Crain's Detroit Business, March 26, 2018 issue by Crain's Detroit Business

RecoveryPark could create jobs — or it could close Page 3

Using tech to track demolitions, improvements. Page 4

MARCH 26 - APRIL 1, 2018 | crainsdetroit.com

HEALTH CARE

REDEVELOPMENT

Hospitals Corktown-to-Fordtown gold rush? adjust staffing to payment changes

By Kirk Pinho kpinho@crain.com

For six months, three vacant houses and an empty plot of land sat on the market in Corktown awaiting a buyer. There had been a few suitors seriously interested, but none pulled the trigger. Within a day of Crain’s first reporting that Ford Motor Co. is pursuing a deal to buy and redevelop the dilapidated Michigan Central Station, bro-

Need to know

Ford Motor Co. reportedly pursuing a deal to buy and redevelop the Michigan Central Station 

 Aftershock for Corktown real estate owners and developers would be widespread

ker James Tumey received several cash offers, even at the full $540,000 price, for the properties that look out on the 500,000-square-foot depot. And some of the potential buyers haven’t even seen inside the homes. And that’s with no finished Ford deal in place.

Assessed property values for both residential and commercial would rise 

If it happens, the aftershock for Corktown real estate owners and developers would be widespread. Assessed property values for both residential and commercial would rise. Apartment rents would move upward. Landlords for restaurants and retail space could command more money for space as the daytime worker population in Detroit’s oldest neighborhood increased, patronizing more businesses along Michigan Avenue and off it west of downtown. SEE CORKTOWN, PAGE 19

Ford Motor Co. is reportedly pursuing a deal to buy and redevelop the dilapidated Michigan Central Station. CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS

TRANSPORTATION

Consultant urged against redeveloping Detroit airport

By Kirk Pinho kpinho@crain.com

and Chad Livengood clivengood@crain.com

A draft report commissioned by the city suggests that the Coleman A. Young International Airport should remain just that — a general aviation airport — rather than funneling large chunks of it off to developers for new industry and jobs. Rather, between $23.2 million and $60 million should be spent on improvements ranging from the bare minimum to bring the airport up to current standards to improvements that would attract commercial carricrainsdetroit.com

er service back to the airport after a nearly two-decade hiatus, according to the draft report. That portion of the report by Pennsylvania-based GRA Inc. recommending improvements over redevelopment, however, has been removed from the final version, submitted to Detroit about six weeks later on Jan. 25, according to copies of both versions of the report obtained by Crain’s. That’s because, the city says, GRA submitted its report with information that wasn’t within the scope of its $74,000 contract to prepare it — by SEE AIRPORT, PAGE 20

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Mayor Mike Duggan’s administration has solicited ideas from real estate developers about how City Airport could be used for nonaviation purposes.

EACH WEEK DON’T MISS OUT ON CRAIN’S SPECIAL REPORT! FAMILY-OWNED BUSINESSES, Page 8 BROUGHT TO YOU BY:

By Jay Greene jgreene@crain.com

Hospital systems in Southeast Michigan are taking another look at the size of their workforces and how they manage clinical care as government and private payers ratchet down reimbursements and patients seek lower-cost outpatient services. Two health systems — Ascension Health Michigan and Detroit Medical Center — have already taken steps to cut costs Need by laying off 500 to know and 330 of their  After Ascension workers, respecand Detroit tively, cutting Medical Center laid millions of doloff more than 880 lars in expenses. employees this Both health year systems annually earn more than  Beaumont, $100 million in Henry Ford, operating in- McLaren and St. come, according Joseph's don't to Medicare cost anticipate layoffs reports, but they this year are starting to see  Systems erosions in profworking to cut its and want to costs to prepare improve worker for lower p ro d u c t i v i t i e s reimbursement and clinical efficiencies. Executives at the other five major health systems in metro Detroit say they hope to cut costs to guard against an uncertain financial future without laying people off, though some have cut staffing through attrition. Still, most health systems have eased back on hiring and are carefully scrutinizing each hire as people leave or retire. “We have been watching (costs) for a long time. I am not surprised by the challenges” facing Ascension and DMC, said Rob Casalou, president and CEO of Mercy Health and St. Joseph Mercy Health System in Ann Arbor. “We are not planning any workforce reductions. It is not in the plan right now. But it does not mean we are not controlling costs.” SEE STAFFING, PAGE 17

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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 R C H 2 6 , 2 0 1 8

MICHIGAN BRIEFS

INSIDE

From staff and wire reports. Find the full stories at crainsdetroit.com

Snyder endorses Calley for governor Gov. Rick Snyder last Wednesday formally endorsed Lt. Gov. Brian Calley to succeed him in office, saying the 40-year-old is “ready to go” and keep his policies on education, business development and government reform going for another four years. “When you’ve got something really good going, folks, why mess it up? ... Just keep going,” Snyder said at a news conference at the Southfield headquarters of construction giant Barton Malow. “And if anything, just hit the gas.” Calley is seeking the Republican nomination in an increasingly heated campaign against Attorney General Bill Schuette, who has long been considered the frontrunner. For Snyder, a former venture capitalist who came out of obscurity to win the 2010 governor’s race, the endorsement of Calley in the Republican gubernatorial primary is the most significant he’s made as the state’s chief executive. Snyder has routinely steered clear of getting deeply involved in Republican intraparty politics. He sat out the 2016 presidential election in the primary and general election after Donald Trump became the nominee. “I’ve been looking forward to this day since the day he agreed to be my

CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS

Gov. Rick Snyder formally endorses Lt. Gov. Brian Calley’s campaign for governor Wednesday during a news conference at the Southfield headquarters of construction giant Barton Malow.

lieutenant governor, going back that many years,” Snyder said. “This is about the next generation of Michigan — and that’s an important aspect that I look at.” Calley is campaigning on the Snyder administration’s accomplishments in Detroit, with balancing the state budget and racking up a nearly $900 million rainy day fund balance. If elected, Calley said he would carry on Snyder’s leadership style of steering clear of political divisions. “I’ve really worked alongside the best — somebody who really did turn around this state,” Calley said. “And I’m prepared for the future.”

Business leaders: Education must improve

Michigan’s education system must be fortified to make the state a top 10 economy in the country, Business Leaders for Michigan found in a new review of best practices in K-12 education. The group put forth its own policy positions to advance discussions on fixing the state's schools, which have been under the microscope for low student scores. Only one in four students are prepared for college and careers upon leaving high school while math and reading scores rank among the worse in the nation, ac-

cording to the study. A report released last Tuesday by the group lays out five principles, with emphasis on teacher training, school accountability and spending, that it says could stimulate K-12 student performance. The study, titled “Business Leaders’ Insights: Leading Practices in K-12 Education that Can Improve Student Outcomes in Michigan,” was led by PricewaterhouseCoopers and BLM. Some of report’s highlights suggest more training for teachers and principals, updating classroom technologies, strengthening the M-STEP assessment to track data for teachers and developing a competency-based learning model for students. “We need to educate the candidates who are running for office to know they don’t have to reinvent the wheel. There’s a plan ready,” BLM CEO Doug Rothwell said about the report’s purpose. Rothwell said more research is needed on how public schools spend

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state aid to figure out how to get more spent on classroom instruction. The report also calls for policymakers to keep in place the current student testing assessment system. “We’ve changed the student assessments three times in three years and we're about to do it again,” Rothwell said. “It’s hard for the teachers to know what the goal is if we keep changing that goal every other year.” The BLM report calls for continued coordination of shared business services among school districts to achieve savings for the state’s 545 local school districts, 299 charter schools and 56 county-level intermediate school districts.

CORRECTION  A story on Page 1 of the March 19 issue incorrectly stated the roles of United Road Services CEO Kathleen McCann at her former employer Soave Enterprises and incorrectly described Soave’s businesses. McCann joined Soave, a diversified holding

company with real estate, metal recycling, industrial facility management, hydroponics and auto retailing, as a group controller for City Management before joining United Road in 2011. The story also gave an incorrect title for Soave CFO Mike Piesko.

DON’T GET LEFT OUT OF THE WINNER’S CIRCLE.

TELL US WHY YOU’RE THE BEST IN CLASS. We’re launching a slate of recognition programs honoring the “Best in Class” in three Metro Detroit business sectors: real estate, law and finance. The awards will honor stand-out achievements – the deals and developments that made the most impact in the last year or so – as well overall excellence in the field.

NOMINATIONS ARE NOW OPEN FOR BEST IN CLASS: REAL ESTATE

in the following categories: • Broker of the year • Developer of the year • Project of the year

• Young gun of the year – Candidate should be under the age of 35 on June 25, 2018 • Deal of the year, by project type Lease / sale; office / industrial / retail

Winners will be announced in our June 25 issue. If you’re up for the challenge, the competition is free and entries will be accepted until Monday, April 9.

Place your nominations at 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 R C H 2 6 , 2 0 1 8

FINANCE

New bank planned — first in Michigan since recession By Kurt Nagl knagl@crain.com

Rob Farr is treading territory left uncharted since the Great Recession. The veteran local banker is aiming to open the first new bank in Michigan since 2009. Last week, he filed an application with the state and the Federal Deposit Insurance Corp. to charter a new community bank planned for the corner of Lahser and Maple roads in Bloomfield Township. Farr said the market needs more

Need to know

First application for de novo bank since Great Recession submitted last week 

 Number of community banks in SE Michigan has shrunk from 22 to six  Single 1,400-square-foot branch location planned for Bloomfield Township

banks catering to small and medium-sized businesses. And he thinks the time is right for more newly chartered banks, known in the industry as de novo banks, whose creation

ground to a halt in the Great Recession. “You’re not going to see the kind of activity you saw earlier in the 2000s, but the model is still good,” said Farr, 61. “There are fewer banks servicing smaller businesses.” Before the economic downturn, there were 22 community banks — those with $1 billion in assets or less — in Southeast Michigan. Only six survived, and Farr’s was one of them. He founded Bank of Birmingham in 2006, during a boom in communi-

ty banking that also saw the creation of what became Troy-based Talmer Bancorp in 2007. In 2009, the bank lost $2 million and found itself in dire Rob Farr: Filed straits which application to most of its councharter bank. terparts could not weather. But the bank persevered

and, in 2016, was acquired by Bank of Ann Arbor for about $33 million with $300 million in assets. Even as companies started to expand again and confidence in opening new businesses grew, the depleted number of banks stayed the same because of heavy federal regulations post-recession and the cold feet of would-be bankers. A good economy and dearth of banks could spawn new bank charters in Southeast Michigan and SEE BANK, PAGE 18

NONPROFITS

Growing pains

RecoveryPark currently operates nine high tunnel greenhouses on its campus east of the downtown area. Plans call for construction of glass greenhouses behind the high tunnels. RECOVERYPARK

RecoveryPark could create 170 jobs for Detroiters. It could also close. By Sherri Welch swelch@crain.com

As he moved between the high tunnel greenhouses on RecoveryPark’s Detroit farm, Clinton Borders was all smiles. The March day was sunny and cold, but it was summer in the tented greenhouses. Borders jumped from job to job before coming to RecoveryPark a year and a half ago. Today, he’s in

Need to know

RecoveryPark on the verge of scaling up or shutting down 

 Social enterprise would create 170 jobs for people with barriers to employment  Nonprofit working to round up short-term operating funds and high-growth investment

charge of seven other employees hired to help tend the specialty crops

MUST READS OF THE WEEK The Morrie looks at regional expansion Developer plans to replicate Royal Oak concept in Birmingham — and eventually in Ann Arbor and Detroit. Page 22

Former education secretary to speak at annual gathering John King Jr. to keynote at Mackinac Policy Conference. Page 5

grown in the high tunnels. As one of RecoveryPark’s 14 employees, Borders, 62, is offered three years of supportive services, but he’s already starting to wean himself off of those. He has his own vehicle, rents his own place and recently took in one of RecoveryPark’s newest hires until he can get a place of his own. RecoveryPark is on the verge of launching a plan that would bring commercial hydroponics farming to

Detroit, creating another 170 jobs for people like Borders with barriers to employment over the next three to five years. It’s also on the verge of closure, after developing the model for the past nine years. President and CEO Gary Wozniak is asking past supporters for help in raising $500,000 in short-term operating funding. With that, RecoveryPark would

have until July or August to raise at least part of the $13 million needed to put the hydroponics plan in motion with construction of the first greenhouse and acquisition of about 15 acres of land from the city. The plan is to fund the project through a planned combination of program-related investments from foundations, private investment, debt and new market tax credits. SEE RECOVERY, PAGE 18

SPORTS BUSINESS

Lions seek practice jersey ad sponsors amid trend of selling space on uniforms By Bill Shea bshea@crain.com

It’s some of the world’s most valuable real estate, and the only remaining virgin surface in U.S. pro sports unadorned by advertising: the uniforms. The NBA moved to allow small advertiser logos on its jerseys this year — Flagstar Bank took the spot for the Detroit Pistons. And the NFL and Detroit Lions may take another dip into the market, though not on game uniforms — at least not yet. The Lions say they are in talks with an undisclosed company to advertise

Need to know

Lions are in talks with training camp jersey sponsor 

 NBA first league to allow game jersey ads  Other leagues watching NBA jersey ad experiment

on the team’s training camp jerseys this summer, and seek another to sponsor their practice jerseys during the regular season. Such deals represent a small step toward a brand one day paying enormous sums to advertise on the team’s

Honolulu blue and silver uniforms. But that’s only if the National Football League signs off on allowing teams to sell ad space on jerseys, a potential revenue boost that can occur only if the NFL’s owners can overcome fear of fan backlash. A rival sport may help assuage their worries: The National Basketball Association last year launched a three-year pilot program that allows teams to sell a small patch on game jerseys, and clubs are cashing in with deals that range from $5 million to $20 million annually. SEE UNIFORMS, PAGE 20

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 2 6 , 2 0 1 8

DETROIT RISING PODCAST

CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS

The Detroit Building Authority uses dashboards to track real-time progress of demolitions of homes and commercial buildings in the city. Demolition contractors submit the data throughout the workday as they complete various steps in the demolition process. The dashboards are displayed on monitors in the agency’s office at the Detroit Public Safety headquarters on Third Avenue.

Using tech to track demolitions, neighborhood improvements

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The city of Detroit’s online map for tracking the demolition of blighted houses and commercial structures has become a more sophisticated database of information about new investment in the city. The Detroit Building Authority’s demo tracker (https://tinyurl.com/ ydh5u976) contains a GPS-enabled interactive map of the city that shows block-by-block data on completed demolitions, structures that are contracted for removal or in the near-term pipeline to be torn down and new city building permits by address. “It’s not just a map looking at demolition,” DBA Director of Special Projects Brian Farkas said in an interview for the Crain’s “Detroit Rising” podcast. The building permits on the demo tracker map provide actionable information for businesses and individuals looking to invest in the city, Farkas said. “You can see where the private sector is building in Detroit,” Farkas said in an interview at Sister Pie bakery in West Village. “And the hope is that if other developers and other investors and residents can see where there’s activity, we can maybe speed that up through open data.” Detroit’s demolition program has led to the razing of more than 13,600 structures since January 2014, including 493 commercial structures, according to the real-time tracking data. The sheer volume of once-thriving homes, retail buildings and schools that the DBA and Detroit Land Bank Authority are tearing down has caused officials to invest in a centralized data system for tracking the progress of asbestos abatement, permitting, contract approval, the actual demolition and final ground grading of a cleared property.

