate offered to the former hospitalemployed CRNAs.” Sources told Crain’s one of the contract disputes the CRNAs had with the PSJ offer was that it substantially cut overtime pay and other benefits, including time off. PSJ is offering above-market salaries to entice CRNAs to join the new company, said Lisa Mueller, a CRNA and president of Mueller Anesthesia Services Inc. , a temporary staffing agency with about 15 CRNAs. The median salary for CRNAs in Southeast Michigan is $168,000, with a range of $154,000 to $182,000, which is just about at the national average, according to Salary.com.

Other examples Besides the two Providence hospitals, at least two other Southeast Michigan hospitals in the past year

have outsourced their CRNAs to anesthesiology groups. McLaren Macomb in Mt. Clemens recently completed a nearly fouryear process to outsource CRNAs into Great Lakes Physician Resources PLLC, a Bay City-based anesthesiology group. In June 2014, Great Lakes replaced a longtime local anesthesiology practice, Lakeside Anesthesia , and hired the McLaren CRNAs, said Mark O’Halla, COO at 11-hospital McLaren Health Care in Flint. O’Halla said he first asked Lakeside Anesthesia to take on the employment of the CRNAs. “The doctors were not interested in doing that. The first few years, there was nothing I could do otherwise, because anesthesiologists were difficult to come by” because of shortages of anesthesia specialists, O’Halla said. Myckowiak said it is not uncommon for anesthesiology groups to decline to take on CRNAs as employees. “They are too expensive to employ without a subsidy from the facility when you consider compensation, time off, benefits and overtime has skyrocketed,” Myckowiak said. “It is difficult to absorb those costs.” Sources told Crain’s that Northland Anesthesia declined to employ the Providence CRNAs, necessitating the formation of PSJ. But some anesthesiology groups are changing their attitudes. By early 2014, a number of regional and national anesthesiology groups became interested in contracting to be a one-stop shop for hospitals, offering both anesthesiologists and CRNAs. O’Halla said he informed the anesthesiologists and CRNAs that he was going to issue a request for proposals for anesthesiology services. The hospital then selected Great Lakes, which then began negotiating contracts with the local anesthesiologists and employed CRNAs, he said. After selecting Great Lakes, “the whole process took six to eight months,” he said. “There was a lot of pre-planning and discussions. …,” he said. “Because we talked about it for so long, it did not come

Rob Casalou: St. Joseph CRNA subsidies increasing.

out of left field. The CRNAs, many of whom had been with McLaren for 15 years, became comfortable with the new company.” Andrea Teitel, president of the Michigan Association of Nurse Anes thetists, said McLaren Macomb is a

good example of why CRNAs should be involved in the process at the beginning. “Hospitals that include CRNAs in the decision-making process are the most successful in transition,” said Teitel. Over the past several years, McLaren has slowly worked to outsource its CRNAs into anesthesiology groups. Of McLaren’s 10 hospital regions, seven contract with anesthesiology groups that also employ the CRNAs. Talks are underway at McLaren Lapeer to transfer the employed CRNAs into a private anesthesiology group, Jackson-based Anesthesia Services Associates , by December 2017, O’Halla said. ASA also contracts with St. John Oakland Hospital and Crittenton Hospital, both owned by St. John Providence. The Detroit Medical Center has also hopped on the outsourcing train. It replaced its anesthesiology group, Anesthesia Staffing Consul tants PC in Bingham Farms, after Northstar Anesthesia PA, a for-profit group based in Arlington, Texas, acquired ASC. DMC also outsourced its employed CRNAs into Northstar, which also now employs many of ASC’s anesthesiologists. Northstar also manages DMC’s anesthesiology residency program and provides CRNA training.

The drivers Hospitals primarily are outsourcing CRNAs because reimbursement is declining due to health care reform and increased financial subsidies hospitals must pay to compensate their CRNAs, Myckowiak said. Some McLaren hospitals were paying “subsidies” — payments to supplement CRNA-generated revenue — that annually increased by 1 percent to 5 percent, O’Halla said. “When CRNAs are integrated with the anesthesiologists, we experienced less growth in costs and in some cases, some cost reductions,” he said. For example, McLaren Macomb was able to reduce its CRNA subsidy by $1 million with a hospital-wide anesthesia agreement, O’Halla said. Meyer said the Providence hospitals needed to outsource CRNAs to “create a more efficient way to provide care and better manage costs.” “Our analysis showed that over-

