Traverse City Business News - December 2023

TRAVERSE CITY BUSINESS NEWS

DECEMBER 2023

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TRAVERSE CITY BUSINESS NEWS

A F e e - O n l y We a l t h M a n a g e m e n t G r o u p

Charles Zhang - Michigan’s #1 Financial Advisor by both Barron’s* and Forbes** Serving the Entire Traverse City Area Traverse City Office 236 1/2 E. Front Street, #26 Traverse City, MI 49684 231-943-6988 Main Office 5931 Oakland Drive Portage, MI 49024 269-385-5888 or 888-777-0216

Our Zhang Financial Team

www.zhangfinancial.com

Fee-Only Unbiased Investment Advice

• We uphold a Fiduciary Standard and work with clients on a fee-only basis.

• We do not receive commissions, kick-backs, or soft dollars from product sales, eliminating inherent conflicts of interest.

Credibility & Professionalism

• Our team of professionals holds designations and degrees such as CFP®, CFA, CPA, MBA, and PhD. • Charles received his MBA from the Kellogg School of Management - Northwestern University, his MA in Economics from WMU, and Executive Education from Harvard Business School and Columbia University.

Charles Zhang, CFP®, MBA, MSFS, ChFC • Ranked #1 on Barron’s list of America’s TOP Independent Advisors and is the highest ranked NAPFA-Registered Fee-Only Advisor on the list.* • Ranked #4 in the nation on Forbes’ list of TOP Wealth Advisors and is the ONLY Independent Advisor in the top 10.** Minimum investment: $1,000,000 in Michigan/$2,000,000 outside of Michigan.

Assets under custody of LPL Financial, TD Ameritrade, and Charles Schwab.

Founder and President

*As reported in Barron’s March 11, 2023 and September 17, 2021. Based on assets under management, revenue produced for the firm, regulatory record, quality of practices, and other factors.

For fee-only status see NAPFA.org. **As reported in Forbes April 4, 2023. The Forbes rankings, developed by SHOOK Research, are based on an algorithm of qualitative criteria, mostly gained through telephone and in-person due diligence interviews, and quantitative data. Those advisors that are considered have a minimum of seven years experience, and the algorithm weighs factors like revenue trends, assets under management, compliance records, industry experience and those that encompass best practices in their practices and approach to working with clients.

See zhangfinancial.com/disclosure for full ranking criteria.

TRAVERSE CITY BUSINESS NEWS

DECEMBER 2023

3

BRIEFLY $7.3M FOR 20FATHOMS 20Fathoms tech incubator in Traverse City is receiving two major grants totaling $7.3 million, allowing it to kick off a new phase. The organization will use the funds to implement a three-year strategic growth plan that will expand its geographic reach, launch new programs, provide early-stage companies with access to capital funds, grow or facilitate partnerships with local and non-local organizations, bring bigtime research projects to Traverse City, and grow the region’s budding reputation as a tech epicenter. The organization is receiving $3.3 million from Michigan’s Small Business Support Hubs program to assist fledgling businesses in the region.

On top of that, it is receiving $2 million from the Build to Scale program, which aims to “accelerate technology entrepreneurship by increasing inclusive access to entrepreneurial assistance and startup capital” along with $2 million in local matching funds.

CALLING ALL OUTDOOR REC BUSINESSES Networks Northwest is hosting a survey to better understand the areas’s outdoor recreation sector. The organization is partnering with Fourth Economy Consulting on an Outdoor Recreation Business Inventory and Economic Impact Study for the 10-county northwest Michigan region. The results will be used by regional leaders to strategize business support and program development for the regional outdoor recreation industry. Find the survey at networksnorthwest.org.

ADVERTISING ASSOCIATION LAUNCHES TC CHAPTER The newest chapter of the American Advertising Federation (AAF) is now operating in Traverse City. AAF-Northern Michigan’s mission is to be the definitive advertising resource in the region with a focus on networking, professional development and community-building opportunities. The club’s first board of directors include: Karl Bastian, president (PB&J Marketing); Brandon Jenkins, vice president (910 Media Group); Rebecca Brown, secretary (910 Media Group); Dave Van Horn, treasurer (Lamar); Pam Brown, membership chair (Spectrum).

AAF-Northern Michigan will host the first-ever national advertising awards show in northern Michigan in February.

Membership is open to all advertising and marketing professionals in northern Michigan. For more information, reach Karl Bastian at (231) 943-1413.

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ALLEGIANT ADDS 5TH DIRECT FLIGHT FROM TVC Allegiant is launching new nonstop service between Cherry Capital Airport (TVC) and Fort Lauderdale starting spring 2024, the airline recently announced.

Direct flights between Traverse City and Fort Lauderdale-Hollywood International Airport will begin May 17 and continue year-round. The route expands on the four other nonstop Allegiant destinations from Traverse City, including Sanford/ Orlando, Punta Gorda, Tampa/St. Pete, and Phoenix/Mesa.

VENTURE NORTH RECEIVES $25K BOOST Venture North Funding and Development has been awarded a $25,000 grant for program operations from the Michigan Nonprofit Relief Fund, established by the Michigan Nonprofit Association (MNA) and the Michigan Department of Labor and Economic Opportunity in response to the COVID-19 pandemic. “We are grateful that MNA created this fund to help nonprofits overcome hardships due to the pandemic,” said Laura Galbraith, president of Venture North, which has more than 1,500 client small businesses in northwest Michigan. “The pandemic virtually eliminated business investment and growth and the revenues we typically expect from our affordable lending that help support program administration.

