Crain's Detroit Business, Dec. 19, 2016 issue by Crain's Detroit Business

A national health care force with a human touch set to retire

Backers of business incentives vow to keep trying

Nancy Schlichting to step down at Henry Ford, Page 3

Developers say more needed to be competitive, Page 3

DECEMBER 19 - 25, 2016

SPECIAL REPORT: 2017 OUTLOOK The Economy

From sliding sales to an aging workforce, disruption looms for auto economy By Dustin Walsh dwalsh@crain.com

Southeast Michigan has enjoyed a strong recovery from the Great Recession, fueled by record auto sales. But more and more, disruption is looming, from self-driving cars to a new president with new and uncertain policies that promise big changes to a critical building block of the local economy. Still, the biggest economic indicator for the success of Southeast Michigan rests at the dealership, and they are expected to lose some steam in 2017. To what extent remains the unknown. Most experts are predicting a down year in 2017, but only slightly off record sales of 17.5 million in 2015 and the projected 17.4 million in 2016. Other keys factors are in play, including what policies Donald Trump pursues when he is inaugurated as the country’s 45th president on Jan. 20. Also unclear is how big a share the region will win of the tech boom

Development Page 10 The Capitol Page 11 Health care Page 12 Nonprofits Page 13 Sports Page 14 from the push toward autonomous and connected cars and the industries born from them, such as car-sharing. Still, basic auto sales are an economic barometer that affects Southeast Michigan first, then the rest of the country. “We’ve hit the auto sales peak, and that’s a warning sign for Southeast Michigan,” said Don Grimes, economist and senior research specialist at the University of Michigan. “We’re predicting a (sales) decline, and that will likely lead to a decline in auto manufactur-

ing employment in the state. Michigan leads behavior, so the rest of the country should be watching carefully.” But consumer sentiment has risen since the November presidential election and is near the 2015 high, which was the highest recording since 2004, according to UM’s monthly consumer confidence survey. “The surge was largely due to consumers’ initial reactions to Trump’s surprise victory,” the survey’s chief economist, Richard Curtin, said in the report. “When asked what news they had heard of recent economic developments, more consumers spontaneously mentioned the expected positive impact of new economic policies than ever before recorded in the long history of the surveys.” Charles Ballard, economist at Michigan State University, said local consumers are relishing in the longest economic expansion in recent history, but there’s an inevitable collapse lurking in the shadows. SEE ECONOMY, PAGE 15

Sports

Construction

On Gilbert’s building Feeding Ford Field Executive chef gives an inside peek at handling Lions’ game-day food costs claim: How do city’s numbers compare? By Bill Shea bshea@crain.com

By Kirk Pinho kpinho@crain.com

One of the arguments Dan Gilbert has used to push for a new tax incentive for sweeping developments is that it costs just as much to construct a new building in Detroit as it does in three of the biggest and priciest real estate markets in the country. Whether that’s actually true isn’t entirely clear. Gilbert’s team says its calculation includes all components of new building — minus the cost of land — ranging from materials to permitting and insurance costs. Yet data from a

well-known construction cost estimator puts Detroit’s per-square-foot rate for new office construction well below New York City, Chicago and San Francisco, and construction laborer wages in those markets — a key variable from city to city — are more than 10 percent higher. “It costs the same to build a skyscraper or building in New York City, Chicago, as it does in Detroit,” Gilbert said in an interview with Paul W. Smith on WJR-AM 760 last week. “The rents have come up in Detroit, but they are nowhere near the SEE GILBERT, PAGE 18

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On game days, Joe Nader gets to work by 4 a.m. to make sure fans are well fed.

For Joe Nader, any given Sunday might mean prepping lunch, snack and drinks — for 65,000 guests. But the biggest worry for the Ford Field executive chef isn’t stale hot dog buns or running out of beer. It’s mass transit. Nader, 46, has been executive chef at the Detroit Lions’ stadium since 2005, and about 90 percent of his culinary staff lives in Detroit and relies on the city’s mercurial bus system. Late or missing buses, a problem compounded by snowstorms late in the season, are just one of the endless number of things he must deal with for Lions games, concerts and other events.

This is Crain’s last regular print issue for the year. Next week, we will publish our annual Book of Lists. After that, our next issue will appear Jan. 9. But breaking news can be found online throughout the holidays at CrainsDetroit.com.

“The routes and schedules aren’t reliable for my staff, especially on the weekends when they are reduced,” he said. “The bus system is nowhere near meeting the demands of our workforce..” Nader wears a white chef’s toque, but he could as easily be outfitted with a traffic cop’s hat. He gave Crain’s a peek at how his employer, Chicago-based stadium concessionaire Levy Restaurants, handles gameday food for the Lions, from getting cooks to work to getting hot haute cuisine to wealthy fans in the suites. “On game day, I’m more of a logistics captain,” he said. It’s an understatement. SEE LIONS, PAGE 18

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MICHIGAN BRIEFS Lawmakers rework energy laws on last day The Michigan Legislature approved a rewrite of state energy laws, voting on the final day of the two-year term Thursday to boost the required use of renewable sources of power and to keep intact some competition in the electricity market, AP reported. The bills passed 79-28 and 76-31 with bipartisan votes in the House, then cleared the Senate 33-4. Gov. Rick Snyder will sign the legislation, a top priority at a time when many coal-fired power plants are closing. Republicans who control the House had long been at an impasse on an overhaul of 2008 energy laws, until changes were made to mollify proponents of the “choice” program that gives competitors up to 10 percent of sales in the territories of regulated utility giants DTE Energy and Consumers Energy. The bills would: J Require electric providers to produce 15 percent of their power from wind or other renewable sources by the end of 2021, up from 10 percent. J Set a non-binding goal of meeting 35 percent of state power needs by 2025 through a combination of renewable energy and energy conservation. J Keep intact, at least through 2021, a requirement that utilities save a

minimum amount of power each year with efficiency programs but also boost incentives for utilities that hit higher targets. J Detail how state regulators would set capacity charges that customers of alternative suppliers, which supply the power through the utilities’ distribution systems, could have to pay to help meet peak reserve margins. J Specify that if customers return to their home utility, they could not go back to a competitor for six years. Because the 10 percent limit has been reached, more than 11,000 Consumers and DTE customers are in a queue waiting to buy from competitors. If market conditions change, competitors lose customers in mass to the utilities with no new customers to take their place and choice falls below 10 percent, that new ratio would become the cap for six years. J Not apply — for now — a “grid” charge to new customers participating in a net metering program, instead requiring a study to determine an appropriate fee.

Dow plans innovation center in Midland Dow Chemical Co. plans to build an innovation center that will create 100 new research and development

jobs in Midland, CEO Andrew Liveris told a Grand Rapids crowd during an event with President-elect Donald Trump. The innovation center will support about 200 jobs, including 100 that will be moved from other Dow locations throughout the world to Midland. The center will house scientists and engineers who will focus on advancing technologies. The total investment in the center was not disclosed. Dow’s new global headquarters is scheduled to open in Midland next year. Earlier this year, Dow and Delaware-based DuPont Co. announced a $59 billion merger, although that deal has been delayed as European antitrust officials take more time to consider potential competition issues in pesticides and crop seeds.

MICH-CELLANEOUS

J Days after a fire damaged its main lodge, Boyne Highlands Resort was to reopen its ski slopes Friday in Harbor Springs. The Dec. 11 fire, which injured 12 people, didn’t impact the northern Michigan resort’s snow conditions, access to the terrain or the slopes. About 40 percent of the building was damaged by fire and almost all of the building was impacted by smoke or water, a resort statement said. Investigators continued to study the scene to determine the

INSIDE BANKRUPTCIES

cause of the fire. Authorities said a man sprayed a fire extinguisher at a security guard and ran away during the fire. J John Roberts, Gov. Rick Snyder’s budget director, will leave in February for a job in the private sector. Roberts, 35, will leave Snyder’s administration following presentation of the 2018 fiscal year budget, the budget office John Roberts: To said in a stateexit budget post. ment that did not reveal Roberts’ next employer. He has held the job since 2014; a successor has not been named. J Former Michigan Gov. John Engler plans to retire as president of the Business Roundtable by the middle of next year. He plans to leave the Washington, D.C.-based business group, an association of the CEOs of large companies, by July 1. Engler, 68, served three terms as governor, from 1991 to 2003. J A draft state government report recommended that the Michigan Legislature next year allow multiple regional pilot projects to test coordination of physical health and behav-

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COMPANY INDEX: SEE PAGE 17 ioral health services but maintain current funding of Medicaid services through private health plans and the quasi-public mental health system. In its 77-page work group report, the Michigan Department of Health and Human Services issued 69 policy rec-

ommendations. The report is at www.crainsdetroit.com/assets/ PDF/CD1082841214.PDF. J Wyoming, Mich.-based Metro Health Corp. and the University of Michigan Health System signed a final agreement to affiliate. Terms of the transaction were not immediately available, but sources told Crain’s the deal would make 208-bed Metro Health a subsidiary of UMHS. J Los Angeles-based Pabst Brewing Co. will handle the national distribution and sales of Holland-based New Holland Brewing Co. beers starting early next year under a long-term partnership agreement, the companies announced.

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Development

Leadership

Business incentives backers say they plan to keep trying

A national health care force with a human touch Nancy Schlichting steps down as CEO of Henry Ford Health System after 13 years By Jay Greene jgreene@crain.com

tatives listening to their communities want this to happen,” said Jared Fleisher, vice president of government affairs for Detroit-based Quicken Loans Inc., whose founder and chairman Gilbert is one of the most vocal champions of the brownfield bills. “We cannot do this scale of investment without a tool like this. It’s not economically viable, so we have to go forward,” Fleisher said. “All of this traces back to the conviction that growth and prosperity of this state hinges on having vibrant

When Nancy Schlichting walks the halls of one of Henry Ford Health System’s hospitals and medical centers, she often gets something most other CEOs don’t: hugs from employees. As she retires Jan. 4 after 18 years at the De- Schlichting: To t r o i t - b a s e d retire Jan. 4 from health system, health system. including the last 13 as president and CEO, Schlichting leaves a legacy of financial strength and national stature on health care issues, but also thousands of memories of her human touch. During most of Schlichting's tenure at Henry Ford, her public face has been one of a leader determined to improve quality and patient safety, generate necessary profits by reducing waste, improving efficiencies and closing unproductive hospitals, but also by expanding access to medical services. But in the last two years since announcing her pending retirement, she has

SEE INCENTIVES, PAGE 16

SEE RETIRING, PAGE 17

A plan for a $1 billion Major League Soccer stadium and mixed-use project on the site of the under-construction Wayne County Consolidated Jail building on Gratiot Avenue could be a potential candidate for a brownfield tax incentive under a plan backed by Dan Gilbert.

Leaders vow to lobby for Gilbert-backed bills that would help pay for redevelopment By Lindsay VanHulle

Crain’s Detroit Business/Bridge Magazine

LANSING — Dan Gilbert and other backers of new tax incentives say they’ll keep trying next year after failures in the Legislature this fall — and they’re hoping a new House speaker will give them a friendlier reception. Unfazed by losses in lame-duck session, real estate developers and economic development leaders from across Michigan plan to resume lobbying lawmakers early next year for nearly $300 million in new incentives. They have the support of Republicans in the Senate and say Gov. Rick

Snyder is on board, too. They believe they would have had enough votes in the House for passage, but say House Speaker Kevin Cotter refused to hold a floor vote before session ended for ideological reasons. Since Cotter, R-Mt. Pleasant, is term-limited, incentive proponents will have to hope for a more sympathetic ear in the House when the new legislative term starts in January. Both packages of bills — one, to capture new state taxes for large development projects on contaminated property; the other, to allow employers to keep a portion of new

hires’ income tax withholdings — died in a House committee in the waning days of this term. That’s after the GOP-led Senate approved both proposals in late November. Backers of the so-called “transformational” brownfield bills place blame for inaction squarely on Cotter, who has said billionaire developers like Gilbert in Detroit shouldn’t need the state’s help to close real estate deals. “What we’re asking for is a vote. Let the elected representatives of the people of the House decide, because we think that those represen-

Health care

For retiring state health plans director, MUST READS OF THE WEEK service has been a matter of trust By Jay Greene jgreene@crain.com

Back in the summer of 2013, Rick Murdock was at a birthday party and got a call from Rep. Mike Shirkey, asking him to lead off testimony on the bill that would define Michigan’s approach to Obamacare. But Murdock balked. The executive director of the Michigan Association of Health Plans told Shirkey he didn’t want to upstage the state Department of Community Health as lead agency that would be charged with carrying out the Medicaid expansion. “Mike told me that to move it along, we’d have to do it (under) managed care” health plans to hold down costs and improve quality, said Murdock, who agreed to lead off at the hearing. It was a fitting slot for Murdock, who is retiring Dec. 31. Murdock’s

career spans 25 years in state government and 14 years at the trade group, a run that was bookended by the birth of managed care in Michigan and Rick Murdock: the massive Plans to retire on changes of the Dec. 31. Affordable Care Act, which even more intimately intertwined the government and private-sector financing of health care. After a tough debate that summer and early fall in the state Legislature, and with the support of the Michigan Chamber of Commerce, the Small Business Association of Michigan and every major health care professional organization, Gov. Rick Snyder signed

Public Act 107 into law, creating the Healthy Michigan program. “It’s still a work in progress,” Murdock, 66, said of Healthy Michigan, which has signed up 630,000 people, nearly double the original estimate. “People are accessing health care they didn’t have before. We knew people had a pent-up demand, and utilization is up, beyond what we expected.”