time and on-call costs were making our current structure unsustainable,” Meyer said. “When staffing a 24-hour business such as a hospital, it is important to control overtime and premium pay through an efficient scheduling model. In the new care model, schedules are directly monitored to better control overtime and premium costs,” she said. But Mueller, who runs the CRNA staffing firm, said hospitals often fail to properly account for CRNA revenue generation and lump them in as an expense like other nurses. “Hospitals don’t know about anesthesia revenue,” Mueller said. “If they billed properly, there wouldn’t have to be a subsidy, and we would be revenue generators, which we are.” Rob Casalou, CEO of St. Joseph Mercy Health System in Ann Arbor, acknowledged hospitals don’t bill as well as anesthesiology groups for employed CRNAs. About five years ago, Casalou said, St. Joseph’s asked its contracted group, A4 Anesthesiology Associ ates of Ann Arbor PC , for help to properly code and bill its CRNA services. “A4 helped us perfect our billing,” said Casalou, enabling St. Joseph to boost revenue and help it continue to employ its own CRNAs. Still, because CRNA reimbursement has been cut along with that for most hospital services, Casalou said, St. Joseph’s subsidies have been increasing again. A4 contracts with four of the five St. Joseph hospitals. Its fifth hospital, St. Joseph Oakland Hospital in Pontiac, contracts with Wayne State University Physician Group for its anesthesia services. UPG offers anesthesiologists and CRNAs. O’Halla said outsourcing CRNAs into anesthesiology groups also helps coordination of anesthesia services for surgical patients and providers. Contracting with one anesthesia entity “eliminates the inherent economic disincentive when they are split up into different camps,” O’Halla said. For example, anesthesiologists tend to want to take the best painmanagement cases because they are reimbursed at a higher rate, he said. “CRNAs end up doing the other cases, maybe Medicaid, that are less profitable,” O’Halla said. “By getting everyone under their own roof, it helps scheduling.” Hospitals are also looking to reduce anesthesia costs because of the push by private and government payers to “bundle” — or pay a flat rate for — surgical services, said Matt McCord, M.D., chief of anesthesia at Beaumont Dearborn. “I can see how hospitals with the changing health care want to offload these resources and have someone else manage them,” McCord said. “They need to deliver services more efficiently” because bundling surgical services rewards lower-cost providers. 䡲 Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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Nurse anesthetists: Dispute with St. John Providence not over By Chad Halcom chalcom@crain.com

Nurse anesthetists who lost their jobs at two St. John Providence Health System hospitals in Oakland County said some have been quietly approached about returning since the new year, and the employment dispute is not over. But certified registered nurse anesthetists who rejected offers to be outsourced to newly created contractor PSJ Anesthesia PC and spoke to Crain’s generally agreed on one thing: Negotiations felt abrupt, and the PSJ contract seems like a transitional arrangement until the hospital system can roll out another plan for anesthesia service as a whole. Marie Williams, a member and co-organizer of the holdout CRNAs, said most of the 66 who lost their jobs Dec. 31 have sought unemployment insurance benefits and many have applied for new jobs. But so far, none has broken ranks or returned to work as PSJ contract employees at St. John Providence Hospital and Medical Center in Southfield or at St. John Providence Park Hospital in Novi since the separation. Neither has any heard word yet of any objection to unemployment benefits from Ascension Health, the St. Louis-based nonprofit that owns St. John Providence. The group meets regularly and has been sharing new job leads as well — Williams herself has sought a position within Detroit Medical Cen ter that could start next month. “My first love is working at Providence. What we’ve gained as a group I would never let go of,” said Williams, a CRNA at the Southfield hospital. “And we were OK with not being Ascension Health employees anymore, as long as we had a place at the table.” But several holdouts and their attorney noted that the new PSJ contract lapses in about two years, around the same time that a Providence contract for anesthesiologist services with Northland Anesthesia Associates PC is up for renewal, and it’s possible both service contractors may be consolidated or sold. “That’s quite a coincidence,” CRNA Greg Bozimowski said of the synchronized contract terms. “To my knowledge, no one (hospital) in this area who has contracted both their anesthesiologists and their CRNAs has separate corporations for each. It’s unusual, and the plan does seem to be to eventually put them all into one contractor someplace.” St. John Providence CEO Jean Meyer said the new arrangement gives PSJ both management direction and clinical supervision over CRNAs, and ensures “better integration of the two groups of professionals, which we believe will lead to better experiences and outcomes for patients,” in a statement last week. PSJ was formed by members of Northland Anesthesia, which is the

contractor for Providence’s medical doctor anesthesiologists who typically supervise or coordinate with small groups of CRNAs as “care teams” in hospital surgical wards. “This transition has been supported 100 percent by our medical staff physicians, for the care of their patients,” Meyer said in the statement. The CRNAs say they’ve been told that PSJ is so far staffing surgeries at the two hospitals via a combination of anesthesiologists and the dozenplus CRNAs who were never part of the holdout group or left it early on and signed PSJ contracts. Some staffing agencies haven’t sent temporary CRNAs to Providence in order to stay out of the dispute, Bozimowski said. Meyer said in a statement that no surgeries have had to be canceled, delayed or transferred outside the hospital system since PSJ took over. “Every site for anesthesia has been covered, and the atmosphere is positive and professional,” she said. President Dominick Lago of PSJ Anesthesia has not responded to messages from Crain’s seeking comment. Lago was involved previously with helping to form a CRNA services contractor for McLaren Macomb hospital in Mt. Clemens, which outsourced its CRNAs to GLPS Staffing Solutions LLC in 2014. Also involved as a consultant for McLaren Macomb in the CRNA outsourcing was Dallas-based ONE M a n a g e m e n t S e r v i c e s C o ., which manages health care service contracts with a specialty in anesthesia and has handled billing and office staff employment for McLaren Macomb. Former ONE Management COO Gerry Handley, who left the company last month according to his LinkedIn profile, sent Providence CRNAs employment agreement updates on PSJ’s behalf before then and has a PSJ-affiliated email address, according to attorney David Shea, managing partner at Shea Aiello PC who has represented the holdout CRNAs. Shea, who also took part in the McLaren Macomb negotiations, said a common endgame for hospital services contracts is to get all anesthesia services into one business entity that a large services company like ONE Management can manage for efficiency. The former Providence CRNAs are exploring legal options but it’s too early to tell if litigation will follow, he said, because there is no word on whether Providence or Ascension is going to protest the CRNA unemployment claims. The hospital system has told the CRNAs previously that failing to sign PSJ contracts means they voluntarily resigned as of Dec. 31. “There remains a severance issue to work out, and it’s premature before then to say if there will be any (litigation),” he said. 䡲 Chad Halcom: (313) 446-6796 Twitter: @chadhalcom

