Crain's Detroit Business, Dec. 12, 2016 issue by Crain's Detroit Business

AI startup will keep local home

Don’t go it alone on finances

CEO Lyden Foust says he’s keeping Spatial Labs in Detroit, Page 4

Biz owners recommend having the right money minds in place for growth. Second Stage, Page 13

DECEMBER 12 - 18, 2016 Government

Development

$4 billion question: How to pay for fixes

Thinking like developers, cities dream big

New report notes depth of infrastructure woes By Lindsay VanHulle

Crain’s Detroit Business/Bridge Magazine

GIBBS PLANNING GROUP INC.

An artist’s rendering shows what Troy could look like with a plan for a bustling retail, residential and governmental district.

Troy, other communities look to build walkable urban areas on municipally owned land By Kirk Pinho kpinho@crain.com

In his office, Brian Kischnick pulls out two rolled-up maps of downtown Royal Oak and downtown Birmingham and places them individually over an aerial photo of the 127-acre Troy civic campus. They both fit, with room to spare. Those are the stakes that Kischnick, Troy’s city manager, and a team of planners have in the back of their minds as they shop around a master plan for the campus that would cost at least $350 million and bring at least 850 residences and hundreds of thousands of square feet of walkable retail space to the city, one of Oakland County’s economic engines — even with no downtown. Troy is one of several suburban communities thinking like developers, looking at increasingly valuable

municipal real estate holdings and viewing them as opportunities to create bustling, walkable urban areas attractive to both millennials and baby boomers, and bring in more city revenue in the process. Royal Oak, Northville, Warren and Commerce Township, just to name a few, are all taking aim at the new lust for downtown living. For more than six months, Troy has been working with Bingham Farms-based Core Partners LLC and Birmingham-based Gibbs Planning Group Inc. to develop a master plan for 127 acres of city-owned land on which Troy’s civic complex sits nestled between I-75 to the west, Livernois to the east and north of Big Beaver Road. Not only does the site contain City Hall, but also the police department, library, community center, an SEE TROY, PAGE 22

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Troy’s plans

Residential

Hotel

Cottage homes

Residential Retail & residential

Civic building

Civic buildings

Retail & residential SOURCE: ROBERT GIBBS, GIBBS PLANNING GROUP INC. n At least 180,000 square feet of retail

n 20 acres of parks.

space and restaurants.

n A 6-acre man-made lake.

At least 850 residences: townhouses, live-work spaces, condominiums, apartments and cottage homes.

n A 300-room, four-star hotel.

n Two formal town squares. n City hall, police station, courthouse

and library will remain.

Blue-sky ideas in Copper Country

The northern reaches of the Upper Peninsula are filled with the ghost towns of the copper boom of the 1800s. But there are also surprising stories of business innovation — and a demonstration that technological disruption can arise in the most prosaic of businesses. Stories begin on Page 9.

LANSING — If Michigan is going to crack the surface of its infrastructure spending problem, residents and policymakers will have to ask themselves two questions. Who’s going to pay? And how did we get here? The answer to the first can determine the state’s path toward a solution. The answer to the second could help break a decades-long cycle of underinvestment. No single reason can explain why Michigan’s infrastructure is in bad shape — so much so that new estimates of just how deep the state’s hole is are pegged at close to $4 billion per year for decades. There are many reasons: Lawmakers who sign pledges not to raise taxes when they take office, taxpayers who don’t trust governments to spend their dollars on the services they promised, city halls across Michigan that are starved for cash because property taxes only stretch so far. “It really is on us,” said Kirk Steudle, director of the Michigan Department of Transportation. “We can point fingers at administration, legislators ... anti-tax groups, whoever — but the fact is, we are not taking care of the basic building blocks of society. We. All of us.” In a state where new taxes are often a nonstarter, the idea of raising more money for roads, bridges and drinking water lines has long been a hard sell. Voters last year rejected a road-funding proposal to raise sales and fuel taxes; the $1.2 billion legislative plan that Gov. Rick Snyder SEE FIXES, PAGE 22

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

MICHIGAN BRIEFS Pension bills, Gilbert plan lame-duck casualties In notable news from the Michigan Legislature’s year-end lameduck session, teachers and city employees will keep their pension and retiree health care benefits unchanged, and a plan backed by Detroit’s Dan Gilbert to capture tax money to help real estate developers finance large projects on contaminated sites won’t get House or Senate approval this term. Despite a push by the GOP-led legislature in Lansing, leaders said they won’t vote this term on bills to move new teachers into 401(k)-style retirement plans and cap municipal employees’ retirement health care benefits. The decision to not act in the session that ends this week leaves the benefits issues to be resolved in the legislative session that starts in January. The nonaction on Gilbert’s proposal came the day after he visited the Capitol to try to save a planned five-bill package to use state sales and income taxes for so-called “transformational” brownfield projects. The incentive was touted as a tool to help developers complete projects they say otherwise would be cost-prohibitive. Meanwhile, the Legislature ap-

proved a regulatory framework that would allow Uber and other ride-hailing services to legally operate in Michigan, and the Republican-controlled House voted to stiffen fines for mass picketing and to require that judges halt illegal demonstrations such as obstructing access to businesses and roads. The House also voted to eliminate a requirement that employers advertising for replacement workers during a strike tell new workers that they’d be replacing employees involved in a labor dispute. In a bill approved by the House and now in the Senate for consideration, utilities would be forced to more quickly — within three business days instead of the current 30-day deadline — warn customers if there is too much lead in their water. The bill was spurred by Flint’s water crisis.

’18 closing planned for Palisades power plant New Orleans-based Entergy Corp. announced plans to permanently close the Palisades nuclear power plant in Southwestern Michigan in 2018, which could mean hundreds of job cuts for a major employer in the region if regulators approve the closure, AP reported. Entergy said it has agreed with Jackson-based utility Consumers Energy to

INSIDE

NUCLEAR REGULATORY COMMISSION

Consumers Energy will pay Entergy Corp. $172 million to end a power purchase agreement and help Entergy decommission the Palisades plant.

end a power purchase agreement for the 45-year-old Covert Township plant. The companies said it will save Consumers customers as much as $172 million from 2018 to 2022 and affect about 600 employees, and that less expensive alternatives exist to provide power in the region as Consumers adds renewable energy and natural gas-fired generation. Entergy said it plans to close the plant Oct. 1, 2018. An earlier agreement committed Consumers to purchase nearly all of the power that Palisades generates through April 2022. Consumers said it will consider potential placement of up to 180 employees from Palisades into the utility’s workforce.

MICH-CELLANEOUS

New data from the U.S. Census Bureau shows that home values in

Michigan’s rural areas surpass those

in its urban areas — the opposite of national trends, AP reported. The census’ American Community Survey includes demographic information nationally from 2011-2015. Nationally, urban home values are higher than rural home values, but in Michigan, rural median home values are $136,100 compared with $117,200 in urban areas. Median household income in Michigan rural and urban areas also doesn’t mirror national trends, with median rural household incomes higher. Pleasant Ridge Mayor and demographer Kurt Metzger said Michigan’s major cities largely have been “areas of disinvestment.” J After posting a 4.3 percent loss in its last fiscal year, Michigan State University’s endowment is pulling $100 million from four hedge funds and moving the money into computer-driven funds to diversify the portfolio, Bloomberg reported. Half the money will go to a fund run by New York City-based Renaissance Technologies, as MSU unwinds its investments mostly from long-short hedge funds. J Mophie, the growing global tech company behind the “juice pack” power cells for Apple Inc.’s iPhone, is expanding its footprint in the Kalamazoo area by opening a $685,000 call center in Texas Township, MLive.com reported.

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OPINION

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COMPANY INDEX: SEE PAGE 25 J Auto-Owners Insurance would expand its footprint to four more states if an affiliation agreement is approved with Concord General Mutual Insurance next year, the Lansing State Journal reported. Delta Township-based Auto-Owners announced the proposed affiliation with Concord, which operates in New Hampshire, Vermont, Maine and Massachusetts. The deal requires regulatory approval and a vote by Concord policyholders. J Meijer Inc. named its first nonfamily member CEO, as President Rick Keyes will add the title Jan. 1. Hank Meijer, who has held the role, will serve as executive chairman of the Grand Rapids-area-based retailer’s board. Traditionally, the role of Meijer president has been held by a nonfamily member, with the title of CEO held by family members.

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Development

Biggest tabs for public arena debt? Gilbert, GM By Bill Shea bshea@crain.com

and Kirk Pinho kpinho@crain.com

Dan Gilbert is paying for a significant share of fellow Detroit billionaire Mike Ilitch’s new hockey arena that will open next fall. Property taxes paid on eight buildings owned by Gilbert, the Quicken Loans Inc. chairman who has gobbled up downtown properties in recent years, account for the largest share of funding earmarked to pay the $250 million in public bond debt on $635 million Little Caesars Arena, according to an analysis of proper-

ty-assessment data by Crain’s. A list of the top 30 taxpayers within Detroit’s Downtown Development Authority tax capture district as of June 12 shows that Gilbert-owned properties account for $192.2 million of a total of $423.5 million in total tax value of the top 30 properties within that district. Some of those Gilbert buildings include One Detroit Center, the former Compuware Corp. headquarters (which he jointly owns with Detroit-based Meridian Health) and the Greektown Casino-Hotel. The portion of Gilbert’s property taxes used for the arena project could be even more because since

2011 he has purchased more than 90 properties — buildings and parking decks, for example — in and around downtown Detroit totaling more than 15 million square feet, according to the most recent figures from Bedrock LLC, his Detroit-based real estate development, management and ownership company. Gilbert’s investments total more than $2 billion, Bedrock said. Additionally, the DDA last month approved a term sheet for a sweeping Gilbert plan to turn two vacant and largely abandoned blocks east of Campus Martius Park into more SEE DEBT, PAGE 25

Transportation

LARRY PEPLIN

The Little Caesars Arena, which will house the Detroit Red Wings and the Detroit Pistons, has a planned opening in 2017.

Insurance

Health care execs differ on direction for Obamacare

By Jay Greene jgreene@crain.com

CHRIS EHRMANN

Below the 2017 North American International Auto Show at Cobo Hall in Detroit is where the AutoMobili-D program will showcase more than 50 startups’ different technologies.

Auto Show 2017

Auto show shines headlights on the business of mobility

Automobili-D: Jan. 8-12

By Dustin Walsh dwalsh@crain.com

John Krafcik, CEO of Google’s self-driving car project, will kick off Detroit’s North American International Auto Show in January as part of a new showcase, called Automobili-D, designed to push the show toward a new focus on the business of mobility. The Silicon Valley executive is the opening keynote on Sunday, Jan. 8, only days after the Consumer Electronics Show in Las Vegas. In recent

MUST READS OF THE WEEK

years, CES has eclipsed NAIAS as the go-to show for automotive technology. This year, NAIAS is answering back with a shift toward mobility tech with Automobili-D, which makes the auto show as much about creating business within the industry as it is about selling cars to the public. “This was born, internally, from realizing there’s so much changing so fast with cars and driving,” said Sam Slaughter, chairman of the 2017 SEE MOBILITY, PAGE 21

The Gallery: Jan. 7; tickets: $500 Press preview: Jan. 9-10 Industry preview: Jan. 11-12; tickets: $110 Charity preview: Jan. 13; tickets: $400 ($390 is tax deductible) Public show: Jan. 14-21; tickets: $13, $7 for kids and seniors, children under 6 years old are free Economic impact: $430 million in 2016, including $270 million on displays Worldwide vehicle debuts: At least 40, compared to 51 last year. Wi-Fi: Cobo Center has spent $2 million to upgrade technology and improve signals.

Top health care executives Wright Lassiter III and Phil Incarnati are on opposite ends of the political spectrum. Lassiter, CEO of Detroit-based Henry Ford Health System who voted for Hillary Clinton for president, wants Congress to make small improvements in Obamacare that include reducing burdensome regulations on online health insurance exchanges and eliminating the 40 percent “Cadillac tax” on generous health insurance benefits. Incarnati, the CEO of Flintbased McLaren Health Care who voted for now-President-elect Donald Trump, also believes regulations need to be streamlined and the exchanges need to be overhauled to encourage more millennials to sign up. It’s clear that change is coming. A bit more than a month after Trump’s election, local health care leaders are still sorting out how it might affect health care delivery and financing. Interviews with an array of local health care CEOs reveal they’d like to see changes to the Affordable Care Act, but don’t necessarily agree on which changes would help people or their businesses. “Historically, Republicans have not been generous to health care. (Trump) has said he would repeal the ACA. I think there are good things for providers and bad things,”

Vision for Detroit

On Broadway

Vision Investment Partners LLC

Developer plans an $11 million project on Broadway Street in Detroit that includes apartments, office space and restaurants, Page 7

has made its first two real estate investments, buying a pair of four-story buildings in downtown Detroit, including a building (right) on Randolph Street, Page 8

Wright Lassiter III: CEO of Henry Ford Health System.

Phil Incarnati: CEO of Flintbased McLaren Health Care.

Incarnati said. “The complexity of the bill is remarkable. The administration was allowed great autonomy to write the rules” that include the cost-sharing provisions to help low-income wage earners for Obamacare health insurance exchange products, which have been challenged in court by congressional Republicans. Lassiter also believes Congress should work with Trump next year to fix parts of Obamacare that aren’t working well. These include the exchanges and some provisions that affect small businesses. “While I would be the first to acknowledge that the Affordable Care Act could be improved, I would not have desired a president coming in who is saying ... we will repeal and replace it without any specificity,” said Lassiter. Over the past five years, the Affordable Care Act has covered an SEE HEALTH, PAGE 24

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

AI startup closes on $2M funding round, will keep base in Detroit By Tom Henderson thenderson@crain.com

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Spatial Labs Inc., one of 12 startups that was part of the Techstars Mobility accelerator program last summer in Detroit, has closed on a funding round of $2 million. The round was led by Serra Ventures of Champaign, Ill., and joined by Connectic Ventures of Covington, Ky.; the M25 Group of Chicago; Fulcrum Equity Partners of Atlanta; and Caerus Investment Partners of Chicago. Spatial announced a development deal with Ford Motor Co. at the Techstars Demo Day in September. As part of its participation in the program, Spatial got $20,000 in equity funding from Techstars and $100,000 from Detroit-based Fontinalis Partners LLC. “I’m feeling pretty thankful right now,” Spatial co-founder and CEO Lyden Foust told Crain’s. The artificial intelligence company was founded in Cincinnati, but Foust said he has decided to keep its headquarters in Detroit. “We didn’t expect to move to Detroit,” he said. “But personally, I’ve loved being here, and there are so many more opportunities here compared to Cincinnati.” Spatial does business as Spatial. ai, the “ai” standing for artificial intelligence. After finishing the summer accelerator program, the company, which has five employees, was offered space at Ford Field by Ted Serbinski, managing director of the Techstars program in Detroit. Foust said the company will use the funding to hire several data scientists and ramp up marketing.

“You can say, ‘Show me the best places with a sunset view on the water,’ Or you could ask, ‘Where are the most pictures of nature taken near here?’” Lyden Foust, Spatial Labs Inc.

