MiBiz Crystal Ball 2016 by MiBiz

Insights, economic sentiment and forward-looking strategies from the regionâ&#x20AC;&#x2122;s business leaders

30%

2 in 3 13th 1 in 10 2.4%

1.5

4.8%

18 million units

71%

$ $$

61,100 50

57%

4.4% *See page 3 for a key to these numbers

SPECIAL YEAR-END ISSUE | DECEMBER 21, 2015 | VOL. 28 | NO. 5 | $1.50 P

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

WHAT’S NEXT? he annual year-end Crystal Ball edition from MiBiz has been an ever-evolving concept since it was first introduced in 2007. Underlying each iteration was a desire to look ahead, to provide valuable information to readers as they develop business strategies for the coming year. This year, we decided to put some stronger framework around that process. We partnered with Crain’s Detroit Business and enlisted Epic/MRA to engage business leaders across the state in an executive sentiment survey sponsored by the law firm Honigman. The results of that survey are spelled out in a comprehensive story by Mark Sanchez on page 5, but here’s a sneak peek at what West Michigan readers like you told us.

BRIGHT FUTURE ■ 88 percent said their personal financial situation is about the same or getting better. ■ 42 percent thought business prospects for their companies would improve in the coming year. ■ 53 percent expected to raise wages for their employees by an average of around 4.5 percent.

Published since 1988 MiBiz® is a registered trademark of REVUE Holding Co., Inc. Publisher Brian Edwards / bedwards@mibiz.com

On the heels of the announcement of the $130 billion DowDuPont mega merger, and coming off a year in which M&A activity is bound for the record books, 14 percent of respondents in West Michigan also said there was a 50/50 chance or better that they’d be involved in a business transaction in the coming year. That finding offers the chance to highlight some of the upcoming special features we have planned for MiBiz in 2016. It takes capital to do deals — or, frankly, to launch and grow a business. That’s why our reporting team will first dive into a comprehensive regional capital outlook in the Jan. 11 edition and follow it up with an in-depth M&A outlook special report on Jan. 25. Both data-rich special reports will feature outlook stories on the West Michigan region and how we compare nationally, as well as extensive lists and executive roundtables. These new projects are a part of our commitment to help readers find ways to save money, make money and access money to grow their businesses. They’re the first of many changes you’ll see at MiBiz in 2016, as we, too, look for growth in the coming year.

Associate Publisher

Here’s hoping there’s more business opportunities for you in the new year.

Columnist

Denise Schott / dschott@mibiz.com Editor Joe Boomgaard j boomgaard@mibiz.com Senior Writer Mark Sanchez / msanchez@mibiz.com (finance, health biz, life sciences) Staff Writers Jayson Bussa / jbussa@mibiz.com (sports, nonprofi ts, web editor) jbussa@mibiz.com Nick Manes / nmanes@mibiz.com (real estate & development, small biz) John Wiegand / jwiegand@mibiz.com (manufacturing, agribiz, econ. development) Contributing Reporters Andy Balaskovitz, Josh Veal Contributing Photographer Katy Batdorff, Jeff Hage, Jena McShane, Fran Dwight

Melissa Anderson Director of Marketing

STORMCLOUDS AHEAD?

Cheers,

■ 29 percent believe the next downturn will happen soon — either next year (15 percent) or 13 to 18 months from now (14 percent). ■ 10 percent said talent remains a major concern heading into 2016. ■ 6 percent cited rising health care costs as a worry for next year. ■ 5 percent thought government regulations were hurting their business.

& Audience Development Kristi Kortman / kkortman@mibiz.com Senior Advertising Consultant Shelly Keel / skeel@mibiz.com Advertising Consultant

Brian Edwards Publisher, MiBiz

Joe Boomgaard Editor, MiBiz

Renee Looman / rlooman@mibiz.com Editorial Designer & Ad Traffic Coordinator Rachel Harper / rharper@mibiz.com Circulation For address corrections or subscriptions, email subscribe@mibiz.com.

Key to the cover of Crystal Ball:

MiBiz

See all those numbers on the cover of this issue and wonder what they mean? Here’s your key:

1.5

Number of unemployed people for every job opening, down from a high of 7 in 2009 Source: Upjohn Institute

18 million units

Projected North American automotive production for 2016, up 3.4 percent from this year Source: University of Michigan Research Seminar in Quantitative Economics

61,100

Number of jobs Michigan will

add in 2016 Source: University of Michigan Research Seminar in Quantitative Economics

2.4%

Expected employment gains in the Grand Rapids-Wyoming MSA for 2016 Source: Upjohn Institute

Visit www.mibiz.com

4.4%

Projected increase in personal income for Michigan residents in 2016 Source: University of Michigan Research Seminar in Quantitative Economics

4.8%

Projected unemployment rate in Michigan at the end of 2016 Source: University of Michigan Research Seminar in Quantitative Economics

2 in 3

Survey respondents rated the Michigan Legislature’s job performance as fair-to-poor Source: Epic/MRA survey of MiBiz and Crain’s Detroit Business subscribers sponsored by Honigman

71%

Gov. Rick Snyder’s approval rating Source: Epic/MRA survey of MiBiz and Crain’s Detroit Business subscribers sponsored by Honigman

13th 57%

Michigan’s tax climate ranking Source: Tax Foundation

Portion of survey respondents who expect the Michigan economy to improve next year Source: Epic/MRA survey of MiBiz and Crain’s Detroit Business subscribers sponsored by Honigman

30%

Portion of companies in the Grand Rapids area that expect to hire in the first quarter Source: Manpower

1 in 10

ISSN 1085-4916 • USPS 017-099 Formerly MiBizWest • Established 1988 MiBiz is published every other week by REVUE Holding Co., Inc., 65 Monroe Center, Suite 5, Grand Rapids, MI 49503. Telephone (616) 6086170. FAX (616) 608-6182. E-mail: info@mibiz. com. Subscription changes: www.mibiz.com. Periodicals Postage is paid at Grand Rapids, MI. POSTMASTER: Send address changes to MiBiz, 65 Monroe Center, Suite 5, Grand Rapids, MI 49503. Subscriptions are available without cost to qualified readers. Paid subscriptions are available to those not meeting qualified circulation requirements. Paid subscriptions are $46/ year, $68/two years and $84/three years. Single copy and back issues (when available) are $1.50 each, plus first class postage. GRAND RAPIDS 65 Monroe Center, Suite 5 Grand Rapids, MI 49503 616-608-6170 phone • 616-608-6182 fax COPYRIGHT ©2015. All Rights Reserved.

Survey respondents cite the talent gap as their biggest business concern for 2016 Source: Epic/MRA survey of MiBiz and Crain’s Detroit Business subscribers sponsored by Honigman

Reproduction or use of any portion without permission of the publisher is prohibited.

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

and

Executive Sentiment Survey Highlights of the survey can be found in this issue. View the full survey at honigman.com 4

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

— EXECUTIVE SENTIMENT — 60

62 How will Michigan’s economy fare in the next year? 57

In an Epic/MRA survey of 400

business executives — split evenly between subscribers of MiBiz and

Crain’s Detroit Business, respondents were asked a series of questions on economic sentiment. The survey, sponsored

by the law firm Honigman, found a majority of executives think the Michigan economy will improve in the coming year.

20 TOTAL Crain’s

10 MiBiz Source: Epic/MRA survey of Crain’s Detroit Business and MiBiz subscribers sponsored by Honigman

6 5 7 0

IMPROVE

REMAIN THE SAME

GET WORSE

2 2 2 UNDECIDED

BUSINESS LEADERS STATEWIDE REMAIN ‘CAUTIOUSLY OPTIMISTIC’ FOR 2016 Snyder earns praise, but execs say legislature, MEDC leave much to be desired

By MARK SANCHEZ | MiBiz msanchez@mibiz.com or Natura Architectural Consulting LLC, business this year has exceeded expectations. Revenues are up at the Grand Rapids firm that had surpassed its growth goals for 2015 as of mid-November, and Natura continues to bring aboard new clients, said owner Nate Gillette. He expects business to stay strong for the foreseeable future. “We’re pretty optimistic about what’s happening,” said Gillette, whose nearly two-year-old firm consults with lenders and real estate developers to assess the condition of properties. “As far as I can see, with as much as we have going on, there’s nothing that’s slowing anything down for the next nine months or so.” Gillette’s view follows that of many of the 400 business owners across Michigan who responded to a sentiment survey commissioned in mid-November by MiBiz and Crain’s Detroit

Visit www.mibiz.com

Business and sponsored by the law firm Honigman Miller Schwartz and Cohn LLP. The sentiment survey generally found widespread satisfaction among respondents about the state’s direction and expectations that the Michigan economy will either hold steady or improve over the next year. “Cautiously optimistic would be a good way to characterize” the mood of survey respondents, said John Cavanagh, a partner at Lansing-based polling firm Epic/MRA, which conducted the survey in mid-November that included 200 subscribers each from MiBiz and Crain’s Detroit Business. In analyzing the data from the sentiment survey, Cavanagh saw respondents indicating they had an overall happy mood. “My business isn’t going great guns, but I’m happy. I’m making money and I don’t see a downturn coming for at least another year and a half, if then,” he said of respondents’ reactions. That finding follows steady improvements in the mood that business owners offered in sentiment surveys Epic/MRA conducted in the last year and a half for clients around the state, Cavanagh said.

“The cautiously optimistic view these respondents have in the economy and prospects for their personal and professional wellbeing continues and has gotten incrementally stronger over the past 18 months,” he said. Statewide, 57 percent of the 400 survey respondents expect the state’s economy to improve in the next year and 35 percent see it staying the same. Just 6 percent believe it will worsen. In West Michigan, 52 percent of respondents expect the state economy to improve next year, 39 percent believe it will stay the same, and only 7 percent expect things to get worse. “Everything is humming right now,” said Greg Metz, a partner at Lott3Metz Architecture LLC in Grand Rapids. Metz reports higher revenue and customer contacts for his firm as well, “and I just see it continuing.” “There just doesn’t seem to be anything on the horizon that will change that, barring anything catastrophic,” Metz told MiBiz. “West Michigan has figured it out.” See EXECUTIVE SENTIMENT on page 6

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

Overall, how would you rate the job being done by Rick Snyder as Michigan’s Governor? 5% 3%

19%

30 Positive Pretty Good Just Fair Poor Undecided

21%

25 22

20 15

71% TOTAL POSITVE RESPONSES 25%

Crain’s Total

52%

Based on your experience with previous economic cycles, when do you anticipate the next downturn for your industry will likely occur? 40 38 36 MiBiz

50%

EXECUTIVE SENTIMENT Continued from page 5 In Southeast Michigan, 62 percent of business owners participating in the survey expect Michigan’s economy to improve and 39 percent expect it to stay the same in 2016. Only 5 percent believe things will worsen economically. Sixty percent of statewide respondents are “somewhat satisfied” with the present state of Michigan’s economy and how it affects their business and 15 percent are “very satisfied.” The results to the question of economic satisfaction and what Cavanagh calls “just a general contentment” are fairly even across the state and varied only slightly between West

75%

Within the next year

Between 13 and 18 months from now

100%

Michigan and Southeast Michigan. “There’s virtually no difference,” Cavanagh said. “And among those that are dissatisfied, it’s not really that strong. It means they are somewhat dissatisfied.” In West Michigan, 12 percent of survey respondents were “very satisfied” with the state economy and 67 percent were “somewhat satisfied,” while 63 percent of Southeast Michigan respondents said they were “somewhat satisfied” and 17 percent were “very satisfied.” Business owners on either side of the state were also fairly aligned in their view of when their business fortunes may run out of steam and move downward. Thirteen percent of respondents statewide expect a downturn within the next year, 12 percent see it in 13 to 18 months, 22 percent believe it will happen between 19 months and two years

15 15 15

From 19 months to 2 years from now

Do not anticipate a downturn in industry

Undecided

Source: Epic/MRA survey of Crain’s Detroit Business and MiBiz subscribers sponsored by Honigman

from now, and 38 percent don’t see a downturn in their industry in the foreseeable future. The relative close views of business owners in West Michigan and Southeast Michigan stood out to Phil Torrence, an M&A attorney at the Kalamazoo office of Honigman, the law firm that sponsored the survey. Torrence was impressed that survey respondents in Southeast Michigan are as “bullish on their economy as we are here on the west side, in fact possibly even more so.” “Clients that I deal with on the east side of the state seem to be more optimistic about the future than the west siders,” he said. “It has a long way to go, but you cannot deny the absolute change that is occurring in Detroit. For so long, Detroit has struggled. Among many, many other things, clearly, this shows it’s back in a very good way, and

that’s good for the state as a whole.” “You can’t have an unhealthy Detroit with a robust west side and expect the state to do well as a whole,” Torrence added. “It’s not going to work.”

HIRING OUTLOOK The relative upbeat perspective on Michigan’s economy showed in the hiring outlook for next year. Thirty-five percent of statewide respondents indicated they would add jobs in 2016, while 52 percent intend to maintain staffing levels. Nearly half of all respondents also plan to increase wages next year and 37 percent will maintain present pay levels. In West Michigan, 53 percent of business owners answering the survey See EXECUTIVE SENTIMENT on page 8

Increase Business Agility with Virtualization Introduce some Virtual Flexibility Virtualization introduces many solutions for traditional IT problems and adds a vital layer of flexibility to any IT department. It also allows a company to better utilize their existing hardware investments, improve operational efficiency, and help mitigate risk. New Horizons has authorized training solutions from VMware, Microsoft, and Citrix for your virtual server, desktop, and application needs. Find out what your network is truly capable of. Learn more at nhls.com/virtualization

Grand Rapids/Kalamazoo 616.574.7500 Lansing 517.318.4005 nhls.com

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

THE RIGHT PLACE

PARTNER PROGRAM

Bring more value to your West Michigan clients.

As a professional services company in West Michigan, your customers depend on you for the information and knowledge to help them succeed. The Right Place Partner Program is your single source for business growth in region. Our partner program is designed to help you bring more value to your West Michigan clients. We work with you to connect your clients to local, regional and statewide business resources they need to continue growing in the region.

WHAT TO LISTEN FOR... 1. GROWING & EXPANDING 2. TALENT & TRAINING 3. BUSINESS TRANSITIONS/SUCCESSIONS 4. NEW MARKETS & DIVERSIFICATION 5. OPERATIONAL IMPROVEMENT If your clients are talking about any of these business challenges, we can help.

To learn more about The Right Place Program, contact us at:

616.771.0325 or info@rightplace.org Visit www.mibiz.com

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

In the coming year, do you plan to increase wages for your employees, decrease wages or leave wages unchanged?

13% Increase wages

49%

Reduce wages Leave wages unchanged

37%

Undecided

1% What are the chances within the next year that the company where you are currently working will be involved in a merger or acquisition? DOR OT H Y A . JOHNS ON CEN T ER FOR PHIL A N T HR OPY

Trusted Guidance for Doing Good Philanthropy is changing faster than ever. 9G IWKFG HQWPFCVKQPU PQPRTQĆ&#x2019;VU RTQHGUUKQPCNU CPF FQPQTU VQ UVTGPIVJGP VJGKT YQTM CPF PCXKICVG VJG Ć&#x2019;GNF With original research, tools, trainings, and more, the Johnson Center for 2JKNCPVJTQR[ RTQXKFGU VTWUVGF IWKFCPEG HQT FQKPI IQQF

7REQOKPI 'XGPVU ) WORKSHOP: 0QPRTQĆ&#x201C;V $QCTF %GTVKĆ&#x201C;ECVKQP January 7 // 4:30â&#x20AC;&#x201C;8:30 PM // $140 This workshop offers guidance for those serving or planning to serve on C PQPRTQĆ&#x2019;V DQCTF CPF JGNRU RCTVKEKRCPVU DGEQOG OQTG MPQYNGFIGCDNG and strategic organizational leaders. ) WORKSHOP: #FXCPEGF 0QPRTQĆ&#x201C;V $QCTF %GTVKĆ&#x201C;ECVKQP January 14 // 4:30â&#x20AC;&#x201C;8 PM // $80 A continuation of the Johnson Centerâ&#x20AC;&#x2122;s staple workshop, this advanced EQWTUG IQGU DG[QPF VJG DCUKEU VQ GPICIG RCTVKEKRCPVU KP UVTCVGIKE EQPXGTUCVKQPU CDQWV VTGPFU CPF KUUWGU HCEKPI PQPRTQĆ&#x2019;V QTICPK\CVKQPU YKVJ FKUEWUUKQP QH VJG DQCTFĹŚU TQNG KP GCEJ VQRKE ) BROWN BAG LUNCH & LEARN: %QOOWPKV[ $GPGĆ&#x201C;V KP 0QPRTQĆ&#x201C;V *GCNVJECTG %JCPIGU CPF 1RRQTVWPKVKGU January 27 // 11:30 AMâ&#x20AC;&#x201C;1 PM // FREE 6JG HQEWU QH VJKU HTGG RTQITCO YKNN DG JGNRKPI RCTVKEKRCPVU WPFGTUVCPF VJG EJCPIGU KP VJG +45 TWNGU HQT EQOOWPKV[ DGPGĆ&#x2019;V UVCPFCTFU WUGF HQT OCKPVCKPKPI PQPRTQĆ&#x2019;V UVCVWU HQT JQURKVCNU CPF QVJGT NCTIG PQPRTQĆ&#x2019;V JGCNVJECTG FGNKXGT[ QTICPK\CVKQPU ) WORKSHOP: 5VCTVKPI C 0QPRTQĆ&#x201C;V 1TICPK\CVKQP January 28 // 1â&#x20AC;&#x201C;4 PM // $55 6WTP [QWT RCUUKQP KPVQ C TGCNKV[ D[ UVCTVKPI C PQPRTQĆ&#x2019;V YKVJ VJG JGNR QH VJKU YQTMUJQR 9GĹŚNN EQXGT MG[ UVGRU VQ UVCTV CPF UWEEGUUHWNN[ TWP C PQPRTQĆ&#x2019;V QTICPK\CVKQP KPENWFKPI KPEQTRQTCVKQP OCPCIGOGPV UVTWEVWTG CPF TQNGU HWPFTCKUKPI CPF OQTGĐ°

.GCTP OQTG CPF TGIKUVGT QPNKPG CV johnsoncenter.org/events

201 Front Ave. SW // Suite 200 // Grand Rapids // johnsoncenter.org

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

2% CERTAIN 4% LIKELY 8% 50/50 Source: Epic/MRA survey of Crainâ&#x20AC;&#x2122;s Detroit Business and MiBiz subscribers sponsored by Honigman

EXECUTIVE SENTIMENT Continued from page 6 said they will raise pay for employees. Amid the improvements in Southeast Michigan and the general optimism across the state, however, there remain lingering concerns. Asked to rank their biggest two concerns, 12 percent of respondents said they still worry about the economy despite the improvements, and 10 percent worry about a lack of customers. While those are two typical issues â&#x20AC;&#x153;weâ&#x20AC;&#x2122;d expect to see,â&#x20AC;? the Epic/MRA sentiment surveys shows talent as a concern rising out of the recession, Cavanagh said. Of the statewide respondents who identified a talent gap as a problem for their businesses, 16 percent said itâ&#x20AC;&#x2122;s becoming a â&#x20AC;&#x153;much bigger problemâ&#x20AC;? and 29 percent reported itâ&#x20AC;&#x2122;s a â&#x20AC;&#x153;somewhat bigger problem.â&#x20AC;? In West Michigan, the talent gap was listed as a â&#x20AC;&#x153;much bigger problemâ&#x20AC;? by 20 percent and a â&#x20AC;&#x153;somewhat bigger problemâ&#x20AC;? by 25 percent of respondents. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s a big deal for our economy,â&#x20AC;? said Bill Guest, CEO and chief solutions officer at Metrics Reporting Inc. in Grand Rapids, which works with clients on human resources selection. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s pervasive enough that every sector is feeling a lot of pain right now.â&#x20AC;? Guest was among survey respondents who listed the talent gap as getting much bigger. He cited data from the U.S. Bureau of Labor Statistics that show at the end of October, there were 5.4 million job openings across the nation. The problem is the ability to get people properly trained for the job skills they need, Guest said. Gov. Snyder has placed a great emphasis on job training and workforce development during his second term, and economic development efforts for years have focused greater attention to the issue, he said. Those efforts need to focus â&#x20AC;&#x153;harder and smarterâ&#x20AC;? on the issue, particularly by helping employers better articulate to prospective talent exactly what they need, Guest said. â&#x20AC;&#x153;Economic development has historically and appropriately focused on bringing jobs to a region,â&#x20AC;? he said. â&#x20AC;&#x153;Well, bringing another employer here doesnâ&#x20AC;&#x2122;t do much if the current employers canâ&#x20AC;&#x2122;t fill their jobs. All thatâ&#x20AC;&#x2122;s going to do is bring more competition for the jobs. The real critical shortage isnâ&#x20AC;&#x2122;t the job openings. The critical need is how do we train people to fill the jobs that exist. â&#x20AC;&#x153;If we become known as the region thatâ&#x20AC;&#x2122;s able to train people to fill jobs and our employers find it easier to fill jobs in West Michigan, that will actually draw employers.â&#x20AC;?

POLITICAL LANDSCAPE Away from the business issues and concerns, respondents to the MiBiz/Crainâ&#x20AC;&#x2122;s sentiment survey give mixed marks to the present political leadership in Lansing. Gov. Snyder received high marks across the state for his job performance, with 71 percent of respondents saying heâ&#x20AC;&#x2122;s doing a good or excellent job. The governor received a 74 percent approval rating in West Michigan and 68 percent in Southeast Michigan. Cavanagh calls the governorâ&#x20AC;&#x2122;s approval ratings â&#x20AC;&#x153;phenomenal.â&#x20AC;? â&#x20AC;&#x153;But what are you comparing him against â&#x20AC;&#x201D; an unpopular president and what some would argue would be a dysfunctional Legislature?â&#x20AC;? said Cavanagh, noting the low approval ratings for the state Legislature and President Barack Obama indicated in the survey. The president had an approval rating of just 30 percent statewide â&#x20AC;&#x201D; 23 percent in West Michigan and 37 percent in Southeast Michigan. The state Legislature fared even worse. Just 25 percent of statewide respondents rated lawmakers as doing a good job and 66 percent gave them a fair-to-poor rating. Nobody on either side of the state gave the Legislature an â&#x20AC;&#x153;excellentâ&#x20AC;? rating. Lawmakers received a 29 percent approval rating in West Michigan. Southeast Michigan respondents had a dimmer view of the Legislature, giving lawmakers in Lansing an approval rating of only 21 percent. Cavanagh attributes the low approval rating for the Legislature to two issues that dominated news out of Lansing in the months prior to when the survey was conducted: the prolonged debate over a package to increase funding to repair the stateâ&#x20AC;&#x2122;s deteriorating roads and the scandal involving former Republican state Reps. Cindy Gamrat and Todd Courser. Fifty-five percent of respondents on both sides of Michigan approve of the roads plan and 35 percent disapprove. The approval for the roads package may simply reflect the years it took to resolve â&#x20AC;&#x153;what everybody recognizes as a serious needâ&#x20AC;? and could indicate people were generally tired of the issue and wanted it resolved, Cavanagh said. Of those who disapprove of the roads package, 23 percent statewide cited the increased fees and taxes.

BUSINESS CLIMATE Elsewhere in the survey, 38 percent of residents said state taxes are still too high in Michigan, despite the changes made early in Gov. Snyderâ&#x20AC;&#x2122;s first term to eliminate the Michigan Business Tax and replace it with a 6-percent corporate income Visit www.mibiz.com

How would rate the job the Michigan House of Representatives and the Michigan Senate are doing in performing their roles as a legislature?

Based on your experience with your business, are Michigan business taxes assessed against your company too high, too low, or about right? MiBiz Readers

17%

24%

Much too high

17%

Excellent

Somewhat too high

Pretty Good

36%

Just Fair

30%

21%

Poor

44%

10% 0%

20%

30%

40%

Too low About right

Undecided

What would you say are the top one or two biggest concerns that you have about your business?