ART FROM PAGE 3

checklist, and you make an educated decision,” said Larson, who is working on a $44 million mixed-use project for the former Tiger Stadium site. VARA will become increasingly relevant in areas of Detroit like New Center, the North End and Eastern Market, where redevelopment is hot and murals are common, said Anne Cubera Lipp, an intellectual property rights attorney for BirminghamAnne Cubera Lipp: based law firm Lippitt O’Keefe VARAwill become increasinglyrelevant. Gornbein PLLC. “Certainly we are doing what we can to get revitalization moving, and this is going to be a speed bump,” she said. Tomkiw said one of his clients, whom he declined to name, last year was interested in purchasing a 73,000-squarefoot building on East Grand Boulevard just east of Woodward Avenue but ultimately shied AndreyTomkiw: away from the Mural implications building’s online scared buyer away. auction because of one reason: “The Illuminated Mural,” with its possible VARA implications. The Albert Kahn-designed building, at 2937 E. Grand Blvd., and the nine-story mural that has covered almost all of its western side since 2009 are the focal points of the 15-page federal lawsuit filed last week against the building’s owner, Princeton Enterprises LLC, claiming the mural is in danger of destruction. That, the lawsuit says, is based on the auction of the building Princeton Enterprises planned but never completed last summer, as well as possible plans for the real estate company to redevelop the 73,000-square-foot building into multifamily housing. Tomkiw said, however, that the lawsuit is likely premature, because it has not been established that the mural is “in danger” because Princeton has not decided what to do with the building — sell it or redevelop it. Andrew Smith, corporate counsel for Princeton Enterprises, said last week in a statement that the company is “still gathering information” on the lawsuit filed by Detroit-based artist Katherine Craig, but that it disagrees with her “characterization of the facts and the law.” He declined further comment. The lawsuit says that after Craig received $33,000 in funding from the College for Creative Studies Community + Public Arts: Detroit program for the project, she searched for properties to house the mural, eventually reaching an agreement with Dennis Kefallinos’ Detroit-based Boydell Development Co. to put the mural at 2937 E. Grand. Boydell owned the building at the time. According to the lawsuit, a contract was signed, with Boydell agreeing the mural would remain on the

building for at least 10 years. Craig, the lawsuit says, “never ‘expressly agreed’ to a waiver of her lifetime rights of attribution and integrity” under the federal law. She has provided subsequent property owners with paperwork notifying them of her copyright on the mural obtained in 2012, according to the lawsuit. Craig, who declined comment to Crain’s on the lawsuit, said “The Illuminated Mural,” which was created with more than 100 gallons of paint using items ranging from cranes to salad-dressing containers to fire extinguishers, is “an essential artwork, both for me as an artist and for the North End community.” “I’m bringing this lawsuit to stand up for the rights of artists everywhere, and for the interests of Detroit’s creative entrepreneurs, like myself, who have invested in the arts, public art and art education,” she said in a statement last week. Along with Craig, one of those people is Michelle Tanguay, a 28-year-old Detroit visual artist who studied at CCS between 2010 and 2012. Tanguay, the co-creator of a mural in Eastern Market, said that during her two years of study at CCS, the federal law never came up during

classes. “Nobody knows about the law, and there’s a lot of gray area,” she said. “But the whole mural phenomenon that’s going on right now in Detroit … now Detroit is getting all this attention in the art world.” One of the gray areas, Lipp said, is a provision that allows a building owner to remove a mural or other piece of visual art if he or she has notified the artist of the intent to do so and given the artist the required 90 days to “safely” remove the art themselves without destroying or harming it. But can, for example, a nine-story mural that covers nearly the entire wall of a building be “safely” removed? “That is an issue that would need to be decided by the court,” she said, adding that VARA does not protect commercial art intended as advertising. “If I have a big mural of Faygo pop, VARA isn’t going to help me.” Craig is being represented by Gupta Wessler PLLC of Washington, D.C., and Wexler Wallace LLP of Chicago. Detroit-based Honigman Miller Schwartz and Cohn LLP , which declined comment, is representing Princeton. 䡲 Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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Foreign firms invested $357M in Oakland County last year By Robert Snell rsnell@crain.com

Foreign companies invested $357 million in Oakland County last year, more than doubling the previous year’s totals, county Executive L. Brooks Patterson said Friday. The total, up from $171 million two years ago, represents about 43 percent of the $835 million in private business investment in Oakland County. Since 2014, private companies have invested almost $1.5 billion. The numbers were revealed in a year-end business recap that reflected on various investments in Oakland County from foreignbased firms that added or retained thousands of jobs. “We’re garnering more foreign investment in Oakland County that most states don’t achieve,” Patterson said in a statement Friday. “Oakland County has a businessfriendly environment, a quality of life that is second to none and the word is getting out about opportunities for global businesses to succeed here.” Several foreign suppliers invested a total of $226.7 million last year, including: 䡲 Canada-based auto suppliers Magna International Inc. and Valiant Corp.

䡲 Germany-based auto suppliers

Durr Systems Inc. and BASF Corp. 䡲 Saudi Arabia-based Aramco Research. 䡲 China-based NEAPCO America. 䡲 Belgian company Umicore Au tocat USA Inc.

