Crain's Detroit Business, May 22, 2017 issue by Crain's Detroit Business

MAY 22 - 28, 2017

OCC’s Meyer’s ouster draws fire

Restaurant boom and jobs

Page 3

Mary Kramer, Page 6

Transportation

Development

QLine goes through teething pains

Is jail/soccer deal handcuffed? Bond funding obligations could push the price too high

By Bill Shea bshea@crain.com

As it turns out, operating a streetcar in Detroit for the first time in six decades is harder than expected. Despite months of testing, managers of Detroit’s new $187 million QLine streetcar system are struggling to cope with what they say are unexpectedly high early ridership numbers after one week of service, and they’re learning to co-exist with the realities of traffic on Woodward Avenue.

By Kirk Pinho

kpinho@crain.com

ne of Dan Gilbert’s and Tom Gores’ biggest hurdles to building a Major League Soccer stadium and three new high-rises at the foot of downtown might not be Wayne County itself. Instead, it could be Internal Revenue Service rules that ultimately seal the future of Detroit’s skyline as the county awaits an answer on whether it can repurpose leftover bond money from 2010 and use it to build a new jail a few miles north. “There is Richard Kaufman, depuno way the ty for county Executive Warren Evans, said the county of county could face more Wayne than $175 million in excould make posure if it diverts the a decision bond money to help pay part of the $300 to go to an alternative million price tag offered by Gilbert for a site with new $420 million that criminal justice complex at a different site. potential exposure.” Gilbert’s Rock Ventures LLC has also asked for what have Richard Kaufman, generally been redeputy for county ferred to as “operaexecutive tional savings credits.” That exposure would be triggered by repurposing $51 million in leftover bond financing from the Gratiot jail project to pay for construction of the criminal justice complex at any other site —including the one Gilbert is proposing at East Forest Avenue and I-75, Kaufman said. At issue are the 45-percent federal tax credits Wayne County received on 10-percent interest it paid on $200 million in Recovery Zone bonds to pay for the half-built Wayne County Consolidated Jail. Because of IRS rules, the county would have to return $51.27 million in tax credits it already received and forfeit an additional $126.07 million, creating a potentially $177.34 million problem.

“[I]t’s also clear a public education campaign to help transit users is needed in Southeast Michigan.” M-1 Rail Vice President for External Affairs Sommer Woods

SEE JAIL, PAGE 16 ILLUSTRATION BY BARBRAFORD VIA ISTOCK

Why QLine executives were surprised at the scope of the initial wave of curiosity, which saw riders fill streetcars starting from the first stop at Grand Boulevard and remain on the train for the entire train loop, isn’t clear. But it’s certainly far too soon, after just a week, to proclaim the QLine a success or failure. After seeing an estimated nearly 50,000 riders in the line’s first seven days, QLine officials on Friday delayed paid passenger service until July 1, keeping it free another six weeks rather than introducing another element of confusion and delay — how to pay to ride — for a system that’s a week into its teething phase. The scramble is to help ensure the system builds a loyal, content clientele instead of creating a chorus of critics who avoid the streetcars because of a perceived reputation as needlessly overcrowded and slow. SEE QLINE, PAGE 15

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MICHIGAN BRIEFS Michigan revenue stable amid budget talks Gov. Rick Snyder and lawmakers will be able to spend slightly more than expected when they finalize the next state budget, after the administration and legislative economists agreed to revised tax revenue estimates last Wednesday, the Associated Press reported. The $12.6 billion school aid fund — Michigan’s largest account — will have $340 million more than expected over this fiscal year and the next budget year than was projected in January, while the general fund — the second-biggest fund — will have $293 million less. The new figures will influence budget talks among the Republican governor and GOP legislators, who want to finish a $55 billion spending plan in early June, four months before the fiscal year begins in the fall.

Business tax credit payouts meet projections Michigan’s business tax credit payouts so far this year are tracking with expectations, several months after state fiscal analysts said the worst of the budget effects from long-term incentives may be over. That’s good news for the state

budget, which has been subject to volatile swings in recent years based on uncertainty around when credits would be redeemed and paid out. Michigan, though, still is on the hook for hundreds of millions of dollars each year in tax credit payments to companies through at least 2031, mostly for one program: The defunct Michigan Economic Growth Authority, or MEGA, which was expanded to offer tax credits for retaining jobs during the recession. Overall, revenue from state business taxes has been softer than expected to date, David Zin, chief economist with the Senate Fiscal Agency, told lawmakers last Wednesday at a biannual revenue estimating conference in Lansing. That includes both the 6 percent corporate income tax, which was adopted shortly after Gov. Rick Snyder took office in 2011, and the repealed Michigan Business Tax, which companies that claim ongoing tax credits are allowed to continue to pay until the credits expire. Combined with slower growth in income tax revenue, general fund revenue is projected to be down $178.8 million in the fiscal year that ends Sept. 30 and $114.1 million in the 2018 fiscal year from estimates made in January, new forecasts show. On the flip side, School Aid

INSIDE

Consumers announced it would supply 100 percent of the new Switch data center’s electricity needs through renewable energy. Switch recently opened a 1.8 millionsquare-foot data center in Grand Rapids in the former Steelcase pyramid building. Fund revenue, in part due to improving sales tax collections, is expected to be above January forecasts by a combined $340.3 million this year and next.

Consumers Energy plans for ‘green rider’ tariff Consumers Energy Co. said last week that it has asked the Michigan Public Service Commission to ap-

th A NNUA L

Kenneth Eisenberg

prove a special type of power purchase agreement for electricity that would allow large companies to purchase 100 percent renewable energy for their power needs. Last year, Jackson-based Consumers announced it would supply 100 percent of the new Switch data center’s electricity needs through renewable energy. Switch recently opened a 1.8 million-square-foot data center in Grand Rapids in the

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Education

OCC board chair orchestrated ouster of ex-chancellor Meyer, supporters say

By Kirk Pinho kpinho@crain.com

The sudden removal of Oakland Community College Chancellor Timothy Meyer resulted in some of his supporters, including the county’s top elected official, pointing fingers at the board chairman as the mastermind. John McCulloch, who did not return multiple messages seeking comment, cobbled together the

votes to place Meyer on administrative leave in a 5-1 vote during a closed-door hearing Tuesday night and name Peter Provenzano, formerly vice chancellor of administrative services, as interim chancellor, according to several of Meyer’s supporters. During his nine-year tenure, he helped bring the Goldman Sachs Foundation’s 10,000 Small Businesses program to the region, and spear-

headed a $21 million expansion of the college’s Southfield campus, among other accomplishments, according to his OCC bio. Daniel Kelly, the former OCC board chair and current member of the Michigan State University board of trustees and board member and equity partner for Troy-based law firm Giarmarco Mullins & Horton PC, said Meyer’s top SEE MEYER, PAGE 16

jgreene@crain.com

Timothy Meyer: Removed from OCC post.

John McCulloch: Orchestrated ouster, sources say.

Land contract woes

PHOTOS BY JOEL KURTH/BRIDGE MAGAZINE

Loose regulations make land contracts a tool to exploit low-income homeowners By Joel Kurth Bridge Magazine

Denise Pope put a down payment on hope as much as a house. Sure, the home wasn’t much: An 800-square-foot wood bungalow, barely big enough to contain her four children and husband. There were holes in the walls, probably from thieves getting to copper pipes. Like most empty Detroit homes, it lacked a furnace and water heater. But it was in a good neighborhood, Rosedale Park, near a big playground. And the house came with a promise: Put $3,500 down, pay $500 per month plus $82 in taxes, and it would be hers

MUST READS OF THE WEEK

Penalty would prod hospitals to report data By Jay Greene

Housing

Denise Pope is trying to buy a bungalow in Rosedale Park on a land contract.

Health care

“I thought this could be our way up.”

in a little over two years. “I thought this could be our way up,” said Pope, 35, a custodian and longtime renter. “We could fix it up, put in some value, build some equity and maybe one day rent it out or have an asset to pass onto my kids.” It didn’t work out that way. Within months after moving in last year, Pope received two legal notices. One informed her the house was in tax foreclosure over a $4,900 debt that predated her even setting foot in the home. A few months later, she was served with eviction papers due to a rent squabble that is still playing out in the courts.

Denise Pope

SEE LENDING, PAGE 17

Employers and consumers of health care in Michigan could have an improved online resource available to them by early 2018 to help them pick a hospital based on quality and patient safety. A new provision in the state’s fiscal 2018 budget, which is pending final approval by the state Legislature and Gov. Rick Snyder, would impose penalties on hospitals that have not yet submitted “consensus-based nationally endorsed standards” to a public website by Jan. 1. Those hospitals that fail to submit required quality data would have 25 percent of their annual graduate medical education payments from the state withheld. That penalty comes after a similar provision last year encouraging hospitals to submit quality data that didn’t contain financial penalties failed to increase the number that do report much. A controversial question is which website would host the quality and safety data under the law. The Michigan Health and Hospital Association wants to be the host of the data and is currently improving its website called VerifyMICare. But legislators have in mind The Leapfrog Group, a Washington, D.C.-based private business advocacy group that ranks hospitals by a variety of patient safety metrics. Currently, about half of Michigan’s 130 hospitals, including eight-hospital Beaumont Health and 15-hospital Ascension Health Michigan, decline to submit data to Leapfrog’s Hospital Safety Score, usually objecting to its methodology. The Leapfrog survey, in which more than 1,800 hospitals participate, is designed to reflect how well hospitals avoid medical errors and patient harm. Last year, Sens. Jim Marleau, R-Lake Orion, and Mike Shirkey, R-Clarklake, inserted language in Section 1805 of the state’s 2017 budget that encourages hospitals to submit quality and patient safety data to an unspecified public website, which most experts believe is Leapfrog. But Marleau told Crain’s that hospitals this year can either continue to submit survey data to Leapfrog or use the MHA’s VerifyMICare website to comply. The updated VerifyMICare is expected to be ready by the end of this year, hospital officials said. SEE DATA, PAGE 18

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Coalition defending auto no-fault system backs fee schedules By Lindsay VanHulle

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centers from fee schedules. The organization said in a news release that its new position is intended to stop an insurer practice of delaying payments or paying less than what is owed to health care providers. In a statement, the Insurance Alliance of Michigan, which represents property and casualty insurers that do business in Michigan, said â&#x20AC;&#x153;we welcome CPAN to this important effort to reform Michiganâ&#x20AC;&#x2122;s broken auto no-fault system by reining in rising medical costs and bringing much-needed relief to Michigan consumers.â&#x20AC;? Lawmakers have tried for years to reform the no-fault system to lower premiums while maintaining benefits, but legislative attempts have failed as powerful insurance and health care lobbies have not been able to agree on changes. Reforming no-fault is a priority for Detroit Mayor Mike Duggan, who said the cityâ&#x20AC;&#x2122;s comeback will stall if auto premiums arenâ&#x20AC;&#x2122;t lowered. A package of bills has not yet been introduced this legislative term, which runs through the end of 2018.

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LANSING â&#x20AC;&#x201D; A coalition defending Michiganâ&#x20AC;&#x2122;s no-fault auto insurance system is calling for fee schedules for health care providers that treat crash victims, a position it used to oppose. The Coalition Protecting Auto NoFault, or CPAN, last week released its policy agenda as state lawmakers again queue up reforming Michiganâ&#x20AC;&#x2122;s no-fault system â&#x20AC;&#x201D; a solution that has long eluded Lansing. Michigan is one of 12 no-fault states, but the only one that does not cap medical benefits. Michigan drivers also pay some of the nationâ&#x20AC;&#x2122;s highest auto insurance rates â&#x20AC;&#x201D; a problem especially acute in Detroit, where sky-high premiums have made buying insurance so unaffordable that drivers often turn to seven-day policies to get their vehicles registered with the state, or simply drive uninsured. Among the coalitionâ&#x20AC;&#x2122;s 24 positions: Adopting fee schedules based on 185 percent of workersâ&#x20AC;&#x2122; compensation; capping hourly rates paid to family members who

offer attendant care to crash victims; pursuing fraud and claims abuse; ending the practice of using credit scores and other non-driving-related factors when setting rates; requiring insurers to get state approval before raising rates, similar to what utilities have to do; and subjecting the Michigan Catastrophic Claims Association, a public entity that charges fees to drivers to reimburse victimsâ&#x20AC;&#x2122; care when claims top $545,000, to state open records laws. â&#x20AC;&#x153;Insurance companies have been asking lawmakers for several years to adopt cost-containment measures, including fee schedules and attendant care, so we believe we have landed on some strong reforms where we can find common ground,â&#x20AC;? CPAN President John Cornack said in a statement. CPAN, which was founded in 2003 and counts health care providers, medical associations and consumer advocacy groups as its members, had opposed both the fee schedules and attendant care caps. Its new proposal would exclude hospitals that are designated as Level 1 trauma