We also had to increase and not curtain personnel expenses to pivot and change course to seek and award urgent needs grants to save about 300 small businesses throughout our 10-county region.”

NOMI POLICY CONFERENCE: JAN. 19 The Northern Michigan Policy Conference will take place Friday, Jan. 19, at the Grand Traverse Resort & Spa. The regional economic development conference is led by the Northern Michigan Chamber Alliance, a coalition of 16 chambers and economic development organizations and more than 7,000 member businesses from across northern Michigan that advocates for rural-centric business policy. Conference content will focus on the alliance’s

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4 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

FROM THE DESK OF...

Sakura Takano, CEO of Rotary Charities of Traverse City

By Art Bukowski Now that many workers are back in the office, the TCBN is bringing back our popular “From The Desk Of” photo feature, showcasing items on the desks of local leaders.

What are these desk items and why are they significant? What do they say about personalities, career paths and successful habits? If you have a suggestion for a future feature, email info@tcbusinessnews.com. This month we’re showcasing the desk of Sakura Takano, CEO of Rotary Charities of Traverse City: Miniature of “Time to Let Go,” the beloved bayside statue commissioned by TART after a successful campaign to expand trails. Rotary Charities was proud to support this campaign.

Medallion from 1934, when the Rotary Club’s district conference was in Traverse City.

I am also heavily involved in the Traverse City Rotary Club and proud.

Stickers from various nonprofit partners.

An old piece of coal from the coal docks in Elmwood Township, which Rotary purchased a few years ago and is transforming into a beautiful public space.

These are gifts from primary schools in Africa. They came from an organization Rotary plans to support as part of its world community service.

Custom order BLT-E (gotta have the egg!) from Red Spire Brunch House, one of my favorite lunch spots.

This is one of my favorite books: “Emergent Strategies: Shaping Change, Changing Worlds”

by Adrienne Maree Brown. It’s very relevant for us as funders as we look at the ways people are solving problems.

Behind my desk is a painting by Duncan Spratt Moran, a teacher at Pathfinder School who has always inspired me. He’s a wonderful person and very talented artist.

I’m a note-taking addict. I use different size notebooks for different tasks, and I rewrite them every two weeks to keep track and stay on task.

TRAVERSE CITY BUSINESS NEWS

BRIEFLY four policy areas within the context of economic recovery and speakers will address chronic issues surrounding business development, talent, housing, and childcare. Visit traverseconnect.com to register.

HEALTH CLINIC HONORED Traverse Health Clinic recently received four 2023 Community Health Quality Recognition awards from the Health Resources and Services Administration. These awards recognize achievements in improving health outcomes and providing high-quality care for underserved patients.

DOWNTOWN TC BUSINESSES CLOSE Long-time downtown Traverse City retail shop Diversions is closing this month after nearly 40 years in business.

Diversions, owned by Phil Anderson and known for its expansive hat collection, has been in the Masonic Building at the corner of Front and Union for 18 years.

The building sold in January and the new owners have their own plans for the space.

Anderson plans to now focus on the original Diversions location in Leland, which he opened in 1972. Other recent downtown retail closings include gift store Suhm-thing after nearly a decade in business and Zest Plant-Based Kitchen, a vegan café on East Front Street that opened two years ago.

MUNSON EARNS “A” FOR SAFETY For the fifth straight time, Munson Medical Center has received an “A” grade from The Leapfrog Group - putting it among six percent of hospitals nationwide that have consistently met this level of recognition since fall 2021. The independent national watchdog group examines hospital quality and safety, assigning a letter grade based on how safe the facility is for patients.

ASSOCIATION RECOGNIZES HOSPITALITY ‘STARS’ Crystal Mountain in Thompsonville was recently honored with the Resort Star of the Year award at the Michigan Restaurant & Lodging Association’s annual industry awards gathering. Other winners include Heather Gates of the Grand Beach & Sugar Beach Resort Hotels in Traverse City with the General Manager Star of the Year award and Seth Britton of the Grand Traverse Resort &

Spa in Acme with the Seasonal Operator Star of the Year award.

SEVEN BREW OPENS 2ND LOCATION Seven Brew Coffee has opened its second drive-thru coffee shop in Traverse City at 2537 N. U.S. 31 South next to Best Buy. The national franchise based in Arkansas has been rapidly expanding into states across the Midwest and South.

TC A “MUST-SEE” FOR FAMILIES Traverse City has been named one of the “Top Must-See Cities” by Good Housekeeping. “This is a great honor,” said Trevor Tkach, president of Traverse City Tourism. “Thanks to the natural resources and year-round activities, Traverse City has a great reputation as an outstanding place to bring the family.”

Good Housekeeping named Traverse City to the list after conducting an on-site visit looking at criteria such as family friendliness, amenities, food, value, quality, and inclusivity.

ORYANA NAMES NEW CEO Oryana Community Cooperative recently announced the hiring of a new CEO. Sarah Christensen will succeed Steve Nance, who is retiring after more than 14 years leading the cooperative.