What Spatial does is answer questions people might have about where they currently are based on their GPS location and what others have posted on social media about nearby places and events, pulling information from 30 sources, including Instagram, Twitter, Facebook and Flickr. If, for example, you happened to be on vacation in northern Michigan and were driving in the Leelanau Peninsula, “you can say, ‘Show me the best places with a sunset view on the water,’ Or you could ask, ‘Where are the most pictures of nature taken near here?’” Foust said. “Or you could say, ‘Show me where there are bands playing tonight.’” Foust was an ethnographic researcher for The Seek Co. in Cincinnati from 2012-2015 and an adjunct professor of design ethnography at Miami University in Ohio before founding Spatial last January. He said the idea for Spatial came when he realized “people would tell me social media more than they’d tell me about the cities they were living in. There was so much information on social media, but no one could make sense of it.” Spatial’s co-founder and chief technology officer is Will Kiessling, who had been lead engineer and technologist at GE Aviation in Evan-

dale, Ohio, from 2007 to last January. At GE Aviation, he was used to managing huge amounts of data during engine development and testing. “It’s the same logic to remote test jet engines as it is to remote test cities,” Foust said. “Billions of people interact with maps across multiple devices every day. Bringing social context to maps using Spatial’s patent-pending technology will improve map usability in many industries, including travel, real estate and automotive,” said Rob Schultz, a director at Serra Ventures, in a news release. “The Spatial team is awesome. Highly coachable, very thoughtful,” Serbinski told Crain’s. “Lyden’s ethnographic background gives him an edge in building a platform that takes a different approach to parsing information about locations. With the rise of AI and machine learning and the shift to mobility and location, Spatial is at the intersection of a massive shift in the industry. I’m extremely excited that we were able to invest in them as part of our 2016 class.” In September, Spatial was named one of the top 10 automotive startups by Fortune magazine. Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2

Fifth Third commits $650 million to metro Detroit over next 5 years By Dustin Walsh dwalsh@crain.com

Fifth Third Bank is committing $650 million to community development in the metro Detroit region over the next five years as part of a broader national initiative. The local commitment, which will be in the form of mortgage lending, small business lending, community development lending and philanthropy, comes at a time when the Cincinnati-based bank is closing 44 branches across its operations. It’s unclear whether any of Michigan’s 22 branches will be closed. The cuts would remove nearly 4 percent of the current 1,191-branch network. Bank officials expect the move to save the company between $13 million and $14 million a year. By early 2017, Fifth Third’s branch network will be 12 percent smaller than it was in 2015, Cincinnati.com reported in

“These are smart investments ... it’s tough to bank in an area where no one wants to live ... .” Greg Carmichael, Fifth Third Bank

September. The community development initiative and the closures are part of the bank’s strategy to close branches where middle-class customers need fewer in-person services and to create new customers in low-income areas, said Greg Carmichael, Fifth Third’s president and CEO. “If you look at what we’ve done recently, we’ve only opened banking centers in low-income areas,” Carmichael said in an interview with

Crain’s. “These are smart investments ... it’s tough to bank in an area where no one wants to live ... building banks where communities are improving is paramount to our success.” Carmichael said the $650 million earmarked for Michigan will focus on lending, but also on improving services for the homeless, veterans and impoverished children. The allocation of those funds will be dictated by local leadership, he said. Carmichael was also scheduled to meet with Detroit Mayor Mike Duggan for the first time and to discuss policies and initiatives that Fifth Third could help the administration, including blight removal. “I’m really interested in getting a clear picture of his agenda,” Carmichael said. “There are a lot of major projects, such as lighting, blight, etc., that we may be of service.”

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Crainâ&#x20AC;&#x2122;s hires Livengood to cover Detroit on the rise Crain's Detroit Business

Chad Livengood, the Lansing bureau chief for The Detroit News, will join Crainâ&#x20AC;&#x2122;s Detroit Business on Dec. 26 to launch a new beat designed to cover the multifaceted story of Detroit rising â&#x20AC;&#x201D; the fledgling and uncertain effort to restore the cityâ&#x20AC;&#x2122;s economic, cultural, and political vibrancy. Livengood, 34, has covered the governor, state agencies, the Legislature and presidential politics for Michiganâ&#x20AC;&#x2122;s second-largest newspaper since 2012. Livengood was a key player in the paperâ&#x20AC;&#x2122;s coverage of the Detroit bankruptcy from July 2013 to Chad Livengood: D e c e m b e r Will cover actions 2014, specialand inaction of izing in the fiDetroitâ&#x20AC;&#x2122;s civic nancial issues leaders. at the center of the legal battle. He also covered the water crisis in Flint. â&#x20AC;&#x153;From afar, for several years now, Iâ&#x20AC;&#x2122;ve been watching Chadâ&#x20AC;&#x2122;s coverage with awe and admiration,â&#x20AC;? said Crainâ&#x20AC;&#x2122;s Associate Publisher and Editor Ron Fournier. â&#x20AC;&#x153;He is one of those rare reporters who breaks news and then uses his sources, data and dogged determination to crank out enterprise stories that give his readers keen and unique insights. He uses every platform from Twitter to the newspaper to inform his readers and build a sense of community around his coverage. â&#x20AC;&#x153;In other words, heâ&#x20AC;&#x2122;s a perfect fit at Crainâ&#x20AC;&#x2122;s.â&#x20AC;? Before joining the News, Livengood covered the Delaware Legislature and governorâ&#x20AC;&#x2122;s office for the Capitol Reporter in Wilmington, Del. A native of Chelsea and graduate of Central Michigan University, Livengood has also worked for the Springfield News-Leader in Springfield, Mo.; the Jackson Citizen Patriot; and the Saginaw News. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re redefining how we cover Detroit,â&#x20AC;? Fournier said. â&#x20AC;&#x153;Real estate deals are a big part of Detroit, but not the whole story. Chad can help connect the dots in our Detroit coverage, find trends in disparate news developments and tell big stories about Detroitâ&#x20AC;&#x2122;s future â&#x20AC;&#x201D; its rebirth or its failure to renew. â&#x20AC;&#x153;Just as he held state leaders accountable, Chad will cover the actions and inaction of Detroitâ&#x20AC;&#x2122;s civic leaders.â&#x20AC;?

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OPINION

State can’t wait on benefits issue

o much for Right to Work 2.0. Michigan lawmakers last week backed away from solving an important issue — public retirement benefit liabilities for local governments and their growing tabs for retiree health care. The liability numbers for both pensions and retiree health care, documented in numerous reports, are massive. Kicking the issues down the proverbial road will only make the financial headache bigger. It’s not going to go away. Consider: A state appeals court in September gave Chicago a green light to phase out retiree health care benefits for people hired after Aug. 23, 1989. We suspect a number of Michigan cities are at least looking at the extreme option. The now-dormant bills would have asked retirees to pay 20 percent of the costs. Perhaps in the new session, a compromise could have younger retirees paying more and older retirees paying less. The delay gives municipal managers, elected officials and union leaders time to come up with a solution. And if they can’t, lawmakers must step in. Incoming House Speaker Tom Leonard, R-DeWitt Township, met with union leaders and told them he would meet with them in the new term. We wish him luck in getting the key players on a “reality page.” Doing nothing is no longer an option. Retirement benefits were not the only thing dropped in the lame-duck session. The plan to capture sales taxes and income taxes from brownfield redevelopments also died — to the chagrin of Detroit businessman Dan Gilbert and the dozens of business leaders and economic developers from across the state who supported the legislation. The bills would have provided up to $50 million a year in tax captures for big business expansions, requiring at least $500 million in private investment in Detroit and lesser amounts in smaller communities. A separate package of legislation also failed that would have provided up to $250 million in annual tax incentives for large business expansions in the state by allowing companies to keep a portion of their income tax withholdings. Members of the new Legislature may be more conservative than the veterans who are term-limited. How will they view these subsidies? It may depend on their geography. Crain’s Lindsay VanHulle reported lawmakers were reluctant to create new incentives when broader incentives had been eliminated at the urging of Gov. Rick Snyder. But business leaders note that Michigan now lacks the kinds of incentives neighboring and competing states have. Again, it’s time for compromise. Michigan’s unemployment rate has declined, but urban areas across the state are hoping to unleash private investment in their core cities. The Gilbert-backed legislation would help not just Detroit but Pontiac, Grand Rapids, Kalamazoo and other cities. It deserves a debate and vote. Current House Speaker Kevin Cotter was wrong to not let it get to the House floor for both.

Let’s make bold decisions now to secure affordable health care

ow that the political realities of 2017 are more clear, it is time for the leaders of our business community to embrace a new model for health care that unleashes the full potential of a free-market approach, delivering real price transparency for consumers and creating meaningful price competition among the largest health care providers. Despite the constant calls for “affordable care,” our health care system is actually getting more expensive. Across the nation, hospitals and insurance companies continue to merge, increasing their market power, often driving up prices and, despite promises, generally making health care more expensive and less accessible. Fortunately, we enjoy the very best medical care in the world. Our doctors, nurses and other caregivers are expert, hard-working and caring. They want a better model, too. Change will not happen on its own. It is time for CEOs and other community leaders to come together to fix our current system. The rise in cost for employers and employees exists in large part because our health care markets lack legitimate competition among health systems. To drive efficiency, the industry needs an open and competitive marketplace. Data on care quality and patient satisfaction are available to us. However, infor-

LETTERS

OTHER VOICES Shane Cerone

Cerone is the founder of Health Market Solutions LLC and the former president of Beaumont Hospital in Royal Oak. mation on the price paid for care is mired in complexity and held in secret by insurance companies and health systems. Health care is a societal good, and stands as perhaps the only service we regularly consume without first knowing what it will cost us. To achieve price competition and reduce the senseless level of price variability, employers (who ultimately pay the bills for most of the care) must demand price transparency from hospitals and provider networks and create a marketplace in which more efficient hospitals and health systems succeed because we entrust them with more of our care. The steps to an employer-led model include: J Create a regional group purchasing organization for health care. J Build a consumer-friendly score-

card so patients and doctors can choose health systems based on quality, patient satisfaction and price. J Solicit price bids from the region’s health care systems to achieve price transparency and competition. J Partner with insurance plans willing to guide patients to health systems that are both high quality and efficient. J Reward doctors and patients with simple economic incentives when care is directed to high-value organizations. J Foster cooperation among health care organizations to share best practices and improve the process each year. Establishing a group purchasing model to price our health care will drive a massive reduction in cost, with the potential of saving 20 percent or more. This disruption of our broken system requires leadership from forward-thinking and engaged business CEOs as community leaders. The model is transformational and will grow in impact as more and more self-funded corporations participate. Detroit can lead the nation in restructuring the health care market to deliver the best health care at a price we can afford. As a society, the impact of creating meaningful competition among health care systems, begun here, would be felt far and wide.

TALK ON THE WEB

Crain’s column on Trump omits critical facts

Re: Lawmakers consider limiting workers’ benefits

Mr. Keith Crain: You seem to have left critical facts out of your editorial on Donald Trump in the Dec. 5 issue. How long do you deem it appropriate for the economy to recover from the debacle of 2008? It would have been nice if you had included some positives, but then you are a staunch Republican. I wouldn’t expect anything else from your publication. Nancy Bartlett Royal Oak

What craziness is this? Having employees use a 401(k) instead of a pension? Having employees pay a portion of the cost for their health care? I thought slavery was dead!

It’s about time the public sector wakes up and faces the reality the rest

down to the level of the masses. The taxpayers of Michigan should be proud to support government workers. It is not their fault they chose to work in a government position. Is it? James Grikschat

of us have had to deal with ... defined benefit plans and retiree health care have been eliminated for 85 percent-plus of the nongovernment population. The MEA “prima donnas” and other public-sector employees should not be entitled to “special” considerations ... we pay for your salary and benefits, you don’t pay a dime for mine! The only group I feel deserves an exception would be law officers (police and sheriffs). Len

keep such results secret from the public it serves. Taxpayers, patients and the public at large should understand exactly how a tax-supported VA system is doing. Quality health care is important, especially for veterans who don’t have the same choices in providers the rest of us may have. There are plenty of challenges in Detroit’s health care landscape, with hospital mergers and changes in the way providers are paid for giving care. The challenges facing our local hospitals are immense. And like all systems, it is going to take lots of time and, of course, money. There

are no simple, quick fixes. But our elected officials, including the current congresswoman Dingell, should be demanding — yelling bloody murder — to make sure the VA hospital in Detroit becomes the best in the land. Competition is a great equalizer. Unfortunately, within the VA system, there is no competition. Maybe veterans should have a voucher system so they can choose their hospitals and providers. Detroit veterans deserve to have the best health care possible. Our congressional delegation should fight to make that happen.

Government employees are on a pedestal and should not be dragged

It is simply inexcusable There has been a lot of talk over the past few years about how bad the Veterans Administration is around the country. Long waits, poor medical service. But somehow, unless I missed it, our local VA hospital seemed to avoid the bad-news headlines. As far as I knew, our Detroit VA hospital was OK. Maybe not great, but acceptable. The John D. Dingell VA Medical Center in Detroit’s Midtown is Michigan’s busiest VA hospital. Now we’re learning it is the lousiest, with a onestar rating in the VA’s own internal reviews. That’s one star out of a possible five, the only VA hospital in the

state ranked so low. Opened in 1996 with 432 beds and 1.2 million square feet of floor space, the modern hospital was later named for our long-serving congressman John Dingell. After all the service John Dingell has given to this region, letting the hospital slide to such a rating is inexcusable. And if I were U.S. Rep. Debbie Dingell, married to the namesake and her congressional predecessor, I would be ashamed to be seen in public. She used to brag about how good the hospital was. But you can’t spin this. It should never have happened. The VA’s internal rating system

KEITH CRAIN Editor-in-chief

only recently became public. It has been a secret system that deliberately keeps results from the public — and the military veterans who are now patients. That’s wrong. A federal program should not

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Basmajian makes more inroads in Detroit with $11M Broadway project By Kirk Pinho kpinho@crain.com

A new $11 million project by developer Roger Basmajian would bring another 30 apartments to the downtown multifamily market. Basmajian has been making inroads in the greater downtown real estate market since the middle of 2013, acquiring and rehabbing buildings downtown, along the east Detroit riverfront and in the Corktown neighborhood. He said his total real estate portfolio in Detroit is just shy of 500,000 square feet and totals about 10 buildings. The project, expected to be complete in 2019 at 1322, 1326 and 1332 Broadway St., is being financed with a $5.9 million construction loan, $1.6 million in financing from community development finance institutions, $2.4 million in developer equity and $1.1 million in historic tax credits, according to a Downtown Development Authority memo. Basmajian said Friday that he would add two new floors to all three three-story buildings on Broadway to accommodate the 30 apartments, as well as 4,500 square feet of office space on the second through fifth floors. Two restaurants totaling 7,700 square feet are also expected on the first floors of the development, which would total 42,000 square feet. â&#x20AC;&#x153;We are doing an historic restoration, adding two new floors on top, which is exciting,â&#x20AC;? he said. â&#x20AC;&#x153;We are hoping this invigorates and spurs some more development on that side of Broadway, which has been kind of quiet compared to (the side) where Punch Bowl Social is (across the street).â&#x20AC;? He also plans to develop the alley behind the buildings into a walkable alley, similar to The Belt thatâ&#x20AC;&#x2122;s part of The Z parking deck nearby. Basmajian purchased the 10,000-square-foot building at 1322 Broadway in January 2015 for $440,000, according to CoStar Group Inc., a Washington, D.C.-based real estate information service. The buildings at 1326 and 1332 Broadway were part of a request for proposals the DDA issued in the summer calling for redevelopment of the buildings, which total about 21,000 square feet. In June 2014, Dan Gilbert had an agreement with the DDA to buy the buildings, along with two others, but it was never executed. Birmingham-based Archive DS is the project architect on Basmajianâ&#x20AC;&#x2122;s new project on Broadway, while a construction manager/general contractor has not been selected, Basmajian said.

Other downtown projects Basmajian is an example of someone other than Gilbert making strides in Detroit real estate development downtown. For example, he is considering whether to build additional floors on the vacant two-story First Independence Bank building at Michigan Avenue and Griswold Street and is one

of the developers involved in the hotel component in the planned $52.4 million project in the Paradise Valley area that was announced earlier this year. The 25- to 30-room hotel, planned to be called the Harmonie Club Hotel at 311 E. Grand River Ave., is slated for the building occupied by the Carr Center. It is expected to be a $13.6 million redevelopment by Patricia Cole, president and CEO of Cole Financial Services Inc., and Basmajian and their 311 E. Grand River LLC. The purchase price of the former Harmonie Club is $1.6 million. It is expected to be completed in 2018.