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DTE Energy Co. is making a big bet that coal isnâ&#x20AC;&#x2122;t the future. The energy company announced Tuesday a company goal to rid itself of coal-burning power plants by 2040 in an effort to reduce harmful carbon emissions by 80 percent by 2050. Gerry Anderson, chairman and CEO of DTE, said the Detroit-based utility will invest $15 billion over the next two decades in renewable energy and natural gas-burning power generation for its 2.2 million electricity customers in Southeast Michigan. Anderson said the utilityâ&#x20AC;&#x2122;s shift away from coal for electricity is driven by reducing greenhouse gases blamed for global climate change. â&#x20AC;&#x153;Climate change is a big deal,â&#x20AC;? Anderson said Tuesday in a briefing with reporters. â&#x20AC;&#x153;I think itâ&#x20AC;&#x2122;s the policy issue of our era. Certainly for the energy issue, it is the defining policy issue â&#x20AC;&#x201D; and I think itâ&#x20AC;&#x2122;s going to be that way for many years to come.â&#x20AC;? Anderson said DTE executives believe the company â&#x20AC;&#x153;and the country have a responsibility to addressâ&#x20AC;? climate change. â&#x20AC;&#x153;There's no suckersâ&#x20AC;&#x2122; choice between a healthy environment and a health economy,â&#x20AC;? Anderson said. â&#x20AC;&#x153;We can have both as we attack this problem, as long as we do it in a smart way.â&#x20AC;? DTE has set a goal of producing 40 percent of its electricity from wind, solar, biomass and hydro electric dams. In 2016, DTE generated 6 percent of its electricity from wind tur-

DTE ENERGY

DTE Energy Co. is investing in wind parks like these in Michiganâ&#x20AC;&#x2122;s Thumb area as part of its goal to produce 40 percent of its electricity from wind, solar, biomass and hydro electric dams. bines and 4 percent from other forms of renewable energy. â&#x20AC;&#x153;The transition is already well under way,â&#x20AC;? Anderson said. Anderson said the $15 billion investment plan can be paid for by rate increases that are kept within the rate of inflation that will be subject to approval by the Michigan Public Service Commission. â&#x20AC;&#x153;It can be done so the rate growth works,â&#x20AC;? he said. The majority of DTEâ&#x20AC;&#x2122;s expanded renewable energy portfolio will be in wind turbine generation, particularly in mid-Michigan where wind farms have been more welcomed than in the Thumb and other parts of the state. â&#x20AC;&#x153;Wind continues to be substantially cheaper,â&#x20AC;? Anderson said. DTE has been building a 250-acre solar farm with 200,000 panels in Lapeer that is expected to be come online later this year. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re going to push into solar, but itâ&#x20AC;&#x2122;s going to be a minority player

until its economics cross over with wind,â&#x20AC;? Anderson said. DTE plans a series of coal power plant retirements in the early 2020s with its last plant in Monroe scheduled to be shuttered by 2040, Anderson said. Under DTEâ&#x20AC;&#x2122;s long-term planning, 40 percent of electricity by 2040 would come from renewable sources, 40 percent from natural gas and the remaining 20 percent would come from the utilityâ&#x20AC;&#x2122;s Fermi II nuclear power plant on Lake Erie north of Monroe. Late last year, the U.S. Nuclear Regulatory Commission renewed DTEâ&#x20AC;&#x2122;s license for Fermi II through 2045. The nuclear plant came online in 1988. â&#x20AC;&#x153;It conceivably will seek another license renewal after that,â&#x20AC;? he said. The goal of reducing carbon emissions by 80 percent starts with a baseline year of 2005, the national standard for tracking reduction in pollution, Anderson said.

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Barracuda to invest $2.3M, add 115 jobs in Ann Arbor

Estate Tax Experience

In Your Corner.

By Kurt Nagl

knagl@crain.com

Barracuda Networks Inc., the Silicon Valley IT security firm founded by University of Michigan graduate Dean Drako, is expanding in Ann Arbor. The expansion is expected to generate $2.3 million of investment and create 115 jobs. Barracuda is expanding in response to market demand for its data protection services, according to a news release from the Michigan Economic Development Corp. The expansion in Ann Arbor, which beat out competing sites in Georgia and California, earned the company a $750,000 Michigan Business Development Program performance-based grant. “We benefit greatly from (Ann Arbor’s) growing tech community, the vibrant downtown area, and the many fine universities across the state of Michigan that produce top engineering talent,” Rod Mathews, senior VP and general manager of data protection at Barracuda, said in a written statement. Barracuda opened its first office in Ann Arbor in 2007. It moved into the building that once housed Borders bookstore on State Street in 2012 and is one of the city’s largest technology employers. The economic development organization Ann Arbor Spark is offering talent awareness assistance to the company during the hiring of new employees.

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OPINION

Dining boom: Jobs for Detroiters?

Letter to the Editor

Term limits result: unaccountable legislators

ames Ingram flunked retirement the first time. He retired as a waiter and manager at the Birmingham Country Club in the early 1990s, but a country club member encouraged him to take a job at the Detroit Athletic Club in 1994. And for the next 23 years, Ingram astonished members and guests with a remarkable ability to remember names, companies, favorite tables and club numbers. Remember “Cheers,” where “everybody knows your name?” The DAC is an upscale version — “Cheers with suits” — and often the first person to know your name was “Captain Jimmy,” who presided in the DAC’s Grill Room for breakfasts and lunches. At age 88, Ingram retired again in April — fully 78 years in the hospitality business when you include his childhood job as a bellhop in his native Alabama. This time, retirement just might take — unless local restaurateurs recruit him to help train their wait staff. Which might not be a bad idea. The explosion of new restaurants in Detroit has touched off a battle for experienced wait staff, according to restaurateur Dave Kwiatkowski, who either solely or with partners owns Wright & Co., Peterboro, Bad Luck, Sugar House and Honest John’s — all in downtown, Midtown or Corktown. “We don’t have a local asset for hospitality training,” Kwiatkowski told me. “This is not a two-day seminar. It’s a six-week course on how to properly deal with the front of the house.” In all the talk about matching jobs to Detroiters, hospitality is rarely mentioned. It should be. Kwiatkowski says wait staff can earn, on the low side, $40,000 and at the higher-end restaurants at least $60,000. Without

James Ingram, often called Captain Jimmy, retired from the Detroit Athletic Club last month at age 88.

MARY KRAMER Group Publisher

a college degree. What if Detroit’s workforce planners worked with members of the new Detroit Restaurant Association chapter to design and create a curriculum? Kwiatkowski said he and his peers would pledge to hire graduates of a six-week training, then offer

KEN VOYLES

feedback on what the inaugural class is lacking, from greeting guests to busing tables to wine service. “These skills are not taught over a couple of hours, but you can learn them,” Kwiatkowski says. “Anyone can learn them.” Ingram disagrees. “You can’t train everybody,” he says, reflecting on employees over the years who arrived late, talked too much, were too intrusive and were simply too loud. “Being on time. That’s number one. You can’t do anything if you aren’t here.” J. G. Ted Gillary, executive manager at the DAC, has instituted continuous improvement and quality measures and training at the club since arriving in 1994.

“Most of us hire based on attitude and then train,” he says. And at a club like the DAC, perks can include health care coverage and a 401(k). If a “hospitality academy” took shape, Ingram could be a guest speaker. His own training included the suggestion from his schoolteacher/wife who advised him to get a list of country club members from the accounting office so he could memorize account numbers. Those names and numbers stuck — for decades. “This is what I like to do,” Ingram said, reflecting on his career. “I don’t believe I could be anything else. My wife has three degrees, she can’t remember anybody’s name.”

portant this is. We are delighted to see our city take on the task of repairing our roads and bridges. There are a lot of important assets for a city when you start to sell its virtues. Certainly, professional sports teams are right near the top. Winning sports teams are even better. Our public schools, which we are working hard to get right, are critically important. And in today’s competitive environment, our cultural institutions, symphony, art museum, opera are all important in attracting corporations to locate in Detroit. And let’s not downplay an airline system that gives corporations access to world markets as well as airports that can accommodate corporate flights as well. There are probably fewer more competitive markets than economic development. Plant expansions are

highly coveted, and we have to realize that Detroit is competing with cities all over North America for development. An investment of $64 million for Detroit’s roads will certainly make its citizens happy, but at the same time it will have an equally important role of impressing potential new corporate citizens. Every time we fix up our own community it has the double impact of helping impress visitors. When we have a world-class event such as the Detroit Grand Prix on Belle Isle, what a great opportunity to invite potential investors, see our city at its best and meet impressive local citizens like Roger Penske. That’s how we develop our economy. I look forward to seeing all those orange barrels on our streets. The mixed emotions mask what is simply good news.

Bring on the barrels

veryone has mixed feelings about all those orange barrels all over our state. We hate them for all the inconvenience they cause, but we know that it also means someone is working on our dilapidated roads. Now we have happily learned that the city of Detroit is ponying up $63 million to fix the roads in our city. As we have said about the state’s repair efforts, it’s about time. One of the nice by-products of the new trolley line is how smooth and nice they made Woodward when they laid down the rails. We are not going to get rails all over our city, but we are glad to know the city has a plan to repair most of our local roads. If it takes an election to get it done, so be it. In a mystifyingly political world, whatever works. I cannot imagine anything worse from an economic standpoint than

KEITH CRAIN Editor-in-chief

to have a potential investor drive in from City Airport and be facing a slew of potholes and lousy city streets. It has to offset so many of our city's positive attributes. There is nothing more important to economic development then good streets and highways. And nothing will chase away potential investors faster than bad infrastructure. With our fourth Detroit Homecoming this fall, we know how im-

Thank you for Chad Livengood’s recent article “The Business Case against Legislative Term Limits,” voicing concerns over our current system. The Metropolitan Affairs Coalition, a group of business, labor, government and education leaders from across Southeast Michigan, shares your misgivings and has adopted a position to eliminate or vastly lengthen term limits for legislative office in Michigan. MAC believes that experienced leadership will yield more effective government. Twenty-six of the 38 Senate members are fully term limited and must leave office at the end of next year. Their departure means they will be insulated from the consequences of the decisions they make. As an example, our senators committed the state to shifting $600 million from the general fund to support our roads, but that provision will not take effect until after two-thirds of them have left office. Balancing the state budget then will be someone else’s problem. We have all been taught from an early age that we should be accountable for our actions and the decisions we make. However, through term limits we have abandoned this concept with our Legislature. Of course the massive upheaval that will occur in the Senate next year is already having repercussions in the House as well, where many will be vying for those open seats. Decisions made by House members may not be focused solely on improving the state, but also on improving their electability against a neighboring legislator. Cooperation turns to competition very quickly under the extreme term limits we have in place. Enshrining the concept that inexperience is preferred to experience is no way to run our state. You would not seek out the most inexperienced person to manufacture your car, deliver your energy, or handle your home mortgage. So why do we want to limit the experience of those running our state, with all of its complexities and human consequences? Mark Gaffney, MAC Co-Chair; Business Agent, Teamsters Local 214 John Rakolta Jr., MAC CoChairman; CEO, Walbridge Beth Ardisana, MAC treasurer; chair, chief executive officer, ASG Renaissance Dr. Daniel Little, MAC vice chair; chancellor, University of MichiganDearborn Conrad Mallett Jr., MAC secretary; executive vice president and chief administrative officer, Detroit Medical Center

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 2 2 , 2 0 1 7

The business of public relations hinges on relationships A reporter asked a question the other day: “Why are so many PR people just sending a written statement instead of giving me some background on the story?” It’s a very relevant question as the business of public relations continues to evolve. It also exposes what could become a detrimental practice among some PR professionals. As in any business, relationships are crucial. In public relations, relationships with journalists must be developed and nurtured. You can’t just send a statement without background or context and expect a story to turn out fair or to meet your expectations. Credibility, trust and honesty are still the cornerstone of a good public relations practice. Part of this phenomenon can be attributed to the way we communicate these days. It’s easier to send a text than to pick up the phone. In our offices, we’re more likely to send an email than to walk down the hall for a discussion. And social media has helped create an abrupt and often rude culture. So I’m sure some PR professionals think: Why have a 5 minute conversation with a journalist when it’s easier to tweet at them? Conversely, how can you expect a journalist to get the story right when you don’t talk to them? What’s happening in public relations today has serious consequences for business. Stories now live online forever and a negative story can have longer-term devastating consequences for business. You can’t always blame the media. If you’re part of the story, you have to be part of the storytelling. There are many factors behind the trend of just sending a written statement. J Many people in PR think that social or digital media can drive any story, and don’t realize how important relationships are to developing a story. Social media is important, but it is not a substitute for a good reporter and a good story. J Reporters can be pressed for time to meet a deadline and sometimes just ask for a statement they can insert into a story to demonstrate balance. J There is also a mistrust of the media, or at least with certain reporters. So rather than take a chance, a PR person will just send a few sentences in an email. J There is pressure from clients who don’t understand that a PR person can’t dictate how a story is written. Some PR people feel they’ll be fired if a story doesn’t turn out how the client wants. I’ve got news for that type of client — public relations is not a science. You can’t expect to have certain inputs that dictate certain outcomes. Frankly, the only way to guarantee a story is written a certain way is to buy the publication or publish it yourself as a paid advertisement. (This could also be

OTHER VOICES John Truscott

Truscott is president of Truscott Rossman, a bipartisan statewide public relations firm with offices in Detroit, Lansing and Grand Rapids.

through sponsored content or contributed content. Many publications — including Crain’s — are open to unique arrangements if the content is of high enough quality.) Like most businesses, the business of public relations hinges on reputation and relationships. But in the fast-paced online world where you order an Uber ride from someone you’ve never met, or order an Amazon delivery for the next day, many professionals have moved beyond understanding the need to establish solid, long-term relationships.

What’s happening in public relations today has serious consequences for business. Stories now live online forever and a negative story can have longer-term devastating consequences for business. What my three decades in this business have taught me is that the PR and news business is changing faster than ever. Nobody can predict where it will end up. But I know the news will always be delivered in some form and

through channels we may not even imagine yet. Be ready to adapt. Most importantly, there is no substitute for trust and respect built through personal contact and a solid relationship. It’s a basic tenet of any good business.