Christensen has served as the CEO of the Green Tree Coop Market in Mount Pleasant since 2003.

There she was responsible for overall organizational management, including business planning, human resources, and financial management, as well as marketing and community outreach.

“Sarah’s authentic leadership experience and value in community connection make her a perfect fit for this role,” said Nance. “Oryana has grown and evolved so much since being founded 50 years ago. Sarah’s energy and vision make her the perfect fit to expand on our mission of caring for our staff, owners, and community.”

Oryana will host a meet-and-greet to welcome Christensen and say goodbye to Nance at the stores in January.

Welcome Keri!

We are pleased to welcome Keri Lindman as Assistant Vice President of Treasury Management. Our Traverse City-based team can provide you the tools your business needs to effectively manage cash flow. For expert solutions — from ACH services to ZBA accounts — contact Keri at (231) 486-6573 or klindman@ssbankmi.com.

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DECEMBER 2023

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TRAVERSE CITY BUSINESS NEWS

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TRAVERSE CITY BUSINESS NEWS

DECEMBER 2023

7

COMMENTARY BY MCKEEL HAGERTY

Onward and Upward: Growth, profitability and continual improvement

EDITORIAL & BUSINESS OFFICE P.O. Box 4020 Traverse City, MI 49685 231-947-8787 ON THE WEB tcbusinessnews.com PUBLISHER Luke W. Haase lhaase@tcbusinessnews.com CONTRIBUTING EDITOR Gayle Neu gneu@tcbusinessnews.com HEAD WRITER Craig Manning COPY EDITOR Becky Kalajian

And year-to-date 2023 results are emblematic of a great business model, with revenue growth of 28% and significantly improved profitability that will allow us to invest in lengthening our leadership position over the coming years by providing best in class service and products for our members.

I am proud of One Team Hagerty – our name for our employee group – which is helping us make the transition from a highgrowth company to a high-growth company that is also profitable. For a public company, profit is critical. That’s what investors expect. But profit is also the engine that allows us to do all the cool things that we do beyond insurance for the automotive enthusiast world that we serve – from our Hagerty Drivers Club and first-class automotive media products to our intelligence data, events and car auctions.

We are far from a finished product, of course. In fact, one of the lessons to emerge from the past year is the power of constantly improving. Apocryphal or not, I once heard a story that by the time the crews who take care of the Mackinac Bridge finish painting the span it’s time to start painting it all over again. They don’t wait for rust to emerge and damage the structure. They attack it on an ongoing basis. That’s a good lesson for all of us, I think. A mindset of continual review and self-improvement is, I believe, how businesses and human beings flourish.

Here are a few other thoughts from our year of change. There may be something here you can adapt to your own company or life.

Remember who you are. Our North Star as a company is “protect, buy and sell, and enjoy.” That vision reminds us of exCREATIVE DIRECTOR Kyra Poehlman CONTRIBUTING WRITERS Art Bukowski Ross Boissoneau Rick Haglund Art Bukowski Clark Miller Rick Haglund Ross Clark Boissoneau Miller WEB PRODUCTION Byte Productions MAILING/FULFILLMENT: Village Press DISTRIBUTION Gerald Morris SERVING: Grand Traverse, Kalkaska, Leelanau and Benzie counties

actly who we are and where we are going, and it has helped us stay focused. Protect, of course, means our insurance. Buy and sell refers to our digital Marketplace, which helps our members buy, sell and finance cars, and to our exciting Broad Arrow live auctions. And “enjoy” is what we think is the whole point of owning and appreciating cool older cars. Those three elements are important, but it’s no coincidence that we put “protect” first. In-

When people flourish, so do companies. I have always believed that, and always will. surance is our foundation. It’s what makes everything else we do possible.

Have a bias toward action. This is a corollary to what I mentioned above about continual improvement, but businesses are simply collections of people, and people sometimes don’t like change.

How many times has a problem become obvious, whether in your business or personal life, but isn’t addressed because, in the end, it’s hard to see beyond how we’ve “always done it.” Cultivating a bias toward action helps people move beyond stasis.

It’s an important skill to develop.

Retention, retention, retention. As business owners know all too well, retaining customers is far less expensive than acquiring them. As we examined the business, we were reminded again and again that AD SALES Caroline Bloemer AD SALES cbloemer@tcbusinessnews.com Caroline Bloemer Lisa Gillespie cbloemer@tcbusinessnews.com lisa@northernexpress.com Lisa Gillespie Abby Walton Porter lisa@northernexpress.com aporter@northernexpress.com Abby Walton Porter aporter@northernexpress.com Kaitlyn Nance knance@northernexpress.com Kaitlyn Nance knance@northernexpress.com Todd Norris tnorris@tcbusinessnews.com Todd Norris tnorris@tcbusinessnews.com Michele Young myoung@tcbusinessnews.com Michele Young myoung@tcbusinessnews.com

TCBN

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For classic car owners, December is a look-back, look-forward kind of month.

This is when we reminisce about the adventures (road trips and pleasure cruises) and misadventures (flat tires and blown gaskets) of the past driving season, dreaming about the spring driving season to come.

At Hagerty, we’re doing much the same: taking stock of the past year and planning for greater things to come.