A new Strand The renovated historic Pontiac theater is to open next month. The building will eventually house a new outpost of Slows Bar BQ, Page 4

A place to start Medicaid managed care is a good place to start to tell Murdock’s career story, for it began back in 1975 as a legislative specialist with a Robert Wood Johnson Foundation project while he was getting his master’s degree in public health from the University of Michigan. He arrived just as the state Legislature was completing work on SEE MURDOCK, PAGE 16

Downtown plan A $20 million redevelopment proposal for a building on Temple Street in Detroit involves philanthropist and Carhartt family member Gretchen Valade, Page 7

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Flagstar Strand Theatre to open after $20M renovation By Kirk Pinho kpinho@crain.com

The former Strand Theatre in downtown Pontiac is expected to open next month with a string of 13 scheduled shows. Formally called the Flagstar Strand Theatre for the Performing Arts

after a naming rights agreement with Flagstar Bancorp Inc. was signed last year, the theater has 895 seats and

will host concerts, live theater, comedy shows, films and community and private events. Kyle Westberg, president and CEO of Pontiac-based West Construction Services, the project’s developer and general contractor, said construction is “probably 95 percent complete.” “The city had done a lot of construction on it in 2005 and we were able to get in there in January and do

“We did $8 million worth of work in nine months.” Kyle Westberg, president and CEO of Pontiac-based West Construction

Services

a little bit of demolishing and cleanup. We did $8 million worth of work in nine months,” he said. Financing comes from the Opportunity Resource Fund, which provided predevelopment financing and has been repaid; Enhanced Capital, which is the investor in $3.3 million in federal historic tax credits the project received; the Michigan Economic Development Corp., which provided about $4.5 million in financing through a low-interest loan and performance-based grant; and Develop Michigan Inc., which provided a construction loan and some of the permanent debt on the project, along with IFF. Other sources include about $900,000 in developer equity and $7.6 million in equity from a city of Pontiac renovation that was never completed. There is also about $1.97 million in deferred developer fees, Westberg said. Encore Performing Arts Center, a nonprofit organization, will be the theater’s operations and business manager. The Strand Theatre has been the subject of proposed renovations dating to at least 1999 after the city took ownership of it following a court battle with its previous owner. None came to fruition. The 38,000-square-foot building was purchased in 2013 by Strand Theater Manager LLC, an entity of which Kyle Westberg and his brother, Brent Westberg, own 98 percent. It will also be the home of a new Slows Bar BQ, which is also expected to open in the first quarter next year with a capacity of 100-150 diners, Kyle Westberg said.

DAVID MOSS

The $20 million renovation of the Flagstar Strand Theatre for the Performing Arts in downtown Pontiac is almost complete as the theater gears up for its reopening next month.

The renovated Flagstar Strand Theatre has 895 seats.

DAVID MOSS

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OPINION

Training, pay key to workforce answers

Among these major cities — Cleveland, Nashville, Baltimore, Atlanta and Philadelphia — Detroit has the lowest number of jobs per capita, about .37 for every resident. And of those jobs, more than 70 percent are held by people who live outside the city. So it’s understandable that Mayor Mike Duggan would want to amend an existing order to require that contractors on city-funded projects have workforces comprised of at least 51 percent Detroiters. The soon-to-be amended order, announced last week, is in anticipation of investments in roads, parks and the city's water system. Contractors who fail to meet the goal will be ordered to pay into a workforce training fund. It’s well-intentioned, but unless workforce programs ramp up to deliver city residents with market-ready skills, it's moot. On the other hand, the order could lead to employers promoting city residency to possible job candidates — boosting population and income tax collections. Consider that when Quicken Loans began its move into downtown Detroit in 2010, only about 100 workers lived in the city. Today, company founder Dan Gilbert proudly shows a map that plots where 3,100 employees of Gilbert-related companies live now — and it's all over the city, not just downtown and Midtown. Still, the longest-lasting impact for the city’s fortunes will be getting longer-term residents into jobs. The creation of the Duggan-initiated Detroit Workforce Board, composed of operating executives from major employers, and the realignment of the nonprofit Detroit Employment Solutions Corp., the city's agenda for workforce programs, are both a good beginning. But time is the enemy. The new hockey arena, for example, hasn't met some of the existing workforce requirements — despite more than 300 entities in Detroit espousing to do some type of workforce program. Training is one major issue; we need the fastest, most effective methods to get a Detroiter ready for a job — in a call center, a retail shop or restaurant or a factory floor. Another issue is flexibility within the labor unions, whether they are skilled trades or United Auto Workers. In the former, contractors and skilled trades unions are working with the city to identify more candidates for training. In the latter, the union-inspired public protests against fast-food restaurants and the campaign for a $15-an-hour wage aren’t helping. Neither is reluctance by unions to allow a two-tier wage scale for manufacturing jobs coming back to Detroit from off-shore. Training and market-rate compensation: These are the pillars for any type of realistic impact on putting more Detroiters to work.

LETTERS

Improve transparency at VA hospital This letter is in response to your Dec. 11 column titled “Poor state of Detroit VA hospital is simply inexcusable.” Like you, I was deeply disturbed when I read the newspaper and learned that the Detroit VA Hospital had become a one-star facility based on an internal five-star rating system used by the U.S. Department of Veterans Affairs. The report this story was based on has not been available to members of Congress, we were not briefed, and we were blindsided by this news. It is unacceptable that these quality ratings are not released to the public, leaving Congress, veterans and the community completely in the dark about the quality of care at VA hospitals and what needs to be done to improve them. The men and women who served our country deserve the best care possible, and it is incumbent upon all of us to get at the root causes of the problems at the Detroit VA. My colleague Congressman Tim Walberg and I have addressed a number of veterans’ issues together

Send your letters: Crain’s Detroit Business will consider for publication all signed letters to the editor that do not defame individuals or organizations. Letters may be edited for length and clarity. Email: rfournier@crain.com since I came to Congress. On Dec. 12, we sent a letter to U.S. Secretary of Veterans Affairs Robert McDonald asking for immediate answers regarding what steps are being taken to improve care at the Detroit VA and how we ensure that patients are receiving high-quality health care that does not impact their outcomes. Veterans, just like every other patient, deserve to know how the hospitals they are receiving treatment in are performing. That’s why I introduced legislation earlier this year with Congressman Walberg that would require improved transparency at the VA by ensuring each VA medical facility issues a quarterly report on the rate of surgical infections and canceled or transferred surger-

ies at VA hospitals. Increasing transparency is critical to understanding the type of care veterans are receiving and how to fix the problems we are facing. John Dingell’s name is on the Detroit VA hospital. I have a moral obligation to ensure this issue is addressed, and I will never walk away from a problem that needs to be fixed. While the Detroit VA is not in our districts, it serves many of our constituents, and both Congressman Walberg and I are committed to getting to the bottom of this. This is not a Democratic or Republican priority, it is an American priority. Congressman Walberg and I are meeting with Robert McDivitt, director for Veterans Integrated Service Network (VISN) 10, and Dr. Pamela Reeves, director of the Detroit VA Medical Center, and we will continue working with the VA to address these problems to ensure veterans are receiving the best possible care. Our veterans have my promise on that. Debbie Dingell Congresswoman, MI-12

A split decision on speed Simply put, I am a great fan of our governor. But like all elected officials, he is bound to make mistakes from time to time due to the sheer volume of decisions facing him. For example, I think the state is still suffering from the governor’s decision to sign into law a bill that allows motorcycle riders to ride without helmets. That decision has caused, and will cause, a lot of closed-head injuries — but allows us to vie as the heart transplant capital of the nation. Now, another bill is heading to the governor’s desk that has both

KEITH CRAIN Editor-in-chief

good and bad features. The Legislature wants to raise the speed limit by 5 miles per hour on both rural interstates as well as rural secondary roads.

I have no problem with raising the speed limit on our rural interstates by 5 mph. If a study was done, I have no doubt that traffic speed is at least 75 miles an hour already. If you go back in the archives, you will discover that during the Eisenhower administration, the interstate system was designed for 80 miles per hour, a speed most cars couldn’t sustain in those days. The roads were designed for what, at that time, was really high-speed travel. If you pay attention to the interstate roads, you will observe that the roads have very soft, slow curves

that were all designed to handle 80 miles per hour traffic on the rural parts of the system. So it makes good, safe sense to raise the speed limit to 75 mph. But it does not make sense to raise the secondary roads in our state by 5 mph. The roads are sadly outdated and can barely handle the speeds that cars and trucks travel today. To raise the speed limit would be a big mistake. Both of these changes are lumped together, and that is wrong. Because of that, the governor should veto the bill with instructions to separate the

two parts, and he would sign the interstate portion of the bill. All too often, legislatures lump together a couple of provisions that simply do not deserve to be together. This is a perfect example of such a mistake. The highway system in rural parts of this state was designed and built to handle 80-miles-per-hour speeds. But our secondary roads are marginal today, and raising their speeds would simply be a dangerous mistake. This bill deserves our governor’s veto.

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 9 , 2 0 1 6

Wayne County-owned building at 640 Temple slated for $20 million-plus redevelopment By Kirk Pinho kpinho@crain.com

An Albert Kahn-designed building owned by Wayne County at 640 Temple St. in Detroit is the target of a $20 million-plus redevelopment plan that includes Gretchen Valade, whose grandfather founded Dearborn-based workwear brand Carhartt Inc.

The building, constructed in the 1920s, is expected to undergo a 24to 30-month redevelopment after the Wayne County Commission approves a purchase and development agreement next month, according to sources familiar with the plan. Among the plans are more than 100 apartments ranging from 850 to 2,000 square feet, plus about 10,000 square feet of retail space in new construction to the west of the 190,000-square-foot building, sources said. Christos Moisides, executive member of Detroit-based 400 Monroe Associates LLC, and David Sutherland, partner with the Wakefield, Sutherland & Lubera PLC law firm in Grosse Pointe Farms, are the other members of the development group, sources said. Valade is a prominent business figure and philanthropist from Grosse Pointe Farms and this yearwas named one of Crain's 100 Most Influential Women. Among a variety of other philanthropic contributions and awards, she received the Max M. Fisher award for outstanding philanthropist in 2007 and donated $15 million to the Detroit Jazz Festival endowment. Valade also recently purchased a block on Kercheval Avenue in Grosse Pointe Farms’ Hill neighborhood. She also owns the buildings that house her businesses on the next block of The Hill. Those include the Dirty Dog Jazz Cafe, Morning Glory Coffee & Pastries and Capricious, a shoe and accessory store. In 2015, she donated $7.5 million to Wayne State University to create the Gretchen Valade Jazz Center, which will operate out of Hilberry Theatre. Valade’s grandfather Hamilton Carhartt founded Carhartt Inc. in 1889. The main developer on the 640 Temple project is expected to be Byzantine Holdings LLC, which is registered to Moisides. Byzantine Holdings is also a member of the anticipated building ownership group, Temple Group Holdings LLC, which is owned by Moisides, Sutherland and Valade, sources said. The 640 Temple building had been targeted by Okemos-based PK Development Group LLC for redevelopment this summer, but those plans fell through. It was slated for 150 to 200 apartments. Just a few blocks northwest of the new Little Caesars Arena under construction for the Detroit Red Wings, the 640 Temple building has been targeted for sale recently in

light of the county's financial woes. A report last year by O’Keefe LLC said the county spends more than $8 million per year in lease costs, which could be reduced by moves like office consolidations and ending unnecessary leases. It also said the county needs to sell real estate for which it no longer has a practical or justifiable use. It suggested not only selling the buildings at 640 Temple and 511 Woodward Ave. and a parking garage on First Street, but also selling the Guardian Building and then leas-

ing space back from the new owner. Moisides’ 400 Monroe was tapped last year to help Wayne County squeeze more revenue out of its real estate holdings. In October, the Michigan Department of Treasury released the county from its consent agreement, 14 months after the county requested the consent agreement as it was grappling with a $52 million structural deficit and an $82 million accumulated deficit.

The 190,000-square-foot building at 640 Temple St. is being targeted by an investment group for more than 100 apartments.

Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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CALENDAR UPCOMING EVENTS

2017 Michigan Economic Outlook. 11:30 a.m.-1:30 p.m. Jan. 5. Detroit Economic Club. Speaker: David Sowerby, vice president, Loomis, Sayles & Co. The Trump administration is set

to be installed with new policies surely forthcoming. What will the impact be in Michigan? Results of the fifth annual Michigan Economic Outlook Survey will also be unveiled. MotorCity Casino Hotel, Detroit. $45 members; $55 guests; $75 nonmembers. Website: econclub.org. 15th Annual NAIAS Breakfast. 7:309:30 a.m. Jan. 13. Inforum. A panel will discuss the future of mobility and the consumer experience. Panelists include Mary Lou Jepsen, who joined the Lear Corp. board of directors this year; Megan Stooke, CMO at Maven, General Motors Co.’s car-sharing service; and Jason Vazzano, who co-founded Vectorform in 1999. Moderator is Jason Stein, publisher and editor of Automotive News. Detroit Marriott at the Renaissance Center, Detroit. $50 members; $75 nonmembers; $25 students; $1,000 table sponsor (table of 10 — preferred seating; company logo recognition in event presentation and event signage). Website: inforummichigan.org/events. The Big Four. 11:30 a.m.-1:30 p.m. Jan. 17. Detroit Economic Club. Detroit Mayor Mike Duggan, Wayne County Executive Warren Evans, Oakland County Executive L. Brooks Patterson and Macomb County Executive Mark Hackel will discuss re-

8-10:30 a.m. Jan. 20. Marketing and Sales Executives of Detroit. Priscilla Archangel, president of Archangel & Associates LLC, talks about keys to strengthen a company’s effectiveness. Management Education Center, Troy. $45 members; $60 nonmembers. Website: www.msedetroit.org. 2017 Technology Industry Outlook. 8-11 a.m. Feb. 13. Automation Alley.