Not all heroes wear capes. Crain’s Health Care Heroes recognizes today’s industry professionals who are dedicated to helping save lives and improving access to care.

NOMINATE A HERO IN ONE OF THESE EIGHT CATEGORIES: • Corporate Achievement in Health Care • Innovation in Oncology Care or Research NEW • Innovation in Heart or Vascular Care or Research NEW • Innovation in Other Health Care Services or Research NEW • Administrator or Executive NEW • Physician • Allied Health • Board Member

LAST CHANCE!

THE DEADLINE TO NOMINATE IS FRIDAY, MAY 26.

For more information and to submit a nomination visit: crainsdetroit.com/nominate

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 2 2 , 2 0 1 7

SPECIAL REPORT: NONPROFIT COMPENSATION

The effects of change

Ron Kagan

Lincoln Smith

Sandy Baruah

Richard Gilfillan

John Thorhauer

Executive Director and CEO, Detroit Zoological Society

President and CEO, Altarum Institute

President, Detroit Regional Chamber

President and CEO, Trinity Health

President and CEO, United Methodist Retirement Communities

2015 total compensation:$927,359

2015 base pay: $294,191

2015 total compensation: $690,116

2015 base pay: $1,428,965

2015 total compensation: $589,307

Gilfillan got a bonus of $877,802 in 2015 vs. $475,771 the year before, reflecting his joining the organization in 2013. With incentive pay and a $405,410 deferred retirement benefit, his total compensation rose 36 percent.

Thorhauer got a 23 percent base pay increase in 2015 and a larger bonus to acknowledge meeting of goals for the nonprofit, his efforts in expanding the nonprofit and making its programs more innovative.

2015 base pay: $368,875 Kagan’s 2015 total compensation increased 21 percent by reported numbers. But the total was inflated by a $460,000 deferred compensation payout that was also reported in an earlier year.

2015 total compensation: $1,489,767 Smith’s compensation in 2015 and 2014 included previously reported deferred compensation. Without that, his pay increased by 21 percent to reward Altarum doubling operating income and decreasing its debt to net asset ratio.

2015 base pay: $373,089 Baruah’s total compensation increased nearly 33 percent in 2015 due to a lump-sum, five-year payout of incentive pay. Without it, his total compensation increased just 1 percent from 2014.

2015 total compensation: $2,756,848

2015 base pay: $357,882

Turnover, retirements factor in big changes in compensation By Sherri Welch swelch@crain.com

The median pay for the top-paid nonprofit CEOs didn’t change much in 2015, the most recent year for which data is available. That doesn’t mean things stayed the same for individuals. According to an analysis of data collected by Crain’s, turnover and impending retirements among the top-paid nonprofit CEOs were a leading factor in big changes in compensation, from double-digit pay increases to drops in executive pay. Turnover dampens salaries in a few ways. Impending deBill Weatherston: parture of executives often spurs Health care costs lump-sum paystrong influence. outs and payment of accrued benefits such as vacation, and the initial year of salary for an incoming CEO is often lower, said Bill Weatherston, vice president of executive search firm Harvey Holhauser. While base pay is often equal to or slightly higher than the prior CEO, bonuses are generally not paid until after the first year for the new CEO, he said. Lump-sum payments and reporting requirements, for some, to restate previously reported deferred compensation payments, further skewed year-over-year comparisons

in 2015. The result for the 59 highest paid CEOs on Crain’s list for 2015 was little movement in the median pay rates. The turnover among the highest paid is part of a larger retirement trend in recent years across local nonprofits of all sizes, said Gray Dembs, president of the Southfield-based Non-Profit Personnel Network. He’s documented over 140 CEO turnovers in Southeast Michigan (including Ann Arbor) over the past three years. Spurring them is the retirement of founders, especially in human services, and to some degree, health care reform, he said. “An economy, still catching up with itself from the 2008-2012 economic downturn, is forcing nonprofit CEOs, under greater board and community scrutiny, to bring in bigger dollars and/or get more creative with earned revenue strategies,” Dembs said. “And not every CEO is prepared to implement that type of strategy.” Health care could also be playing a more direct role in holding compensation increases down for some, said Weatherston. “There is such an incredible amount of discussion in the press ... about the extraordinary cost of health care, in general, that the boards of the nonprofit health organizations along with the management teams may be purposefully limiting compensation increases,” he said, noting political pressure on health care management is likely an equally strong in-

Full compensation database with data membership Members of Crain’s data program can access an expanded database of local and state nonprofit compensation for 2015 and 2014. It is especially useful for nonprofit board members or nonprofit executives seeking to benchmark or research compensation trends. For more information, see crainsdetroit.com/data. fluence on the desire to moderate compensation increases. The list of top-paid nonprofit CEOs was culled from a online database compiled by Crain’s of the compensation paid to more than 125 local and statewide nonprofit CEO and CFOs, researched to provide larger nonprofits with benchmarking data for comparison when setting executive compensation. The list includes compensation data from social services agencies, health care, grantmaking foundations, fundraising foundations, arts and culture organizations and business groups, reported to the Internal Revenue Service on calendar 2015 and fiscal 2016 990 forms. Many nonprofits that are still completing their fiscal 2016 990s provided compensation data to Crain’s separately. In metro Detroit, the top earners across those groups had a median base pay of $307,301 in 2015, down 0.2 percent from the median in 2014 and median total compensa-

tion was $415,700, down 1.3 percent from 2014. National averages for 2015 aren’t yet available, but for some comparison, the median pay for top nonprofit executives increased by 2.6 percent in 2014, according to GuideStar’s annual compensation survey released last fall. In metro Detroit, modest increases of about 3 percent on average were the standard for nonprofit CEOs in 2015, Weatherston said. Increases were tied to the inflation rate more than they were to any specific movement on the overall salary scale for CEOs, he said. And they varied “tremendously” based on size of the organization, with the larger nonprofits that had recovered more quickly from the 2008-09 recession tending to provide slightly higher increases.

The highest paid At the top of Crain’s list of the highest-paid CEOs in metro Detroit

was Blue Cross Blue Shield of Michigan CEO Dan Loepp with $9 million in total compensation. That was nearly double that of the next highest paid CEO on the list: retired Henry Ford Health System CEO Nancy Schlichting who was paid $4.77 million that year. Statewide, top earners included: J Delta Dental Plan of Michigan’s President and CEO Laura Czelada who earned $5.7 million. J Spectrum Health System President and CEO Richard Breon who earned $4.18 million. J Priority Health CEO Michael Freed with $2.08 million in 2015. Not on the list for 2015 is Flintbased McLaren Health Care, which declined to provide compensation data in advance of completing its 990 for the year that ended Sept. 30, 2016. McLaren CEO Philip Incarnati was the second-highest paid nonprofit CEO in the state in 2014, with $6.98 million in total compensation. Forty-nine of the executives on the list were in their positions for both 2014 and 2015, meaning they could be compared for year-overyear change. Of those, nearly half received single-digit pay increases in 2015. Nine saw double-digit base pay raises, and 13 took base pay cuts, according to the reported numbers. Over half received incentive compensation, continuing a trend Crain’s first identified among local nonprofit leaders in 2004. SEE CEOS,PAGE 9

Inside: Blue Cross Blue Shield of Michigan has highest-paid nonprofit executive, Page 9 | A listing of the top-paid nonprofit executives by category, Page 10

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 2 2 , 2 0 1 7

Blue Cross’ Loepp highest-paid nonprofit executive By Sherri Welch swelch@crain.com

The metro Detroit nonprofit led by the highest-paid CEO stands out not only for the amount it pays its CEO but also for its unique history as various kinds of nonprofit. Dan Loepp, president and CEO of Blue Cross Blue Shield of Michigan for the past 12 years, was the highest-paid executive on Crain’s list of toppaid nonprofit executives in 2015, following Dan Loepp: Salary salary boosts the past several boosts past years. several years. He earned $9.03 million in total compensation, including $6.5 million in bonus/incentive compensation to recognize performance in 2014. Blue Cross had a net income gain of $295 million that year.

CEOS FROM PAGE 8

Muddying the comparative waters in 2015 were reporting requirements and lump sum payouts that increased or decreased total compensation for a number of executives on the list. They skewed total compensation percentage change numbers significantly, in some cases. For example, Detroit Zoo CEO and Executive Director Ron Kagan’s total compensation in 2015 appeared to increase nearly 21 percent. But upon closer review, that percentage increase is inflated by a $460,000 deferred compensation payout that was reported in an earlier year. Per IRS rules, deferred compensation must be reported both in the year it is accrued and in the year it is vested, said Patricia Janeway, communications director for the Detroit Zoological Society. Without the restated deferred compensation in 2015, his pay decreased by 39 percent from 2014 when he got a $384,424 deferred compensation payout that boosted his income. The same held true for Lincoln Smith at Ann Arbor-based health care think tank Altarum Institute. His total compensation rose 13 percent to $1,489,767 in 2015, but it included a previously reported deferred compensation payout of $450,040. His total compensation in 2014 also included a restated deferred compensation payment. Without either of those restated payouts clouding the picture, Smith’s total compensation increased 20 percent to 1,039,727 in 2015. Detroit Regional Chamber President Sandy Baruah saw a 7.99 percent base pay increase by the numbers in 2015, reflecting a merit increase the chamber gave him late in 2014, said CFO Karen Belans. His total compensation in 2015 increased nearly 33 percent, according to the reported numbers. That figure included $284,812 in reported incentive compensation. About $165,000 of that was a five-year payout of incen-

While his $1.54 million in base pay didn’t change, his total compensation increased 21.6 percent in 2015. Loepp’s salary began increasing significantly even before Blue Cross Blue Shield’s conversion from the state-legislated nonprofit insurer of last resort to a nonprofit mutual insurance company at the end of 2013. As Crain’s reported in March, Loepp’s compensation rose from $3.86 million in 2012 to $6.67 million in 2013, $7.4 million in 2014, $9 million in 2015 and $10.9 million last year in 2016. That adds up to 182 percent growth in Loepp’s compensation over the past five years. The 21 percent increase last year came despite Blue Cross netting $344.3 million in losses in 2015. His incentive and performance-based compensation considers social mission goals related to delivering value to members, as well as operational performance, said Andrew Hetzel, Blue Cross vice president for corporate communications. Blue Cross Blue Shield contracts

with an independent compensation consultant to do compensation benchmarks of other Blues organizations of similar size and membership and for-profit peers, Hetzel said. For 2016, Blue Cross reported just under $26 billion in revenue. Total membership stood at 4.61 million in Michigan and 5.34 million nationwide. “Over the last six years, Dan Loepp has led our $26 billion organization through a strong record of performance, despite the transformational changes impacting our industry,” Hetzel said in a statement, noting the organization has seen six straight years of membership growth, navigated the rollout of the Affordable Care Act and changed its corporate structure. Talent retention part of Blue Cross’ compensation strategy. Given that it’s nonprofit, the organization can’t compensate with stock or options like publicly traded companies such as Aetna Inc., UnitedHealth Group Inc. and Humana Inc., he said.

“So how do we compete with an organization that does?” The answer, Hetzel said, is by providing higher cash compensation to top leadership. Unlike most nonprofits that secure tax-exempt, nonprofit status from the Internal Revenue Service, Blue Cross Blue Shield of Michigan is a nonprofit by state statute. Before 1986, Blue Cross Blue Shield organizations were tax-exempt under the federal 501(c)(4) nonprofit designation as social welfare plans. The Tax Reform Act of 1986 revoked the federal exemption because the plans sold commercial-type insurance. The Michigan organization has operated as a nonprofit under state law since 1980. With its recent conversion to a nonprofit mutual health insurance company, Blue Cross Blue Shield now pays city and local property taxes, a 1.25-percent premiums tax instead of the 6 percent corporate income tax, and the federal taxes it had

been paying. That sets it apart from many nonprofits. Yet, like federally designated nonprofits, it has a mission, said Hetzel. The insurer is in the business to deliver benefit to its membership through lower rates, rather than to provide dividends to ownership, Hetzel said. “Being a nonprofit, by definition, means we put the resources to work to improve health care for our membership and keep it affordable.” Blue Cross also provides a public benefit in the form of required payments to the Michigan Health Endowment Fund which is focused on protecting vulnerable people in Michigan. The law that converted Blue Cross to a nonprofit mutual health insurance company requires it to contribute $1.56 billion to the fund over 18 years. To date, it’s paid $270 million, Hetzel said.

tive pay that Baruah elected to take that year, Belans said. Without the lump sum payout, Baruah’s total compensation in 2015 would have been just 1 percent higher than the total compensation paid to him in 2014. Yet, the significant increase of others on the list was an accurate reflection of rewarding performance, those nonprofits said. “The economic recovery was a driver of higher increases,” said Paul Creasy, partner with Avon, Ohiobased Organizational Consulting Group LLC. It enabled nonprofits to expand operations, secure more revenue and in turn, reward CEOs. “If an organization is not rewarding its talent adequately, it could get more turnover. It’s almost a given,” he said. Schlichting got $2.4 million in incentive pay in 2015, nearly double the year before. That boosted her total compensation by 34 percent, reflecting Henry Ford Health’s substantial improvement on key metrics between 2013 and 2014, Kathy Oswald, senior vice president and chief resources officer said in an emailed statement. Schlichting also received a special retention award. The same was true for Health Alliance Plan President and CEO James Connelly, Oswald said. His total compensation increased 69 percent, reflecting improved performance for the nonprofit HMO, along with his move from the CFO job at Henry Ford Health System to CEO of Health Alliance Plan in 2014. Blue Care Network CEO Kevin Klobucar got a 25 percent base pay raise in 2015, reflecting his promotion to senior vice president of Blue Cross Blue Shield of Michigan from vice president. The bump also reflected Blue Care’s stellar year in 2014 when it received high quality ratings and membership increased by more than 150,000 to 879,853 commercial, Medicare and Medicaid members in 2014, said Helen Stojic, director of

corporate affairs for Blue Cross Blue Shield. Among social service nonprofits, United Methodist Retirement Communities President and CEO John Thorhauer got a 23 percent base pay increase in 2015 and an increased bonus. “The board’s determination of compensation for John is measured against meeting board-established goals,” Karen Owen, marketing and campaign manager for United Methodist Retirement Communities, said in an email. “Our facilities and services have expanded dramatically and the innovation brought to the care and housing options we offer our residents and their families each day has established our organization as the leader in senior living in Michigan.” Health care and universities — which Crain’s doesn’t include on the list of the top-paid nonprofit CEOs given public universities’ ties to the state government — have shown the most significant increases in salary, Weatherston said. They compete nationally for talent. At the same time, consolidation, especially in health care, leaves remaining CEOs with more responsibility. And that positions them to command higher salaries, Weatherston said. Amid the increases, 13 executives showed pay decreases in 2015. Southwest Solutions CEO John Van Camp saw a 10.7-percent decrease in base pay in 2015 to $240,510, and a 9.6-percent drop in total compensation bringing it to $273,144. His decrease reflected the fact that Southwest didn’t perform as well in 2015 as it had the year before, as well as the absence in 2015 of a “catch-up” payment the nonprofit’s board authorized over a period of years given his long tenure, Communications Manager Steve Palackdharry said. As much as there are nonprofit boards increasing salaries to keep their CEOs competitive, other local nonprofits are carefully watching the

compensation paid to their top executives and intentionally limiting annual increases to a level they consider reasonable, Creasy said. So long as the stock market increases and estate taxes remain in place, things could continue to increase, he said.