For us, 2023 has been a challenging but transformative year. Starting in late 2022, about a year after we joined the New York Stock Exchange under the ticker HGTY, we began a rigorous effort to make Hagerty a more efficient, profitable company, a process we called “focus, fix and finish.”

We examined everything – our planning, operations, technology, staffing and more – with an eye toward the all-important metrics of customer satisfaction and retention, the primary drivers of our longterm growth and profitability.

It has been a fruitful process. Just a few weeks ago, we shared our momentum with the investor community during our third quarter earnings call. Here are a few of the highlights: • Hagerty is by far the biggest provider of specialty insurance for the collectible car market, insuring 2.4 million vehicles today, and consistently growing at a double-digit rate.

• The road ahead looks promising, with approximately 45 million enthusiast vehicles in the U.S. worth an estimated $1 trillion.

• Our business is highly predictable, with more than 88% of our revenue baked in at the start of the year, thanks to high customer retention.

member experience and satisfaction – the keys to strong retention – are critical to our company. And probably to yours as well.

It all starts with people. As I mentioned earlier, we are lucky to have outstanding employees. Their talents, energy and enthusiasm are the reason Hagerty’s Net Promoter Score (a metric that measures customer experience programs that measures loyalty) is almost twice that of our competitors. One of the underlying reasons for our success as a company is a clear set of values that we actively follow: 1. We take care of each other.

2. We are driven.

3. We have a growth mindset.

4. We enjoy the ride.

We created these principles because we want to be a place where people flourish.

When people flourish, so do companies. I have always believed that, and always will.

In closing, let me say what I have said many times before: I am so grateful for the people of Traverse City and the greater Grand Traverse region. You have always supported us, and it’s important to us that we support you right back. Over the years, Hagerty has granted more than $5.5 million to community-building efforts, and Hagerty employees have contributed more than 100,000 hours of volunteer service. This has been our home from the beginning, and that is never going to change. We look forward to many more years of growth and prosperity in the city and the region that we love.

A happy holiday season to all of you!

Onward and upward.

McKeel Hagerty is CEO of Hagerty (HGTY).

The Traverse City Business News Published monthly by Eyes Only Media, LLC P.O. Box 4020 Traverse City, MI 49685 231-947-8787 Periodical postage qualification pending at Traverse City, MI. POSTMASTER: Send address changes to The Traverse City Business News, PO Box 1810, Traverse City, MI 49685-1810.

The Traverse City Business News is not responsible for unsolicited contributions.

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8 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

BANKING & FINANCE

‘EVERYONE’S CLAMORING FOR DEPOSIT DOLLARS’ Two big banks outpace smaller banks in overall down deposit year

By Rick Haglund Bank deposits in Grand Traverse County have dipped for the second straight year as COVID-related federal stimulus payment dried up, while higher inflation and interest rates are forcing customers to withdraw savings to support rising living and business operational costs.

The 11 banks with offices in Grand Traverse County held $3,559,438,000 in deposits as of June 30, according to an annual report by the Federal Deposit Insurance Corp., which insures bank deposits. That’s down 3.2% from deposits

Max Anderson

Al Zelinski

of $3,675,387,000 held by banks locally on the same date last year.

Grand Traverse County bank deposits peaked in 2021 at $3,760,534,000 as consumers and business owners stashed COVID cash in their bank accounts.

Credit unions are also feeling the pinch with several credit union leaders saying deposit growth has slowed considerably in the wake of higher inflation and interest rates.

“Definitely deposit growth has slowed down,” said Karen Browne, president and chief executive officer of TBA Credit Union in Traverse City. “The cost of living is higher and there are no longer any

Cindy Ockert

Troy Noble

federal supplements. People are spending their savings.”

TBA Credit Union had $300,450,896 in deposits at the end of June. The National Credit Union Administration does not produce a detailed report on deposits similar to the FDIC’s annual report.

Banks and credit unions were awash in cash in 2020 and 2021, but now they’re competing for deposits by boosting interest rates on savings accounts and certificates of deposit. They’re also seeing competition from online banks and payment services like Venmo that are offering attractive rates of return.

“Oh yeah. Everybody’s clamoring

Cory VanBrocklin

for deposit dollars,” said David Boeve, senior vice president and group manager of Independent Banks’s Traverse City operations.

In recent years, small, local community banks claimed they were attracting new customers who were fed up with bank mergers and impersonal service from big, out-of-state banks. That appeared to be true between 2021 and 2022 as their deposits rose while the largest banks operating here shed deposits.

But those smaller institutions all lost deposits over the past year, while two large banks saw impressive gains.