1% Undecided/Refused

Source: Epic/MRA survey of Crain’s Detroit Business and MiBiz subscribers sponsored by Honigman

12% 10% Economy

Talent gap/ finding qualified employees

tax, and the phased-in repeal of the personal property tax. Half of construction companies said state taxes are too high, as did 52 percent of businesses involved in real estate and 40 percent of manufacturers. Forty-three percent said state taxes were “about right” and 2 percent said they were too low. Cavanagh noted that surveys Epic/MRA conducts for public school districts planning a bond issue or millage increase typically find that 20 to 25 percent of people always say that their taxes are too high. Compared to the rest of the nation, Michigan ranks 13th this year in its overall business tax climate, according to an annual report published each November by the Washington, D.C.,-based Tax Foundation. In specific areas, the state is 11th in the corporate income tax, 15th in the individual tax rate, 7th in the state sales tax, 48th in its unemployment tax, and 26th for property taxes. Michigan’s business climate was rated as excellentto-good by 41 percent of business owners responding

to the MiBiz/Crain’s survey and fair-to-poor by 48 percent. In West Michigan, 37 percent gave the state’s business climate an excellent-to-good rating and 54 percent rated it as good to poor. Architect Metz in Grand Rapids agreed the state business climate surely has improved of late, but said he believes it could still be better. “We’re certainly not super-competitive,” said Metz, whose overall present optimism about the economy comes “despite our Legislature.”

MEDC EFFECTIVENESS Readers of MiBiz and Crain’s Detroit Business gave a “mixed bag” of responses when asked about the Michigan Economic Development Corp., which had its funding for fiscal year 2016 cut by 27 percent, forcing the layoff of 65 staff members. Just 12 percent of respondents in both West Michigan and Southeast Michigan believe the funding cut will

have a major negative impact on the state’s overall economic development future. Meanwhile, 24 percent see it as important but not having a major impact. Thirtyfive percent statewide see the MEDC’s funding cut as having only a minor impact and 15 percent said it will have no impact at all. While the results reflect the personal perspective of survey respondents, they are not good for the MEDC, Cavanagh said. “You have a pretty strong majority who don’t see the MEDC as being a benefit to them,” he said. That’s worrisome for Metz, who regularly sees the work the MEDC does through incentives provided to commercial real estate projects, redevelopments and the rehabilitation of old facilities in which his firm is involved. Without those incentives, many of those projects would not proceed, Metz said. “A lot of projects are getting done because of the MEDC,” he said. “It’s one of the better things we have going right now.”

10% Lack of customers

6% Health care costs Source: Epic/MRA survey of MiBiz subscribers sponsored by Honigman

KVCC BRONSON HEALTHY LIVING CAMPUS - CLASSES STARTING FEBRUARY 2016 -

csmgroup.com grow.kvcc.edu

Visit www.mibiz.com

CHANGING THE LANDSCAPE OF DOWNTOWN KALAMAZOO Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

As the CEO of a global furniture manufacturer, Brian Walker says the ever-evolving shifts in how people work have played out well for Herman Miller Inc. Heading into 2016, Walker says his company remains focused on staying ahead of workplace trends in terms of ergonomics and, more broadly, how space gets used. I think the great news for our industry is we’re in a pretty robust economic cycle right now. The economy isn’t growing super fast, but companies are doing well. We’re certainly in a period where talent acquisition is at the top of everybody’s mind. Innovation is at the top of every company’s mind. So I think that all bodes well for our industry. We are in a period I think where the way people work is being pretty radically reinvented, and I think companies are more and more realizing that if they’re going to attract the people that they need and they’re going to innovate, they’re going to have to adapt their spaces to what is both the new social and technological environments. I think that’s just good for industry. … Heading into the new year, what keeps me awake at night, in the short term, is the current state of where currencies are. (It’s) tough for every business that is trying to be global. It’s certainly on our list of things to worry about.

Compiled by Nick Manes Courtesy Photo

BRIAN WALKER CEO, Herman Miller Inc. | Zeeland

Visit www.mibiz.com

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

WE’LL GET YOU TO THE TOP. The GVSU Seidman College of Business M.B.A. programs are raising the bar. West Michigan’s premier business college is making it their business to give you the tools to go far. Get in on the ground ﬂoor and apply for your future today.

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

As West Michigan’s entrepreneurial community continues to grow, Craig Hall would like to see elected ofﬁcials focus on breaking down barriers for business. The vice chair of eMerge West Michigan, an entrepreneurial services group, says the current economic cycle could be on the downslope, but it’s important to focus on what businesses can control. There is a lot of uncertainty in today’s economy and the markets that surround them. And yet innovation is clearly at an all-time high, unleashed by fast telecom networks, smartphones and social networks that spread commerce. My experience has shown me that it is during these challenging times of stress and change when great breakthroughs and disruptions both good and bad — bad if you are an incumbent, good if you are the disruptor — can happen. … This is the world that eMerge West Michigan is focused on. We are helping to create focus and to rationalize the support ecosystem for the region’s emerging startup ecosystem. It will be through our innovative startups that we will help create the future and change our world for the good. We will just need to learn to get out of the way.

Compiled by Nick Manes File Photo

Visit www.mibiz.com

CRAIG HALL

Vice Chair, eMerge West Michigan | Grand Rapids

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

LOU ANNA SIMON President, Michigan State University | East Lansing

While her university’s football team eyes a potential national championship run, Michigan State University President Lou Anna Simon remains focused on maintaining the school as one of the state’s best assets. The university continues its West Michigan expansion with its Grand Rapids Research Center, something Simon said she hopes will create an economic windfall for the West Michigan region. 14

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

We have to continue to work on the resurgence of the state of Michigan in a variety of ways — both from the major tech transfer (MSU does) and getting our students to be interested in being in Michigan. … We’re a sector that everyone believes is more and more important. But with the effects of budgets, we know that the burdens have been placed more and more on families. We have to be viewed by families and our graduates as an extraordinary value and investment for their future. We have to continue to demonstrate that. … We’ve been in Grand Rapids for 40 years and we know that research drives economic development significantly by attracting companies and entrepreneurs to be around that.

Compiled by Nick Manes Courtesy Photo

Visit www.mibiz.com

THANK YOU FOR A GREAT YEAR . We couldnâ&#x20AC;&#x2122;t have done it without you. Have a Happy New Year!

KERKSTRA PRECAST www.kerkstra.com

Visit www.mibiz.com

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

BE IN THE CENTER OF IT ALL Now Leasing retail and restaurant space on the corner of Monroe Center and Ionia Avenue. Contiguous Space: 2,100 - 10,235 SF Call 616.432.6500 to schedule a showing. themortongr.com

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

Kalamazoo-based sportinggoods retailer Gazelle Sports Inc. plans to open its fifth location in downtown Birmingham, Mich. in early summer of 2016 and eyes additional growth opportunity through an expanded workforce and increased marketing efforts. Co-owner Chris Lampen-Crowell says investments in the stateâ&#x20AC;&#x2122;s education infrastructure are critical for that continued regional growth. Investing in education is the most critical short and long term concern. The Michigan economy will continue to improve overall, but especially in the areas that invest in education and technology. Consumers will continue to shop across multiple platforms that include online, discount and local unique experiences. This looks like a person that shops online with Amazon Prime for commodity products, then goes to Costco for weekly needs, and ends up at her favorite local boutique purchasing an outfit for a special trip. â&#x20AC;Ś To gain market share, stores will have to focus on providing exceptional customer service, convenience through technology, and innovative experiences. Local brands can win through partnerships with other businesses and organization in their communities. And hyperlocal items will accelerate as the consumer claims what she values.

Compiled by Nick Manes Photo by Fran Dwight

Visit www.mibiz.com

CHRIS LAMPEN-CROWELL Co-owner, Gazelle Sports Inc. | Kalamazoo

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

Mergers and Acquisitions Experience

In Your Corner.

West Michigan Team

Seth W. Ashby

Kimberly A. Baber

Jeffrey W. Beswick

Jacob A. Droppers

James M. Eardley

Scott J. Hill

Scott A. Huizenga

Harvey Koning

Joseph B. Levan

Zachary J. Meyer

Eric R. Post

Dean F. Reisner

Peter G. Roth

Fred L. Schubkegel

Michael G. Wooldridge

With our broad base of experience in corporate matters, we provide guidance in: Ŷ Mergers and acquisitions

Ŷ Corporate structuring

Ŷ Private equity, angel and venture capital

Ŷ Succession planning

Ŷ Commercial finance

Ŷ Real estate transactions

Ŷ Commercial transactions

Ŷ Tax planning matters

Ŷ Joint venture transactions

Ŷ Cross border transactions

First Tier Ranking in Corporate Law and Commercial Litigation

Legal Experience In Your Corner.® varnumlaw.com Ŷ

Grand Rapids

Detroit

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Novi

Kalamazoo

Grand Haven

Lansing

Visit www.mibiz.com

BILL MANNS

President, Mercy Health Saint Mary’s | Grand Rapids

Mercy Health Saint Mary’s President Bill Manns shares the view of many economists that the economy will hold up in 2016. But Manns concedes that he’s watching the presidential election closely because depending on who wins, the results could have major implications for the Affordable Care Act that’s reshaping health care in the nation. Visit www.mibiz.com

I don’t think there is anybody in health care that would not argue there is considerable waste in the system. What we’re doing is asking those that are closest to the patient to help us in identifying that waste and help us in improving the quality and safety in health care. As we continue to ring out that waste in the system, we at Mercy Health Saint Mary’s at least, will do OK, but it really is a cultural shift and a different mindset. It’s not the traditional reduction in force, slash and burn, etc. as you see in a downturn in the economy. That’s really what I’m trying to do, to get ahead of that curve and do it while the organization is doing well financially and there’s no obvious threat.

Compiled by Mark Sanchez Courtesy Photo

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

BOB TREZISE President and CEO, Lansing Economic Area Partnership | Lansing

The Lansing Economic Area Partnership has been busy in the second half of 2015 with the PROTO product accelerator fund and an initiative to attract high-tech businesses to be near Michigan State University’s National Superconducting Cyclotron Laboratory and Facility for Rare Isotope Beams. Coming off a “solid” 2015, LEAP President and CEO Bob Trezise expects 2016 to shape up well for emerging industries in the capital region, which still maintains strong ties to the auto industry. 20

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

It’s tempting to worry about car sales that have thankfully accelerated for a near record string of years in a row, but how long can it last? When you add this to inevitable interest rate hikes, one must wonder whether that might ding car sales. But perhaps low gas prices, the still bulging amount of old cars that we are all holding on to for 13-plus years, and the beginnings — finally — of some wage increases will offset the worries about lower car sales. But the issue is always worth watching because of its major impact on the state’s economy and budget. The state’s economy is strong and moving in a positive direction, yet we best use this time, beyond cars, to focus on targeted areas of the economy to accelerate momentum in those areas with new economic development efforts. We expect 2016 to be a good year of developing these and other emerging industries.

Compiled by John Wiegand Photo by Jena McShane

Visit www.mibiz.com

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

SAVE GREEN

BE GREEN Want to save money on gas, do a favor for the environment â&#x20AC;&#x201C; or a little of each? West Michigan Rideshare offers Kent, Ottawa, and Allegan counties solutions for connecting riders trying to ďŹ nd a better way to manage their commutes as well as the business community seeking solutions to improve travel for employees. Sign up for FREE at www.wmrideshare.org. Click the Carpool Sign Up button to connect with your fellow commuters and start saving money today.

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

JOHN ESSEX

CEO, Port City Group | Muskegon

In one of the larger auto supplier deals in the region in 2015, Muskegon-based Port City Group merged with Pace Industries of Fayetteville, Ark. John Essex, CEO of Port City Group, a manufacturer of aluminum and zinc die castings, mechanical assemblies and injected-molded plastics, says the deal allows his company to access a more robust capital structure to ďŹ nance future growth. Visit www.mibiz.com

While it is our view we will see moderate growth in the U.S. economy, we still believe we will see significant strength in our business due to our primary sales being to the automotive industry. (If the Fed raises rates, the) cost of borrowing and leasing obviously will increase, but not enough to make a substantial impact on earnings or capital investment. ... I believe our state will be heavily dependent on manufacturing and the auto industry for several years to come. We do not anticipate a slowdown in the auto industry for at least three to four years. (Still, Port City Group is) targeting additional programs to increase overall sales growth, even during a reduction in auto sales.

Compiled by John Wiegand Photo by Katy Batdorff

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

DOUG DEVOS & STEVE VAN ANDEL President, Amway Corp. | Ada CEO, Amway Corp. | Ada

In many ways, Amway’s independent business owner model foreshadowed the development of the many companies today that allow people to work on their own schedule and pace, according to President Doug DeVos and CEO Steve Van Andel. The growth of that model could have a bright future: In its Global Entrepreneurship Report, the direct-selling giant found 51 percent of people in the U.S. can imagine starting their own business, up from 44 percent in 2014. 24

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

The global business environment has been changing for years. New and emerging economies are reshaping the way people live, work and do business. People are relying more on themselves for financial security and using technology to work from anywhere at any time. All of this is giving rise to what’s known as the ‘gig’ economy. It’s fueling companies like Uber and Airbnb whose appeal is in the ability to work for yourself, set your own schedule and make a little extra income, either full-time or on the side — something Amway has been doing for more than 50 years. … As positive attitudes toward entrepreneurship rise, so does the direct-selling industry, which offers a similar opportunity for extra income, flexibility and independence by selling products person to person. … Amway is focused in 2016 on helping our business owners capitalize on these trends by continuing to offer solutions and experiences tied to the highest quality products that appeal to more consumers — and their way of living — around the world.

Compiled by Joe Boomgaard Courtesy Photo

Visit www.mibiz.com

After spending much of 2015 successfully fending off a hostile takeover, Perrigo Co. plc is focused on better bringing together its global operations in 2016 to generate the full beneﬁts of a number of acquisitions it made in recent years, particularly in Europe. President John Hendrickson sees creating continuity and cohesion around the world as both the biggest challenge and opportunity next year for Perrigo, which produces over-the-counter store-brand medications as well as generic drugs. The world economy is a challenging place up and down, but the businesses that we’re in are pretty good segments. I can’t tell you whether they’re going to boom next year or not. You have a lot of other dynamics. But I will tell you that if you look over the next three or four years, I feel great about where we’re at. Health care costs are going up, up, up around the world. Consumers’ costs of that are going up, up, up. We bring a great way to bring some value to certain segments of health care costs. It’s a good position to be in. … I still think the U.S. economy, when I look through my perspective globally, is going to be one of the strongest economies out there. I still think Europe’s going to have its continued economic challenges. The U.S. is in a good place. (At Perrigo,) we have a global supply platform that we can shift around depending on what’s going on economically, and it puts us in a decent position no matter where it turns.

Compiled by Mark Sanchez Photo by Katy Batdorff

Visit www.mibiz.com

JOHN HENDRICKSON President, Perrigo Co. plc | Allegan

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

Construction Management General Contracting Design Build A Client Centered Construction Company

Thank you to everyone who helped make 2015 our best year yet!

www.triangle-inc.com | 616.453.3950 | 26

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

Joan Budden moves into the president and CEO position at Priority Health in midJanuary, when she will lead one of the largest health plans in Michigan. Budden has been Priority Health’s chief marketing ofﬁcer since 2009 and will succeed the retiring Mike Freed as chief executive. She takes over in an era when technological advances are reshaping health care, and she thinks those developments could be a source of disruption for the industry in 2016. I feel like there’s going to be more technology disruption. Maybe it’s not a surprise, but I think it will just keep happening and it will come out of nowhere and we’ll have Uber for something else. I think people will keep poking at how do we disrupt the normal way that we’ve always done things. How can we have technology that circumvents the kind of processes that have been in place forever and aren’t very efficient? I think there’s a whole cadre of people across society thinking about that every single day and you never know when the next good idea is going to pop up. There are all kinds of new technologies in terms of medical treatments from monitoring your statistics and whether you’re compliant with your medicine or your treatment regime. They’re going to continue to evolve and innovate around that space, and it’s kind of exciting for all of us.

Compiled by Mark Sanchez File Photo

Visit www.mibiz.com

JOAN BUDDEN Incoming President and CEO, Priority Health | Grand Rapids

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

MARC SCHUPAN

CEO, Schupan & Sons Inc. | Kalamazoo

Coming off a disastrous year for industrial recyclers as commodity prices continued to weaken, Schupan & Sons CEO Marc Schupan expects steady business in the new year, despite headwinds ranging from overcapacity in the metals markets to the threat of cheap imports related to the strong U.S. dollar. Barring a wildcard event — China shuttering major steel and aluminum plants, a major terrorist event or an automotive slowdown — he’s projecting growth for his company as it expands its value-added services.

I think the economy in 2016 will have slow growth and be possibly weaker than 2015. We have an unusual environment with generally strong manufacturing unless you are in mining-related equipment or energy-related drilling. … The positive for companies that are metal dependent is they will have low raw material prices. In 2016, the world will continue to have much more capacity to produce metals than demand. This is primarily due to China’s continued increase in capacity over the last eight years. There is now much weaker demand as China’s growth has slowed considerably. The once huge importer of raw materials is now an exporter of finished product. … 2016 will be a year of metal producers having to cut capacity unless they are government supported. There will probably be some consolidations and bankruptcies until there is balance between supply and demand. This could take a few years. … Today’s low prices should continue for most of 2016. Our division that handles beverage container recycling … will be steady for 2016 with some growth because of new customers. Our electronic recycling division will have strong growth next year as we expand our services geographically. In 2016, we need an expansion of our Kalamazoo facility for Schupan Aluminum & Plastic Sales. I believe we will also outgrow our current facility for electronic recycling in Kalamazoo.

Compiled by John Wiegand File Photo

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

YOUR SPACE, OUR BUSINESS

/2&$7,1* &5($7,1* $1' 0$1$*,1*

*1 ' ( 66 , 5 2 , 5 , 1 7 ( 6 ( 5 9 , &M( PANIES CO FI R BY

PHYSICAL SPACES ZKHUH EXVLQHVVHV WKULYH All of the Expertise You Need Under One Roof BUY, BUILD OR LEASEâ&#x20AC;&#x201C; First Companies will help you ďŹ nd the right property, research ďŹ nancing options, oversee all aspects of construction, and then maintain the buildings for youâ&#x20AC;&#x201C; ensuring your space is professional, functional and a great place to be!

Call us today to discuss your space needs. &216758&7,21 _ 5($/ (67$7( _ 3523(57< 0$1$*(0(17 4380 Brockton Drive Southeast, Suite 1, Grand Rapids, Michigan 49512 Phone: 616.698.5000 | Fax: 616.698.0900 | Web: FirstCompanies.com

Visit www.mibiz.com

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

DRIVE

FORT CUSTER INDUSTRIAL PARK

-0 AN RD .(M

WAYNE

GEISLINGER DR.

GES YD

RIV

EAST TO DOWNTOWN BATTLE CREEK

IGA

RIV

NA V

US COMPANIES

E. NORTH TO GRAND RAPIDS

GEISLINGER CORPORATION

COSMA CASTINGS MICHIGAN

J J STEEL

NEXTHERMAL CORPORATION ROSLER METAL FINISHING USA

AVENUE A MC QUISTON DR.

HILL BRADY RD.

LAWRENCE LAKE REESE RD.

WKW ROOF RAIL SYSTEMS

EAST TO DOWNTOWN BATTLE CREEK

DICKMAN RD.

BUS. 94

ADVANCED PLASTICS MFG, INC. ADVANCED SPECIAL TOOLS, INC. ASMO MANUFACTURING, INC.

AIR NATIONAL GUARD

ENGINEER LAKE

DENSO AIR SYSTEMS

HARTS LAKE RD.

DENSO MANUFACTURING MI, INC. D

ERAND DR.

WATER TOWER

C.A. PICARD, INC.

HELMER RD.

FORT CUSTER MILITARY RESERVE

BLEISTAHL NORTH AMERICA

HARMONIA RD.

EVERGREEN

DENSO RD.

AW TT O R. T

N AY

F R IT Z

HILL BRADY NORTH

RD.

C LA R K

K E IP E R

LAM

INTERNATIONAL INVESTMENT

AR M S T

D. GR

B LV D .

M W. DI CK

TT O

BRA

MATT URBAN DRIVE

TO A A U G U ST

LEONARD WOOD DR.

A CL

N ES

V.A. HOSPITAL

ARMSTORONG RD.

ILR

HI-LEX CORPORATION

I I STANLEY COMPANY, INC.

STANLEY DR.

LOTTE USA, INC.

S. UM

BIA

E AV

STEVENS RD.

MUSASHI AUTO PARTS MI, INC. SK CORPORATION SYSTEX PRODUCTS CORP.

COLUMBIA AVE.

TODA AMERICA, INC. TOYOTA TSUSHO AMERICA INC.

STONE JUG RD.

L CO

D. TR OR

HELMER RD.

GI LO RD R. BU

MARLEY PRECISION INC.

W. TERRITORIAL RD.

/C A

ICS

HARTS LAKE

KBK, INC.

NA TI

W.K. KELLOGG AIRPORT

TRMI, INC. YOROZU AUTOMOTIVE N. AMERICA, INC.

RENTON RD.

LEGEND FORT CUSTER INDUSTRIAL PARK FORT CUSTER MILITARY RESERVE FOREIGN TRADE ZONE

RT IN L ER ME UT LY M H E SK . H R K YL WY IN G IN . JR E D . RI V E)

BUS. 94

HIGHWAYS

EXIT 92

269.962.7526

/ bcunlimited.org 1/4

EXIT 95 1-94

3/4

1 MILE

WATKINS RD.

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

HELMER

WEST TO KALAMAZOO

1/2

94 EAST TO JACKSON & 1-69

Visit www.mibiz.com

DAVE STAPLES Chief Operating Officer and interim Chief Financial Officer, SpartanNash Co. | Byron Center

Investments in renovations at stores in East Grand Rapids (Breton Village), Holland, Zeeland and Petoskey show SpartanNash remains focused on the customer experience, according to COO and interim CFO Dave Staples, whoâ&#x20AC;&#x2122;s been with the company since 2000. In 2016, look for SpartanNash to remodel its Grand Haven location and focus on expanding offerings for healthy products as part of the in-store Living Well Centers. Visit www.mibiz.com

We anticipate modest growth in the economy with minimal inflation in 2016. While this is not conducive to growth in our industry, we do believe it will facilitate continued industry consolidation, and as a result of our merger in 2013, SpartanNash is extremely well positioned to take advantage of such consolidation opportunities. Our industry also is experiencing changing consumer shopping trends like the demand for more fresh, organic, minimal ingredient products; healthy ready-made meals; locally supplied products; and alternative delivery systems. This change in consumer demand has created opportunities which SpartanNash has embraced with the launch of our Full Circle organic private brand line and expansion of fresh national, local and private-brand offerings. We also will continue to invest over $70 million in capital annually across our network to enhance our offerings and improve our customersâ&#x20AC;&#x2122; experiences. The Living Well Centers in our newly remodeled D&W and Family Fare Supermarkets now carry thousands of organic, non-GMO and gluten-free products and expanded health and beauty offerings.

Compiled by Joe Boomgaard File Photo

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

JORGE GONZALEZ Executive Director, West Michigan Hispanic Chamber of Commerce | Grand Rapids

The West Michigan Hispanic Chamber of Commerce will start 2016 with a new executive committee that Executive Director Jorge Gonzalez believes will help bring new ideas and strategies to the 12-year-old organization. The overarching goal: To give voice to the growing number of Hispanicowned businesses in the region.

As far as the economic forecast, itâ&#x20AC;&#x2122;s looking very promising. A lot of my members come to the Chamber to tap more into the Hispanic market. The Hispanic population is rapidly growing. Itâ&#x20AC;&#x2122;s one of the few populations in West Michigan that has increased over the years and they have tremendous purchasing power. So many of my members are looking for ways to tap into that Hispanic community. My forecast is that companies are going to be much more intentional in their inclusion and diversity efforts. They come (to the Chamber) to see how they attract and retain talent. The Census forecasts that a quarter of the people in West Michigan will be Hispanic. It makes business sense and economic sense for all of us to be inclusive.

Compiled by John Wiegand Photo by Katy Batdorff

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

J. PATRICK LENNON Partner, Honigman Miller Schwartz and Cohn LLP | Kalamazoo

With a law practice focused on real estate, zoning and land use issues, Pat Lennon foresees multiple indicators pointing to more growth in 2016 and the years ahead. Lennon’s work also has him active in the Michigan chapter of the Urban Land Institute, which plans to increase and expand its events and services around the state in the coming year.