The investments created or preserved 2,161 jobs. Oakland County saw investments last year from eight Chinese firms, seven from Japan, six from Germany, four from Canada, three each from Korea and France and one from Belgium, Italy, the Netherlands, Switzerland, Saudi Arabia, Taiwan and Turkey. In all, more than 1,000 firms from 39 countries operate in Oakland County. “The past two years have been very successful,” said Irene Spanos, the county’s economic development director. “Our foreign direct investment is equal to that of many states. No other county in the U.S. does what we do — there are a few states which do it, but not counties.”

BANKRUPTCIES The following business filed for protection in U.S. Bankruptcy Court in Detroit Jan. 1-7. Under Chapter 7, a company files for liquidation. 䡲 KHY Trucking LLC, 4225 Bingham St., Dearborn, voluntary Chapter 7, assets and liabilities not available. 䡲

“No one can expect a media organization to produce excellent journalism for free. It can’t be done.”Anna Clark, Columbia Journalism Review media writer

NEWS FROM PAGE 1

Journalism Review.

Losses – and replacements Under the retirement offer aimed at newsroom employees age 55 and older, The Detroit News lost 13 staffers at the end of December from its newsroom of about 130, according to Managing Editor Gary Miles, and another staff member will leave at the end of this month. The Free Press, which has a newsroom of about 150, lost a similar number. The News is in the process of deciding how many retirees it will replace. But job postings last week include breaking news editor and five reporter positions. Recent hires include Jonathan Oosting, who was hired away from MLive Media Group by The News for its Capitol bureau. The newspaper also is shifting talent around, promoting Kelley Root to assistant managing editor for local news, among other moves. There’s no ideal mix of rookies and veterans The News seeks to have on staff, Miles said via email. “We don’t have an age ideology. We want to bring in talented journalists who are ready to take the next step in their careers,” he said. “We want journalists who want to break stories on their beats, who can write breaking news, enterprise and features. We want them to be comfortable with the relevant digital tools such as social media and multimedia that make it easier to tell people in just a few seconds what news is happening and why it’s important.” The Free Press also is seeking new talent. “We are hiring. We made a key hire last year with business reporter Matthew Dolan, who was previously with The Wall Street Journal,” said Free Press Executive Editor Robert Huschka via email. “We expect to announce more hires as soon as (this) week. We are aggressively searching for a breaking news reporter, health reporter and a restaurant writer. And we plan to add to our senior leadership team.” Still, it doesn’t appear as if either newspaper will replace all of the retirees.

Covering news The newsroom managers have to figure out how to best deploy the resources they do have to cover the city, metro area and state. For some time, that’s been to hire and invest in digital delivery. “As mobile platforms become even more important, we are constantly refining our strategies on social media and mobile apps,” Huschka said. “We pay a lot of attention to where our traffic is coming from and how long people are staying on our sites. That vigilance has been paying off: We recently set new records on mobile page

Gary Miles: Will look for new ways to cover stories.

Robert Huschka: Plans meetups with readers.

views and app traffic.” Huschka said the Free Press also is concentrating on new products. “We started four new podcasts in 2015, mostly related to sports. More podcasts are on the way in 2016. We launched a series of mobile apps around our local sports teams in 2015,” he said. As standing policy, the newspapers don’t discuss profitability or finances, so it’s unknown if the new products are making money. Without spelling out details, Huschka said the Freep is increasingly collaborating with its Gannett Co. -owned sister newspapers in Lansing, Battle Creek, Port Huron and Howell. The newspaper also plans to engage readers physically rather than in print or pixels. “We are planning bus tours, cultural meetups and other experiences where we will interact face-to-face with our audience,” Huschka said. At The News, the plan remains in flux. “The first of these departures occurred less than two weeks ago, so it’s still early,” Miles said. “But, as always, we don’t decide that there are subject areas we won’t cover. Maybe we’ll have to get a little more discerning about the stories that we take on. But that’s difficult to measure. “With 130 people out there every day, there’s a lot we can and will still cover. As you know, the best reporters have lists of stories that they want to get to — more than they can pursue. That was true when I was a reporter, and it’s just as true — almost certainly more true — today. Reporters and their editors are used to making these kinds of choices. They make them every day. We’ll keep pursuing the best ideas and stories.” Resources still will be poured into the major stories that serve reader interests (and sometimes win awards). “We want to focus on our core mission of outstanding public service journalism and being an essential source of community information and discourse,” Miles said. “We want to remain a platform that advertisers find attractive because of the audience we attract.” Some things probably will change, he said. “For example, our outstanding food writer, Kate Lawson, is among our retirees. There’s no question we’ll miss her contributions, her grace, her experience,” Miles said. “Yet with so many recipes just a few clicks of your phone away, it may not be as critical to run as many recipes as we did each week. We can approach

food coverage in different ways — we won’t eliminate recipes, but restaurants and other meal options may play a bigger role in coverage. And we can look for multiple contributors instead of relying on one.” The News also has opted to let others provide coverage of commodity news “We might let the wire service cover an event that everybody’s covering so we can focus our reporters and photographers on subjects nobody else is covering. That expands our coverage footprint with no real downside,” Miles said.

nist Terry Foster said he took early retirement from The News because he didn’t want his reassignment to the Detroit Pistons beat. Some retirees are being tapped to help the paper on a freelance basis. And the newsrooms themselves have been downsized physically. A smaller staff led the newspapers and the partnership that handles their joint business functions to move in October 2014 from the 415,000-square-foot Detroit News building at 615 W. Lafayette St. to six floors inside the former Federal Reserve at 160 W. Fort St.