â&#x20AC;&#x153;We see this kind of fitting in with what we are doing in Paradise Valley,â&#x20AC;? he said. Basmajian, who was instrumental in the revitalization of Ferndaleâ&#x20AC;&#x2122;s downtown area, also owns the buildings at 607 Shelby St., 220 W. Congress St. and 751 Griswold St. in Detroit. He paid $1.31 million for the 50,000-square-foot Shelby Congress Building in November 2013, $570,000 for the 35,000-square-foot Sterling Building on Congress and $800,000 for the 19,000-square-foot former Olde Building (now called The 751) on Griswold.

PHOTO BY ARCHIVE DS

Developer Roger Basmajian plans an $11 million project at 1322, 1326 and 1332 Broadway St. in Detroit that includes apartments, office space, restaurants and a walkable alley.

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Vision Investment buys 2 buildings in Detroit By Tom Henderson thenderson@crain.com

Vision Investment Partners LLC, a family office that launched in August in Bloomfield Hills with a fund of more than $15 million, has made its first two real estate investments, buying a pair of four-story buildings in downtown Detroit — a building known as Bert’s on Broadway at 1315 Broadway, and a building at 12241234 Randolph St. “We’re thrilled. We’ve been looking at Detroit for quite some time and when this came up, we moved very quickly to put it under contract,” said Kevin Denha, president of Vision Investment’s real estate group. “We’ll work with the city of Detroit and Bedrock and the other property owners in the area to make sure we fit in with everything going on in the area and make sure our development is complementary and in tune with everything else,” said Denha, the mention of Bedrock LLC referring to Dan Gilbert’s growing real-estate empire in downtown Detroit. Vision Investment has retained Jonna Luxury Homes of Birmingham as the property developer and Detroit-based Archive Design Studio as the architect. “I’ll take the project through all the city processes and coordinate whatever incentives we find,” said

COSTAR GROUP INC.

The buildings at 1315 Broadway (left) and 1224-1234 Randolph will be redeveloped into residential, commercial or office space. Joey Jonna, the owner of Jonna Luxury Homes. The buildings were bought from Jeffrey Serman. Denha declined to disclose a sale price. He said it hasn’t been determined, yet, how the buildings will be developed. “It could be residential, it could be commercial, it could be office. We don’t honestly know yet. We’ll do everything we need to maximize the value of the properties.” “This all happened so quickly, we haven’t had time to do due dili-

gence,” said Jonna. “We need to get in there and see exactly what the space is.” He said all the retail space on the ground floor is leased out but the rest of the two buildings has been empty for years. Tenants of the Randolph building include two bars, The Baltimore and The Well. Jonna said public documents give conflicting numbers for the amount of square footage in each. He estimated the Bert’s building at 14,000-15,000 square feet and the

Randolph building at 16,000-18,000 square feet. “We’ll know soon. We do it now with lasers and get each measurement down to the inch,” he said. “I’m a residential guy, primarily. High-end residential is my specialty,” said Jonna. “If there’s an opportunity for that and we can work it out, I’d be up for that. But my interest is a successful development, and I’m not wedded to residential.” He said it would take three to six months to get permits and approv-

als, decide on how to develop each building and get started. He declined to speculate on a finish date. “If it’s office, it takes less time than residential,” he said. Jonna Luxury Homes is also developing Russell Flats, an 82-unit apartment community in Eastern Market scheduled to open in spring of 2018. In September, Mike Sarafa, until recently the president of the Bank of Michigan in Farmington Hills and the former head of the Associated Food Dealers of Michigan, was recruited to help run Vision Investment Partners. Its funding came from two pairs of brothers, Mark and Kevin Denha and Omar and Saber Ammori, who had sold a minority but substantial interest in Bloomfield Hills-based Wireless Vision Holdings LLC, which owns and runs 270 T-Mobile retail stores across the country. Vision Investment Partners is also the franchisee in Michigan for Jamba Juice, a California-based seller of what it describes as healthy smoothies with 1,000 stores worldwide. There are three stores in Michigan, in Livonia, Canton and Shelby Township, with plans to open 20 more, with the next three planned for Ann Arbor, Roseville and Waterford. Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2

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SPECIAL REPORT: CRAIN’S MICHIGAN BUSINESS MARY KRAMER Publisher

Despite media woes, Crain’s still values quality journalism

he buzz last week — or spin, perhaps — is that “fake news” contributed to Hillary Clinton’s defeat. Fake news didn’t throw the presidential election to Donald Trump. Tin ears among Democratic leadership did. The bigger story about the media is the ongoing disruption in the industry’s advertising-supported business model, which has led to a withering of newsrooms and bureaus in state capitals across the country. Nobody has said it better than HBO’s John Oliver, the host of “Last Week Tonight.” (Oliver, who left “The Daily Show” for his own HBO slot, will be performing at the Fox Theatre Dec. 30 and 31.) Oliver’s 18-minute screed on the state of journalism and its implications for society can be found on YouTube, where it has collected 7 million views. (I know, cute kittens garner more, and that’s just one of Oliver’s points.) Before joining Crain’s, I worked for daily newspapers in Grand Rapids, Ann Arbor, Jackson and Kalamazoo. Ann Arbor has no real newspaper any more. Newsrooms at the other cities have shrunk. Detroit’s daily papers have offered buyouts to their staffs. The revenue is not sufficient to support the newsrooms of old. Print advertising accounts for well over 50 percent of our revenue at Crain’s— the revenue that helps to support our terrific newsroom. But we also post about 100 stories a week on our website, crainsdetroit.com, and offer an array of e-newsletters. We limit the number of “free stories” a non-subscriber can read. In 2017, that number will shrink. We ask our audience to pay for what they value — business news and information that’s not reported anywhere else. We’re also offering a new higher-level subscription package that provides access to all of our data and top company lists from current and past years. To me, the ultimate value of Crain's Detroit Business is the breaking news and reporting insights of our beat reporters. Last week, our newly appointed editor, Ron Fournier, announced that Chad Livengood, chief of the Detroit News bureau in Lansing, is joining Crain’s on Dec. 26. (See story, Page 5.) Livengood has a stellar reputation; he'll join an already-strong newsroom. His arrival is a signal that journalism is alive and well at Crain’s Detroit Business. In fact, I think 2017 will be one of the best years for the business journalists in our newsroom. And for our readers. Mary Kramer is publisher of Crain’s Detroit Business. She speaks with WJR AM 760’s Paul W. Smith at 6:10 a.m. Mondays.

U.P.’s blue-sky ideas

From a new rebar process to a colorful reagent to a device that aids in blood donation, innovation abounds up north NEUVOKAS: Erik Kiilunen is manufacturing a fiber reinforced polymer rebar to compete with steel, this page MICRODEVICE: The MTU spinoff is aiming to market a device to eliminate waste, speed up blood donation, Page 11 STABILUX: The company’s reagents cause targeted cells to glow brightly, making them easier to detect, Page 12

Neuvokas raises the bar on manufacture of rebar By Tom Henderson thenderson@crain.com

“I work with a lot of companies in Michigan, and this is one of the few that can be a billion-dollar company,” Arcadio Ramirez, technology business consultant for the Michigan Small Business Development Center, speaking about a small company in the Upper Peninsula called Neuvokas Corp.

as you can get, Key West, Fla.) The peninsula is filled with abandoned houses, abandoned mines and heaps of red conglomerate rock, waste byproduct piled up over decades by miners, which tourists still climb on, looking for nuggets of copper that have gone unfound for more than a century. Even with the ghost towns and

waste heaps, the Keweenaw is beautiful, heavily forested, big inland lakes, Lake Superior waves crashing onto craggy, rocky shores. It’s not a place, though, to look for riches. Nothing would get you thinking of millions, let alone billions, but that’s where you’ll find Neuvokas Corp., in the former machine shop

t’s the last place in Michigan you’d expect to find a billion-dollar company, this blue building surrounded by acres of fields and woods outside the small village of Ahmeek in the Keweenaw Peninsula. Ahmeek and its brethren towns, Mohawk, Allouez and New Allouez, look more like ghost towns, many of their storefronts and houses, which were built along what is now U.S. 41 during the copper boom of the 1800s, sitting empty. (The highway begins at the northern tip of the Keweenaw, in Copper Harbor, and ends in a place as far removed from the U.P. in spirit and distance

NEUVOKAS

Erik Kiilunen, founder and CEO of Neuvokas, thinks he’s on the verge of changing the market with the manufacture of GatorBar.

of the fabled No. 6 shaft of the

Ahmeek Mining Co.

Neuvokas, founded in 2013, makes fiber reinforced polymer rebar to replace the rods of steel rebar used to reinforce concrete in buildings, roads and bridges. The product is called GatorBar for its rough-textured surface. The problem with steel rebar is that while it makes concrete stronger at the beginning, it eventually rusts, causing the concrete to deteriorate. Polymer rebar is corrosion resistant and has higher tensile strength. In theory, it can extend the life of a roadbed from 20 years to 100, but it is more expensive than steel and hasn’t had large market acceptance. Erik Kiilunen, 48, the founder and CEO of Neuvokas, named for a Finnish word meaning creative and inventive, thinks he’s on the verge of changing that. He has created a manufacturing process that he says makes his rebar cost-competitive with steel. Kiilunen is a serial entrepreneur. SEE NEUVOKAS, PAGE 10

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SPECIAL REPORT: CRAIN’S MICHIGAN BUSINESS

NEUVOKAS FROM PAGE 9

A Keweenaw native, he worked for his grandfather’s company in Brighton, Weld Mold Co., for 14 years before returning the UP in 2000. That year he bought Superior Polymers, a spray-foam insulation company in Calumet that he still owns. In 2005, he founded Dirt Bag Inc. in the Calumet Industrial Park, an online seller of plastic covers to protect computers and keyboards from airborne dust, dirt and grime in industrial settings. “It’s a nice little business,” he said. “I have 10 kids, and they usually start working there when they’re 14, when they start needing money.” And then he founded another company in Calumet he still owns, EcoStud LLC, which makes studs of recycled plastic used for the framing in construction projects. Kiilunen had his eureka moment while trying to figure out how to make a PVC stud that was stiff, cheap and nontoxic when burned. After he began designing a manufacturing process, it came to him: “Why don’t I just make rebar? It would be easier.” That led to research into the rebar market and the finding of a 2012 report by the American Composites Manufacturers Association that discussed fiber-reinforced polymer rebar. Despite all its advantages, because of its expense, it was only used

in critical applications, like bridge decks. “I found an established market with a price-point challenge and believed we could solve the challenge, which we have,” said Kiilunen. The key was designing a manufacturing process that would speed up production, and in turn lower the cost enough to be competitive with steel. Kiilunen found his current building to house his manufacturing equipment at a good price. It remained a machine shop after its mining days but had sat empty for a decade. When Kiilunen looked at it, there was grease and dirt everywhere, and water leaked through the roof when it rained and snowed. Since the Keweenaw gets an average of 270 inches of snow a winter, that was a lot of leaking. “I saw it before he bought it, and it was a complete mess. But he saw something there,” said Ramirez, who got to know Kiilunen in 2013 through NextEnergy in Detroit. Based in Ann Arbor, in his role as consultant for the Grand Rapids-based Small Business Development Center (SBDC), Ramirez was engaged by NextEnergy to coach Michigan companies for the CleanTech Open, a business-plan competition in Minneapolis that October. Neuvokas qualified as clean tech because its rebar takes a sixth of the

energy to produce as steel rebar; at a seventh of the weight, it uses less fuel to be transported; and it reduces the amount of concrete needed to lay over rebar to delay its corrosion. Kiilunen didn’t win one of the five prizes at the open but nonetheless came away the big winner. “We raised $1.2 million,” he said. “We were the only company to raise outside capital during the competition.” That was followed by a series of grants, including National Science Foundation (NSF) grants totaling about $1.5 million, with Matt Kero, a 2006 graduate of Michigan Technological University in Houghton and Neuvokas’ first employee, serving as principal investigator; a community development block grant of $275,000 through Allouez and the Michigan Strategic Fund; $70,000 from the SBDC; $40,000 from the Michigan Corporate Relations Network; $40,000 from the U.S. Office of Energy Efficiency and Renewable Energy, which also provided an unsecured note of $350,000; and $25,000 from the University of Michigan’s Institute for Research on Labor. Kiilunen has gone through several iterations of his manufacturing process, recently increasing top production speed to 150 feet per minute, though manufacturing is generally done at 100 feet a minute. That, says Ramirez, compares to average production in the FRP industry of seven to eight feet a minute. “For the first time, FRP rebar is competitive with steel,” said Ramirez. Kiilunen has applied for two pat-

MICHIGAN TECHNOLOGICAL UNIVERSITY

Neuvokas makes GatorBar, fiber reinforced polymer rebar to replace the rods of steel rebar used to reinforce concrete in buildings, roads and bridges. ents on the process. Ramirez has continued to coach Kiilunen — “he’s one of the most passionate entrepreneurs I know” — and at his urging, Neuvokas presented last November at the annual Accelerate Michigan Innovation competition. Kiilunen was shut out by the judges but won $10,000 as winner of the People’s Choice Award in a vote by the audience, a reward for a pitch that managed to be humorous despite its topic of rebar performance and polymer tensile strength. Kiilunen returned to metro Detroit in May as one of the presenters at the Michigan Growth Capital Symposium in Ypsilanti, where he pitched his rebar to venture capitalists more used to hearing from those with medical devices and IT innova-

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tions promising miracles in the cloud. “I got a few nibbles, but that was it,” he said. As it turned out, it wouldn’t matter. He was about to close on a funding round of $2 million that would trigger $500,000 in matching funds from the NSF. Kiilunen plans to use that money to get Neuvokas’ manufacturing speed to 250 feet per minute by the end of 2017.

Chasing a customer, catching an investor Two years ago, Kiilunen was in Green Bay, Wis., when he saw a truck unloading rebar at a construction site. It bore the name Stahl Concrete Construction on the side. When the driver pulled out, Kiilunen followed

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SPECIAL REPORT: CRAIN’S MICHIGAN BUSINESS