Detroit Building Authority Director of Special Projects Brian Farkas talks about the city’s online demo tracker wtih Crain’s reporter Chad Livengood at Sister Pie in the West Village neighborhood.

About the podcast The weekly feature profiles people and issues in business, nonprofits and government in Detroit. If you have a story idea to feature on the podcast, email clivengood@crain.com or call (313) 446-1654.

CHAD LIVENGOOD clivengood@crain.com

Detroit’s multimillion-dollar demolition program has faced scrutiny for improper costs as well as contractors who didn’t complete the work. Farkas said the dashboard-tracking technology has helped improve compliance with contractors to ensure they’re following health and safety guidelines and meeting deadlines to

complete demolition contracts. “There’s not another city in the country, and perhaps civilization, doing what we’re doing ... blight removal at scale,” Farkas said. “Where is a better place to do this than Detroit, where scale is in our DNA? We put the world on wheels, we were the Arsenal of Democracy. Where else to teach the world how to do this and make a great city blight-free?”

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 2 6 , 2 0 1 8

Former education secretary to speak at Mackinac

Labor & Employment Experience

In Your Corner.

Ŷ Defends claims of harassment, retaliation and discrimination, as well as FMLA and whistleblower claims Ŷ Counsels employers on hiring, discipline and performance matters, wage and hour issues, employee leaves and accommodation requests

By Annalise Frank afrank@crain.com

Former U.S. Secretary of Education John King Jr. will address the question “Is Michigan prepared?” at the 2018 Mackinac Policy Conference. The Detroit Regional Chamber chose King as a keynote speaker for its yearly gathering of business and gove r n m e n t officials, which will run May 29June 1. King, president and CEO of Washington, D.C.-based John King Jr.: To nonprofit The speak at Education Mackinac Trust, will speak Need May 31, accordto know ing to a news reJ John King Jr. will lease. He will discuss how to address "Is support educaMichigan tors and stuprepared?" dents and make J Policy college more afconference is May fordable. 29-June 1 The longtime J Others speakers educator served under President include John Boehner and Peggy Barack Obama and as New Noonan York’s education commissioner. Also on May 31, former U.S. House Speaker John Boehner is scheduled to deliver a talk about trust-building. The conference also chose Public Broadcasting Service President and CEO Paula Kerger and Wall Street Journal columnist Peggy Noonan to speak this year. The event at the Grand Hotel on Mackinac Island brings attendees together to mingle and discuss statewide hot topics such as mobility and job creation. The pillars, or core talking points, for this year are: J “Is Michigan prepared” as a competitive business destination J “The mobility disruption,” referring chiefly to the connected and autonomous vehicle industry J “Trust” in government, media and business

BANKRUPTCIES The following businesses filed for bankruptcy protection in U.S. Bankruptcy Court in Detroit Feb. 17-24. Under Chapter 11, a company files for reorganization. Chapter 7 involves total liquidation. J Crystal River Specialties LLC, 2848 W. Maple Road, Troy, voluntary Chapter 7. Assets: $13,050.80, Liabilities: $26,929.60 J Universal Investments Group LLC, 32420 Michigan Ave., Wayne, voluntary Chapter 11. Assets and liabilities are not available.

Ŷ Represents employers before the EEOC and various state agencies

First Tier Ranking in Labor Law – Management

Contact Bethany Sweeny at bsweeny@varnumlaw.com

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C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 2 6 , 2 0 1 8

OPINION Big data is a fact of life T

he first time you used a credit card to buy groceries, you entered the world of big data. The supermarket knew what you bought, and how much you paid. The issuing bank already knew who you were and where you lived. Now it could make a pretty good guess on whether you had kids or a dog, based on what you bought. From then on, that data became marketing gold. Then you bought a car, and created lots more data. Then you bought a house. There were no more secrets. Now folks are getting upset when they learn Barack Obama or Donald Trump used such data to figure out where to aim their messages. If that upsets you, you don’t understand how the world works these days. In exchange for access to all this wonderful technology, we are more than willing to give up our information. We give it up in massive amounts, and we give it up willingly to the world’s data farmers. It would seem that privacy disappeared a long time ago. Nothing is free, and unless we want to live in a cash-only society, we will continue to be ensnared in big data. Should we have a right to opt out? That deserves debate. We can minimize the amount of data we share simply by limiting the

KEITH CRAIN Editor-in-chief

number of institutions we do business with. But we should assume that they all are mining our data and turning around and selling it to whomever is willing to pay for the information. We should probably have some sort of regulation, like we do with telephone service or broadcasting. I would not be the person to know how to regulate big data, but we have done a pretty good job of regulating automobiles, for example. It is not an impossible task. It is probably more shocking to realize how many people don’t understand that they are giving up all this data. It’s not going to get easier in the future. Think of all the data that an autonomous vehicle would supply. It’s probably easiest to just think of it as more advertising or marketing. If you don’t like it, ignore it. Or learn as much as you can about it.

LETTERS

Michigan needs 24/7 energy sources

In a March 11 article titled “DTE gets pushback on new St. Clair County Power Plant,” opposing environmental groups presented their case to encourage the Michigan Public Service Commission to forgo approval of DTE Energy’s proposed 1,100-megawatt gas plant and advise the company to replace the generation capacity of three coal-fired power plants being retired over the next five years with renewable energy sources. We agree that Michigan’s energy future should incorporate new, cleaner ways of meeting the state’s energy needs, and we are committed to developing cleaner energy infrastructure. We also have a responsibility to balance reliability, affordability and renewable sources of energy to best meet Michigan’s needs. While renewable energy plays a critical role in Michigan’s energy landscape today and into the future, wind and solar provide energy only when the wind is blowing and the sun is shining. In the article, these advocates neglect to address the need for 24/7 generation to power Michigan’s 24/7 economy. It is important to remember that when most of us power down to sleep at night, Michigan’s economy and energy grid do not. Auto and steel manufacturers continue operations around the clock, our lights still need to come on during short winter days, and our thermostats need 24/7

DTE Energy’s natural gas plant Heat recovery steam generator

Gas turbine

Steam turbine

Generator Transformers

Heat recovery steam generator

Generator

Gas turbine Building

Transformers

Transformers Source: DTE Energy

power to heat and cool our homes. Not only does DTE’s proposed gas plant provide reliable, 24/7 energy, it significantly contributes to our overall goal of reducing carbon emissions by 30 percent in the early 2020s and 45 percent by 2030. These planned reductions will be achieved by shifting our retiring coal-based generation to the proposed natural gas plant and adding more renewables. Our goal exceeds the 32 percent reduc-

tion by 2030 that would have been required by the EPA’s Clean Power Plan. For over 60 years, the bulk of the state’s energy needs were met through coal-fired power plants, which could support those 24/7 energy needs. However, due to age and environmental regulations, DTE will retire three of our five remaining coal-fired power plants over the next five years. These retirements repre-

sent 19 percent of our current generation portfolio — enough to power over 700,000 homes. While this energy infrastructure is going away, the need for reliable, affordable, and clean power is not. So, what is the most affordable and efficient new source of 24/7 generation? Many in opposition to the natural gas plant cite fault in DTE’s resource analysis — insisting their analysis

provides a cost-effective option for Michigan residents without compromising reliability. However, their proposal suffers from both analytical errors and unrealistic assumptions about how much energy could be saved through even more aggressive energy efficiency programs, resulting in a proposal that will not reliably meet Michigan’s 24/7 energy needs. DTE conducted extensive modeling to determine what resources made sense, running more than 50 scenarios throughout the process. Our proposed plan is now under the scrutiny of state regulators in what is known as an “Integrated Resource Plan.” This rigorous analysis conclusively showed that a natural gas power plant is the best option to meet the 24/7 needs of our customers. In July 2017, DTE filed a request for a Certificate of Necessity, proposing to build a state-of-the-art 1,100 megawatt power plant fueled by clean, lowcost and abundant American natural gas. If approved, this plant would represent almost a $1 billion investment in Michigan’s energy grid, create approximately 520 skilled-trades jobs, and would serve the state’s families, businesses and around-the-clock manufacturing economy for decades to come. The Certificate of Necessity process is transparent and provides opportunity for stakeholders to weigh in or submit competitive alternate plans. While many have weighed in with opinions on how Michigan’s future energy landscape should look, not a SEE LETTERS, PAGE 7

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 2 6 , 2 0 1 8

LETTERS FROM PAGE 6

single alternate bid was submitted to the Michigan Public Service Commission. Both Michigan’s utility regulatory staff and the attorney general’s office concluded that DTE’s analysis supports finding that DTE’s proposed natural gas power plant is the most reasonable and prudent means of meeting future power needs of DTE’s customers. Over the past five years, DTE has driven investments of over $2 billion in nearly 1,000 megawatts of wind and solar renewable generation, and plans to add over 300 megawatts during the next two years. In 2018, DTE will commission its Pine River Wind Park and plans to bring an additional wind park online in early 2020. However, Michigan also needs to add additional 24/7 generation, which a natural gas combined-cycle plant provides. Our customers expect and deserve a thoughtful path forward as the state pursues an increasingly clean energy future. As we have throughout our 170-year history, DTE is committed to responsibly powering Michigan with affordable, reliable energy to meet the needs of our state’s families, businesses, and 24/7 manufacturing economy. Trevor F. Lauer President and COO, DTE Electric DTE Energy Co. Detroit

gan insurers are not profitable. Premiums are not intended to create a profit. They create “float” which insurers (AKA banks) use to generate immense profits; just ask Warren Buffett (Geico). More insurers will write in Michigan if real reform efforts are made. If the chamber wants to increase the profitably of its members, lower cost to Michigan’s consumers, increase competition, quality and effectiveness, support the move to universal health care. The evidence of its efficacy is overwhelming. If you wish to aid Rep. Lana Theis in her efforts to support her constituents needs push the legislature to public financing of campaigns with time limits on campaigning in exchange for ending term limits. If you wish to grow Michigan’s economy,

embrace real reform, not tinkering around the fringes of the real problems. Chuck Fellows South Lyon

Wayne, Washtenaw: Go ahead on transit

To the editor: Having read Warren Evans’ transit proposal, I find zero about permitting Wayne and Washtenaw counties to proceed with the implementation of a transit plan should their voters agree to fund it apart from Oakland and Macomb. If the mayor of Detroit and Wayne/Washtenaw county execs do not bargain for such an agreement, the future vote is being set up for failure. In essence, the

vote will be an exercise in futility. The same issue was present decades ago in Atlanta when they voted the first phase of MARTA in. The New York Times Magazine described such in an article about 15 years ago wherein it told of how counties north and south voted for MARTA while counties east and west did not due to the possibility of the wrong color coming into their communities. However, as the agreement permitted counties north and south to start construction of their first transit line, the subsequent influx of green (i.e., huge development dollars) convinced the dissenting counties to fund an east/ west line so as to not miss out. This same scenario can happen here should a similar agreement be reached. Hopefully Transportation Riders United will

be able to obtain a copy of the agreement reached in Atlanta so as to not reinvent the wheel. On another front, if such an agreement can be reached, Mayor Mike Duggan and Wayne/Washtenaw county execs should waste no time attempting to convince Oakland and Macomb residents to approve of a transit millage since, no doubt, all of their residents have autos, can afford insurance, are physically capable of driving no matter the age; or, they are of the liveried set with access to Uber, Lyft, Metro Cars or chauffeurs. In fact, they could probably do away with their school buses. In closing, thanks for your efforts to move Metro Detroit into the 21st Century. Robert Thibodeau Detroit

Auto insurance should be regulated

To the editor: The cause of the high cost of Michigan’s auto insurance is attributed to “no-fault insurance.” This approach is wrong. The problem is not “no-fault.” The problems are legislative negligence, insurance company financial gamesmanship, runaway medical costs, fraud and claim buildup. The proposed legislation to change Michigan’s no-fault insurance system would not have resolved the cost difficulties Michigan’s insured face. By law auto insurance is required. It is therefore a public utility and should be regulated accordingly beginning with transparency in financial reporting and rate setting. Not addressed in reform efforts. Seven day insurance, which does support auto sales, should not entitle the insured to a regular license plate and registration. Doing so encourages fraud and uninsured motorists. Not addressed in reform efforts. Current law allows medical care providers to charge whatever they want for accident-related medical services. Correct the current law and, since this is a public utility, impose rate controls using our preexisting schedules from Medicare, worker’s compensation and normal fees for services outside the scope of those schedules. Creating an authority to review fraud and appropriate funds selectively is redundant. We have the tools to investigate fraud but refuse to fund. A new bureaucracy invites further fraud and an additional consumer cost impacting those already financial stressed the most. Restricting the seven-day insurance option will reduce the number of uninsured motorists. Finally, end the myth that Michi-

If you want a stronger future for Michigan,

raise your hand. If you want Michigan’s economy to grow and thrive, we need to compete with other states and win. We need to create an environment that attracts new business, and talent that has the education and training to do the jobs of tomorrow. A plan has been developed to accomplish these goals: the Plan for a Stronger Michigan. Raise your hand to support the Plan at StrongerMichigan.com.

An Initiative of Business Leaders for Michigan.

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 2 6 , 2 0 1 8

FOCUS

FAMILY-OWNED BUSINESSES

STRICTLY BUSINESS

Joe Schodowski is president and CEO of Shelving Inc. Story, Page 10 LARRY PEPLIN FOR CRAIN’S

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 2 6 , 2 0 1 8

Why family companies should consider family employment policies By Rachelle Damico

Special to Crain’s Detroit Business

In this package Policies in place: Why family companies should consider employment policies. This Page Shelving Inc.: For family-owned businesses, transparency is paramount. Page 10 JEM Tech: Her dad made her work for it, and she will too. Page 11 Les Stanford Chevrolet: Consultants can help family businesses with their employment policies. Page 12 Policy primer: Thinking about implementing employment policies? Here’s what you need to know. Page 13

It can be a tremendous stress reducer for family companies to have family employment policies in place. Rejeana Heinrich, associate director at the Stevens Center for Family Business at Saginaw Valley State University, said one of the biggest issues family companies face is that business can become emotional. Issues get shoved under the rug, and conflict can arise. “Having policies in place that address potentially sensitive issues up front can serve the family so much better than just waiting until things blow up,” she said. Heinrich said even the act of writing employment policies can be a good tool for family companies. It’s a process where the family can come together to clarify expectations, and for Rejeana Heinrich: them to feel like they’re all in it together. Writing policies a “Things can be aired out good tool. during that process, and it really does lend itself to Need more cohesion, underto know standing and positive  Family-owned communication among businesses can put the family members,” policies in place to Heinrich said. “It has buyprevent favoritism in, and people feel much of second- and more committed to it.” third-generation Having family employemployees ment policies can also be  Just creating healthy for a company’s the rules can give culture, helping to elimifamilies the nate favoritism between opportunity to family member employees create buy-in, and non-family member improve communi- employees. cation “Treat family members equally as if they were  Many policies non-family member eminclude a rule that ployees — don’t show fafamily employees voritism,” said Jami Moore, must work outside president and co-owner of the business JEM Tech Group. “Everyone should follow the rules, family or not family.” Family employment policies can also bring new skills to a company. A common employment policy requires family members to work at an outside company for a specific amount of time before joining the family company. “They can share what worked at an organization and what didn’t,” said Joe Schodowski, president and CEO of Shelving Inc. Tackling everything from hiring to firing, Crain’s talked to three family-owned businesses about their family employment policies, and how those policies benefit their companies.