Columbus, Ohio-based Huntington

Doug Buck

Steve Mitchell

TRAVERSE CITY BUSINESS NEWS

DECEMBER 2023

9

BANKING & FINANCE

BANK LEADERS - GRAND TRAVERSE COUNTY

2023

2022

Source: FDIC

2018

INSTITUTION

MARKET SHARE

INSTITUTION

MARKET SHARE

INSTITUTION

MARKET SHARE

1. The Huntington National Bank __________________________________

38.07% ______________________

1. Fifth Third Bank __________________________________

25.36% ______________________

1. Fifth Third Bank __________________________________

25.36% ______________________

2. Fifth Third Bank __________________________________

17.72% ______________________

2. Chemical Bank __________________________________

19.92% ______________________

2. Chemical Bank __________________________________

19.92% ______________________

3. JPMorgan Chase __________________________________

15.99% ______________________

3. The Huntington National Bank __________________________________

16.39% ______________________

3. The Huntington National Bank __________________________________

16.39% ______________________

4. Independent Bank __________________________________

9.46% ______________________

4. JPMorgan Chase Bank __________________________________

16.03% ______________________

4. JPMorgan Chase __________________________________

16.03% ______________________

5. First National Bank of America __________________________________

6.63% ______________________

5. Independent Bank __________________________________

9.40% ______________________

5. Independent Bank __________________________________

9.40% ______________________

6. PNC Bank __________________________________

3.47% ______________________

6. First National Bank of America __________________________________

4.69% ______________________

6. First National Bank of America __________________________________

4.69% ______________________

7. Honor Bank __________________________________

2.81% ______________________

7. PNC Bank __________________________________

3.16% ______________________

7. PNC Bank __________________________________

3.16% ______________________

8. First Community Bank __________________________________

1.55% ______________________

8. Honor Bank __________________________________

1.84% ______________________

8. Honor Bank __________________________________

1.84% ______________________

9. West Shore Bank __________________________________

1.48% ______________________

9. mBank __________________________________

1.83% ______________________

9. mBank __________________________________

1.83% ______________________

10. Nicolet National Bank __________________________________

1.45% ______________________

10. First Community Bank __________________________________

1.37% ______________________

10. First Community Bank __________________________________

1.37% ______________________

11. State Savings Bank __________________________________

1.38% ______________________

11. West Shore Bank __________________________________

0.01% ______________________

11. West Shore Bank __________________________________

0.01% ______________________

National Bank, which holds $1.36 billion in Grand Traverse County deposits, by far the largest bank operating locally, saw its market share jump nearly 2.5 percentage points from 2022. Huntington now controls almost 40% of bank deposits in the county.

Grand Rapids-based Independent Bank boosted its market share by 1.97 percentage points from a year ago. Independent Bank, which acquired Traverse City State Bank in 2018, had $337 million in deposits here on June 30 and ranked fourth in deposits with a 9.46% market share.

Executives at both banks cited competitive interest rates on deposits and a strong emphasis on personal service as reasons for their market share growth.

Reassuring individual consumers and business customers that their money was safe was essential after the failure of several regional banks earlier this year in California and New York that rattled the banking industry, they said.

“This was a challenging year for many regional banks,” said Seth Perigo, Huntington’s northern/central Michigan re-

gion president. “We are very committed to the northern Michigan market. We spent a lot of time talking to our customers about the strength of the bank.”

Perigo credits Huntington’s leadership team, headed by Northern Michigan Market President Nick Florian, with “really leading the charge in Traverse City.”

The bank also is undergoing “a signifi-

Bank employees spent considerable time reassuring customers about the bank’s condition in the wake of regional bank failures that some experts feared could have spread throughout the country, Boeve says.

“I think we come across as a steady bank in that regard,” he said.

Another large financial institution,

“Definitely deposit growth has slowed down. The cost of living is higher and there are no longer any federal supplements. People are spending their savings.”

–Karen Browne, president and CEO, TBA Credit Union in Traverse City cant refresh of branches to make them feel more welcoming,” Perigo said.

Boeve says Independent Bank’s expanded lending team has lured deposit and loan customers from other banks. Independent added $61.1 million in Grand Traverse deposits from June 30, 2022 to same date this year. Independent had $336.6 million in deposits on June 30.

4Front Credit Union in Traverse City, has gained $73 million in new deposits this year, in part through the acquisition earlier this year of Old Mission Bank in Sault Ste. Marie and the opening of branches in Holland, Zeeland and Muskegon.

“It’s been quite a year for us,” said Andy Kempf, 4Front’s president and

CEO, adding that the bank passed the $1 billion asset threshold at the end of September.

Kempf said higher interest rates have been a burden to many customers, resulting in slower deposit growth than in the past couple of years. Of particular concern is what he sees as widening income inequity.

“A lot of people are really struggling, but some are doing fantastic,” he said.

Fifth Third Bank saw its local deposit share dip slightly this year, but surpassed Chase Bank to become the second-largest bank in Grand Traverse County, based on deposits. Autumn Gillow, Fifth Third’s northern Michigan market executive, attributed the bank’s slight decline in deposits to customers drawing out cash to fund business expansions rather than borrowing at higher interest rates.

“At the beginning of the year we had clients using cash rather than borrowing due to current rate environment,” Gillow said. “This has shifted some in the last few months and we’re seeing a decent loan pipeline for balance of this year and 2024.”

Local lending. Like really local. myhonorbank.com/business

10 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

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BANKING & FINANCE

Boeve

Hoeh

Fifth Third had $630,686,000 in deposits on June 30 and a local market share of 17.72%.

Honor Bank, which had $100 million in Grand Traverse County deposits on June 30, saw deposits slip by nearly $5 million. But its deposit market share rose slightly as some competing banks experienced larger deposit losses.

Dixie Lagerquist Hoeh, Honor Bank’s first vice president and head of banking, said her bank has been aggressively seeking deposits and shifting customers from non-interest-bearing accounts to interest-paying accounts. That has boosted the bank’s cost of funds.

“Higher interest rates have really changed the game,” she said. “We don’t pay the highest rates but we’re being competitive.”