My colleagues and other firms (in real estate law) are all very busy. When the zoning and land use work is busy, it means that construction will follow. We’re in the process of getting approvals for several potentially significant projects throughout the region. That foreshadows development and projects that follow the approvals. That’s been one of the indicators that we see when we’re looking ahead to the year to come. In addition, there continues to be a favorable economic climate for more development … (with the) reasonable cost of financing, reasonable underwriting standards and a general positive outlook for the next several years. … The institutional capital that’s coming into the markets to do refinancing is aggressive. It’s money from outside our markets coming in. All of the public financing projects seem to be getting approved. That creates a real opportunity for builders and others in the construction industry.

Compiled by Nick Manes Photo by Katy Batdorff

Visit www.mibiz.com

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

When Vander Mill’s new $4 million production facility and restaurant opens in Grand Rapids in 2016, “I’m telling you, eyes will pop,” says CEO Paul Vander Heide. The Spring Lakebased hard cider producer will increase its annual capacity to 1 million gallons of cider at a time when consumers increasingly are turning to the beverage. To avoid stalling the industry’s growth, Vander Heide advocates that state and federal lawmakers need to re-evaluate antiquated regulations. I believe the 2016 economy will be strong. Investment will continue to increase because we have a smart and talented workforce and also because we embrace entrepreneurship and a diverse culture that will continue to attract more people to our communities. Local governments can also play a positive role in this growth if they seek to simplify and apply reasonable oversight of development. With a collaborative mindset, businesses will continue to risk capital that ultimately benefits all of us with services and employment. The craft beverage industry will benefit from this culture. As employment and our standard of living increases, consumers seek higher-quality products. At Vander Mill, we continue to educate folks about the quality of our ciders and their root in Michigan agriculture. … We will continue to tell our story to bring new consumers to the cider category. We also intend to seek new markets where we believe consumers are currently under-served. … Our expansion in Grand Rapids of production capacity and hospitality will allow us to further this message.

PAUL VANDER HEIDE CEO, Vander Mill LLC | Spring Lake

Compiled by John Wiegand Courtesy Photo

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

ADRIENNE STEVENS President, Notions Marketing Corp. | Grand Rapids

Business is booming for crafting industry supplier Notions Marketing in Grand Rapids. The company hired hundreds of new employees in 2015 and is in the middle of a $33 million expansion at its main distribution center as it works to enhance its product offerings. President Adrienne Stevens says the global economy may be fragile, but in times of stress, people often turn to crafting and creative activities to reduce anxiety. Visit www.mibiz.com

The world is becoming a smaller and more interconnected place to be. As it relates to Notions Marketing, the fastest and most significant portion of our growth is generated by e-commerce. … Our access to the consumer is greater and we have expanded internationally, selling to more than 87 countries. Simply put, e-commerce has affected everything from transportation patterns to consumer behavior. Product availability, pricing, delivery and the significant increase in mobile applications are driving both competition and growth. … The rapid rise of e-commerce is creating opportunity for our business. The key to success is speed to market and the delivery of items to the consumer as fast and as efficiently as possible. If we don’t do it, the consumer will find someone else who will. We are protecting our position with the investment of a new facility and technology that will enable speed and efficiency. At the same time, we are expanding to new markets to diversify our base and ensure continued success.

Compiled by John Wiegand Courtesy Photo

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

BRIAN STEKETEE CEO, Modustri LLC | Grand Rapids

Tech firm Modustri, which develops digital tools and web-based platforms that provide measurement and diagnostic information on highwear components in heavy equipment, has been on a growth spurt as of late, doubling its headcount in each of the last two years. The Grand Rapidsbased firm now employs 35 people. Through a series of equity raises and mezzanine financing, the company quickly has scaled up its technology, inking a strategic partnership with Caterpillar in 2015. For CEO Brian Steketee, Modustri’s experience in West Michigan points to a robust future for the region’s nascent high-tech industry. 36

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Michigan’s technology sector is seeing significant growth, specifically with the way it collaborates with large enterprises, which is our economy’s core economic strength. Our new economy exists in an ecosystem that respects possibly disruptive technologies because it is home to CEOs and executives who are eager to bring new value to their customers by adopting, incorporating and bringing these capabilities to market. … Furthermore, we are seeing significant growth in Michigan’s advanced manufacturing specialty, especially within the context of smart, connected devices. Simply put, Michigan makes things. We design and create millions of objects every day. We understand materials and how to manipulate and embed hardware technology into them. This Internet of Things segment is poised to contribute nearly $14 trillion to the global economy over the next seven years, and Michigan is positioned to lead it. We will do this by bringing this manufacturing capability with West Michigan’s software development community, which is among the most cost-effective labor forces in the country. While other regions are trying desperately to balance their overloaded workforce with ‘golden tickets’ to imaginary IPOs, we in Grand Rapids offer an unmatched quality of life and an inherent balance between work and personal life.

Compiled by John Wiegand File Photo by Katy Batdorff

Visit www.mibiz.com

We enhance client success. Business Law is a tool to support the client’s business. At Mika Meyers, we view Business Law as a tool to help our clients achieve growth, proﬁtability, asset protection, succession planning or any other strategic goal. Whatever your goal, our attorneys craft creative legal solutions that give our clients a competitive edge. Business and Commercial Law. One of the Mika Meyers practice areas that add value to our clients’ businesses. For more information, visit mikameyers.com.

900 Monroe NW Grand Rapids, MI 49503 (616) 632-8000 mikameyers.com

Visit www.mibiz.com

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

Q&A Mike Wall

advancing it as much as they can to the Tier 2 frame. That’s where a lot of the folks that operate here in West Michigan would generally fall. Those conversations will be coming up, but it’s one of those things that I’m not sounding an alarm bell on by any stretch. But it’s something that is going to be entering into the vernacular more and more.

| MANUFACTURING

Director of Automotive Analysis, IHS Automotive Do you see any specific type of emerging technology leading the way next year?

While North American light vehicle sales are in the “late innings”of the recovery — peaking in 2017 at 18.2 million units — Mike Wall at IHS Automotive in Grand Rapids expects production to remain robust through 2020. As production plateaus and emerging technologies enter the marketplace, Wall says automotive suppliers need to maintain pace to be successful. What do West Michigan automotive suppliers need to pay attention to in the coming year? Supporting and growing automakers in Mexico and the southern U.S. is going to be top of mind. To the extent that these suppliers can target automakers and facility location where they can support these automakers, that’s going to be a real defining time for a lot of these suppliers. The vast majority of them are doing quite well and you want to keep that pace with high production volumes and more launches coming.

Should the automotive industry expect more regulatory scrutiny in the wake of the Volkswagen diesel emissions scandal? I think we’re going to see more of that, and it’s going to be a progression. … I think you’re going to see a lot more questions about warranty and recall and those sort of things moving further down the supply chain, just given the profile it’s been raised to and the environment at present.

I think autonomous driving and a lot of that autonomous content is going to be a big story in 2016. … We’ll soon be entering into that next phase of CAFE and getting into those discussions on the review period. Certainly, I think hybrids are going to be in focus. Electric vehicles are always top of mind these days. With gas at $2 or less a gallon, it makes it tougher, but they still seem to be out there.

What’s a potential disruptor for 2016? $40 oil — and it’s been sitting in that range — is starting to have some impacts, certainly on the automotive space. When you look at automotive in terms of the segments that people are gravitating toward, it’s having an impact on the Detroit Three. They’re doing very well on trucks and large cars and crossovers, which is having a great impact on margin for them, but they’re struggling on some of that small car segment. How will that percolate, because it’s an interesting dynamic that can have some ramifications, whether we’re talking about CAFE compliance or dealing with new investment going forward. It’s tough to be planning out full-electric vehicle strategies.

Can the industry expect large-scale M&A to continue? It wouldn’t surprise me to see something come down the pike about a big player. When you see some of the strategic activity from some of the suppliers, whether it’s JCI spinning off some of its divisions or the ZF-TRW acquisition, these companies are sitting on a lot of money (and) they have very good liquidity. It wouldn’t surprise me to see a couple of these larger suppliers looking at some really core, strategic ventures out there and picking something up. (But) I think the bulk of the deal activity will be from those mid-cap and smaller size companies.

What impact will the new domestic automakers have on West Michigan suppliers in 2016? It has been something that’s been impacting for some time now, and we expect that to continue. You look at Subaru, and they have just been a force to be reckoned with. They’re growing every year. … You look at the growth prospects of BMW, Mercedes and Hyundai-Kia, and there is sizeable growth coming into the North American market. It’s not so much that we’re expecting GM, Ford and Chrysler to fall off significantly, (but) with production growth of 1.5 million, that is going to be coming from the new domestics.

Do you have any indication of how far down the supply chain that will go? As of right now, I think it’s largely going to be a Tier 1 type of discussion, with those Tier 1s

Interview conducted and condensed by John Wiegand.

Executive decisions just got easier.

7 Florida nonstops. The easiest way to get away for work or play is a nonstop flight. The Ford Airport offers 124 daily nonstop flights jetting in and out of 23 of the most popular travel destinations in the U.S. – including Tampa, St. Pete/Clearwater, Orlando, Punta Gorda, Fort Lauderdale & Fort Myers. Check out all of our nonstop destinations at flyford.org.

@FlyGRFord

facebook.com/ GeraldRFord International Airport

Getting there is better here.

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

Auto suppliers wrestle with challenges posed by strong vehicle sales forecast Auto Focus By Melissa Anderson Owner, Melissa Anderson Consulting LLC mandersonconsultingllc@gmail.com

t looks like the stage is set for yet another year of robust light vehicle sales and production in 2016. Major forecasters are projecting slight increases in overall unit volumes from 2015, with product activity over the next few years concentrated in compact cars and midsize SUVs, as well as lower-end luxury models. But if you believe a rising market signals unqualifiedly good times for all suppliers, think again. Fi r s t , t h e ov e ra l l i n c re a s e obscures variation in the outlook for specific models and automakers, so some programs will be down. Suppliers to Volkswagen, for example, will see lower volumes on diesel models as the company seeks to resolve its engine software problem, and future VW programs could be delayed by the financial fallout. Suppliers can also be tripped up by variation in demand for specific trim levels. One company told us recently that changes in the mix for Ford F-150 pickup trucks in 2015 resulted in some difficulties for the supplier, so less fluctuation in 2016 would be good.

Visit www.mibiz.com

Second, higher volumes will continue to be a mixed blessing next year since suppliers have struggled to find the balance between servicing rising demand and caution about investment in capacity. The pinch points occur on a model-by-model basis, so the pressure will continue for companies that have been trying to maximize output on hot models without adding to fixed assets. A third trend that suppliers will continue to wrestle with in 2016 is globalization. Mexico has been dubbed the shining star of Latin America through its growth as a regional automotive hub, and in a recent supplier survey by IRN Inc., almost 70 percent of respondents without a production plant in that country said they had been asked to put one in. This has led to some interesting pressures. A West Michigan manufacturer that is not currently an automotive supplier recently told us that its European owner is evaluating the automotive market for the U.S. facility. The reason is that automotive customers of the corporate parent’s India and China plants want the company to be able to supply Mexico from its West Michigan plant. Of course, problems associated with abundance are somehow more pleasant than problems of a declining market, so suppliers can look forward to 2016 with a positive attitude if they consider these “good problems to have.”

Q&A Dave Andrea

| MANUFACTURING

Chief Economist, Original Equipment Suppliers Association The Original Equipment Suppliers Association (OESA) expects North American light vehicle production to grow from approximately 17.5 million units in 2015 to 18 million units in 2016, according to a consensus forecast from its members. While that growth is positive for the industry, suppliers will need to navigate that momentum amid uncertainty regarding talent and international markets, OESA Chief Economist Dave Andrea tells MiBiz. What are the major trends you see driving automotive suppliers in 2016? From the North American perspective, the two biggest issues next year are going to be keeping up with current production demand as well as executing flawless launches of the new vehicle models. That is in the context, though, of bad auto markets in Brazil and Russia and uncertainty in terms of how the European market will recover and a slowdown in the growth of the Asia-Pacific market. How are your members preparing to foster growth next year? One strategy they’re looking at is capital investment for greater productively on the shop floor. For the most part, our members have turned to alternative work schedules. (They’re) working on 24-hour shifts to keep up with production. There’s been a major shift in our supplier barometer. Last year, 50 percent of suppliers said 25 percent of their production was on alternative three-crew or fourshift work schedules. This year, over 75 percent of our members had more than 25 percent of their workers on alternative work schedules. They’re managing their workforce in terms of the schedule and they’re also tapping into contract and temporary workers. Do you foresee any major headwinds in the automotive supplier industry? We have been operating in an environment of lower cost

of inbound materials. …We know we’re going to be on the other side of that curve (so) suppliers need to be cognizant of that and still maintain cost structure to maintain their margins in what might be rising input costs over the next couple years. Will the industry see major supply chain consolidation like it experienced this year? I think that we will be in a constant flux of M&A activity. It’s twofold: Large component suppliers will always be looking at their total product portfolio and how that fits into the larger industry, similar to JCI’s spinoff this year. The other piece of it is with all these new technologies — whether suppliers are looking at vehicle-to-vehicle or advanced driver vehicle systems — you’ll see our traditional suppliers acquiring technology. Do you see any major disruption impacting the automotive industry in 2016? The mid-term review for the CAFE law is important to see if we keep the standard and model-year deadline or how we will adjust for credits or for testing cycles that might modify what the current rule is. That will determine a wide variety of issues, but primarily around powertrain technology and the mix between electric, hybrid electric and gasoline engines. Interview conducted and condensed by John Wiegand.

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

CONSTRUCTION MANAGERS GENERAL CONTRACTORS DESIGN BUILDERS

616.241.4491 cdbarnes.com 40

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

— OFFICE FURNITURE ROUNDTABLE —

Joining MiBiz for a office furniture manufacturing roundtable were (top row from left) Bill Bundy of Trendway Corp, Ann Harten of Haworth Inc., Art Hasse of Kentwood Office Furniture. (Bottom row from left) Mark Lindquist of Rapid-Line Inc., Dave Rinard of Steelcase Inc. and Bill Stough of Sustainable Research Group LLC. PHOTOS: JEFF HAGE

— Office Furniture Manufacturing Roundtable —

Manufacturers rely on new products, talent development strategies to navigate industry challenges By JOHN WIEGAND | MiBiz

BUSINESS OPERATIONS

jwiegand@mibiz.com

The Business Institutional Furniture Manufacturers Association (BIFMA) raised the issue of pressure from imports in its recent forecast. How will imports impact your business in 2016?

he office furniture industry today faces a complex, challenging future. Company executives must manage their operations amid increasing margin pressure and an influx of imported products and new regulations, all while running short on talent. To navigate these challenges, industry leaders are turning to their strengths in new product development while implementing unique strategies to attract and retain talent. MiBiz gathered a group of leaders in the furniture industry for a roundtable discussion to talk about how these challenges and solutions will impact their businesses in 2016. Participating in the conversation were: ■ Bill Bundy, president of Trendway Corp. ■ Ann Harten, vice president global human resources at Haworth Inc. ■ Art Hasse, president and CEO of Kentwood Office Furniture Inc. ■ Mark Lindquist, president of Rapid-Line Inc. ■ Dave Rinard, director global environmental performance at Steelcase Inc. ■ Bill Stough, president of Sustainable Research Group LLC Here are some highlights of the discussion.

Visit www.mibiz.com

BUNDY: Imports have been a very interesting reality in our business. If you look at the BIFMA data, the U.S. produced value of office furniture in 1995 was about $9.5 billion. In 2014, and in 2014 dollars, the U.S. production value of office furniture was $9.5 billion. In 1995, imports from various parts of the world were $700 million. Today they’re topping $3 billion, up over 350 percent. HASSE: We’re in the remanufacturing business, primarily of Herman Miller and Haworth systems, and 100 percent of those back in 1995 would have been locally produced. Today, there is a very significant portion of what we do that we import in containers in terms of parts, pieces and different items. LINDQUIST: There was this massive wave of China, China, China until the longshoreman strike hit and all of a sudden the world changed. Finally, the element of risk came back into play. Everyone was enamored with the (imports), and now they’re not so enamored. It hasn’t slowed them down tremendously, but it has had them think twice about the risk involved of this process, certainly with regard to components.

HARTEN: Customers are starting to look for a collaborative space product that does not have to have the 20-year guarantee of staying power. … As you shift from the more private and assigned space to the more collaborative space, that collaborative space is viewed as something that should be updated on a regular basis. That opens up an opportunity for the lower-cost, potentially lower-quality product.

What does that do to durability standards? RINARD: You talk about not just the quality standards, but let’s talk standards in general that we’re expected to meet domestically — whether it be quality, customer expectations around material chemistry and product off-gassing. The same customers that are demanding all of these high standards are the same customers who want the cheapest stuff they can get, and they don’t seem to be aware enough to realize the dichotomy that cheap gets you cheap.

With sustainability being championed by the office furniture industry, how do those products that don’t meet environmental standards impact the good actors? STOUGH: I think the stakes are starting to rise on that very issue. There’s a brand new study from Harvard and their School of See OFFICE FURNITURE on page 42

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

OFFICE FURNITURE Continued from page 41 Public Health. They basically are saying that … your cognitive performance is 100 times different from a standard office space (compared to the) ultimate green (office space). BUNDY: That’s a lot. STOUGH: That’s a huge amount. If you think about a 2-percent performance increase company-wide, it’s millions of dollars. I understand what you’re saying about the margin squeeze, but more and more data is coming out saying that these cheap imports, maybe at some point, someone is going to realize that we can’t afford to have them in our facilities. RINARD: I think we as major (manufacturers) in the industry will be impacted in many ways because face it, some of our supply chains go there. Nike is a good example where you, by default, become responsible for suppliers’ performance, and our brand reputations are incredibly important to us. We’re not going to let suppliers’ poor performance tarnish us. We’re going to have to build expectations into the supply chains we deal with.

How do you as manufacturers police and filter those regulations down to your supply chain partners? HARTEN: Audit, audit and audit. (Suppliers)

will sub-supply. So you have an agreement with one and the first runs are terrific and then six months later, all of a sudden you notice a quality issue. When you go back in to see what happened, there’s been a sub-supplier that’s been assigned your particular piece of business. … It’s about presence. Every visit, every handshake, every casual walk around the facility, you have to have savvy people who know what they are looking at. RINARD: It’s a process that starts out with a qualification questionnaire that’s very broad — not just in terms of environmental performance but we’re also looking at it in terms of supply chain

“There was this massive wave of China, China, China until the longshoreman strike hit and all of a sudden the world changed. Finally, the element of risk came back into play. Everyone was enamored with the (imports), and now they’re not so enamored. It hasn’t slowed them down tremendously, but it has had them think twice about the risk involved of this process, certainly with regard to components.” — MARK LINDQUIST RAPID-LINE INC.

PHOTO: JEFF HAGE

reliability and financial stability. There are a number of dimensions that have to be looked at to determine if someone is going to be an acceptable supplier. Particularly, as we’ve gotten more and more lean, you can’t afford disruptions. Then I think there becomes a relationship issue.

use the same stuff, and our whole industry is a rounding error to the steel industry. We have no leverage. If you look at all of our raw materials, our entire industry doesn’t have that leverage.

As a supplier, do you actively market the sustainability angle as part of your pitch to furniture makers?

Do you expect any disruptions as a result of the upcoming presidential election?

LINDQUIST: You can’t. We’re kind of a mouse

between two elephants. You’re not going to tell a steel mill that they’re going to do something. So you’re kind of out of luck on that. RINARD: That is really true. There is not a special brand of Steelcase steel or Trendway steel. We all

LEGISLATION

HARTEN: Are we going to have a lift or a downturn next year as people are waiting? An election year always has one or the other. Are people going to be incredibly cautious because they’re concerned about who is going to be in office and hold their investments, or are they going to move forward?

LINDQUIST: Forty of the last 44 elections, the economy always goes up that year, typically in the last six months when the party in power stimulates the economy a little bit to try to get their candidates elected. So you can bank on the later half of the year being good for a short period of time. Now when you look at 2017, it could be very scary. BUNDY: What is the disapproval of Congress — something like 80 percent? When it’s that high, something starts to set in, and it’s apathy. It doesn’t matter, they’re going to remain dysfunctional.

On the state level, is there anything in particular that you’d like to see Gov. Rick Snyder champion in 2016? HARTEN:

For those who are on an hourly

— We are change agents working to make Southwest Michigan a great place to live, work, and play —

Thriving Businesses 21st Century Talent Safe, Happy Neighborhoods 42

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Learn more at www.kinexus.org Visit www.mibiz.com

wage, there is no place to live. … We’ve all just experienced it in the summer of discontent of 2015. It seems like the water raised for everyone, including the auto (suppliers), and we all started trading people. … We’re going to need people and we are going to need places for them to live. If I could ask Governor Snyder to work with businesses, (it would be) to figure out how to create places for people to live, close to where we are. There’s a proximity of life to work that is very important to them, and we need spaces for them in affordable housing for people to want to come. BUNDY: I think we could do some things like bring the manufacturers of chair casters back to the U.S. It’s injection molding and assembly. … There are trades like woodworking that if we want to bring it back, we’re in trouble because the skilled trades have gone away. RINARD: There was a study done that showed the single most-effective return on investment to grow prosperity and jobs was funding in the education sector. If you grow college degrees, then they said you create innovation economies, and it builds into skilled trades and trickles through the system.

TALENT What are some ways the business community or state legislators can make up for the talent gap? HARTEN: A light rail system between the major

areas. BUNDY: We’re hiring people through (Hollandbased) 70x7 Life Recovery staffing. They’re working with felons who have served their time to bring them back (to the workforce). We have 10 to 12 of them and these people are some of the most grateful. HASSE: We have several employees who have come from the prison system. Several have also come from Goodwill. The Goodwill people do much to help those people prepare to go to work. Once they’re there, we have greater

success with them than we do with the temporary agency people. RINARD: I’ve heard anecdotally that in the community, companies were having trouble hiring employees to work the 10-hour shift, and their constraint was that they had a second job they had to get to, because the first one wasn’t paying them enough to live on. HARTEN: We’ve introduced new shifts into our programs. We have weekend shifts, parttime shifts and seasonal shifts. In Michigan, because agriculture is in our top three (industries), there are plenty of workers who can’t work from November to April so they’re willing to come in as seasonals. That’s a non-traditional approach for us. LINDQUIST: The state has a fundamental problem. Something like 82 percent of the University of Michigan graduates leave the state. With that kind of vacuum being created, we can’t get there from here unless something changes.

What can manufacturers do to help keep those graduates in the state? HARTEN: We take time to have our junior high and high school kids come through on tours and we show them this amazing thing called manufacturing. We take them into some of the areas where we have our highly technical products and we give them a peek at our design work. LINDQUIST: You have to get the parents involved. The parents are so negative on manufacturing, so they steer the kids away from it. The school system pushes them to college, and the parents push them to some kind of clean industry or clean job. RINARD: I went to, at the time, one of the wealthiest high schools in the state: little old Godwin High School. We were the school that GM and Lear paid the taxes on. We had the most amazing auto shop, wood shop, machine shop in this incredible facility. Most of that is all gone.

PHOTO: JEFF HAGE

“(O)ur brand reputations are incredibly important to us. We’re not going to let suppliers’ poor performance tarnish us. We’re going to have to build expectations into the supply chains we deal with.” — DAVE RINARD STEELCASE INC.

See OFFICE FURNITURE on page 44

Van Andel Global Trade Center is ready to help your global business grow: GLOBAL MARKET RESEARCH

INTERNATIONAL CONSULTING

WORLDWIDE CREDIT REPORTS

EXPORT/IMPORT GUIDEBOOKS

COMPLIANCE ASSISTANCE

CUSTOMIZED ON ON-- SITE TRAINING

Shorten the distance between you and the world! WWW.VAGTC.ORG l (616) 331-6811 Visit www.mibiz.com

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

OFFICE FURNITURE Continued from page 43

CONSUMER TASTES Many experts have described sitting as the new smoking. How is the wellness movement impacting your business and how do you expect it to drive design in the future? RINARD: The whole wellness movement is def-

initely a trend worth watching. I think it’s this whole idea of mind, body and soul — if you want to think about it in that holistic way — has been (on) a little bit of the pendulum moving. You’ve probably all experienced this where there was this time where no one had a space, everyone was mobile and nobody should have a space. I would describe that as pounding a square peg through the round hole, where (now) you’re seeing a shift backward where people do need private space. They need collaborative space. It’s what you’d call a variety of place. HASSE: I think the key is balance. As you said, the pendulum has swung to the more open plan, lower-height workstations and that kind of thing. Then all of sudden the noise level and distraction level was driving people nuts, and there was nowhere to go for privacy. The whole worker thing has changed so dramatically and people are trying to optimize the real estate at the same time and have less real estate per person.