Why it matters

Looking back

Newsroom losses undercut journalism’s watchdog role at a time Michigan has been rocked by crises such as the water scandal in Flint. The senior staff exiting at the Detroit newspapers was followed last week by news that Grand Rapids-based MLive was slashing 29 positions from its digital and print operations. Clark, the Columbia Journalism Review media writer, said the public is at risk anytime its watchdog is defanged by layoffs, but also said readers share responsibility in supporting journalism. “We need more good journalists, not less, here in the state that is one of only two in the nation that exempts both the governor’s office and the Legislature from open records requests,” she said. “To be fair, media consumers have a role to play here too in supporting the hard news they say they value. That includes sharing enterprise stories on social media (and not just ‘Elf on the Shelf’ slideshows) as well as financially supporting news outlets they value through subscriptions or donations. No one can expect a media organization to produce excellent journalism for free. It can’t be done. “That said, as newsrooms get smaller, it puts the public at real risk. As the Flint water crisis has shown, this is literally a matter of life and death.”

Berman took a retirement deal last month at The News after more than 30 years as a features and news columnist. In a lengthy email, she expressed gratitude that editors allowed her time to do the work she did, including overseas travel and investigative work that took weeks or months. “Editors are really pushing reporters to find compelling and distinctive stories, and will put resources — i.e., time and money — behind that,” she said. But Berman said the economic realities are harsh on those who remain, in the short and long term. “A smaller staff means there’s more push on most to fill the paper every day. That corresponds to covering the basics — press conferences, protests — with less opportunity to dig deeply into events or malfeasance,” she said. Some of the rank-and-file journalists, who spoke to Crain’s on the condition of anonymity, talked of an identity crisis at the papers. “Are we a breaking news site — if so, we need to deploy resources there,” one Free Press journalist said. “If we are about doing stuff nobody else is and deep, well-reported stories, we need to deploy resources that way and learn to ignore some of the fluff.”

Who left

Newsroom buyouts and layoffs now are a fixture of the business, said Ken Doctor, who analyzes the newspaper industry for the Nieman Journalism Lab at Harvard University. That has led newsrooms to cut or centralize production staff, managers and others, he said. “The notion: Skinny down newsroom staffing to local reporting as much as possible and cut as much of the rest, to match print ad loss.” The push for journalists to pick up new (usually digital) talents is a legitimate need, Doctor said, but also is sometimes used as an excuse by some companies to replace higher-priced veteran labor with lower-priced young staffers. “The way to do it right is to mix the old with the new,” he said. “Veteran reporters who know where the bodies are buried, and who’s who in town, with younger staff able to use the digital medium for all it’s worth.” 䡲

Free Press business columnist Tom Walsh in November became one of the major names among the senior journalists to opt for early-retirement buyouts aimed at newsroom staff ages 55 and older. Already at retirement age at 65, Walsh said, he was going to work a few more years, but opted to take what he deemed a good deal because another may not come along. Others took the deal for a variety of reasons, and the names of those who have left are significant. Among them at the Free Press were food writer and restaurant critic Sylvia Rector, who had covered food since 1998, and sports director Gene Myers, who joined the paper in 1983 and led its sports section since 1993. Among those The News lost were lifestyle columnist Marney Rich Keenan, music writer Susan Whitall and film reviewer Tom Long. Longtime Detroit sports colum-

Industry thoughts

Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

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CHARITY FROM PAGE 3

DADA nonprofit funding reach Since its 1976 debut, the auto show Charity Preview has raised more than $100 million for local children’s charities, over $43 million of that in the last 10 years alone. The 2015 event grossed $5.34 million, the most since 2008, when it grossed $6 million. DADA made $4.37 million in grants after costs last year. Now in its 40th year, the preview benefited just four charities for the first half of its existence, and none of those groups are still among the direct beneficiaries, Alberts said. The list of charities grew to 12 in the 1990s and 2000s after the show went international. By 2004, there were 11 charities benefiting, including the Detroit Auto D e a l e r s A s s o c i a t i o n C h a r i t a b l e Foundation Fund, which launched in 1998 as a fund housed at the Com munity Foundation for Southeast Michigan . The fund makes about

$250,000 in annual grants to other children’s charities in the region, helping to spread the preview’s impact further. In 2011, during the recession, when the event’s proceeds dropped to less than $2.6 million, the North east Guidance Center and Easter Seals Michigan were dropped as direct beneficiaries. The two agencies, which were selling fewer tickets than the other charities at the time, were cut so the DADA could make more meaningful grants to remaining charities, said Brent Wirth, president and CEO of Easter Seals Michigan. The next year, Easter Seals received a $50,000 grant through the DADA Charitable Foundation Fund. DADA does not plan to name a new beneficiary to replace the Detroit Institute for Children. Instead, beginning this year, it will designate 10 percent of the charity preview proceeds to the DADA Charitable Foundation Fund so it can assist a greater number of children’s chari-

Local charities benefit from auto show preview Local children’s charities and other nonprofitsshared in $4.37 million in grants raised through the 2015 Charity Preview of the North American International Auto Show. The largest grants, totaling $4.14 million, went to nine charities providing children’s services or support for them. The amount of the grants is based on the number of preview ticket buyers designating them, as well as a share of ticket sales benefiting all of the direct charity beneficiaries. The charities benefiting directly from the preview last year were:

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Children’s Hospital of Michigan Foundation, $1 million Boys & Girls Clubs of Southeastern Michigan, $810,400 The Children’s Center, $565,000 Judson Center, $485,000 Detroit Police Athletic League, $335,000 March of Dimes, $290,000 Detroit Institute for Children, $237,500 Boys Hope Girls Hope of Detroit, $225,000 DADA Charitable Foundation Fund, $195,000

ties in the region, said Max Muncey, public relations manager for the NAIAS. For the Detroit Institute for Children, loss of the Charity Preview revenue translates to roughly $250,000 to $400,000 in annual revenue used to fund a weeklong summer camp for special needs children and equipment for sensory rooms in schools, LaRuffa said. LaRuffa said when the DADA told the institute it would remain a beneficiary for the 2015 preview, it was told that to be considered for 2016, it would need to meet and undergo further review of its finances. But the meeting never took place; a letter from DADA initially went to the wrong address and, LaRuffa said, she never had the opportunity for a follow-up meeting with DADA or its board.

Turnaround story As part of shifting the model to provide services for special needs children in more school and preschool programs, LaRuffa said the institute decreased its administrative staff from 15 people in 2014 to three and increased its therapist staff to 61 from 45.

INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: Ambassador Software...................................... 4 Amplifinity .......................................................... 4 Anesthesia Surgical Associates .................... 22 Autoliv ................................................................ 14 Belfor Holdings ................................................. 14 Boydell Development...................................... 23 Charles Stewart Mott Foundation ................. 11 Cooper-Standard Automotive ....................... 14 Detroit Auto Dealers Association ................... 3 Detroit Free Press ............................................... 1 Detroit Institute for Children ........................... 3 Detroit Medical Center ................................... 22 The Detroit News ................................................ 1 Domino’s Pizza.................................................. 14 Dykema Gossett ............................................... 15 EPIC-MRA............................................................. 1 FCA USA............................................................. 14 FCE Bank............................................................ 14 Federal-Mogul ................................................... 14 Flint Farmers’ Market ....................................... 11 Ford Motor......................................................... 14 General Motors ................................................. 14 Genesys Health System................................... 12 Honigman Miller Schwartz and Cohn .............. 1 Hurley Medical Center ...................................... 11 Huron Capital Partners..................................... 5

Kelly Services .................................................... 14 Kerr Russell & Weber ....................................... 15 Larson Realty Group .......................................... 3 Lippitt O’Keefe Gornbein................................ 23 McLaren Health Care....................................... 22 Michigan Department of Agriculture............. 11 Michigan Municipal League.............................. 6 Michigan State University............................... 12 MLive Media Group.......................................... 24 Myckowiak and Associates ............................ 22 New Economy Initiative.................................. 20 North American International Auto Show .... 3 Princeton Enterprises..................................... 23 PSJ Anesthesia .......................................... 22, 23 Re/Max Leading Edge........................................ 9 St. John Providence Health System .......... 1, 23 St. Joseph Mercy Health System .................. 22 Southwest Detroit Business Association...... 9 Southwest Housing Solutions......................... 9 Tomkiw Mackewich ........................................... 3 University of Michigan..................................... 16 Uptown Redevelopment Corp. ....................... 11 TI Automotive................................................... 14 Wayne State University.................................. 20 Wayne State University Physician Group .... 20 Zara Creative..................................................... 18

Last year, it served 5,000 children — 250 more than before it closed the clinics — in more than 100 schools (most in Detroit and Wayne County) up from 87 schools last year and 59 in fiscal 2013, LaRuffa said. This year, it expects to serve 6,000 children. While the institute was struggling financially five or six years Gerald Lindman: ago, that’s To penalize seems changed in the rash. last couple of years, said John Bebes, industry group leader for Plante Moran PLLC’s national nonprofit practice. In both 2009 and 2010, it reported operational losses of more than $1 million, and pension plan obligations added to that, Bebes said after reviewing the charity’s finances at Crain’s request. It shed its defined benefit pension plan liabilities in 2013 when the Pension Benefit Guaranty Corp . agreed to take them on. The plan was underfunded by about $2 million at the time, Bebes said.

By fiscal 2014 and 2015, its financial statements show the significant operational changes it made, and now it’s generating excess revenue, he said. The institute’s operating revenue increased to $2.7 million last year from $2.5 million in 2014. And a $546,000 operating excess last year supplanted a $150,000 operating deficit and $534,403 loss on the discontinued operation of its clinics it reported the year before, according to its audited financials. “The question is: What is the DADA seeing, and do they understand what’s happened? That’s something they have to make a decision on,” Bebes said.

Best practices At the end of the day, DADA/NAIAS reserves the right to add and change charities at its discretion, Muncey said. While there’s not a formal review of them each year, Alberts and the executive committee for the Charity Preview board — whose directors are auto dealers from around the region — are in frequent talks with each to discuss their performance. The Detroit Institute for Children demonstrates it is working hard to change its business model in the face of dramatic changes to health care, said Gerald Lindman, a nonprofit legal and management consultant who led the Center for Nonprofit Management at Lawrence Technological University for 10 years. “In the midst of all this, to penalize them (early on) in ... a coupleyear strategy to change their business model, seems rash.” Like private foundations, the DADA does not have an obligation to fund any specific nonprofit, and it does have final discretion over grants, he said. “However, it would seem that (DADA) does have responsibilities of good stewardship of the charitable funds, and this is where best practices come into play as a guide.” 䡲 Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

Ilitches in Newsmakers honor In Detroit, big ideas frequently start with an I. More precisely, an Ilitch. Crain’s will honor its 2015 Newsmakers of the Year, the father-andson duo of Mike and Christopher Ilitch, at a luncheon at 11:30 a.m. Feb. 9 at MotorCity Casino Hotel in Detroit. The Ilitches are being honored for their work building The District Detroit , which will be anchored by the new Detroit Red Wings arena, and for funding the Mike Ilitch School of Business at Wayne State University. Crain’s will also recognize nine other 2015 Newsmakers at the luncheon for reasons ranging from M&A deals to economic development.