Hoeh said Honor’s biggest competitors for deposits aren’t local banks, but rather local investment firms that are luring deposit customers seeking potentially higher financial returns.

Ludington-based West Shore Bank, which entered the Traverse City market in 2017, also posted a small decline in deposits and a slight uptick in market share.

West Shore had $52.7 million in local deposits on June 30, down from $52.9 million on the same date a year ago.

“A couple years ago business customers were not so concerned with leaving cash in their accounts. They were living on their lines of credit,” said Sid Van Slyke, West Shore’s Traverse City market

Perigo

leader. “A year later they’re looking at that much harder as interest payments have doubled. That really has been a major change.”

Frankfort-based State Savings Bank, which has been aggressively expanding in northern and central Michigan, fell from seventh place in 2022 to last place this year in Grand Traverse County, based on deposits.

State Savings Bank had $49.1 million in local deposits on June 30, down from $65 million on the same date a year ago.

Its deposit market share fell from 1.77% last year to 1.38% on June 30.

Like at other banks, State Savings customers have been drawing down savings to reduce loan debt and offset the impact of higher inflation on household budgets. But spokesman Doug Zernow said deposits have stabilized since the release of the FDIC’s deposit report.

“In a difficult rate environment, we’re still adding customers and accounts,” he said.

Despite the deposit drop, most banks in Grand Traverse County are hanging on to much of the cash they’ve captured over the past five years.

Bank deposits in the county have jumped 50% since 2018, from $2.4 billion to nearly $3.6 billion, a result of federal COVID stimulus payments to families and businesses, and sustained population growth fueling the local economy.

“People are still moving here – a lot of people,” Van Slyke said.

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Banks and credit unions mostly experienced deposit declines or tepid growth for the second straight year.

• Only two of 11 banks operating in Grand Traverse County saw deposits increase between June 30, 2022 and the same date this year: Huntington National Bank and Independent Bank.

• Those banks reversed a trend from the past two years in which smaller banks outperformed bigger banks in deposits.

• Total Grand Traverse County bank deposits fell 3.2% this year from a year ago, from $3.675 billion last June 30 to $3.559 billion on the same date this year.

• Credit unions also reported slumping deposits.

• Bank and credit union executives say deposits fell because of the end of federal COVID stimulus programs, and higher inflation and interest rates that prompted customers to draw down savings to support higher living and business costs.

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12 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

BANKING & FINANCE

PRUNING THE BRANCHES Financial institutions open, close in response to market

By Ross Boissoneau If you think you’re seeing more empty bank branches, you’re not wrong.

According to S&P Global Market Intelligence, from Jan. 1, 2021, to Dec. 31, 2021, there were nearly 4,000 branch closings nationwide, compared with slightly more than 1,000 branch openings. The provider of financial information services notes that with a negative net of 247, Michigan was second only to California, which had 269 closings.

Yet at the same time that many branches are closing, others are opening. Bank officials say that’s due to a number of dueling factors, from increased use of online services to consolidation after mergers to winning new depositors.

“We’re so pleased with what we’ve been able to do. It’s been a terrific market for us,” said Brad Kessel, CEO of Independent Bank, which entered the Traverse City market in 2018.

Yet the Grand Rapids-based Independent Bank today operates 59 branches in Michigan, down from 106 before the 2008

Great Recession.

Kessel said that until about 2015, the more branches a bank had, the more business it would do.

“From 2015 to 2020, instead the trend went the other way. You don’t need as many branches,” he said.

Among its closures was one in the Acme area. Kessel says the bank didn’t notice any subsequent loss of business overall.

has reduced the need for customers to actually go into a bank.

Add the increased use of technology accelerated by the pandemic, and it became a trend.

“Consumer behavior shifted so dramatically since then. Branch traffic was down significantly,” said Perry.

And while it may be true that older customers are more inclined to visit

“Grandparents got used to their grandkids on Zoom, so doing (online banking) is not as frightening.”

–Jim Perry, senior strategist, Market Insights Jim Perry, senior strategist at the financial consulting firm Market Insights, says the closure of many bank branches is due to the same reason retailers are shuttering stores in the wake of Amazon.

The success of online banking, from making deposits remotely to transferring money and paying bills from the web,

branches than younger people, Perry said banks cannot count on even those people continuing to do so.

“Grandparents got used to their grandkids on Zoom, so doing (online banking) is not as frightening,” he said.

Kessel said keeping all customers engaged is a key to success.

“Younger people are not coming in.

They’re totally excited about mobile and digital. So we’re not investing in a lot of brick and mortar, we’re investing in talent and technology,” he said.

While branch numbers have declined, he is buoyed by the fact the Independent Bank branches still open are doing robust business.

“We’ve actually been able to triple the deposit dollars per branch. A decade ago it was $25 million. Today it’s closer to $75 million,” he said.

Another reason for shuttering branch offices is the trend toward consolidation. When a financial institution then finds two branch locations near one another as a result of a merger, it only makes sense to close one of them.

Realtor Kevin Endres, owner and broker at the commercial real estate firm Three West, says his firm represents Huntington National Bank, with which he’s worked on several such closures.

“When Huntington merged with First Merit, they closed some (branches),” he said. “I’ve sold a lot in the last five years

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BANKING & FINANCE

– probably 12 to 15 locations.”