The 2017 Technology Industry Report will be unveiled as Automation Alley surveyed technology and manufacturing executives to determine whether they are ready for the coming changes in the manufacturing industry. Detroit Institute of Arts, Detroit. $25 members; $45 nonmembers. Email: events@automation alley.com; phone: (800) 427-5100. Young Professionals Panel — The Changing Face of Leadership. 7:30-9 a.m. Feb. 21. Leadership Oakland. Moderator: Jennifer Korman, Mercedes-Benz Financial Services. Panelists: Talisa Norton, co-owner/COO, All Pro Color; Sara Stoddard, chief of emergency management, Oakland County Homeland Security Division; Jordan Twardy, community and

economic development director, city of Ferndale. MSU Management Education Center, Troy. $32 members; $36 nonmembers. Website: leadershipoakland.com.

gional successes, issues and their plans to drive the Southeast Michigan region forward. The meeting will take place during the 2017 North

ACQUISITIONS & MERGERS

GRIT Technologies, Clinton Township, an IT services firm, has acquired Motor City Technology, Detroit. Website: grittechs.com.

ton Hills, a public relations and digital media agency, has designed, developed and launched a refreshed website for Riverfront Eyecare, Flint. Websites: riverfronteyecare.com, marxlayne.com.

CONTRACTS

EXPANSIONS

Your People LLC,

Huntington Woods, a public relations firm, was named the agency of record for IPS Realty, Grosse Pointe Park, for blogging and media relations, and is handling media relations for the Coalition on Temporary Shelter, Detroit. Website: yourppl.com. Marx Layne & Company, Farmington Hills, a digital marketing firm, has been selected by Pentastar Aviation, Waterford Township, a business aviation firm, to provide digital program consulting and implementation, strategic communications and media relations. Websites: pentastaraviation.com, marxlayne.com. Cranbrook Schools,

Bloomfield Hills, is collaborating with MIT Edgerton Center, Cambridge, Mass., on an initiative that will help Cranbrook faculty accelerate innovative and design thinking in their curriculum. Websites: schools.cranbrook.edu, edgerton.mit.edu. Marx Layne & Company, Farming-

Art Van Furniture, Warren, has opened a 26,000-square-foot showroom in Bloomington, Ind., in a franchise agreement with the former Furniture First in Bloomington. Website: artvan.com. Kerkstra Precast, Grandville, an automotive manufacturer of modular precast products, purchased a 350,000-square-foot manufacturing facility in Trenton. Website: kerkstra. com. Domino’s Pizza Inc., Ann Arbor, has opened an outlet in Malmo, Sweden. Website: dominos.com.

sult program, a partnership with the

Michigan Department of Health and Human Services, Lansing, to provide

health care professionals with the latest information about HIV disease management, drug therapy, perinatal treatment, exposure, prevention and more. Website: henryford.com. Lear Corp., Southfield, an automotive supplier of seating and electrical systems, announced Crafted by Lear, a team offering automakers advanced development solutions for next-generation seating. Website: lear.com. Kardiatonos Inc., Rochester, a biopharmaceutical company, has launched a new website to introduce product development, future product pipeline, business strategy and intellectual properties. Website: k2therapies.com.

NEW SERVICES

MyCDLapp.com, Southfield, a web-based driver application software, announced an update that includes a custom question builder that allows carriers to better adapt online applications to business needs. Website: mycdlapp.com.

Henry Ford Hospital, Detroit, has announced the Michigan HIV Con-

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

Litigation Experience

In Your Corner.

American International Auto Show

and will also include the unveiling of the 2017 Detroit News Readers Choice Awards winners. Cobo Center, Detroit. $45 members; $55 guests; $75 nonmembers. Website: econclub.org.

Ŷ Business litigation, contracts and commercial matters.

60 Minutes to Success: Connecting Business to the Education Pipeline. 3:30-4:30 p.m. Jan. 17. Automation Alley. Learn about MI Bright Future, a program created by the Workforce Intelligence Network that connects

Ŷ Construction law and litigation.

regional employers with local students. Speakers include Sarah Sebaly, senior program manager, and Lisa Gordon, program coordinator. Free. Automation Alley, Troy. Contact: rivarde@automationalley.com. Ten Key Questions for Leaders: Moving From the Urgent to the Important.

Calendar guidelines. Visit crainsdetroit.com and click “Events” near the top of the home page. Then, click “Submit Your Events” from the drop-down menu that will appear. Fill out the submission form, then click “Submit event” at the bottom of the page. More Calendar items can be found at crainsdetroit.com/events.

First Tier Ranking in Corporate Law and Commercial Litigation Ŷ

Detroit

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Contact Rich Hewlett at rthewlett@varnumlaw.com

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SPECIAL REPORT

WHAT WE SEE FOR 2017

ost of 2016 is in the books. If nothing else, 2017 portends change. n A new presidential administration with drastically different priorities promises to be friendlier to business but has also introduced new uncertainties. n A raft of new lawmakers will take office in Michigan’s Capitol. n Detroit’s resurgence seems likely to keep gathering steam. n And — you may have heard about this — two of Detroit’s sports teams will have a new home come fall. Here’s your guide to the year ahead.

Development Detroit projects likely to gain momentum, with more shovels in the ground, Page 10

The Capitol New House speaker aims to tackle public employee retirement costs and the highest auto insurance premiums in the country, Page 11

Health care Providers and insurers work to prepare for an Obamacare revamp that they don’t know the shape of, Page 12

Nonprofits Likelihood of changes to the tax code could have ramifications in the philanthropic world, Page 13

Sports Local athletic world will be anything but dull in 2017, even if you don’t include Jim Harbaugh, Page 14

ISTOCK

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SPECIAL REPORT: 2017 OUTLOOK | DEVELOPMENT

Detroit construction market eyes lending boost from Washington

Q&A: Sachse sees shovels in ground in 2017 Detroit-based Sachse Construction is one of the most active construction contractors in downtown Detroit, having most recently completed the $65 million The Scott at Brush Park development with 199 apartments and Sachse first-floor retail space. The company’s CEO, Todd Sachse, spoke with Crain’s reporter Kirk Pinho about his outlook for the downtown construction market next year. What’s your outlook for new construction in 2017? I think there is going to be significant new construction starts in 2017 and beyond. Talk a little about the labor market and costs for next year. There’s a different labor force other than the stadium (Little Caesars Arena). Now you are bringing in the structural people, site utilities, all that type of stuff where you’re building the core and shell instead of renovating buildings. Some of those trades haven’t been enjoying some of the stuff that others have. When the arena is finished, and it will be finishing up shortly, that’s going to free up a lot of capacity in the market. I don’t think there is going to be a significant increase in (construction) rates as a result of the work.

An early concept for the Hudson’s site, released in 2015. The real plan from Dan Gilbert’s Bedrock LLC is still being awaited. By Kirk Pinho kpinho@crain.com

This year was one of the most active in recent memory for new construction projects in and around downtown Detroit — those being proposed and those with shovels actually getting in the ground. And two of the area’s leading experts — one in commercial real estate lending and another in construction — are bracing for another busy year. Dennis Bernard, president of Southfield-based Bernard Financial Group, and Todd Sachse, CEO of Detroit-based Sachse Construction Inc. (See Q&A, this page), say 2017 will be another busy year both in terms of lending as well as new buildings. Yet perhaps the biggest question for commercial real estate experts is how an expected scaling back of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 under President-elect Donald Trump and a Republican-controlled Congress will affect lending locally, Bernard said. “A hoped-for and expected scaling-back” of the regulations passed in wake of the financial meltdown and Great Recession, Bernard said. A number of the law’s requirements, including increasing the reserve requirements for banks, take effect during 2017, Bernard said. As a result, Bernard said, that will generally roll back the loan-to-value ratio at which banks are able to lend for construction and acquisition. For example, instead of an $8 million loan on a $10 million purchase or development, the bank would likely issue only a $7 million or $7.5 million loan. The borrower is also required to contribute

cash for projects and acquisitions. “The new requirements are requiring real cash equity to make up a larger portion of the capital stack, real cash,” Bernard said. Plus, commercial mortgage-backed securities (CMBS) debt issued at the height of the lending bubble 10 years ago will mature, and how those loans are disposed of will be a key indicator of the market. “We still have a lot of 2007 legacy loans that are the worst of the worst but are somehow holding on,” Bernard said. “We’ve started to see significant increases in maturity defaults.” One of the concerns is that borrowers will not be able to make the so-called “balloon payment” — which is much larger than a borrower’s monthly debt service payments — that typically comes when CMBS debt matures. But Bernard remains optimistic about the overall health of the Detroit construction market. “All that said, we did $1 billion in mortgages this year (2016) and expect to do that in 2017 again. In the 30 years I’ve been doing this, I’ve never seen more lenders currently involved in southeastern Michigan. The fundamentals are still really good,” Bernard said. “And if there ever was a President-elect of the United States who understands this stuff, it's Donald J. Trump,” he said.

Legislation Still, one of the big unknowns is what will happen in Lansing, where lawmakers spent the last three months considering a new state law

COURTESY BEDROCK

that would help offset the costs of construction of so-called “transformational” projects. A Senate proposal, spearheaded by Quicken Loans Inc. and Rock Ventures LLC founder and Chairman Dan Gilbert, would capture new sales and income tax revenue generated at completed real estate developments from new residents and retail customers. After receiving support in the Senate, the five-bill package faced a buzzsaw in the state House, where it died in committee. Developers would be able to use the capture to help finance what are being called transformational brownfield projects, or those on property with environmental contaminants or are considered blighted or obsolete. Gilbert has said he has $2.5 billion to $3 billion worth of construction projects in downtown Detroit that would be able to get the green light if the legislation passes. Among them: a plan for the 2-acre block that formerly housed the J.L. Hudson's department store on Woodward Avenue; a twoblock development east of the former Compuware Corp. building that would bring more than 800,000 square feet of new office and residential construction to downtown; and a still-up-in-the-air idea to scrap plans for finishing the half-built Wayne County Consolidated Jail project and instead building a $1 billion mixed-use development with a Major League Soccer stadium and three 18- to 28-story towers of office, residential and hotel space. The bill package is expected to be reintroduced in the next legislative session.

What’s the basis for your prediction for more construction starts next year? I don’t think ’17 is going to be a giant spike, but will continue at the pace we are seeing. We have more backlog this year than we ever have had in our history, and most contractors do. It’s also a much more diverse backlog: There are a lot more players than there were in the last couple years. You could literally count on one hand the number of developers that were driving the vast amount of the work. I could name 10 developers and institutions, and that group probably did 90 percent of all the construction. Those 10 are still active, but there is another 50 that are much smaller but are adding to it. The types of projects that are going to be happening are also much more diverse. The reason why is because, at the beginning, there were only a handful of us that were believers. But there really are people that are moving downtown and thinking, “I really can buy that building and renovate it and find tenants.” There are pioneers and there are settlers. We are just past the pioneering stage; all of us that have been here the last five years, some of us pioneers got arrows in our backs, but the settlers stayed. Pioneers have a much higher risk and reward and in most cases they get arrows in their back, but so far we haven’t. And the pioneers want the settlers. How about project locations? The geography is expanding, which is great. I used to say my term was Woodward, plus or minus two (blocks to the east or west of it). It’s something I’ve been saying the last five years. It’s pretty much a guarantee and safe, from Warren to the river and plus or minus those two blocks. But that is expanding now. Corktown definitely is very real now. Lafayette Park is very real. There’s stuff, real estate, announced on the east riverfront. There is a lot of talk now in the back rooms. You’ll definitely see more in New Center. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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SPECIAL REPORT: 2017 OUTLOOK | THE CAPITOL Q&A

Auto no-fault, teacher pension reforms among House GOP priorities in 2017 LANSING — Tom Leonard campaigned for his third term in the Michigan House this fall with a small good-luck charm at his side — his infant daughter, Hannah. The two-term Republican state representative from Clinton County’s DeWitt Township, north of Lansing, and his wife, Jenell, commissioner of the Michigan Film & Digital Media Office, welcomed their first child in September — about two years after being told the couple likely never would have a biological child. “I tell folks (the) good Lord’s got a sense of humor, because we wound up having a child at the exact moment I probably would have said, ‘Don’t do it,’” said Leonard, the House’s speaker pro tem, “and that was in the middle of an election year.” The former assistant prosecutor and county GOP party chairman will enter his final two-year House term in January as speaker. He will preside over a Republican caucus that retained its 63-47 majority even as polls suggested a stunning defeat for the party in November. He soon plans to recruit about a dozen Republican state representatives to draft the majority’s agenda for the new legislative term — covering everything from auto no-fault insurance reform to restructuring teachers’ pension benefits. Leonard, 35, recently sat down with Crain’s reporter Lindsay VanHulle to preview the upcoming term. The following interview has been edited for length and clarity. Were you surprised by the general election results? Going into the weekend of the election, I had very little concern that we were going to lose majority. I never thought in a million years we were going to come back with 63 seats. I remember talking to somebody just before the polls closed on Tuesday night and ... I said, “If we have a bad night, House Republicans, I think we’re going to wind up at 58 or 59.” I said, “If we have a really good night, we might be able to get to 61.” The over/under for me was 59 or 60. Do you see a priority issue emerging among the incoming GOP representatives? The incoming caucus is going to be even more conservative than the caucus that we see here in Lansing right now for this term. ... Auto nofault reform (is one). That has been something that is pressing our state very hard. We’ve got the highest auto insurance rates in the country.

related to skilled trades employment? More paths for students to be able to go to those community colleges early to work on that trade. If (there are) young men and women in high school or even in community college, how do we open those doors and those avenues to get them certified and go into the trade that they want to go into?

“I’ve refrained personally from putting too many ideas or things that I want to accomplish out there for next term because I want this to be a collective team effort when we put this (plan) out.” Rep. Tom Leonard

State Rep. Tom Leonard plans to recruit about a dozen Republican legislators to draft their agenda for the new term. We have got to tackle this issue before the system implodes. And I don’t want to see these no-fault benefits go away, but we’ve got to find some cost controls in there to be able to preserve the system. That said, a vast majority of these incoming freshmen that I’m talking to, they bring up and they talk about the need for auto no-fault reform. How do you get buy-in from Democrats on this issue? I think our best target, if you will, for getting Democrats on board is trying to do something for the city of Detroit. There is not one city of Detroit legislator right now who hasn’t expressed the need to lower rates for the citizens in Detroit. ... We also have a huge ally in Mayor Mike Duggan on this issue. I know that he wants to see something get done, as well.