“Having policies in place that address potentially sensitive issues up front can serve the family so much better than just waiting until things blow up.” Rejeana Heinrich

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their policies 10

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 2 6 , 2 0 1 8

SPECIAL REPORT: FAMILY-OWNED BUSINESSES

For family-owned businesses, transparency is paramount

By Rachelle Damico

After hearing horror stories from other family companies at networking events, Joe Schodowski, president and CEO of Shelving Inc., felt his family’s second-generation led company needed employment policies in place for family members interested in entering the business. “I’ve seen other companies bring family members in that feel entitled, and morale goes down, employees start leaving, and it quickly goes downhill,” Schodowski said. “We totally want to avoid that.” The Auburn Hills-based distributor and retailer provides shelving, racking and storage products for commercial and residential customers. The company also sells its products and services through its websites, Shelving.com and TheShelvingStore.com. The company has 30 employees and generated $11 million in revenue last year. Shelving Inc. was founded in 1960 by Jack and Helen Schodowski, Joe Schodowski’s parents. Joe Scho-

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Special to Crain’s Detroit Business

Spec

Shelving Inc. provides shelving, racking and storage products for commercial and residential customers. LARRY PEPLIN FOR CRAIN’S

dowski bought the company in 2000 along with his brothers, John Schodowski, vice president of operations, and Michael Schodowski, vice president of sales. His brother-in-law Jim Aiello, vice president of strategic ini-

tiatives, also owns the company. About 10 years ago, Joe Schodowski said he approached the partners about putting policies in place for third-generation family members interested in joining the busi-

ness. Prior to their ownership, there were no solid rules in place for family members entering the company, he said. “There wasn’t originally clearly defined roles or responsibilities,” Schodowski said. “I said, ‘We should probably have some ground rules and do it now, so we’re all in agreement.’” The partners agreed third-generation family business members must have some type of formal education outside of high school, such as a college degree. Also, family members must work a minimum of five years outside of the family business before joining the company. “It brings different skills, and can bring fresh ideas to the company,” Schodowski said. Schodowski said outside experience also helps gain the respect of non-family member employees. “You want to make sure you don’t disrupt the culture by bringing somebody in that just so happens to be a family member, but isn’t really adding much to the team,” he said. Family member employees must also meet the same criteria non-family employees do, Schodowski said. Prior to hiring, employees take an assessment test to determine which position is a fit for them. The company uses DISC, an online behavior assessment tool that matches an individual’s behavioral traits to an appropriate job description. “It helps us determine if their behavior and personality is a good fit for that position,” Schodowski said. Family member employees are not paid more just because they’re related to management. Schodowski said Shelving Inc. relies on data from recruiters and websites such as PayScale.com and Salary.com that give a range of market rates based on the position. “Again, there’s no favoritism there,” Schodowski said. “It’s what the market dictates.” Once an employee is hired, they are required to meet with management for a performance review. During the first year, employees must attend three performance review meetings. After that, meetings are semi-annual. Employees must also meet benchmarks according to their position to determine their performance at the company. For instance, a marketing

employee would report conversion rates, as well as other data. Schodowski said this helps hold both family member employees and non-family member employees accountable. “If they’re working on a project, there’s got to be an objective way to hold them accountable, and data to determine their performance,” he said. To avoid favoritism, Schodowski said transparency with family members is paramount. “Build a lot of transparency so there’s not a lot of room to hide and make excuses,” Schodowski said. “That individual has to earn the respect of everybody else on the team.” Family member employees aren’t exempt from disciplinary action or termination. Schodowski said the company has had to make the hard decision of letting a family member go because they weren’t the right fit for the company. “If you see a problem arise, you’ve got to address it all the way — don’t bury it under the rug,” he said. “If you went through all the different ways to try to fix it, and it’s just not working out or it’s the wrong fit, rip the Band-Aid off.” Schodowski said companies planning to hire family members should at least have a document that provides a clear description of their position, as well as their commitments and expectations to the company. Shelving Inc. employees each write their own one-page commitment and expectations outline, and their direct supervisor does the same for that employee’s position. “That way there’s clarity if there’s ever an issue that comes to surface,” Schodowski said. “It’s also a document that can be referred to if either person feels that expectations or commitments for the position aren’t being met.” Schodowski said multi-generational family businesses are a great thing, but knows the odds are stacked against companies with each passing generation. “Culture is key — it trumps about anything and takes a long time to build, and doesn’t take a long time to lose,” Schodowski said. “If you nip these issues in the bud, you have a much greater chance of success.”

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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 R C H 2 6 , 2 0 1 8

Her dad made her work for it, and she’ll do the same By Rachelle Damico

Special to Crain’s Detroit Business

Jami Moore, president and co-owner of JEM Tech Group, said family employees should be treated equally to non-family member employees to be successful. “Don’t show favoritism. That’s where I see problems sometimes with other family businesses,” Moore said. “Policies, roles and job descriptions need to be in place so everybody knows where they fit within the company.” The Clinton Township-based company provides power and cooling infrastructure and services for companies’ data centers, server rooms and network closets. JEM has 14 employees and generated $9 million in revenue last year. Moore’s father, James Edward Miller, founded the company in 1979 as JEM Computers Inc., which specialized in ink ribbons and tape backup for servers. Before joining her father’s company, Moore worked in corporate

“My dad said, ‘You can’t just take over the company. You have to learn what the business is about.’ He said, ‘If you screw this up, you’re going to basically make me have to start over.’” Jami Moore

America for more than eight years. After a bad day at work in 1999, Moore asked her dad to dinner and approached him about taking over the company. But it was no easy task, Moore said. Her father had planned to retire and sell the company to a third party. “My dad said, ‘You can’t just take over the company. You have to learn what the business is about,’” Moore said. “He said, ‘If you screw this up, you’re going to basically make me have to start over.’” Moore said her father required her to prove that she could run a small business. She took night classes in Ann Arbor through Great Lakes Business Council, a nonprofit that provides business development training programs. Through the program, Moore learned how start a business from the ground up and how to write a business plan. As a required project, she presented JEM, which included findings on how to grow the company. Her father attended the presentation. “He was surprised,” Moore said. “He didn’t think I had the tenacity to do it.” Moore officially joined JEM in 2000. She was required to start at an entry-level sales position before working her way up the ladder. Moore’s sisters, Kelly Nutting (finance and human resources) and Denise Bonino (sales support) also joined the company that year. They had gained experience working for other companies prior to joining

JEM, although Moore said her dad wasn’t as hard on them because they had no desire to run the company. “My dad led with an iron fist,” Jami Moore: Moore said. “My Policies need to goal as a leader be in place. is to train others to do what I’m doing so that if something did happen, this compa-

ny would sustain without me.” Moore became president in 2003, growing the company from $2 million to $9 million in revenue. Her dad left the company the same day she became president, although he is still a co-owner. (Moore currently owns about 70 percent of the company.) Although Moore said her and her dad approach leadership differently, she does have some of his tendencies when it comes to hiring family members. Last year, Moore’s cousin’s son,

Nick Grodzicki, approached Moore about joining the family business. He had just graduated with a bachelor’s degree in business from Central Michigan University, with a concentration in entrepreneurship, sales and management. Moore said she required him to go through the same hiring process as non-family employees, including an interview with Moore and a separate interview with JEM team members. “I told the team, you need to approach him as if this was a person

that came from a recruiter,” Moore said. “Everybody’s been here so long, you don’t want to upset the apple cart.” After Grodzicki was hired, Moore started him at an entry-level sales position and wage, just as her dad required of her. “My dad didn’t put me on a pedestal, I had to work for it,” Moore said. “I’m doing the same with Nick, and I think there’s a team appreciation for that, because he’s treated the same as everybody else.”

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 2 6 , 2 0 1 8

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Dan Smith (left), Gary Stanford, Paul Stanford and Weston Stanford of Les Stanford Chevrolet.

Consultants can help family businesses with their policies By Rachelle Damico

Special to Crain’s Detroit Business

When Les Stanford Chevrolet Cadillac Inc. executives met with their consulting group to help with succession planning, they were told their third-generation family company needed policies in place for the next generation of leaders. “They’ve seen some family situations that may have torn families apart,” said Gary Stanford, vice president. “With their experience and knowledge, they help family businesses smooth out these rough roads you can possibly get into.” Les Stanford Chevrolet was founded in 1968 and is celebrating its 50th anniversary. The Dearborn-based dealership sells and services new and pre-owned vehicles. The company has about 180 employees, including those at Stanford-Allen Chevrolet Cadillac Inc., the company’s Monroe-based location. Gary Stanford and his brother Paul Stanford bought the company from their dad, Les Stanford, in 1993. Both brothers began working for their dad in the 1970s. They worked their way up to management positions while working at the dealership, washing service department floors, cleaning parts bins and selling vehicles. Their father also had them work in multiple departments. Paul Stanford said one of their first jobs was work-

“He wanted to expose us to all aspects of the business. There’s no elevator to the executive suite — you’ve got to start at the bottom and work your way up.” Paul Stanford

ing in the accounting department, doing tasks that included paying bills. “He wanted to expose us to all aspects of the business,” said Paul Stanford, president. “There’s no elevator to the executive suite — you’ve got to start at the bottom and work your way up.” When Paul Stanford’s son, Weston Stanford, and Gary Stanford’s son-inlaw, Dan Smith, expressed an interest in working for the business, Paul and Gary contacted their consultants to help them with succession planning. They had hired The Rawls Group, an Orlando, Fla.-based consultancy, in 2002 to help with estate planning. The consultants told the brothers that if they wanted their children to succeed in the business, they should spend at least 18 months working for a different company. “That was a requirement, because

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when you’re working for somebody else, you get zero favoritism,” Paul said. “You have to learn to be there on time, take direction and toe the line.” Weston Stanford went to work for other dealerships, including Fresard Buick GMC in Ypsilanti. He returned to the family dealership, where he worked in various departments before working his way up to a management position. “That’s when you get a really good pulse and grasp on what actually happens day to day,” Weston said. “It also gains the respect of your co-workers who may one day potentially be your employees; working side-by-side with them and earning your stripes.” Both Weston Stanford and Dan Smith work for the Monroe location. Weston Stanford manages the preowned vehicle department, and Dan Smith is the general sales manager. The company’s consultants have been mentoring them to eventually take over ownership of the company. Working with consultants helped make the prospect of succession planning less daunting, Paul said. “To try and tackle that as a business owner, and make it work all by yourself, might be more than you would ever expect, and (the success) of that transition might be diminished if you had to do it yourself,” he said. “It helps with the transition and succession process when you have guidelines and policies to guide you through it.”

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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 R C H 2 6 , 2 0 1 8

SPECIAL REPORT: FAMILY-OWNED BUSINESSES

Thinking about implementing family employment policies? Here’s what you need to address By Rachelle Damico

Special to Crain’s Detroit Business

1. Define what criteria are necessary for a family member entering the business.

tion, as well as its roles and responsibilities.” 5. Have clear rules for termination.

Many business consultants advocate that termination rules be part of a family company’s policy manual. “If the business is going to survive for the benefit of the family, it has to be run in a sound, fiscally responsi-

ble way,” Heinrich said. “Keeping dead weight on the payroll, whether they’re family or not, can be pretty counterproductive.” Heinrich said when it comes to termination policies, it should be explicitly stated if there will be regular performance evaluations based on established goals, or that family members, just like non-family

“It can bring down the culture of the company if someone’s coming in with a sense of entitlement. All those years that you’ve worked to get (the company) to where it is also took a lot of effort from the people who are there day-to-day making things happen.” Joe Schodowski, president and CEO of Shelving Inc.

members, have to meet expectations or there will be consequences. “It’s not doing the family member or the business any favors if a person who is not performing, and is

probably not happy in their job, is allowed to just drift along,” Heinrich said. “It can be a very hard issue to address, but for the benefit of everyone, it should be addressed.”

To diminish favoritism in the workplace, family companies should require family members to meet the same criteria as non-family members employees. That means family employees should go through the same hiring process as non-family employees, and have comparable education and experience. “It can bring down the culture of the company if someone’s coming in with a sense of entitlement,” said Joe Schodowski, president and CEO of Shelving Inc. “All those years that you’ve worked to get (the company) to where it is also took a lot of effort from the people who are there dayto-day making things happen.”

S F

2. Consider having family members work outside of the business.

It can be beneficial to require family employees to work outside of the family company for a period of time. Rejeana Heinrich, associate director at the Stevens Center for Family Business at Saginaw Valley State University, said outside experience allows family member employees to gain outside perspective, and prove to themselves that they can make it on their own. “They’ll know what it’s like to be evaluated objectively by a non-family member,” she said. “It certainly would raise credibility in the eyes of their non-family co-workers when they do enter the family business, as well as the prestige and respect of other family members.” 3. Include benchmarks and performance reviews.

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To hold family employees accountable, family companies make sure they’re meeting benchmarks and participate in regularly scheduled performance reviews or meetings. “There’s got to be some sort of data to determine their performance that’s numerical,” Schodowski said. “There should be weekly or at least monthly meetings where you have that time, even if it’s in a group setting, to discuss who’s doing what and how’s it coming along.” 4. Address compensation policies.

Family companies should spell out clear policies for compensation, and if applicable, ownership stake or other perks. To keep compensation fair, family companies can research a position’s market value. “You can get data from a lot of different websites and recruiters,” Schodowski said. “They give us a range of what the market rates are based on a description of the posi-

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C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // M A R C H 2 6 , 2 0 1 8

CRAIN'S LIST: LARGEST MICHIGAN FAMILY-OWNED BUSINESSES Ranked by 2017 revenue Company Address Rank Phone; website

Year founded First-generation owner

Percent of business family-owned

Revenue 2017/2016

Percent change

Meijer Inc. 2929 Walker Ave. NW, Grand Rapids 49544 (616) 453-6711; www.meijer.com

$18,940.0 B $17,900.0 C

5.8%

1934 Hendrik Meijer

Hank Meijer, executive chairman, grandson; Doug Meijer, director, grandson

Gordon Food Service Inc. 1300 Gezon Parkway SW, Wyoming 49509 (888) 437-3663; gfs.com

13,700.0 D 12,900.0 D

6.2

1897 Isaac Van Westenbrugge

Dan Gordon, chairman, great-grandson; Jim Gordon, vice chairman, great-grandson; Kara Gordon Warren, board member, great-great-granddaughter

Amway 7575 Fulton St. E., Ada 49355-0001 (616) 787-1000; www.amwayglobal.com

8,600.0 8,800.0

-2.3

1959 Jay Van Andel and Rich DeVos

Steve Van Andel, chairman, son of co-founder Jay Van Andel; Doug DeVos, president, son of cofounder Rich DeVos

100

Kelly Services Inc. 999 W. Big Beaver Road, Troy 48084 (248) 362-4444; www.kellyservices.com

5,276.8 5,276.8

0.0

1946 William Russell Kelly

Terence Adderley, chairman, son

Meridian Health Plan 1 Campus Martius, Detroit 48226 (313) 324-3700; corp.mhplan.com

3,810.6 3,732.0

2.1

1997 David Cotton

Jon Cotton, president, Meridian Health Plan of Michigan, son; Sean Cotton, president, Meridian Technologies, son; Michael Cotton, COO, son

100

Ilitch companies 2211 Woodward Ave., Detroit 48201 (313) 471-6600; www.ilitchcompanies.com

3,600.0 3,400.0

5.9

Plastipak Holdings Inc. 41605 Ann Arbor Road, Plymouth 48170 (734) 455-3600; www.plastipak.com

2,782.4 2,689.4

3.5

Barton Malow Co. 26500 American Drive, Southfield 48034 (248) 436-5000; www.bartonmalow.com

2,443.3 2,425.5

0.7

Moroun family holdings 12225 Stephans Road, Warren 48089 (586) 939-7000; NA

2,404.2 F 2,218.5 F

8.4

1937 T.J. Moroun

2,294.2 2,130.4

7.7

The Suburban Collection 1795 Maplelawn Drive, Troy 48084 (877) 471-7100; www.SuburbanCollection.com

1948 Richard Fischer

2,100.0 2,050.0

2.4

H.W. Kaufman Group Inc./Burns & Wilcox Ltd. 30833 Northwestern Highway, Farmington Hills 48334 (248) 932-9000; www.hwkaufman.com

1969 Herbert W. Kaufman

2,040.0 1,940.0 G

5.2

Serra Automotive Inc.