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him for about 45 minutes to Casco, a small village near Green Bay where Stahl is headquartered. Kiilunen said he was just following advice he’d gotten from participating in I-Corps, an accelerator program run by the NSF, to interview at least 10 potential customers a week. Kiilunen walked in carrying a piece of his rebar and asked for the owner. “He showed up, introduced himself and showed me a piece of his rebar,” said Jesse Stahl, the owner. “I was pretty amazed by it. It was so much lighter than the rebar we were using. I’d never seen anything like it.” Stahl Concrete does flat work, driveways, sidewalks and commercial parking lots. He became Neuvokas’ first customer last year. This year, as Neuvokas has sharply increased its speed of production and brought down the price, Stahl has gone to it exclusively for its rebar. “It’s seven times lighter, so seven semi loads weigh as much as one semi load used to weigh, and that’s amazing,” said Stahl. Kiilunen didn’t just land a customer. Right after their first meeting, Stahl told him he had a friend who had sold a business and had some money to invest, and the friend, who has asked not to be named, became an investor, putting in a total of $2.2 million in two tranches. Kiilunen chased down a truck to find one investor. Serendipity led to two others. Steve Williams is the co-founder Williams & Works Inc., a civil engineering and consulting firm in Grand Rapids. An avid and expert skier, nine or 10 years ago, he was in the lodge at the end of a day skiing at Mt. Bohemia in Lac La Belle in the Keweenaw. Mt. Bohemia has the longest and steepest runs in the Midwest, with 70 single-, double- and triple-black-diamond runs. Kiilunen came in, talked to the owner and was pointed in Williams’ direction. It turned out Kiilunen had a cabin nearby and was looking to rent it out in the winter, which Williams has been doing since. So when Kiilunen got into the rebar business, “that was something I knew something about,” said Williams. “We’d talked in the industry about using polymer rebar for many years because of its corrosion resistance, but it was always too expensive compared to steel. Erik thought he could devise a process that was fast enough to make it cost competitive, and he did.” Two years ago, Williams became an investor, too. “Subsequently, we found other people with more money to invest. I’m tremendously happy with the progress he’s made. These things usually take twice as long and twice as much money as you think,” he said. “Erik was able to keep on time and on budget, so we’re very happy. It’s a really exciting adventure, given it’s been a dream of the industry to find reinforcement that doesn’t corrode.” Serendipity led to a recent investment, too, in the $2 million funding

round that was closed earlier this year. A chunk of it was taken by someone in the composite industry who distributes about $1 billion a year in fiberglass, carbon fiber, resins and related supplies, a contact made after one of the business owner’s sales reps made a call on Neuvokas and had to tell his boss about this new rebar he’d seen. Kiilunen has targeted Houston, a city with many large ongoing or planned construction projects, as a place to grow revenue and serve as a proof-of-concept site to help him break into other markets. Larry Goldberg was hired in August as sales manager for the Houston region for Neuvokas, and Kiilunen couldn’t have found a better voice to help get the word out there. A civil engineer with 33 years of experience in commercial, residential and highway construction projects, he is president-elect of the Texas section of the American Society of Civil Engineers. Goldberg met Kiilunen in June when he was still working at Landev Engineers Inc. in Houston. “Erik found us. He came to a lunch-and-learn at our office,” said Goldberg. “I gave him some leads on projects we were working on and was intrigued by his product.” The two had dinner together, discovered they both like running and went for a few runs together. Goldberg then visited Neuvokas’ operations in Ahmeek to verify production speeds. “I was very impressed by what they had put together and the potential in the market,” said Goldberg. “Fiber-reinforced polymer has been around a long time, but Erik has made it competitive with steel. This is the real deal.” Neuvokas has 13 employees, with plans to add a second shift and 30 more employees over the next two years. Kiilunen said revenue could hit $1 million this year and $3 million next year. The real growth opportunity will come with what Kiilunen calls Neuvokas 2.0. His polymer rebar is reinforced with basalt fibers. Other polymer rebar in the market is reinforced with fiberglass or carbon. Today, Kiilunen buys his basalt fiber from Russia and China. In another year or two, he hopes to ramp up another manufacturing process to make his own fiber from what are called volcanoclastic extrusive basalts, which are abundant in the Keweenaw in addition to the red conglomerate that produced copper. “Bringing fiber production inhouse will drop the company’s material and manufacturing costs significantly, more than 50 percent, which will allow Neuvokas to drop its rebar pricing below that of its steel competitors,” said Ramirez. And further below competitors making fiberglass and carbon reinforced polymers. And that’s how you get to a billion. “I’m building a global enterprise. You just can’t see it yet,” said Kiilunen. Tom Henderson: (313) 446-0337 Twitter: TomHenderson2

MTU spinoff’s device screens would-be donors’ blood, speeds donation process By Tom Henderson thenderson@crain.com

MicroDevice Engineering Inc., a spinoff from Michigan Technological University in Houghton, is aiming to market a battery-operated device to help blood donation centers determine blood type and to screen for diseases and anemia in the blood of would-be donors. Such a device, whose patent is pending, would eliminate waste and speed up the donation process. It would eliminate, for example, the donation of blood that has been contaminated by disease, such as hepatitis. Instead of taking contaminated blood and testing it later, then throwing it away — not to mention the time involved of health care workers — if it doesn’t meet specifications, blood banks would tell the would-be donor thanks but no thanks. It is estimated that up to 20 percent of donated blood is thrown out. MicroDevice is an example of the “it takes a village” philosophy of growing tech companies in Michigan these days. The company was co-founded by Adrienne Minerick, the associate dean for research and innovation in Michigan Tech’s College of Engineering, a professor of chemical engineering and an adjunct professor of biomedical engineering; and by Mary Raber, the assistant dean of academic programs for the school’s Pavlis Honors College and co-direc-

tor of its Innovation Center for Entrepreneurship. Minerick and Raber formed the company while participating in the Nation-

al Science Foundation’s I-Corps

program, which coaches academics on how Adrienne Minerick: to commercialize their work. Co-founded The company MicroDevice. has received nearly $1.3 million in NSF grants. The I-Corps program followed their participation in inforum’s ACTiVATE program, which offers training for women entrepreneurs. The Inforum participation, in turn, was sponsored jointly by Michigan Tech and the Michigan Tech Enterprise Corp. SmartZone. In all, a variety of school and state programs contributed a total of $165,000 to MicroDevice, including funding from the Michigan Translational Research and Commercialization (M-TRAC) program and the Michigan Tech Transfer Talent Network (T3N), two programs funded by the Michigan Strategic Fund to commercialize university research and provide new companies with mentors or executives; Superior Innovations, a company funded through

alumni donations to MTU; Superior Ideas, a Michigan Tech crowdfunding site; and the school’s Commercialization Milestone Grant program. At the heart of the MicroDevice technology is a disposable chip called a cuvette that is made in a clean-room fabrication facility on the MTU campus. The Indiana Blood Center and the Wisconsin Blood Center will do clinical trials for MicroDevice. If trials are successful, the company could get approval from the U.S. Food and Drug Administration to begin sales in 2018, Minerick said. In its presentation last May to the Michigan Growth Capital Symposium

in Ypsilanti, the company said it would fund commercialization from grants through next year, with projected revenue of $885,000 in 2018, growing to $8.5 million in 2022. Minerick estimates the cost for end users will be less than $5 per test. MicroDevice will begin trials on 3,000 donated blood samples at the Indiana Blood Center early next year. Its chips, known as microfluidic chips, slide into a port of a portable electronic unit, whose printed circuit boards are made by Calumet Electronics, another Keweenaw County company. “We are doing our best to use as much local talent as we can,” said Minerick.

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SPECIAL REPORT: CRAIN’S MICHIGAN BUSINESS

StabiLux sees colorful future in cell analysis technology By Tom Henderson thenderson@crain.com

StabiLux Biosciences Inc. was just what Steve Tokarz was looking for when he began working with Michigan Technological University in Houghton last summer — a promising technology startup whose founder was willing to work with an experienced executive to accelerate commercialization. StabiLux was founded in 2014 by Yoke Khin Yap, a physics professor at MTU whose group has developed reagents it thinks will be of value to researchers using machines called cytometers to do cell analysis. StabiLux’s reagents cause targeted cells — cancer cells, for example — to glow brightly, making them easier to detect and quantify than traditional reagents. “When you are screening for cancer cells, there are so few in the blood that they are hard to detect,” said Yap. Or, at least that’s the plan. It’s up to Tokarz now to help turn the plan into a business. Tokarz is president and CEO of SMKR LLC, an Ann Arbor-based consulting firm that helps startups get to market. He has helped several University of Michigan startups and has formal relationships with Western Michigan University and Michigan Tech to serve as an entrepre-

neur-in-residence for their spinoffs as opportunities come along. Prior to founding SMKR in 2015, Tokarz spent 25 years at Taylor-based Masco Corp., where he was senior director of product development and engineering. In 2009, he founded Livonia-based BDT LightSource, which imported and manufactured energy-efficient lighting for businesses, which merged with American Green Technology in 2012 and was sold to Ushio America in 2016. The entrepreneur-in-residence program is part of the Tech Transfer Talent Network, a program launched in 2011 by the Michigan Economic Development Corp. to help universities pay for experienced business executives to commercialize their technologies. “I looked at a lot of opportunities at Tech and met with Yap in June and then in August. He had really good technology, with a really good market, but he needed help getting over the hump,” said Tokarz. “Yoke is a sharp guy. This is foundational technology, and he has it locked up. But the reality is, you can’t be an effective CEO and a faculty member at the same time,” said Tokarz. “Yoke was really receptive to what’s best for the company, that he can’t do it all, which can be hard when you’ve been working on a

MICHIGAN TECH

StabiLux was founded in 2014 by Yoke Khin Yap, a physics professor at Michigan Technological University.

technology for years.” Yap, a native of Malaysia who got his Ph.D. from Osaka University in Japan and joined MTU in 2002, had learned the hard way how difficult it is to run a business and continue to carry a full teaching workload. His first spinoff from MTU was called Nano Innovations LLC, which was founded in 2011 with an NSF grant of $245,000 to commercialize boron nitride nanotubes, which have been called “the divas of the

nanoworld.” They have alluring properties, such as being perfect insulators and being able to withstand heat well above 1,100 degrees Celsius, but are notoriously hard to work with. (According to an MTU website, “Professor Yap is interested in the fundamentals of synthesis, properties and applications of functional materials, which include carbon nanotubes, graphene, boron nitride nanotubes, boron nitride nanosheets, boron carbon-nitride & carbon nitride nanostructures, etc.; ZnO nanostructures; energy-harvesting nanostructures; wide band-gap single crystals and quantum dots.”) Nano Innovations is still in existence, but in name only. Yap said he might revive it as a going concern at some point. “Like a lot of professors, I didn’t spend a lot of time on business development. As a faculty member here, I didn’t have enough time. I had to do my job here, first. It was a lesson learned,” said Yap, who remains as StabiLux’s president and chief technology officer. In July 2015, StabiLux was awarded an NSF Phase 1 Small Business Technology Transfer grant of $241,000, which runs through the end of this year. It will apply for a Phase 2 grant of $750,000 late this

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year or early next. In all, the company has received about $560,000 in a variety of grants. It has one employee, not counting Tokarz or Yap, one of his former post-docs named Nazmiye Yapici. In the announcement of the award, the NSF said the funding was to help the company develop new fluorophores, which are chemical compounds that emit light when excited by a laser, and that offer a wider range of colors and are 250-1,000 times brighter than existing fluorophores. Yap declined to say whether there are exotic nanoscale materials in his fluorophores, but said they currently are six times brighter than reagents currently on the market. “I believe our products can be improved to at least 200 times brighter,” he said. In a presentation to would-be investors at last May’s Michigan Growth Capital Symposium in Ypsilanti, Tokarz said the company would begin sales next year, with revenue projections of $400,000 in 2017, $2.3 million in 2018 and $18.3 million in 2020. The plan is to license the technology to existing companies, like Beckman Coulter Inc. and Becton Dickinson & Co.

Because its products will be sold to the research community, it does not need approval from the U.S. Food and Drug Administration. Tokarz hopes to close on a seed round of $600,000 by the end of this year. “This makes cell analysis more accurate and more sensitive,” said Fredrick Molnar, vice president of entrepreneurship at the MEDC. Before joining the MEDC in 2014, he had spent more than 25 years in a variety of jobs involving flow cytometry, including being director of flow cytometry operations in North America for Beckman Coulter. Molnar said the global market for flow cytometry has been growing at 10-12 percent a year and is expected to be at $5 billion by 2021. “It’s a healthy market, and 60 percent of it is reagents, and StabiLux is solely in the reagent space. Their potential is significant,” he said. Molnar connected StabiLux with David Adams, who runs the flow cytometry lab at the Biomedical Research Core Facilities in the Office of Research at the University of Michigan. His lab began evaluating StabiLux’s reagents this fall. “If Dave Adams says it works, it works,” said Molnar. Molnar said StabiLux is a good example of the research being done at Michigan Tech, usually under the radar screen. “People think, ‘The U.P.? What's going on up there?’ It’s really encouraging to see a small community like Houghton taking advantage of what it has. The (Michigan Tech Enterprise Corporation) SmartZone there and Michigan Tech do such a great job. “It’s a community of — what, 13,000? And they’re really kicking butt.”

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SPECIAL REPORT: SECOND STAGE

Managing resources

Having the right financial people in place helps companies achieve long-term goals Stories by Rachelle Damico

Michael Sosnoski, financial adviser for Troy-based Northwestern Mutual, helps an average of 50 business owners every year plan and pursue their financial goals. His top advice to businesses owners regarding managing finances? Don’t do it alone. “It’s very difficult for business owners to build, plan and protect (finances) on their own,” Sosnoski said. “You have to have the right people in place to help.” Financial professionals can help business owners plan for growth, manage cash flow and offer advice as to what direction to take the company. These are reasons why Sandy Rosen, partner and CEO of Detroit-based GLR Advanced Recycling, has hired financial professionals, including CFOs. “A lot of companies get themselves into trouble because they don’t take time to plan out and manage their own success,” Rosen said. “A good CFO is thinking about the long-term debt management and cash flow.” Business owners should also plan for investments strategically rather than pour too much money into the company at once. “A common mistake is when companies invest in parts which are not needed to begin with,” said Neetu Seth, president and CEO of Novibased NITS Solutions Inc. “Start with a small budget and increase your budget as the company grows.” Sosnoski said business owners should have enough reserve finances to sustain not having a paycheck for six months to a year in case anything happens to the company. “In the growth phase, it’s very common (for entrepreneurs) to want to put money back into the business because they feel they get a better return on the money versus elsewhere — but things can turn south, and if you haven’t put money away, it can come back to hurt you,” Sosnoski said. In this month’s Second Stage, we spoke to three different businesses — including a small company, a second-stage company and a larger company — for advice on building a financial management structure. Read their stories beginning on Page 14.

Sandy Rosen, CEO and partner of GLR Advanced Recycling, has experience hiring financial professionals. PHOTO BY LARRY PEPLIN

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SPECIAL REPORT: SECOND STAGE

GLR chief: Staff will benefit from financial professional Sandy Rosen, CEO and partner of

GLR Advanced Recycling, has experi-

ence hiring many financial professionals, both outsourced and internally. “A lot of people discount the importance of having a financial professional on staff,” Rosen said. “When an entrepreneur is wearing all of those hats, they don’t have the time to do everything as well as it could be done.” The waste management and recycling company is on pace to reach $75 million in revenue this year and has 120 employees. The company was founded in 2014 through a merger with Advanced Recycling and Great Lakes Recycling (founded in 1927) and has eight scrapyards throughout Michigan and one in New York. Rosen joined Great Lakes Recycling in 1985 and became CEO in 1992. GLR hired a controller in 1999 to do bookkeeping, insurance and oversee accounts payables and receivables. The company was growing and the CPA, Rosen’s wife, was working full-time hours for a job that began as part-time position. “She said, ‘You really need to hire someone who does this as a full-time job,’” Rosen said.

The company grew rapidly from 2004 to 2011. A $30 million-to$40 million in revenue company was heading toward $60 million in revenue, and adding additional locations. “The controller was sharp, but we needed someone more strategic who could help us map out where we were headed,” Rosen said. Rosen said the company’s chief operating officer approached him about hiring a CFO to put together a forecast for the bank to be able to finance for additional equipment. “One of our lines of business was expanding so much, it was running around the clock,” Rosen said. “We really needed a CFO to help us with these things.” The COO searched for candidates by using internet ads, and after narrowing down candidates and pre-interviewing them, the candidate was interviewed by the company’s board of directors and put on staff between 2008. “He had experience in the waste management industry in the past,” Rosen said. The company was approached in 2011 with an unsolicited offer to buy part of the company, and when the company sold, Rosen said the CFO moved on because the job became smaller and was no longer as in-

volved. As an interim solution, Rosen hired an outsourced CFO to work one day a week and work closely with the company’s controller. “It went OK, but the outsourced CFO really wasn’t adding that much value to us, because our controller was really strong enough,” Rosen said. Although Rosen said that an outsourced CFO didn’t make sense for his company, he recommends businesses experiment with it. “It allows a young entrepreneur or a newer business to get their toe in the water and at least test the benefits without committing to a six-figure salary on day one,” Rosen said. Rosen promoted his original controller he hired in 1999 to CFO in 2012, where he remains with GLR Advanced. The CFO handles tax strategies, oversees accounting and maps out how to manage growth and cash flow. “I think every growing business needs to have someone in that seat — and not the entrepreneur themselves,” Rosen said. “(Entrepreneurs) can never have that same level of attention they would get from somebody whose prime objective is to manage that.”