What did you think about the D-insurance concept that Duggan proposed, which would offer an optional medical benefits cap for Detroit drivers? I have not looked at the particular D-insurance bill, so it’s difficult for me to take a position on a bill that I haven’t read. But what I would say is this: In concept, if we can find a way to bring rates down in the city of Detroit, I’m all about that. ... Anytime somebody that’s uninsured gets injured, or any time somebody who’s driving around without auto insurance coverage and they’re not paying into the system, it hurts all of us around the state. What are your own policy priorities? I’ve refrained personally from putting too many ideas or things that I want to accomplish out there

for next term because I want this to be a collective team effort when we put this (plan) out. But all that to say, I’ve personally put three agenda items that I want to make certain will make that action plan. First and foremost, tackling or finding a solution to our broken teacher retirement system. I’m proud of the fact that the Senate has at least begun the discussion on this. I’m looking forward to picking it up next year and working with Senator (Arlan) Meekhof on that. Secondly, mental health (early interventions). ... And then last, I’ve thrown out there skilled trades. And this is something that I think there’s going to be overwhelming support on. The question is going to be: What is the solution? What kinds of policy changes would you consider

Let’s address the elephant in the room — teacher and public employee benefits. Several fiscal analyses related to the legislation taken up in lame duck suggested there could be large transition costs to move teachers into a defined-contribution plan. How will you address them? That’s the big mountain that we have to climb on shutting off the teacher pension system, is ensuring that we can pay down those (legacy) costs in a way that’s not going to substantially cut money from our classrooms. And that’s where the big argument and the debate is, and that’s something we will continue to have. In terms of the local (other post-employment benefits) liabilities ... early next year, I will be reaching out to (public employee unions) along with (Rep. Lee) Chatfield and other members of our caucus that are going to work on this issue, and (we’re) willing to include the governor’s office and the Senate as well — bringing everybody to the table to make certain that their voices are heard and come up with the best solution we can find for our state. Is revisiting Proposal A on the table? Some municipal leaders said restricted growth in property values is part of the reason they’re struggling to contribute toward unfunded retirement obligations. We’ve got billions of dollars in unpaid debt. So at this point, it doesn’t matter how much money you throw at the problem, you’re not going to fix it unless you also bring some serious policy changes and solutions. And there’s going to have to be some type of concessions. What they are, I don’t know, and I’m certain there are several different ways of getting there. But spending alone is not going to get us out of this problem. Lindsay VanHulle: (517) 657-2204 Twitter: @LindsayVanHulle

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SPECIAL REPORT: 2017 OUTLOOK | HEALTH CARE

Trump’s election points to strong prognosis for health care changes By Jay Greene jgreene@crain.com

The big question in the health care industry and for patients of all stripes is whether President-elect Donald Trump and the Republican-dominated Congress will move to repeal the Affordable Care and Patient Protection Act of 2010. CEOs of metro Detroit health care companies have already spoken out on that question: They are opposed to any changes that would eliminate or diminish coverage for the 22 million people who now have Medicaid or private health insurance. Trump, for his part, already has nominated key figures for his Cabinet and key administrative posts that have called for the repeal of Obamacare and a move to more free-market solutions. For example, Seema Verma, CEO and founder of SVC Inc., a national health policy consulting company based in Indianapolis, has helped craft Medicaid expansion plans in Indiana, Ohio and Michigan and is Trump’s pick to head up the Centers for Medicare and Medicaid Services. Though supporting replacing before repealing Obamacare, Verma has favored Medicaid expansion, but has advocated for covered beneficiaries to share in the costs or leave the program. For example, one-third of those eligible for Indiana’s Medicaid program choose not to be covered because they don’t feel they can afford the cost-sharing arrangements. U.S. Rep. Tom Price, R-Ga., one of the most outspoken opponents of Obamacare, has been nominated by Trump to be secretary of the U.S. Department of Health and Human Services. He also favors turning Medicare into a voucher program and expanding managed care. Despite some shortcomings of the law,

BLOOMBERG

U.S. Rep. Tom Price, R-Ga., and chairman of the House Budget Committee, is President-elect Donald Trump’s pick for health secretary. health care executives at hospitals, physician organizations, home health agencies, nursing homes and health clinics have carved out business models the past five years to make Obamacare work. As a result, the Affordable Care Act has cov-

ered an 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 im-

prove quality and lower costs. During the campaign, Trump has 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 and pushing for national tort reform to reduce medical malpractice payouts. He also has voiced interest in ending traditional Medicare by creating a voucher system. Aside from what will happen with Obamacare in 2017, other ongoing trends are likely to continue: J Mergers, consolidations and innovative joint ventures between hospitals, physician groups, home health agencies, nursing homes, health insurers and other support providers will continue to grow. J Health care costs are projected to rise the same rate of 6.5 percent as in 2016, despite higher expected use. Movement to outpatient services and greater integrated care among medical, dental and behavioral health will help slow cost trends. J The movement to consumer-based health care services, increased price and quality transparency and greater online and telephone assistance by hospitals, doctors and pharmaceutical companies on care coordination and access to care will ramp up. J Employers’ movement to encourage workers to use lower-cost and higher-quality providers will continue by offering such services as telehealth, free second opinions and consultations and narrow provider networks. Companies will also continue to shift costs to workers by increasing copayments and higher deductibles. Some companies could contribute higher amounts to employeee health savings accounts to ease the transition to move consumer-based care.

Q&A: Former Oakwood CEO talks Obamacare, uncertainty and costs Every expert, prognosticator, pundit and taxicab driver is predicting major changes in health care policy, financing and delivery in 2017. Crain’s senior reporter Jay Greene talked with Brian Connolly, former CEO at Oakwood Connolly Healthcare, now president of Connolly Associates in Dearborn, for his thoughts on changes next year.

Republicans threatened to repeal Obamacare, but now they have the ability to do what they say, what changes do you expect with the Affordable Care Act? Fundamentally what is in place will stay there for the next year. It takes time and effort to make changes with insurance codes. It is hard to know. Part of the concern is now you have a single marketplace for Obamacare policies. It provides more competitiveness. I believe it will stay, with some tweaking.

What do you think will be the big trends in health care for 2017? I think there is a lot of anxiety around Obamacare and the changes that might come with new leadership in the White House. Hospitals and physicians geared up from an information technology and insurance perspective, whether they liked it or not, because they understood this is what was expected of them. Now there is concern about the financials of the industry and what kind of costly changes people will have to make based on the changes coming from the White House.

With this uncertainty, will there continue to be more hospital, insurance and physician practice mergers or combinations? There are not very many individual health care systems remaining. There were many mergers and consolidations. Going forward, a lot of these consolidations will have to deliver some of the promises and expectations on cost-effectiveness, on affordability, on efficiencies and quality. They can make all the promises they want. To actually deliver is tough.

Trump made campaign promises,

What about hospitals and doctors

working together in clinically integrated networks or accountable-care organizations to direct contract with employers? At least five CINs (clinically integrated networks) and more than 10 ACOs (accountable care organizations) have been formed in Michigan. Will they deliver promises of improved quality and lower costs through better care coordination? Those groups will continue to coalesce. There’s lots of opportunities to improve. Doctors are concerned about changes in reimbursements. They don’t have the infrastructure to sustain these changes. Some doctors have done a remarkably good job at improving quality and reducing costs. When you get physicians involved, give them real leadership responsibilities, you get much more change. What will employers do to manage health care costs? Employers can remove overhead with insurance companies by direct contracting. It takes infrastructure to do direct contracting, a provider network and how to manage the data.

We will see more of this in the future. Will employers do more in 2017 to help workers manage their rising out-of-pocket costs? I would hope employers continue to be more aggressive around transparency and providing employees with more cost data. It is the right thing to do and helps them manage outof-pocket costs. When we shared costs of central supplies with doctors, they were shocked. They had no idea supplies were that expensive. They told us, we don’t need that product. The more transparency on costs, the better for everyone. What can be done about rising pharmaceutical costs? It is the fastest-rising cost of the health care premium. It was 25 percent of the costs at Blue Cross Blue Shield of Michigan. Some new drugs are incredibly expensive, $30,000 per year for a hepatitis C drug. You ask someone why they need insurance. They used to say in case they are hospitalized. Now they say it is to pay their drug costs. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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SPECIAL REPORT: 2017 OUTLOOK | NONPROFITS

Michigan’s nonprofits brace for possible tax changes under Trump By Sherri Welch swelch@crain.com

Federal tax reform and other changes that could be spurred by the incoming Trump administration are top of mind for Michigan’s nonprofit sector heading into the new year. During post-election meetings with legislators in Washington, D.C., the message was clear. “With the Republicans controlling the House and Senate and Trump as president, we’re going to see tax reform,” said Rob Collier, president of the Council of Michigan Foundations. For nonprofits, one of the major concerns with tax reform is what it will do to the charitable deduction, one of the oldest pieces of U.S. tax policy, dating back 100 years, he said. Tax plans put forward by Speaker of the House Paul Ryan and President-elect Donald Trump are likely to be the two that move forward, nonprofit leaders said. While Ryan’s plan would preserve the charitable tax deduction, Trump’s tax plan would eliminate all deductions, including those for mortgage interest and charitable donations. Without the charitable deduction and/or with a larger standard deduction that gives taxpayers less reason to itemize on their tax returns, fewer people will be incentivized to donate money, nonprofit leaders fear. Ryan’s “blueprint” would eliminate the estate and gift taxes, which could also de-incentivize estate gifts. “The data is pretty clear that tax incentives don’t influence whether someone gives, but they do influence how much they give,” said Kyle Caldwell, executive director of the Dorothy A. Johnson Center for Philanthropy at Grand Valley State University. Ryan’s plan also calls for reducing the number of tax brackets. If a larger standard deduction is put in place, that could reduce the number of people who itemize their taxes and the number of charitable donations made since they aren’t being claimed on taxes, Caldwell said. The tax cuts included in the plan would be expected to fuel economic growth that would make up for losses in individual tax revenues through increased revenue in other areas. But if that growth doesn’t come, it would necessitate federal cuts to balance the budget and increase the burden on safety net nonprofits. Also as part of the Ryan plan, the earned-income tax credit for low-income people is likely to see scrutiny over concerns about fraud, waste and abuse and could be reduced or eliminated, increasing the burden on nonprofits. Trump’s cabinet member appointees in the areas that impact nonprofits, from environment to education to health care, are also something being watched closely, said Mariam Noland, president of the Community Foundation for Southeast Michigan, which counts a Washington lobbyist among its employees. “If the federal government changes its policies and support, it will directly impact the provision of services in many areas of the community.” Beyond tax reform, there’s talk in Washington of repealing Obamacare and privatizing traditional government programs like Social Security and Medicare, Caldwell said. That could mean investment in nonprofits or disinvestment in the services they provide and a larger burden for safety net nonprofits if services delivered are less effective at

Q&A: Why Michigan is at vanguard of nonprofit trends The Dorothy A. Johnson Center for Philanthropy at Grand Valley State University plans in January to release a white paper on 11 megatrends expected to impact the local, national and global philanthropic sectors in 2017. Those trends include more foundations, an increased focus on data and measurable progress, the Caldwell generational transition of wealth and leadership, social movement hashtags and polarization. Johnson Center Executive Director Kyle Caldwell spoke with Crain’s senior reporter Sherri Welch about the trends impacting Southeast Michigan and the state overall. What are some of the more important trends? They’re all important, but one I think that is foremost on everybody’s mind is the next generation of donors and the need to understand them. What are their interests? How do they think about philanthropy? A second one is the new forms of giving that are out there. We’re seeing an increase in collective giving, people giving in groups for causes they care about, pooling their resources. We’re also seeing people who are part of things like the Giving Pledge who are giving while living, while they are active and involved in the charities they care about.

ANDREA LEVY FOR CRAIN’S

meeting needs, he said. Also potentially in the offing: new regulations on donor-advised funds, a giving vehicle established at a public charity, that enables donors to make a charitable contribution, receive an immediate tax benefit and recommend grants from the fund going forward. The funds and payouts are managed by the charity. Donor-advised funds are the fastest-growing form of organized philanthropy because they are so easy to do for donors, Collier said. Boston-based donor-advised fund Fidelity Charitable ranked first on the Chronicle of Philanthropy’s Philanthropy 400 list of the U.S. nonprofits raising the most money in 2015, with $4.6 billion in private donations last year. “If Congress starts to put new regulations on donor-advised funds, that will certainly dampen enthusiasm for creation of (them),” Collier said, which could impact the fundraising abilities of large nonprofits that typically offer them as a giving vehicle, including community foundations, universities and the Jewish Federation. Nonprofit universities could also face new concerns over required payouts from their permanent endowments. U.S. Rep. Tom Reed II from New York is expected in January to introduce a bill in the House that will target university endowments, requiring a 25 percent payout for scholarships, Collier said. Permanent endowments are meant to sustain the nonprofits they support in perpetuity by granting or spending a percentage of the interest they generate and not touching the principal.

Legislators have been scrutinizing endowments of large nonprofits such as universities and health systems for several years, so the issue isn’t new. But with 49 new members of Congress, “we have to do a better job of making the case for endowments,” Collier said. There could be changes coming in the rules governing nonprofits, as well. While on the campaign trail, Trump said he planned to get rid of the Johnson Amendment, which was introduced in 1954 by then-Sen. Lyndon B. Johnson to prevent 501(c)3 nonprofits from endorsing and supporting political candidates. The rule extends to religious groups, which have felt they should be allowed to endorse candidates from the pulpit. Caldwell believes the topic of how foundations operate in terms of their transparency and guards against conflict of interest could also see attention from Congress, the Internal Revenue Service or watchdog groups, given the controversy surrounding the Clinton and Trump foundations during the election campaign. In light of the changes expected for the nonprofit sector, nonprofits should get attuned to the policy issues facing them and over-communicate their organization’s value to not only donors, but public officials, as well, Caldwell said. “Not everybody can go to Washington, but everyone can engage their local ... (and) state officials to make them aware of the work and value of their organization,” he said. “It’s no longer just nice to do; it’s essential.”