1,780.0 1,838.8

Soave Enterprises LLC

Other family members in management with relation to the first-generation owner

1959 Christopher Ilitch, president and CEO, Ilitch Holdings Inc., son Mike and Marian Ilitch 1967 William P. and Mary E. Young

William C. Young, president and CEO, son

1924 Ryan Maibach, president, CEO and chairman, grandson; Doug Maibach, executive vice chairman, Ben Maibach Jr. E son; Ben Maibach III, chief community officer, son

100

Manuel Moroun, son, and Matthew Moroun, grandson, both hold several executive positions

David T. Fischer, chairman and CEO, son; David Fischer Jr., president and COO, grandson; Zachary Fischer, director, grandson

100

Alan J. Kaufman, chairman, president and CEO, son; Daniel J. Kaufman, corporate vice president, grandson

100

1948 G.W. Haworth

Dick Haworth, chairman emeritus, son; Matthew Haworth, chairman, grandson

-3.2

1973 Albert M. Serra

Joseph Serra, president, son

100

1,610.4 1,193.0

35.0

1961 Anthony Soave

Angelique Soave, vice president, daughter; Andrea Soave Provenzano, vice president, daughter

100

Walbridge

1,500.0 1,450.0

3.4

1916 John Rakolta H

John Rakolta Jr., chairman and CEO, son; John Rakolta III, EVP and CAO, grandson

Wolverine Packing Co.

1,303.0 1,280.0

1.8

The Diez Group

1,190.0 1,152.0

3.3

1973 Gerald Diez

United Shore Financial Services LLC

1,086.0 857.0

26.7

Zeigler Auto Group

1,084.0 1,000.2

Garber Management Group Inc.

Haworth Inc.

Haworth Center, Holland 49423 12 1(616) 393-3000; www.haworth.com E. Hill Road, Grand Blanc 48439 13 3118 (810) 694-1720; www.serrausa.com E. Lafayette, Detroit 48207 14 3400 (313) 567-7000; www.soave.com Woodward Ave., Suite 300, Detroit 48226 15 777 (313) 963-8000; www.walbridge.com Rivard, Detroit 48207 16 2535 (313) 259-7500; www.wolverinepacking.com

1937 Jim Bonahoom, president, son; Roger Bonahoom, vice president, son; Jay Bonahoom, vice Alfred Bonahoom president, grandson

100

April Diez, vice chairman, daughter; Gerald Diez Jr., president, son; Sherry Diez, vice president, daughter; Mark Diez, vice president, son

100

1986 Jeffrey Ishbia

Mat Ishbia, president and CEO, son

100

8.4

1975 Harold Zeigler

Aaron Zeigler, president, son

100

1,013.1 946.6

7.0

1907 Guy S. Garber

Richard J. Garber, president, grandson

925.2 816.8

13.3

1980 Michael T. LaFontaine

Ryan LaFontaine, dealer, son; Kelley LaFontaine, dealer, daughter

100

LaFontaine Automotive Group 4000 W. Highland Road, Highland Township 48357 (248) 887-4747; www.thefamilydeal.com

Kenwal Steel Corp. 8223 W. Warren Ave., Dearborn 48126 (313) 739-1000; www.kenwal.com

882.0 774.0

14.0

1947 Sol Eisenberg

Kenneth Eisenberg, chairman and CEO, son; Stephen Eisenberg, president, Burns Harbor, Ind. plant, grandson

100

General RV Center Inc.

827.6 707.0

17.1

1964 Abe Baidas

Robert Baidas, CEO and chairman, son; Loren Baidas, president and chairman, grandson; Wade Stuff, vice president of operations, grandson-in-law

100

Tireman Ave., Dearborn 48126 17 8111 (313) 491-1200; www.thediezgroup.com E. Maple Road, Troy 48083 18 1414 (855) 888-8737; www.unitedshore.com Stadium Drive, Kalamazoo 49008 19 4201 (269) 375-4500; www.zeigler.com S. Washington Ave., Saginaw 48601 20 999 (989) 790-9090; www.garberauto.com

Assembly Drive, Wixom 48393 23 25000 (248) 349-0900; www.generalrv.com

This list of family-owned or controlled businesses is an approximate compilation of the largest such businesses in Michigan. It is not a complete listing but the most comprehensive available. Crain's estimates are based on industry analyses and benchmarks, news reports and a wide range of other sources. Unless otherwise noted, information was provided by the companies. For some companies, the founders were later bought out by another family. Actual revenue figures may vary. NA = not available.

B Supermarket News Top 75 estimate. Fiscal year ended in January 2018. C Supermarket News Top 75 estimate. Fiscal year ended in January 2017. D Company estimate. E Founded in 1924 as C.O. Barton Co. by Carl Osborn Barton. The Maibach family acquired majority control in 1961. F Crain's estimate. G From MiBiz. H George B. Walbridge and Albert H. Aldinger founded the company in 1916. John Rakolta Sr. bought the company in 1963 with business partner Robert Robillard. LIST RESEARCHED BY SONYA D. HILL An expanded version of this list is available with a Crainâ&#x20AC;&#x2122;s membership at crainsdetroit.com/lists

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 2 6 , 2 0 1 8

CALENDAR State of the State: Now and in the Future. 11:15 a.m.-1:50 p.m. Detroit Regional Chamber. Gov. Rick Snyder will discuss how the state has grown over the past eight years while also looking at the long-term impact of those accomplishments. Following his remarks, Snyder will participate in a moderated discussion with business leaders from three key industries to project how Michigan will continue to grow over the next five years. Panelists include: Lorron James, president, Gov. Rick Snyder James Group International; Daniel Loepp, president and CEO, Blue Cross Blue Shield of Michigan; Andra Rush, founder, president and CEO, Rush Group LLC. MGM Grand Detroit. $75 members. Contact: Marianne Bogard, phone: (313) 596-0479; email: mbogard@detroitchamber.com

UPCOMING EVENTS Positive Links Speaker Series: Technology and Happiness: The Social and Emotional Costs of Being Constantly Connected. 4-5 p.m. April 3. Ross School of Business. Elizabeth Dunn, a professor in the Department of Psychology at the University of British Columbia, will describe new findings from the UBC Happy Lab, showing that being constantly connected to the internet may carry hidden costs for individuals and organizations. Michigan Ross Campus. Free. Contact: Jacob Fein-

berg, phone: (734) 764-0544; email: cpo-events@umich.edu; website: positiveorgs.bus.umich.edu Success Is In Your F.A.C.E. — Lessons in Focus, Awareness, Communictions and Execution. 9-11:30 a.m. April 4. Oakland County Department of Economic Development & Community Affairs. Speaker: Terry Bean, founder of Networked Inc. and Motor City Connect. Oakland County Executive Office Building Conference Center, Waterford. $40. Phone: (248) 8580783; Email: smallbusiness@oakgov. com Create Raving Fans Lunch and Learn. 11:30 a.m.-1:30 p.m. April 11. Troy Rotary Club. Panelists include: Ara Topouzian, president and CEO of Troy Chamber of Commerce; Shawn Lee, founder and owner of Shawn Lee Studios in Southfield and director of photography for TEDxDetroit; and Candice Simons, president and CEO, Brooklyn Outdoor Advertising. Bank of America Plaza, Troy. $20 (includes lunch). Contact: Rene Pothetes, phone: (248) 972-8126; email: rene@michaelangelocaruso.com; website: portal.clubrunner.ca/1475/Event/ creating-raving-fans Business Banking Seminar: Social Media Strategy. 6-7:30 p.m. April 12. DFCU Financial. Seminar will discuss how to achieve specific objectives by platform, how to develop a paid social media campaign and measuring social media success. DFCU Financial, Livonia. Free. Contact: Lauren Steinhelper, phone: (313) 322-8258; email: lauren.steinhelper@dfcufinancial.com; website: dfcufinancial.com/businessbanking

The Next Big Thing: Adcraft Luncheon with Brian Cooley. 11:30 a.m.-1 p.m. April 18. Adcraft Club Detroit. Brian Cooley, editor at large, CNET, takes a look at what consumers will respond to — and when they probably won’t. Learn about the innovation fueling and creating new ways people consume content, go about their lives and discover loyalty to brands. San Marino Club, Troy. $50 members; $75 nonmembers. Contact: LaVar Harris, phone: (313) 872-7850; email: lharris@adcraft.org; website: adcraftdetroit.com Inside the CEO Mind. 8 a.m. April 19. Detroit Regional Chamber. Consumer Energy’s President and CEO Patti Poppe shares her journey in the energy and automotive industries. Townsend Hotel, Birmingham. $30 members; $50 nonmembers. Contact: Maggie Greaney, phone: (313) 596-0482; email: mgreaney@detroitchamber.com Digital Marketing Secrets Revealed. 7:30-11:30 a.m. May 3 (rescheduled from March 22). Detroit Regional Chamber. Digital marketing leaders from the Detroit region will look at the current digital marketing landscape. Greektown Casino-Hotel. $55 members, $99 nonmembers. Contact: Jim Connarn, phone: (313) 596-0391; website: detroitchamber. com/digital-marketing/ To submit calendar items 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.

DEALS & DETAILS CONTRACTS J NSF International Inc., Ann Arbor, a public health and safety organization, signed a two-year partnership with the Institute of National Anti-Doping Organisations, the international body for National Anti-Doping Organisations, Bonn, Germany, for using NSF’s Certified for Sport program and app as resources to help athletes and consumers avoid potentially harmful ingredients and athletic banned substances found in dietary supplements. Also, NSF International recently launched the NSF DNA Authenticated mark to be used on dietary supplement labels as an independent testing protocol and verification program for raw botanical ingredients used in the dietary supplement industry. Websites: nsf.org, inado.org. J Burns & Wilcox Ltd., Farmington Hills, a wholesale insurance company and underwriting manager, announced sponsorship of Justin Abdelkader, alternate captain and left wing of the Detroit Red Wings hockey team. Website: burnsandwilcox.com. J The International Drone Racing Association, Belleville, has announced that Miracle Flights, Las Vegas, a health and welfare flight organization, is the official charitable partner for the

2018 Drone Racing Series and 2018 Challengers Cup. Miracle Flights provides free commercial air transportation to critically ill children in need of medical care far from home. Websites: idra.co, miracleflights.org. J Detroit-based Huron Capital Partners LLC’s Flex Equity Group has partnered with independent sponsor Empeiria Capital Partners LLC, New York, N.Y., private equity firm that primarily focuses on investing in small and mid-cap companies, and the Minneapolis, Minn.-based Pohlad family in a joint investment in B&B Roadway Security Solutions LLC, Franklin, Ala., a provider of traffic control equipment for movable bridges and HOV lanes. Websites: huroncapital.com, empeiria.com, bbroadway.com. J Curtis Metal Finishing Co., Sterling Heights, has retained Aqaba Technologies Inc., Sterling Heights, an internet marketing and web design agency, to build a new mobile-responsive website that will include a complete catalog of services and products integrated with a custom process quoting engine and more. Also, Kimberly LED Lighting LLC, Clarkston, launched a new website with the help of Aqaba Technologies. Websites: aqabatech. com, curtismetal.com, kimberlyledlighting.com.

EXPANSIONS J Faurecia Interior Systems Inc., Auburn Hills, an automotive seating, interior systems and clean mobility company, plans to build a $60 million, 250,000-square-foot interiors production facility in Blue Springs, Mo., creating 300 new jobs. Website: faurecia. com. J Eview 360, Farmington Hills, a design agency, has helped Kia Motor Corp., Seoul, South Korea, an automaker, open eight pop-up salons in shopping centers across the United States, to support the launch of the automaker’s 2018 Stinger GT sport sedan. Websites: eview360.com, kia. com. J Girl Boss Fashion LLC, Detroit, has opened a second location inside Lakeside Mall, Sterling Heights. Phone: (586) 800-BOSS. Website: girlbossfashions.com. J Denso International America Inc., Southfield, an automotive technology, systems and components supplier, is investing $190 million in its Athens, Tenn., facility. The investment will add four new production lines and 320 jobs. Website: denso.com/us-ca/ en.

Submit Deals & Details items to cdbdepartments@crain.com.