With more open spaces, obviously, the overall floor plan of workstations has shrunk. How has that impacted your business? HARTEN: With collaborative spaces, we are outfitting the same number of offices for far less revenue because of the things you’ve outlined. BUNDY: It wasn’t that many years ago where you could sell a workstation for $4,000. Today, a pretty rich workstation is $1,500. So you think about what we had to do, and that’s led to diversification to a lot of this lounge furniture and acquisitions for fabric companies. It’s pretty amazing.

HASSE: We had our two-day planning meeting yesterday, and I kicked it off by explaining that we’re manufacturing workstations for 80-percent off, where we used to sell for 65-percent off. We used to be 67-inch-high panels, now we’re 48 or 54 (inches). So the dollars per person of what customers are buying is down dramatically, which is why there is that margin challenge.

Are you adding value back in with technology and power integration? HARTEN: Certainly. Getting power out to the middle of the floor is becoming one of the biggest challenges for our customers. BUNDY: The integration of technology into the walls of furniture — I hear a lot of people saying be careful with that because the technology that you integrate today will be obsolete in three months. HARTEN: We look at how you connect, then those connections are what we will update. Right now, you have USB and regular power and those things may morph and change, but you’re not building to a specific device. It’s the only way to succeed.

If there was one major disruptor for the office furniture industry in 2016, what would it be? LINDQUIST: $40 a barrel of oil is a blessing and a problem at the same time. It’s a pretty major disruption right now. RINARD: China’s economy softening has created some really interesting things in my little piece of the world. The value of steel to be recycled and the commodity market has tanked to a point where corrugated is very difficult to get recycled. HARTEN: I wonder if corporate and office security is going to become an issue that somehow might impact what we do. It is on the minds of our members and customers. What is it that they are now going to want or is there anything that our industry will be able to provide? I don’t think we’re hearing it yet, but because we’ve had seven (terrorist attacks) this year and other (incidents), I’m wondering whether or not it’s going to start becoming a bigger thing.

PHOTO: JEFF HAGE

“We have weekend shifts, part-time shifts and seasonal shifts. In Michigan, because agriculture is in our top three (industries), there are plenty of workers who can’t work from November to April so they’re willing to come in as seasonals.” — ANN HARTEN HAWORTH INC.

Helping people train for, find, and keep good jobs is what Goodwill is all about. WORK has the power to transform LIVES. Changing lives through the power of work! Serving Muskegon, Newaygo, Lake, Oceana, Mason, and Manistee counties; and portions of Kent, Ottawa, Osceola, Mecosta, Montcalm, and Allegan counties.

www.goodwillwm.org 44

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

Q&A Sen. Gary Peters

| GOVERNMENT

D-Mich. Nearly one year into his first term, U.S. Sen. Gary Peters has spent considerable time working on legislation geared toward small business as a member of the Senate Small Business and Entrepreneurship Committee. Peters spoke with MiBiz regarding a number of pieces of legislation he’s worked on that he hopes will improve the small business climate. What’s the legislative landscape from your perspective sitting on the Small Business and Entrepreneurship Committee in the Senate? Making sure that there’s money available for small businesses. The committee has responsibilities over the Small Business Administration, and I have been working to expand the cap on the 7(a) loan program, which has been very successful — which is why we need to expand the cap to allow for more loans to be made.

were created as a result of this lending. This lending is done through the MEDC. They’re provided the money and then use that money to provide small businesses with loans, usually working with existing, private banks through loan guarantees or collateral support. It leverages private-sector money. That money is basically coming to an end. But because of its success in Michigan, … I’ve introduced legislation to do a second tranche of money to continue to fund the initiative, which would help small business efforts around the country. We also believe that if we can pass the second round, it could be evergreen. The money comes back from these loans, and they could re-loan and there would be a constant pool of money available.

What’s the impact of the recent reauthorization of the Export-Import Bank? That’s now part of a transportation bill that passed, and it was critical. There were so many small businesses in Michigan that utilized the bank’s services to open up (foreign) markets. When I was in Grand Rapids (earlier this year), we did an event … with Mill Steel. That was an example where without the Ex-Im Bank, (the company) wouldn’t be able to continue its business, primarily into Mexico. Here’s a business where they were clear: This business wouldn’t grow, it would be hurt and he may even have to lay folks off. Now that won’t be a problem.

You’ve probably heard the debate about granting tax breaks to a large Nevada cloud data center that wants to open a facility near Grand Rapids. There’s a lot of concern from existing data centers that the tax breaks won’t apply to them. Where do you stand on that issue? I’ve followed it tangentially because it is a state issue. I’m personally of the belief that we need to have a good business environment for every business, including the ones that are currently here. When you set up a program like that, it’s not unusual but you’d expect businesses that are already here to wonder why they don’t get tax breaks or help to grow their businesses as well. So it does create some potential inequities in the tax code, which is not a good thing. Unfortunately, the situation we’re in is that other states use those tools. So if you don’t use them, someone else will and it’s difficult to grow your business. It’d be better if we had comprehensive tax reform. We’re dealing with those issues nationally. But when you have states competing with each other, it’s difficult to disarm one state if the states next to you are using that tool.

What is the status of your bill looking at oil pipeline safety? What’s the status of those changes? That legislation has passed the Senate. We’re waiting for House action. I’ll be working with some of my House colleagues to get that passed and get it signed into law. There doesn’t seem to be really any opposition to it. People realize it’s been a successful program providing essential help to small business. So hopefully we can get that done early next year.

We all know the recreational value of the Great Lakes, but the Great Lakes provide drinking water for 40 million people. It’s something that is absolutely critical that we do all we can to prevent oil contamination. My hope is that the analysis of pipelines — and particularly aging pipelines — will be helpful to the state of Michigan as they look at strategies. … I’m happy to say (the bill) passed the Senate Commerce Committee on a unanimous basis, so there was broad bipartisan support. That increases the odds significantly we will be able to put it on the Senate floor.

What else do you hope to work on in the New Year? The state’s small business credit initiative — so far, it’s been estimated that over 9,000 Michigan jobs

Interview conducted and condensed by Nick Manes.

www.AdvancedManufacturingExpo.com Second Annual Advanced Manufacturing Expo is doubling it’s floor space and exhibitors from 70 to 120 this year by moving to the Deltaplex in Grand Rapids! To save your booth, please email info@advancedmanufacutringexpo.com or call Mark at 616-836-5536 West Michigan Works! Is hosƟng a skilled trade job fair during show hours with over 70 booths! Contact Deb Lyzenga at westmiworks.org Or call 616-336-5148

LEADERSHIP. NETWORKING. RESOURCES. TECHNOLOGY.

ALL IN ONE PLACE

WEDNESDAY AUGUST 10, 2016 5:00 PM - 6:30 PM ..... AME Preview Show (free entry) 5:00 PM - 6:30 PM ..... West Michigan Works! Job Fair THURSDAY AUGUST 11, 2016 8:00 AM - 2:00 PM ..... Advanced Manufacturing Expo 8:00 AM - 2:00 PM ..... West Michigan Works! Job Fair FRIDAY AUGUST 12, 2016 8:00 AM - 2:00 PM – Golf Outing Fund Raiser for First Robotics (lunch included) Visit www.mibiz.com

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

PERSPECTIVE IS KEY Our many in-house disciplines allow us to see the big picture, approach each project with a variety of perspectives and share our unparalleled ability to innovate.

Fishbeck, Thompson, Carr & Huber, Inc. engineers | architects | scientists | constructors 800.456.3824 | ftch.com

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

— DEVELOPMENT ROUNDTABLE —

Joining MiBiz for a development roundtable were (top row from left) Rick DeKam of Midwest Realty Group LLC, Jonathan Jelks of J.A. Jelks Consulting LLC and Nick Monoyios of The Rapid. (Bottom row from left) Monica Steimle of 616 Development LLC and John Wheeler of Orion Construction Inc. PHOTOS: JEFF HAGE

— Development Roundtable —

Active development market in West Michigan leads to growing pains By NICK MANES and JOSH VEAL | MiBiz nmanes@mibiz.com takeholders in West Michigan’s commercial development industry say 2016 will look much like 2015, particularly in the increasingly popular urban multifamily housing market. But with hundreds of units expected to come online next year, many say it’s time for Grand Rapids to confront some of its growing pains. From greater neighborhood equity and involvement in the development process to further diversifying the city’s transportation and retail options, those in the development community say that 2016 needs to be the year Grand Rapids and its near-neighborhoods start to think like a bigger city. MiBiz convened some of these stakeholders for its annual Crystal Ball edition development roundtable. Participants in the discussion were: ■ Rick DeKam, principal at Midwest Realty Group LLC ■ Jonathan Jelks, owner of J.A. Jelks Consulting LLC ■ Nick Monoyios, long range planner at The Rapid ■ Monica Steimle, director of development for 616 Development LLC ■ John Wheeler, director of business development at Orion Construction Inc. Here are some highlights from the conversation.

How has 2015 shaped your forecast for 2016? MONOYIOS: 2015 saw a concern as far as transportation funding, clearly at the state level. The Rapid, specifically with transit, is funded by three primary pieces of the pie — it’s farebox recovery, property tax millage that we levy and state operating assistance. State operating assistance now is at about 28 percent. In 1998, it was at 50 percent.

Visit www.mibiz.com

One of the limitations, especially concerning development, is that the transit authority is funded by a millage of the six cities (where it operates). Grand Rapids is at the behest of these suburban communities in terms of how far we advance with our mass transportation in the city (due to less support for transit in the other areas). JELKS: I think that the two key things that informed and inspired my outlook for 2016 were the Forbes article about the state of AfricanAmericans in the city of Grand Rapids — we’re the second-worst metropolitan area in the country for African-Americans — and then the other article that says Grand Rapids is the best place to raise a family. So I’m trying to put those two things together and analyze them and understand that we are in the deindustrialized Midwest. We have a ton of development going on. It’s an extremely exciting time to be in Grand Rapids, which I think is kind of leading the way in the region as far as business, innovation and development. But then wrestling with how our neighborhoods are impacted by the new boom, the gold rush. I live in East Hills where things have changed. It’s exciting, but frightening at the same time. WHEELER: 2015 couldn’t have been a better year for development. Interest rates are good. Demand is high. City planning commissions are cooperative. Strong master plans are drawing community. The 35 neighborhoods all have a good coalition of things they want to have completed. (There are) good designers, contractors and subcontractors. It’s been a banner year. This is my 39th year of doing this and it’s the best year we’ve ever had. Our vision for the next three years is about the same. We’ve done a lot of renovation work in the core. The core is pretty well fixed up now. There was a time when we started in 1987, buying all these buildings for $5 and $10 per square foot, that we thought there’d be an endless supply of them. Now there’s maybe one building left on Division up there right across from the police station. They’re pretty much used up.

STEIMLE: We’re focusing our efforts on becoming housing experts and how we can apply that to our developments, communities and neighborhoods. It has been a great year. It’s been fun to be a part of it, to watch it happen. … So we’ve learned to adjust and understand how we need to develop differently based on the market. (We have) more product online, which is awesome, so we’re seeing a little bit of stabilization in the market but definitely still demand in growth. DEKAM: Midwest Realty has typically worked across the states in the Midwest region: primarily corporate-buyer, tenant-rep and in our spare time, development. … We’re seeing rates — office, retail and industrial — creeping up. You can see the influence almost quarterly, which I haven’t seen in my career. Everyone’s adjusting. They’re anticipating absorption, what else is out there and where it’s going. They’re pricing above market now. There’s just not that many options if you’re a user anymore, which is driving new construction. I’m excited about 2016. 2015 was a banner year for us, and even though we’re still primarily focused in the greater Kalamazoo area, I suspect that with demand and where it’s going, that will change as well.

How will the raising of interest rates — expected before the end of the year — impact the commercial development business? WHEELER: From my standpoint, we buy forwards on all our projects. So I lock everything between seven and twelve years. I tried to get through two of those little weird bubble waves of financing. I write all my leases that are subject to a fixed-rate dollar amount at the time we lock. So if I’m quoting a deal and it’s eight months to bring it to market, we’ll make an assumption with the rate inside of that and they’ll pay more if it goes up and less if it goes down. That is the sensitivity. See DEVELOPMENT on page 48

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

DEVELOPMENT Continued from page 47 DEKAM: Everybody’s talking about interest rates (and) where are they going to go. That’s a problem for most developers because a lot of these projects are one to three years in the making. When you predicate things at 3-percent and 4-percent interest rates but end up with 10-percent interest rates, it can have a really devastating effect. I think as long as market product continues to be absorbed at the rate it’s being absorbed, which is ferocious right now, (the market will work itself out).

Rick, you do a lot of work in the Kalamazoo area. How do you view the different markets? DEKAM: Kalamazoo is in a different place. I think Grand Rapids is actually responding to the market conditions much faster. Kalamazoo is really lagging behind. We’re not anywhere close to approaching an oversupply. We’re so far behind the curve it’s not even funny. People keep asking, ‘How come there aren’t spec projects that are going up like you see in Grand Rapids everywhere?’ And nobody’s got the answer. We’ve got talent and demand coming out our ears. We’ve got great interest rates and lenders wanting to do the projects, but nothing coming out of the ground. … It’s like we’re too conservative. WHEELER: You can become your own worst enemy. You do have to take a risk in this business.

There have been a handful of downtown apartment projects announced in the Kalamazoo market. How many units does the city need? DEKAM: You know, they just did a study. Everybody’s saying the study’s wrong. For the first time, they’re saying the study is underestimating the actual demand. We’re seeing 5,000-unit demand currently. That’s right now. That’s how far behind (we are). If you look at downtown multifamily and condo occupancy, we’re at 100 percent. Somebody moves out, somebody moves in, literally on their heels. It’s a very unique situation.

And what about downtown Grand Rapids? WHEELER: We’ve got to be very cautious as downtown developers not to price ourselves out of the market or we’re going to watch this thing slide back to the ’burbs. That is not what we’ve worked 20 years to do. We’re trying to magnetize people to live in an urban environment and really enjoy everything it has to offer. But the price point is sensitive. STEIMLE: We’re not there yet. We don’t have the downtown retail to make it worth it. I live up the hill on Belknap, practically downtown, but I still have the benefits of a neighborhood and don’t have to pay what it costs to live in an apartment or condo downtown. But I do see that rents are starting to stabilize with the future projects, going from $2.10 to $1.75 (per square foot). From this year to next year, the amount of product (coming) online is huge, it’s ridiculous.

What trends have you noticed in how people are renting all these apartments? WHEELER: When we did Eastown Flats (on Wealthy Street), our studios and one-bedrooms were gone online before we finished the project. Our twobedrooms, we almost had to give them away for the price of one-bedrooms. I don’t know what it is. People don’t want roommates anymore.

STEIMLE: They don’t mind the small spaces, either. They’d rather stay in a lower price-point for a smaller space. We always do 70 percent of our buildings as studios and one (bedrooms). … Now we’re looking at micro-apartments. A lot of people are (considering micro-apartments) to really hit a different price-point where we can fill the gap we’re seeing in the market with the rent in the $600 to $900 range. We have a lot of the same housing that’s on the market right now — the market-rate standard apartments and rentals. I think we’re going to start seeing new product like micros and more condo development, just so that we can keep a balance and grow with our city. WHEELER: If you believe the Zimmerman Volk (housing) study that updated in August, you’d think we could do this forever. I read the lines very carefully — where are you going to get all those people that are in that study? … This would be the first time ever that we delivered this many units, so let’s just wait and see. I could be totally off base. Probably a bunch of people do want to come here.

With all this growth in urban apartments and many of them getting built on surface parking lots, how do we address transportation? MONOYIOS: As city builders, from an urban policy

standpoint, the latter half of the 20th century was strictly built around the speed and scale of cars. We’re starting to rethink that in terms of how cities are planned. That’s encouraging this kind of development we’re talking about, to make mobility and accessibility that much faster. No longer are we making these islands of cars next to every activeuse building. We’re starting to create a vibrancy. We’re taking that mall culture, turning it insideout and putting it in neighborhoods and cities.

PHOTO: JEFF HAGE

“It’s egregious in my mind to have a city that’s this prosperous and not have development in the core city neighborhoods where black and brown people live, quite frankly. We need that to happen. We need partnerships with developers. We need African-American and Latino developers. How to create that and get that pipeline going is deﬁnitely at the forefront of black people’s minds.”

How do you think different modes of transportation affect neighborhood business districts? MONOYIOS: The Green Well was the first new restaurant in East Hills, and the comment was always, ‘Well, where are people going to park? It’s going to fail because people can’t park there.’ But that level of thinking is changing. Especially in the West Side, it’s exciting to see what’s going to happen there and no longer is parking that trump card. We’re building better cities because of that.

If all of a sudden, you don’t have to build one-and-a-half parking spaces per unit, how does that impact what developers build and the cost? STEIMLE: Parking is expensive. It’s very expensive. So no, we don’t want to build it. But also, we want to support the alternative transportation options. We’ve spent a ton of time educating people on the other options. We don’t want to have a ton of parking. We’re still a city and neighborhood that needs it. We’re not quite there yet, but we’re getting there. I think people don’t want to use their car. They want to have walkable neighborhoods.

Jonathan, you’ve worked a lot at the neighborhood level around issues of equity and inclusion. What are you hearing? JELKS: I know commerce is going to happen — this is a capitalistic society — but it has to be

— JONATHAN JELKS J.A. JELKS CONSULTING LLC

compassionate. There has to be a plan with the residents who are already there. The indigenous population needs to be at the table to some degree with business before development happens. Those are some of the issues that people from my constituency would be focused on. You can’t just come in and do anything you want. It’s not going to be acceptable in 2016 and beyond for you to come in and develop and alter the entire fabric of the community and people that are living there as well.

How have you seen it play out in the past? JELKS: I used to live on the other side in the Baxter community. Wealthy Street has completely changed. Some of the businesses that were there in my childhood are no longer there. Some of the neighbors who have been there for a long time weren’t able to afford to stay in those communities. … When you talk about Franklin and Eastern and some of these other neighborhoods, these walkable business districts that are filled with potential, different organizations I work with are going to be looking at how to have development happen but have the indigenous population there be a part of that newfound prosperity. I think it’s unacceptable in 2016 to have

“We’ve got to be very cautious as downtown developers not to price ourselves out of the market or we’re going to watch this thing slide back to the ’burbs. That is not what we’ve worked 20 years to do. We’re trying to magnetize people to live in an urban environment and really enjoy everything it has to offer. But the price point is sensitive.” — JOHN WHEELER ORION CONSTRUCTION INC. PHOTO: JEFF HAGE

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

development but have no people from the community that surrounds it working in the businesses or on the projects. That’s not a soapbox, it’s just real.

As developers build in neighborhoods with long histories, how do you address these concerns? STEIMLE: From our perspective in Creston, during the process, we had conversations with the neighborhood and businesses early on. Knowing the impact that this amount of development would have on a single corridor, we don’t want to develop something that we just build and walk away from. We have to develop the right thing. We’ve worked with the neighborhoods, the business associations, the commissioners for each neighborhood, the city — we start the process before we ever even buy something just to understand what the neighborhood feel is. … I appreciate your comments, Jonathan. It’s never our intention to bulldoze a neighborhood. WHEELER: You can’t go into a neighborhood and expect to change it. You have to work with it. That’s what we do. I grew up in the Belknap neighborhood. We got involved and I bought Coit school years ago and fixed it up. That neighborhood has been really close to me. We got up and we’re doing development where we’ll be the first commercial enterprise up there. We’re doing a restaurant — we’re going to hire a bunch of neighborhood kids.

All of this growth should eventually support retail like a downtown grocery store of some sort. How do you see this playing out? MONOYIOS: There has to be some risk on the retail end of the development. We’re almost to that threshold where retail’s going to suddenly explode downtown. WHEELER: I think the real canvas for our future as developers, whether it’s residential or commercial or neighborhood, is we’ve got to get that one missing link downtown. Actually, it’s two. One is getting more people to live downtown. Now we’ve got enough (units) coming online, it appears, if everything gets built that they say is going to get built.

Visit www.mibiz.com

What’s the other? WHEELER: I’m going to work my ass off to get us a department store. There are a lot of cities our size that have these urban Targets popping up all over (with) 20,000 to 30,000 square feet. They capture the market — people love them. I’m going to work super, super hard to try to get that. They also have a pharmacy in those so you don’t have to have an independent CVS with a drive-through. … We need a little more entertainment than just sitting at a bar stool. That would be theater, gaming, Dave & Busters, bowling. I just hope (Celebration Cinema) pulls (its proposed downtown movie theater) together. We need a little bit more entertainment. JELKS: We need a lot more entertainment.

“Parking is expensive. It’s very expensive. So no, we don’t want to build it. But also, we want to support the alternative transportation options. … I think people don’t want to use their car. They want to have walkable neighborhoods.”

Are there other cities Grand Rapids could look to for best practices to achieve this? DEKAM: My son is an engineer and moved to Denver a year and a half ago, so I’ve been spending some time in Denver. The interesting thing: You want to see where Grand Rapids is going, go to Denver. It’s a little larger, but what’s interesting is that the millennials own that town. They’ve solved a lot of the issues you’re talking about already. The demand is so much greater and there’s so many people infusing into Denver every month. They’ve got this new bullet train going from Denver to the airport. I go there and it’s like being in Disneyland and I’m 5-years-old. WHEELER: Minneapolis has done the same thing. Indianapolis has done the same thing. We just have to go there and steal some of their ideas. I mean how can downtown Rockford, Michigan have a 20,000-square-foot department store and they have 1,800 people there and (Grand Rapids) doesn’t have even one of those. What is it?

— MONICA STEIMLE 616 DEVELOPMENT LLC

PHOTO: JEFF HAGE

What keeps you up at night heading into 2016? MONOYIOS: To me, it’s process and sequencing. Being involved with GR Forward and (Downtown Grand Rapids Inc.), with all of the transportation, what are the outcomes and implementation? It’s easy to talk about all this stuff, but how can this all be obtained in the most effective way? Sequencing has a big part to do with that. It comes down to communication. What is development doing that the transportation people need to know about and vice versa? What are some of the issues the neighborhoods are having? DEKAM: I am concerned about interest rates. We’ve printed a lot of money and we’ve held back inflation, but some people are calling that the next wave. It’s going to wipe out anybody who hasn’t got back on their feet after the recession here, which is just going to create more opportunity for those that plan and are fairly well-rooted. Those things concern us and shade the risk we’re willing to take. That said, I remain very optimistic and positive, but anybody that’s telling you they got both feet on the gas probably didn’t learn enough from the last recession. WHEELER: My biggest concern, and it has been as an investor and developer in Grand Rapids, is that we still don’t have a corporate commitment in our community to make a stake in downtown Grand Rapids. We have been blessed with some of the best companies in the country who have never put a toe in the water of downtown Grand Rapids because they don’t want to pay the 1-percent income tax or they can’t see their car outside the window of their office. JELKS: Grand Rapids is a city of silos. That’s what keeps me up at night — the fact that these conversations don’t happen in my neck of the woods enough. There’s a lot of expertise at this table and I think city government has to be part of that conversation, too, because they have the pull and the reach to bring different rules together. I would love to see more leadership from the city government endorsing that. But particularly, clearly, I started off with that Forbes article and that’s something we’re not going to let go.

What do you think that says about the city? JELKS: It’s egregious in my mind to have a city that’s this prosperous and not have development in the core city neighborhoods where black and brown people live, quite frankly. We need that to happen. We need partnerships with developers. We need African-American and Latino developers. How to create that and get that pipeline going is definitely at the forefront of black people’s minds.

Visit www.mibiz.com

Take good care of the company you keep.

Blue Cross Blue Shield of Michigan and Blue Care Network offer complete insurance solutions to protect the overall health and well-being of your employees. GROUP HEALTH PLANS

SPECIALTY BENEFITS

BCBSM.COM/EMPLOYERS

Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association.