Any other trends in the paper having local impact? Relevant to Detroit and other Michigan communities, we are seeing an interesting blending of roles between philanthropy, nonprofits and government. I think we saw that in the Detroit bankruptcy with the Detroit Institute of Arts and the commitment of many foundations and creation of a new (DIA) nonprofit, all to help settle the nation’s largest municipal bankruptcy. If you look at M-1 Rail, that’s also a very different way for government and foundations to work together. And that’s unique to Michigan? I think it is. I’m struggling to find other like examples. I think it’s very clear if you look at the Flint water crisis and how philanthropy is investing more than government. Over $125 million has been pledged by the Charles Stewart Mott Foundation and other foundations around the country. It’s an example of philanthropy being a first responder in what is largely considered a municipality’s role and responsibility — providing safe, clean drinking water. I think it’s very different for philanthropy to stay in that role. Another example I think that’s unique to Michigan is the Kalamazoo Promise, which was largely an education program providing scholarships to college graduates in that community. Now, presumably some of the same donors have committed money to the city of Kalamazoo to help lower property tax rates. They’re providing private funding to the city that will be put in a trust to help lower property rates for the city’s residents. It’s not only for retention but to make the community’s tax rates more competitive to attract more residents and more businesses. Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

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SPECIAL REPORT: 2017 OUTLOOK | SPORTS

Arena, Pistons move, Stafford future to be among top stories next year

The new LIttle Caesars Arena will get a grand opening next fall, and will be home to two teams — the Red Wings and the Pistons. By Bill Shea

Welcome home

The new year will not be a dull one when it comes to the business side of sports. Here’s a quick look at the major stories on tap for 2017:

Pistons owner Tom Gores and the owner of the Red Wings, the Ilitch family, spent 2016 crafting a deal to relocate the basketball team from The Palace of Auburn Hills, the fate of which is unclear, to Little Caesars Arena. The aesthetics of the new venue will reflect both teams sharing it. Financial terms of the deal between the teams haven’t been revealed, but they were enough to convince the Pistons to leave an arena they owned outright and have called home since 1988. Additionally, the young Pistons are expected to be an improving team that could arrive downtown as a contender to make it deeper into the playoffs. Gores and the Ilitches will operate their entertainment businesses as a joint venture, and could collaborate on a new regional sports network.

bshea@crain.com

New arena After two years of construction, the $635 million Little Caesars Arena is scheduled to open in September as the new home of the Detroit Red Wings and, under a deal announced in November, the Detroit Pistons. Built with a mix of public and private money, the arena is the anchor of a $2.2 billion mixed-use redevelopment of 50 downtown blocks under a plan known at The District Detroit. The arena will have its ice rink 40 feet below grade and is billed as a unique “deconstructed” design with a glass-roofed concourse that links it to exterior buildings. The Red Wings, who continue to replenish their roster, will leave Joe Louis Arena, their home since 1979. The team has made the playoffs for 25 consecutive seasons — but will it still be a Stanley Cup contender when it takes up residency in its new home?

Tigers burning ... bright? The Detroit Tigers front office made it clear that owner Mike Ilitch had green-lighted payroll reductions that mean beloved players could be traded. Then word emerged during the Winter Meetings that the Tigers might not be so willing to sell. Is that a change of heart, or a bargaining tactic? Detroit’s $205 million roster in 2016 didn’t buy a playoff bid, and a decade of spending on free-agent

stars appears to be over. Ilitch, at age 87, has been public about his thirst for a World Series title, and he’s developed a reputation for splashy freeagent deals. General Manager Al Avila opted to hire more analytics staff for the 2017 season, too, and brought back manager Brad Ausmus despite steady fan and media criticism of his decisions. Detroit’s TV ratings have remained strong, but attendance has begun to trickle downward.

Detroit Lions, winners! The Detroit Lions started 2016 slow, but ran off a flurry of thrilling victories to position the team for a possible January playoff game at Ford Field for the first time. No matter how this season turns out, management will have to make a decision in 2017 on quarterback Matthew Stafford, who has been exceptional and is a free agent after 2017. He and the team likely want the relative safety of a long-term deal, but at what cost? Insiders say he could get northward of $25 million a season. In 2017, the honeymoon will be over for team President Rod Wood and his hand-picked general manager, Bob Quinn.

Michigan man University of Michigan football coach Jim Harbaugh, something of a

OLYMPIA DEVELOPMENT OF MICHIGAN

postmodern art project in khakis and a headset, remains hugely popular in Ann Arbor after winning 20 games his first two seasons. But the former UM quarterback and gadfly is 0-2 against the Wolverines’ archrival, Ohio State University. Beating the Buckeyes is a priority for whoever coaches Michigan, so the heat will increase in 2017 for him to get it done — especially with the game being at the Big House. Also fueling the pressure is the fact Harbaugh is the top-compensated coach in college football.

Championship city The Detroit Sports Commission in August submitted 54 applications to bring 15 college championships in nine sports to the region in coming years (2018-19 to 2021-22), including NCAA basketball, hockey, wrestling and football across different divisions. The decision on which cities will get the various events, which was originally expected in December, has been delayed until April. The nonprofit commission, in charge of seeking amateur and college events for the area, is seeking events in conjunction with the University of Detroit Mercy, Oakland University, the University of Michigan, Michigan State University, Wayne State University, Adrian College, Olympia Entertainment and the Lions.

Q&A: He built it, and now plans more When the Chicago White Sox inked Utica Unicorns outfielder Austin Crutcher last month to a Single-A contract for 2017, it represented the eighth United Shore Professional Baseball League player to get a minor league Appleby deal since the league launched in May. That was a pleasant surprise for league founder and majority owner Andy Appleby, the Rochester sports entrepreneur who financed the $15 million startup cost for the independent developmental baseball league and a 2,000-seat stadium along M-59 in Utica. Appleby got his start in sports with the Detroit Pistons and Palace Sports & Entertainment in the 1980s, and eventually launched his own sports services company in 1998. He’s owned a San Diego Padres farm team and a British soccer club, but the three-team USPBL is his legacy project. The public and pro baseball embraced it. His league averaged 3,200 per game, and sold out 42 of 75 games this season at Jimmy John’s Field. Appleby spoke with Crain’s sports business reporter Bill Shea about his baseball plans for 2017, and sports in general. What are your plans for a fourth team in 2017? We’re definitely bringing on a fourth team. It will be most likely west of our ballpark. It’s a phenomenal new nickname that every kid is going to love. I can’t quite name it yet, but it’s going to be really great. Will it be named for a metro Detroit city? I don’t know the community as of yet because we’re negotiating with 10 or 12 communities, as far west as Colorado. What are your plans to build another stadium, when and where? We hope to have an agreement in place for a new ballpark in the next three to six months, with groundbreaking shortly after that. It would be in place for summer 2018. What do you expect the cost range to be for a new stadium, and how many seats? I would say approximately $15 million and approximately the same type of ballpark (as Utica). I think we have a really great model with 2,000 SEE APPLEBY, PAGE 15

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SPECIAL REPORT: 2017 OUTLOOK | THE ECONOMY ECONOMY FROM PAGE 1

“I don’t see any sign of an imminent slowdown, and with a little luck, we will continue with a growing economy in 2017,” Ballard said in an email. “However, the further out we go, the more I worry. For one thing, economic expansions eventually come to an end. This one has been going on for seven and a half years now, and no expansion in history has lasted more than 10 years.” Trump’s campaign stump speeches have also called for a reduction of the corporate tax rate to 15 percent from 35 percent, which he believes will spur reinvestment and boost gross domestic product to upwards of 4 percent from the 1.5 percent figure that’s been stagnant in recent years. The president-elect has also promised to revamp the Obama administration’s contentious Affordable Care Act, which has raised costs for employers and workers yet helped provide health insurance to millions of previously uninsured Americans. Trump’s plan remains unclear, and whether a new policy will lead to reduced heath care costs is anyone’s guess. Trump’s take on free trade has also caused apprehension among the local business community. He spent much of his campaign railing against the North American Free Trade Agreement and proposes to alter it. The proposal for a 35 percent tariff on local automakers that import cars from Mexico remains a very real threat. Experts predict this would have disastrous effects on the auto industry, which imports more than 2 million cars from Mexico annually. If such a tariff happens, it’s predicted U.S. consumers would pay significantly more for a new car.

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The biggest economic indicator for the success of Southeast Michigan rests at the dealership, and they are expected to lose some steam in 2017. Grimes, however, said the rising strength of the dollar may insulate consumers from protectionist policies that raise costs. “Driven by a gap in the interest rates, the dollar should continue to strengthen,” Grimes said. “With inflation remaining low, this will benefit consumers looking to buy products and may help car sales.” But this will also inhibit Trump’s plans to create a bottleneck for imports, Grimes said. The Mexican peso is down 12 percent since the election, making it even cheaper to do business in Mexico. “Currency is far more important than tariffs,” Grimes said. “I do not believe Trump is going to change the status of U.S. manufacturers using Mexico as a base.” Michigan manufacturing employment is expected to fall in 2017, even though the overall unemployment rate is expected to remain stable at 4.6 percent, a November study predicts. Manufacturing is expected to purge 10,000 jobs in 2017 and 2018, offset by the addition of 21,900 jobs in construction, according to the study. The drop in manufacturing jobs stems from stagnant sales. Another factor is the overtime pay

mandate, which was pushed by the Obama administration but stalled by a federal court as it reviews details of a lawsuit from 21 states, including Michigan. The Department of Labor advocated for the new overtime rule requiring employers to pay overtime to salaried workers earning less than $47,500 a year, doubling the current standard of $23,660 set in 2004. The ruling is expected to have the biggest impact on small business, locally and nationally. Across the country, rural economies will continue to suffer as urbanization grows, including in the city of Detroit, Grimes said. “Cities like Detroit, Grand Rapids and Ann Arbor have made a major move to the knowledge economy and become more attractive places for young college-educated people to live and work,” Grimes said. “That bodes well for the future of the state.” Detroit saw a boon of investment in recent years, mostly due to deals made by real estate mogul Dan Gilbert, but also from the automotive industry. Lear Corp. opened its Detroit Innovation and Design Center in October.

Rival Adient Ltd. followed suit by announcing it would spend $75 million to buy and renovate the Marquette Building for its new world headquarters. Real estate in the city of Detroit is a hot commodity, and other auto companies may seize the trend of urbanization and move managerial and research operations to the city. Suppliers appear focused on creating plants in Detroit as well. Urbana, Ill.-based Flex-N-Gate Corp. announced it would invest $95 million to open a plant in the I-94 Industrial Park. Others are expected to follow. Lear Corp. wants to open a plant in the city, provided it can create a new wage tier with the UAW. The auto industry also invested heavily in mobility, including ride-sharing and connected and autonomous vehicle technology in 2016. General Motors Co. acquired California startup Cruise Automation for $1 billion, invested $500 million in Lyft and launched its own car-sharing service called Maven. Ford Motor Co. created a subsidiary based on mobility and partnered with Uber. Fiat Chrysler Automobiles NV formed a relationship with Google for automated minivans. The city of Detroit hired a new mobility chief in December. More investment is expected, which should result in more jobs. But it’s possible economic turmoil in China and Europe can offset local growth, Ballard said. Maybe not in 2017, but in the coming years. “There is ... uncertainty about Europe, which may unravel even further in 2017, and China, which has a real estate and finance bubble that could do a lot of damage if it bursts. I still find myself pretty optimistic about 2017, but when we get to 2018 and beyond, I have more and more concerns.” Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

Q&A: Of uncertainty and the labor shortage

Southeast Michigan’s automotive industry continued to hum throughout 2016, expecting another near-record year in auto sales. But the scales are tipping as sales began to slow late in the year — an indicator is the large incentives automakers are offering consumers. Experts are predicting the auto market will remain flat in 2017, and that plateau means the industry will have to focus on efficiencies or stealing market share to boost profits. Complicating things further are a new president in the White House next year and an aging workforce that is pushing unemployment down, making it difficult to find workers. Michigan’s largest industry is sensitive to the shifts in the economy, and 2017 is filled with the potential for change. Crain’s reporter Dustin Walsh discussed the coming headwinds and tailwinds with Charles Chesbrough, executive director of strategy and research and senior economist for Troy-based Original Equipment Suppliers Association about what local automakers and suppliers can

expect next year. What is lurking out there that is a danger to our local economy? There are a number of threats that are dangling out there. The major concern is that the (auto) sales peak is now behind us. We may now see vehicle sales decline. We’ve seen incentives rise dramatically from (automakers) over the last couple of quarters. The fast growth rates are in the rear-view mirror. Also, interest rates. We’ll probably see a number of interest rate increases next year. Certainly that will have a negative impact on consumers looking to buy vehicles and businesses looking to borrow money. And unless we see a significant drop in sales, labor is a real issue. Although there’s a lot of talk that there are no good jobs in America, that’s not the case in the auto sector. Suppliers are having a lot of trouble trying to find skilled labor. These jobs are in high demand, and there’s not enough of them to go around. We’re starting to see more and more among

our suppliers that say this issue may hold them back in 2017. It’s a very competitive environment right now. What can be done about the labor shortage? We may need a more organized response from government if the free market can’t solve this problem. Maybe it’s directives to create skills training in the associate or bachelor’s level. The government can fund more vocational programs to create workers with the skill sets needed. It’s such a widespread problem, and it doesn’t appear the situation is going to take care of itself. Are their concerns over President-elect Donald Trump? There’s a lot of uncertainty around the election. Now, some of that could be quite positive, such as a corporate tax cut. But how the new administration will act on tax policy, regulations and trade remains unknown. This makes it difficult to plan around. The uncertainty around trade policy is the biggest concern. The sooner the

agenda is set, the better. Michigan passed a progressive autonomous vehicle testing package recently. Will that have a positive impact on the local economy? I think it will. Companies are still moving forward, regardless of who is in the White House, on taking these driverless cars to the marketplace. It’s sparked new companies and is bringing a lot of innovation to the industry. That is already resulting in more economic activity in Southeast Michigan. And more and more hightech companies will become interested in what we’re doing here. Is there any other upside to 2017? The economy is still looking strong. Job creation is strong. And despite concerns, interest rates are still quite low, historically. Also, we know there’s a lot of new product that’ll be introduced in 2017. Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

APPLEBY FROM PAGE 14

seats but can grow to 4,000. I think that’s a really great template for any ballpark we build in America going forward. Do you have a template for how you finance stadiums — is it a mix of public subsidies and debt? Yes. Every situation is different in terms of location and how much public investment there is versus private. That’s what we’re working through now. Every city wants it, but it’s how much they can contribute to it. What’s the biggest unexpected lesson you learned operating a stadium and league this year? I’ve had 30 years leading up to this. That doesn’t mean I didn’t expect surprises day to day. I kind of envisioned this as it happened. It’s wonderful experience with a state-of-theart ballpark. It’s extremely affordable for family and companies to enjoy it. That coupled with all of our experiences, and having a minor league baseball team for eight years in Fort Wayne, nothing surprised me. Will you do anything differently in 2017? No, we’d like to just keep doing it. You don’t hit a grand slam with nobody on base. I knew we’d have to build this one family at a time, and that’s why I was at almost every second of every game. For me, this was really my first opportunity since my Pistons days to positively influence every aspect of the operation, simply because I live 15 minutes away from the ballpark. I absolutely love it. Shoot me if I ever complain about being at our ballpark. Did the level of corporate sponsorship investment this season ($3 million) meet or exceed your expectations? I think it met my expectations. The best part about it is that all of our partners are very happy with the value they received. We probably double or tripled the level of service that’s been provided in sports. Did you think you’d have eight players signed to Major League Baseball organizations by this point? No. We were hoping privately for one to two. If there was a wonderful surprise, it was that, to have so many players not only signed but have a legitimate chance to make the major leagues. What did you think of the World Series, with the Chicago Cubs finally breaking their curse and breaking the hearts of Cleveland Indians fans? I felt the World Series was good for the Tigers and on a smaller scale, us. People fell back in love with baseball.