But if estate taxes are removed, as is being discussed at the federal level, there’s less incentive to make contributions to nonprofits. That could have a dampening effect on salaries going forward, Creasy said.

Crain’s Senior Reporter Jay Greene contributed to this story.

Sherri Welch: 313 (446-1694) Twitter: @SherriWelch

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 2 2 , 2 0 1 7

Top-paid nonprofit executives Crain’s compiles a database of compensation of the top executives at prominent Southeast Michigan nonprofits. This year’s review focused on compensation data for calendar 2015, which is the most recent available, given that nonprofits can get extension of up to 11 months after the close of their fiscal year to file their 990 tax forms. It includes large nonprofits and smaller organizations that in our judgment merited inclusion, such as civic and business organizations and smaller nonprofits whose CEOs earned compensation commensurate with their peers at larger nonprofits. Published here are some of the top-paid executives in those categories. An expanded version of this list is available with a Crain’s data membership at crainsdetroit.com/lists ARTS AND CULTURE Executive

Organization

2015 base compensation

2015 bonus and incentive

2015 total compensation

2014 total compensation

Ron Kagan

Detroit Zoological Society

368,875

40,737

927,359

767,824

Graham Beal1

Detroit Institute of Arts

244,886

30,000

716,162

476,131

Dominic Dimarco

Cranbrook Educational Community

383,420

50,000

499,161

489,431

Patricia Mooradian

The Henry Ford

326,057

65,000

450,452

419,006

Anne Parsons

Detroit Symphony Orchestra

310,018

446,149

437,007

BUSINESS AND CIVIC ORGANIZATIONS Executive

Organization

2015 base compensation

2015 bonus and incentive

2015 total compensation

2014 total compensation

Doug Rothwell

Business Leaders for Michigan

538,245

100,000

786,898

733,434

Sandy Baruah

Detroit Regional Chamber/ Detroit Regional Chamber Foundation

373,089

284,812

690,116

519,821

Jeffrey Krause 2

SME (formerly Society of Manufacturing Engineers)

305,262

349,032

401,041*

Rodrick Miller

Detroit Economic Growth Corp.3

269,346

10,800

333,430

431,749*

Beth Chappell

Detroit Economic Club

259,520

327,853

327,709

FUNDRAISING FOUNDATIONS Executive

Organization

2015 base compensation

2015 bonus and incentive

2015 total compensation

2014 total compensation

W. Clark Durant

The New Common School Foundation

493,269

545,418

528,200

Carla O'Malley

Oakwood Healthcare System Foundation

154,202

120,917

496,991

500,113

Susan Burns4

St. John Providence Foundations

282,824

66,383

423,297

452,255

Paul Miller

Presbyterian Villages of Michigan Foundation

143,193

12,871

156,064

155,178

Jill Hunsberger5

Eastern Michigan University Foundation

121,665

147,566

81,006*

GRANT-MAKING FOUNDATIONS Executive

Organization

2015 base compensation

2015 bonus and incentive

2015 total compensation

2014 total compensation

Richard Rapson

The Kresge Foundation

660,394

766,732

700,688

Audrey Harvey

Blue Cross Blue Shield of Michigan Foundation

265,056

325,605

685,775

1,049,904

Mariam C. Noland

Community Foundation for Southeast Michigan

541,455

60,000

676,022

590,389

David Egner6

Hudson-Webber Foundation

383,424

4,944

469,860

449,939

Tonya Allen

The Skillman Foundation

382,680

433,308

425,416

Executive

Organization

2015 base compensation

2015 bonus and incentive

2015 total compensation

2014 total compensation

Dan Loepp

Blue Cross Blue Shield

1,540,000

9,000,000

7,400,000

Nancy Schlicting7

Henry Ford Health System

1,515,072

2,369,274

4,766,978

3,563,412

Richard Gilfillan

Trinity Health

1,428,965

877,072

2,756,848

2,030,560

John Fox

Beaumont Health

1,298,411

250,000

2,315,902

1,569,426

James Connelly8

Health Alliance Plan of Michigan

817,685

1,215,949

2,310,126

1,369,923

Executive

Organization

2015 base compensation

2015 bonus and incentive

2015 total compensation

2014 total compensation

Michael Brennan9

United Way for Southeastern Michigan

392,165

75,000

589,307

485,377

John Thorhauer

United Methodist Retirement Communities

357,882

41,775

501,417

423,613

Roger Myers

Presbyterian Villages of Michigan

307,301

29,513

347,818

334,839

Scott Kaufman

Jewish Federation of Metro Detroit/United Jewish Foundation

322,435

340,536

351,822

Scott A. Landry

YMCA of Metropolitan Detroit

201,411

47,500

318,749

267,678

Executive

Organization

2015 base compensation

2015 bonus and incentive

2015 total compensation

2014 total compensation

Kevan Lawlor

NSF International

507,867

965,273

1,898,512

1,676,688

Lincoln Smith

Altarum Institute

294,191

450,040

1,489,767

1,318,454

Jane McNamara1 0

GreenPath Financial Wellness

431,192

475,776

643,193

Larry Alexander

Metro Detroit Convention and Visitors Bureau

371,737

396,058

380,815

Louis Glazer

Michigan Future Inc.

196,829

184,258

HEALTH CARE

SOCIAL SERVICES

OTHER

1Graham Beal retired June 2015. 2Jeffrey Krause was named executive director and CEO in January 2015 3Rodrick Miller replaced George Jackson Jr. as president and CEO in Aug. 2014. 4Susan Burns left in February 2016 for Wayne State University Foundation 5Jill Hunsberger, formerly chief development

officer, was named interim vice president for advancement/ executive director Oct. 1, 2015 6Melanca Clark was named president and CEO as of August 2016. Dave Egner left at the end of 2015 7Wright Lassiter III succeeded Nancy Schlicting, who left at the end of 2016 8Former CEO James Connelly

retired at the end of 2015. Teresa Kline succeeded him in November 2016. 9Herman Gray was named president and CEO in October 2015, succeeding Michael Brennan. 1 0Greenpath Financial Wellness: Kristen Holt was named president and CEO in April 2016. *2014 total compensation was for prior CEO

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First phase of Packard Plant construction to begin next month Fernando Palazuelo plans a $450 million to $500 million redevelopment of the dilapidated Packard Plant at East Grand Boulevard and I-94 over several phases.

By Kirk Pinho kpinho@crain.com

Construction on the $16 million redevelopment of the former Packard Motor Car Co. administration building in Detroit is expected to begin in the next four to six weeks. The developer, Peru-based Fernando Palazuelo, said at an event Tuesday morning at the Packard Plant said he “will not fail” in the effort to redevelop the dilapidated plant on Detroit’s lower east side. “I have renovated buildings all over the world, and I notice the strength and determination of the people here in Detroit that is unlike any other. I am committed to this project and to the lower east side of Detroit,” Palazuelo said. Once remediation and abatement on the 121,000-square-foot building, which sits windowless on East Grand Boulevard as part of the 3.5 million-square-foot shuttered plant, construction will begin to convert it into office and commercial space, said Kari Smith, director of development for Palazuelo’s Arte Express Detroit LLC. It is expected to take two years and cost $23 million, which includes soft costs, Smith said. Crain’s reported in January that construction was expected to begin in the spring. The committed tenants for the four-story building include Silveri Architects, Environmental Consulting & Technology Inc., Testing Engineers & Consultants, Sterling Security and the Detroit Training Center, a nonprofit job training organization, Crain's reported earlier this year. It’s expected to cost $450 million to $500 million to redevelop the entire plant, which Palazuelo bought for just $405,000 in a Wayne County tax-foreclosure auction in 2013. Many local real estate experts have expressed reservations about the project to convert the Packard Plant, which became a symbol of Detroit’s decay and was long the target of vandals, arsonists, graffiti taggers and scrappers. They have a difficult time imagining an economically viable redevelopment of that scale at that site and with the uses envisioned. Those include retail, light industrial space, multifamily and senior housing, office space, recreation and art all co-existing in a largely forgotten part of the city, one previously all but ignored by the redevelopment boom concentrated on Detroit’s central core. In addition to Smith and Palazuelo, others speaking at the event included Wayne County Executive Warren Evans and Detroit City Council member Mary Sheffield, who said the redevelopment is long overdue. “It’s been a long, long time coming,” Sheffield said. Detroit-based Albert Kahn Associates Inc. is the architecture firm on the project; Troy-based O'Brien Construction Co. Inc. is the general contractor.

PHOTOS BY KIRK PINHO/CRAIN’S DETROIT BUSINESS

Fernando Palazuelo paid just $405,000 for the 3.5 million-square-foot Packard Plant on Detroit’s lower east side in a Wayne County tax-foreclosure auction in 2013.

EASY WAYS TO SAVE Warmer weather may make it hard for businesses to save money on their gas and electric bills while still keeping employees and customers cool. That’s why DTE Energy wants you to know what you can do to accomplish both goals. Programming thermostats to automatically adjust the temperature during unoccupied periods and installing motion sensor lights in less used areas are easy ways to save without sacrificing comfort. Replacing water heaters with ENERGY STAR® certified ones will result in even more energy savings. Together, we can reduce energy waste and help your business thrive. For more tips and ways to save, visit dteenergy.com/savenow.

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 2 2 , 2 0 1 7

North American Bancard to acquire Total Merchant Services By Tyler Clifford tclifford@crain.com

PHOTO BY COSTAR GROUP INC.

Global Automotive Alliance acquired the 75,000-square-foot building at 2801 Clark St. in 2013 for an undisclosed price.

Global Automotive Alliance opens new HQ in southwest Detroit By Dustin Walsh dwalsh@crain.com

Detroit-based Global Automotive Alliance LLC opened this week a new headquarters at a former FedEx distribution center in southwest Detroit. GAA acquired the 75,000-squarefoot building at 2801 Clark St. in 2013 for an undisclosed price. The building includes 10,000 square feet of office space and space for a business incubator, which currently houses three entrepreneurial companies, said Sylvester Hester, GAA’s president and CEO. The move is part consolidation of its five subsidiaries under one

roof and plans for growth, Hester said. “This is the first time we’ve consolidated all of our businesses under one roof,” Hester said. “Our companies used to operate as completely separate entities, but now is the time to integrate and share resources.” GAA’s businesses include: ARD Logistics, a national logistics and warehousing firm; Grupo Antolin Primera Automotive Systems, which assembles headliners for Ford Motor Co.; Global SQ, a quality inspection service provider for Toyota Motor Corp.; Key Logistics Solutions, a global logistics and supply chain services firm; and Vitech, a warehous-

ing and distribution services firm. GAA, a certified minority-business enterprise, has 11 employees in the new headquarters now with plans to expand that base over time, Hester said. GAA employs 1,600 globally. Detroit Mayor Mike Duggan, Detroit City Council President Brenda Jones and other community leaders are expected to join the company’s executives for a ribbon-cutting ceremony Thursday. GAA generated revenue of $229 million in 2016, down from $415 million in 2015 due to the selling off of its Vitech gas tank manufacturing assets.

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Marc Gardner, NAB

tory of providing its clients premier business solutions with a strong focus on ease, affordability and customer service. It is these traits that made this acquisition a strategic fit for us.” With the acquisition, NAB will gain access to more integrated software vendors and invest in future technologies to spur more growth, the release said. NAB employs more than 900 employees and TMS employs nearly 300, Tajer said. “NAB is an ideal fit for TMS. This combination unites two companies that share a common vision for sustained growth, industry-forward leadership and strong commitment to customer service,” TMS CEO Joe Kaplan said. “I am confident that the broader platform and combined management team will pave the road for growth.” New York City-based Skadden, Arps, Slate, Meagher & Flom LLP and Westport, Conn.-based Berkowitz, Trager & Trager LLC advised TMS in the deal. Detroit-based Honigman Miller Schwartz and Cohn LLP advised NAB.