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C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 2 6 , 2 0 1 8

Craig Fahle returns to talk shows as streaming startup adds local talent By Annalise Frank afrank@crain.com

Craig Fahle is returning to the talk show world with a Farmington Hillsbased online streaming startup that is gathering up familiar Detroit radio names. The host of an influential talk-radio show on WDET 101.9 FM and former Detroit Land Bank Authority spokesman will host an hourlong “Craig Fahle Show” weekdays 11 a.m.-noon on New Radio Media. The online studio launched this month in Farmington Hills. It streams video programs live, free for viewers and listeners and often local to metro Detroit, on its website and mobile app. Broadcasts are also available archived, like with a podcast. Craig Fahle: To Fahle, 50, said host show on New his new gig will be Radio Media similar to the well-loved weekday talk show he manned for seven years on WDET (also the “Craig Fahle Show”) before leaving in 2014 to become spokesman for the city’s land bank. His last day at the land bank was March 2, he told Crain’s Tuesday. And now he’ll be showing his face every day, unlike on the radio waves. The “Fahle Show” will cover current events, politics, arts, business and culture with a hefty amount of audience participation through call-ins, Twitter and Facebook. The show will focus on metro Detroit and Michigan, but at times delve into national issues. “Just rational conversation about complex issues,” he said. The new platform may also give him more room to be less serious and attract those who may not have been traditional public-radio listeners, he added. Fahle also referenced an oft-cited decline in traditional radio. “If you look at all the trends that are happening in radio, all of the momen-

Need to know

J Craig Fahle left position at Detroit Land Bank Authority J To host livestream video talk show on New Radio Media J Farmington Hills-based online platform launched this month

“If you look at all the trends that are happening in radio, all of the momentum is going in the streaming category. I wanted to be on the leading edge, as opposed to on the trailing edge.” Craig Fahle

tum is going in the streaming category,” Fahle said. “I wanted to be on the leading edge, as opposed to on the trailing edge.” Former 97.1 The Ticket show host Bill McAllister of the “Stoney and Bill” morning show started as New Radio Media’s program director in February. He had left 97.1 in a round of 2016 budget cuts. McAllister will host an 8-10 a.m. local morning show with his wife, Danielle Carlomusto, starting Monday — same as Fahle. Sara Fouracre, also formerly of 97.1, will host a show called “Pop that Culture” with Joe Santos, formerly of 96.3 WDVD. It starts April 9 and will run 10-11 a.m. on weekdays. “We all have a brand in Detroit media, so we’re hoping some of our past advertisers will be willing to sign on,” McAllister said. That could include advertising and sponsorships during shows, he said. The site draws in revenue through advertising and pay-to-play show slots open for businesses. It also has investors. “Digital sales are increasing, while it seems like radio sales are going

down a bit,” McAllister said. “We’re hoping to get people on board to advertise and invest in the programing because we do feel this is the way it’s going.” More shows will roll out in the coming couple months, McAllister said, but he declined to announce some local personalities’ names whose contracts aren’t yet finalized. “The goal is to have just full block programming from 6 a.m. to 6 p.m. to compete” with radio and TV, McAllister said. New Radio Media LLC’s CEO is Paul Bensman, who had hosted “Bensman Biz,” a business radio show, on ESPN Detroit. Peter Perlman, a radio and record industry veteran, signed on as chairman and longtime radio executive Buzz Van Houten is executive director, according to its website.

Film and mockumentary Fahle’s new show won’t take up all his working hours. He started a company, Craig Fahle Creative, to encompass various media endeavors. They include his new video-radio work, possibly some television work and a film project that’s in its “infant stages” that he is calling a “mockumentary.” Fahle’s old WDET show, which started in 2007, had emerged as an influential media platform for discussion of Detroit, garnering awards and praise for Fahle from industry watchers such as Columbia Journalism Review, Crain’s has reported. He said in 2014 that he was leaving radio for the land bank because it was a job that would allow him to be involved in revitalizing the city in a different way. Fahle then announced last January that he had decided to leave the land bank, after mulling his future and realizing how much he missed media. A replacement for Fahle as the authority’s spokesman hasn’t yet been chosen, Detroit Mayor Mike Duggan spokesman John Roach confirmed Tuesday.

ADVERTISING SECTION

SPOTLIGHT McCann hires new Detroit president

Advertising executive James Ward has been named the new president of McCann Detroit. M c C a n n Worldgroup, part of the New York City-based Interpublic Group of Companies, said Ward, 48, will oversee operations at its Detroit branch starting in early James Ward April. He replaces Mel Smart, who left the agency earlier this year and had served in the role since May 2013. Ward comes from Doner Detroit, an advertising agency based in Southfield, where he was chief strategy officer. Ward started his career as an account director with McCann Detroit in 1991.

Michigan lottery commissioner resigns

Michigan Lottery Commissioner Aric Nesbitt is stepping down from the post he has held just one year, reportedly to run for state Senate. Gov. Rick Snyder’s office announced Nesbitt’s resignation last week, saying he was leaving to “pursue other public service opportunities.” The governor Aric Nesbitt appointed Chief Deputy Commissioner Brian Neill

To place your listing or for more information, please call Debora Stein at (917) 226-5470 or email: dstein@crainsnewyork.com

KNOW SOMEONE ON THE MOVE?

For more information or questions regarding advertising in this section, please call Debora Stein at (917) 226-5470 or email: dstein@crainsnewyork.com

UM names corporatefunded professorship

The University of Michigan named associate professor Andrew Ryan its first UnitedHealthcare Professor of Health Care Management. U n i t e d Healthcare Group Inc. is donating $2.5 million to the school and establishing a professorship endowment in the School of Andrew Ryan Public Health. The endowment aligns with the Minnetonka, Minn.-based managed health care company’s initiative of collaborating with care providers and supporting a value-based health care system. Ryan’s research is to center on value-based payment models that motivate providers to deliver high-quality, affordable care. This professorship is the fourth corporate-funded endowed professorship at the School of Public Health. UM has a total of 33 corporate-funded endowed professorships.

PEOPLE ARCHITECTURE/ ENGINEERING J G. Jerry Attia to vice president and managing principal, AECOM, Detroit, from principal, Rossetti Inc., Detroit.

FINANCE www.crainsdetroit.com/onthemove

to replace him. Nesbitt, 38, who became commissioner in February 2017, plans to run to replace term-limited Sen. Tonya Schuitmaker, a Lawton Republican, in the 26th Senate District, Gongwer News Service reported. Before heading up the lottery, Nesbitt served three terms in the Michigan House of Representatives for the 66th District in West Michigan.

Mohamad Hammoud to vice president and small business banking manager, Michigan Market, Bank of America, Troy, from small business senior client manager. J Steve Flores to vice president of operations, Cornerstone Community Financial, Auburn Hills, from operations manager. J

GOVERNMENT J Tracey Emmanuel to housing director, city of Northville, from division director, Community Development, Livonia Housing Commission, Livonia.

HEALTH CARE J Kenneth D. Rates to administrative manager, Department of Urology Ambulatory Care Unit, Michigan Medicine (University of Michigan), Ann Arbor, from director of clinic operations, McAuley Health Center,

University of Detroit Mercy, Detroit. J Marc Vanderburg to vice president of business development, Health Alliance Plan, Detroit, from associate vice president of account solutions.

NONPROFITS/ ORGANIZATIONS J Jenifer Daniels to vice president, marketing and communications, Charles H. Wright Museum of African American History, Detroit, from founder and managing director, Colorstock.

REAL ESTATE J Elizabeth Carlson McCririe to president and chief operating officer, Beztak Properties, Farmington Hills from president.

SERVICES J Steve Vamplew to quality program manager, Michigan Manufacturing Technology Center, Plymouth, from quality manager, Harada Industry of America Inc., Novi.

To submit news of your new hires or promotions to People, go to crainsdetroit.com/peoplesubmit and fill out the online form.

Page 2

STAFFING FROM PAGE 1

Casalou said the combined system’s eight hospitals in Michigan have been improving clinical and administrative processes. Starting in 2013, St. Joe’s and Mercy began to improve efficiencies and quality using what is called “lean process engineering,” a production practice with roots in the auto industry centered on reducing wasteful steps and practices. “What is the ‘secret sauce’ to Rob Casalou: System improving maintain productivity?” Casalou processes. said. “We have more than 20 process engineers, full time, spread around our hospitals. They are master blackbelt process engineers. They are looking at processes every single day to make things better and improve services.” Casalou said they pay for their positions time and time again. Mercy Health and St. Joe’s are owned by Livonia-based Trinity Health, a 93-hospital Catholic health system and the nation’s second-largest nonprofit system. COO Bob Riney of Henry Ford said the six-hospital health system just completed last December a three-year, $300 million cost reduction and process improvement program and is embarking on a more extensive five-year plan. He said the new program is projected to return $200 million a year in value to the system, split 60 percent in cost reduction and 40 percent in revenue growth. Riney has organized 20 management and staff teams focused on key areas that include supplies, ambulatory, physical plants, emergency services and customer services. But Riney, like other health system executives interviewed by Crain’s, said he doesn’t expect Henry Ford will be forced to make the kind of layoff decisions that Ascension Michigan and DMC went through. “A lot of us are working really hard to be highly reliable organizations and make sure what we do best is to hardwire what we do,” said Riney, adding that the focus on discharge planning, education of patients and family members and reducing hospital readmissions. “We are seeing real improvements. We are reducing our utilization and getting better at eliminating waste.” Over the past several years, with hospitals leading the way, the health care industry has helped push down the national unemployment rate to 4.1 percent. Hospitals added a total of 150,000 jobs in 2017, but those job gains appear to be slowing this year, according to the U.S. Bureau of Labor Statistics. Hospitals added 12,400 jobs in December, but only 9,300 in January and 9,000 in February. Jobs in ambulatory services such as outpatient centers, physician’s offices and dental clinics, however, continue to grow slightly faster proportionately than of hospitals as the demand for outpatient services grows. “Layoffs are a relatively blunt instrument” that should only be used in emergencies because of the negative reaction it has on workforces, said Carsten Beith, managing director and co-head of health systems mergers and acquisitions with Chicago-based Cain Brothers. “That is a one-time thing. You need to change work processes and cultures.”

’S S DETROIT BUSINESS C R A I N ’ S D E T R O I CTRAIN BU INES S // M A R C H 2 6 , 2 0 1 8 Beith said getting buy-in from the workforce to improve efficiency is critical. “(Employees) can come up with incredible ideas,” he said, adding: “You don’t want to do anything to reduce patient satisfaction.” But depending on whether systems are gaining or losing patient volume or market share, health systems take various approaches. “The very forward-looking organizations are looking how to decrease costs and improve satisfaction,” he said. “How they do it depends on the skill set of the C-suite and department management team.” System executives at Ascension and DMC said some of their layoffs were directed at reducing top-heavy management layers and also to create more of a nurse-based care model for departments. DMC’s layoffs also have included a variety of medical support personnel, dietary and food service, social services and pharmacy. Ascension laid off some clinical personnel, including patient care technicians, nursing unit clerks and respiratory technicians.

Why are hospitals facing an uncertain future? Hospital systems are being squeezed by several competing pressures, including reimbursement failing to keep up with inflation, shift to risk-based reimbursement, insurers paying for higher quality instead of volume and a shift away from inpatient care to lower-cost outpatient settings, said Beith. “Payers and physician groups are trying to keep patients out of hospitals and there is a decrease on inpatient volume,” said Beith, who is based in Birmingham. “This is really impacting hospitals and creates a need to be much more cost efficient.” Nonprofit hospitals also recently were hit with millions of dollars in revenue reductions in January when the Trump administration slashed reimbursement rates on certain drugs under the 340B drug discount program. Some 37 Michigan hospitals will lose a total of $73 million in revenue, according to the Michigan Health and Hospital Association. Effective Jan. 1, federal tax reform hit nonprofit hospitals harder than for-profit hospitals as advanced refunding of tax-exempt bonds used for construction and equipment purchases has been eliminated. Nonprofit hospitals have saved millions of dollars in costs in past years by refinancing bonds when they can get lower interest rates. Moreover, proposed vertical mergers between CVS/Aetna Inc, Cigna/ Express Scripts, United Healthcare/ Optum/Davita and the announcement by Amazon/Berkshire Hathaway/JP Morgan that they would seek to reduce health care costs in unspecified ways has hospitals worried about further revenue and inpatient market share erosion. In a statement indicating a bear market in 2018 for hospitals, Moody’s Financial Services said: “Reimbursement rate increases below inflation coupled with the continued swelling of staffing and technology expenses will put a damper on not-for-profit and public health care.” This year, the Congressional Budget Office estimated that 4 million people will lose health insurance or Medicaid coverage, increasing hospitals’ uncompensated care costs, reducing operating margins and cash flow. In addition, commercial insurance premiums will increase at least 10 percent and employers will ask insurers to create more narrow provider

March 26, 2018 17

BEAUMONT HEALTH SYSTEM

The Beaumont system merged with Oakwood and Botsford hospitals.

networks and high deductible-type benefit plans.

Took its ‘medicine’ Several years ago when Trinity St. Joe’s closed a hospital in Saline, sold a hospital in Port Huron, closed its helicopter program and laid off some employees, Casalou said: “We were honest about it and transparent. We will take our medicine now and we turned around our performance dramatically.” One approach St. Joe’s takes in hiring is when someone leaves the company that position is reviewed very carefully to determine if it is needed in the future. “It is easier to not hire someone than to let someone go,” Casalou said. “When you don’t hire someone you are not sending people to the unemployment line. We look at productivity numbers and ours have really improved because of discipline.” But Casalou said scrutinizing hiring and using clinical and administrative process improvement doesn’t mean, “we won’t face what Ascension and others are facing.” St. Joe’s looks very carefully at nursing ratios and patient care associate rates to be careful not to allow ratios get too large. “We know patients are sicker. A 1-4 nurse to patient ratio (that was fine) 10 years ago may be difficult now,” he said. At the management level, for example, Trinity St. Joe’s last year went through a very intensive benchmarking process. “We looked at every manager. We went from 1-12 to 1-15 manager to direct reports. The higher number is the more efficient number.” But Casalou said Trinity St. Joe’s is not looking to reduce its workforce this year. In fact, St. Joe’s increased its FTE count in 2017 because of patient volume and services growth, he said.

McLaren moves McLaren COO Mark O’Halla said the 13-hospital system has long focused on keeping costs in control and manage staffing, which accounts for 60 percent of all hospital costs. But the recent report that projected average hospital Medicare margins will drop to a negative 11 percent this year got his attention. “Every single hospital that has Medicare volume as a percent of total volume increase needs to reduce costs,” O’Halla said. “We are doing a lot of things and tried to be very proactive in managing staffing by flexing staffing to patient volumes, so we don’t wind up in a predicament where we have a big loss.” Beith said some hospital-based systems are running various financial exercises to get a picture of what their revenue might be if they were only paid Medicare rates, which typically is lower than commercial payer rates but higher than Medicaid rates. “Most big hospitals aren’t profitable at Medicare rates,” he said. Because pharmacy is one of health

care’s fastest growing costs, last year McLaren started using a company to manage all its pharmacies. “We reduced drug formulary (available medications) by 30 percent so we could reduce costs. We eliminated brand drugs where we could and use more generic drugs,” O’Halla said. McLaren also moved to regional marketing so hospitals can share staff and avoid duplicate planning costs. It does physician recruiting regionally instead of hospital by hospital, and it creates joint centers of excellence between its hospitals to avoid costly duplication of staff. For example, McLaren hospitals in Flint and Mt. Clemens have one stroke team and standardized stroke protocols. But O’Halla said McLaren still last year eliminated several job positions and had targeted layoffs in certain hospitals to better match staffing with volume. “It’s not like we had a 10 percent across the board layoff, but we will continue to look for ways to reduce our overall cost structure,” he said. “That is a fact of life.”

Beaumont ‘synergy’ Beaumont CFO John Kerndl said the eight-hospital system is not in crisis mode, but that it will continue to look for cost savings, especially this year with all the pressures on revenue that hospitals are facing. “Two things have helped us. The organization spent the last three years in integration and finding synergy and pulling costs out” to build the Beaumont system after the merger with Oakwood and Botsford hospitals, Kerndl

said. “It was helpful to go through last three years with that mindset and culture. We still are on path to reduce costs.” Beaumont continues to focus on improving its revenue and collection cycle, identify insurance underpayments and partial payment denials, Kerndl said. But it also sees opportunities to grow market share and patient volume with its Beaumont brand, he said. “There is a shift from inpatient to outpatient and cases are going out of the hospital to ambulatory surgery centers. It is nice we have maintained our market share,” Kerndl said. “Our clinical reputation has allowed us to replace lost” revenue. Kerndl said Beaumont has found ways to reduce its workforce through attrition where it has inefficiencies, but it has moved employees to other jobs when possible. “Our FTEs have been relatively flat” the past year, he said. “We have outsourced some services and brought in house some, so there have been changes.” Kerndl said Beaumont will be hiring this year as it builds a centralized telemetry monitoring unit. “If we build an ambulatory center, we could find inpatient employees and move them to the ambulatory side,” he said.