INCENTIVES FROM PAGE 3

cities, that that’s how you attract young talent.” Gilbert and economic development agencies from across the state support a plan to create a new brownfield tax incentive for projects with at least $500 million in private investment in Detroit — between $15 million and $100 million in smaller communities. The proposal as originally introduced would have allowed developers to capture sales and income taxes generated at developments that are costlier to rehab due to environmental contaminants, blight or obsolescence. The state could have approved up to five projects and $40 million in captures annually; the cap recently was lowered from $50 million. House local government committee members this month approved changes to the bills, but didn’t send them to the floor. They kept a provision allowing developers to capture income taxes from new residents of

MURDOCK FROM PAGE 3

Michigan’s new HMO law and participated in much of the work to implement the law that paved the way for managed care in Michigan. Some 33 HMOs received licenses in Michigan during those first few years. “I got to meet and work with many of the pioneers in our industry at that time whose insights helped immensely later in my career,” said Murdock, who served as a health planning specialist with the state office of health and medical affairs from 1977 to 1990. Jim Haveman, former director of community health and a pioneer in the behavioral health field, met Murdock in the early 1990s when he was mental health director under Gov. John Engler, and quickly came to appreciate Murdock’s policy and fiscal analysis skills. At that time, Murdock was in the state budget office working on Medicaid financing and mental health issues. There, he met the late Paul Reinhart, a visionary government executive who would become Medicaid director in 2003. Murdock was part of the team in 1996 that joined the new department of community health, where he worked to develop the Medicaid managed care program, which now covers nearly 1.8 million children, pregnant women, the elderly, the blind and disabled beneficiaries. “Rick was a key architect (of the Medicaid managed care program) and had to work with a lot of new companies, Midwest, Meridian, Blue Cross,” Haveman said. “He always was knowledgeable, informed, creative, smart and loyal. We never had to worry about what he was doing. He knew policy and financing and enjoyed health care. It was always about the consumer and how to improve wellness.” Murdock said he is proud of the time he spent in state government, working to move the Medicaid managed care program forward, creating

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the developments, but excluded sales taxes generated by new retail customers of the finished projects. Instead, developers would have been able to capture a portion of the income taxes from employees who work at the completed mixed-use buildings and from construction workers who help build them. The incentive would end after the financing gap that prompted the developer to apply for the incentive has been covered, or after 20 years, whichever is sooner. The incentive would sunset after 2021. The committee’s changes “reflected changes that the governor wanted to see,” Fleisher said. “With that construct, I think it’s fair to say that the governor really is behind this, supportive of it, wants to see it become law. And we’re very grateful to him.” Snyder spokesman Ari Adler did not directly confirm Fleisher’s characterization, but said the governor “is feeling a little more comfortable” with where the bills were headed. Snyder eliminated many incentive programs as part of a revamp of Michigan’s tax code early in his first

term. More recently, developers and economic development professionals have started to say publicly that the tax overhaul might have taken too many tools out of Michigan’s playbook to compete with other states for jobs and development. The brownfield incentive was geared to help projects that have a gap between the cost of construction and what the market might return in rent, Fleisher said, adding that the funding gap can range from 15-20 percent. Gilbert told the House committee this month that he expected the market would respond once a few such “transformational” projects are completed. “You may need some tools, but we had so many at one time that the toolbox was overflowing, and what is really helping at that point?” Adler said. “(Snyder) wants to see something that’s truly a transformational project if you’re talking on that large of a scale.” Cotter, in a statement after the committee’s decision not to vote the bills to the floor, said the Legislature

performance-based contracts that emphasized quality and outcomes and setting the table for what would come later. “We were one of the first in the nation to create (capitated payment) withholds to build in quality requirements into the (managed care) contracts,” said Murdock. “We worked with the National Committee on Quality Assurance” to raise the quality standards of the managed care organizations.” The NCQA accredits HMOs. As a result, Michigan’s health plans are some of the highest-ranked in the nation for clinical quality and customer satisfaction, Murdock said. Michigan ranks 10th in the nation by NCQA in the number of highly ranked health plans. In 2002, Murdock joined MAHP, and in 2004 became its executive director, replacing Eugene Farnum, a popular executive who died of cancer in 2003. Over the next 12 years, Murdock said, he is especially proud of how he modernized MAHP to give it a major voice in shaping Michigan’s HMOs and contributions to health care policy. “We changed how the association does business. We have become transparent and data-driven and took the tact of being proactive with our communications,” said Murdock, crediting the hiring of Martin Waymire Advocacy Communications in 2007 as helping the association with various initiatives. Murdock also increased the funding and clout of its two political action committees: the MAHP PAC, which seeks private donations for contributions to politicians and has increased its balance sheets from about $2,000 to more than $200,000, and the MAHP Advocacy PAC, which takes funds from corporations and can only fund efforts to educate or inform the public on issues. “We want to create an environment for members to be competitive,” said Murdock, adding that HMOs now have taken a larger market share of the individual market than ever before and with recent insurance code

changes can compete in the self-insured market, where Blue Cross Blue Shield of Michigan controls about 75 percent of the business. Haveman said Murdock was especially qualified to be chief spokesman and strategic thinker for the HMO association. “This is a very different job, (with) very complex personalities and interests you have to balance. He was able to do that with those values, honesty and transparency,” Haveman said.

Lessons learned On Jan. 1, Dominick Pallone, the association’s deputy director, will take over for Murdock as executive director. “Rick’s steadiness on the issues and resolve to find the right policy outcome has been tremendous and great for us to follow,” said Pallone, who said Murdock has been a mentor to him the past 2 1/2 years he has been at the association. Lessons Pallone said he has learned from Murdock include the value of maintaining relationships with decision makers and the importance of building trust with all stakeholders with the goal of reaching necessary compromises. “Few are willing to compromise on an issue if you can’t trust them,” Pallone said. Before Pallone came to MAHP, he was a multi-client lobbyist with Midwest Strategy Group and also served as a staffer in the state Legislature. “I saw how influential (Murdock) was on policy decisions and in the creation of the Healthy Michigan program. I saw him sometimes get frustrated with legislators and the potential directions they considered taking at the time,” Pallone said. “When things got tense, I could see him take a few deep breaths and leave the room for a while,” Pallone said of Murdock. “He came back and always tried to find middle ground.” Haveman said Murdock’s experience greatly helped ease concerns of

has worked to create a level playing field for business, rather than picking “winners and losers” with tax dollars. “Dan Gilbert has done great things for Detroit, and he has shown that he is a competitor and a winner,” Cotter said in the statement. “If he can’t make a deal work without state aid, then it is not a deal worth doing, and Michigan taxpayers should not be forced to invest.” Still, lawmakers last year approved a tax incentive specifically for data centers to lure Nevada-based Switch, which planned to open a data center campus outside of Grand Rapids. Cotter was among the supporting votes. His spokesman, Gideon D’Assandro, said the data center incentive was a unique regulatory circumstance involving a type of business that did not exist on a large scale in Michigan before Switch.

Push next year Business Leaders for Michigan, the state’s business roundtable, and other groups plan to revisit a three-bill package that also didn’t make it out of

legislators. “His word was golden in the Legislature,” he said. When Snyder and other Republican leaders needed someone to explain Healthy Michigan to secure a vote from a key legislator, Haveman said Murdock never let them down. “It took a lot of lifting to get it done — adding copayments, wellness, (quality) metrics, but he was always there, talking with his members, legislators, trying to come to agreement,” Haveman said. Murdock said he often explained to legislators that expanding Medicaid could help reduce business costs. “Part of the reason the business community signed on to Healthy Michigan was to reduce (hospital) uncompensated care,” said Murdock, adding that the state contracted with the University of Michigan to study business cost savings from Healthy Michigan. Study results are expected next year. “You have to look at the uncompensated costs passed on to purchasers. There’s lots of moving pieces,” he said. “The only way for the state to cover the costs is if there are savings. I was conceptually on board with that.”

Crossroads During this year, Murdock’s main goal has been to reach agreement with state government and mental health providers on the sticky issue of behavioral health integration with physical health care, which the HMOs are primarily responsible for under the Medicaid program. Murdock said the issue between the HMOs and mental health providers got off to a bad start in February when language was inserted into Gov. Rick Snyder’s 2017 budget proposal that called for the HMOs to take over management of the state’s $2.4 billion Medicaid behaviorial health system, currently managed primarily by quasi-public mental health authorities. “The way it was presented in the

the House local government committee. The bills would have allowed companies to keep up to half of the income tax withholdings of new hires for no more than five years, provided they pay average wages that equal the county’s average wage and hire at least 500 employees. Companies could keep all of the new income tax withholdings for up to 10 years if they hired at least 250 new workers and paid at least 125 percent of the county’s average wage. “The bottom line is that we’re competing against other states that have good business climates and tools like the ones provided in those legislative packages,” said Kelly Chesney, a spokeswoman for Business Leaders for Michigan, in an email. “We can’t compete with one arm tied behind our back. ... If the incentive packages don’t move forward, we are going to make a push for them next year. We’re going to keep fighting for this because it’s the right thing to do. It’s too important to drop.” Lindsay VanHulle: (517) 657-2204 Twitter: @LindsayVanHulle

budget (in Section 298 boilerplate) was a complete disaster,” Murdock said. “We spent a lot of time explaining our industry and how we have operated the past 20 years. It was bad what happened because we had to play defense.” Murdock said during the process he at times became frustrated with being labeled “money-grubbing ne’er-do-wells” because the state’s Medicaid HMOs have saved Michigan government and taxpayers more than $6 billion on Medicaid and have increased quality, outcomes and services for millions of people. “We believe as an industry that integration (of physical and behavioral health) is a good policy,” he said. Bob Sheehan, executive director with the Michigan Association of Mental Health Boards, worked closely with Murdock on the issue, albeit on opposite sides of the fence. “Overall, it’s been a positive experience, but challenging,” Sheehan said. “Our two associations have a set of goals that most of the time are in sync, but for Section 298 are not in sync, and directly opposed. “He has a job to do, and so do I. It causes us to have opposing views at the same minute,” said Sheehan. Both Murdock and Sheehan recalled an event earlier this year, just after Section 298 became known as a controversial part of Snyder’s budget proposal. Lt. Gov. Brian Calley had called a meeting between the two sides, and an extraordinary thing happened. Before more than 100 mental health and HMO executives, Murdock and Sheehan tried to set the tone of the meetings by shaking hands — and it wasn’t a quick shake, both recalled. “Early during 298, when things were hot, we shook hands for a long time to show people we could get something done,” Sheehan said. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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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 9 , 2 0 1 6

RETIRING

same year Henry Ford received the

FROM PAGE 3

shown the public more of her personal and caring side, a personality facet that employees, executives, friends and family have known well for years. Because of this, it is not surprising that her greatest disappointment during her tenure at Henry Ford was the 1,500 employees laid off in 2001 at the health system, including more than 600 at flagship Henry Ford Hospital when she was president there. The system lost more than $90 million that year. “We had to reduce substantial costs and get our cost structure (corrected) to be profitable. I vowed never to do that again. Even when we closed two hospital campuses (Warren and Grosse Pointe), we worked very hard to find places for people. How change affects our people is the most difficult to me,” said Schlichting, 62, who will be succeeded by Wright Lassiter III, whom she personally recruited from Oakland-based Alameda Health System. Schlichting grew up in Akron, Ohio, and spent more than 35 years in the health care industry at four health systems. She joined Henry Ford in 1998 as its senior vice president and chief administrative officer and became president of Henry Ford Hospital in Detroit in 2001. She was recruited by former CEO Gail Warden, one of the nation's legendary health care executives who was chair in 1995 of the American Hospital Association. “Gail tried to recruit me twice before. The third time was the charm,” said Schlichting, who first met Warden in 1979 when he was COO of the AHA. “He helped direct my career from the very beginning and has been my mentor for almost 40 years.” But Henry Ford at the time was going through some massive change due to changing federal reimbursement policies, a movement to outpatient services and a depressed economy in Detroit. Employee morale was low. Under Schlichting’s deft direction, losses shrank to $12 million in 2002, and by 2003, when she was appointed system CEO, the health system was profitable again. By 2009, Henry Ford had stabilized its bond ratings enough to fund the $360 million Henry Ford West Bloomfield Hospital. All along the financial turnaround, Schlichting and top executives preached quality and patient safety. In 2005, Henry Ford began its innovative No Harm Campaign to reduce medical errors. Schlichting also helped revitalize Midtown in 2009 with Detroit Medical Center and Wayne State University. The attention paid off in 2011, when Henry Ford was chosen for the Malcolm Baldrige National Quality Award, the nation’s highest honor for innovation and performance excellence. That

John M. Eisenberg Patient Safety Quality Award, and 2004 Foster G. McGaw Award, the AHA’s highest honor.