Crestmark Bank acquires Florida-based Allstate Capital

You’ve made the chocolate, jam, pasta or cold-pressed juice. Now learn how to connect with buyers and make the sale. Join us as food entrepreneurs share their success stories — and stumbling blocks. Plus grocery executives talk about what they look for in a pitch.

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North American Bancard Holdings LLC has entered an agreement to acquire Woodland Hills, Calif.-based Total Merchant Services Inc., the Troy-based company announced Wednesday. The deal would give the payment processor supplier the seventh highest number of merchant locations in North America and is expected to process about $50 billion annually, the news release said. NAB processes more than $36.2 billion in transactions annually at more than 250,000 merchants nationwide, while TMS processes more than $12 billion at more than 500,000 businesses, NAB spokeswoman Brooke Tajer said. TMS offers payment and business management products services to small- and medium-size businesses. NAB and TMS declined to disclose revenue. Terms of the deal were not disclosed. The deal is expected to close in the second quarter pending regulatory approval. NAB and TMS will continue to operate separately during the transition period, but Tajer did not say if they would operate separately if the deal closes. NAB does not anticipate any changes to its local operations and the company has not discussed changes in executive leadership, she said. “We are ecstatic about this acquisition,” NAB President and CEO Marc Gardner said in the release. “TMS has been an industry staple for more than 20 years and has a his-

“TMS has been an industry staple for more than 20 years and has a history of providing its clients premier business solutions...”

Crestmark Bank has acquired an equipment lender based in Florida, the Troy-based bank announced last week. Allstate Capital LLC leases business, fitness, computer and medical equipment, among others, and provides equipment financing across the nation. The transaction will boost the equipment market share of Crestmark Equipment Finance Inc., the leasing division and wholly owned subsidiary of Crestmark Bank, the news release said. Terms of the deal were not disclosed. A request for comment was not returned. The division will report to Scot Lund, first vice president and head of small ticket leasing. “Allstate Capital is impressive in what they have built,” said Lund. “This will be a great addition to our leasing division, and I look forward to being a part of the strategic growth of Crestmark’s small ticket leasing programs.”

“Bringing this respected small ticket leasing provider to the Crestmark family helps us round out our strategic plans...” Mick Goik, Crestmark

“Bringing this respected small ticket leasing provider to the Crestmark family helps us round out our strategic plans for our leasing division's continued growth — they were the right company at the right time,” Crestmark President and COO Mick Goik said in a statement. “We’re looking forward to providing expanded help and growth for our clients together.” Crestmark’s specialty is an array of business financing, including factoring and asset-based lending.

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 2 2 , 2 0 1 7

DEALS & DETAILS CONTRACTS

Qualitech, Bingham Farms, a technology integrator and software reseller, has installed its hosted phone system at Gold Law Firm, Bloomfield Hills. Website: qualitech. net. J

J Gentleman’s Box, Royal Oak, a subscription box of accessories for men, has partnered with Jim Beam Black, Chicago, Ill., a Beam Suntory company, to release a series of limited-edition boxes in May and September of 2017. Websites: gentlemansbox.com, beamsuntory.com.

EXPANSIONS

J Atrio Systems Inc., Bloomfield Hills, a Microsoft Dynamics CRM consulting and implementation services firm, has opened in Nashville, Tenn. Website: atriocrm.com. J ZIFit Infrared Fitness, Birmingham, an infrared therapy and fitness studio franchise, plans to open a lo-

CALENDAR TUESDAY, MAY 23

ASE Compensation and Benefits Conference. 7:30 a.m.-3:30 p.m.

American Society of Employers. Building and maintaining a successful total rewards system that attracts, retains, and engages employees while keeping up with today’s rapidly changing business environment. Suburban Collection Showplace, Novi. $219 members; $259 nonmembers. Contact: Heather Nezich, phone: (248) 223-8040; email: hnezich@aseonline.org; website: https://www.aseonline.org/Conferences-Events/Compensation-Benefits-Conference

WEDNESDAY, MAY 24

Tech Takeover: Ransomware Rescue Manual. 8:30-10:30 a.m. Automation

Alley. A cybersecurity presentation will define the different ransomware that exists and address how to avoid an attack, what to do if hit and how to protect a business. Speaker: Godfrey Nolan, president, RIIS LLC, a mobile and web development firm based in Troy. Automation Alley, Troy. Free for members; $20 nonmembers. Phone: (800) 427-5100; website: automationalley.com Workshop: Business Model Canvas.

6-8 p.m. Ann Arbor Score. Every business needs a plan. Using the business model canvas, define the logic of a business visually on a single page using nine key building blocks. New Center Building, Ann Arbor. $10.00 Email: annarborscore@scorevolunteer.org; website: http://www.annarborarea.score. org

THURSDAY, MAY 25

Inforum 55th Annual Meeting Featuring Mae Jemison. 11:30 a.m.-1:30

p.m. Astronaut Mae Jemison, a scientist, doctor and crew member on Space Shuttle Endeavour, is the speaker. The Henry, Dearborn. $50 members; $75 guests. Website: inforummichigan.org.

cation in Birmingham in June and in the Miami-Ft. Lauderdale, Fla. markets later in 2017. Website: zifitinfraredfitness.com.

J Zeel, New York, N.Y, an in-home massage membership provider, has launched its services throughout the metro Detroit area. Website: zeel. com.

NEW SERVICES

J Preferred Rehabilitation Inc., Allen Park, a physical therapy rehabilitation and physician services company, has launched a new website, rehabhere.live.

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.

The Legal Side of Business Lunch and Learn. Noon-2 p.m. A panel of legal

experts in small business will discuss legal issues important to business. Topics include: protecting your ideas, patents, liability issues, entities, intellectual property, contracts and more. There will be an extended Q and A session. Panel: David K. Tillman, of Tilman & Tilman PLLC; Rachel Doxsie, of Doxsie Law Firm PLLC; T.L Summerville, of Summerville Law Firm PLLC and Tenicia Moulden, of The Moulden Agency. University of Phoenix, Southfield. $20. Website: http://www.semea.org

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UPCOMING EVENTS

Tech Takeover: Collaborative and Autonomous Robots: How Do You Use These Things? 8:30-10:30 a.m. May

31. Automation Alley. Behco-MRM, a technology distributor and integrator, on how to successfully use new robotic tools in applications including machine tending, fabrication, quality inspection and assembly. Automation Alley, Troy. Free for members; $20 nonmembers. Phone: (800) 427-5100; website: automationalley.com Building a Consumer-Focused Health Care System. 11:30 a.m.-1:30 p.m.

June 5. Detroit Economic Club. Mark Bertolini, chairman and CEO, Aetna Inc., will discuss his thoughts on a 21st century health care system that is built around the consumer. Townsend Hotel. $45 members, $55 guests, $75 nonmembers. Website: econclub.org. Calendar guidelines. Visit crainsdetroit.com and click “Events” near the top of the home page. Then, click “Submit Your Events” from the drop-down menu that will appear. Fill out the submission form, then click “Submit event” at the bottom of the page. More Calendar items can be found at crainsdetroit.com/events.

Sunday, June 11, 2017 MEADOW BROOK HALL 1 PM - 4 PM ENJOY FOOD FROM MICHIGAN’S TOP RESTAURANTS, TASTE 100 TYPES OF THE FINEST WINE, VIEW REMARKABLE CLASSIC CARS, ALL WHILE GIVING BACK TO YOUR COMMUNITY. PROCEEDS BENEFIT SCHOLARSHIPS FOR STUDENTS IN OAKLAND COMMUNITY COLLEGE'S CULINARY STUDIES INSTITUTE AND OTHER VOCATIONAL PROGRAMS

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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 // M A Y 2 2 , 2 0 1 7

Investor sues Taubman Centers in proxy fight By Dustin Walsh dwalsh@crain.com

An activist investor based in Connecticut filed a lawsuit Wednesday against Taubman Centers Inc. challenging the Taubman family’s control of the board, ratcheting up an ongoing proxy fight at the mall operator. The suit, filed in U.S. District Court for the Eastern District of Michigan in Ann Arbor, alleges the family’s ownership of the company’s preferred shares, or voting shares, violates the ownership guidelines set in the company’s charter and that the company’s proxy materials contain materially false and misleading statements about the ownership and voting power of the Taubmans. The suit filed by investor Land & Buildings Investment Management LLC alleges the family owns 29.3 percent of voting shares, while the charter restricts ownership at 8.23 percent. It’s unclear how many shares each individual family member owns. Taubman refutes the allegations, saying the lawsuit is without merit. “The (voting) shares were created nearly 20 years ago as a result of a restructuring of the operating partnership,” the company said in a statement to Crain’s. “It is unfortunate that Land & Buildings continues to wage a campaign based on inaccurate attacks in an attempt to obtain board representation for its director nominees who are

significantly less qualified than Taubman’s nominees. Taubman is confident it has the right strategy and board to continue delivering strong financial and operational results and driving value for all Taubman shareholders. Jonathan Litt: “While we typically do Started proxy not comment on pending battle. litigation, we believe it is important to again set the record straight on the persistently erroneous allegations of Land & Buildings,” the company said. The suit is the latest attempt by Land & Buildings to shake up the Taubman board. Robert Taubman: In April, Jonathan Litt, Son of Taubman co-founder of Land & founder. Buildings Investment, started a proxy battle to oust Robert Taubman, CEO, president and chairman of the Bloomfield Hills-based mall operator and the son of its founder; and Myron Ullman III, the former executive chairman and CEO of J.C. Penney Co. from the board.

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Both are up for re-election during this year’s annual shareholder meeting on June 1. Litt wants a seat on the board, and is also proposing Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware for a seat, according to an April press release. Last year, Litt launched an activist campaign in light of what he called a lack of board diversity, poor corporate governance and bad capital allocations. His recommendations included halting any major external growth initiatives such as new development; exploration of “management-led privatization or a sale of the company to a third party;” selling assets and buying back Taubman stock; monetizing its Asia business in a joint venture, spin-off company or outright sale; and a sale of the Beverly Center in Los Angeles. The new suit now seeks to limit the Taubman family’s role in the company, saying its “poor performance” is a direct result of the family’s dominance of the board. Year-to-date, the share price of Taubman Centers (NYSE: TCO) is down nearly 21 percent to $58.40 at midday Wednesday. It reported net income of $132.6 million on revenue of $612.6 million in 2016. Taubman Centers was founded in 1950 by A. Alfred Taubman, who died in April 2015 at age 91.

CONSTRUCTION

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Mark A. Saba Executive Director Sheet Metal & Air Conditioning Contractors National Association (SMACNA) Metropolitan Detroit Chapter

Rick Arceci

Vice President/ Business Development Officer Commercial Alliance, LLC Rick Arceci Vice President/Business Development Officer Commercial Alliance, LLC. Commercial Alliance announces that Rick Arceci has joined the firm as VP/BDO. Arceci will support Commercial Alliance’s successful model of originating and servicing commercial loans on behalf of its credit union owners and affiliates. He brings 30 years of commercial lending and credit administration experience to the company. For more information, please visit www.commercialalliance.com.

Gabriel Scharg Director of Investments and Portfolio Management Applebaum Family Office Scharg was recently engaged as Director of Investments and Portfolio Management and Senior Officer of Strategy and Operations Management of the Eugene & Marcia Applebaum Family Foundation. Scharg will help manage the family’s investment portfolio and steward new investment opportunities. He will also lead strategic and technological solutions for philanthropic advancement. Prior, Scharg ran a business/investment advisory practice, and worked in private equity at Colony Capital in Santa Monica.

SMACNA Detroit is pleased to announce the appointment of Mark Saba, former Business Manager, Sheet Metal Workers Local Union 80 to the position of Executive Director effective May 1, 2017. Saba brings over 27 years of construction industry administration experience to the position. SMACNA Detroit looks forward to working with Saba in this new capacity as he will focus on securing market share through program promotions as well as strengthening membership services and association relations.

For more information about advertising in this section, contact Lynn Calcaterra at (313) 446-6086, or email lcalcaterra@crain.com

SPOTLIGHT Volunteers of America Michigan names next president, CEO Volunteers of America Michigan has named Executive Vice President Patrick Patterson as its next president and CEO, effective July 1. He will succeed longtime president and CEO Alex Brodrick, 73, who is retiring at the end of June after a 35Patrick year career with Patterson: Next the SouthCEO, president. field-based organization. Patterson, who joined Volunteers of America Michigan in 2000, has overseen fundraising, public relations, construction and maintenance activities for the Alex Brodrick: past five years as Retiring after 35 executive vice years. president. Prior to that, he served as vice president of operations for nearly seven years, directing social service, construction, building maintenance and community engagement. He also served as director of operations for five years. Patterson, 52, serves on the Governor’s Interagency Council on Homelessness. He holds a bachelor’s degree in political science and a master of science in environmental law and policy from Michigan State University, as well as a master of nonprofit administration from the University of Notre Dame’s Mendoza School of Business.

Central Michigan hires athletic director Central Michigan University has hired Michael Alford as its new athletic director, the Associated Press reported. The school announced last week that the senior associate athletic director for administration and development at the University of Oklahoma is replacing Dave Heeke, who was Michael Alford: hired as the UniNew Central versity of ArizoMichigan AD. na’s athletic director in April. The 47-year-old Alford will start his new job in July. He has worked at Oklahoma for four-plus years. Alford’s previous stops include working as the Dallas Cowboys’ senior director for corporate partnerships and Alabama’s general manager of Crimson Tide Sports Marketing. He also worked at ESPN, USC and for the Cincinnati Bengals and the University of Cincinnati.