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Angela Vincent, owner and manager of Detroit bar Liv Resto-Lounge LLC, which does business as MIX Bricktown, hired an accountant this September in order to manage growth and allow more time to focus on the daily operations of the business. “The company is growing, and I need to organize all of the finances so as to be able to forecast future growth, and prepare the business for funding,” Vincent said. The self-funded company, founded in 2011, employs four and generated more than $250,000 in revenue last year. Vincent hired an outside accountant to manage the company’s income statements, balance sheet, payroll and taxes. “Hiring a professional can you help you strengthen your financial management systems within the business,” Vincent said. Vincent, a graduate of Goldman Sachs Group Inc.’s 10,000 Small Businesses program, tapped networking contacts within the organization for recommendations. She then vetted several accountants by interviewing them. She hired Shaniece Bennett, founder and CPA of Chesterfield

Township-based AccuTrak Consulting & Accounting Services PLLC. Ben-

Francisco-based company Square

nett also teaches financial management at the Goldman Sachs program, a factor in why Vincent said she hired her. “She has a strong knowledge base for financial management for small businesses,” Vincent said. Vincent’s accountant consults with her weekly to perform a financial overview of the company. Vincent said she then plans to Angela Vincent: meet with her on No more pen and a monthly basis paper for tallies. to review financial records. “I hired an accountant for their expertise,” Vincent said. “I want to be able to review where to make cuts and where to spend more so we can make adjustments along the way.” Previously, Vincent tracked finances herself using an Excel spreadsheet. She also used cloud-based financial management tools from San

Vincent said the free point-of-sale software allows Mix to keep track of sales within the company, monitor financial performance and see which items, such as cocktails, sell the most. “No one uses the pen-and-paper process anymore,” Vincent said. “You can access cloud-based software anywhere.” The company also uses Square’s credit card-processing device that plugs into a smart tablet as a cost-effective alternative to their separate credit card processing machine. “For a small business that’s inventory-based, it’s an inexpensive way to operate the business,” Vincent said. Vincent said she will continue to do the company’s bookkeeping using these tools, while the accountant will help navigate financing and better prepare her company for future funding opportunities. “You have to show you’re well documented, well researched and have something to bring to the table,” Vincent said. “Good accountants know what funders are looking for, and how to present your finances.”

Inc.

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SPECIAL REPORT: SECOND STAGE

Multiple CPAs keep fast-growing company’s balance sheet strong Neetu Seth, president and CEO of

NITS Solutions Inc., hired two CPAs to

manage cash flow for the company’s local and overseas operations. “I wanted to make sure my balance sheet was strong,” Seth said. “It’s just as important as any function of the business.” The Novi-based company is a provider of data analytics and marketing services for organizations in the automotive, health care, retail and education industries. Last year, NITS generated $5 million in revenue and anticipates reaching $8 million in revenue this year. The company employs about 70 people. NITS hired a CPA in 2012, when the company’s growing accounts became too difficult for its accountant to manage. “As the team and projects grew, the accounting became complex,” Seth said. “I needed someone who had experience handling larger and more detailed accounts.” Through a friend’s recommendation, Seth found a CPA and interviewed the person one-on-one. “I wanted someone who understands our industry, and we were very much in sync,” Seth said. The CPA’s responsibilities include

New businesses can build track record in credit It’s difficult for new businesses to establish credit lines with banks. “Typically, there’s not collateral to establish credit for a startup company,” said Michael Sosnoski, financial adviser for Troy-based Northwestern Mutual. “It’s really based on the owner’s creditworthiness.” A newer business owner should immediately consider opening a business bank account to help build a track record. Neetu Seth, president and CEO of Novi-based NITS Solutions Inc., said that one of the first things she did when she founded the company was open a business account at a local branch. Seth, who originally self-funded the business, kept in contact with the banking manager in order to build credibility. Two years later, she was able to secure a credit line of about $25,000. “Our first line of credit was very challenging,” she said. “Once we established a relationship (with the banking manager) and he saw that my balance sheet was strong, he believed in our company.” The company was able to increase the amount each year. Today, NITS has a credit line of about $500,000. “We made sure we were using the line of credit very wisely, and paid it off very quickly,” Seth said.

managing the company’s funds and cash flow, offering tax advice and leveraging cash. “A CPA can provide you with a strategy layout for years to come,” Seth said. Seth said a CPA is also cost-effective. She estimates a controller or full-time CFO would cost her company $78,000 a month to have on staff. “The cost of a full-time CFO or controller is very high,” Seth said. “If we grow more, then we will add (financial) staff as Neetu Seth: needed.” Expanded her Seth hired a company to India. second CPA in 2014, when the company expanded to India. “If you’re in an overseas market, make sure you have a local CPA,” Seth said. “They’ll understand the market and the culture.” In order to keep on top of overseas finances, Seth speaks to her India-based CPA daily to make sure cash flow is going well. Also, Seth said she and the CPA

are able to access financial reports easily using cloud-based Quickbooks software, which Seth uses for both her local and overseas operations. “I can look into my reports any time of the day,” Seth said. “It’s an easy accounting tool for anyone to understand when it comes to (managing) payroll and balance sheets.” Seth has also been working with a financial adviser over the past three years to advise how funds are being managed, if the company was investing in the right places, and making sure funds were being leveraged. “They have a benchmark and know what’s going on in the industry,” Seth said. The company has experienced a 200 percent revenue growth compared to last year, and has seen significant growth from big data usage in the automotive industry. Seth credits the professionals she consulted along the way to help make financial decisions that helped grow the company. “I strongly believe you should find the right key people who understand your company and the industry you are in,” Seth said. “They will guide you in the right direction.”

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SPECIAL REPORT: SECOND STAGE

Companies must find, then meet, clients’ changing needs

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Problem to be solved: Global Telecom acts as a broker for more than 60 telecommunication providers, including Comcast Corp., AT&T Inc. and Wide Open West LLC. GTS helps its customers, which are businesses that employ between 20 and 500 people, determine the pros and cons of various provider’s services — including phone, internet, mobility and cloud. This is at no cost to its clients. The problem is that over the past 10 years, the telecommunication industry has faced commoditization pressure, said Mark Stackpoole, CEO of GTS. To stay competitive, service providers are offering increasingly lower rates for higher bandwidth speeds. This posed a challenge to GTS, which gains revenue based on sales. As prices dropped, so would the company’s profits. “We had some fear in our eyes when the cable companies started selling to businesses,” Stackpoole said. “Their prices were exponentially lower.” Stackpoole said that just a few years ago, 100MB would cost large companies $5,000 to $10,000. Now, they’re in the $2,000 price range. Solution: To stay competitive in the changing industry, GTS offered customers additional services. For instance, businesses may receive a second internet connection from a

Stage 2 Strategies: Global Telecom Solutions Inc. Location: Detroit Description: Consulting firm for business telecommunications needs Mark Stackpoole: David Broner: “We had some fear Meet a company’s in our eyes.” key players.

Founded: 2002 Employees: Eight full-time, 120 independent sales agents Revenue: $2.3 million in 2015, $3 million expected in 2016

separate service provider as a backup line in the event that their internet service dies. Or a backup service connection if a company’s cloud-based website or main server goes down. “It’s our goal to make sure we have them for 10 years — or forever,” Stackpoole said. Stackpoole also added customer service software that tracks client data — such as how many times a client has called, and what their concerns have been — to learn more about their customers’ wants and needs. Risks and considerations: By offering the additional services, GTS had to spend more money to retain employees, Stackpoole said. “Our sales channel could dry up in a short amount of time,” he said. “The challenge was, how are we go-

ing to retain our recurring revenue?” Expert opinion: David Broner is a certified mentor with SCORE, an organization under the U.S. Small Business Administration that connects experienced former business executives with entrepreneurs. He said businesses should learn about their customers first, and sell second. Often, customers will have their own solutions. “This is about sustainability,” Broner said. “If they really try to understand the challenges that the client is having, then they should offer the right medicine for that illness.” Broner also recommends having core employees meet a company’s client’s key players to create sustainable relationships. “See from each department how they’re using or saving information, and understand their IT program,” Broner said.

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Haven names public health leader as CEO Haven, a Pontiac-based nonprofit that provides shelter and services for victims of domestic violence and sexual abuse, named public health leader Amna Osman as president Amna Osman and CEO. She succeeds Beth Morrison, who held the role for 13 years before her departure last summer to take a position in Tucson, Ariz. With 15 years of public health and nonprofit leadership experience, Osman most recently served as a consultant in leadership development, strategic planning and board development services. She was a leadership coach and mentor at the Great Lakes Leadership Academy at Michigan State University. She was division director for the Michigan Department of Community Health for five years.

Rochester chamber president to leave Sheri Heiney will step down as president of the Rochester Regional Chamber of Commerce at the

end of the year after leading the chamber for 15 years. Heiney is departing to Sheri Heiney become president and CEO of the Prescott Chamber of Commerce in Arizona. Maggie Bobitz, chair of the chamber’s board of directors, will be interim president in Rochester. Under Heiney’s direction, the chamber has grown to more than 1,000 members and launched an awards program to recognize business leaders.

Visteon names Daimler executive Van Buren Township-based Visteon Corp. appointed Matthias Schulze of Daimler AG as the supplier’s head of advanced driver assistance system development, Automotive News reported. Schulze, 54, worked for Stuttgart, Germany-based Daimler for more than 20 years, most recently leading the group research and advanced engineering department in advanced driver assistance system development. The unit deals with autonomous driving, vehicular communication and environment perception efforts. He will start in January in Karlsruhe, Germany.

ADVERTISING & MARKETING Aaron Hodari, CFP, CIMA & Ilana Liss Managing Director’s Schechter Wealth

Jeff Taylor Senior Vice President of Research and Customer Insights Phoenix Innovate Jeff Taylor named Sr. Vice President of Research and Customer Insights at Phoenix Innovate, Troy, MI. Jeff is deeply knowledgeable about consumer decisionmaking and his efforts have led to uncovering new target audience insights that resulted in cost effective solutions to complex marketing challenges. He has spent his career working across a range of market sectors from B-to-B, B-to-C and distribution networks.

Schechter Wealth, a 3rd generation wealth advisory firm has promoted Aaron Hodari to managing director. Mr. Hodari leads Schechter’s efforts in the alternative investment and hedge fund space. He is a frequent speaker nationally and a subject matter expert in Private Placement Life Insurance and Premium Financing Strategies. Prior to joining Schechter 3 years ago, Hodari was an analyst with Blackrock in NY. Ilana Liss has been promoted to Managing Director of Schechter Wealth. Liss is instrumental in the development, presentation and execution of complex financial and life insurance strategies for high net worth clients. She brings 13 years of experience working with clients and their attorneys and CPAs. Prior, Liss worked as a client service advisor at a hedge fund in Chicago. She is a graduate of the Ross School of Business at the University of Michigan.

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Senior Vice President Invest Detroit Invest Detroit has named Keona Cowan as Senior Vice President, focusing on commercial real estate lending and the organization’s New Markets Tax Credit program. With 20 years of experience in the Detroit and Southeast Michigan market, Cowan has been engaged in many of the real estate transactions promoting Detroit’s economic revitalization. Cowan was previously with Bank of America and began her career with JPMorgan Chase (formerly NBD Corporation).

Jim Lammers Trustee

The Nature Conservancy - Michigan The Nature Conservancy welcomed Jim Lammers, president of Dart Container Corporation and vice president of the Dart Foundation, to its Michigan Board of Trustees. Lammers has led many charitable organizations, including American Red Cross Mid-Michigan Chapter and the chapters of the Juvenile Diabetes Research Foundation. “I’m very excited to join Michigan’s board for The Nature Conservancy. I’ve long been impressed by the Conservancy’s innovative approach to developing solutions,” he said.

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Financing for business succession

As businesses change hands, here’s practical advice for ensuring success By Bayard King Merger and acquisition activity among businesses of all sizes continues to heat up. Low interest rates, a recovering economy, changing consumer trends and a wave of owners seeking retirement may make it an attractive time to buy and sell. As more businesses change hands, here are some common and creative strategies that can help ensure business succession. One thing’s for sure in today’s market — interest rates remain at historic lows and buyers, especially private equity, hedge fund and cashflush businesses, are seeking strategic acquisitions. Currently, few investment options offer the returns of buying the right business. Common targets include niche manufacturers, value-added service providers and a variety of consumer goods sectors. Everything from major brands to private labels can find new homes with buyers paying strong premiums for best-ofclass operators with well-developed organizations. Whether you’re AT&T

retain roles within the succeeding entity. Businesses that execute a solid succession plan and have their financial processes in order have the highest chance of success. Beyond large industry players, smaller businesses with cutting-edge products and services should consider whether now is a good time to sell. While buyers may have the resources and knowledge needed to execute a purchase, there’s an art to preparing a company to sell and, often, it’s this preparation that can make a deal or influence the amount paid.

Preparing your business for sale

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buying Time Warner, or simply have decided to sell the business you spent a lifetime building, there are plenty of buyers, and finding the right buyer and structuring the right transaction can be daunting. Typically, it’s larger companies with established distribution channels and deep re-

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it. It’s possible your organization is struggling with culture, or perhaps the strategy necessary to move forward isn’t clear, or it may just lack the resources and systems required to execute. While these three elements are the keys to long-term profitable growth, it’s vital to prioritize which you need to focus on first. We offer an assessment through our entrepreneurship program, the Automation Alley 7Cs™. It is perfect for qualified second-stage manufacturing and technology companies who either want to grow, are looking for strategic or Industry 4.0 technology assistance, or just want to know how they are doing.

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Discussion and planning with trusted business advisers such as your accountant, lawyer, banker, real estate agent and others will generate suggestions on how to best prepare your business for sale. Among them may be: • Move to a higher level financial statement by a reputable firm. • Upgrade internal financial management practices. • Positively position balance sheet and working capital profile. • Develop detailed customer and supplier information. • Improve physical plant and/ or production/warehouse/ service areas. • Motivate and retain key employees.

Fine-tuning your deal With so much riding on seller preparation, the sale of your business requires a savvy financial expert – one knowledgeable on the fundamentals within your market space. Look for a financial expert who understands your industry and the competitive environment that affects your business. By choosing someone well-connected with strategic investors, knowledgeable lenders and recent acquisition activity in the market, you can fine-tune the sales process. Having a financial expert that can respond quickly with equity and/or financing solutions can help you capitalize on the best opportunity.

Designing your financing solution Structuring a deal will largely depend on your unique opportu-

nity and the nature of your objectives regarding how your ownership interests are transferred. The purchase will likely involve financing on the buyer’s side, and the use of equity. A seller note is not uncommon as well. For businesses producing a stable free cash flow, mezzanine financing can be an effective way to bridge the gap between a conventional loan against assets and the total value of the business purchase. While mezzanine financing carries a higher interest rate, more buyers are opting for it as an avenue to obtain financing without issuing equity and diluting their ownership of the business. A buyout structure could involve an earn-out provision consisting of a stock transfer over an agreed upon timeframe between buyer and seller. If you’re an owner among partners, you’ll also need to consider the benefit of a cross-purchase agreement or an entity-purchase agreement providing key-person insurance on all business experts. Such coverage can provide proceeds used to buy out a share of the business and ensure a smooth transition, should you or a business partner pass away. If transitioning ownership within your family — say your daughter plans to finance her purchase over 10 years — she may wish to use a combination of capital sources enabling a portion of the buyout to be funded at closing through debt financing over the first five years and another portion in the form of an earn-out provision tied to the business’ financial performance over the remaining years. Whatever your motivation for selling, preparation, the right financial expert, and well-designed financing are key. Whether you’re ready to move on, or desire to stay on for an extended period to ensure the finer points of your legacy are preserved, there are a variety of ways to make sure the sweat equity you put in over the years endures. The decisions you make now can help you and yours secure a bright future. Bayard King is Senior Vice President Commercial Banking at Huntington Bank, bayard. king@huntington.com, 248-2442962.

December 12, 2016

C R A I N ’ S D E T R O I T B U S I N E S S // D E C E M B E R 1 2 , 2 0 1 6 CRAIN’S DETROIT BUSINESS

Page 21

MOBILITY FROM PAGE 3

NAIAS and CEO of Sellers Auto Group, which owns dealerships in Farmington Hills and Macomb Township. “The future of this business (automotive) is not known, whether it’s car-sharing or autonomous or more, but it’s all transportation. How we all fit in that picture is completely relevant to the auto show and what’s happening in Michigan.” However, the addition of a technology element to the show didn’t stop Fiat Chrysler Automobiles NV from choosing to unveil its cars at CES on Jan. 3, six days before NAIAS starts. “As with any international auto show, sometimes product cycle launches do not coincide with show dates,” Rod Alberts, NAIAS executive director, said in an emailed statement. “In total, NAIAS will have nearly 60 hours of presentation content from OEMs, suppliers, technology companies and startups that will be delivered from our global stage here in Detroit.” Automobili-D, which will run during press preview days and industry preview days at the show, Jan. 9-12, will occupy 120,000 square feet in Cobo Center’s atrium and focus on showcasing and creating business opportunities for advanced technologies.