Schlichting was named Crain's Newsmaker of the Year for 2012. She also has been recognized multiple times by Modern Healthcare magazine as one of the Top 25 Women in Healthcare and one of the 100 Most Influential People in Healthcare. But Schlichting said her best memories of Henry Ford have been her contributions in helping change the culture of the health system. “We became a success as an organization because of the success of Henry Ford Hospital and its programs,” she said. “We changed our confidence level. For years we were our own worst enemy and not friends with the (city of Detroit). I became the city’s biggest cheerleader. We wanted an organization with mojo, with great clinical quality and diversity.” She specifically credited three physicians as helping Henry Ford Hospital hit its stride — Mani Menon, chairman of urology and director of the Vattikuti Urology Institute; John Popovich, hospital president and system chief medical officer who started at the hospital in 1975 as an intern; and Scott Dulchavsky, CEO of The Henry Ford Innovation Institute and also the hospital’s surgeon in chief. Henry Ford now is one of the nation’s most integrated health systems with $5.2 billion in revenue, a 1,100-employee medical group, a 650,000-member HMO and insurance organization, 30 outpatient medical centers and 27,000 employees.

‘Family’ commitment Brian Peters, CEO of Michigan Health and Hospital Association, said he job shadowed Schlichting in 2009 for a week as part of a national leadership fellowship program of the National Center for Health Care Leadership, an organization that Warden helped found. “I will never forget that. It was extraordinary to see her in action. She shared with me her thoughts on leadership and how she has been so successful in leading Henry Ford and other organizations,” Peters said. “Nancy is one of my very favorite people, not just as a hospital CEO and (association) board chair, but someone who is a true mentor to me.” But it was on walks with Schlichting through hospitals, outpatient facilities and the corporate office that most struck Peters. She leads by example, he said, whether it is picking up a chewing gum wrapper on the floor or donating $2 million to the hospital foundation during the system’s recent $250 million Envision Campaign. In her honor, a section of Henry Ford’s Innovation Institute has been named the Schlichting Education Commons.

INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: 400 Monroe Associates LLC

Dorothy A. Johnson Center for Philanthropy 13

ings ong get

Bernard Financial Group

Crain’s Detroit Business

325 ene

Detroit Pistons

Sachse Construction

Detroit Red Wings

United Shore Professional Baseball League 14

Detroit Lions

1, 14

Flagstar Strand Theatre

Henry Ford Health System

Michigan Association of Health Plans

3 10

“Nancy really does treat her entire team as family. It is apparent. When I shadowed Nancy ... literally all the people we ran into — workers in the cafeteria, mopping the hallway, doctors and executives — would stop, and not just engage in conversation, but would engage her with a hug," Peters said. “I have been around the block with many hospital CEOs, and that was the only time I have seen that kind of family environment,” he said. When Schlichting was told the story, she laughed and said, “Welcome to my world.” Schlichting remarked about mentoring future CEOs and executives. “I love doing that,” she said. “I know Brian’s dad, Doug Peters (former executive with Henry Ford), and was happy to have him for a week.” Over time as an executive, Schlichting said she learned to view her fundamental job as creating an environment where people can not only do their best, but also understand why decisions like layoffs, pay freezes, facility acquisitions or sales, or quality measurements are made so they become invested in success. “When we laid (employees) off, many came back (in other jobs),” said Schlichting, noting that during one new employee orientation she asked how many were returning. “Half came back. We treat them with respect and dignity, and they appreciate that.” During 2008-2009, Schlichting was board chair of the hospital association when the economic recession was hitting people hard in Michigan. “She was a phenomenal board chair when the economy went south,” Peters said. “Nancy led a larger urban-based health system, but she clearly understood the value of thinking about the entire membership and the state. She supported public policy that might benefit rural hospitals in the Upper Peninsula but had no benefit to Troy and Southeast Michigan. She wanted to look out for health care throughout the state.” Sandy Pierce, the system’s chairman and senior executive vice president and chairman of Michigan with Huntington National Bank, has known Schlichting for 15 years. One of the big things that stands out is how she gets involved in her work at the health system, with employees, and her contributions to public service and various boards. “She thinks out of the box, is very creative and cares deeply about her patients, colleagues and community,” said Pierce. “It is not just words. You look at all things she has done in her career in Detroit for patients and the neighborhoods. She is the former chair of the Detroit Regional Chamber, the board of Walgreens, a public company, work on behalf of the VA for Obama. It is very important for the industry and important for the community.” Pierce said she is nationally known for her skill sets in health care. “She has served us well at Henry Ford. Our bond ratings have improved, we’ve restructured debt. Our financial foundation is very strong. She has taken very good care of the system and is growing it the right way.” Earlier this year, Henry Ford added Allegiance Health, a 222-bed hospital in Jackson, an acquisition which many

believe to be one of many future steps toward expanding the system’s geographic reach. “It was an important strategic move, and we want to continue to grow in Michigan,” said Pierce. Another move to expand Henry Ford's footprint is when the system opened Henry Ford West Bloomfield Hospital in 2009. “We opened West Bloomfield and Nancy hired Gerard Van Grinsven from the Ritz-Carlton. This was a unusual decision because Van Grinsven was strong in customer satisfaction but had no health care experience,” Pierce said. “All benefited the system.” Schlichting also oversaw the closing of two community hospitals in Warren and Grosse Pointe because they were losing money and didn't fit with the movement to outpatient services. But she also spent $325 million to upgrade Henry Ford Hospital, the system’s flagship in downtown Detroit. Henry Ford also has a few missteps over the years. In 2013, Henry Ford and Beaumont Health System announced they planned to merge. After a year of talks, however, it was clear to all executives and physicians that corporate cultures did not match and the deal was terminated. Beaumont has since merged with Oakwood Healthcare and Botsford Hospital to form Beaumont Health. Schlichting said she was disappointed that the Henry Ford executive team spent a year working on that merger only to conclude it wouldn’t work. “We learned a ton from that, and it will help us in the future,” she said. Another mistake that still bugs Henry Ford executives is the loss this year of Medicaid managed care contracts in Southeast Michigan for HAP Midwest Health Plan. The loss of the contract cost the system more than $20 million in annual profits that were projected to increase under Healthy Michigan Medicaid expansion. “We are still very passionate about that,” said Pierce. “Could we have done a better job in the application? We we retotally blindsided by the decision.” Schlichting said the Medicaid decision made by the state “was not the right decision. We have a nonprofit HMO that serves the community. We take care of a ton of Medicaid patients at the system. They didn't give us credit for our integrated system and gave credit to national for-profit organizations over us. They vetted us the same way you’d vet office supplies.” Despite the missteps, Pierce said Schlichting overall has done an outstanding job in leading Henry Ford through massive change the past five years as the health care industry adjusted to the Affordable Care Act. Pierce said the hiring of Lassiter as Schlichting’s successor in 2014 and immediately appointing him president has worked out very well. “We got criticized for hiring Wright with an unconventional succession period of two years,” Pierce said. “Everyone on the board, and Wright, would say it has worked seamlessly. It allowed Nancy to do the work she needs to do on the VA and allowed Wright to get to know the system and the community.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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

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LIONS FROM PAGE 1

Nader arrives at Ford Field between 3:30 and 4 a.m. for a 1 p.m. game, and spends the next 15 hours ensuring that a massive food and beverage logistics operations runs seamlessly so fans — especially those in the pricey premium seats — get their meals without problems. That’s a crucial customer service needed to ensure the revenue flows, because food and beverage sales are an important cash stream split between the team and Levy. He has a game-day culinary staff of about 100. Add in the part-timers and nonprofit volunteers who staff the concession stands, and the walking beer vendors, the number of people working on food and beverage for a Lions game is nearly 1,500, Nader said. “It’s organized chaos. It’s kind of like a pirate ship. We’ve got our merry band, and I’m Captain Hook,” he said, chuckling. In addition to 10 Lions games, Ford Field hosts several concerts each year and major events such as monster truck rallies and motocross. It also hosts small to large private events, such as the annual Hob Nobble Gobble fundraiser attended by 2,000 people, and Nader and his staff handle all of it. “There’s always something going on,” he said. Levy also keeps the Breadstick restaurant inside Ford Field open during the week to feed the 900 people who work daily in the stadium, which has thousands of square feet of commercial office space for companies such as advertising firm Campbell Ewald. In addition to feeding fans, Nader’s staff feeds the game officials, network TV crews, reporters in the press box, the players and coaches and owners of both teams, visiting

GILBERT FROM PAGE 1

double to triple, if not more, rents that happen in those other cities.” The second sentence in that statement is undeniably true. The first claim is dubious.

Guide to costs Every two years in November, for more than eight decades, Marshall & Swift Valuation Service has released a guide for real estate and construction professionals that estimates new construction costs in hundreds of cities across the country. The average cost to build a new Class A office building nationwide ranges, depending on quality, from $125.26 per square foot to $264.04 per square foot, according to Marshall & Swift. Included in those estimates are building materials and labor, but not things like sprinkler systems and land costs. Gilbert has said that he is not including land purchases when talking about construction costs. “Getting a parcel on Larned and Griswold (streets in Detroit) is a different land price than a parcel in San

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 9 , 2 0 1 6

dignitaries and VIPs, and league officials. Even the walking beer vendors, who work for a third-party specialty firm called Rocket Man, get a little box lunch assembled by Nader’s staff and delivered before the game. There’s postgame food for everyone, too. Nader doesn’t leave the stadium until after 5 p.m., and is back the next day to continue preparing for the next event — and during the Christmas season, that includes a stream of holiday parties inside the stadium. He’s also in charge of food for the Lions’ training facility and headquarters in Allen Park.

Game-day routine Nader will tour the entire stadium a few hours before kickoff, and just before the stadium doors open to fans. He greets staff at various concessions booths, offering advice and encouragement. “Looks good. Good luck today. I’ll check on you later,” he says to the workers in a pretzel and sausage stand. One of them is Juan Demedicis, a Henry Ford Community College culinary school student who handrolls many of the 800 traditional Bavarian-style pretzels made and sold at the stadium during games. No matter where he is, whether in his office or on his marathon hikes around the stadium, Nader has a black Westinghouse two-way radio in his grip so he can answer questions and solve any crisis that arises. “This is my baby,” he said, motioning at the walkie-talkie. “There’s a constant system of communication going on.” A burly, gregarious man in woodframed glasses and a salt-and-pepper beard, Nader is warmly greeted with smiles and handshakes by everyone, from lowly clerks to former Lions greats such as Lomas Brown. He puts in up to 10 miles walking around Ford Field on game days, he says. SeemingFrancisco or Manhattan. That’s a huge variable,” said Anthony Sanna, senior managing director in the Birmingham office of New York City-based Integra Realty Resources Inc., a national real estate valuation, counseling and advisory company. According to Marshall & Swift, a Class A office building in Detroit costs $137.79 to $290.44 per square foot to build, 10 percent more than the national average. Yet in New York City, it costs $187.89 to $396.06 per square foot. In San Francisco, it’s $180.81 to $380.22 per square foot, and in Chicago, it’s $161.59 to $340.61. But it’s important to consider that whatever Gilbert builds using those tax incentives, if approved by the state Legislature in its next session, is likely to exceed in complexity what construction cost estimators use to calculate their projections, said Marc Nassif, senior managing director, Midwest, of the Livonia office of Dallas-based BBG Inc., a commercial real estate appraisal firm.

Paying for space The differences are more pronounced when considered in the context of one project that Gilbert

ly nothing misses his eye. For example, at a little gelato stand on the club level, he notices flavor signs are missing from two bins. He tells the young girl working the stand he’ll take care of it. Those details, he says, are what separates a good fan experience from a great one. “I’m looking to see readiness. I want to see it from the guest perspective,” he said. Nader takes a personal interest in the details. For example, in the MGM Grand Tunnel Club, opened last year deep inside the stadium as a premium location for monied fans to eat gourmet food in close proximity to players entering and leaving the locker rooms, there’s a different custom ice sculpture each game. Nader designs the sculpture and orders it from Detroit-based U.S. Ice Corp. of Southeast Michigan. “I’ll do a rough sketch and email it to them,” he said. For the game against the Chicago Bears on Dec. 11, the sculpture was an ice tray that included the team helmet logos and some wording. The tray contained a selection of oysters on the half shell, cocktail shrimp and snow crab. Fans walked past the ice tray, looking at it like it was art that shouldn’t be touched — before sneaking a shrimp.

as the food CBS Sports orders for its 60-plus staffers needed to broadcast a Lions game. “This is the traffic control booth of catering,” he said. The cork board likely will soon give way to a digital system that would further increase efficiency, Nader said. But for now, it’s all paper, pushpins and cork. It works. Data and analytics are used by the culinary staff to predict how much food, and what kind, will be needed for games, and also for events such as concerts, Nader said. They have data dating back to the building’s opening, so they have a good sense of what to expect from football fans versus boy-band concertgoers at Ford Field, and the Levy staff will adjust its supply order to meet those expectations. Purchasing happens at least two weeks ahead of time, he said. Deliveries are staggered, similar to the auto industry’s just-in-time logistics. For a typical Lions game, food preparation begins on Wednesday with the creation of items that can be stored for a few days, such as sauces and dressings, Nader said. There are more deliveries and preparations on Friday and Saturday, such as baking breads, and on Sunday the work begins before dawn to prepare the hot foods.