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

COMMUNITY C ATA LY S T Philanthropy is more than just a desire to promote the welfare of others, it’s a privilege. R A J A . M A LV I YA

G R F O U N DAT I O N .O R G

Attorney at Miller Johnson

R A J A . M A LV I YA Each year, professional advisors like Raj talk with their clients about charitable interests, our great city, and how they might make a real diﬀerence in the community. We are thankful when Grand Rapids Community Foundation can be a part of those conversations—it communicates an invaluable level of trust in our leadership and belief in our mission. For more information about doing good, call 616.454.1751 or visit grfoundation.org.

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

— AVIATION ROUNDTABLE —

Joining MiBiz for a aviation roundtable were (top row from left) Cheryl Bush of Landmark Aviation EFD Inc., Russ Kavalhuna of Western Michigan University, Ron Kitchens of Southwest Michigan First. (Bottom row from left) Curt Pullen of West Michigan Regional Air Alliance and Brian Ryks of Gerald R. Ford International Airport. PHOTOS: JEFF HAGE

— Aviation Industry Roundtable —

Despite looming pilot shortage, aviation stakeholders point to industry growth By NICK MANES| MiBiz nmanes@mibiz.com esponding to a strong economic cycle for both business and leisure travel, Gerald R. Ford International Airport in Grand Rapids has focused on investing in both its infrastructure and amenities. Beyond adding parking and enhanced shopping and dining options, the airport just launched a $45 million project to consolidate the security checkpoint and improve the customer experience at the facility. While airport executives invest in providing better customer service, the broader aviation industry faces a looming pilot shortage, leading to a period of uncertainty for facilities managers, communities and economic developers as they wait to see how airline carriers respond. To get an idea of where the aviation industry is headed in 2016, MiBiz convened a panel of experts for a roundtable discussion. Participants included: ■ Cheryl Bush, general manager at Landmark Aviation EFD Inc. ■ Russ Kavalhuna, executive director of flight operations at the College of Aviation at Western Michigan University ■ Ron Kitchens, president and CEO of Southwest Michigan First ■ Curt Pullen, vice chairman of the advisory board for the West Michigan Regional Air Alliance ■ Brian Ryks, executive director of Gerald R. Ford International Airport Here are some insights from the conversation.

Visit www.mibiz.com

What’s the general outlook for the aviation industry as you look ahead to 2016? RYKS: We’ve had a very strong year. Our passenger numbers are up 9.5 percent to date. It’s going very well. Since Southwest Airlines came to our market in August of 2013, we’ve seen a lot of stimulation. It not only is because of Southwest, but because of other airline’s responses to Southwest. Airlines like American and Delta and United are all adding capacity and doing things to compete. That’s been very good for our environment. We’re seeing double-digit increases in seat capacity as we move into the first quarter of 2016.We had a nice announcement from Southwest indicating that they’re going to start serving Midway Airport (in Chicago) with three frequencies a day starting in April.We think that will offer additional stimulation as Midway is the top domestic hub of Southwest. Because they’re offering three frequencies a day, it will allow them to compete more for the business traveler piece of the business, which certainly they want to see grow out of the Grand Rapids market.

culminated in some of the low-cost carriers coming in and then continued. It’s a great example of the business community and the at-large community being able to sit down with Brian and his leadership team and really talk about the issues we think are important to address so that we stay ahead of them. The problems he’s having are because of the success of the community. We want that to continue. It’s a channel of communication that works both ways. We can talk from the needs of the community. He’s certainly wanting that audience represented in his thinking. But it gives him a way to communicate back to those businesses as well as to (tell them) what would help him. The project that’s underway — I think we’ve got a lot of really good work going back and forth between the Regional Air Alliance and the board members that volunteer their time.

What’s happening in the Southwest Michigan region? How are you handling that growth?

What has led to the business community actively engaging with the aviation industry in West Michigan?

KITCHENS: (In Battle Creek), Duncan Aviation has completed their expansion and new aprons are under construction. It’s also a pretty big commitment by Duncan and (an example of ) their growth. Battle Creek (is) their second biggest facility globally. They’re in the remanufacturing of corporate jets business. It’s in Battle Creek, but one of the reasons it’s strong is because of Western Michigan University’s commitment to aviation. When we look at that growth, one of the things we have to remember is it’s not just pilot training. There’s a lot of places you can get pilot training, but there’s not a lot of places you get the mechanical training, the flight skills and the air traffic controller experience. It really has built that culture.

PULLEN: The Regional Air Alliance started in 2010 and that effort

See AVIATION ROUNDTABLE on page 52

RYKS: We’re always trying to stay ahead of the demand curve from a

facility standpoint. The biggest project right now is the consolidated checkpoint which will transform the passenger experience. It’s actually starting now. You’ll start to see – at the end of December – construction walls going up in the Grand Hall area and various places. There’s already some construction equipment on the northeast side of our facility.

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

AVIATION ROUNDTABLE Continued from page 52

“Commercial aviation is critical. It’s both an expectation of business and a commodity. … You need a frequency that will enable your people to travel very efﬁciently — one ﬂight per day on Southwest to Midway is not enough. … If people can’t move in and out, then all of a sudden it doesn’t make sense for Herman Miller executives to be here and you relocate them.”

How so? KITCHENS: When we look at aviation, airports are important, but the corporations to us are a critical component. This airport is part of the regional (economic development) strategy.

How do broader economic trends contribute to the industry’s growth? PULLEN: From the overall economic standpoint, as long as the economy does well, aviation does well from the standpoint of business travel. The volume of business travel is up. Leisure travel is up because people feel confident to go on those vacations.

How is the pilot shortage affecting the industry?

— RON KITCHENS SOUTHWEST MICHIGAN FIRST

KAVALHUNA: The primary place of employment

that we send our product — our airline pilots — to are the airlines. The airline industry has seen over the last five years a significant consolidation with really four major carriers providing most of the competition among themselves. They are experiencing a significant pilot shortage.

PHOTO: JEFF HAGE

What’s driving the shortage?

don’t have as many flying days for training environments. When you fly in the clouds, there’s a particular set of skills you need to do that.

What changed with the regulations? KAVALHUNA: When I became an airline pilot, I think

I had 600 hours of flying time. Today, I wouldn’t be able to be in an airline cockpit because of the legislative change that requires at least 1,000 hours of flying time and your airline transport certificate. … There’s only a couple institutions that get (students to) that 1,000 hours: my institution and some of my competitors. I say all that to tell you that it’s not as easy to fill the cockpits these days. That’s not just hyperbole. Airlines are parking airplanes right now because they can’t fill the cockpits with pilots. PULLEN: I think the real key is the economics have to become attractive enough for people to want to (become pilots) and pursue it as a career. Where else can you devote your time and energy into a degree and come out fully-qualified and not be hired (due to federal regulations)? Bridging that gap is really critical and how do you get them to work right away so they can build their experience and feel optimistic about their career potential.

What is the university doing to help the situation? KAVALHUNA: What we’ve tried to do as an institution is compete for more of the students that might want to become airline pilots. One of the strategic disadvantages we have being in Michigan … is we

How can you get around Michigan’s weather? KAVALHUNA: Western Michigan has approved at the board level the process of opening its first campus in Punta Gorda, Florida. We plan to start traveling down there the beginning of next year and evaluate the potential of building a new hangar facility to do flight training. We’re going to train pilots there, we’ll train maintenance professionals and I believe there are two other colleges in our university who will send students there. It will be the first time the university has ever opened a campus outside the state of Michigan. We’re in the planning stages of building a $5 million building on that airport. So our pilots, if they get caught in three or four or five weeks of bad weather, we plan to give them the opportunity to go and fly Western Michigan airplanes in Florida.

What’s the impact for the West Michigan region in opening a Florida facility? KAVALHUNA: Everyone (else on the roundtable) is

in the real world and we’re trying to support them. We’re excited that there’s a lot of demand. But frankly, I worry about not being able to meet it. RYKS: That’s a serious concern. They’re the pipeline and we’ve got another piece of that sitting on the airport with the West Michigan Aviation Academy, (which is) starting to manufacture pilots and getting kids interested in aviation careers as well. The timing is perfect for that and I think the school is getting a lot of national recognition for that. Delta just presented a check for $150,000 to the school a couple months ago so they could buy their second Cessna 172 training aircraft.

How is the shortage impacting the industry?

RYKS: The airlines are going to have no choice but to start to invest in that pipeline as well as create partnerships. I’m sure (WMU) already has partnerships with some of the carriers. My feeling is as the years go by when they really start to feel that shortage and that pinch, there will have to be other methods to bring new pilots and new folks interested in the career into the pipeline. I think the airlines will share in some of that investment. BUSH: I think they’ll have to because with the

9001:2008 CERTIFIED

How does this pinch affect business travel in a community like Kalamazoo? KITCHENS: Commercial aviation is critical. It’s both an expectation of business and a commodity. … You need a frequency that will enable your people to travel very efficiently — one flight per day on Southwest to Midway is not enough. If I can’t get there and back in the same day dependably, then I’m just not going to do that. If we lose that capacity, we don’t have a backup. We don’t have trains (like Europe). It really is a business driver. If people can’t move in and out, then all of a sudden it doesn’t make sense for Herman Miller executives to be here and you relocate them. It really can’t be overstated why this is a regional issue and why we worked (about 10 years on the issue). It’s how we grow Grand Rapids and Kalamazoo.

Are these issues causing more companies to have their own aircraft? BUSH: I think that it does, but then we also are impacted by this pilot shortage that will really be consumed by the commercial side. It puts a pinch on the general aviation business.

Over the last several years, we’ve seen a variety of infrastructure and amenity upgrades at Gerald R. Ford International Airport, and there’s more on the way. Why are those renovations so critical? RYKS: To keep up with demand is one of the obvious reasons, but I think the other thing that we’ve really focused on is the whole customer experience and ensuring that when individuals are coming and going from Ford Airport, that it’s an excellent experience. … We realized that we’re oriented around customer

u are in the fo r yo e you cov od py e ere ev hav d! ra er we

CERTIFIED SHEET METAL continues to support the food manufacturing industry with food grade stainless fabrications for over 30 years.

Parts Assembly

Kitting

Sorting/Collating

Packaging

A Division of

and more!

E a s t M u s k e g o n R o o fi n g

Custom Projects

What role are airlines playing in helping fill the pipeline?

ISO

Quality Assured On-time Delivery

Goodwill

RYKS: Absolutely. In fact, we’ve already had some impacts with (cuts to) our Cincinnati service. Delta indicated that was purely a result of the pilot shortage. KAVALHUNA: What I can tell you, in my experience, the pilot shortage will not affect one leg or two legs between two cities. It will affect system-wide in a rare kind of happenstance position. … I don’t think it will result so much in cancellation of routes. It will be foisted on us when you and your wife want to go on vacation and it just so happens that the pilot shortage hits that day of travel for the entire system. If we don’t stem the tide, well (the airlines) can’t provide service because they don’t have the pilots. But right now it’s just going to be that thing that drives us as passengers crazy.

increased demand or requirements for the certification and the additional hours, the cost of that education gets close to six figures. I think the support from the industry (is critical).

id m

Industrial Outsourcing Solutions

Has West Michigan felt that ripple effect at all?

W h

KAVALHUNA: There’s several reasons for that. The pilot workforce is generally older than other workforces. There’s a mandatory retirement, so the numbers game just cannot be manipulated, at least without a legislative fix. Because we make pilots, I’m not interested in having a legislative fix. The other thing causing the demand is, recently, the rules associated with getting into an airline cockpit … have changed.

RYKS: There’s going to be 16,000 pilot retirements between now and 2020 with the big four airlines — Delta, American, United and Southwest. … But with the whole pilot shortage, the other impact is small community air service. If airlines don’t have pilots to fly planes, that’s going to have a ripple effect across the entire country. We’re starting to see it already. Communities are losing air service because there’s just not enough pilots to fly those airplanes to those communities. We need a bigger pipeline of pilots to enter the system.

(231) 722-7871

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

and Sheet Metal

616.791.6900 certifiedsheetmetal.com

Visit www.mibiz.com

service.We’re not just a utility anymore. I think airports were thought of as basic utilities for many years. There was only one purpose — to get them on a plane. But that’s all changed. We want this airport to reflect West Michigan and the values that surround it.When businesses are bringing clients in, it’s the first impression and the last impression. PULLEN: The customer part is really key. In (the furniture) industry, we pay a lot of attention to places where people work because we think they matter. The CEO of Southwest Airlines was once asked, ‘What’s more important: Your customers or your employees?’ He said, ‘Well, of course, my employees. Without happy employees, I can’t have happy customers.’ … We’ve always said the employee experience needs to be the same as the customer experience. The (security checkpoint project) is going to make an important contribution to your experience as you spend time here passing through the airport. RYKS: This (airport) industry has become ultracompetitive so we have to market ourselves and put out a good product — a product that is priced, from our standpoint, fairly to the airlines. Otherwise, they’ll go somewhere else.

Prior to the emergence of the Air Alliance and the addition of some lower-cost carriers, customer leakage studies showed that people were leaving the West Michigan region to travel from other airports. Will there be an update to that study? RYKS: Yes, we are actually doing that (study) this year. In 2016, we’ll be updating that catch analysis to determine what the change has been. The last one was done just before Southwest arrived. That capture rate was 72 percent in our primary service area. We think that has increased. … We’d like to be in the 80 percentile range. People that were driving to Detroit and Chicago Midway to catch a Southwest flight — we think we’ve captured a lot of that traffic.

The airport is currently in the process of switching from being a department of Kent County to an authority-based management model. How is that expected to help operations? RYKS: I’ve been one that’s always in favor of an airport authority governance model. I’ve spent half my 30 years in the industry working for different airport authorities. The county has done an extremely good job of running the facility — the department has always been an enterprise department — but I think that the challenge you have in being part of a city or county government is that aviation is a different animal. It operates in a different business cycle. At times, you have to respond quickly to demands in the industry. Also, I think from a regional perspective, this airport serves a much larger region than just Kent County. About the time that I came (to Grand Rapids), the county allowed a seventh board

member to be outside of Kent County. That does nothing but promote goodwill throughout the entire region. Our plan is to transfer the operating certificate from the county to the new authority — which must be approved by the FAA — on July 1, 2016.

How could trends affecting large airline carriers impact operations in West Michigan? RYKS: Airlines are making more money than they’ve ever made before. The nice thing is they are investing that money back into the product and back to the customer service. That’s the biggest thing that I’m seeing. It also allows them to invest in additional capacity in markets that they can be profitable in. This market here, from a Delta perspective, is a top-50 revenue market across their entire system. We have many businesses that spend a lot on travel in the area. They see and recognize that. They’ll continue to invest as long as they’re making a good return. Those are the things we’re seeing. KAVALHUNA: Grand Rapids is a pretty top-notch airport. Being on the Michigan Aeronautics Commission, it’s a little precarious for me to say because I represent a lot of different airports that are in very close proximity.

Fair enough, but what can you say about the health of the other airports in the region? KAVALHUNA: None of the airports are doing revenue guarantees. … Sometimes airports want and need airline service so badly that they’ll guarantee the revenue to the airlines. They’ll hope they make it. … If they don’t make the guarantees, they have to write a check to the airline to sustain service. In West Michigan, no one is having to make guarantees. That’s a statement to the health of these airports.

How important are corporate headquarters to securing air service in a region like West Michigan?

PHOTO: JEFF HAGE

“We realized that we’re oriented around customer service. We’re not just a utility anymore. I think airports were thought of as basic utilities for many years. There was only one purpose — to get them on a plane. But that’s all changed. We want this airport to reﬂect West Michigan and the values that surround it. When businesses are bringing clients in, it’s the ﬁrst impression and the last impression.” — BRIAN RYKS GERALD R. FORD INTERNATIONAL AIRPORT

KITCHENS: They’re critical. Stryker’s headquarters are on the Kalamazoo airport. That’s not accidental. The private aviation business is a function of headquarters and regional headquarters. But when we look at the downturn when private aviation was hurt so dramatically, those people began to fly commercial. Without viable commercial locations, you see teams get relocated. So it’s critical (to the local economy). An airport is a trailing indicator, so when you see a healthy airport, it tells you the business community is healthy and that the community is vibrant. It tells you that there’s wages being paid at a level that allow families to travel. It is absolutely (critical) that you have far-sighted aviation administrators, educators that are building that capacity and betting on a future that is strategic and thoughtful, but certainly not guaranteed. That’s why aviation and economic development are so closely aligned.

“The pilot workforce is generally older than other workforces. There’s a mandatory retirement, so the numbers game just cannot be manipulated, at least without a legislative ﬁx. Because we make pilots, I’m not interested in having a legislative ﬁx. The other thing causing the demand is, recently, the rules associated with getting into an airline cockpit … have changed.” — RUSS KAVALHUNA WESTERN MICHIGAN UNIVERSITY PHOTO: JEFF HAGE

Visit www.mibiz.com

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

MICHIGAN’S LEADING CORPORATE/M&A PRACTICE Honigman’s Corporate/M&A practice has ranked number one in Michigan since 2004 according to Chambers USA: America’s Leading Lawyers for Business, a respected client and peer review publication. It notes: “The team is known for (its) comprehensive practice with a particular focus on transaction work in the middle market. Preeminent in the M&A arena and dominant in the state for private equity matters.”

“The team leads the way in venture capital work, and is a popular choice of counsel for securities and corporate governance.”

180 Counsel to more than 180 corporate transactions that closed in 2014

$14 billion Total value of these 2014 transactions was $14 billion

We invite you to learn about how Honigman can add value to your organization today. For more information, please contact Phillip D. Torrence at 269.337.7702 or ptorrence@honigman.com.

WWW.HONIGMAN.COM

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

— BANKING ROUNDTABLE —

Joining MiBiz for a banking roundtable were (top row from left) John Irwin of Huntington Bank, Phil Koning of West Michigan Community Bank and Jeff Kuras of Honigman Miller Schwartz and Cohn LLP. (Bottom row from left) David Ramaker of Chemical Financial Corp., Ray Reitsma of Mercantile Bank Corp. and Sean Welsh of PNC Bank. PHOTOS: JEFF HAGE

— Banking Roundtable —

With no major obstacles in sight, bankers say 2016 will offer more of the same Slow growth will continue, capital remains available to borrowers By MARK SANCHEZ | MiBiz msanchez@mibiz.com s bankers look ahead to 2016 within their industry, they’re faced with adapting to the tastes of today’s tech-savvy customers, not to mention dealing with costly federal regulatory burdens enacted in the wake of the recent economic crisis. That’s on top of navigating the limited available growth opportunities and operating in an economy that has improved, but still leaves much to be desired. MiBiz convened a group of veteran West Michigan bankers to talk about what they see ahead for next year. Participating in the roundtable conversation were: ■ John Irwin, West Michigan president for Huntington Bank ■ Phil Koning, president and CEO of Hudsonville-based West Michigan Community Bank ■ Jeff Kuras, an attorney in the financial institutions group and a partner at Honigman Miller Schwartz and Cohn LLP, the law firm that sponsored the roundtable ■ David Ramaker, chairman and CEO of Midland-based Chemical Financial Corp. ■ Ray Reitsma, senior lender and West Michigan president at Grand Rapids-based Mercantile Bank Corp. ■ Sean Welsh, executive vice president and regional president for West Michigan at PNC Bank.

Visit www.mibiz.com

Here are some highlights from the discussion.

From each of your perspectives, what’s the lay of the land? What are the conditions as we head into the new year? KONING: There are a lot of challenges, but there are also a lot of opportunities. From an economic standpoint, we don’t think there’ll be another recession, but we’re not looking for significant economic growth, either. We need economic growth to actually generate loans. If I see a challenge in the future, there are not enough loans for all of us to share in. Deposits, there seems to be plenty of, but loans are going to be the challenge for most of us. RAMAKER: I would agree in the sense that I see a continuance of the economy in 2016 versus 2015 and actually 2014. From that standpoint, there is some economic lift in the marketplace, but it’s also market-share grab that we’ll be taking as we look for our growth. I, however, think there are enough opportunities from a lending standpoint. What we’re focused on is trying to figure out how to grow our deposits. We need fuel as we move forward, and I think that as the industry continues to evolve over the next couple of years, deposits are going to be more precious, quite frankly, than even loan growth. WELSH: 2015 and ’16, economically, will be very similar. The opportunity in ’16 and going beyond is how do we show up where our clients want us. When you look at the transaction counts for our retail business, I think we’re up to 54 percent of our clients don’t use our branches, but they are still our clients. We’re trying to figure out how do we be relevant and add value where our clients are. As I tell people, we have to serve my mother and we have to serve my daughter, and they both want to be served very differently. That’s a challenge in our industry that we’re all trying to figure out how to do.

REITSMA: There’s no question the trend toward electronic banking is continuing at an accelerated pace. The economic cycle is certainly maturing, but it hasn’t matured, so we have a little bit of run left. We’ve rung out a tremendous amount of excess in the Great Recession, so the ability to sustain a good economy postrecession is enhanced by the severity of what we went through. We have a ways to go in this. KURAS: We’re hearing a lot of similar things. No one’s expecting a large uptick. There are some complaints about there not being enough good loans out there, and where there are, there is some very heavy pricing competition. IRWIN: I think it’s a great time to be a borrower. You look at where rates are, you look at the liquidity of the banks — all of us are chasing the same customers. People have lots of choices, so it’s a great time to be looking at their balance sheet and their capital structure and figuring out what they want to do for the next five years. (It’s about) being present where the customers want us to be, it’s about giving them choices. … We have to have all of the access points to capture the market share.

What do you see ahead for interest rates in 2016 and how will they affect access to credit and capital? Editor’s note: The roundtable was held prior to the Dec. 15-16 meeting of the Federal Open Market Committee of the Federal Reserve. IRWIN: All of our banks and our investors already have an interest rate increase factored into what they’re going to be doing in terms of our earnings forecast, so that’s already baked in. A quarter point See BANKING ROUNDTABLE on page 56

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

BANKING ROUNDTABLE Continued from page 55 here or there, if that’s going to make the difference for your business to borrow, then we want to take another look at it. Those of us around the table here, some of us who have been in banking a long time remember when in 1980 the prime (rate) was 20 percent. The Fed, in my opinion, isn’t going to do anything drastic to change the course of action here in terms of where we’re going. They want to see it controlled and I think that’s what we’ll see. I don’t think things are going to change from a credit perspective. WELSH: If you really look at it from the client’s standpoint, there are two clients here: The depositor and investor, and then there’s the borrower. The borrower, if we see a quarter point or something minor that we will probably see, that’s not going to change the decision on whether I buy a new car … or if I expand my plant. What’s really impacting the economy is our potential retirees and our savings. Everyone thinks increases in rates are a bad thing. But there’s also a good thing in there. We have become much more of a savings nation, and that’s something that did come out of the deleveraging of the 2009 Great Recession. So you have to look at it from two angles. KONING: Relative to access to capital, I don’t believe there will be any change. There will be significant availability of capital for businesses with good business plans. REITSMA: I would agree. Interest rates aren’t going to change the landscape of the borrower. In fact, if anything, they’re just going to continue to see there is more economic activity and they do need to continue to meet and fulfill those orders and so forth — whether that means buying equipment to make that happen or expanding their buildings to put in a new line. It’s still going to be a process that’s going to continue to happen. If anything, as we move through next year, we might see more of a flattening of the curve and that will mean that, obviously, the long-term rates will probably hold

“A recession would surprise me. I just think fundamentally, there’s still room to grow. The Fed needs to increase rates to show it has the ability to increase interest rates, but there’s still plenty of opportunity for ramp-up.” — DAVID RAMAKER CHEMICAL FINANCIAL CORP.