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The Nissan stage being constructed for the 2017 North American International Auto Show in Detroit. Roughly 120 companies will be represented at Automobili-D. The speaker list includes Krafcik; Carlos Ghosn, president and CEO of Nissan Motor Co. Ltd.; Chris Thomas, founder of Detroit-based venture capital firm Fontinalis Partners LLC; Ted Serbinski, managing director of Detroit-based startup accelerator Techstars Mobility; Donna Satterfield, vice president and partner of automotive, aerospace and defense industries at IBM Corp.; and representatives from Uber Technologies Inc.; General Motors Co.; Facebook Inc.; Delphi Automotive plc; Nvidia Corp. and others. Serbinski recruited 50 startups from around the world, including Detroit-based Inventev LLC and Ann

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want to go to CES to see these technologies. The idea is to change the perception of Detroit as a place for innovation.” NAIAS, put on by the Detroit Automobile Dealers Association, paid for part of the Automobili-D portion of the auto show out of its own coffers. Slaughter declined to say how much. “I have a picture ... it’s of an intersection in New York City in 1903 or 1904. It’s filled with people walking and of horses and buggies,” Slaughter said. “There’s a red circle around the one automobile. Another photo of that same intersection in 1914 ... well, there’s only one horse. Not talking about the combustion engine in 1904 is equally as ridiculous as not talking

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Arbor-based Splitting Fares Inc., doing business as SPLT, to showcase at the show. Inventev is developing and marketing a mobile power-generation system for work trucks and is seeking to open a vehicle development center in the city of Detroit. SPLT developed an app to create a community for carpooling. Serbinski said the goal is to convince startups, investors and dominant players in the industry that Detroit should be ground zero for mobility technology. “A lot of innovation is coming from all over the world, not just Silicon Valley. Let’s flip the model,” Serbinski said. “I want to stay in Detroit. I don’t

CHRIS EHRMANN

about mobility today. That’s why we’re doing this.” Automobili-D also allows the show’s organizers to expand ticket sales for engineers and other industry workers that typically use the two industry preview days to benchmark vehicles inside Cobo Hall. Industry preview tickets, $110 per ticket, now grant entry into the Automobili-D portion of the show Jan. 9-12. Industry preview access to the entire show is Jan. 11-12. NAIAS sold 39,788 industry preview tickets last year. Slaughter believes more will be sold for the 2017 show. “Typically, the show was limited to the mechanical and electrical engineers looking to benchmark,” Slaughter said. “Now, with these symposiums, we’ll be attracting software engineers and others that are growing within the business.”

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C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // D E C E M B E R 1 2 , 2 0 1 6

TROY FROM PAGE 1

aquatic center and the 52-4 District Court. Those buildings would remain largely unchanged, minus a new facade and clocktower for City Hall. Itâ&#x20AC;&#x2122;s the acreage surrounding those buildings thatâ&#x20AC;&#x2122;s expected to see the most activity as retail spaces, townhouses, live-work units, condominiums, apartments and cottage homes are built, plus a 300-room hotel. The planners and city council and planning commission have come to a consensus on a master plan for the area that involves the development of what Robert Gibbs, the urban planner and landscape architect on the project, likened to Troyâ&#x20AC;&#x2122;s version of downtown Birmingham, fresh out of the City Beautiful planning movement of the 1920s that built downtowns around civic buildings. â&#x20AC;&#x153;The overall goal is to give Troy a downtown that they never had,â&#x20AC;? he said last week. The site, said Matt Farrell, founder of Core Partners, is a gem that has been overlooked by developers. â&#x20AC;&#x153;It has been right underneath ev-

erybodyâ&#x20AC;&#x2122;s noses for a long time,â&#x20AC;? he said.

Ambitious plan Troy, one of Oakland Countyâ&#x20AC;&#x2122;s economic hubs with 83,000 residents and 13.26 million square feet of office space, is almost 34 square miles of large office buildings, highend shopping centers like the Somerset Collection, department stores, strip malls, restaurants, houses and apartment buildings. It has 125,000 workers during the day. The problem, according to Gibbs? â&#x20AC;&#x153;They have to get in their car and drive to Chiliâ&#x20AC;&#x2122;s for lunch,â&#x20AC;? he said. If its residents and workers want a walkable community, they have to look to other areas like Birmingham, Royal Oak, Rochester or Ferndale, which have vibrant downtowns nearby with their own unique personalities and challenges. Birmingham and Ferndale have parking shortages. Royal Oak has a dearth of office workers. Rochester is a trickier commute. The Troy project could be less daunting with what essentially is a development blank slate and a massive block of land with substantial infra-

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structure already in place, not to mention the residential and employment base to support it. What happens with Troyâ&#x20AC;&#x2122;s property remains an open-ended question. Things could change; five-year projections for the site based on market studies, said Dave Mangum, planning associate at Gibbs Planning, are enormous: 2,000 or more residences, 600,000 square feet or more of retail space. Yet the planners are being conservative with their early project estimates: 850 residences, 180,000 square feet of retail at a $350 million price tag. Troyâ&#x20AC;&#x2122;s plan, presented last week to what Kischnick said were 50 to 100 developers at the International Council of Shopping Centers deal-making conference in New York City, could take years to materialize. First, a master developer has to be chosen; a request for qualifications could be sent out next year. Best-case scenario: â&#x20AC;&#x153;Some (construction) activityâ&#x20AC;? beginning in 2018, said Larry Goss, executive vice president of Core Partners.

Happening elsewhere Itâ&#x20AC;&#x2122;s not just Troy that is taking its real estate and putting it in the hands of private developers to turn into something urban and unique. The largest in the works is the Commerce Towne Place project in Commerce Township, which is well over 300 acres of land. For more than a decade, Commerce has plugged away on the project at M-5 and Pontiac Trail, with a massive 340 acres (130 or so would be preserved as parkland). The project, chugging along after coming to a screeching halt in 2008 with the economic collapse, is expected to bring about 700 single-family houses, senior housing units and townhouses to the market, along with 550,000 square feet of retail and office space in a project expected to cost more than $270 million. The land for the project is owned by the townshipâ&#x20AC;&#x2122;s DDA, which purchased a pair of golf courses and several other large parcels with the Commerce Towne Place vision in mind. In Royal Oak, the plans for a new $100 million city hall in the Royal Oak City Center development have been delayed slightly but are still proceeding as the city commission mulls whether to lease 30,000 square feet for city operations in a multitenant office building to be built or be the lone user in another one, said Ron Boji, president and founder of Lansing-based The Boji Group, one of the developers. â&#x20AC;&#x153;Certain communities have had â&#x20AC;&#x201D; and mostly everyone has had â&#x20AC;&#x201D; very, very modest growth because of the downturn in the economy in Michigan the last 10-12 years,â&#x20AC;? Boji said. â&#x20AC;&#x153;They are using their own infrastructure, whether that be courts, police, a city hall, other civic items such as conference centers, things of that nature, as stimulators to a private-public partnership to bring on other items such as retail, residential and office.â&#x20AC;? Bojiâ&#x20AC;&#x2122;s development group also includes The Surnow Co. and RAD Development Group, both based in Birmingham. The 190,000-square-foot building was originally planned to include

30,000 square feet for city government operations and about 130,000 square feet of leasable office space with 20,000-square-foot floor plates. Financing for the project is now expected to close in the spring or summer. The building would also include a rooftop garden terrace and event center, along with leasable space for a specialty grocery store and a restaurant with a liquor license, Boji said. Also included in the project plans are a 533-space, six-story parking deck, a park with an amphitheater and playground, and new Royal Oak Police Department headquarters. In Northville Township, a former state corrections facility site is planned to be redeveloped into more than 350 residences with 28,000 square feet of retail, three or four restaurants and a 50,000-square-foot anchor retailer, said Dale Watchowski, president, COO and CEO of Southfield-based Redico LLC, one of the developers on the project. He said the redevelopment of the 57-acre former Robert Scott Correctional Facility site, which was owned by the township, at Five Mile and Beck roads, is expected to break ground in the spring. Some of the residences â&#x20AC;&#x201D; which include 111 single-family houses, 66 townhouses and 180 apartments â&#x20AC;&#x201D; are expected to be complete late fall next year. Farmington Hills-based Pinnacle Homes is a developer on the residential components of the project. In Warren, 210 loft units south and east of city hall at a $32 million development cost have been planned, said Mayor Jim Fouts. A groundbreaking for the Bingham Farms-based Burton-Katzman LLC project is expected next year. In Dearborn, the city sold its old City Hall on Michigan Avenue in the east downtown area to a Minneapolis-based developer that converted the three-building campus into 53 lofts. The ensuing development, the City Hall Artspace Lofts, welcomed its first residents to the $16.5 million redevelopment of the 1920s buildings Jan. 1.

Millennial movement? Robin Boyle was skeptical at first when briefed on the plans in Troy. â&#x20AC;&#x153;Incredibly hard to walk around there,â&#x20AC;? said Boyle, a professor and chairman of the Wayne State University Department of Urban Studies & Planning and a member of the Birmingham Planning Board. He also said a lot of prerecession mixed-use suburban developments touting walkability were largely paying lip service to the concept. But he is beginning to change his mind. â&#x20AC;&#x153;Now, I am beginning to think that the developers are genuinely interested in this and they think the millennial buyer wants to have a tightened development,â&#x20AC;? he said. â&#x20AC;&#x153;They want to have a chance ... to take the kids for an ice cream or buy the paper or get a drink or get dinner and walk there.â&#x20AC;? And thatâ&#x20AC;&#x2122;s what Troy hopes to provide, in perhaps one of the least-expected cities in the region. â&#x20AC;&#x153;Of all places,â&#x20AC;? Boyle said. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

FIXES FROM PAGE 1

ultimately signed will get half of its funding by diverting existing state spending. Most recently, in November, a $3 billion regional transit tax for Southeast Michigan failed, largely due to opposition in Macomb County. Yet the state might have no choice. In large part, thatâ&#x20AC;&#x2122;s because the emergency in Flint, where lead-contaminated drinking water is still unsafe to drink, has cast a spotlight on the stateâ&#x20AC;&#x2122;s infrastructure problems â&#x20AC;&#x201D; and will remain a priority for a long time. The city was under state oversight when it switched drinking water sources without properly controlling for corrosion. Lawmakers have approved $234.1 million in aid for Flint to date, with another $10 million on its way to the governorâ&#x20AC;&#x2122;s desk. A spokesman for Snyder said the state remains committed to spending more on pipe replacement and public health needs. Congress also is debating legislation that would award $170 million to Flintâ&#x20AC;&#x2122;s recovery as part of a larger water bill. But drinking water isnâ&#x20AC;&#x2122;t the only system facing shortfalls. Roads, bridges, stormwater sewers, wastewater pipes, internet access and energy transmission also make the list. And if President-elect Donald Trump follows through on a campaign pledge to invest $1 trillion into infrastructure upgrades across the country, itâ&#x20AC;&#x2122;s likely to spawn more conversations about where Michigan should spend those dollars. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re going to reach a point in this state and in this country where people have to realize if you want things to be new and improved, youâ&#x20AC;&#x2122;re probably going to have to pay for it,â&#x20AC;? Snyder spokesman Ari Adler said.

Users pay? A Snyder-appointed commission last week offered some ideas when it released its initial review of the condition of Michiganâ&#x20AC;&#x2122;s various infrastructure systems, suggesting that user fees be the primary funding source for infrastructure repairs. The idea there is to allow people who use the systems to pay for upkeep. While not meant to be prescriptive, the 27-member task force also suggested the state consider such ideas as public-private partnerships, toll roads and a state infrastructure bank. It recommended the state start by spending $2 million to create a database that can collect and store data on various infrastructure systems, which could be expanded into a statewide clearinghouse to help agencies better plan maintenance. â&#x20AC;&#x153;The report was an honest assessment of where we are, not sugarcoated,â&#x20AC;? said Steudle, who as a department director held a nonvoting seat at the table. Advocates who believe infrastructure needs to be a priority point to the economic toll underinvestment already has had. They say bad water, crumbling roads, unreliable electricity and spotty broadband internet access can make Michigan unattractive to companies and the talent they need. The American Society of Civil Engineers wrote that the cost of delayed

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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 // D E C E M B E R 1 2 , 2 0 1 6

maintenance to U.S. GDP could be $4 trillion by 2025, and more than $14 trillion by 2040 if the problem is not addressed. By 2025, the Reston, Va.based association said, U.S. businesses could lose more than $7 trillion in sales and 2.5 million jobs due to poor infrastructure conditions. The debate over funding anything, including infrastructure, often centers on whose responsibility it is. Incoming House Speaker Tom Leonard told Crain’s last week he believes federal and local governments also have to contribute toward infrastructure fixes. He said the GOP-led Legislature already has taken steps to address transportation maintenance by passing the 2015 road-funding package. Yet like state government, federal and local leaders also face competing demands, and municipalities are limited by state law in their ability to raise money through property taxes. “On a state level, at least for the foreseeable future, we’ve done our part. What I’d like to see is: What is the plan that’s going to come out of the federal government?” said Leonard, R-DeWitt Township. “This cannot always be on state government.”

Less from feds The federal share of infrastructure spending also has been sliding. From 2003 to 2014, federal spending on transportation and water infrastructure systems dropped by roughly 19 percent, compared with about 5

percent at the state and local levels, according to a March 2015 report from the Congressional Budget Office. That’s largely because Washington spends a bigger share of its infrastructure dollars on capital projects than states and cities do, and because prices for building materials have risen. The budget office said federal infrastructure spending was 38 percent in 1977 before falling during the 1980s as states and municipalities began to increase their share. Federal dollars make up about a quarter of all public transportation and water infrastructure investment, a figure that generally has held since 1987. As a percentage of GDP, federal spending generally has held at about 2.4 percent over the past 30 years. Federal spending on maintenance outpaced capital investments over the same period, the report showed, which is a reversal from earlier decades that brought interstate highways, dams and the federal Clean Water Act. Washington in 2014 spent $96 billion on transportation and water infrastructure systems, down 21 percent from a peak of $122 billion in 2002 when adjusted for 2014 dollars. Federal spending historically rises after legislative action. Whether President-elect Donald Trump is able to deliver on his trillion-dollar campaign plan remains to be seen. His plan would include tax credits to encourage private-sector investment. “I’m very doubtful, actually, that

the infrastructure promises from Mr. Trump will come to pass,” said Charles Ballard, a Michigan State University economist. “There would be some tax breaks, and if businesses decide on that basis that it’s in their interest, they would undertake some infrastructure projects. That’s a technique that may or may not be effective.” A combination of factors has contributed to that problem in Michigan, he said. They include increased polarization in Lansing, an ideological opposition to taxes by residents, government leaders who haven’t always done a good job of explaining the reasons for and impact of millage requests and eroding buying power of Michigan taxes over time, such as a flat gasoline tax that only recently was raised and a sales tax that hasn’t extended to services even as services became a larger share of consumer spending. Ballard conducted an analysis of state and local taxes as a percentage of personal income dating back to 1972; he found that Michigan’s share was 9.5 percent in 2012, compared with more than 13 percent in the 1970s. “Government has come to be equated with something we don’t like,” Ballard said, adding that the problem — and solution — is on everyone, from voters to nonvoters to policymakers. “As long as there’s anything else to cut, I suppose you could cut something and put it into infrastructure, but we’ve cut so many categories of public

expenditure very greatly in Michigan, especially (local) revenue sharing,” he added. “Hard for me to figure out how we can do it without new revenue.” The Snyder-appointed commission noted that funding for some recommendations could come from existing resources. Mike Nystrom, executive vice president of the Michigan Infrastructure & Transportation Association and a commission member, said shifting current dollars back to infrastructure could free up some money. But it wouldn’t be enough on its own, he added. Nystrom’s association last week launched a new awareness campaign about Michigan’s infrastructure problem, which he said eventually could lead to advocating for legislative solutions if they’re proposed. “The major new investment is not going to come out of shifting and efficiencies. It’s going to have to come out of new user fee investments,” he said.