Perry notes that the local number of banks already surpasses the overall average of 28 banks per 100,000 customers.

“Grand Traverse is (around) 100,000 people, and there’s 35 or 36 banks in the county. On that metric alone Grand Traverse has more than average,” he said.

While the area’s population is growing, he said many of those are retirees.

“Older people bring their money, but also the previous banking relationships,” he said.

It’s not all gloom and doom for the banking industry. While some branches close, other financial institutions are already moving in. As reported in The Ticker, veteran banker Gregg Bigger has been working to bring the already-named Grand Traverse State Bank to town.

He previously launched the Bank of Santa Barbara in California, and recently purchased the downstate First State Bank of Decatur to make it a subsidiary of the new Grand Traverse State Bank.

Plans call for a loan office in Traverse City to open in spring 2024, with a full-service branch and offices to follow in late 2024.

One challenge he faces is actually finding a suitable location. Most shuttered bank branch offices have clauses built into their original leases prohibiting another such institution from opening there for a number of years.

But that’s not always the case. The government can step in to protect access to banking if the institution being acquired is the only one in its area.

Endres said when Huntington acquired TCF, a number of branches were in such rural markets.

“The federal government stepped in and said, ‘You have to sell those branches to another bank,’” he said. “It was a condition of the merger.”

And while some bank branches close, other similar financial institutions are finding the area ripe for growth.

Perry

Clobes

Endres

Kessel

“You may not come in once a week, maybe not once a month, but a branch shows support. If there are any concerns, there are humans to talk to.”

– April Clobes, president and CEO, Michigan State University Federal Credit Union Lake Michigan Credit Union, 4Front Credit Union and Michigan State University Federal Credit Union all opened branches on US 131 less than a half mile from one another in the last couple years. Traverse Catholic Credit Union and TBA Credit Union and other banks and financial institutions are just a couple miles away.

April Clobes, president and CEO of MSUFCU, said the goal for her credit union is to serve faculty, students, staff and alumni of the university, wherever they are.

“We’re not trying to take over the world, but have plans to expand and grow our service,” she said. MSUFCU has not only entered northern Michigan, but the Chicago area as well, in response to the thousands of MSU alumni there.

Perry said ultimately those financial institutions that can offer the best customer services, be they banks or credit unions, will be the ones that survive and thrive. That includes both in-per-

son and online experience.

Clobes agreed. “We need to have the channels people want,” she said. That includes a robust yet easy-to-navigate online experience.

She and Kessel remain bullish on providing in-person experience as needed.

“Seventy percent of our new accounts are from branches, even though digital (account opening) works,” said Clobes.

“You may not come in once a week, maybe not once a month, but a branch shows support. If there are any concerns, there are humans to talk to.”

Kessel says that regarding the closing of branches, it’s important to keep some.

“It shows a commitment to the market,” he said.

Growth takes on different forms The numbers tell the story – even when they point in different directions.

At Independent Bank, while the company has closed branches, it has done

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more business.

“Over the last decade, we’ve gone from $2 billion to over $5 billion.

Today we’re the largest bank based in Michigan,” said Kessel.

At the same time, it has opened three new branches in the last three years, one each in Washtenaw, Ottawa and Macomb counties. More importantly, Kessel says he is committed to banking on all levels: digital, mobile and in-person.

He adds that in the past, more branches equaled more business, but that has changed. He said moving forward, growth will come from commercial business instead of retail.

Warren Call, CEO of Traverse Connect, says he sees the situation as similar to retail, which is a mix of online and storefront.

“I think you’ll continue to see brick and mortar banks, but they may look more like lounges or coffee shops, rather than teller lines,” he said.

Mercer Advisors Traverse City Team Matthew Bohrer Wealth Advisor, Director

Merideth Gillis Client Service Specialist

Renée Egelski, CFP® Wealth Advisor

Becky Leslie Client Service Specialist

Kevin Russell, CPA, CFP®, AAMS®, CRPC® Wealth Advisor

310 West Front Street, Suite 308, Traverse City, Michigan 49684 l 231.929.4500 l merceradvisors.com © 2023 Mercer Global Advisors Inc. All rights reserved. Mercer Global Advisors Inc. is registered with the Securities and Exchange Commission and delivers all investment-related services. Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Advisors is not a law firm and does not provide legal advice to clients. All estate planning documentation preparation and other legal advice is provided through its Advanced Services Law Group, Inc. Tax preparation and tax filing are a separate fee from Mercer Advisors’ investment management and planning services. Trustee services are offered through select third parties with which a client would engage directly. Mercer Global Advisors has a related insurance agency. Mercer Advisors Insurance Services, LLC (MAIS) is a wholly owned subsidiary of Mercer Advisors Inc. Employees of Mercer Global Advisors serve as officers of MAIS. MAIS provides individual life, disability, long term care coverage, and property and casualty coverage through various insurance companies. 20231016

14 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

BANKING & FINANCE

PEAK PERFORMANCE KPIs help local businesses measure productivity, results

By Art Bukowski Feelings, instinct and intuition are crucial in business.

And while Matt Bulloch knows this to be true, he needs more. It’s fine to feel something, he said, but what does the actual data show? Does it confirm or refute those feelings?