May 22, 2017

QLINE FROM PAGE 1

A quick glance at social media since the May 12 launch shows a mixed bag of comments from QLine riders, from those professing irritation at crowded streetcars, long wait times between cars, and slow rides as DDOT buses sped past the streetcars, to messages of civic pride and happiness that the system is finally running. Crowded stations, hot streetcars packed with riders, slow lines to get on and off the cars, and long wait times between cars were attributed by officials to curious passengers riding the streetcar for its entire 6.6mile loop, which meant people couldn’t get on at other stops. QLine officials are hopeful their tweaks will mitigate the early problems, including putting more cars into service during peak times and allowing the public to satisfy their curiosity with free rides. A “street team” will be deployed this week along the line’s 20 stations and on cars to answer questions about the streetcar service and other transit questions, QLine officials said. That will include education on how the QLine works, and how to use it in conjunction with other transit services, geography, payment, etc. “It will help integrate the streetcar into daily commutes and provide the necessary time for educating the riding public about the system. It’s the right way to build sustainable QLine ridership and support our goal of a true regional transit system,” Matt Cullen, CEO of the nonprofit M-1 Rail that oversees the QLine, said in a statement. He was unavailable for direct comment Friday. After a decade of planning, financing and construction, the QLine launched on May 12. Its cars were full over the opening weekend, spokesman Dan Lijana said, as people sought to ride the city’s first streetcar since the last system ended 61 years ago in favor of buses. Paid fares were to begin May 15, but QLine officials decided to extend it initially a week as they worked through startup kinks and processed ridership data and trends. The decision was made to extend free rides by six weeks as they sort out details such as how many of the six streetcars to operate and when. “As we refine operations to accommodate demand, it’s also clear a public education campaign to help transit users is needed in Southeast Michigan,” said M-1 Rail Vice President for External Affairs Sommer Woods. “Over the next six weeks, we will deploy street teams at station stops to assist riders in navigating the system and connecting to the destinations throughout the Woodward corridor.” The QLine averaged 8,300 riders per day on the May 12-14 opening weekend, and averaged 5,120 daily riders during the Monday-Thursday workweek. M-1 Rail, financed with a mix of public and private funds, has set the benchmark of the line’s success at 5,000 daily passengers. Whether the current ridership pace — 50,000 over seven days is 7,142 riders — is sustainable is impossible to know after only a

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CRAIN’S DETRO I T ’SBDUETROIT S I NBEUSINESS S S // M A Y 2 2 , 2 0 1 7 CRAIN

QLine cars were packed in the opening weekend. week of service. The streetcar has yet to face major obstacles such as weather, big events or street construction. The streetcars are intended to make the end-to-end ride in 22-25 minutes and travel at the speed of traffic. Riders have reported significantly longer wait times at stations, and on trips — especially during the critical rush hour commute periods. “It varies by the time of day and traffic, but we’re in the 23-26 (minute) range for a one-way trip,” Lijana said. The average wait between stations now also varied by traffic the first week. “We’ve had wait times under 15 minutes and a few up to 40 minutes. Typically we’re around 25-30 minutes between cars,” Lijana said. The QLine also is working to improve the accuracy of the screens that display the expected arrival time of the next streetcar, he said. The QLine said it intends to use more of its six-car fleet to trim ride time during peak periods. Each can carry about 125 or more passengers, and during the first weekend every car was regularly packed, QLine officials said. They didn’t expect that. The first streetcar was delivered in the fall, and not long after testing began, including simulated paying passenger service. That apparently didn’t quite give the system’s operators a true picture of how complex running a streetcar on the city’s main artery could be. So, they’re trying to adjust on the fly, and QLine officials say continued free rides help those efforts. “It’s a whole different type of reality (versus simulated service),” Lijana said. “We want to make sure we built in enough time to adjust.” Hence, adding passenger payment to the service now could exacerbate delays. Paying to ride the streetcar will involve a learning curve for the public: Riders pay via an app, or by using their debit or credit cars at digital stations mounted in each station. Kiosks on the streetcars themselves are for cash-only payments. The payment units in the stations don’t take cash. The base fare is $1.50 for three hours of use, and long-term passes will be available. The line is expected to see additional rider demand with the Movement electronic music festival over Memorial Day weekend, increased Tigers crowds once school is out, and when the Detroit Red Wings and Pistons move into new Little Caesars Arena — which has its own QLine stop — beginning in September. M-1 Rail said it “gained valuable experience in servicing its first spe-

CRAIN’S DETROIT BUSINESS/KURT NAGL

cial event crowd with the Detroit Tigers home series this week and continues to work to accommodate the large crowds expected for games, concerts and special events throughout the summer season.” The streetcar was to operate until midnight May 21 to serve riders attending the 8 p.m. Detroit Tigers

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game. The system had closed on May 16, its first day in operation during a Tigers game, because the game went into extra innings and didn’t end until after 12:30 a.m. The streetcar and team are in talks to coordinate service, but it’s impossible for the line to know when a game could go so late. The line’s basic hours are 6 a.m.-11 p.m. Monday-Thursday, 6 a.m.-midnight on Fridays, 8 a.m.-midnight on Saturdays and 8 a.m.-8 p.m. Sundays. Officials have said hours will be adjusted for special events. If the line averages 5,000 riders a day, that still leaves it with fewer passengers than the oft-maligned Detroit People Mover, the downtown elevated 3-mile monorail loop that opened in 1987 and was intended as a piece of a wider system that failed to develop. The 12-car People Mover last year had 2.1 million riders, averaging nearly 6,000 a day — numbers that get inflated because of

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events such as the Detroit auto show and Red Wings games. It has 13 stations, while the QLine has 20 stations spread over 12 stops. The QLine’s early ridership estimates were based on observation by QLine staff and drivers, Lijana said. Electronic counters will be used eventually. The QLine’s plan always was to use the sixth streetcar only during peak service demand periods, leaving it otherwise available as an emergency backup. They were forced to use it over the inaugural weekend to meet demand. Even with early hiccups, the top QLine executive expressed formal satisfaction with the line so far: “We couldn’t be more pleased with the enthusiastic reception the QLine received from riders during our first week,” Cullen said.

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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 // M A Y 2 2 , 2 0 1 7

JAIL FROM PAGE 1

“There is no way the county of Wayne could make a decision to go to an alternative site with that potential exposure,” Kaufman said. “The issue would have to be resolved in some way.” Evans has said his main concerns are whether Rock can build the jail complex in a timely fashion, whether the complex meets the county’s needs and whether the county can’t afford it. One way to address that is what’s known as a voluntary closing agreement program, or VCAP. Essentially, that allows the county to admit that it understands it is not using the bonds in the originally intended way, and that it accepts an as-of-yet unknown financial penalty, Kaufman said. The process typically takes up to five months, but the county is hoping for a resolution soon. “The best metaphor is a plea bargain,” Kaufman said. “We go in and admit that using this money at an alternative site would violate one of the rules, but we want to know what would be the penalty the IRS would issue if we did it, and then we know the extra cost for moving to an alternative site. ”

Step needs to take place Matt Cullen, principal of Rock Ventures, said the potential exposure figures “don’t sound exactly right” but agreed the bond issue does pose a substantial liability. “There is a potential financial exposure, a significant one, if ultimately the IRS doesn’t agree that deploying the bond money toward the creation of a criminal justice complex on (Forest) didn’t qualify.” He said Rock doesn’t have a “real ability” to insulate the county from that exposure, but he believes shifting the bond money’s use from Gratiot to East Forest “seems like a pretty straightforward request.” “It’s not a bait-and-switch kind of

MEYER FROM PAGE 3

accomplishment was restructuring labor agreements to provide the college administration with more flexibility over course scheduling, curriculum and where courses are offered. Meyer is not without his detractors, and dissatisfaction reached its height in 2014 when faculty members issued a vote of "no confidence" in him. A 2015 contract with the Oakland Community College Faculty Association scrapped a provision requiring a minimum of 290 faculty positions across its five campuses, amid falling enrollment. The college also shed adjunct faculty. The day after he was removed from his post, Meyer hired a Washington, D.C.-based higher education attorney to represent him. He had expressed concerns about his job security in recent months in private conversations and felt that McCulloch was attempting to unify opposition

The Gratiot jail project was halted nearly four years ago when cost overruns pushed the price tag from $220 million to an estimated $391 million. thing,” he said. “Everyone knows we need to deal with this, and everyone thinks it’s reasonable that they would ultimately get this concurrence, but it’s a step that needs to take place.”

man of Quicken Loans Inc. and Rock Ventures and one of the biggest players in downtown Detroit real estate, and Detroit Pistons owner Tom Gores unveiled their plans for the MLS team a

Last week, the county issued a sixweek extension to Walsh Construction Co. to submit plans to resume construction on the Gratiot jail. Walsh now has until June 28 to submit its proposals for building both a 1,600-bed jail and a 2,280-bed jail, which the county has asked for as it weighs Gilbert’s proposal. Gilbert, the founder and chair-

year ago. The Rock Ventures proposal calls for a 1,600-bed jail, but the Detroit-based company said it could also build a 2,000-bed jail for an additional $43 million. It would also

build a 160-bed jail for juveniles, a new courthouse, sheriff’s office, prosecutor’s office and surface parking to replace the Frank Murphy Hall of Justice. The Gratiot jail project was halted nearly four years ago when cost overruns pushed the price tag from $220 million to an estimated $391 million. The complex was designed to consolidate Wayne County’s criminal justice facilities in downtown Detroit. The county issued $200 million in recovery zone bonds in 2010 to pay for the consolidated jail and began building it in 2011, but by the time construction stopped, the estimated cost had ballooned to $390 million. It

against him among board members, said one source who spoke on the condition of anonymity. Trustee Kathleen Bertolini, the lone board member who opposed removing Meyer from his position, said she was so upset by the decision that she abruptly left the meeting after the vote was cast. She declined to discuss in specifics what occurred behind closed doors but did say, “I do believe that it was an orchestrated action by Mr. McCulloch and the coerced board members,” she said Friday morning. She said she felt blindsided by the removal of Meyer, who had been chancellor since 2008. “I believe there are some backroom politics going on,” she said. “I believe that these people are out for personal gain, and I felt I couldn’t stand by and go quietly along with this. I didn’t always agree with Dr. Meyer, but that’s part of working together and collaborating, and I really felt like he was moving the college forward.” McCulloch was most recently ex-

ecutive director of the Huron-Clinton Metroparks Authority but was let go from that job in October 2014; he was appointed in December 2012, the month after losing a re-election bid as county water resources commissioner to Democrat Jim Nash. L. Brooks Patterson, the county’s longtime executive, Republican torch-bearer and a Meyer supporter, expressed concern Thursday evening over the ouster. “McCulloch is behind the thing, he staged the whole thing. It’s a shame,” Patterson said. “(Meyer is) a strong leader but they are making some changes. He was a change agent and doing a hell of a job.” “The Board remains steadfast in its commitment to students, faculty, staff and community,” McCulloch said in a statement released by OCC on Wednesday night. A spokeswoman said Friday that McCulloch and the board had no additional comment. George Butler, OCC’s attorney and member at Detroit-based Dick-

inson Wright, also did not return messages Thursday and Friday seeking comment. McCulloch is a Royal Oak resident and a longtime GOP stalwart in the state’s richest county but has twice since 2012 lost countywide elections — once to Nash and last year in a bid to unseat Treasurer Andy Meisner. He was elected to the OCC board in 2014. On Wednesday, immediately after his Tuesday night placement on administrative leave, Meyer retained Washington, D.C.-based higher education attorney Raymond Cotton of Nelson Mullins Riley & Scarborough LLP. “They banned him from campus,” Cotton said Thursday night. “Why do you do that to someone, when there is no cause, no reason given, for their actions? I have asked, and they won’t give me any reasons. They have taken away all of his communication devices, banned access to his office.” Meyer’s biography and spot on the list of “chief college officers”

Rock Ventures proposal Cullen: “There is a potential financial exposure.”

CRAIN’S DETROIT BUSINESS

has sat partially finished ever since. Recovery zone bonds, created under the recession-era American Recovery and Reinvestment Act of 2009, can fund both public and private projects in an area deemed to have significant poverty, unemployment or home foreclosures. Forty-five percent of the interest on the bonds is subsidized by the federal government. “The IRS bond issue is an issue that, if it can’t be resolved by itself, could stop consideration of this alternative site for the jail and the criminal justice center,” Kaufman said.

have also been stripped from the OCC website. “He wasn’t tapped on the shoulder by an angel. He didn’t step down because the west wind blew his hair askew,” Cotton said. “The next step is that I am going to try to negotiate a solution between my client and the board. Months (to reach a solution) is out of the question. This has to be resolved quickly.” Meyer was the college’s eighth chancellor. In 2014, faculty issued a vote of “no confidence” in his leadership for the first time in OCC history. At the time, the president of the Oakland Community College Faculty Association described his style as “autocratic and not inclusive.” OCC is based in Bloomfield Hills and has five campuses throughout Oakland County with about 26,405 total enrollment, according to the most recent figures from US News and World Report. It offers approximately 100 degree and certificate programs.