PHOTO: JEFF HAGE

so that the borrower that’s potentially fixing for a while is not going to see a lot of movement in those rates. The opportunity is still going to be there to borrow. IRWIN: The biggest issue all of our customers have is not the direction of rates, it’s the ability to attract talent. They cannot find the talent to fuel their growth and attract the jobs. Talent is a bigger issue for businesses in West Michigan than interest rates or the economy, in my opinion. What are some of the issues and trends you saw surface in 2015 that will continue on 2016? WELSH: (Banks) are investing in technology because that’s where our clients want us to be. That’s been a big trend. It’s been coming slowly, but I think it really went on steroids this year when we saw a jump in the out-of-the-branch activities. In the fourth quarter of 2013, we were at about 45 percent of the transactions that happened outside of the branches. We’re

now up to 54 percent. That’s going to do nothing but accelerate. RAMAKER: One (issue is) technology and where that’s pushing us and how that’s going to help us deal with our customer base and provide additional opportunities for them. … From an electronic perspective, we’re trying to figure out and provide to the customer the various ways they want to touch us, versus we dictate how they touch us. It’s a huge thing for our industry and it’s truly ramping up. But then on the opposite side is the regulatory side of the equation and the increased burden that we’re facing because of that technology and what we need to do from that standpoint in order to meet those needs and protect the information that our customers are entrusting us with. We have both sides of that equation we’re having to deal with. One’s positive from a growth perspective, and the other one is really reeling in that side of it. KURAS: Protecting that data has been a real interest to boards. In particular, I think it’s tougher from some of the smaller banks to spread out that cost of managing that technology, making sure you have the right systems, and getting your systems audited. That’s been a real issue on people’s minds. KONING: And branches are changing. They’re changing from transaction centers to salesand-service centers. I read an article recently that maybe as many as half the branches in the United States won’t be needed in the next five to 10 years. You may see wholesale closing of branches for banks.

We’ve heard so much the last few years about how the federal Dodd-Frank Act has significantly raised the regulatory burden and costs for banks. How has the law affected your businesses and do you see any relief coming?

PHOTO: JEFF HAGE

“We need economic growth to actually generate loans. If I see a challenge in the future, there are not enough loans for all of us to share in. Deposits, there seems to be plenty of, but loans are going to be the challenge for most of us.” — PHIL KONING WEST MICHIGAN COMMUNITY BANK

WELSH: Dodd-Frank … is directional legislation and the legislation is now being effectively interpreted by the regulators and what the intent was on that. There’s a lot of really good regulations and they’re protecting the banks to make sure there is liquidity, which is effectively what most of the banks got into with the mortgages they had on their balance sheets. They’re protecting from capital things, but there’s always the unintended outcomes that come out of that legislation. Our hope is that it evolves as we go forward. As we talk to our legislators, we try to show them here was the intent and here was the outcome. Will it be easy in a presidential year? No. But those discussions continue. The goal of the government is to ensure steady liquidity for businesses and consumers, and the business that the banks are in is to supply that. Our goals are in line so it’s really just trying to understand how we get to that middle ground.

off. I do think they’re all positioned for conservative, long-term growth. All of our customers that made it through the down cycle are much better prepared for anything that they face going forward, so that’s the good side of it. But it’s just going to be a little choppy, I think, next year. RAMAKER: I think it’s going to be more of the same. I don’t see 2016 being a whole lot different than 2015. I think you’re going to continue to see consolidation. You’re going to continue to see the opportunity for growth for our borrowers. The growth in electronic banking will continue. More regulation will roll through. So changes will happen from that standpoint. I think it’s just really a continuing picture. I don’t think there’s one market segment that’s better than the others at this juncture. WELSH: We’ll probably be sitting here a year from now talking about the same issues but they will have moved forward a little bit. We’ll go from 55 percent or 54 percent of the transactions outside of the branches to whatever … 58 percent or something. My hope is that regulations will become a little clearer. Again, Dodd-Frank was not a clear document. It was more directional (legislation) with the intent of where they wanted to go and the regulators have been interpreting that. And interest rates, I don’t see a lot of change in that a year from now.

There still seems to be a fair amount anxiety out there from the Great Recession, even though the economy has largely recovered. How’s that affecting business from commercial borrowers and their lines of credit? WELSH: They will use 99.9 percent of their capacity before they buy a new machine, whereas in the past, maybe when you got to 85 (percent) you started thinking about it. (Now) you’ll fill every square inch of your plant before you think about expanding it. REITSMA: I think they are willing to fund their working capital requirements first, then fixed assets like plants, equipment — that type of thing — because it’s somewhat involuntary. You generate a receivable, you have to finance it. But in terms of mindset, they are in no hurry to go further in debt for capacity they may need. They’ll certainly do it for capacity they do need. WELSH: They’re waiting until the last minute. They’re doing everything that they can do to maximize their productivity, and then at the last minute they’re expanding from an equipment perspective or whatever. We have businesses out there with much better management teams, much better ownership, much more experience on how to work through all of these issues. That’s what they’ve learned, so that’s what they are putting into place. Quite frankly, from our perspective, I think that’s better for us, too. REITSMA: They appreciated the downside that they didn’t maybe in 1996. There’s much more appreciation for the downside that can occur in an industry and the general environment.

What are some issues you see arising in 2016? IRWIN: We know we’re looking at fairly modest growth next year — 2.5 percent (GDP growth), or wherever that ends up — so I don’t think any of our customers are going to be blowing the doors

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

What would surprise each of you in 2016? WELSH: The Cubs win the World Series. (Laughter around the table.) Actually, I think they will. This is their year.

Visit www.mibiz.com

RAMAKER: A recession would surprise me. I just think fundamentally, there’s still room to grow. The Fed needs to increase rates to show it has the ability to increase interest rates, but there’s still plenty of opportunity for ramp-up. If you look just in this state and look at the automobile industry, the number of cars that are being bought at this point in time just continues to drive the thought process that the economy in 2016 is going to be solid. Is it going to be outstanding? No, but it’s going to continue to show some growth. So I don’t see a negative in the forecast. And the Fed’s not going to increase KONING: interest rates to the point where it’s going to shut everything down. They’re just not going to do it. IRWIN: I would be surprised if anything happened that impacted auto sales or home buying. Those are two areas that are so important to our regional economy. (The Fed is) watching those numbers really tightly. WELSH: There are events out of anyone’s anticipation that can occur, but you can’t plan around such low-percentage events.

“The past couple of years, we’ve been saying, ‘This is the year (M&A is) going to shake loose.’ It’s simply because there are so many banks that probably should. They’re not troubled, but they’re at that asset size. If you have $200 million in assets and compliance costs are up, it’s very difﬁcult long term to see where you’re going to go.” — JEFF KURAS HONIGMAN MILLER SCHWARTZ AND COHN LLP PHOTO: JEFF HAGE

Where do you see M&A activity in the banking industry going in the next year or so? KURAS: The past couple of years, we’ve been saying, ‘This is the year it’s going to shake loose.’ It’s simply because there are so many banks that probably should. They’re not troubled, but they’re at that asset size. If you have $200 million in assets and compliance costs are up, it’s very difficult long term to see where you’re going to go. In some of these communities, you still have the local-investor model. These people are aging. They want a market for their shares. But then you see a lot of deals break down for the smaller banks because those social issues are a very big deal for them. Who’s going to stay on the board? Are you going to sell to another community-type bank or a super-regional bank? That type of thing can really delay things or (cause) some reluctance on their part to make some of the moves that they probably should. RAMAKER: I’m getting an announcement a day, maybe twice a day, about M&A activity that’s coming across my email from around the country. So I think we’re going to continue to see consolidation. There are roughly 120 banks headquartered in Michigan at this point in time. We’re probably going to be somewhere — I’ve been saying, in the next five to seven years — around 70 to 80. KONING: Not all of these banks are in desirable markets to be in, either. There are a lot of no-growth areas in Michigan. There are probably some very good markets, but there are also some markets that only a community bank could want to serve. WELSH: If you look at the environment that banks operate in, where they are investing now is technology. They’re investing in revenue streams that bring solutions to their clients and that add on to the loans and deposits. It may be asset-management businesses. It may be servicing businesses, it may be technology businesses. Banks have really become information-management companies for their clients. We hold their money, we bring them solutions, but we’re doing a lot more. So for the investment of capital on behalf of a bank, the options are so much wider and so much different than they were 10 years ago.

If Gov. Snyder were to call and ask for advice on what he could do to help Michigan’s economy next year, what would you tell him? REITSMA: Reduce the (regulatory) burden on our borrowers. Make their ability to comply greater. They have the same issue that we have as an industry. Almost every industry has its compliance challenges. To simplify those would help our borrowers a lot. They spend their resources just like we do (in) trying to figure out what the law is and comply with it. It takes them away from whatever it is that makes their company great at what they do. RAMAKER: (State government) has to continue to treat the tax base and the taxpayer as customers and (acknowledge) that we need an answer. We don’t need a delay. Delays are trouble for all of our businesses. Give us an answer. Whether it’s good or bad, we just need to know. Give us something. REITSMA: You just want certainty. WELSH: And I think he has done a lot of that.

Visit www.mibiz.com

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

Q&A Kevin Stotts

| TALENT

President, Talent 2025 Inc.

Q&A Leisl Clark

President, Michigan Energy Innovation Business Council

Experts predict that the labor shortage will continue to impact the majority of business sectors in 2016. With West Michigan’s unemployment rate tracking around 3.2 percent, businesses need to focus on retraining workers who are reentering the workforce after leaving in the recession years, says Kevin Stotts, president of Grand Rapids-based Talent 2025 Inc. What’s keeping you up at night regarding talent development in 2016? I really worry about the declining labor force participation rate that we have here in the region. After the recession, there’s been a drop in the labor force participation rate. We’re trailing some of the top-performing communities by about 5 percent and that equates to about 20,000 adults 24 to 54 years of age who have just chosen to not look for work or to be employed. That group provides a huge potential labor force because you have 30,000 jobs that were in the region that were open and posted in October. That would go a long way in meeting that talent shortage. How could increasing the labor participation rate boost the economy in West Michigan? We’ve done some analysis, and our guess is that if we can get those who exited the workforce back in the labor force and help that group of working poor get above a survival budget threshold, then that would be $1 billion in additional economic activity for the region. These are big numbers, and it would be a huge impact if we can figure it out. What’s standing in the way of reintegrating those people into the economy? These people have all kinds of barriers: character

| ENERGY

skills, as well as technical skills and education they’d need to be employable. So I spend my time thinking about how we as a region — employers, educators and workforce development leaders — will help that group overcome whatever barriers there are, because that’s ultimately going to impede our economic success. What sort of strategies will companies use in 2016 to develop their talent? I think one would be partnering with K-12 education to really start to create pipelines of students graduating high school and having a pathway into a job. The second would be to look at new efforts to work with those individuals in the adult workforce who might have challenges with deficits in soft skills or technical skills and employers picking up the cost or working with different agencies or local community colleges to fill that knowledge or skills gap. I think employers are going to be much more engaged and instead of expecting the candidate have 100 percent of what they’re looking for, maybe they’ll have 70 percent of what they’re looking for and then they’re going to find partnerships that help that person get that other 30 percent. Interview conducted and condensed by John Wiegand.

Q&A Rick Murdock

While lawmakers will likely wait until next year to decide the future of Michigan’s energy policy, Liesl Eichler Clark, president of the Michigan Energy Innovation Business Council, believes corporate purchases of alternative energy will drive the sector in 2016. What are the major drivers in the energy sector that will impact business in 2016? This issue of corporate purchases of advanced energy is a really big deal. I know I’m hearing more and more of these companies coming in … saying we want 100 percent renewables. Look at Herman Miller, Steelcase and Whirlpool — there are already a lot of companies that are doing this in Michigan. I think this issue is only going to grow exponentially. I think this is going to be a trend and we’re only going to see it explode further in Michigan. Are your members advocating for any specific policy change for 2016? Fundamentally, the board has been very clear that they want to see support for renewables and efficiency. Expanding our use of renewable energy in Michigan is critical, and using energy efficiency in Michigan to keep bills down is important as well. Our future when it comes to energy is going to look diverse, and it needs to be a diverse portfolio. The other thing our board has been very clear on is the opportunity for market access to be part of that. Our members want to be able to have a role working

with the utilities to help build that generation and be part of that energy mix in Michigan. With that in mind, if you could pick one policy for Governor Snyder to champion in 2016, what would it be? I think the Governor laid it out in his March energy address when he talked about our diverse energy portfolio in the future being up to 40 percent renewables and energy efficiency. If he can champion what he’s already said, I think that’d be fantastic. … It needs to be reliable. Reliability is a big deal for manufacturing. We need to have the energy there when we need it. Is there anything that keeps you awake at night? I think that my one fear with this legislative process is that we end up with something that’s not better than the status quo. I’m not always sure from dayto-day as the legislation evolves that what we’re talking about is better than the status quo. Interview conducted and condensed by John Wiegand.

How will the economy play into all of this?

| HEALTH CARE

Executive Director, Michigan Association of Health Plans The growth of private health exchanges and the migration of more employers to self-insured health benefits are the key trends Michigan Association of Health Plans Executive Director Rick Murdock is watching for 2016. Murdock also expects continued moderation in premium increases. The Association of Health Plan represents 17 health plans in Michigan that collectively cover more than 2.5 million people through commercial, individual, Medicare and Medicaid products. What are the opportunities and challenges in 2016 in terms of health benefits? There’s continued evolution within the Affordable Care Act, and that’s kind of on the margins. When you take a step back, we have a lot of conversations about the public exchange for the individual market and the small market, but that’s not really what’s taking place. What’s taking place is off the market. It’s dealing with the private exchanges, it’s dealing with some of the other exchanges that are going to go on in the large employer base and what’s happening with self-insured products. From our point of view, we’re trying to position our members to get more engaged in those markets and create opportunities to do so.

The economy kind of drives the benefit plans and how much we continue to drive high-deductible plans that have just grown tremendously over the last five years. To keep health care more affordable or to sustain that affordability, there’s going to be just the continued offering of — you can call it high-deductible (plans) or you can call it more consumer engagement. The employee or the individual is going to have more financial stake in health care because of the nature of the economy and the cost-sharing that goes on. That’s just totally necessary to keep the overall health care coverage on track. We have the individual mandate and we have the employer mandate out there. You’re supposed to have health care coverage equal to the essential health benefits package. We still have the remnants, if you will, of the Affordable Care Act, but the common policy (of employers) now is just driving more toward increased cost-sharing.

What’s an issue that you see arising in 2016 for health plans and their members? One of the real issues out there is the discounts that are negotiated by health plans (with care providers). You make a lot of difference between in-network and out-of-network (prices) and you can call it a drive-by-type of thing where you have a lot of providers and consumers who have no choice about whether they are in-network or out-of-network.

When might that kind of issue arise? These are the specialists — the radiologists, anesthesiologists and others — who send a bill that says ‘out of network rates’ because they might have provided a service within a hospital that was an innetwork provider and that’s as far as the consumer knew and they had no choice of the provider. Those issues we’re going to get more into over the next year. One way or another, that’s going to come to a head. We’re looking at some legislation that at least can create a little more transparency on those relationships.

What about rates for 2016? Will the moderation in annual premium increases of the last few years continue for some product areas and markets? I would use the term ‘moderation’ in premium increases to continue with more pressure for reducing the administrative costs for those serving self-insured plans. Issues of HICA (health insurance claims assessment) and the ACA premium tax will have an inflationary factor in rates.

What’s lurking just beyond the horizon that’s going to get more attention next year?

Where do you see the industry going next year?

We’re starting to look at where technology is going, and I think where the growth will just take off like a rocket in the next 12 to 18 months is in specialty drugs. So we need to be ready for that. It’s going to be a big budget-buster on the public sector side. And the issue there isn’t around the efficacy of the product. It’s really about the price. These are all price issues and how much profit is enough on the pharmacy side. I wouldn’t say it’s new. I just think we’re going to see it accelerated.

I see a lot more movement toward addressing — on the commercial side — the self-insured and private exchange opportunities.

Interview conducted and condensed by Mark Sanchez.

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

Q&A Anirban Basu

| CONSTRUCTION

CEO, Sage Policy Group Inc. | Chief Economist, Associated Builders & Contractors As chief economist of the Associated Builders and Contractors (ABC), Anirban Basu expects 2016 to be another year of modest growth in the range of 2.6 percent, well below the countryâ&#x20AC;&#x2122;s pre-recession average of more than 3 percent. Speaking to the West Michigan chapter of ABC, Basu said the current state of the global economy and the strong dollar compared to other currencies wonâ&#x20AC;&#x2122;t get the country back to previous growth rates in near term. Following his presentation, Basu spoke with MiBiz about some trends affecting the construction industry. Multifamily construction has presented a lot of growth opportunities for general contractors in West Michigan and beyond. Do you imagine that will continue? I think itâ&#x20AC;&#x2122;s a demographics story. There was a time when the housing market was booming. It was a time where a lot of baby boomers were reaching their peak-earning years and investing in even larger homes. Generation X was also chasing really large homes, often in the suburbs. For much of that period of the housing boom, oil prices were low. Gas prices were low. People didnâ&#x20AC;&#x2122;t seem to mind lengthy commutes as much. So the housing market was very strong, obviously things were overbuilt, prices rose too quickly in too many markets and they collapsed. That has caused Generation Y to rethink home buying. They donâ&#x20AC;&#x2122;t simply assume that itâ&#x20AC;&#x2122;s a good idea. Will people in that generation ever change their minds? My very strong belief is that as more form families and have younger children, then home buying will become all the rage again. It may take more than a few years. But itâ&#x20AC;&#x2122;s something that will play out over the next decade and beyond.

Seasons Greetings! 7KDQN \RX WR DOO RI RXU FOLHQWV DQG VXE FRQWUDFWRUV

If that trend plays out, what does that mean for all the apartments being built right now? I think that weâ&#x20AC;&#x2122;ll wind up with too many apartments in urban America. As Generation Y living in those apartments moves out in surprisingly large numbers to the suburbs, at that point, I think you may see another round of condominium conversions. We saw this roughly a decade ago. Developers will tell you these are really hard deals to get done, but they can get done because they did them a decade ago in large numbers. Who will want to move into those condos? What youâ&#x20AC;&#x2122;ll see is baby boomers looking to downsize and looking for more urban opportunities and many actually prefer ownership because thatâ&#x20AC;&#x2122;s what theyâ&#x20AC;&#x2122;ve been accustomed to, whereas their children who have been living in the cities move out to the suburbs to homes. Where else will we see significant development? I also think there will be a significant amount of growth in the market for suburban apartments. Thereâ&#x20AC;&#x2122;s a lot of baby boomers who will need the equity in their homes to live on in their retirement years, so they will be apartment dwellers but theyâ&#x20AC;&#x2122;re not necessarily interested in moving into the cities. I think thatâ&#x20AC;&#x2122;s an under-supplied market and I think youâ&#x20AC;&#x2122;ll see quite a bit of development in the next decade. What should developers and contractors be watching for in the next year? The leading threat to the countryâ&#x20AC;&#x2122;s well-being, I think, is the national debt, which is now around $18 trillion. I donâ&#x20AC;&#x2122;t think itâ&#x20AC;&#x2122;s a crisis in 2016. People are still willing to buy U.S. treasuries and willing to finance the countryâ&#x20AC;&#x2122;s debt, often at extraordinarily low interest rates. But there will come a time over the next 10 to 15 years that there will be a crisis. What are some things that could happen next year that would surprise people in the economy? Thereâ&#x20AC;&#x2122;s so many possible surprises â&#x20AC;&#x201D; a geopolitical event comes to mind. The world seems to be a pretty unsteady place. I think people would be really surprised if we got a significant rebound in commodity prices. I think the conventional wisdom is that gasoline will stay very affordable and natural gas will stay affordable. Copper prices will stay low, and gold prices are below $1,100 an ounce. But one of the things about that is when prices are high, people expect them to stay high and when prices are low, they expect them to stay low. They tend to not stay where they have been. I think thatâ&#x20AC;&#x2122;s one of the risks in the economy that not a lot of people are talking about. Interview conducted and condensed by Nick Manes.

Visit www.mibiz.com

&200(5&,$/ Â&#x2021; ,167,787,21$/ Â&#x2021; ,1'8675,$/ )22' $*5,&8/785$/ Â&#x2021; )$,7+ :256+,3

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

Best Practice Better Community Recycling electronic devices and restarting lives since 1986

Every time your business purchases or donates electronic devices to Comprenew, 100% of the proceeds fund Comprenewâ&#x20AC;&#x2122;s outreach programs for both adults and kids at risk.

RECYCLE

RESTART

Â&#x2021; +LJKHVW OHYHO RI GDWD VHFXULW\

Comprenew doesnâ&#x20AC;&#x2122;t just restart electronics, we restart lives!

Â&#x2021; =HUR ODQGILOO ]HUR H[SRUW SROLF\

Here are some of Comprenewâ&#x20AC;&#x2122;s community outreach programs that are made possible by business partners like you.

Â&#x2021; )XOO GRZQVWUHDP WUDFNLQJ ZLWK FHUWLILHG UHF\FOLQJ SDUWQHUV

The Comprenew Workforce Development Program equips adults with the necessary skills to be successful in the U.S. work environment.

REFURBISH Â&#x2021; 2XU DELOLW\ WR UHIXUELVK DQG UHVHOO HOHFWURQLF GHYLFHV ORZHUV \RXU recycling costs and increases your revenue Â&#x2021; :H JHQHUDWH TXDOLW\ WHFKQRORJ\ WKDW LV PRUH DFFHVVLEOH DQG affordable to the community through our retail stores Â&#x2021; :H UHGXFH \RXU HQYLURQPHQWDO IRRWSULQW

The Comprenew Academy is an environmentally-focused program for at-risk inner-city youth that provides mentorship, direction, and preparation for the workforce. The Comprenew Service Learning Program hosts schools, churches, and community groups to educate and inspire an increased level of care for the environment.

Call today, and start making a difference!

616.451.4400 or www.comprenew.org 60

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

Q&A Scott Sylvester

Will movement in interest rates by the Federal Reserve cut into lending growth?

| CREDIT UNION

COO, Consumers Credit Union | Kalamazoo Consumers Credit Union has been riding right along with the rest of the industry in Michigan, putting up strong growth in membership, deposits, and loans — both to consumers and small business owners. COO Scott Sylvester expects the good fortunes to continue in 2016 for both the industry and Consumers Credit Union, which has about $650 million in assets and nearly 67,000 members through 16 offices in West Michigan. Two more branches are under construction in the Grand Rapids and Kalamazoo areas.

What do you see the economy doing in 2016 and how is it affecting business? I think we’re going to see a little more of the same — some slow and steady growth. It’s been a very positive year for the state of Michigan and the economy as a whole. From our industry’s perspective, that equates to people obviously out shopping for cars. The car loan volumes for the year are pretty significant and they’re projected to continue into next year. We’re doing a lot of car loans. On the other side of it, the housing market has picked up. Maybe you have folks who are no longer upside down on their mortgage, and we’re seeing home equity (lending) pick up as people take care of some improvements that they had put on hold over the last five years. If they don’t want to improve their current situation, they’re deciding to put their house up for sale and move to a different location. We have a lot of first-time (buyers) purchase mortgages. That will continue slowly and steadily in 2016, for sure.

This first increase is going to be them testing the waters and a pretty small increase, maybe 25 basis points would be my guess. I don’t think it’s going to affect long-term rates or even short-term rates by that much immediately. It’s going to be more of a gradual (increase). With the economy where it’s at, if they take their time and are methodical in how they increase rates, I don’t think it’s going to impact the economy in a negative way. I think people will continue to make purchases for consumers-related goods — cars and houses. I don’t think an increase of 25 basis points or even a little more would slow that down.

What’s the business opportunity for you in 2016? The challenge in our industry is centered around how people are banking. They are doing a lot more through digital channels — their mobile phones, their iPads and from the comfort of their home depositing a check versus coming into an office. Although not a surprise, it’s certainly a key focus for us in how we are going to transform our business. We certainly don’t want to be the next Blockbuster, for example. How do we transform those offices and make them expert centers for complex transactions like mortgages and business banking, as the transactions that were there 20 years ago are declining? How do we reinvent ourselves and transform the offices to be able to handle those transactions in a different manner? Maybe two-way video with remote tellers and those types of things.

What do credit unions have to do in 2016 to maintain their growth and momentum? For us, we will need to continue to acquire members at our offices, through the car dealers and online, with an emphasis on lending to maximize interest revenue. To retain our current members, we must provide them easy-to-use digital tools.