Starting options The commission proposed some areas to start, based on ideas being done in other places. Bonding for priority projects could remain an option given Michigan’s credit rating and low interest rates, the group wrote. Michigan also could start an infrastructure bank, which is meant to finance public and private investments in infrastructure. They’re good for projects “re-

ANNOUNCING A NEW PROGRAM FOR THE

quiring large lines of credit, which in some cases, allows an entity to multiply its infrastructure investment capacity,” it wrote. The Legislature would need to pass bills creating an infrastructure bank; similar efforts have included revolving loan funds for drinking water and clean-water projects, the commission wrote. Snyder proposed using $165 million in general fund dollars to start a state infrastructure fund, which could accrue and pay for projects over time. Just $5 million was added this year, though Adler said Snyder is glad the discussion was started. Public-private partnerships, commonly referred to as P3s, are another option. They allow private entities to pay for public projects; the private company often is repaid with longterm revenue collections. Last year, MDOT entered into a $123 million partnership with New York-based entities BlackRock Infrastructure and Freeway Lighting Partners LLC to upgrade 15,000 lights on metro Detroit freeways and tunnels, with the private company responsible for operating and maintaining the lights for 15 years. “We’ve got to have more investment in all of those assets that are listed in that report,” Steudle said, “and in order to have more investment in it, you’ve got to generate it somehow.” Lindsay VanHulle: (517) 657-2204 Twitter: @LindsayVanHulle

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additional 22 million people, funded thousands of health clinics for the poor, provided subsidies for private health insurance to millions of lower-income people, extended the solvency of Medicare by more than a decade and created Medicare pilot programs to improve quality and lower costs. During the campaign, Trump won loud cheers from crowds as he promised to repeal and replace Obamacare. Among other things, he suggested a number of new paths to lower costs, including expanding the use of private health savings accounts, allowing individuals to fully deduct medical expenses from their taxes, lifting restrictions on importation of prescription drugs from overseas, pushing for national tort reform to reduce medical malpractice payouts and ending traditional Medicare by creating a voucher system. Crain’s also interviewed leaders from a physician organization, a health insurance company, an insurance agency and a health plan, as well as a health policy analyst. Not all wanted to share their opinions about changes to Obamacare, or provisions they felt needed to remain going forward under Trump. For example, Daniel Loepp, CEO of Blue Cross Blue Shield of Michigan, said the state’s largest health insurance company has done its best to help people keep their health policies or purchase a policy for the first time. “We’ll continue to do so until such time as the law changes,” Loepp said in a statement. “There have been tremendous changes in health insurance in recent years. Blue Cross is committed to ensure that our company and customers understand the impacts of these changes and can navigate them successfully.” Loepp said he doesn’t expect any immediate impact from Trump’s election on open enrollment, which runs through Jan. 31. Michael Williams, M.D., president of United Physicians in Bingham Farms, said the two main problems with the health care system are the high number of uninsured (17 percent before Obamacare insurance expansion, now down to 10.5 percent) and the high cost of care. “We still have to address these issues,” he said. “The key thing is we need to maintain adequate coverage and do it at sustainable cost. It is hard to ride your bike while changing your front tire. (Change) has to be well thought out. Don’t throw everything out all at once.” Williams suggested that Congress should take a year to debate the issue, hold hearings and listen to physicians, consumers, and health care and insurance executives. Incarnati agreed. He said Trump should spend time with the provider community to discuss changes in Obamacare. “We are the closest to anyone to the patient level,” he said. “He should talk with us and get as much feed-

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

back as you can before making any changes.” Joe Mullany, CEO of Detroit Medical Center, said any changes in Obamacare should not affect coverage for the thousands of patients in Detroit that DMC serves. “It is more about protecting what we have, mainly Healthy Michigan (Medicaid) that provides the uninsured with coverage,” he said. Any changes, said Mullany, should be geared toward helping individuals on the online exchanges and small businesses that have been hit the hardest with premium increases. “Repealing Obamacare without a replacement ... would have a dramatic affect on DMC and the people we serve,” he said. Joe Haney, president of Sterling Insurance Agency in Sterling Heights, said Congress should improve Obamacare. “People talk about tweaks, and there can be some good ones,” he said. “But (Trump) isn’t talking about tweaks. He is talking about wholesale change. Nobody can guess what will happen.”

Possible changes Trump also has called for the elimination of online state and federal health insurance exchanges that also have been key components of Obamacare’s effort to reduce the uninsured rate. Trump says the exchange websites don’t work, the subsidies are too costly, premiums are rising and some national health insurers are bailing from the markets. Eliminating the exchanges, however, could result in more than 330,000 people in Michigan — and millions of others nationwide — losing private health insurance because the system relies on federal subsidies, which Trump wants to cut as he favors eliminating taxes on high-income individuals that help pay for them. Rick Murdock, executive director for the Michigan Association of Health Plans, said health plans are concerned about Trump’s proposal to eliminate the individual mandate while maintaining requirements that health insurers offer policies to people regardless of their health status. “(This) would be a death spiral for insurance coverage as only those who need insurance would purchase it,” Murdock said. Though Incarnati believes Obamacare’s online health insurance exchanges, as currently structured, are doomed, he thinks they can be fixed somehow if they change to encourage more millennials and healthy people to sign up to balance the risk pool. Insurance experts say having sicker patients in the exchange drives up premiums for those purchasing from it. “It needs to be overhauled to get the millennials into the mix,” Incarnati said. Lassiter said he opposes eliminating the online health insurance exchanges, but he favors reducing administrative cost burdens that make it difficult to manage financially sustainable health plans on the exchanges. “We have been challenged with

(HAP’s) PPO products on the exchange,” Lassiter said. “We had high administrative costs based on the regulatory requirements with small enrollments and high claims expenses.” HAP and Priority Health dropped PPO plans on the exchange for 2017 for those reasons. Lassiter said he favors eliminating various taxes on health insurers and reducing or eliminating the Cadillac tax on employers. “I believe very strongly that health insurance coverage is not just insurance, it is economic development, a jobs issue, a societal issue,” he said. In Michigan, all hospitals, physicians and health plans have benefited from expanding enrollment in both Medicaid and private health insurance, Lassiter said, adding: “I am opposed to any new policy that reduces coverage for (people) who have been outside the health care system because of lack of insurance.” Henry Ford owns Health Alliance Plan, a commercial health plan, and HAP Midwest Health Plan, a Medicaid HMO. McLaren also operates a nonprofit health plan, McLaren Health Plan, which serves the commercial and Medicaid markets. DMC recently sold its profitable Harbor Health Plan. Both Lassiter and Incarnati favor retaining Medicaid expansion under Obamacare, which has led to Healthy Michigan and more than 630,000 enrollees. Michigan now has about 2.5 million people on Medicaid. They also disagree with Trump and some Republicans about block-granting federal Medicaid funds to states. Trump wants to give more local control over health funding and benefit design to the states. That would mean states would decide who gets Medicaid, how many get it, what services they get and, ultimately, how much government will pay for it. “If you are truly saying you want to give the states flexibility, I am not opposed to that on its face, but when most people say block-granting, it means a significant reduction in the Medicaid program,” Lassiter said. “Block-granting is code for providing less money.” If that happens, doctors and hospital fees are cut, or states reduce benefits or eligibility levels, Lassiter said. Incarnati also feels block-granting Medicaid would result in a massive cost shift to states that could result in higher taxes to support benefits and provider payments. “It is just a recipe for states to pick up the responsibility. It’s a cost shift to the states (that will result) in reductions to provider payments,” he said. On the other hand, Murdock said, block-granting Medicaid could benefit Michigan, depending if current funding continued and if there were no strings attached on spending. Mullany said it could work with the right formula. “We shouldn’t automatically resist that approach,” said Murdock. “The critical issue is that whatever changes are made, Michigan is able to sustain the enrollment gains as result of expansion.” To encourage more competition,

Trump wants to allow insurance companies to sell policies across state lines, which he believes could lower premiums by increasing competition. Republicans have long advocated for this. However, most state insurance commissioners and other policy experts have called this idea unworkable. Haney said he supports allowing health insurers to compete across state lines because it would give choice to his out-of-state clients. “It could work like worker’s compensation,” he said. “I have clients out of state, and unless they are domiciled in Michigan, they can’t get a quote from Blue Cross. If it were allowed, it could increase competition and that might lower costs.” But others disagree. Naomi Lopez Bauman, director of health care policy with the Arizona-based Goldwater Institute, who was a panelist at Crain’s recent health care summit, said multi-state sales of health insurance won’t reduce costs. “Provider networks don’t fit this model,” she said. “I have no idea how this became such a popular idea.” Incarnati also opposes allowing insurers to sell policies across state lines. “I don’t think that is good for competition. You create virtual monopolies,” he said. Lassiter said allowing insurers to sell across state lines sounds great, but it wouldn’t move the needle in costs. “From HAP’s perspective, if tomorrow we could sell across multiple states, it wouldn’t change what we do. It wouldn’t help us sell products on the exchange market and would not help us with our PPO,” Lassiter said. Trump also has suggested eliminating the individual and employer mandate for businesses with more than 50 full-time-equivalent employees. Haney supports eliminating the employer mandate, but worries about Trump’s proposal that would allow individuals to write off from income taxes their health premium costs, as businesses are now allowed. “I don’t know how that would affect group insurance,” he said. “I would like to know that before it is done.” Trump also has called to reduce Obamacare taxes, but Williams said reducing taxes will mean cutting services to patients and reducing reimbursement to hospitals and doctors. “It is hard to cut taxes and expect everything to improve. Doctors are experiencing significant overload with regulations by providing so much data while cutting fee schedules,” he said. Lassiter also is opposed to eliminating Obamacare’s mandate that all policies must be sold with the 10 essential benefits, which have increased premiums to some degree. “Anytime you have public policy on insurance, you have a minimum standard,” he said. “You have a minimum standard on Medicaid and Medicare benefits.”

New payment models? All the executives believe that re-

gardless of what happens with Obamacare, advanced payment models like accountable-care organizations, bundled payments for episodes of care, medical homes and value-based payments to hospitals and doctors will continue. “It helps reduce health care costs,” Incarnati said. “You look at the last five years, it has helped moderating cost increases and probably lessened some pressures.” Williams said Obamacare created the clear path toward elimination of fee-for-service payments and connecting profits to quality and patient safety. “Value-based care and consumer-based care is here to stay. We will see more high-deductible plans. (House Speaker) Paul Ryan wants more defined contributions and giving vouchers (for Medicare), allowing people to choose,” he said. “They choose the lower-cost and higher-deductible plans, and that transfers (risk) to physicians.” Going forward, Williams said, hospitals and doctors will have to work together on care coordination and sharing financial risks. “United Physicians has prepared for value-based care by investing in information technology, care management, data analytics and we intend to carry forward with those plans,” he said. “How care is delivered with change. We can’t do episodic-type care. We need to keep them out of the hospital, restore their health. This will continue.”

Effects on businesses? The executives also said they expect to begin talks about contingency plans in case parts of Obamacare are eliminated or changed. But none have put together backup plans. Lassiter said Henry Ford is just starting to discuss contingency plans, but no capital spending projects have been delayed. “Nothing will happen in 2017, no matter what you do,” he said. “The insurance rates are set, and we are starting to plan for 2018 offerings. We are monitoring the debate. Our health plans will be most affected by any changes.” Lassiter said he believes that, post-election, health care shouldn’t be a political issue between Republicans and Democrats. “When you look at societies around the globe, we stand out like a sore thumb with policies and coverages that undermine our success,” Lassiter said. “I am hopeful that our new president and Congress move us forward.” Incarnati said McLaren executives are discussing future strategic plans. “Should we go ahead or throttle it down?” he said. “A lot of it is conjecture. If we are (true to) our values, we will be fine. Since 1994, when we came of age, we have believed that high quality and low cost will be required. There will always be a place for those providers. High-reliability organizations will be in demand. That is the path we are on and will accelerate.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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

DEBT

Top 10 arena taxpayers

FROM PAGE 3

than 800,000 square feet of new office and residential space. Gilbert is also working on developments on the site of the former J.L. Hudson’s department store on Woodward Avenue at Grand River Avenue and a new Major League Soccer stadium on the site of the half-built Wayne County Consolidated Jail on Gratiot Avenue at I-375. The tax dollars from Gilbert and other taxpayers will subsidize some of the cost of the state-of-the-arena that will be home to Ilitch’s Detroit Red Wings and the Detroit Pistons, whose owner, billionaire Tom Gores, in November decided to relocate downtown. The arena anchors an Ilitch-led $2.2 billion redevelopment of 50 downtown blocks called The District Detroit. Gilbert, the founder and chairman of Quicken Loans and Rock Ventures LLC, said he has no problem with his property taxes paying for another billionaire’s entertainment venue. “We are supportive of tax revenue being allocated to significant and important developments like the Little Caesars Arena and The District Detroit. The taxes we, and many other businesses, pay help fund numerous services and projects downtown and in every neighborhood of Detroit,” Rock Ventures said in a statement. “New developments create new jobs and new taxes that increase the city’s revenue. Like wealth, the economic activity that is responsible for tax revenue is created. Without substantial new vertical construction in Detroit, businesses will be unable to grow, create new jobs and generate new tax revenue. When an investment is made into the development of large construction projects that become filled with those businesses creating employment opportunities, then the entire ecosystem benefits tremendously.” Gilbert is a proponent of taxes — including sales and income — being diverted for economic development. He backed legislation, which died last week (for now) in the state House, that would have captured new sales and income tax revenue that is generated at mixed-use developments from residents and customers. Projects would have qualified if they were located on contaminated property, deemed blighted or obsolete or are historic structures that wouldn’t be redeveloped if not for the incentive. In Detroit, developers would have to put up at least $500 million in private funding.