Chris (left) and Mike Ilitch will be hon-

ored as Newsmakers of the Year on Feb. 9. Individual tickets are $75. A reserved table of 10 is $800. Student tickets are $65. Walk-in registration, if available, will be $95. Tickets are available at crainsdetroit.com/events. Questions about the event can be directed to Kacey Anderson at cdbevents@crain.com. 䡲

CRAIN’S DETROIT BUSINESS www.crainsdetroit.com Editor-in-Chief Keith E. Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Associate Publisher Marla Wise, (313) 446-6032 or mwise@crain.com Editor Jennette Smith, (313) 446-1622 or jhsmith@crain.com 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

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

WEEK

ON THE WEB DEC. 31-JAN. 8

Huntington Bank Detroit Digits adds branch in Mexicantown $6.25 million A numbers-focused look at last week’s headlines:

untington Bank opened a

branch on Friday in southwest Detroit’s Mexicantown community at 7740 W. Vernor Highway. It followed the opening of 43 new branches in Meijer stores around the state. Huntington Bank’s parent company is Columbus, Ohio-based Huntington Bancshares Inc.

COMPANY NEWS 䡲 Ann Arbor-based Millendo Therapeutics Inc. said it raised a venture capital round of $62 million, the largest VC round for a Michigan drug development company. Millendo, formerly known as Atterocor Inc., also announced an exclusive licensing agreement with London pharmaceutical giant AstraZeneca plc to continue human trials and commercialization of a drug developed to fight endocrine disease. The previous state funding record of $59.5 million was set in 2014 by ProNAi Therapeutics Inc. of Plymouth Township. 䡲 Farmington Hills-based H.W. Kaufman Financial Group purchased Toronto-based Technical Risk Services, a loss control services, inspections and risk control consulting company. The sale price was not disclosed. 䡲 Ann Arbor-based NSF International, a nonprofit provider of auditing, testing and certification services for the dietary supplement, natural product and food industries, acquired Richmond, Calif.based AuthenTechnologies, a provider of next-generation, DNAbased species identification services. The sale price was not disclosed. 䡲 Troy-based AirTime Trampoline & Game Park said it is opening a 30,000-square-foot location in Novi — its fourth site — in February. A company official did not disclose the cost of constructing the location, to employ 75. 䡲 Bloomfield Hills-based Taubman Centers Inc. and Santa Monica, Calif.-based The Macerich Co. agreed to purchase the Country Club Plaza mixed-use retail and office center in Kansas City, Mo., for $660 million in cash from Raleigh, N.C.-based Highwoods Properties Inc. Taubman and Macerich will each hold a 50 percent interest in the center and jointly manage it. 䡲 A federal judge in Detroit dismissed a lawsuit by Quicken Loans Inc. against the U.S. Department of Justice over its approach to investigating home loans insured by the Federal Housing Administration. This means the Detroit company’s quarrel with the government will proceed in Washington, D.C. 䡲 Detroit-based General Motors Co. will invest $500 million in Lyft

The price tag for the Detroit building near Corktown that holds the Galapagos Art Space. The 138,000square-foot building is now on the market.

$20 million

The value of a five-year early childhood development program in Detroit launched by the Troy-based Kresge Foundation. The program will focus on new early childhood centers, improvement of current facilities, neighborhood grants, and more.

The number of Granite City Food & Brewery locations, with the latest to open in Detroit at the Renaissance Center next month. The 16,000square-foot restaurant was originally scheduled to open in October, but saw delays. Inc., giving the ride-hailing startup a

valuation of $5.5 billion and a major ally in the global battle against Uber Technologies Inc., Bloomberg reported. Meanwhile, GM’s board of directors elevated CEO Mary Barra to the role of chairman, replacing Tim Solso, who will continue to serve as lead independent director. 䡲 La Rondinella, an Italian restaurant from Dave Mancini, owner of the Supino Pizzeria in Detroit’s Eastern Market, opened next door to Supino.