Growth at UM “Governmental changes in programs that serve these patients, in addition to concerns about the cost of health care, have a significant impact on our operations,” said UM spokesman Mary Masson in an email to Crain’s. “To balance the industry environment, as well as fund our planned investments, we consistently ask our management staff to review clinical and non-clinical operations for efficiencies. When employees are impacted, attrition or placement in another role across the system is our preferred method.” But UM said it is in a growth mode, adding more than 1,000 jobs across the system and planning additional capital projects. It also plans to open a new outpatient center, the Brighton Center for Specialty Care, this fall. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

JOB FRONT POSITIONS AVAILABLE MEDICAL ECONOMICS DATA OPERATIONS SPECIALIST

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RECOVERY FROM PAGE 3

Construction on the first twoacre glass greenhouse could start as soon August if the money’s there, and it could be operational by January, Wozniak said, creating a projected $2.2 million annually to support RecoveryPark’s operations and construction of the next greenhouse as part of a plan to bring 19 acres of hydroponics under glass. “All the pieces are in place; it’s just finalizing the funding,” Wozniak said. He points to an independent study RecoveryPark commissioned from Novogradac at a lender’s request that he said proved the viability of its farming business model. But identifying high-growth capital has been a challenge. And ramping up growing operations, even in the pilot stage, has strapped the nonprofit. Financial Gary Wozniak: pressures are Need to finalize nothing new to funding. Wozniak. He’s been piecing together $6 million in grants and investments over the years to support RecoveryPark to this point. But the nonprofit is now at a tipping point. “We’re probably a little too successful to get just grant funding,” said Wozniak, who will give a keynote speech on RecoveryPark’s model at an international urban agriculture conference in Seoul, South Korea, in May. “But we’re not successful enough, yet, to get regular debt funding or

CECOVERY PARK

Clinton Borders joined RecoveryPark a year and a half ago after serving a 24-year prison sentence. Today, he’s in charge of seven other employees tending plants in the high tunnel greenhouses.

straight up equity funding.” RecoveryPark has contracted with several firms to help it line up the funding, including Plante Moran PLLC, Mid-States Advisors Inc. in Birmingham, Nixon Peabody LLP in Washington, D.C. and Montana-based Evergreen International. Projections call for some of the funding to be in place as soon as late summer, Wozniak said. If the plan takes root, the farming operation would transfer to employees after three to five years, and RecoveryPark would turn its focus to other businesses like its pilot Rainbow Trout farm in Carleton, Mich., or a yet-to-be-launched processing business that would wash and chop lettuce and other produce, to create more jobs for people with barriers to employment. “If you come here and talk to my people who served decades in prison, (they) are now working and

have smiles on their faces and skill sets,” Wozniak said. “Everybody deserves (another) chance.”

Testing the model In the late ‘80s, Wozniak served three and a half years in prison for using client funds entrusted to him as a stockbroker to support his addiction. When he got out in 1991, he applied for a job but was turned down because of his record. He went into business for himself, becoming one of the original Jet’s Pizza franchisees before launching a financial consulting company and two mortgage companies. He’d gone to Self Help Addiction Rehabilitation in Detroit in 1987 to get clean, and returned years later when CEO Dwight Vaughter invited him to join the nonprofit. It was through that work that Wozniak

came to launch his ambitious plan to create jobs for people returning from prison, recovering addicts and others with barriers to jobs. He spent more than five years developing RecoveryPark’s model and in 2015, when there was political will with city leadership, secured a development agreement for about 40 acres of city-owned land bounded by I-94 on the north, East Forest Avenue on the south, St. Aubin Street on the west and Chene Street on the east. The land is part of a 105-acre area RecoveryPark is targeting for development. It currently owns 10 acres, leases land from the city and has pre-approvals to purchase the land held by the city and land bank when it’s ready to build on it. RecoveryPark built nine high tunnel greenhouses in late 2016 and early 2017 and launched hydroponics growing in the basement of its building at the end of last year. But like any startup, the operations have struggled as they ramped up. The farming business generated about $400,000 in gross revenue last year, not even half of RecoveryPark’s annual budget of $1.2 million. According to audited financials, last year, the nonprofit saw a $1.1 million loss from operations and a $1.9 million increase in its liabilities as it took out about $1.6 million in debt to fund infrastructure. It ended the year with a net asset deficiency of just under $714,000, something that elicited a going-concern warning from its auditor and capped three years of operating at a loss. All startups go through the same financial pressures, Wozniak said. “We knew we were going to lose money and the losses were going to shrink over time, and they have been.” The goal with the farming pilot

BANK FROM PAGE 3

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across the country, said Michael Moran, senior consultant with ProBank Austin. However, a lot of that rides on the fate of legislative deregulation, such as Senate Bill 2155, which seeks to ease restrictions on banks that were tightened by the Dodd-Frank Act coming out of the financial crisis and Great Recession. “With the banking industry, there’s a pretty clear line of demarcation between the global behemoths and the community banks,” Moran said. “Ninety percent of chartered banks in the country are community, but they hold 10 percent of the total assets.” Before the recession, banks were being chartered at a clip of 150-200 each year across the nation. In the past five years, there have been only about a dozen. In 2016, the FDIC launched its Community Banking Initiative, encouraging new charters. Farr went to an information session in Chicago and it was all the convincing he needed. Under the holding group MiCommunity Bancorp, Farr and a group of 13 others — with backgrounds in investing, manufacturing and real estate — are aiming to raise the necessary $25 million to $30 million to make the project happen, and have tapped investment advisers Donnelly Penman & Partners and Schwartz & Co. for assistance. (Disclosure: Crain’s Group Publisher Mary Kramer is one of the founding investors. She was not involved in writing

was to prove there was a market for the produce it grows, set a pricing strategy and prove the viability of RecoveryPark’s social mission, he said. “And we’ve done that.” If Wozniak can secure short-term operating dollars and the highgrowth investment needed, the first greenhouse would create seven to 10 jobs and the larger plan 170. Pay rates would start at $11 plus benefits and supportive services and increase over 18-36 months to average pay of $18-$20 per hour for the high tunnel employees and $22-$28 per hour for employees working in the greenhouses. Current employees are earning an average of $13.50 per hour; their pay rate would increase with the addition of the greenhouse revenue. Employees would be making a living wage, Wozniak said, and get training in farming, large building maintenance, hydroponics, water maintenance, LED lighting technology and computer system management. It’s early, but retention rates are promising, he said. Of the 10 employees RecoveryPark brought on board over the last year and half when he launched the farming operation, six are still working there. Wozniak, who worked on farms in his native Shelby Township from the ages of 7 to 20 when he graduated college, recruited two seasoned growers to RecoveryPark: Michelle Lutz, who built the hydroponic greenhouse at Henry Ford Hospital in West Bloomfield, and Jeff Gilbert, a Cornell University graduate who worked in Leamington, Ontario, with De Ruiter, a Dutch company, on hybridization of tomato, pepper and cucumber seeds. Sherri Welch: 313 (446-1694) Twitter: @SherriWelch or editing this story.) The group has so far raised $1.65 million in capital. Farr said that amount is twice what he needed when starting his bank in Birmingham, but capital requirements were made more stringent after the recession. Considering what happened to community banks a decade ago, the investment is a risky one, but Farr is confident the timing is right. He said he’s also sure his new bank, like the one in Birmingham, could withstand another downturn when it comes. “And we have the suburbs and now we have the added benefit of Detroit making such a huge comeback; the automotive economy is strong,” Farr said. For Farr and his partners, the next few months will be spent waiting and raising capital. The federal and state approval process will take anywhere from four to six months, and in April they are planning to start raising capital from accredited investors. If the funding and approval fall into place, the plan is to open a small branch in 1,400 square feet of leased office space at 3707 W. Maple Road. Farr will serve as its chairman and CEO, and the other 13 partners will make up the board. It will likely employ 15 people and grow as needed. The bank has yet to select what name it will operate under. It will offer all the standard services and products of a community bank with a primary focus on business lending. There are also plans to offer a full product line to individual depositors as well. Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl

C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // M A R C H 2 6 , 2 0 1 8

CORKTOWN FROM PAGE 1

In short, if Corktown becomes Fordtown, the neighborhood would see a seismic shift. â&#x20AC;&#x153;After this news, people are going crazy. They are buying just based off of Ford maybe coming in, throwing out offers on properties they haven't even seen,â&#x20AC;? Tumey, a Corktown resident who is vice president for Farmington Hills-based Friedman Integrated Real Estate Solutions LLC, said. Ford has neither confirmed nor denied Crainâ&#x20AC;&#x2122;s original report about a pending Ford/Moroun family deal for the hulking depot. But thoughts of it coming into Corktown with, say, 1,000 employees has spawned something of a gold rush: Investors looking to get in before the Dearborn-based automotive giant makes its expected announcement, perhaps as soon as next month. â&#x20AC;&#x153;We have generated a lot more activity, more conversations, more people talking,â&#x20AC;? said Benji Rosenzweig, vice president of retail brokerage in the Southfield office of Colliers International Inc. He is marketing an L-shaped plot of North Corktown property on 14th and 15th streets on the north side of the West Fisher Freeway service drive for redevelopment. There have been several largescale redevelopment plans in the works for years, including Bloomfield Hills-based Larson Realty Groupâ&#x20AC;&#x2122;s proposal for The Corner, the site that once housed Tiger Stadium until it was razed starting in 2008. Anthony Soave is also building hundreds of apartments nearby in a development known as Elton Park. But those were in the works well before Ford began discussions with the Morouns. And if Ford, which reported $41.3 billion in revenue last year, strikes a deal with billionaire trucking mogul Manuel â&#x20AC;&#x153;Mattyâ&#x20AC;? Moroun and his son, Matthew, expect more big projects along those lines, if not larger. â&#x20AC;&#x153;If anything, I think it will expand the amount of buildings that are renovated and turned into condos, apartments, etc.,â&#x20AC;? said Michael Colvin, a Corktown landlord who has an owned furnished loft condominium for rent nearby for $2,900 per month. â&#x20AC;&#x153;It will push out further where the mice go.â&#x20AC;?

â&#x20AC;&#x2DC;A big whale ... causes ripplesâ&#x20AC;&#x2122; The ramifications for Corktown would be huge for residents, business owners and developers. â&#x20AC;&#x153;You get a big whale jumping into a pool like that, it causes ripples,â&#x20AC;? said Scott Lowell, owner of the Traffic Jam and Snug restaurant and redeveloper of the Forest Arms apartment building in Midtown. He also owns property near the train station. Austin Black II, owner of City Living Detroit, a residential brokerage firm, said real estate values would climb. â&#x20AC;&#x153;When you have that significant of a relocation into the city, itâ&#x20AC;&#x2122;s going to have a pretty broad implication on real estate values. On the commercial side of things, that kind of investment is going to drastically change Michigan Avenue, which has some gaps from downtown to the train station.â&#x20AC;? While properties currently on the market may not be able to fetch much more immediately, the sellers could be more stringent on terms

CHAD LIVENGOOD/CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS

Any redevelopment of the train station would likely seek millions in tax incentives.

and in the future, off-market activity will soar, said Marc Nassif, senior managing director and partner of the Detroit office of BBG Inc., a leading national appraisal firm. â&#x20AC;&#x153;If you look at whatâ&#x20AC;&#x2122;s already on the market, I would be surprised if you see asking prices immediately get jacked up,â&#x20AC;? he said. â&#x20AC;&#x153;But you would see off-market activity from a sellerâ&#x20AC;&#x2122;s perspective get much more active. There are a lot of those deals floating around and those sellers would be much more demanding in their expectations. This would just embolden them a lot more.â&#x20AC;? That comes as assessed values in Corktown and North Corktown rose between 2017 and 2018, the city said last month. Exact increases were not available prior to press time.

Beyond the train station Fordâ&#x20AC;&#x2122;s ambitions in Corktown go well beyond the train station, which was abandoned in 1988 when Amtrak stopped service. According to a source familiar with the plans, the blighted former Detroit Public Schools book depository immediately to the east â&#x20AC;&#x201D; where a man was found frozen, encased in ice in 2009 â&#x20AC;&#x201D; would be purchased from the Morouns for parking. Itâ&#x20AC;&#x2122;s not known whether the building would be repurposed for that use, or torn down with new parking built in its place. The auto giant has also looked at other properties not owned by the Morouns in the area for purchase. So while a redevelopment of the train station and its office building

would easily be north of $400 million, according to development experts and others familiar with the property, that figure doesnâ&#x20AC;&#x2122;t include what is expected to be a large-scale campus that would build off what will in the next few months be Fordâ&#x20AC;&#x2122;s first step into Corktown: 225 or so autonomous/electric vehicle employees in The Factory at Corktown, 1907 Michigan Ave. Any redevelopment of the train station would likely seek millions in tax incentives. A project of the scale discussed behind the scenes could qualify for incentives from the stateâ&#x20AC;&#x2122;s â&#x20AC;&#x153;transformational brownfieldâ&#x20AC;? law, pushed by Detroit mortgage and real estate mogul Dan Gilbert and economic development officials and adopted in Lansing last year.

Matthew Moroun, the son of Matty Moroun, told Crainâ&#x20AC;&#x2122;s last year that he has broached the idea of Amtrak trains running through the old train depot with Kirk Steudle, director of the Michigan Department of Transportation. The opening night of the annual Detroit Homecoming event, produced by Crainâ&#x20AC;&#x2122;s, took place at the train station in September. Steudle said heâ&#x20AC;&#x2122;s receptive to the idea and connecting the old train station to the central business district in the same way the QLine streetcar system connects the New Center area with downtown. Last year, Michael Samhat, president of the Morounsâ&#x20AC;&#x2122; Crown Enterprises, said the Moroun family had spent more than $8 million over the past five years abating the building, constructing a freight elevator in the shaft of the depot's original smokestack and installing 1,100 windows. One source familiar with Fordâ&#x20AC;&#x2122;s pursuit of the train station said the move is aimed at building a workplace in an urban setting that can attract younger workers to the automaker. Ford officials, including Executive Chairman Bill Ford Jr., have said talent attraction was a driving factor in the company buying The Factory building and embedding a team of employees focused on developing the business strategy for selling electric and autonomous vehicles of the future. â&#x20AC;&#x153;Our young people love ... living and working in urban areas,â&#x20AC;? Bill Ford Jr. said in January at the Detroit auto show. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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AIRPORT FROM PAGE 1

including a recommendation for how the city should proceed rather than simply evaluating the current circumstances of the 91-year-old airport. It also included information on future redevelopment potential that was also scrapped from the final version. Mayor Mike Duggan’s administration has solicited ideas from real estate developers about how the 264-acre airfield — best known as City Airport — could be used for nonaviation purposes amid continued operating losses and limited use. “Airports are unique assets which are difficult to replace and throughout the country, general aviation airports seldom break even and DET (the city airport) can play an important role in the City’s ongoing revitalization due to its strategic location less than five miles from downtown,” the draft report reads. “Many business leaders, real estate professionals, and aviation industry stakeholders agree that the Airport could be leveraged to attract investment in the aviation facilities and surrounding area.” The 60-page draft, which was whittled down to a 39-page final version, seems at odds with Duggan’s stated preference of redeveloping at least a portion of the airport at Gratiot Avenue and Connor Street. Jed Howbert, executive director of Duggan’s Jobs and Economy Team, said GRA’s draft report didn’t follow the phased approach that the city requested and directed the company to rewrite it.