Others paying

These are the top 10 property taxpayers in the Detroit DDA’s tax capture district for paying off the $250 million in public bond debt on Little Caesars Arena. Figures are the taxable values of the properties for 2016, not actual taxes paid.

www.crainsdetroit.com Editor-in-Chief Keith E. Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Associate Publisher/Editor Ron Fournier, (313) 446-1674 or rfournier@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 Kristin Bull, (313) 446-1608 or kbull@crain.com Digital Editor Carlos Portocarrero (313) 446-6056 or cportocarrero@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 or shill@crain.com Newsroom (313) 446-0329, FAX (313) 446-1687, TIP LINE (313) 446-6766

n Riverfront Holdings Inc. (General Motors) $109.5 million n 1000 Webward LLC (Dan

Gilbert/Meridian Health — former Compuware Corp. building) $59.2 million

n 500 Webward LLC (Dan Gilbert

- former One Detroit Center) $45 million

n Greektown Casino LLC (Dan

Gilbert) $32 million

REPORTERS

n Quicken Loans Inc. (Dan

Gilbert) $25.7 million

n General Motors LLC $20.4

million

tors; the 150 West Jefferson skyscraper, owned by Southfield-based Redico LLC; and the Riverfront Towers, owned by New York City-based Image Capital LLC's Asher Koenig. The 150 West Jefferson Building ($81.5 million) and Riverfront Towers ($79.5 million) both sold this year to their new owners for a combined $161 million. The actual taxes paid by the property owners within the DDA district were not available from the agency, but the assessments represent the general picture of who has the biggest property tax bills.

n Olympia (Ilitch family) $20.1

million

n Piedmont Operating

Partnership LP (150 West Jefferson) $17.8 million*

n Riverfront Tower Holdings

LLC $17.4 million**

n Whitney Partners LLC (David

Whitney Building) $12.1 million

Source: Downtown Development Authority *Now owned by Redico LLC **Image Capital LLC

Construction of the hockey arena is being financed with two series of bonds, one public and one private, and the property taxes captured downtown are the source of repayment funds for the public-backed bonds. No income taxes, or property taxes outside the DDA’s special taxing district, are used for the project. The largest single property in terms of assessed value for arena project taxation is the headquarters of General Motors Co., the Renaissance Center, at $109.5 million. GM also paid $20.4 million in personal property taxes in the DDA district, making it the second-largest taxpayer on the arena project. Ilitch, through his Olympia Entertainment and other holdings that include theaters and parking garages, accounts for $21.1 million in assessed real and personal property tax value for 2016. He’s responsible for all the arena cost beyond the $250 million in public bonds. Other significant properties in terms of tax value include the Renaissance Center, owned by General Mo-

INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: Bedrock LLC

Jonna Luxury Homes

Blue Cross Blue Shield of Michigan

Liv Resto-Lounge LLC

Core Partners LLC

McLaren Health Care

Detroit Downtown Development Authority 3

MicroDevice Engineering

Detroit Pistons

Neuvokas

Detroit Red Wings

NITS Solutions

Gibbs Planning Group GLR Advanced Recycling

1 13, 14

Global Telecom Solutions

Henry Ford Health System

13, 15

North American International Auto Show

Spatial Labs

StabiLux Biosciences Vision Investment Partners LLC

12 8

How it works Using taxes to subsidize ballparks and arenas for sports teams has been common for decades — in a controversial practice that often draws outrage from critics who say it’s little more than welfare for billionaires. The financing arrangement for the new Red Wings arena faced little formal opposition. Under a deal approved by the state Legislature in 2012, the DDA issued $250 million in tax-exempt bonds (originally floated by the Michigan Strategic Fund as collateral to back the DDA’s bonds) to pay for the arena’s construction, and the bonds will be repaid by 2048 via the DDA’s tax increment finance mechanism. Helping muffle criticism — perhaps aside from the deal’s mind-boggling complexity — is that Detroit’s general fund isn’t subsidizing the arena. The DDA’s funding is separate from the city government, and during Detroit’s municipal bankruptcy, the DDA was one of the largest creditors. The DDA, which owns the 20,000seat arena scheduled to open in September at I-75 and Woodward, since 1978 has captured property taxes in defined zones of more than a square mile in the city’s central business district for the purpose of using the money to fuel economic development within those zones. Legally, the money can’t be diverted to the schools or public services such as police and fire protection. The tax capture arrangement is Byzantine: For starters, the DDA doesn’t capture every cent of property taxes. Instead, it captures taxes paid on the increase in property val-

ues in the district after a baseline year for each parcel of land. The thinking is that new development increases the value of everything around it, so the value of the increase in taxes is what’s captured. For example, if a property in the DDA TIF district has a $1,000 tax bill in the baseline year, what’s collected is only the amount that the tax increases by the next year — ostensibly because a new development has boosted values nearby. So if the property’s value is $1,100 in year two, the DDA captures that $100 difference. The rest goes to the taxing entity. Each property owner pays property taxes to several taxing authorities, much like a homeowner. The arena deal approved by the state allows the DDA to capture three property levies — state education tax, Wayne County Regional Educational Service Agency and Detroit Public Schools — as revenue sources for paying off the arena bonds. Money collected from those three taxes can be spent by the DDA only within a 40-block zone around the arena site, known as the Catalyst Development Project Area. Five other tax entities — city of Detroit, Detroit library, Wayne County, Wayne County Community College District and Huron Clinton Metroparks

taxes — are collected in the DDA’s wider TIF district known as Development Area 1, but all but $2 million of those taxes are for use on any DDA project, such as paying down past bonds and loans not tied to the arena. One caveat: Under the 2012 arena legislation, about $2 million collected in total from those five taxes will be used to pay off the public bonds. In the fiscal year ended June 30, the DDA’s Development Area One property tax collection was $14 million while the Catalyst Development Area fund (for the arena) collected $13.7 million. It’s estimated the DDA will pay about $15 million annually for bond retirement, and Olympia will pay $11.5 million. By the time the bonds are paid off, borrowing costs and interest will have pushed the arena’s price tag to beyond $1 billion. Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

Jay Greene, senior reporter Covers health care, insurance, energy, utilities and the environment. (313) 446-0325 or jgreene@crain.com Tom Henderson Covers banking, finance, technology and biotechnology. (313) 446-0337 or thenderson@crain.com Kirk Pinho Covers real estate, city of Detroit. (313) 446-0412 or kpinho@crain.com Bill Shea, enterprise editor Covers media, advertising and marketing, the business of sports, and transportation. (313) 446-1626 or bshea@crain.com Lindsay VanHulle, Lansing reporter. (517) 657-2204 or lvanhulle@crain.com Dustin Walsh, senior reporter Covers the business of law, auto suppliers, manufacturing and economics. (313) 446-6042 or dwalsh@crain.com Sherri Welch, senior reporter Covers nonprofits, services, food and hospitality. (313) 446-1694 or swelch@crain.com

ADVERTISING Sales Inquiries (313) 446-6032; FAX (313) 393-0997 Advertising Director Matthew Langan Senior Account Manager Katie Sullivan Advertising Sales Christine Galasso, Gerry Golinske, Diane Owen Classified Sales Manager Angela Schutte, (313) 446-6051 Classified Sales Lynn Calcaterra, (313) 446-6086 Marketing/Events Director Kim Winkler Events Manager Kacey Anderson Senior Art Director Sylvia Kolaski Marketing Manager Marilyn Banes Special Projects Coordinator Keenan Covington Sales Support Suzanne Janik Media Services Director Geof Innis Media Services Manager Hussein Abdallah

CUSTOMER SERVICE Main Number: Call (877) 824-9374 or customerservice@crainsdetroit.com Subscriptions $59 one year, $98 two years. Out of state, $79 one year, $138 for two years. Outside U.S.A., add $48 per year to out-of-state rate for surface mail. Call (313) 446-0450 or (877) 824-9374. Single Copies (877) 824-9374 Reprints (212) 210-0750; or Krista Bora at kbora@crain.com To find a date a story was published (313) 446-0406 or e-mail infocenter@crain.com Crain’s Detroit Business is published by Crain Communications Inc. Chairman Keith E. Crain President Rance Crain Treasurer Mary Kay Crain Senior Executive Vice President William A. Morrow Executive Vice President/Director of Strategic Operations Chris Crain Executive Vice President/Director of Corporate Operations KC Crain Vice President/Production & Manufacturing Dave Kamis Chief Financial Officer Bob Recchia Chief Information Officer Anthony DiPonio G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Editorial & Business Offices 1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000 Cable address: TWX 248-221-5122 AUTNEW DET CRAIN’S DETROIT BUSINESS ISSN # 0882-1992 is published weekly by Crain Communications Inc. at 1155 Gratiot Ave., Detroit MI 48207-2732. Periodicals postage paid at Detroit, MI and additional mailing offices. POSTMASTER: Send address changes to CRAIN’S DETROIT BUSINESS, Circulation Department, P.O. Box 07925, Detroit, MI 48207-9732. GST # 136760444. Printed in U.S.A. Contents copyright 2016 by Crain Communications Inc. All rights reserved. Reproduction or use of editorial content in any manner without permission is prohibited.

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

THE WEEK ON THE WEB DECEMBER 3-9 Snyder signs bills allowing autonomous cars on public roads

Detroit Digits A numbers-focused look at last week’s headlines:

utomakers and tech companies will be able to develop, test and sell autonomous vehicles in Michigan, per legislation Gov. Rick Snyder signed into law Friday, Automotive News reported. The liberal policy allows vehicles without steering wheels or brake pedals to drive on public roads, companies to operate autonomous ride-hailing services and self-driving cars that have passed adequate testing and certification to be sold to consumers.

The amount of a grant awarded by the Troy-based Kresge Foundation to help protect children from the effects of lead poisoning and strengthen the health and human services delivery system in Flint. The Community Foundation of Greater Flint will administer the grant and use it to expand programming and to create a more coordinated and strategic effort to fight lead poisoning.

COMPANY NEWS

$20 million

Detroit-based Olympia Development of Michigan, which recently lost its top executive, is bringing The Cordish Cos., a Baltimore-based developer of mixed-use entertainment districts linked to professional sports venues around the country, into The District Detroit project. Cordish transforms arenas and ballparks into year-round districts for people to live, work and play. The entertainment neighborhoods at the core of its developments are often branded as “Live!” districts with restaurants and sports-viewing options. The 50-block District Detroit is anchored by Little Caesars Arena, which will be home to the Detroit Red Wings and Detroit Pistons when it opens in September. J Electric-vehicle maker Tesla Motors Inc., which filed a lawsuit in federal court in September contesting Michigan’s direct-to-consumer sales ban, opened a one-car gallery in Troy inside the Somerset Collection. Tesla is prohibited from selling its vehicles in Michigan due to an amendment to the state’s dealer franchise law, but it has been using galleries in states with similar bans to showcase the cars and provide information to consumers. J A Detroit-based advertising firm launched last week has landed a major client: Taylor-based Wallside Windows. The new Standard Wonder Group, headquartered in Detroit’s Eastern Market, said the window company has hired it as agency of J

$2 million

The amount of a gift by Detroit businessman and philanthropist Mort Harris to Henry Ford Health System for cancer care and research. The gift, which Crain’s reported last week would be the largest in the Detroit-based health system’s 100-year history, is in honor of the giver’s late wife, Brigitte Harris, who received care for pancreatic cancer at Henry Ford Hospital. The gift is part of a $40 million package from Harris supporting Henry Ford’s new Detroit cancer building project.

$165 million

The estimated cost of the reconstruction project that will close southbound I-75 between Detroit and the Downriver area for two years. The Michigan Department of Transportation

last week announced a Feb. 4 starting date for the project, which will focus on much-needed repairs to the Rouge River Bridge. Completion is expected in fall 2018.

record. Financial terms were not disclosed. Beverly Hills-based Lerner Advertising Inc. will continue to handle the creative for Wallside, and Standard Wonder Group will handle media buying and placement. The Wallside account’s media work had previously been with West Bloomfield Township-based Media Period. J The Detroit Symphony Orchestra

KIRK PINHO

The $65 million The Scott at Brush Park project in the up-and-coming Detroit neighborhood opens next week with 199 apartments and a portion of its first-floor retail space leased. Crain’s reporter Kirk Pinho took a tour; see the photos at crainsdetroit.com/kirkpinho.

said it will perform 11 concerts in Japan and China in July, marking the orchestra’s first visit to China. The William Davidson Foundation, Ford Motor Co. and Ford Motor Co. Fund are the top supporters of the Asia tour, which will make five stops in Japan and five cities in China July 14-29. It will be the DSO’s first visit to Japan in 19 years.

OTHER NEWS

RUMBLINGS Salvation Army division’s fundraising campaign off pace

he Salvation Army Eastern felt like Christmas until this week. Michigan Division’s Red “We (also) know historically in Kettle campaign is pacing election years it’s tougher to raise about 10 percent behind a typical contributions at Christmas beyear’s fundraising three weeks cause discretionary spending for into the year-end effort. charitable work has probably been Since its launch on the second impacted by donations to political week of November, the campaign campaigns,” Turner said. has raised $2.1 million, a quarter of It’s also been a little more challenging to find bell ringers for the the $8.4 million goal. In years past, the effort has con- 500 Red Kettles stationed in the retinued into the early part of the new year, but the campaign runs only until Dec. 31 now, to ensure the donations it raises are counted as part of totals at its national parent organization, said Lt. Col. John Turner, divisional commander for the southeastern Michigan division. The Salvation Army Eastern Michigan Division’s The division is an Red Kettle campaign is pacing about 10 percent behind affililate of the na- a typical year’s fundraising three weeks into the effort. tional Salvation Army organization. gion this year, he said. If the 10 percent lag continues When it doesn’t have enough through the rest of the campaign, volunteers, the Salvation Army the division will be about $840,000 hires people to ring for minimum short of its goal, Turner said. wage. Turner believes the lower The Salvation Army fell short of unemployment rate in the region its $8.7 million goal last year, rais- could be impacting the nonprofit’s ing just under $8.1 million through ability to get as many bell ringers. Red Kettle donations, individual The campaign funds food boxes, gifts in response to its direct mail toys and coats as part of Christmas campaign, online and corporate assistance provided to those in need. giving. The remainder funds year-round proThe warmer than normal tem- grams, including food, shelter, disasperatures possibly have impacted ter services, substance abuse treatgiving, Turner said, noting it hasn’t ment and after-school programs.

J A California retail expert, Rochester native Anthony Buono, has bought a building along the QLine route near Grand Boulevard in Detroit. Buono is the managing member of 6538 Woodward Investors LLC, the investment group that purchased the building at 6538-6540 Woodward Ave. in September for $510,000. Buono said he intends a long-term ownership and plans to begin renovations next year. J Detroit Mayor Mike Duggan and a coalition of civic, community and business leaders unveiled a new municipal identification card for Detroit residents. The Detroit ID card will be available to all city residents 14 years or older, regardless of immigration or housing status, criminal record or gender identification. The new card will help thousands in the city gain access to city services. J The third annual Quick Lane Bowl at Ford Field in Detroit will feature the University of Maryland and Boston College at 2:30 p.m. Dec. 26, officials announced. In Michigan-related major bowls, the No. 6-rated University of Michigan will play No. 11 Florida State University Dec. 30 in the Orange Bowl in Florida, and No. 15 Western Michigan University will face No. 8 University of Wisconsin Jan. 2 in the Cotton Bowl in Texas. J The Southeast Michigan Purchasing Managers Index tumbled by more than 10 points in November, dropping to 57.0 after hitting an eight-month high of 67.2 in October. A value above 50 indicates an expanding economy. The index is a partnership between Wayne State University’s Mike Ilitch School of Business and the Institute for Supply Management–Southeast Michigan. J Pinckney Community Schools plans to open the latest Michigan Cyber Range Hub this week. The Pinckney

A draft report on how Michigan can better coordinate the dual Medicaid physical and behavioral health systems is expected this week to recommend the state maintain the current funding streams to HMOs and the public mental health system, Crain’s has learned. Sources said Michigan Depart-

information technology professionals cybersecurity courses and the opportunity to earn government recognized certifications. The center is pairing with Pinckney Community High School to offer classes, making it the only program in Michigan to offer classes to high school students. J Michigan’s recount of presidential votes ended after a federal judge lifted an order that forced a statewide review of millions of ballots. The recount lasted three days in more than 20 of the 83 counties. Judge Mark Goldsmith said he must follow a decision by the Michigan Court of Appeals, which found that Green Party candidate Jill Stein couldn’t seek a recount.

officials wanted participants in the work group looking at the issue to give the state Legislature more open-ended options on how to use the state funding stream to encourage closer integration of services. But a majority of the work group participants, which included mental health professionals, families and relatives of people served and HMO executives, felt a go-slow approach was best. Multiple work groups have been meeting since March. Earlier this year, Gov. Rick Snyder’s proposed 2017 state budget included a provision that could have allowed the state’s managed care organizations to manage the $2.4 billion Medicaid behavioral

Cyber Training Institute and Sentinel Center will offer college students and

Draft of state mental health report set to come this week

ment of Health and Human Services

health funding. Currently, 10 prepaid inpatient health plans, which are operated by the public mental health system, manage the funding and contract with providers. Mental health advocates strenuously objected to HMOs taking over the entire system, and the issue has been contentious all year between the two sides and the state. In a Dec. 8 email to participants, MDHHS said it has revised its timeline to complete a mandated report to the state Legislature on improving coordination of physical health and behavioral health services. MDHHS officials said it will submit an interim report with policy recommendations to the Legislature by Jan. 15. It will then submit a final report with financing models and benchmarks by March 15. Both reports will be posted for public review, and the department will host meetings to review each report. Public comments will be accepted after the release of the draft interim report this week, MDHHS said. A public forum will be held in early January, officials said in the email.

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