In the kitchen

Culinary arms race

The nexus of the game-day culinary operation is a simple, wellworn cork bulletin board that hangs in an alcove off the main stadium kitchen on the third level. Affixed to the ancient cork — Nader believes it’s been there since the stadium opened in 2002 — are the dozens of BFOs, or banquet food orders. These are the forms that list everything needed by the kitchen, from the time the food is needed and the location and amount, for various clients, such

The complexity of ballpark food has evolved from your basic hot dogs, burgers, and pizza slices to increasingly sophisticated meals, including ethnic fare. Fan tastes and expectations demand a complex menu, especially in the luxury areas. In the club-level buffets, one can find applewood smoked bacon, apple sausage, eggs Benedict, and even a table of food that’s an homage to fare from the visiting team’s city. For the recent Bears game, it was Chica-

and his team have proposed: a sweeping two-block ground-up development east of the former Compuware Corp. headquarters downtown, which would include at least 600,000 square feet of Class A office space in a tower at least 20 stories tall. Depending on the office construction’s quality, that would cost $82.67 million to $174.26 million, based on Marshall & Swift figures. In addition to sprinkler systems and land costs, that doesn’t include other things like parking, for example, a major expense in a downtown core that has a shortage. Yet in New York City, 600,000 square feet of Class A office space would cost $113 million to $237.64 million to build — 36 percent more than in Detroit. In San Francisco: $108.49 million to $228.13 million, which is 31 percent higher. In Chicago: $96.95 million to $204.37 million, or 17 percent higher. Other cities with the same estimated building costs for Class A space as Detroit, according to Marshall & Swift? Walla Walla, Wash.; St. Cloud, Minn.; Schenectady, N.Y.; and Blythe, Calif., to name a few. Buildings tend to be more expensive in certain markets because of labor costs and logistical issues like

transporting materials to construction sites, among others. Labor costs are increasing nationwide as average hourly wages rise. The average construction worker made $28.93 per hour last year compared to $29.98 today, a 3.6 percent increase. Unemployment in the industry is down 1 percentage point to 4.5 percent, its lowest level since 2002, according to a third-quarter construction report from JLL (formerly Jones Lang LaSalle). The key factor, though, is wages. According to the Bureau of Labor Statistics, the annual mean salary for a construction worker in Detroit and its suburbs as of May 2015 was $45,200, or $21.73 per hour, the lowest of the four cities. In San Francisco, the mean salary was $49,970 and hourly rate was $24.03. In New York, it was $50,980 or $24.51 per hour, while in Chicago it was $56,890 per year or $27.35 per hour. However, the cost of materials, overall, is relatively consistent from city to city, Sanna said. “Conduit, steel, wire — it’s pretty much the same.”

Data source? So what data is Gilbert using when

go’s Little Italy. Nader, who has a degree in philosophy from Eastern Michigan University and a culinary degree from Washtenaw Community College, studies food trends at other venues and restaurants, locally and nationally, to keep abreast of the culinary arms race. He also has to keep pace with the phenomenon of one-off unusual items, like the 4-pound, 9-inch doughnut cake covered in Honolulu blue frosting. His office inside the Ford Field kitchen has stacks of cookbooks, and he spends his offseason tinkering with ideas that can work within the confines of a stadium operation.

Data makes the dough Customer wait time is the bane of any stadium or ballpark, and at Ford Field there are crews of Wayne State University business school students who are gathering data on how long fans wait in line at various stands. They pick one at a time, and count how long it takes them to get their food. Nader and Levy use that data to create strategies to trim wait times. For example, more serpentine lines are likely in the future on the concourse, which can alleviate both wait times and traffic congestion among the thousands of wandering fans. The Lions also have become more aggressive under new team President Rod Wood in surveying fans and gathering them in focus groups. Data culled from those efforts will be used to continually shape how food and beverage service is handled at Ford Field, Nader said. And thanks to everything going digital, changes don’t have to wait until next season. “We can change things from one game to the next,” he said. Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

he says a skyscraper in Detroit costs as much to build as one in New York, Chicago or San Francisco? It’s not known. Detroit-based Bedrock LLC, the real estate development, ownership and management company Gilbert coowns, declined to provide specific calculations used to come to that conclusion. “High-quality, high-rise ‘vertical’ construction is costlier than other forms of development due to the construction methods and associated logistics,” John Olszewski, vice president of construction, said in a statement to Crain’s. “Components of the hard construction cost include trade labor, all materials and equipment, smart technology, insurances, permits, bonds and the construction manager’s staffing, general conditions and requirements, and their fee on the direct cost. Adding to these costs are skilled labor shortages in the Detroit area and the overwhelming activity in the construction activity as a whole. ” The Marshall & Swift data calculations do not factor in the so-called “soft costs” like insurances, permits and bonds. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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 9 , 2 0 1 6

THE WEEK ON THE WEB DECEMBER 10-16

GM subsidiary confirms redevelopment plan with Gilbert

subsidiary of General Motors Co. confirmed Friday that it is working with Dan Gilbert’s team on a large-scale mixed-use development east of the Renaissance Center in downtown Detroit. Riverfront Holdings Inc., which owns the RenCen, said in a statement to Crain’s that it is in negotiations with Gilbert’s Rock Ventures LLC to develop about 10 acres of vacant land now being used as surface parking. Other details about the project — including size, precise location and time frame — were not released.

COMPANY NEWS

J At the Wayne State University School of Medicine’s annual holiday town hall meeting, Dean Jack Sobel, M.D., said talks would soon commence with other hospitals in Southeast Michigan about possible academic affiliations because the corporate culture with academic partner Detroit Medical Center no longer fits the nation’s largest single-campus urban medical school. J General Motors Co. said it will be the first company to mass-produce autonomous vehicles, with test versions of Chevrolet Bolts equipped with self-driving technology planned to start rolling out of the Detroit automaker’s Orion Township plant in January. CEO Mary Barra also said GM will start testing autonomous Bolts on public roads near the GM Technical Center in Warren. J Billionaire investor Carl Icahn once again extended his offer through Jan. 4 to gain total control over Southfield-based Federal-Mogul Holdings Corp. Icahn, through a subsidiary of his Icahn Enterprises LP, offered to pay $9.25 per share in an all-cash deal, 86 percent higher than the supplier’s share price of $4.98 on Feb. 26, when Icahn first proposed the buyout for $7 per share. J Warren officials approved plans for a new Kroger grocery store to replace a vacant former Kmart building. The grocer expects to build one of its Kroger Marketplace stores and a fuel center at the northeast corner of 13 Mile and Schoenherr roads, the Macomb Daily reported. It will be the chain’s largest store. J The University of Michigan and French manufacturer Navya announced they will work together on a fully autonomous, 15-passenger electric shuttle that will provide self-guided tours of Mcity, an Ann Arbor-based test site for connected and automated vehicles. J Coca-Cola Co.-backed premium milk-brand Fairlife has picked Southfield-based Doner as its new agency of record for strategy and creative. The MDC Partners shop won the busi-

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

$2 million

The amount of a grant by the Grosse Pointe Farms-based Ralph C. Wilson Jr. Foundation to the Detroit Employment Solutions Corp. to support the regional

expansion of TechHire, a White House initiative launched to expand local tech sectors.

9.6 percent

The year-over-year increase in median home and condominium sale prices in November in the four-county metro Detroit region, according to a report by Farmington Hills-based Realcomp Ltd. II. Home and condo sales climbed by 17.3 percent between November 2015 and last month.

9.9 percent

The rate increase approved by the

Michigan Public Service Commission for DTE Energy Co.’s

natural gas service. The rate increase is the first since December 2012.

ness following an internally led review that involved several agencies. J A $1 million commitment from the Troy-based Kresge Foundation to Chicago-based community development finance institution IFF will support the expansion of a program supporting facilities improvements for early child care education providers in Detroit. J Alex Brodrick, longtime president and CEO of Volunteers of America Michigan, plans to retire next June, capping a 35-year career with the Southfield-based organization. Brodrick, 72, has led VOAM for 21 years. J Ann Arbor-based tech company Deepfield Inc. will be acquired by Finnish communications and information technology giant Nokia Corp., Terms were not disclosed. The deal is slated to close in the first quarter. J Two major Detroit cultural institutions, the Detroit Symphony Orchestra and Michigan Opera Theatre, reported positive financial results. The DSO reported its fourth consecutive year of a surplus as subscription sales grew for the fifth year in a row. MOT reported a surplus for the second year in a row, on the strength of a 23 percent increase in ticket revenue. J A $1 million gift from Edsel and Cynthia Ford, longtime supporters of the Detroit Zoo, will fund the expansion of the zoo’s indoor giraffe habitat. Renovations are to be complete next spring. Also, the zoo expanded its sustainable practices with the addition of a permeable pavement parking lot. J Detroit bakery Avalon International Breads opened an outpost in downtown Ann Arbor. The 5,200-squarefoot restaurant, at 120 E. Liberty St., has a café featuring a coffee and pastry bar and a kitchen area with a din-

RUMBLINGS

ing room that seats 75. J The Entrepreneurs of Color Fund said it has loaned $2.75 million to nearly 30 minority-owned small businesses since it began making loans a year ago. The $7 million fund was created by the Detroit Development Fund, J.P. Morgan Chase & Co. and W.K. Kellogg Foundation to support Detroit neighborhood businesses owned by entrepreneurs of color and businesses primarily hiring people of color. J Southfield-based Ciena Healthcare marked the grand opening of a $4.5 million rehabilitation unit at its Regency Heights Nursing & Rehabilitation Center in Detroit.

OTHER NEWS

A judge said a federal subpoena served on the Detroit Land Bank Authority as part of an investigation into the city’s demolition program will be unsealed to the public Jan. 12. Government lawyers have fought to keep the subpoena private because it includes details about the investigation of the program amid questions about costs and bidding practices, the Detroit Free Press reported. J The Michigan appeals court upheld a decision that struck down a 10-year agreement between the Taylor school district and the Taylor Federation of Teachers — a deal that was seen as a way to get around the state’s right-to-work law by locking in union dues and membership. J The 2017 Meridian Winter Blast in Campus Martius Park is taking place earlier to coincide with the last weekend, Jan. 20-22, of the North American International Auto Show. The date change for the Quicken Loans Inc.-presented festival is part of a new partnership with NAIAS. J Tickets have gone on sale for the second LPGA Volvik Championship at Travis Pointe Country Club in Ann Arbor. Details on the May 22-28 event are at volviklpga.com/tickets or (734) 707-0789. J The Garland Building project opened in Detroit’s West Village. The $1.35 million effort repurposed three buildings into three 1,200-squarefoot apartments and three 1,200-square-foot retail spaces on Kercheval Avenue at Parker Street. Set to occupy two of the retail spaces are the Village Parlor salon and Motor City Match grant winner Geiger Eat Shop. J The first of three M-1 Rail QLine streetcars launched the first of 1,000 mandatory state and federal tests the cars will undergo before passenger service begins next spring along Woodward Avenue in Detroit. J

BANKRUPTCIES The following business filed for protection in U.S. Bankruptcy Court in Detroit Dec. 9-15. Under Chapter 11, a company files for reorganization. J RSG Real Estate Enterprises LLC, 1315 Lone Pine Road, Bloomfield Hills, voluntary Chapter 11. Assets and liabilities not available.

PHOTOS BY EDSEL & ELEANOR FORD HOUSE

The new visitor center (top photo, right) and administration building (top photo, left) at the Edsel & Eleanor Ford House will be built starting next summer. The visitor center will include outdoor seating (bottom photo) at the Cotswold Café; it will be among the few area dining locations with views of Lake St. Clair.

Edsel & Eleanor Ford House plans for visitor center

he Edsel & Eleanor Ford House in Grosse Pointe Shores plans to add a visitor center, administration building and upgraded parking as part of ongoing renovation of the historic home. The proposed plans, which will be submitted to the city’s planning commission on Jan. 10, are the first major alterations to the estate in more than 25 years. The organization declined to detail the costs of the project. The new 40,000-square-foot, two-story visitor center will include classrooms, exhibition space, expansion of the existing cafe, event space and expanded retail. The new 17,000-square-foot administrative building allows the organization to restore historic buildings currently used by administration to the former aesthetic. Both buildings, designed by Detroit-based architectural firm SmithGroup JJR LLC, will use solar and geothermal technology to offset utility use, the organization said in a press release. The new parking lot will feature bio-swales to filter stormwater that enters nearby Lake St. Clair.

“The addition of these two buildings is an important step in furthering the vision my grandparents, Eleanor and Edsel, had for their estate,” Edsel Ford II, chairman of the Ford House board of trustees, said in a statement. “This phase of the master plan will provide us with the opportunity to interpret the entire home. Continuing their legacy in a sustainable manner is a top priority for the board and for the entire Ford family.” Construction is expected to begin in the summer of 2017. In November, the National Parks Service designated it as a national historic landmark — the 42nd such site in the state. The Henry Ford Estate-Fair Lane in Dearborn, which is also being renovated by the nonprofit operating Ford House, was among the first in the country to secure the designation. Construction on Ford House began in 1926 on the site known as Gaukler Point. Edsel and Eleanor Ford moved in three years later. Edsel Ford was the son of Henry Ford and served as president of Ford Motor Co. from 1919 until his death in 1943.

‘Christmas Bop’ showcases state’s music talent in cover of ’70s song In a Detroit version of “We Are the World,” Detroit media company Ringside Creative has pulled together Michigan talent to create “Christmas Bop,” a remix of the 1975 song from English glam rock band T. Rex. More than 30 Michigan artists, producers and musicians donated their time and talents to create the Detroit-centric cover. Among them: Ann Arbor native and “The Voice” finalist Laith

Al-Saadi on lead vocals and guitar;

Grammy-winning mixing engineer

Derik Lee, who lent his talents to the

Broadway musical “Hamilton”; and Detroit artist and illustrator Mark Penxa. “Christmas Bop” is available exclusively through Bandcamp at https://christmasbop.bandcamp. com for $1 through Dec. 31, with 100 percent of the proceeds benefiting Detroit’s Cass Community Social Services.