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 2 6 , 2 0 1 8

Possible airport improvement plans JJFirst option: $23.2 million, bring the airport up to good working condition JJSecond option: $37 million to $50.4

million, making the airport “the premier destination for general aviation aircraft in metro Detroit” JJThird option: $83 million, bring air carrier service back to the airport

Source: GRA Inc. final report, Jan. 25

“Phase No. 1 is basically gathering the facts,” Howbert said. “When we got some of the work-in-progress drafts from the consultant, we basically said they skipped ahead. I think they just got ahead of themselves. They produced a document that wasn’t consistent with what we wanted. Phases No. 2 and No. 3 are really going from the basic facts from Phase No. 1 and looking forward into the different scenarios.” Those scenarios are as follows, Howbert said: “Maintain it as it is as an airport and bring it up to good repair; Scenario No. 2 is to maintain the airport with a single runway with some development around it; and Scenario No. 3 is closing it entirely” and redeveloping its 264 acres. The contract with GRA, which began July 25 last year and expires July 24 this year, said that the company for the first phase was to: “Create a baseline financial and operational overview of Coleman A. Young Municipal Airport, including its capabilities, financial performance, assets and liabilities and infrastructure needs, as well as an over-

view of aviation trends in the metro Detroit area.” Richard Golaszewski, executive vice president of GRA Inc., confirmed his company scaled back the report at the city’s request. “Phase 1 really wasn’t set up to reach conclusions,” Golaszewski said. “That’s why the one that was released is a narrower version.”

Airport defenders Airport supporters see the Duggan administration’s ongoing study of the airport while denying aviation companies, flight schools or vendors the ability to sign multi-year leases and invest in the facility as part of an effort to slowly put the long-struggling airfield out of business. “I don’t know why it is that (Duggan) has such a narrow mind as to the value of the airport,” said Beverly Kindle-Walker, executive director of Friends of City Airport. Duggan has focused his scrutiny of City Airport on whether it's producing the most amount of economic benefit that could be generated on a large chunk of open space in the heart of Detroit’s east side. He has compared the airport to a new Flex-N-Gate auto parts plant being constructed in the I-94 Industrial Park on 30 acres of city-assembled land that will employ 400 workers later this year. “We’re almost out of land ... The airport needs to be analyzed,” Duggan said last May. “You’ve got 300 acres of land (at the airport) that right now has 200 people employed.” In the final version of the report, the city’s consultant estimated the airport’s

UNIFORMS FROM PAGE 3

The Detroit Pistons are reportedly getting between $5 million and $10 million a year for a patch deal with Troy-based Flagstar Bancorp Inc. All for a piece of fabric that measures 2.5 inches by 2.5 inches. The other major U.S. pro sports leagues are monitoring the NBA’s experiment, and its success likely will dictate if pro football, baseball and hockey follow suit. Soccer and auto racing already are awash in uniform sponsorships. A prominent NFL consultant thinks it may happen eventually. The league’s enormous popularity and its limited schedule — just 16 regular-season games versus 162 for baseball and 82 for hockey and basketball — mean the NFL could charge far more than the NBA is charging for its jersey space. Obstacles remain, however. “They are watching the NBA’s program and its success,” said Marc Ganis, co-founder of Chicago-based sports consulting firm Sportscorp Ltd. and known as the “33rd NFL owner” because of his familiarity with the league’s thinking. “It has significant revenue potential but the NFL does not allow teams to sell advertising or sponsorships that are visible (other than tangentially) on the field of play during game broadcasts. In the case of the NFL, scarcity has value.” The primary obstacle seems to be backlash. Outspoken uniform purists and casual observers have a platform with social media to blast teams for what they may perceive as a crass money grab by slapping a corporate logo on the jersey of their beloved team. For example, the Detroit Tigers’ decision this year to

land value at $11.8 million based on the sale of property to Flex-N-Gate at $44,737 per acre. Removed from the final report was a section in the draft version laying out “airport redevelopment opportunities and challenges” that suggests Duggan’s office envisions converting the airport and surrounding city-owned property into a large-scale industrial park. “The Mayor’s Office current strategy to redevelop the airport is based upon large auto suppliers requiring 40-acre parcels, allowing for up to six users with another 25 acres for commercial and retail redevelopment of the Historic Executive Terminal at the corner of Conner Avenue and Gratiot Avenue,” GRA’s draft report says. “Taken together, the airport and surrounding land could total in excess of 530 acres for industrial users.” But Detroit would likely face an uphill legal, political and budgetary battle if Duggan moved to sell off all or part of the airport land. The city would have to pay back an as-yet unknown “large obligation” in grants for the airport it has received over nearly 20 years, and the State of Michigan has right of first refusal for the land, according to the GRA consultant's report. The exact obligation is not known; that is expected to be determined in the third phase of the study. And battles in St. Clair, Mo., and Santa Monica, Calif., to close those airports have been lengthy and costly for those two communities; St. Clair’s closing received Federal Aviation Administration approval four months ago after a seven-year battle, while Santa Monica's airport can’t be closed until 2028. Santa Clara also faces legal opposition from

residents who want the airport to remain open, the report says.

Even if the NFL isn’t ready for game jersey ads, it cracked the door years ago on the possibility. The league has permitted practice jersey ad patches since 2009, and the Lions had a sponsor that year with The Ronald McDonald House of Detroit and the Southeastern Michigan McDonald’s Operators Association. Detroit’s last practice jersey advertiser was Henry Ford Health System in 2015.

SportsCenter pickup is certainly a possibility for the higher-profile athletes and teams.” Joyce Julius & Associates has been hired to analyze the value of the game jersey ads for several NBA teams, but not the Pistons, Wright said. “The patches are averaging about four to five minutes of TV time per telecast,” he said. “I’d say the two most unique benefits of these sponsorships are, first and foremost, being literally attached to the athlete. The association is nearly impossible to miss by the home viewer. And secondly, maintaining that visibility with the athletes, even when the team is on the road, is a unique and valuable attribute of these types of sponsorships. No other sponsorship travels like the jersey patches.”

Practice makes perfect, cheaply

DETROIT PISTONS

The Detroit Pistons are reportedly getting between $5 million and $10 million a year for a patch deal with Troy-based Flagstar Bancorp Inc.

make the “D” on their caps slightly larger sparked an outcry from some.

Watching the NBA Uniforms have long been considered sacrosanct by teams, leagues and fans, making them off limits for anything but the garment manufacturer’s logo and the occasional commemorative patch. Major League Baseball, which has gone a bit loose with its uniform limitations under Commissioner Rob Manfred, told Crain’s last week that it’s not considering uniform ads. National Hockey League Commissioner Gary Bettman has said pro hockey’s jerseys are too iconic to spoil with advertising logos, said Paul Lukas, who writes the “Uni Watch” on ESPN.com and runs a website of the same name devoted to uniforms. “I would have thought the NHL would have been first (for advertising),” Lukas said. “But I’ve been on conference calls with Bettman where

he’s said, convincingly, that an NHL sweater is the single most iconic piece of apparel in the sports world.” How much of that is genuine and how much is reflexive PR-speak from Bettman remains to be seen, Lukas added. The NBA’s toe-dip likely will affect what the other leagues do. “I think all the leagues are watching closely to see how that turns out,” Lukas said. “It’s all uncharted territory for North American sports leagues.” He’s skeptical about the NFL’s thirst for uniform ads in the nearterm, despite Commissioner Roger Goodell’s stated goal of growing the league from its current $14 billion in annual revenue to $25 billion by 2027. Logo patches theoretically could command billions as part of larger advertising campaigns. “I don’t see the NFL going that route for game jerseys any time soon. Goodell has shown no appetite for it,” Lukas said.

While the dollar figures haven’t been released, non-game uniform patch deals are inherently cheaper for companies to buy into because of the nature of the exposure they receive. “I don’t think anyone cares about training camp or practice jerseys. It’s not a big deal. Game jerseys are different,” Lukas said. No matter the sport, practice gets little coverage. Games get the eyeballs. And brands are willing to pay millions to have their logos reach those eyeballs on TV and social media. But that’s not to say practice jersey deals are worthless. “Exposure for a brand sponsoring a practice jersey is sporadic and unpredictable, with most of exposure coming from a picture or video accompanying a player interview from a shoot-around, a morning skate, or a mid-week NFL practice,” said Eric Wright, president and executive director of research at Ann Arbor-based Joyce Julius & Associates Inc., which measures the impact of sponsorships across all forms of media. “Usually this type of exposure-producing news coverage is dominated by local or regional media, although a more valuable

Losing money For years, the airport has operated at a loss. The airport had $2.43 million in expenses in fiscal 2017, compared to $701,000 in revenue, for a $1.73 million loss. It lost $2.02 million in fiscal 2016 on $477,000 in revenue and $2.5 million in expenses. Two factors appear to be contributing to those losses: increasing and “extremely high” utility costs growing to 57 percent of the fiscal 2017 budget, and low fees that aren’t generating enough revenue. The consultant’s report noted the airport’s water bill increased nearly tenfold from $55,207 in the 2016 fiscal year to $498,008 last year. Jason Watt, the airport’s general manager, said the water bill shot up last year because of the impervious runway surface and multiple rooftops in the 264-acre airport is subject to the Detroit Department of Water and Sewerage’s steep fees for water runoff surfaces, which were initially set at $852 per acre. Watt said the full water bill technically is not paid because it’s owed to another city department, which writes off the cost. But the cost is counted as part of the airport’s operating loss, even though money doesn’t actually trade hands, Watt said. The city’s consultants recommended the utility expenses be audited “as they appear to be extremely high for a general aviation airport of DET’s size ($1.4 million of $2.4 million in total expenses) and exhibit extreme year over year changes.”

Why spend so much? Brands are willing to write big checks for uniform ads because they perceive them as a worthwhile investment, and there are some metrics to back that up. Data from Santa Monica, Calif.-based artificial intelligence company GumGum shows that over the past 30 days, Flagstar’s patch on Pistons jerseys has generated $109,000 in social media placement value — the amount the bank would have had to pay for equivalent value on Twitter, Instagram, and Facebook during games over that span. That ranks 14th among the teams with patch deals. GumGum is a benchmarking tool for analyzing media value generated from NBA team-owned social media accounts. It doesn’t estimate the patch’s value derived from being seen on television. Atop GumGum’s social media value for all NBA advertising patch-

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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 R C H 2 6 , 2 0 1 8 The consultants also took note of City Airport’s fees being generally lower than its competitors, Willow Run Airport and Oakland County International Airport in Waterford Township. For example, a transient plane visiting Detroit City Airport pays a daily fee of $10 to $35. In Willow Run, a transient plane is charged $130-225, while Oakland County’s airport charges $150 to $400. The GRA report says the majority of public general aviation airports across the country operate at a loss and that improvements are often made with federal, state and other grants. “GA airports can be profitable if they have very large numbers of based aircraft (especially jet and turboprop aircraft) or if they have unique land assets that produce revenues (such as agriculture, mineral extraction or a specific industrial use),” the final report reads. City Airport is defined as a mostly “transient” airport — a destination for general aviation planes and private jets to come and go — while few planes stay parked long-term, in part because there’s more hangar space at the Willow Run and Waterford airports. Just 6 percent of all aircraft at the six regional general aviation airports in Wayne, Oakland and Macomb counties are based at the Detroit airport, according to the GRA report.

Airport businesses While the city continues to study the airport, some businesses and aviation enthusiasts are trying to forge ahead with plans to transform the airport’s stagnant operations. Construction work began last week es over the past month is Goodyear’s deal with the Cleveland Cavaliers, owned since 2005 by Detroit real estate investor Dan Gilbert. The Goodyear patch has generated the equivalent of $3 million in social media placement value for the brand over that time. Goodyear’s jersey patch sponsorship deal with the Cavs is believed to be the NBA’s third-largest, at about $10 million per year, according to Crain’s Cleveland Business, and Golden State’s deal with Japanese e-commerce giant Rakuten reportedly is for a league-high $20 million a year. Flagstar’s advertising sponsorship is part of the NBA’s three-year pilot program that allows teams to sell jersey ads that 2.5 square inches or smaller and forbids deals with gambling or alcohol brands and political sponsorships. Patch deals cannot compete with brands that have league-wide sponsorships. The Flagstar patch deal also includes static and digital signage inside Little Caesars Arena, and is part of Pistons broadcast and social media plans. The bank also now offers co-branded credit and debit cards. Forbes estimated the patch deal, with its various other elements, to be worth up to $10 million annually. The team and bank declined to disclose financial details. Twenty of the NBA’s 30 teams now have jersey ad patch deals, with the Dallas Mavericks and L.A. Clippers announcing sponsorships earlier this month. GumGum estimates that the NBA’s jersey patch deals will generate $350 million in value to the sponsors on social media. Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

Jason Watt is City Airport’s general manager.

on converting an old maintenance shed next to the main terminal into a classroom space for Detroit high school students who want to learn airplane mechanics or get their private pilot’s license. The building also will serve as the headquarters of the Detroit 100th Composite Squadron of the Civil Air Patrol, an all-volunteer auxiliary service of the U.S. Air Force that assists first responders in aerial search-and-rescue. The $975,000 project is being funded by an anonymous donor from California with the goal of bringing back the Davis Aerospace Technical High School, which left the airport in 2013 and was folded into the skilled trades programs at Golightly Career and Tech Center, Kindle-Walker said. The California man also has pledged to donate two Cessna airplanes in a bid to get the Detroit Public Schools Com-

LARRY PEPLIN FOR CRAIN’S

munity District to revive the aerospace education program. The donor also wants to fund the expansion of a model rocket-building program that is run out of the Tuskegee Airmen National Museum inside the historic main terminal hangar, an 88-year-old building with out-of-order bathrooms and a patchwork of rundown and poorly heated offices, said Brian Smith, president of the museum who teaches the mini rocket class. “What I want to do is build a building here — the donor has given me money to do that,” Smith said. “But the city has forbid it because they say we don’t know what we’re going to do with the airport.” The inability to secure a long-term lease with the city has left the Tuskegee Airmen’s youth aviation and rocketry program operating “month to month,”

Smith said. “Why would you invest a half a million dollars in a place where you could get kicked out of next month?” he said. Basil Cherian, senior policy adviser to Duggan, said the city is not entering into long-term leases until it completes its on-going evaluation of the airport. “We will develop a clear long-term strategy to support whichever path the city takes once the process has concluded,” Cherian said in a statement. Some businesses based at the airport also are in limbo as they wait for the Duggan administration to make a clear policy on the future. Detroit Aircraft Corp. leases half of the second floor of the terminal that once was the waiting area for passengers until the last commercial carrier ceased service in 2000. The company is developing an unmanned aerial vehicle for air taxi service — an Uber for the sky — and wants to build a factory at or adjacent to the airport to assemble its part-airplane, part-helicopter vehicle, said Jon Rimanelli, founder and CEO. Detroit Aircraft, which has been in business since 2011, is getting close to testing a prototype of the four-seat aerial vehicle it’s developing that would provide passenger and cargo freight service, Rimanelli said. “It’s not vital — it’s critical,” Rimanelli said of having Detroit’s airport as a home base. “Because what we have is a lot of real estate here that we can build a big factory.” Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

Tigers, Red Wings follow tradition in dropping ‘Mr. I’ memorial patches By Bill Shea bshea@crain.com

The Detroit Tigers have dropped the “Mr. I” memorial patch from their uniforms for 2018, and the Red Wings will follow suit after this season ends. The commemorative blue and white oval patch was sewn onto the right sleeve Tigers’ jerseys last season to memorialize team owner Mike Ilitch, who died at age 87 in February 2017. The Red Wings currently are wearing a rectangular red and white “Mr. I” patch on their left shoulder of their sweaters. Ilitch, who bought the Red Wings for $8 million in 1982 and the Tigers for $85 million in 1993, played in the baseball team’s minor league system in the early 1950s and was affectionately known by employees as “Mr. I.” While a few pro sports team have worn patches memorializing an owner or player beyond a single season, and both Major League Baseball and the National Hockey League have no rules prohibiting a jersey patch beyond a year, the Tigers and Red Wings are following a tradition of wearing such patches for a single season. “It is a pretty well-established custom (to wear a patch only one season),” said Paul Lukas, who writes the “Uni Watch” on ESPN.com and runs a website of the same name devoted to uniforms. “Although it’s not unheard of to go into a second season. But in general, in Major League Baseball the custom is to do it for just one season. That’s true throughout most sports.”