Between January and November, state regulators approved 13 mergers in Michigan, reducing the number of state-chartered credit unions from 175 to 162. Merger activity, especially involving small institutions becoming part of larger credit unions, has been elevated in recent years. Do you see that continuing in 2016? The small ones, it’s so difficult for them to survive with the regulations and compliance and the burdens that they have. It’s really the same as the larger institutions. And the ability for small credit unions to even get volunteers to serve on their board of directors is such a challenge that I think you’re going to continue to see that (M&A). Strategically, Consumers Credit Union has made the choice to grow primarily organically, and we’ve had one merger of a small rural credit union in Lawton in our 60-plus years in existence. We feel growing organically allows us to keep our employee culture in place and have employees who are engaged. There are mergers happening around us. It’s just not something we actively pursue. Interview conducted and condensed by Mark Sanchez.

Save up to 35% on your business phone & internet services. Local Phone Service | Integrated T-1: Voice and Data Long Distance and Toll Free Services Dedicated Internet Services | Hosted Phone Systems VOIP and Telecommunications Consulting

Toll Free 877.308.3335 info@makannah.com | makannah.com Visit www.mibiz.com

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

When it comes to

heavy lifting of legal matters for M&A, eDiscovery, records information management, privacy & security, tax law, supply contracting, automotive recalls, economic incentives, labor & employment, employee benefits & executive compensation, litigation & dispute resolution, government affairs, banking & ﬁnance, trusts & estates, real estate, intellectual property, family law & divorce, health law, insurance law, energy, environmental, resources, and all other legal services...

we’ve got you covered.

A BETTER PARTNERSHIP ® By y providing discerning and proactive legal counsel, we build a better partnership with clients. co ou

F=9 R^\ ~ '%% $"" " ' F

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

Q&A Birgit Klohs

| ECONOMIC DEVELOPMENT

President and CEO, The Right Place Inc. As the U.S. economy continues to improve, economic developers in West Michigan see increased competition from other states impacting their activity in 2016 — more so than in previous years. Birgit Klohs, president and CEO of Grand Rapids-based The Right Place Inc., weighs in on the changing economic development landscape and how the organization intends to keep West Michigan competitive.

WE PROVIDE FORWARD-LOOKING SOLUTIONS

WALK

RIDE

SMALL

TALL

STACK

STORE

RISE

SHINE

Does the debate in Lansing over incentives for Switch’s data center showcase a change in economic development policy from economic gardening to hunting big deals next year? It’s a change in tax policy. We have made changes to our tax policy under the leadership of Gov. Snyder and the legislature over the last five years. We have eliminated the personal property tax on machinery and equipment for manufacturers (and) done away with the Michigan Business Tax and created a new corporate tax. To me, amending the tax policy for the sales and use tax for an industry — not for Switch — is not going back or switching back and forth. It is trying to make sure that we level the playing field for a (rapidly) growing industry.

So it doesn’t have to be one or the other strategy in terms of economic development policy? This is not either/or — and I’ve never thought in my world that I’m picking winners and losers. Hopefully, we pick winners who locate in West Michigan versus them landing in Indiana, Ohio or South Carolina — in which case we lose and they win.

How will economic development be different in 2016 with the Michigan Economic Development Corp. having lost a portion of its budget this year? The MEDC has realigned its resources. Obviously, they had to lay off some people in that process but as far as we’re concerned, the agency is doing fine. They have adjusted to those budget constraints, they have made adjustments and we work as closely with them every day as we did before. It’s in many ways no different than what our companies had to do when they fell on hard times and had to make cuts that are not pleasant. You have to readjust. They’ve done that, and I think they’ve done that very well and are getting into a very good space.

In 2015, food processors seemed to stand out as a high-growth industry in the state. What industries are rising to the top of the pipeline in 2016? At RPI, we look at what our strengths are and our strategic plan hasn’t really changed. It’s centered around five buckets or industry sectors… (But) the whole talent discussion around design is really rising to the top.

Why has design talent become an issue? If you think about any product, regardless of what you make, it starts with someone having a design. West Michigan has a very deep design history predicated on 100-plus years of the furniture industry that transitioned from the home furnishings industry to the office furniture industry — but now also to other industries. … We look at the design industry as a component of our whole talent pool.

How will The Right Place work with rural communities for economic development in 2016? We have a contract and just renewed it with Ionia County. We have a first-year contract with Montcalm County, and we just signed a contract for business (and) economic development and collaboration with Newaygo County. … Most assuredly, rural economic development is important to keep jobs in those small rural communities for the people of those communities. We are working collaboratively with the entire 13-county region.

What impact do you think the upcoming 2016 presidential election will have on economic development in West Michigan?

SALES, RENTALS, PARTS AND SERVICES FOR ALL MAKES Providing Award Winning Service Since 1953

www.morrison-ind.com

Reach Higher!

It always depends. … If the U.S. is perceived as a competitive and relatively risk-free place in which to do business, (then) that obviously helps the country and eventually helps us (in Michigan). … If I had a wish list for whoever gets in, it would be (that) we need to reform our tax code because it is entirely too complex. It is not good for business, and some of the European countries today have better tax structures than we do. I would say that should be very high up on the list of anyone who gets elected.

What major headwinds for 2016 are keeping you up at night? What keeps me up at night is that the competition doesn’t sleep and how do we continue to position us in West Michigan for the investment that is coming to the United States. … Our local companies are obviously being marketed to by other states. How do we stay ahead of that? How do we make sure that our local companies know we are here to help them? Then what are the companies around the world that are looking for new locations? We need to make sure that we are in that mix. Interview conducted and condensed by John Wiegand.

Visit www.mibiz.com

GRAND RAPIDS Î 616-447-3800 BkXX c%ƉÎƉƅŎƅěƀíƅěĿíǈǈ a U):kcƉÎƉƖƐŎěƀƐƐěŎƖĉĂ U X a ¬kkƉÎƉƖƅĿěƐíŎěƀĉĿǈ a kcƉÎƉĂŎƀěƅƀƅěĿǈǈǈ ELKHAR ƉÎƉĂƀĉěƖƅĉěƐƅĿĿ

BA X)Ɖ ))UƉÎƉƖƅĿěƐƐĿěƐĿĿĂ F:B kcƉÎƉíŎǈěƖƖƀěƅƐŎŎ TRA ) )Ɖ F ¥ƉÎƉƖƐŎěĿĉƀěǈƀíǈ : ))c FXX)ƉÎƉƅŎƅěƀĂĉěĿŎĂƐ k BƉ )c%ƉÎƉĂƀĉěƖíƀěĉƖĿǈ k¥ƉÎƉƖĉíěíĂǈěƀǈŎƀƉ

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

Q&A Beth DeWilde

| TECH

Winter/Spring 2016 I.T. Staff Changes

Principal and Chief Recruiting Officer, Paragon Recruiting LLC | Holland Beth DeWilde expects hiring in West Michigan’s technology sector to continue at a strong pace in 2016. The demand for talent will remain strong across all areas, from programmers and coders to app developers and data analysts, said DeWilde, the principal and chief recruiting officer at Holland-based technology staffing company Paragon Recruiting.

From where you sit, how do you see 2016 shaping up for your business? I think it looks great, personally, from a technical placement standpoint. I see it as being really solid. There are definitely a lot of opportunities, meaning companies are looking to add technology staff and it’s still very rampant. There are definitely certain kinds of areas that are busier than others, it feels like. Business intelligence, data analytics and systems analysis seem to be hot areas, as well as developers and programmers still.

60% INCREASE

0% DECREASE

40% STAY THE SAME Source: Paragon Recruiting Technology Employment Forecast

We’ve heard for a few years that there’s a shortage of I.T. and technology workers. Is it getting better or worse? It’s not getting better, but I guess I wouldn’t say it’s getting worse. I think more people have made changes recently, so that makes it more challenging because then they’re not in the pool anymore — at least for a period of time. What we’re also finding is people coming back to the area who moved away and want to return.

What’s the biggest challenge right now for your business?

What did you see emerge in 2015 that you expect will continue in 2016?

The availability of candidates and being able to get to the folks who have the technical skillset as well as the personal characteristics that companies are looking for — people who are change agents and people who are collaborative. Gone are the days where you had coders who were just heads down, “don’t bother me,” and those kinds of things. People need to communicate and a lot of process methodologies are being emphasized to be more efficient and effective with the technology work we do.

I circle back around to that whole (issue of) business intelligence and data analytics — and there’s a lot in mobile development.

Might that communication also help lure people to the industry? It’s also getting the exposure so that people in this area who maybe aren’t necessarily looking to make a change can be made aware of the opportunities out there. They might not even realize that in West Michigan there are a lot of progressive, leading-edge technology businesses.

What would surprise you in 2016? If companies would not start to be more open-minded about remote working, about flexibility with time, because that’s what we hear from a lot of candidates when we ask them what’s important in work. That is a major component. You could open up the doors to more candidates if opportunities could be receptive to remote working. It would surprise me if companies don’t embrace that more.

Are they warming to the idea of remote working? What’s going to drive hiring activity in your industry in 2016? Companies are seeing that they can run their business through technology and leverage the technology that they have already purchased, as well as looking at new systems. It seems a lot of it is all coming back to data analytics and all of this data we seem to capture and how can we apply that to making decisions in the business.

They’re starting to, but some organizations are just not able to accept that and integrate that into their system. Maybe it could be because of the kind of product they’re doing or because of the type of position that might limit that. Interview conducted and condensed by Mark Sanchez.

CPAs BRINGING NEW

“GOOD IDEAS!”

TO YOUR BUSINESS.

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

Q&A Carl Bednarski

| AGRICULTURE

President, Michigan Farm Bureau

What are the top legislative priorities for the Farm Bureau in 2016?

Do you see any major headwinds impacting Michigan agriculture in 2016?

For this past year and going into the future, the top one is energy. Energy is a big one and it’s not only the fuel that we put in our vehicles, but when we look at the natural gas supply and three-phase power in rural areas, it’s lacking. We’re also looking at the drone issue. It’s some fantastic technology that agriculture is looking forward to using but as it stands currently, a drone cannot be used commercially. We have companies out there who would like to use that technology to get it out to producers, but they’re unable to do that.

The labor issue is still huge in Michigan. It’s not only the labor that people think about, which is picking the crops. We need people in the technology area, we need people working in the food processing plants. We are just up against a drain of talented people that agriculture needs. It’s not just your entry-level people.

We’ve been working with him and talking a lot about food processing. This state has so much diversity, there are so many different commodities out there that we produce. (But) there are too many that we are shipping out of the state to get processed that turn right around and come back in. We want to try to identify those opportunities for food processors and try to make it feasible to make them come into certain areas (in Michigan) and set up shop.

| RETAIL

Owner, Vertigo Music

As West Michigan’s agriculture sector wraps up a strong year, industry leaders plan to focus on several issues heading into 2016. Carl Bednarski, president of the Michigan Farm Bureau, says he’d like to see the state attract more food processors and work on agricultural talent development.

If you could choose one thing for Governor Snyder to champion in 2016, what would it be?

Q&A Herm Baker

That talent extends into farm owners and managers as well, right? Absolutely. When you look at that, it’s not just driving a tractor anymore. Most of the time we don’t drive the tractor. There is so much technology — it’s GPS guidance and we’re recording everything we’re doing. We’re putting nutrients on in small areas and at variable rates. There is so much technology in agriculture that we just cannot take that entry-level person and put them in a $300,000 piece of equipment. We need to have some training so they have some expertise. There are some great opportunities at that level. Interview conducted and condensed by John Wiegand.

As owner of Vertigo Music, a new and used music store on South Division Avenue in downtown Grand Rapids, Herm Baker has weathered tectonic shifts in how people listen to music, not to mention major changes to the commercial landscape in the surrounding Heartside neighborhood. Within one block of the store are multiple homeless shelters as well as upscale restaurants and other new retailers. Baker spoke with MiBiz about the trends he’s witnessing in the downtown retail market. What are you seeing in terms of trends for downtown Grand Rapids retailers?

How has that clientele changed over the years as the neighborhood has evolved?

We have lots of things coming and going in the neighborhood. The thing is that it always ebbs and flows and that changes the dynamic of the block, too. I think the future is that we’ll see more and more of that kind of thing.

Dads are bringing their 15-year-olds in here to buy some records. That’s the big new difference here: My customer base is changing. It’s not necessarily because of the neighborhood, but it does help to have people here.

Are you feeling the pressure of rising rents?

What’s the outlook for the music store business like these days, especially with the growth of vinyl?

I think we’re safe in term of rents going really high, on this street in particular, because of (the homeless shelters in the area). I heard part of the reason (some businesses have decided) to move is their customers are uncomfortable in this neighborhood. … For us, I think it’s going to be more of the same and I think nothing but good things in terms of continued growth down here.

How do master planning efforts such as GR Forward affect a store like yours? It matters absolutely. We need more density of people living downtown. (Our clientele) are the urbanites — people who live in Eastown, Heritage Hill and then down here, and then people from the suburbs coming in here.

It’s thriving. We are up 35 percent this year, and it’s all because of vinyl. There’s no store in West Michigan that has 22,000 new LPs. The plan is to grow to 30,000 and then 40,000 — if space permits. But we’ll make it fit. The used CD business is still really good and the used DVD business is still really good, but you’re giving the stuff away for $3 to $5 each, which is fine. You can still make money on it. We are actually in better financial shape now than we have been in 10 years. Interview conducted and condensed by Nick Manes.

Grand Rapids • Kalamazoo

Photo: Corporation Hall (Catalyst Development) Visit www.mibiz.com

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

FROM PLANNING TO RETIREMENT

At Chemical Bank, our philosophy is deeply rooted in the tradition of providing highly personalized wealth management services through local, financial professionals. Our wealth management services include Chemical Bank’s Private Banking program for qualified households. Our Private Bankers will draw upon the full resources of Chemical Bank to develop and implement a customized financial strategy meeting all personal financial needs through a single point of contact.

You can expect the following from your Private Banking relationship:

• Convenience: a single point of contact for all your personal ﬁnancial needs • Exceptional service: competent, courteous and prompt • Responsible advice: objective advice that is based upon your needs and goals

Our Private Bankers are passionate about partnering with our clients to maximize their current ﬁnancial situation while helping them preserve their most precious resource, time.

To contact a Private Banker or learn more about Chemical Bank Wealth Management, contact us at 616.588.7426.

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

— STATE POLICY OUTLOOK —

THE YEAR AHEAD IN STATE POLICY: ENERGY, MARIJUANA, TAXES AND BALLOT INITIATIVES By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com f any meaningful policy changes at the state level are to happen in 2016, they will likely come at the bookends of the Legislature’s session, observers say. Being an election year in the state House means lawmakers will likely play it safe leading up to a May filing deadline to run and the November general elections, leaving a four-month window at the beginning of the year and — as is historically the case — a hurried lame-duck session in December to pass significant policy changes. The more contentious the issue, the less likely House members will risk political capital among voters. “The rule in an election year is to first, do no harm,” said Susan Demas, editor and publisher of the political newsletter Inside Michigan Politics. “Usually an election year is a great time for doing legislation that are a priority for members so they can go home and campaign on it.” Ultimately, House Republicans will be looking to maintain their majority at the end of the year, Demas added. She gave Democrats a 10-percent

chance of taking over the House after a March special election gives them a 63-47 deficit. Demas said Democrats would likely pick up five of 12 contested “tossup” seats that are currently held by Republicans. “But it might only be a couple,” she said. In that context, the Legislature still has several pressing issues before it in 2016. Additionally, several ballot initiatives underway also have the potential to change state law. Here are several statewide policy issues affecting the business community that will likely get attention next year.

ENERGY With a road-funding deal out of the way, the Legislature’s next big issue affecting the business community — and virtually all Michigan residents — is crafting a new comprehensive energy policy. Lawmakers in both chambers spent all of 2015 wading through the complex issue as the state’s last major energy policy from 2008 is scheduled to level off at the end of the year. Supporters of

that law, which mandated 10 percent of energy to come from renewable sources, say the state should continue on that path, ramping up to a higher target over the next 10 years. But Republican lawmakers are set against the continuation of any standards and are pursuing a plan that would require utilities to file detailed outlook strategies with the Michigan Public Service Commission to ensure the most costeffective generation portfolio. Gov. Rick Snyder is supportive of that route and has said publicly that Michigan could reach a 40-percent goal of renewables and energy efficiency by 2025. Meanwhile, the administration also has said that it will move swiftly next year to pull in a diverse group of stakeholders to develop a state strategy to comply with the federal Clean Power Plan, despite legal challenges by 24 states and multiple national business groups. Included in that group of opponents is Attorney General Bill Schuette and the Michigan Chamber of Commerce, who have been calling it federal overreach.

MARIJUANA

Q&A Andy Johnston

| POLICY

Vice President of Government and Corporate Affairs, Grand Rapids Area Chamber of Commerce

Grand Rapids Area Chamber of Commerce members share concerns over energy, health care policy and talent development, and those are the issues the organization will focus on in 2016, according to Andy Johnston, the group’s vice president of government and corporate affairs. What are the top legislative priorities for the Grand Rapids Chamber going into 2016? Like with any new year, you still have to deal with the hangover from the last year. … The key really is the energy discussion. We want to make sure that that we have a plan in place that protects competitive electric markets and ratepayers — so that’s going to be a top priority for the Chamber.

Do you think energy policy will get any attention in the final days of this year? I don’t think we see a path to that getting done by the end of this year. We have a long history at the Chamber of supporting energy policy that improves the competitiveness of Michigan businesses, and that includes electric choice. The way some of the legislation is written — as of today — is a bit concerning and needs to be improved.

How do you expect road funding will impact businesses, even though the added cost isn’t fully coming online until 2017? We want to make sure what was passed in

Visit www.mibiz.com

November gets appropriately implemented. There’s $100 million earmarked to a Road Innovation Fund. We want to see that report issued quickly so that funding can be released quickly by the legislature and go to all road and transit agencies. We’ll be seeing that in the first quarter.

What’s one thing you’d like to see Gov. Snyder champion in 2016? I think him continuing to be a champion on workforce development will really pay dividends for our members.

What are some top concerns for your members going into 2016? We’re still focused on addressing key concerns of members, which includes workforce investment on both sides of the talent continuum. We (also) need to protect our investment in early childhood (education) and continue to put money in the skilled trades training fund that West Michigan employers have gotten a lot of help from for key investments in training. We want to make sure that continues. Interview conducted and condensed by John Wiegand.

State cannabis policy could undergo major changes next year, both for medical and recreational users. Lawmakers came close this year to creating a system to tax and regulate the commercial growing, distribution and retail selling of medical marijuana at dispensaries. After clearing the House with strong bipartisan support in October, the dispensary bill is now (as of press time) hung up in the Senate Judiciary Committee. One key advocacy group, the National Patients Rights Association, withdrew its support for the plan after an amendment was added to create a tiered system similar to alcohol that would block licensees from engaging in multiple levels of the system. State Sen. Rick Jones, R-Grand Ledge, said work on the bill will continue into 2016. Outside of the medical realm, two groups continue collecting petition signatures as they look to ask voters to legalize the recreational use of marijuana by adults. Both groups — the Michigan Cannabis Coalition and the Comprehensive Cannabis Law Reform Initiative, or MILegalize — are hopeful they will gather enough signatures for a November 2016 vote. State Rep. Winnie Brinks, a Kent County Democrat, told MiBiz that she supports a regulatory system for dispensaries and is “generally supportive” of legalization, but she wants to ensure it is done right. “I want to make sure we watch what’s going on in other states to learn from their experiences so we do it thoughtfully,” Brinks said. Should both happen, the legal marijuana industry could thrive in Michigan as it has in other states like Colorado, Washington and Oregon.

TAX POLICY As this edition of MiBiz went to press, lawmakers were still debating legislation that would grant tax incentives to Las Vegas-based Switch Communications Group LLC in hopes of luring the company to Gaines Township to use the former Steelcase pyramid building for a major cloud-based data center. However, the Michigan Chamber of Commerce has taken a firm stance against the

“The rule in an election year is to first, do no harm. Usually an election year is a great time for doing legislation that are a priority for members so they can go home and campaign on it.” —SUSAN DEMAS Editor and Publisher, Inside Michigan Politics

incentives, saying it creates an uneven playing field for one company over existing data centers already operating in the state. Michigan Chamber President and CEO Rich Studley said the issue will carry into the future regardless of how lawmakers come down on the plan. He is also concerned that the state will attempt to expand the state sales tax to cover cloud computing services. “It’s clear there are some lawmakers who want to engage in this bait-and-switch tax policy,” Studley said. “The legislation was introduced with the best of intentions, but it has created serious questions about cost-shifting and subsidies and putting state government back in the game of picking winners and losers.” Separately, the Michigan Chamber is also fighting a plan by state Rep. Al Pscholka, a Republican from Berrien County, on what it calls a nearly $2 billion health insurance tax increase on individuals and businesses. The bill would extend the Health Insurance Claims Assessment, which is a fee levied on health insurers and businesses to help the state match federal Medicaid dollars. Studley said while it may reach Snyder’s desk this year, the Michigan Chamber will continue advocating to stop it or reduce the length of it. “Our members feel very strongly that it’s completely irresponsible to put the Health Insurance Claims Assessment on autopilot for the next eight years,” Studley said.

BALLOT INITIATIVES The Michigan Chamber is also opposing two ongoing ballot initiatives to raise the corporate income tax and mandate paid sick time in the state. Supporters of those efforts, however, say they are meant to ease the burden on residents who have had to pay for tax cuts for corporations approved by Snyder in 2011, as well as to provide assurances that they don’t have to give up income to care for a sick child. Finally, efforts continue by advocates to eliminate Michigan’s prevailing wage law since the Legislature and Snyder have been unwilling to do so. After alleged dishonesty among paid circulators came to light earlier this year, the Associated Builders and Contractors, a statewide contractor group pushing the amendment, has restarted efforts to get on November 2016 ballots. The group is publicly outspoken about using the initiative to work around the governor’s veto.

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

ON YOUR SIDE. With offices strategically located statewide and over 80 attorneys, we are incredibly flexible, uncommonly accessible, and always up for a challenge.

616-774-8000

www.shrr.com

ANN ARBOR GRAND RAPIDS MUSKEGON TRAVERSE CITY

Find us on: 68

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

— NONPROFIT OUTLOOK —

NEW CHARITABLE VEHICLES, EXECUTIVE TURNOVER DOMINATE NONPROFIT DISCUSSION By JAYSON BUSSA | MiBiz

CHANGING PRACTICES

jbussa@mibiz.com

The Chan Zuckerberg Initiative also caught the attention of Diana Sieger, president of the Grand Rapids Community Foundation, whose sentiments echoed the trend Caldwell outlined. Given the Zuckerberg announcement and what she has observed with endowed philanthropy, Sieger said the nonprofit sector likely will not see the large lifetime gifts it has long banked on for support. In light that trend, foundations and nonprofit professionals must make the necessary adjustments. “Developing strong and authentic relationships with people (is important),” Sieger said. “We need to continue to keep people informed with what’s happening. This really is not bad news. It’s encouraging that people continue to be generous.” Other trends cited for 2016 aren’t necessarily new, like the fact that the nature of giving has changed, Caldwell said. Social media has given donors new avenues of finding worthy causes and allowed them to give quickly and conveniently. “These cyberspace organizing and giving opportunities are likely to continue. The question for the sector is can these movements be managed?” Caldwell said. “How will nonprofits and foundations — not to mention regulators — be able to ensure the integrity of the field while growing the ways people contribute? Will virtual giving and organizing propel or diminish local giving and volunteering?”

onprofit experts in West Michigan and beyond are monitoring a major national charitable endeavor, the announcement of which has earned both criticism and praise. In early December, Facebook chief executive and co-founder Mark Zuckerberg and his wife, Priscilla Chan, unveiled the Chan Zuckerberg Initiative, which they plan to fund with 99 percent of their Facebook wealth that’s currently valued at $45 billion. The initiative was structured as a limited liability company, which has drawn significant disapproval from opponents who claim it’s a move to avoid paying taxes on the funds donated to the LLC, not to mention that it’s also a way around the oversight required of a traditional foundation, the typical vehicle for such donations. However, the move is also garnering praise for the flexibility it allows in spending Caldwell the funds, and it has drawn the attention of local nonprofit professionals, who wonder if this could be a complete game-changer moving forward. While nonprofit leaders have long tried to think outside of the box, now they’re considering throwing those boxes away completely, said Kyle Caldwell, executive director of Grand Valley State University’s Dorothy A. Johnson Center for Philanthropy. Sieger “The world of philanthropy has changed due to interests, concerns and frustrations of donors. This is especially true of the younger generations who want to work, live and give all at the same time,” Caldwell said. “In the past, business titans would earn their wealth and then in the latter years of their life and career, they would marshal their abundant financial resources to give back to the society that propelled them to fame and fortune. “Their investments in civil society often Goorhouse took the form of great institutions like foundations. Today, successful entrepreneurs are working to do good while doing well and find institutions of the past too limiting and not in line with their ‘sector agnostic’ approaches to community problem solving.”