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 // M A Y 2 2 , 2 0 1 7

LENDING FROM PAGE 3

It’s a familiar story with land contracts, a form of seller financing with a deep, unsavory history in cities nationwide. They’re flourishing again as an alternative to mortgages in Rust Belt cities since lending regulations tightened after the housing collapse. “This is becoming a big problem all over besides just Detroit — like Flint, Battle Creek and other urban areas,” said Lorray Brown, co-director of the Michigan Law Poverty Program, which is helping draft legislation to regulate land contracts. The business model for many land contracts: Buy cheap homes at tax auctions. Do no repairs. Sell for as much as 10 times the purchase price to desperate or naive buyers at high interest rates. Make the owner assume all back debt and upkeep. Evict the buyer if payments are late. Predatory land contracts are blamed for costing generations of African-Americans their homes — and family wealth — in Detroit and Chicago from the 1940s to early 1970s. And activists fear history is repeating, so they’re drafting reforms in Lansing and hoping to organize buyers. “These have been around for such a long time. We were foolish to think the practice had ended,” said Mike Gallagher, a retiree who was part of a well-known Chicago activist group that fought against contract buying in the 1960s. He’s leading a group of activists who plan to travel to southeast Michigan this week to knock on doors of contract buyers. Last year, land contracts outnumbered mortgages in Detroit, 834 to 710, according to Wayne County records. The land contract numbers are likely far higher than that recorded number because there’s no law that requires them to be filed with county officials. Oakland County had about 800 land contracts last year (compared to 18,000 mortgages). Macomb County officials didn’t respond to requests for information, but in 2015 recorded about 750 (compared to 11,000 mortgages that year). In most cases, land contracts are used legitimately when conventional mortgages are unavailable or private financing is more convenient. But loose regulations make them an easy tool to exploit inexperienced homebuyers, experts said. The general rule: Buyer beware. Sellers keep the deeds to homes until they’re paid in full. And in Michigan, there’s no law requiring land contract sellers to disclose debts and liens or have homes appraised before sales. “Nobody wants to get a land contract,” said Anita Groggins, a Farmington real estate agent who has sold homes on land contracts in Detroit but says she steers them to mortgages. “The only people who get land contracts are those who can’t qualify for mortgages.” That’s a lot of people in Detroit, where the average credit score is 585, nearly 100 points lower than

the national average. And such contracts are especially appealing because banks don’t traditionally loan money to homes worth less than $50,000, which is the case for many homes in Detroit.

Evicted over $164 Looking around her house, Pope wonders what happened. Her family heard of the house from a family friend while they were renting a larger house for $750 a month. The land contract seemed like a good opportunity: Sacrifice space in exchange for a lower monthly payment and a path to homeownership. Today, she spends most nights sleeping on the couch in the front room because there are not enough beds. The home has no stove, so she cooks on a hot plate. Nor is there a kitchen table or dining room. But there is heat and hot water. That’s because Pope spent $3,000 on a furnace and heater after signing the contract on March 1, 2016. Looking back, Pope said there were warning signs. When the family bought the home, a man was still sleeping in it. Turns out, he was the last contract buyer and getting evicted, Pope said. And rather than receive monthly payments by mail, an agent for the home’s seller would knock on her door every month to collect, Pope said.

three years old, while another 15 are at least one year behind in taxes — a situation that couldn’t occur with traditional bank lending that requires all liens be cleared and debts paid before ownership changes. Nearly one in three (59) of the homes sold by land contract last year were bought out of tax foreclosure and flipped on land contracts, according to the analysis of records from Realcomp Lt., a Farmington Hills-based company that lists real estate sales. The homes were bought for an average of $10,000 and resold for $45,000, Bridge’s analysis showed. The analysis is likely conservative, as the homes listed through Realcomp typically are far more expensive than other city land contracts and less likely to be predatory. “These (land contracts) are sold as a way to achieve the American dream and accumulate wealth, but you’re not buying the title to the house,” said Gallagher, the land contract activist. “Basically, you are fixing up someone’s house for years. You can make it all the way through to the end of the contract and, if one thing goes wrong, one late payment, you end up with nothing. By and large, these deals are structured to fail.” Pope’s contract stipulated the home was sold “as-is” and that she assumed all debts. But after the foreclosure notice, she stopped includ-

“All these things — subprime loans, land contracts — they’re all just another way of screwing the underclass.” Jack Macnamara

Then, last summer, the tax foreclosure notice came. “I was stunned,” said Pope. “I had a bad feeling. That’s when I knew: We’ve been bamboozled.” Wayne County property records indicate the home has been foreclosed for nonpayment of taxes twice since 2006. It was bought at the county’s tax auction for $1,800 in 2012 by an investor who sold it the next year to International Traders LLC for $10,000, county records show. Representatives for International Traders LLC did not return messages seeking comment. Michigan records indicate its business address is a UPS mailbox and it hasn’t filed required corporate paperwork with the state since 2012. Representatives of a separate company that acts as a property manager for Pope’s home also did not return messages.

Homes sold laden with debt An analysis by Bridge Magazine shows that Pope isn’t alone in buying a house that’s careening toward foreclosure. A sample of 200 Detroit homes sold on land contracts last year showed that one in five (39 homes) went into foreclosure this year because of tax debts that are at least

ing the $82 for taxes in her monthly payment because she said it was clear the seller wasn’t paying taxes to the county, Pope said. This February, there was a rap on the front door. It was court officers serving her with eviction. Her total delinquency: $164, according to court papers reviewed by Bridge. “That’s when I decided to fight,” Pope said. “I’m not giving up.”

Activists were ‘ahead of their time’ Neither are Gallagher or Jack Macnamara, although both thought they’d won this battle nearly 50 years ago. Macnamara helped form the Chicago Buyers League in the 1960s when he moved to the Lawndale neighborhood as a young Jesuit. He met family after family in contracts that forced them to pay tens of thousands of dollars more than their homes were worth. They couldn’t get mortgages because Federal Housing Administration guidelines made them practically impossible to obtain in urban neighborhoods. The Buyers League grew to 500 residents who picketed landowners’ homes, lobbied City Hall and went on strike, withholding monthly payments in hopes of renegotiating land contracts. The Chicago Tribune wrote that

the strike “convulsed the city,” leading to mass evictions and showdowns with police who would drag out people’s furnishings onto the street and activists who would put them back in as soon as the authorities left. Eventually, more than 400 contracts were renegotiated, saving an average of $13,500 per family. Data on land contracts collected by the league helped Congress pass the 1977 Community Reinvestment Act that ended federally backed redlining. And then, the episode largely faded to history until the story was recounted in “Family Properties,” a 2009 book by Rutgers University Professor Beryl Satter (who has relocated to Detroit), and “The Case for Reparations,” a famed essay in The Atlantic in 2014 by Ta-Nehisi Coates. “I guess we were a little ahead of our time. Detroit is similar or even worse than Illinois,” Macnamara told Bridge. He and his group collected reams of data, which later were used by federal officials, that estimate failed land contracts cost black Chicago residents $500 million between 1940s and 1970s, about $3 billion in today’s money. Nationwide, disparities in homeownership are cited as prime factor in the wealth gap between whites and blacks. In 2013, the median wealth for white families was $141,000, compared to $11,000 for blacks and $13,700 for Hispanics. The contracts have become popular again after the subprime mortgage crisis, which led to the foreclosure of more than 65,000 Detroit homes. Reforms passed after the housing crash make it more difficult for the poor to get mortgages, so private lending is flourishing, Macnamara said. “All these things — subprime loans, land contracts — they’re all just another way of screwing the underclass,” he said. Gallagher and other volunteers plan to spend several days in Detroit, knocking on doors of land contract buyers. Their goal initially is to collect data and information and lay the groundwork for buyers to organize, he said. They’ve made similar trips in recent months to Pittsburgh and two Ohio cities, Akron and Youngstown.

Legislative remedy Efforts are underway, meanwhile, in Lansing to craft legislation to add protections to contract buyers. The Michigan Poverty Law Program is working with Sen. Steve Bieda, D-Warren, on the legislation. Among other things, it would require the filing of land contracts with county registers of deeds (it’s now optional) and inspections before sales. Other possible proposals include requiring third-party appraisals and forbidding sellers from passing on taxes or liens to home buyers. Bieda told Bridge he expects to introduce legislation in the next few months. He said he hasn’t yet approached Republicans about the bills, which is typically required for

passage in the GOP-dominated Legislature. One concern is that legislative remedies could discourage legitimate land contracts and encourage “scammers to get creative and find another way around it,” said Ted Phillips, executive director of the United Community Housing Coalition. The Detroit nonprofit assists buyers stuck in “egregious, horrible, predatory” land contracts by buying out their contracts, Phillips said. The homeowners repay the loan through a zero percent land contract to United Community Housing Coalition. “We are using the same tool but in the right way,” said Phillips, whose group is assisting the Chicago activists but focused now on helping homeowners facing tax foreclosure. The Genesee County Land Bank employs a similar strategy, selling 330 tax-foreclosed homes to occupants last year to occupants through land contracts, said its executive director, Michele Wildman. The agency is amid a review of the program, though, to ensure that houses remain in good condition and buyers comply with terms of the contracts. Another possible concern? Just about every solution to predatory lending in the past 50 years has led to more predatory lending, said Lindsay Helfman, a lecturer at the University of Michigan who is writing her dissertation at Temple University on lending in Detroit in the 1970s. Many homes that are now being sold on land contracts, for instance, had been foreclosed on after subprime loans failed. “The real estate market in Detroit is just broken,” Helfman said. “There’s basically a dual housing market of (mortgages and private sales). So it’s profitable to exploit people who have limited options in housing. “This problem has always been so big that (officials) just throw their hands up and create Band-Aid programs that end up creating even more predatory lending.”

A fighter Sitting on her couch, which doubles as her bed, Pope still allows herself to dream. One day, she and her family will have a big backyard. Bedrooms for everyone. A spacious dining room. Until then, she’s tethered by her land contract. Pope’s eviction case was dismissed after she produced receipts showing she made her monthly payments (minus the taxes). The foreclosure is on hold while Pope sues the contract seller in an attempt to make the company pay the back taxes, said her attorney, Joe McGuire. Pope had hoped to pay off the home by next year, keep it as a rental property or sell it for profit and move into a bigger house. That may not happen now. The easiest thing in the world would be to walk away. But she won’t. “This has opened my eyes to land contracts but I’m a fighter,” Pope said.

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 2 2 , 2 0 1 7

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FROM PAGE 3

“Some don’t want to use Leapfrog. Some want to use MHA website,” said Marleau, adding: “Two important things (MHA’s) website needs. (First), it (should be) printable, so patients can take it with them to the doctor’s office. (Second), some hospitals want to present aggregate data” on Sen. Jim Marleau: multiple hospitals in their sysProponent of tems. “We need quality and price to keep (the retransparency. port) by campus. That caused some of the hiccups last year.” While last year’s state budget did not include a financial penalty for failing to report, it did require the 60 hospitals that receive state GME funding to submit a report by June 1 on direct and indirect costs of GME to the Michigan Department of Health and Human Services. MDHHS also is required to develop a system by Aug. 1 to account for costs on their GME programs to show how dollars are spent and to gather information on the number of medical residents who stay in Michigan after their training is completed. The reports would be used by state officials to recommend future GME funding. State officials and others told Crain’s that the 2017 budget provision only marginally increased the number of hospitals that submitted quality reports. Marleau said the incentives weren’t enough to achieve greater hospital compliance and so legislators added the noncompliance penalty. Under Michigan’s proposed fiscal 2018 budget, Senate and House leaders inserted a new provision that includes the 25 percent GME non-reporting penalty. A similar provision was in Gov. Rick Snyder’s proposed executive budget. The Senate and House are expected to reconcile their budgets in June, which will then go to Snyder’s desk for action. Marleau, who has been a major proponent of quality and price transparency for hospitals and doctors for several years, said he believes legislators will insist on keeping the 25 percent penalty for hospitals that don’t comply. “The governor is happy the reporting will start Jan. 1. I do think it will be 100 percent compliance,” he said. With public reporting of quality, Marleau believes providers will speed up cost reduction and quality improvement efforts as consumers and businesses make informed health care decisions and shift market share based on best value. Back in 2015, Marleau introduced Senate Bill 590, which would have created the Michigan Health Care Transparency Act to enable consumers, employers and researchers the ability to access comprehensive cost and quality information. The act, which was opposed by many hospitals and health insurers, would have

created an “all-claims payer database” that at least 11 other states have. Marleau’s backup plan was to increase hospital price and quality transparency by public reporting. He negotiated a deal in 2015 with the MHA in which the association agreed to hospital reporting in exchange for preservation of state GME funding support, state officials told Crain’s. Michigan was considering eliminating about $100 million in GME support, a move that about 10 states have made in recent years. Snyder has favored ending state funding for GME for years. But MHA officials say they never agreed — in the various versions in 2016 and this year — to any financial penalty for the teaching hospitals that don’t comply with public quality and patient safety reporting. Chris Mitchell, senior vice president of advocacy with the MHA, said the hospital association is opposed to the GME penalty provision and prefers hospitals to voluntarily submit quality data to its VerifyMICare website, which currently offers charge and Medicare price information for the top 50 most common procedures. “Threatening hospital graduate medical education funding, which is critical to the training and preparation of physicians in our state, in exchange for unrelated data sharing with private entities is simply unacceptable,” Mitchell said in a previous statement. In a statement, Beaumont Health officials said they don’t submit data to Leapfrog because they disagree with how Leapfrog interprets various data elements it uses to come up with the quality safety grades. Beaumont cites a study by the University of Michigan that questions the validity of Leapfrog’s data in measuring a hospital’s quality performance, at least when it comes to two common hospital-acquired infections and reasons for inpatient readmissions in 2013. The study found Leapfrog scores are higher when hospitals positively report results and don’t often compare to mandated Medicare quality metrics. “Beaumont strongly supports public reporting of quality and safety data to help consumers make informed health care decisions,” said Sam Flanders, M.D., Beaumont’s chief quality and safety officer, in a statement. Flanders said Beaumont will submit data to the MHA’s VerifyMICare and believes the website will “provide consumers with quality data that is meaningful, reliable and valid.” But not all hospital administrators oppose reporting public data to Leapfrog. Rob Casalou, CEO of St. Joseph Mercy Health System in Ann Arbor and past MHA chairman, believes hospital quality reporting is a good idea and can lead to positive results for consumers and provides useful information for hospitals to improve. “I support public transparency. It is not an issue for us. I do not support (withholding funds for) GME to require public reporting. They don’t relate to one another,” said Casalou,