Ilitch died during the Red Wings’ 2016-17 season and the patches were added shortly thereafter. They opted to wear them for the full 2017-18 season. Other Detroit sports team owners have been memorialized on their teams’ jerseys for more than one season. The Detroit Lions added a chest patch honoring owner William Clay Ford Sr. after he died in 2014, and continued wearing it through 2016. His WCF initials were added to the left jersey sleeve, replacing the patch, last season. The team said in 2016 it would make the Ford commemoration a permanent part of the uniform. The Lions remain owned by Ford’s widow, Martha Firestone Ford, and her children. Long-term owner memorials on uniforms are more common in the NFL. The Cleveland Browns and Oakland Raiders had multi-season jersey commemorations for owners that died. The Detroit Pistons in 2009 added “Mr. D” on the back of their jersey collars after owner William Davidson died that year, but it was removed when current owner Tom Gores bought the team for $325 million in 2011. In baseball, the only known owner memorial patch lasting multiple full seasons was for Ray Kroc, the McDonald’s tycoon who also owned the San Diego Padres. The team wore a patch with his initials “RAK” for three seasons after his 1984 death, according to a uniform patch database from the National

Baseball Hall of Fame and Museum. Pro sports leagues typically maintain tight control over team uniforms, and require that teams seek approval to add patches or make changes to designs and colors. Memorial symbols, from black crepe to armbands and patches, date to at least 1876 in baseball. They’ve become far more common in the 21st century, Lukas said, with patch usage starting in the 1970s. The first memorial patch in baseball was worn in 1973 by the Pittsburgh Pirates, who adopted a No. 21 in a circle on their jerseys sleeves to honor Roberto Clemente, who died the year before in an airplane crash. The Tigers first wore a memorial, in the form of what was likely black crepe, in their inaugural season of 1901 to honor Bo Needham, sports editor of the Detroit Free Press, according to the baseball hall of fame. Detroit was among eight teams in 1920 to wear black armbands after Cleveland shortstop Ray Chapman died from being hit by a pitch. The Tigers subsequently have worn several mourning emblems: a black sleeve armband in 1966 to honor late manager Charlie Dressen; an “EH” sleeve patch in 2010 to commemorate broadcaster Ernie Harwell; and a “SPARKY 11” sleeve patch to memorialize former manager Sparky Anderson. The Tigers used last year’s “Mr. I” team patch as not only a memorial, but sold it to fans for $15 with all proceeds benefit the team’s nonprofit charitable foundation.

www.crainsdetroit.com Editor-in-Chief Keith E. Crain President KC Crain Publisher/Editor Ron Fournier, (313) 446-1674 or rfournier@crain.com Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@crain.com Product Director Kim Waatti, (313) 446-6764 or kwaatti@crain.com Digital Product Manager Carlos Portocarrero, (313) 446-6056 or cportocarrero@crain.com Creative Director David Kordalski, (216) 771-5169 or dkordalski@crain.com News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Special Projects Editor Amy Elliott Bragg, (313) 446-1646 or abragg@crain.com Design and Copy Editor Beth Jachman, (313) 446-0356 or bjachman@crain.com Research and Data Editor Sonya Hill, (313) 446-0402 or shill@crain.com Newsroom (313) 446-0329, FAX (313) 446-1687, TIP LINE (313) 446-6766

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C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 2 6 , 2 0 1 8

THE WEEK ON THE WEB

RUMBLINGS

City to buy large chunk of former state fairgrounds site for $7 million

Gayle’s Chocolates to move shop to Arizona

MARCH 16-22 | For more, visit crainsdetroit.com

he Michigan Land Bank Fast Track Authority board has agreed to the sale of nearly 90 percent of the former Michigan state fairgrounds site to the city of Detroit for redevelopment. The city would purchase 142 acres for $7 million, pending approval from the Detroit City Council. Magic Plus LLC would purchase 16 acres of it along Woodward Avenue in two noncontiguous parcels, according to a Wednesday news release. Half of the city’s $7 million purchase price would be paid up front, while the remainder would be paid once it’s redeveloped. David Williams, senior adviser to Mayor Mike Duggan on his Planning, Housing and Development team, said Wednesday morning that environmental assessments and due diligence on the property should happen in the next several weeks, and the city expects to issue a request for proposals or start to market the property for sale by the fall. “Primarily we see this as a job creation opportunity,” Williams said. “It is one of the largest developable parcels in the city. Those companies, those developers are all looking for a place that could employ hundreds if not thousands of people. “We honestly think it is a win for everyone. Magic Plus is able to develop a smaller, more manageable site and we at the city are going to drive the rest of the site.” Magic Plus LLC is the development group tapped four years ago to redevelop the site, which is owned by the land bank at Eight Mile Road and Woodward Avenue. Its principals are Joel Ferguson, a Lansing developer and member of the Michigan State University board of trustees; Marvin Beatty, chief community officer for Greektown Casino-Hotel; and NBA and MSU legend Earvin “Magic” Johnson. Magic Plus is paying about $472,000 for its 16 acres. “We’ve got a number of uses we are working on,” Ferguson said Wednesday. “We are going to do some things that the people adjacent to it are really interested in having ... Everything we are looking at, we are going to go back to the city planning department and see if that’s what they want, too.” The group had planned a massive redevelopment of the site with millions of square feet of new space, including residential, retail, office and entertainment uses, but in the 4 1/2 years since a purchase agreement was signed with the land bank little has happened to the site.

BUSINESS NEWS J The popular Detroit City FC semipro soccer club in Hamtramck is considering options in its bid to turn professional, including co-launching a new league in 2019. J Dan Gilbert’s Bedrock LLC is anticipated to begin demolition in June on a pair of buildings downtown that will make way for a large underground parking garage for his

DETROIT TIGERS

The Detroit Tigers last week unveiled new food offerings at Comerica Park for the 2018 season, including apple pie-filled and Nutella-filled egg rolls (pictured). Other offerings include the Ode to Detroit Dog, smothered in brisket chili, habanero queso cheese and green onions, and a doughnut ice cream sandwich, featuring a cake doughnut and scoop of ice cream. Opening Day is March 29.

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

$5.2M

The amount in fines contractors paid on the Little Caesars Arena construction project for failing to employ enough Detroiters.

142 acres

The amount of former Michigan state fairgrounds land the city of Detroit would purchase for $7 million from the Michigan Land Bank Fast Track Authority, pending City Council approval.

The number of varsity sports Eastern Michigan University is cutting as it works on restructuring amid budget struggles.

planned $830 million Monroe Blocks development. J Kar Nut Products Co. has overhauled its logo and rebranded its most popular trail mix as the Madison Heights-based company seeks to tap into its hometown pride with the phrase “Detroit Born.” J A report by union nurses at one of the Detroit Medical Center hospitals charges that Tenet Healthcare Corp. has violated the terms of its purchase of DMC in 2013 based on a 98 percent reduction in charity care to $470,000 in 2016 for four of its hospitals from $22.9 million in 2013. J Hospitality and real estate developer Aaron Belen plans to grow his Royal Oak restaurant The Morrie with a second location in downtown Birmingham, with Detroit and Ann Arbor spots to follow. J Longtime candy maker Gayle’s Chocolates Ltd. will close its flagship shop in Royal Oak, pack up its equipment and move to Arizona to “start a new chapter.” J This year’s LPGA Volvik Championship is returning to Ann Arbor with a new pro-am event sponsored by the University of Michigan C.S. Mott Children’s Hospital Congenital Heart Center. J The Oakland County Health Division lifted a mandatory evacuation notice for Franklin Village Plaza and

gave the all-clear to two of the five businesses there after toxic chemicals were found in the building earlier in March. J Following accusations of sexual harassment and the filing of a lawsuit, morning news anchor Malcom Maddox is out at WXYZ-Channel 7. J A Houston-based clothing recycling company agreed to pay $75,000 and take corrective action after Michigan Attorney General Bill Schuette sued it for deceptively labeling charitable collection bins across the state. J Auburn Hills-based Grupo Antolin Michigan Inc. is working with Macomb Community College’s tech program to run its first training program in the U.S. J Under pressure that Detroit’s golf courses may not open this spring, City Council narrowly approved a controversial management contract last Tuesday to turn over operation of three municipal courses — Rackham, Rouge Park and Chandler Park golf courses — to Pinehurst, N.C.based Signet Golf Associates II for $90,000 a year in operating fees. J 2016 Comerica Hatch Detroit contest winner Meta Physica Wellness Center LLC celebrated its grand opening in Detroit’s Corktown neighborhood. J Lumen Detroit, the anchor restaurant for DTE Energy Co.’s Beacon Park in northwest downtown, plans to open the first week of April. J Empire Kitchen & Cocktails aims to open in The Scott at Brush Park in May.

OTHER NEWS J Southwest Economic Solutions received $3.5 million in grants from the W.K. Kellogg Foundation to help local residents overcome barriers to employment and support emerging entrepreneurs in Detroit, especially those from minority communities. J The University of Michigan-Ann Arbor’s graduate program for social work ranked as the best of its kind in the nation, according to the U.S. News & World Report’s 2019 Best Graduate Schools report. J The Coalition on Temporary Shelter received a $1 million grant from the West Bloomfield-based Vera and Joseph Dresner Foundation to assist in rehab of its forthcoming Fitzgerald neighborhood emergency shelter, Peggy’s Place.

ongtime Royal Oak candy maker Gayle’s Chocolates Ltd. is leaving town. The company announced Wednesday that it will close its flagship shop in Royal Oak, pack up its equipment and move to Arizona to “start a new chapter.” After making and selling chocolates for about 34 years at 417 S. Washington Ave., owner Gayle Harte said it’s just time for a change. “My husband had a lot to do with it; we’ll blame him,” Harte quipped. She founded the company in 1979 with one pan and one stove at her home kitchen in Huntington Woods. Last year, Gayle’s Chocolates produced $1 million in revenue. “I’ve been doing this for a long time, and I want to keep doing it, but I am ready to go to a warmer climate,” she said. “It’s sad to leave Royal Oak. I’ve seen a lot happen here.” Gayle’s Chocolates opened the

store in 1985 and was the first to serve espresso in the city during the downtown’s transition from sleepy to bustling, it said in the release. Now the company is scouting a new location in Cottonwood, Ariz., where an investor is prepared to buy a 75 percent stake, Harte said. She did not disclose the buyer or value of the acquisition that is expected to close at the end of the month. The deal includes moving expenses. “It’ll take a while to find a new spot, but the store will be here until the end of May and we’ll be here until the end of August,” Harte said. “There are orders that we have booked through August. We’ll still be making it.” Local Plum Market and Holiday Market stores will continue to carry the hand-made candies. The store will officially close on Mother’s Day, May 13.

KEVIN BIDDISON

The owner of The Morrie in Royal Oak aims to open a second location at 260 N. Old Woodward Ave. in downtown Birmingham, shown in this rendering, pending city approval.

The Morrie plans expansion to Birmingham location D

eveloper Aaron Belen is confident The Morrie — his dining, drinking and live-music concept in Royal Oak — can be replicated across the region. Belen, principal of Berkley-based AFB Hospitality Group, has signed to lease a downtown Birmingham space for The Morrie’s first transplant. From there, he wants to open in Detroit and Ann Arbor and bring the total to four or five restaurants within the next five years. “This is a very expensive, time-consuming effort,” he said. “I don’t have any interest in closing, so I’d rather grow organically and slow.” The Morrie must first answer questions and go before the Birmingham Planning Board on March 28, said Jana Ecker, the city of Birmingham's planning director. The City Commission would give final approval. With a green light, Belen’s lease and build-out would start in the Palladium building at North Old Woodward Avenue and Hamilton Road, with the aim of opening before the end of year. “I wanted to build something that was Michigan-made, Michigan-owned, Michigan-run and scale it,” Belen said. “Come up with a concept that the market was missing. And

I view The Morrie as that concept.” The first Morrie, at 511 S. Main St. in Royal Oak, opened in fall 2016. The 7,400-square-foot restaurant seats around 240, including on its patio. Birmingham would be slightly larger — approximately 7,900 square feet, but with less street frontage. Seating numbers haven’t yet been determined. The Morrie will continue to use Birmingham-based architect Kevin Biddison. Belen expects the Birmingham build-out to cost more than $1 million. Belen, a 2015 Crain’s Forty under 40 honoree, owns The Morrie’s Royal Oak building, as well as his upscale French restaurant Bistro 82’s space in Royal Oak. He renovated both extensively. In downtown Birmingham, Belen hopes he can break a string of bad fortune. The 260 N. Old Woodward space previously housed French diner Au Cochon and old-school American Italian restaurant Arthur Avenue from chef Zack Sklar’s Peas & Carrots Hospitality. They closed in fall 2016, The Detroit News reported. It was also formerly home to Chen Chow Brasserie, which closed in 2013, and Pampas Brazilian Grille.

DON’T MISS THE BOAT!

Every year, Crain’s Detroit Business covers the Detroit Regional Chamber Mackinac Policy Conference in a special issue. This year, we’re stretching to new heights and distributing our Mackinac Report issue starting Tuesday, May 29 at coffee shops, bars, hotels, restaurants – anywhere and everywhere around the island. We’ve even secured venues for live events, meet-ups and interviews!

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PRINT DATE: May 28 | CLOSE DATE: April 26 For advertising opportunities, contact Lisa Rudy at lrudy@crain.com

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