DRIVING THE ECONOMY However, nonprofits remain major employers in Michigan, and they served as an economic engine that helped pull the state out of the recession, Caldwell said. According to a recent study from Lansing-based research firm Public Sector Consultants Inc., the nonprofit sector was the only segment of the economy to remain fairly constant in its workforce, employing one in 10 workers in the state throughout the recession. In addition, the nonprofit sector generates more than $80 billion each year in economic spending. For Sieger of the Grand Rapids Community Foundation, the industry’s impact does not come as a surprise. “A very strong nonprofit sector is extremely important to a very strong for-profit business sector,” Sieger said. “I’m very happy to say that our social sector is one of the strongest in the country and that will only make our for-profit businesses grow and thrive and vice-versa. “What we should be happy about is that there is a strong relationship between the nonprofit sector, the for-profit sector and indeed our public sector. When we all work together — and sometimes don’t agree — it makes us stronger as a community. That’s not just words — that’s true.”

“A very strong nonprofit sector is extremely important to a very strong for-profit business sector. I’m very happy to say that our social sector is one of the strongest in the country and that will only make our forprofit businesses grow and thrive and vice-versa.” —DIANA SIEGER President of Grand Rapids Community Foundation

BRACING FOR TURNOVER As many long-time leaders look to transition out of the organizations they’ve led for years, it has nonprofit executives on the lakeshore bracing for ways to deal with that loss of institutional knowledge, said Mike Goorhouse, President and CEO of the Community Foundation of the Holland/Zeeland Area. “Given the conversations I have been a part of in the last few months, it seems like we are going to have a high number of nonprofit executive directors retiring in 2016,” Goorhouse said. “A lot of these individuals have been in their positions for a long time. These leadership transitions are critical moments for nonprofits to navigate and will have a lasting impact on their ability to meet their mission.” Addressing the leadership “void” remains key for Goorhouse, who also said he is interested in seeing how the lakeshore community will respond to the absence of Kandu Inc., which folded this year and was a leader in providing employment options and services for adults with developmental disabilities. Goorhouse said mental health might be a key issue in the nonprofit community in the coming year. “Ottawa County has experienced significant cuts to community mental health programs, and the county has agreed to put a specific mental health millage on the March ballot,” he said. “Local organizations and donors have increased their focus on this issue as well. All of that combined will lead to greater awareness of mental health needs as well as opportunities to show support for this issue.”

what’s your encore? Encore, powered by Grand Rapids Community Foundation, is seeking to inspire individuals in their 50s and beyond to engage in meaningful work and service that makes a difference in our community. We want to help shape this new stage in life that offers the freedom to work differently and contribute in new ways.

share your story and get involved at Dave Kagan, Memory Maker

Visit www.mibiz.com

G R F O U N DAT I O N .O R G / E N C O R E

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

5,7< * 7(

1-2 <

;&( /

081,7< 20

7 (1

/ ( 1

5( $ 7 , 9 , 7< 0DNLQJ WKH & R P S O H [ 6LPSOH 6 L Q F H

:2/9(5,1( %8,/',1* *5283 %$5'(1 '5,9( 6( *5$1' 5$3,'6 0,

ZROYJURXS F FRP FRPSDQ\ ZROYJURXS ZROYJURXS ZROYJURXS 70

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

Q&A Paul Isely

leisure world, they earn less than half of what people earn in manufacturing, construction or professional services per hour. I think we’re going to see construction continue to be strong. I would expect to see a turnaround in manufacturing wages this year. We certainly see really strong growth in the I.T. sector.

| ECONOMIC DEVELOPMENT

Associate Dean, Grand Valley State University Seidman College of Business While the economy will continue to grow into the new year, it will be at a more tempered rate than in 2015, primarily because of less job growth in the manufacturing sector than in the past, says Paul Isely, the associate dean of the Seidman College of Business at Grand Valley State University. At the same time, Isely expects the economy to be affected by rising wages and uncertainty due to the upcoming presidential election. What will the economy look like in 2016? Certainly what we’re starting to see is the growth in manufacturing is slipping each cycle. Every time we take that yearly turn since 2013, each cycle it’s slowed down a little bit. Because manufacturing was the push for us, that slow cycling down of growth there is going to start to impact our ability to see the big job growth we’ve seen over the last few years. This coming year will be weaker than this year was.

How are wages tracking during this talent crunch that manufacturers are facing? I’m slightly more worried about wage inflation than the average economist. I’m worried not because it’s there, but because we are only just marginally competitive with the rest of the world. So small changes in wages could really affect the ability of a firm to continue doing what they’re doing here in the U.S. I don’t think that’s a one-year issue, but certainly over the next five years, it’s going to be an issue. Do you think the pending interest rate hike from the Federal Reserve will impact business in 2016? I think the small movement we’re going to see by the Fed in short-term rates is already built into the market. Everybody already assumes that it’s there. There will be a little pop right away, but it’s not going to change the world much. Do you have any expectations regarding the commodity market next year? There is very little in the cards for commodity inflation right now. … Commodity prices in the past held back inflation, but now they’re not going to recede a lot more. Therefore, the big change has already happened, and it won’t be able to hide that for us next year. What’s keeping you up at night? I always worry about things during an election year, and we’ve seen some very incendiary language coming out of the candidates. That can really affect consumer confidence. Certainly some of the protectionist binges I’m seeing on both sides of the aisle worry me a lot because that’s bad for business.

Given how linked the economic recovery has been to manufacturing, is West Michigan still too tied to the automotive industry? In Michigan as a whole, and to a lesser extent here in West Michigan, automotive is really the cycle. We had breakneck growth in annualized units sold from 2009 to 2014, then it’s really flattened out. What we had for the last year has been catch-up. (Automotive) really has been very flat for the last 18 months. It gives us a nice base, but there is nothing that tells us that automotive is going to grow substantially from where it is right now.

Is there anything else going on in the West Michigan economy that will impact business in 2016? For the first time since 2000, my housing price index in Grand Rapids, whether I include distressed or nondistressed houses, is showing the same increase over the last 15 years. So essentially it’s showing that the effect of distressed houses has completely gone away. Those distressed houses are what caused the bubble before 2006 and caused the crash after 2007 and now they’re back to where all the other houses are. That’s telling me now that housing is back and healthy in West Michigan. That’s exciting and it shows us that it took 15 years for all of that to happen, and now we’re really almost getting back to the prices we saw for nondistressed houses back in 2004. It makes me happy.

Does that call for increased emphasis on diversifying the Michigan economy? We’ve seen a lot of growth in the leisure side of the game. (But) if I look at that hospitality and

Interview conducted and condensed by John Wiegand.

Refresh. Retool. Rediscover. With over 50 non-credit courses in everything from business writing and web coding to painting and jewelry, Kendall College of Art and Design of Ferris State University’s Continuing Studies Adult and Professional classes are designed to keep you technically proﬁcient, creatively ﬂexible, and endlessly curious about the world around you. Integrating for Impact: De-Mystifying the Language and Practice of Design and Innovation

New! Business Writing New! Present Like a Pro Web Coding for Designers

Also offering custom corporate events, workplace training, and more! Register now at kcad.edu/continuing-studies Session I: January 11–February 26 (register by January 4) Session II: March 7–April 30 (register by February 29)

Kendall College of Art and Design of Ferris State University

Visit www.mibiz.com

17 Fountain St. NW Grand Rapids, MI 49503

616.451.2787 x3012 kcad.edu/continuingstudies

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

Q&A Marie Briganti

| ECONOMIC DEVELOPMENT

President and CEO, Battle Creek Unlimited Inc.

Promise has demonstrated that their four-year college offer can help the local economy. The state is in a position to polish the Kalamazoo model and to offer a voucher to attend any of Michigan’s institutions of higher learning.

Besides K-12 and college programs, what else can be done?

An experienced economic developer and business leader, Marie Briganti accepted a leadership position at Battle Creek Unlimited in April. Briganti, who holds dual citizenship in the U.S. and Italy, previously managed the international business development program at the Michigan Economic Development Corp. She shared with MiBiz her outlook for the coming year.

The state needs to develop social and economic policies that reward family structures — all family structures. This means an intensification of the effort to drive educational attainment rates, strengthening laws that favor independent contractors — as in, trailing spouses — and push for a high technology entrepreneurial and employment exchange.

Based on your experience with previous economic cycles, when do you anticipate the next downturn for your industry will likely occur? What are you doing to prepare for it? While we can argue that we have never fully recovered from the 2008 downturn, progress has been made. We will sustain our activity over the next three to five years by building fund balances and sharpening our sales strategy.

Where do you see the economy going in 2016?

In the last downturn and during the recent recovery, Michigan leaders took steps to encourage economic diversification, yet the state remains heavily reliant on manufacturing and the automotive industry in particular. How would you assess the state’s prospects the next time the auto industry takes a dip?

We believe the economy will strengthen throughout 2016. Even a rise in interest rates will not mitigate the forces of growth. Battle Creek Unlimited will be watching the situation with a change of government in Canada, the weakening Euro, and the continued, albeit slowed growth in Asia. Domestically, BCU expects to see a continuation of an active site selection climate.

The state’s fortunes continue to be disproportionately tied to the auto industry. Much of this is changing as the industry has globalized and new technology, such as autonomous cars, is being tested by non-automotive companies. Nonetheless, Michigan’s egg in the automotive basket is big enough that should the industry decline, it will hurt Michigan’s economy.

What sets BCU apart in that process?

Granted, it’s an election year, but what could be done at the federal level to improve the business climate in 2016?

We will meet growing global company and industry needs better than most because our boards and our predecessors are long-term planners. Last month, we broke ground on an expansion of our highly successful Regional Manufacturing Technology Center by investing $2.75 million into tomorrow’s workforce. Whatever the crystal ball has in store for us, we’ll be ready.

Tax reform is necessary at the federal level. Our current corporate income tax rate of 35 percent simply does not compete with the 15 percent offered by Canada. Moreover, the right kind of tax reform, which would free up cash reserves offshore, can bring close to $1 trillion in new investments in the U.S. economy.

What legislative issues would you like Gov. Snyder to champion in 2016?

What’s one thing you see happening that could surprise everyone in 2016?

Funding to repair Michigan roads and bridges, a state energy policy, and clarifications for personal property tax elimination.

It might surprise some, but we could see our Battle Creek EDGE program becoming a national model that removes barriers to employment and connects potentially qualified, albeit disadvantaged employees to the employers that need them.

Manufacturers and others repeatedly cite talent issues as one of their top challenges. What can the state do to help?

Looking ahead to 2016, what keeps you up at night?

State government needs to replenish the K-12 pool in Michigan. The state should consider jumping in front of its competitors by being the first state to offer a free college education. Although Battle Creek has a great Legacy Scholars program that pays for two years of community college, the Kalamazoo

The low cost of energy is wonderful, but it cannot last. Interview conducted and condensed by John Wiegand.

G ESS R U B CONCRETE CONSTRUCTION, INC.

LIFTING/STABALIZING EXISTING FOUNDATIONS

FOUNDATION PIERS/NEW CONSTRUCTION

TEMPORARY REUSABLE WALL BRACING

HELICAL APPLICATIONS Q Underpinning: Commercial & Residential

Q Shoring

Q Deep Foundation Piers for New Construction

Q Pole Bases and Communication Towers

Q Reusable Bracing for Tilt Up, Precast & Masonry Walls

Q Utility and Pipe Line Tie Downs

Q Slope Stabilization

Q Boardwalks, Bulkheads and Sea Walls

1262 Cutting Industrial Dr. | Moline, MI | 616.877.0008 | burgessconcrete.com 72

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

— ECONOMIC OUTLOOK — Michigan Income Growth 6%

2015

2016

2017

Real GDP: % Change: Year-Over-Year

2.4

2.6

2.9

Civilian Unemployment Rate

5.3

4.9

4.6

Light Vehicle Sales (millions)

17.4

18.0

18.1

5% 4%

Economic Indicators

4.1 4.1

4.4 4.3

5.0

5% 4%

2.7

2.8

Source: Research Seminar in Quantitative Economics, University of Michigan

1.7

Net Employment Outlook Summary of Results for Grand Rapids-Wyoming MSA

Personal Income 2014

2015

2016

2017

Real Disposable Income Source: Research Seminar in Quantitative Economics, University of Michigan

Increase staff levels

Maintain staff levels

Decrease staff levels

Don’t know

Source: Manpower Employment Outlook Survey

AS AUTO SALES PLATEAU, SERVICE JOBS WILL DRIVE MICHIGAN ECONOMY By MARK SANCHEZ | MiBiz msanchez@mibiz.com conomists expect Michigan’s economic resurgence to continue in the new year and push unemployment lower, although job growth in the manufacturing sector may peak as the auto industry’s rebound from the Great Recession plateaus. The state’s economy will still benefit from a strong auto sector in 2016, “but it’s not pushed forward at this point” as much by the industry, said Robert Dye, chief economist at Comerica Inc. “The state is starting to feel some of the headwinds,” said Dye, who expects 2015 and 2016 will be periods of “peak performance” for Michigan’s economy. Mokrzan “The job recovery that we’ve seen in the auto sector looks nearly, if not already complete at this point,” he said. “The tailwind from the auto sector is in the rearview mirror right now.” Dye forecasts auto sales of 17.5 million units in 2016, equal to the expected volDye ume of 2015. Away from the auto sector, Dye expects home prices in the state to continue to climb in 2016, and consumer spending “should be good with strong confidence” as unemployment falls further. For the region in central and western Michigan that covers the Grand Rapids, Isely Kalamazoo and Lansing markets, Comerica projects an unemployment rate in 2016 of 3.7 percent, down from an estimated 4.1 percent for 2015. While the auto industry lifted job growth in the state, particularly in the manufacturing sector, Dye doubts that it can continue for much longer as a large job creator.

Visit www.mibiz.com

“It’s at such a high sales rate I don’t think it’s reasonable to expect the type of gains we’ve had over the last year in the sector going forward,” he said. “We’re approaching top-of-the-cycle numbers. That tells me that the auto sector generally will probably be leveling out in terms of employment, if it hasn’t done so already. I don’t think we’re going to see much increase from here.” The University of Michigan’s outlook for the state notes that manufacturing, “after being the engine of growth during the early years of the recovery,” will account for only one in 12 new jobs in Michigan over the next two years. That prediction comes even as U-M’s outlook for the U.S. economy projects North American automotive production to reach 17.4 million units this year, followed by 18.0 million units in 2016 and 18.1 million in 2017. Professional and business services will generate a quarter of the new jobs during the same period, U-M economists project. Nearly 60 percent of the jobs will come in professional, scientific and technical positions. Since bottoming out in mid-2009, Michigan’s economy has been on a steady growth trajectory. U-M economists project that Michigan will add another 126,000 jobs over the next two years, bringing total job growth since the summer of 2009 to 586,000. “From the perspective of how the economy has been performing overall in growing out of the prior severe recession, things are looking pretty good. The environment has stabilized and progress has been fairly impressive,” said Fulton, director of U-M’s Research Seminar in Quantitative Economics. “And the state appears to be poised to continue the ride for a while longer, although perhaps not at the same pace.” Fulton and his colleagues predict employment gains of 61,100 jobs during 2016 and 64,800 jobs in 2017, down from projected gains of 84,600 in 2015. Continued job growth will further drive down Michigan’s unemployment rate from the present 5 percent to 4.8 percent at the end of 2016 and 4.5 percent by the end of 2017.

HIRING REMAINS STRONG Locally, the latest results from Manpower Inc.’s quarterly outlook survey indicate hiring in the Grand Rapids area should remain strong during the early months of 2016.

Thirty percent of the employers surveyed by Manpower expect to hire in the first quarter, 5 percent plan to trim staff, and 62 percent said they would maintain the present size of their workforce. A year ago, 29 percent of survey respondents told Manpower they would add staff, 3 percent planned to reduce headcount, and 67 percent said they would maintain employment levels. Statewide, 26 percent of the employers responding to Manpower said they would hire in the first quarter, 5 percent indicated they would reduce staffing, and 66 percent said they would hold employment levels steady. George Mokrzan, director of economics at The Huntington National Bank, credits the state’s rebound to the auto industry recovery, economic diversification, structural changes in state government, and improvements in Michigan’s business and tax climate. Even with automotive employment plateauing at a high level, Mokrzan expects economic performance in Michigan to remain strong as jobs in other sectors continue to grow and the state experiences further “sustained, solid improvement.” “At this point, the outlook is quite positive,” he said. “Michigan is getting back to the old Michigan in terms of its successes.”

LOOKING NATIONALLY Across the U.S., economists expect economic growth to remain steady next year, although potential problems linger. After an estimated growth rate of 2.4 percent for 2015, U-M projects real GDP growth of 2.6 percent in 2016 and 2.9 percent in 2017. Unemployment will continue to decline from 5.3 percent this year to 4.9 percent next year and 4.6 percent the year after. Mokrzan predicts 2.5 percent national GDP growth in 2016 with unemployment declining to 4.8 percent by year’s end. Meanwhile, Comerica forecasts real GDP growth in 2016 of 2.4 percent with 4.6 percent unemployment. “It doesn’t appear the economy is capable of accelerating, but at the same time it looks like we have enough support to keep from decelerating,” Dye said. “We look forward to another good year in 2016, but this is not what I call a robust economy. We can expect ongoing, moderate growth.” While surely better than the not-too-distant

past, moderate economic growth in the U.S. is troublesome because even a mild downturn could put the economy into recession, Dye said. “If we’re used to thinking about a 3 or 4 percent (GDP growth) economy and we hit a headwind and we knock two (percentage points) off of that, we’re still expanding. In a 2 percent economy, we hit a headwind and we knock two (percentage points) off that, we’re not expanding anymore,” he said. “Even though we’re expecting to see ongoing gains, we do remain vulnerable in this lower-growth economy compared to where we were in the mid-2000s and certainly in the 1990s.”

EXPORT HEADWINDS U-M economists also warn that “not all, however, is rosy” in the U.S. economy, given the economic volatility overseas and the strong dollar that hurts exports. “The turmoil in financial markets earlier this year served as a reminder that the United States is not insulated from economic events in the rest of the world. Over the past year, several of our trading partners experienced weakness in their economies, prices for a wide range of globally traded commodities declined sharply, and the dollar appreciated substantially,” U-M economists wrote in their recent outlook. Wage growth will also “rear its ugly head” and accelerate in 2016, driven by tight labor markets and new minimum-wage laws in many states, said Paul Isely, a professor of economics and associate dean of the Seidman College of Business at Grand Valley State University. The higher labor costs will cut into corporate profits and may contribute to inflation by the end of next year, Isely said. That could also cause problems for the stock market during the year and for drawing foreign investments into the U.S., Isely said. Wage inflation could even cut a half-percentage point from the GDP in 2016, he said. “We’re just starting to see it happen,” he said of wage inflation. “It’s going to cut into several things.” U-M economists forecast growth of 4.4 percent in personal income in Michigan next year and 4.3 percent in 2017, versus 4.1 percent in 2015, “on the back of increasing strength in wages and salaries and proprietors’ income in 2016.”

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

— BENEFITS OUTLOOK —

Mercer survey, by the numbers

PPO/POS HMOs

Here are some of the highlights from Michigan in Mercer’s annual survey of health benefits with employers that employ 500 people or more:

High-Deductible Fifty-six percent of all employees covered were enrolled in PPO/POS plans, 24 percent were in HMOs, and 20 percent were in high-deductible consumer-driven plans.

5.9 %

11,123

3.7 %

The total cost of health benefits for active employers increased 5.3 percent in 2015 to an average of $11,123 per employee.

Respondents expect costs to increase 5.9 percent in 2016 without any change in benefits designs. The cost will go up 3.7 percent if they do alter benefits or change vendors.

63%

One of five Michigan respondents offered a high-deductible plan in 2015 with an HSA or HRA. Looking ahead, 63 percent expect to offer a high-deductible plan in 2018.

$118 | $140 | $71 The average employee contribution for employee-only coverage was $118 per month for a PPO/POS plan, $140 per month for an HMO, and $71 per month for an HSA-eligible consumer-directed health plan (CDHP).

5% Five percent of responding employers said they were likely or very likely to terminate their medical plans within five years and send employees to the public health exchange to seek coverage.

BEWARE THE CADILLAC TAX By MARK SANCHEZ | MiBiz msanchez@mibiz.com f you haven’t yet learned about the coming “Cadillac tax” on health benefits, get ready. Set to take effect in a little more than two years, the 40-percent federal excise tax on the value of benefit-rich health policies that exceed a certain threshold may affect far more employers than initially believed. Beginning in 2018, the tax will hit benefits plans that have an actuarial value of $10,200 for singleperson coverage, and $27,500 for family coverage. Policies above those value thresholds will get taxed, a cost that health insurers, presumably, will pass on to employers. In the 2015 national benefits survey by Mercer, 23 percent of responding large employers said they have at least one benefit option that, based on current premiums, will exceed the thresholds for the tax. By 2022, that grows to 45 percent, according to the Mercer survey. And many of the plans that will hit the tax’s threshold “are not what we consider rich plans,” said Mick Young, the leader of Mercer’s Grand Rapids office.

That’s a reflection of an unintended consequence of the Cadillac tax and how policies for people with high-cost chronic medical conditions can easily exceed the value thresholds. When enacting the Affordable Care Act in 2010, Congress failed to take into account that many health plans sponsored by large employers and unions “don’t necessarily have rich plans designs. They have people who are high users and drive the costs up,” said E.J. Pearson, president-elect of the West Michigan Association of Health Underwriters. The group represents about 230 insurance agents and brokers in the region. The number of employers affected by the Cadillac tax could have been higher had many not already made changes to their health coverage through reduced benefits or increased employee contributions. “Employers have taken action,” said Mercer’s Young. “They’ve done some basic things to move the needle and get themselves out of trouble.” Meanwhile, there’s plenty of activity to get rid of the Cadillac tax, which was designed to tax the costliest benefit plans to slow down medical spending and raise revenue to pay for extending health coverage to the uninsured. Bipartisan legislation to repeal the tax has the support of more than 300 members of Congress, according to the Alliance to Fight

the 40, a coalition of interests advocating repeal. In a show of bipartisan support behind the issue, the U.S. Senate voted 90-10 this month to include an amendment repealing the tax in legislation to dismantle the Affordable Care Act — which, even if it passes Congress, will surely face a veto from President Obama. Pearson calls the Cadillac tax “the next big impact” on employer-sponsored health coverage from the Affordable Care Act that will become a “major topic” in next year’s presidential election. “The excise tax, if it’s not repealed, could be devastating,” said Pearson, the vice president of benefits at Lighthouse Insurance Group in Grand Rapids. “By repealing the tax, we’re going to protect employer-sponsored health benefits.” Even with the repeal movement gaining momentum, both Young and Pearson urge employers that have not already done so to examine if the Cadillac tax will affect them, whether in 2018 or subsequent years. The experts advise employers to plan accordingly. “You don’t want to be stuck all of a sudden and not have done anything for it,” he said. “This is really about how long you can defer before you hit the threshold. Is it going to hit you in 2018 or 2022? When is it going to hit?”

BAUER sheet metal & fabricating EST. 1932

83 YEARS OF SHEET METAL AND STEEL FABRICATION EXPERTISE New Contamination Free Fabrication Room

bauersheetmetal.com | (231) 773-3244

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com

Special Year-End Edition: MiBiz Crystal Ball 2016 / DECEMBER 21, 2015

Reliable, modernized grid Energy is essential to the way we live, work and play. ITC operates, builds and maintains the region’s electric transmission infrastructure. We’re a Michiganbased company working hard to improve electric reliability and increase electric transmission capacity throughout the Midwest.

We’re ITC – your energy superhighway.

www.itctransco.com 76

DECEMBER 21, 2015 / Special Year-End Edition: MiBiz Crystal Ball 2016

Visit www.mibiz.com