OTHER NEWS 䡲 Terrance Keith, a Wayne County probate judge, dropped plans to take the “Detroit RiverWalk” name away from the Detroit RiverFront Conservancy, the nonprofit that built one of the city’s top recreational spots. Crain’s Detroit Business first reported that Keith filed trademark applications last month. The aboutface followed a meeting between Keith and conservancy officials. 䡲 The Bert’s Warehouse building in Detroit’s Eastern Market will go up for auction Feb. 22-24 for the third time. The building and surface parking lot fetched $2 million by a local bidder, but the deal fell apart in November. Last July, a non-local buyer could not close a deal for nearly $2 million. 䡲 The 27-story Buhl Building in downtown Detroit is being marketed for sale. The 385,000-square-foot office building is 71 percent leased, said a confidential investment summary prepared by the Chicago office of Cushman Wakefield, which is marketing the building to buyers. 䡲 Lafayette Greens, a volunteerrun urban farm in downtown Detroit, is one of 10 new case studies

in an online architecture exhibition, “Designing Our Future: Sustainable Landscapes,” from the American Society of Landscape Architects. 䡲 Three young professionals in Michigan’s nonprofit sector have been cited by the Chronicle of Philanthropy as “trailblazers.” Included on the Chronicle’s inaugural “40 under 40” list are Ryan Friedrichs, 38, chief development officer for the city of Detroit’s office of grant management; Veronika Scott, 26, founder and CEO of Detroit nonprofit The Empowerment Plan; and Jason Franklin, 36, of the Dorothy A. Johnson Center for Philanthropy at Grand Valley State University. 䡲 Amid rumors that he could retire from the National Football League at age 30, Detroit Lions star wide receiver Calvin Johnson issued a statement through the team that confirmed he’s mulling his next career move. Johnson said he would expect to have a decision “in the nottoo-distant future.” 䡲 Denver-based Frontier Airlines announced nonstop service between Detroit Metropolitan Airport and Phoenix starting April 15. 䡲 Christine Beatty, the former chief of staff to Detroit Mayor Kwame Kilpatrick convicted in a sex and corruption scandal in 2008, will host a live call-in show on WFDF AM 910 on Saturdays beginning Jan. 23. The station also is launching a Saturday talk show featuring Wayne County Circuit Court Judge Vonda Evans and Detroit City Council member Mary Sheffield. 䡲 Detroit saw a drop in most violent crimes in 2015, the second consecutive year in which homicide totals in the city dipped to pre1970 levels, according to newly released data, AP reported. 䡲 Detroit is considering creating a demolition department to help deal with rising costs associated with tearing down blighted and vacant properties, AP reported. 䡲 The Southeast Michigan Purchasing Managers Index, a research partnership between Wayne State University’s Mike Ilitch School of Business and the Institute for Supply Management-Southeast Michigan, continued a two-month slide in December, falling from 57.1 to 54.8. Meanwhile, Comerica Bank’s Michigan Economic Activity Index improved in October after a flat September. 䡲 Michigan environmental regulators are poised to allow the Marathon Petroleum Corp. refinery in southwest Detroit to increase emissions of at least eight air pollutants, AP reported. The state Department of Environmental Quality proposes to approve revised permits for refinery modernization and expansion that would increase emissions, but within state and federal regulations.

OBITUARIES 䡲 Y. Gladys Barsamian, a retired Wayne County Juvenile Court judge who was a champion of women’s rights and troubled children, died Jan. 4. She was 84. 䡲

RUMBLINGS

TRAVEL MICHIGAN

Pure Michigan displays will populate terminals at Detroit Metropolitan Airport.

Pure Michigan to greet auto show international arrivals housands of international journalists and automotive executives will experience Pure Michigan immediately after touching down at Detroit Metropolitan Airport for the 2016

North American International Auto Show. The state’s Travel Michigan

tourism division last week got marketing displays in place along a corridor from the jet bridge for arriving international flights to a customs inspection station at the airport’s McNamara Terminal. Crain’s first reported the branding strategy in October. Included are billboard murals stretching as high as 12 feet at the terminal, which hosts Atlantabased Delta Air Lines and affiliates Air France and KLM Royal Dutch Airlines. Other displays went into the North Terminal, which houses all other airlines at Metro. “We need to provide the most hospitable environment right from the first arrival moment,” said Travel Michigan Vice President Dave Lorenz. “We want them to know how proud we are of America’s comeback city.” Pure Michigan television commercials will come later to the airport, as will welcome videos in several languages. The campaign spun out of a federal initiative to improve passengers’ experience at 17 U.S. airports, including Detroit. That includes shortening wait times, updating wireless and cellular service, and improving signage. The auto show begins with press previews Monday and with a public show Jan. 16 at Cobo Center.

Robb Report thinks luxury Also coming to Cobo for car buffs is the luxury lifestyle magazine Robb Report, owned by Rockbridge Growth Equity Inc., a private equity firm co-founded by Quicken Loans

Inc. chairman Dan Gilbert.

The magazine will be covering the event from a 10,000-square-foot studio on the Detroit auto show floor, interviewing top executives and streaming segments on robbreport.com. Some material will also air via a syndication deal with NBC, said Elyse Heckman, director of communications for Robb Report. Coverage continues Monday through Wednesday. “Cars and auto coverage are a big category for the Robb Report,” Heckman said. “We plan to shed light on the luxury and design in Detroit.” In addition to coverage, the magazine will be a display sponsor of vintage and current luxury cars, including the $600,000 Lamborghini Aventador LP750-4 Superveloce Roadster and $2.5 million 1969 Lamborghini Miura P400.

Utley to retire at Goodwill In the latest leadership shift among local nonprofits, Lorna Utley plans to retire from Goodwill Industries of Greater Detroit at

Lorna Utley: Has led for eight years .

year’s end. Utley, 61, who headed the organization the past eight years, was previously president of the

General Motors Foundation and a director of

diversity initiatives and philanthropy after many years as a GM human resources professional. Goodwill returned under Utley’s tenure to the thrift store market in 2011 after a decade-long absence, creating a sustainable revenue source for its job training and placement mission. The nonprofit will open a sixth thrift outlet, on Carpenter Road in Ypsilanti, on Friday. 䡲

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