adding that legislators are inappropriately looking for leverage to force transparency. “VerifyMICare has the support (of many hospitals in Michigan).” Robert Riney, current MHA president and COO of Henry Ford Health System, which also submits quality data to Leapfrog, said all public reporting websites have flaws and challenges. He said Henry Ford submits data to Leapfrog. “It is not perfect, but it is a reasonable interpretation. We feel we can influence better results as a participant,” said Riney, who also objects to the 25 percent penalty. Bret Jackson, president of the Economic Alliance of Michigan, which represents major employers, unions and consumers, said he believes the 25 percent GME penalty withhold is critical to persuade more hospitals to provide greater quality data. EAM is an affiliate organization of Leapfrog. “Higher quality leads to lower overall costs,” Jackson said. “So any ability for consumers to get information on costs and quality at one facility over another helps them make better decisions.” Multiple studies have shown public quality reporting can lead to lower costs charged by hospitals and improve quality, Jackson said. For example, the journal Health Affairs in 2014 said public reporting on hospital quality helps reduce prices and put pressure on hospitals to compete based more on quality. The study looked at two common yet pricey cardiac procedures — coronary artery bypass grafts and percutaneous coronary interventions from 2005 to 2010 — and found commercial health plan prices rose slower in states that publicized cardiac quality data. Those two cardiac procedures accounted for $15 billion in U.S. health care costs in 2012. Over the past two years, Jackson said there has been a 1,000 percent increase in people using Leapfrog data. “We need a lot more data and more hospitals to report. (Quality and patient safety data are) one piece of the puzzle,” he said. Jackson said studies have shown that mortality rates are different depending on the relative quality of a hospital. “If you use the Leapfrog hospital safety, you have ... less of a chance of dying at an ‘A’ (rated) hospital than a ‘B’ hospital, and more for a ‘C’ and ‘D’ hospital,” Jackson said. “The likelihood of dying or having a complication is impacted by the (relative) scores.” In its hospital quality scorecard, Leapfrog collects self-reported qual-

ity and patient safety data from hospitals and from Medicare patient satisfaction and quality reports. After crunching the data according to a process it has tweaked over the past few years to address complaints, Leapfrog assigns hospitals grades of A, B, C, D and F. For example, last October, Leapfrog gave the following grades to 79 reporting Michigan hospitals: A, 29; B, 5; C, 31; D, 4; and no Fs. Michigan ranks 19th nationally for patient safety, with 36.7 percent of the state’s hospitals earning an “A.” Four hospitals regularly get A scores. They are Dickinson County Healthcare System in Iron Mountain, DMC Huron Valley-Sinai in Commerce Township, Henry Ford Allegiance Health in Jackson and University of Michigan Health System in Ann Arbor. Jackson said Hurley Medical Center in Flint reported to Leapfrog in 2016 for the first time “because of the budget language.” But Casalou said some hospital administrators complain that Leapfrog data penalizes large teaching hospitals for treating complex patient cases. For example, St. Joseph Mercy Ann Arbor, St. Joe's flagship teaching hospital, scores a 'C' on Leapfrog's survey while St. Joe's other four community hospitals each regularly score an 'A.' “The problem with public reporting is that it creates confusion in the public because there are different methodologies” for each public scorecard, he said. “There is not a gold standard across the country.” Casalou said the MHA wants to house quality data and be the public database, and he supports that effort. He said all MHA board members, including Beaumont, have committed to submit data to the MHA website, which is expected to be ready later this year. “We are not looking to hide anything. We want (data) to be consistent and accurate,” said Casalou, adding he has seen the updated VerifyMICare and said it is more user-friendly and will be helpful for consumers. Riney said consumers have difficulty in how to interpret the quality data. He said MHA’s VerifyMICare website has to be easy for consumers to navigate and extract useful information. “Ultimately we need to agree on one set of data that all parties agree has objective value,” he said. “The MHA website is well suited. It has earned the trust and reliability with all the providers in the state.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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

Henry Ford Health System

Barracuda Networks

Non-Profit Personnel Network

Blue Care Network

Oakland Community College

Blue Cross Blue Shield of Michigan

Organizational Consulting Group LLC

Detroit Regional Chamber

Taubman Centers

Detroit Zoo

Total Merchant Services

Global Automotive Alliance Harvey Holhauser

12 8

Trinity Health

United Methodist Retirement Communities 8

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 2 2 , 2 0 1 7

THE WEEK ON THE WEB

RUMBLINGS

MAY 13 - 19 | For more, visit crainsdetroit.com

Businesses coordinate efforts to stabilize Cody Rouge

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

hree of Detroit’s largest employers and the Skillman Foundation are teaming with residents in the Cody Rouge neighborhood in a coordinated effort to stabilize the residential area on the city’s far west side and create career opportunities for youth. DTE Energy Co., General Motors Co. and Quicken Loans Inc. are working together on the initiative, focused on stabilizing a neighborhood marred by housing blight and creating potential talent pipelines for their companies. The Skillman Foundation brought the three companies together to better coordinate overlapping services and outreach in a neighborhood of 34,000, foundation CEO Tonya Allen said. “We are not here to try and save your community,” Allen said at a Wednesday morning event at Don Bosco Hall on West Chicago Street. “Because one, you don’t need to be saved. ... You know what things need to be fixed.” Kenyetta Campbell, executive director of the Cody Rouge Community Action Alliance, said she’s hopeful the three big Detroit businesses can help accelerate efforts in her neighborhood to raze blighted homes and improve nearby schools needed to attract families. “Our main goal is really to attract people to move into the community as well as retain residents who are already here,” said Campbell, who has led the Cody Rouge neighborhood group since 2007.

BUSINESS NEWS Marian Ilitch, 84, co-founder and owner of the Little Caesars’ pizza empire, now tops Forbes’ list of America's richest self-made women with a net worth of $5.1 billion as of last Wednesday. J HopCat Royal Oak was expected to open Saturday at 208 Fifth Ave. in the city’s downtown area after a $3 million build-out that started in September. J Homes and condominiums continue to sell faster and for higher prices than this time last year as the declining number of listings drives a seller’s market in metro Detroit, according to data from Farmington Hills-based Realcomp Ltd. II. J The semi-pro Detroit City FC soccer club drew 5,041 fans to its opening match of the 2017 regular-season at Hamtramck’s Keyworth Stadium — an impressive crowd for an amateur team, but more than 2,300 fewer fans than the club’s opener a year ago. J Anheuser-Busch Companies LLC has agreed to a multiyear deal as a Landmark-level partner at Little Caesars Arena, replacing Miller Lite with Bud Light as the official domestic beer of the Detroit Red Wings. J

385

The number of vacant public housing units Detroit Mayor Mike Duggan’s administration is proposing it will purchase in an effort to redevelop the buildings and help the Detroit Housing Commission improve its portfolio.

$15 billion

The amount DTE Energy Co. plans to invest over the next three decades as it looks to rid itself of coal-burning power plants by 2040 in an effort to reduce harmful carbon emissions by 80 percent by 2050.

75,000 square feet

The size of the headquarters Detroit-based Global Automotive Alliance LLC opened this week at a former FedEx distribution center in southwest Detroit.

O2 Investment Partners LLC of Bloomfield Hills has made a significant investment in Fairhaven Integration Services of Atlanta, Ga. J Huntington Bancshares Inc. is planning to close a facility in Holland and slash 129 jobs after the lease expires later this year, according to a notice filed with the state. J A restaurant planned for the Mall at Partridge Creek in Clinton Township, Muer’s Table + Bar, cannot use the Muer family name, a Macomb County Circuit Court judge ordered after restaurateur Joe Vicari of Joe Muer Seafood in Detroit had filed a lawsuit. J Construction on the $16 million redevelopment of the former Packard Motor Car Co. administration building in Detroit is expected to begin in the next four to six weeks. J MoGo Detroit Bike Share will roll out the city’s new public bike share J

system in downtown, Midtown and eight nearby neighborhoods with a community ride out starting 10:30 a.m. Tuesday. J Detroit-based Adamo Group Inc. has been awarded the contract to demolish the Pontiac Silverdome, The Oakland Press reported. J Discount supermarket chain Aldi is spending about $28 million to remodel 20 of its approximately 30 locations in metro Detroit by the end of 2019. J The Michigan Court of Appeals ruled against Van Buren Township in a bond payment battle with its largest corporate resident, Visteon Corp., tied to the construction of the company’s 263-acre campus near Ecorse Road and I-275. J The Quicken Loans Inc. family of companies and 1xRUN, a Detroit-based art company, have selected six Detroit businesses to be decorated with murals by metro Detroit artists. J Meadowbrook Country Club in Northville will reopen its golf course Thursday after a $5.3 million renovation recognized by Golf Inc. magazine as a Renovation of the Year honoree.

OTHER NEWS Detroit’s tax collectors are pursuing as many as 7,000 residents and businesses in downtown and Midtown that have not been paying the city’s income tax in recent years. J The Kresge Foundation added data on local entrepreneurs’ perceptions of Detroit to its Detroit Reinvestment Index, which showed this year that overall optimism for the city’s revival is still high. J Five metro Detroit artists will compete in the first Pitch Night Detroit, hosted by ArtPrize and the Museum of Contemporary Art Detroit, for a $5,000 grant and to showcase their art in a hot spot in this year’s international art competition in Grand Rapids. J

OBITUARY Julian Abele Cook Jr., a retired Detroit federal judge, has died at age 86, The Associated Press reported. The court said Cook died Tuesday in Silver Spring, Md., his home in retirement. A cause wasn’t disclosed. J

LARRY PEPLIN

“We are not here to try and save your community,” Skillman Foundation CEO Tonya Allen said Wednesday at an event at Don Bosco Hall in the Cody Rouge neighborhood in Detroit. “... You know what things need to be fixed.”

LON HORWEDEL

Ariya Jutanugarn blasts out of a grenade trap on the tenth hole during Sunday’s final round of the LPGA Volvik Championship at Travis Pointe Country Club in Ann Arbor.

LPGA Volvik Championship in Ann Arbor sees more sponsors, ticket sales

he Volvik Championship is teeing off next week at Ann Arbor’s Travis Pointe Country Club, marking the LPGA tour event’s second year. With ticket sales and corporate sponsorships eclipsing last year’s numbers, tournament organizers are confident the event’s sophomore installment will be a success. Keith Karbo, tournament director, said “tickets are selling non-stop” and that more have been sold than last year, although he could not provide the number. About 30,000 tickets were sold for the entire tournament week last year. There are a few more sponsors this year than the 84 last year, Karbo said. There are more than 20 new sponsors, including Japanese automaker Infiniti, Detroit-based Faygo and Selfridge Air National Guard Base in Harrison Township. Corporate hospitality options have remained largely the same, with a few skybox enhancements, Karbo said. Last year, there were nine corporate

skyboxes along the 16th and 18th greens that sold for $30,000 to $32,000 each. New for fans this year are grandstands around the 18th green and on the ninth hole. Volvik signed a three-year deal as title sponsor of the event. The South Korean golf ball maker saw sales increase following the inaugural tournament. Faygo is sponsoring the tournament’s Friday round, Kansas Citybased Applebee’s is the sponsor for Saturday action, and championship Sunday is sponsored by Novi-based ITC Transmission. Major organizers of the tournament include KC Crain, executive vice president and director of corporate operations of Crain Communications Inc., which owns Crain’s Detroit Business, and his wife, Ashley Crain, who is the tournament’s chairwoman. She was captain of the golf team at Old Dominion University, has written for Golfweek and was a competitor on the Golf Channel show “Highway 18.”

Detroit Startup Week focuses on mobility, startups D etroit Startup Week is kicking off Monday to connect entrepreneurs and provide access to executives from some of the country’s top companies. The event, May 22-26, is free to those who register and is being held at the historic Masonic Temple in downtown Detroit. Colorado-based startup accelerator Techstars is hosting the event and the main sponsor is J.P. Morgan Chase. The event starts Monday with a panel between Sen. Gary Peters; Jean Redfield, president and CEO of Detroit-based NextEnergy; and Paul Hemmersbaugh, chief counsel and public policy director for General Motors Co. The panel will discuss disruptive mobility technologies and what role startups play in the future of mobility and public policy.

Chris Genteel, head of business inclusion for Google, and Seth Romaine, head of global deals for Google, will also speak at the event. This year’s Detroit Startup Week has expanded to include 16 information sessions on technology, entrepreneurship 101, mobility, music, the business of food, financial tech, women entrepreneurship, and more. The event will also host a pitch competition, launch of the Startup Next Detroit 2.0 “pre-accelerator” and legal advice for startups. Sponsors include Comcast; Miller, Canfield, Paddock and Stone PLC; Google; Quicken Loans Inc.; Atwater Brewery; Techtown Detroit; Bodman PLC; Michigan State University and others. For more information or to register, go to detroit.startupweek.co.

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