“Bring me data, or we’re going to be making decisions based on my opinion,” said Bulloch, president and CEO of TentCraft. “That’s not the way to do it. There’s times where I’ve been wrong because how I feel is not what the data suggests.”

Traverse City-based TentCraft, which employs nearly 90 people and designs and manufactures a wide variety of tents and other structures for displays and events, relies heavily on key performance indicators (KPIs) in all facets of its operations. Like many other modern businesses, managers there use KPIs to monitor the performance and productivity of their company.

“Just like you monitor your physical health – is my cholesterol too high, and if so, how do I correct that? – business is no different. And KPIs help measure the health of the business,” said Luke Mason, TentCraft’s vice president of customer

experience. “Everybody is competing for profitability, that’s the health, but there are so many factors that go into profitability, and that’s where all these different KPIs come into play.”

KPIs can be many or few. They can be quantitative or qualitative. They can be something a business looks at once a week or once a quarter. In many cases, they represent items that have been monitored in some form or another as long as businesses have existed.

“KPIs are all about growth, and obtaining that growth by seeing the trends,” said Ellen Kozlowski, who manages Cherry Republic’s satellite stores. “It’s identifying gaps and creating growth.”

Leveling up Jason Homa is vice president of sales and service at Cherry Republic, where he’s worked for more than two decades. He vividly recalls those early days, scratching and clawing to stay in business one sale to the next. Data was an afterthought then.

“There are these moments where businesses reach peaks and then climb to the next level, and one of those is being able to use data to make decisions,” he said.

In its early days, Homa says that the

locally-owned company was fighting to survive from sale to sale.

“Frankly, it didn’t matter if we made a penny or $100 on a sale, we just wanted the next sale…but if you don’t have that data working for you at a certain point, if you make enough mistakes, the cost can bleed you out,” he said.

About eight years ago, Cherry Republic invested in an enterprise resource planning system that helped tie their disparate sources of data together to be easily viewed and monitored. In Koslowski’s world, she’s looking at sales-oriented KPIs like units per transaction, traffic, conversion and more in stores in Frankenmuth, Charlevoix, Holland and Ann Arbor.

“There’s a lot of variables that I look at based on what’s happening in that particular region, in that store and around the store, and what could be contributing to a sales gain or loss,” she said.

Koslowski says she also dissects the metrics to see the story they might be telling.

“If your traffic is increasing and your conversion isn’t as high as it’s been, then we might look at a few things,” she said. “Is it customer service? Is it a product issue?”

Kozlowski

Homa

Cherry Republic leaders regularly monitor a digital scorecard loaded with KPIs, which helps them keep track of issues that need to be addressed.

“When we reach a threshold, (like) 1% of our total orders that need to be reshipped, for example, that turns our scorecard red,” Homa said. “And in that case the red means this is a time where we really need to figure out what the root cause is.”

And while most of these KPIs are quantitative business metrics, Cherry Republic also uses them to take a look at culture. They have an employee happiness KPI, for example, that is derived from employees ranking their general happiness on a sliding scale.

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BANKING & FINANCE

It’s more than just lip service or a cliché to monitor such a statistic, Homa says, as employee satisfaction can have major implications for businesses.

“Each response builds up to a composite score, and we have a minimum happiness expectation that we have here,” he said. “When we don’t meet that, which does happen, that triggers us to (investigate).”

A faster pace The concept of monitoring performance by studying metrics is, of course, not entirely new. But the way they are used is different, particularly in a fastpaced environment. Leading indicators that shed light on the future are particularly valuable, business leaders said.

“Metrics have been used in business for a long time, but I think the reason we see more of an emphasis on KPIs is because I think the pace of business is speeding up,” said Warren Call, president and CEO of Traverse Connect.

Call says that leaders are now looking for quick, early indicators that measure week to week instead of the more traditional quarterly measurements.

“The key thing is those (weekly) KPIs help you adjust in real time, and in a shorter amount of time,” he said.

Call says that Traverse Connect looks

at KPIs on a weekly basis. Those KPIs include new members to their membership-based business, membership retention rate, and accounts receivable (outstanding invoices). It gives them a good idea of whether they’re demonstrating their value, which is of utmost importance to continued growth. Call said it’s important for each business to carefully determine what’s worth tracking.

“Number one, it’s got be something you can actually track. What can you track on a weekly basis that is relevant and valuable? It has to be more than something that’s just good to know. Does it give you an indication of where things are headed?” he said. “You always have to dig deeper. If something says you’re not on track, you might have to dig another layer down to see what’s going on.”

TentCraft, which used to have 20 KPIs, now watch six. Mason, the VP of sales and experience, says it’s important to not get hyper-focused on any one data point but rather employ counterbalancing KPIs. “If I tell the sales team that no matter what, we need to get to $1.5 million by the end of the month, they’re going to discount like crazy, the average sale will plummet and we’ll sacrifice a lot of profitability,” he said. “That counterbalancing KPI is a really important piece to steering, otherwise you can achieve one target but sacrifice a metric somewhere else.”

Mason

Call

And while data is tremendously valuable, it’s still important to not always follow it blindly, leaders said. After all, those gut feelings still count for something.

“It’s tough to manage what you can’t measure.

There are some things that are just the

Bulloch

right thing to do that you can’t put a real good metric to. For example, what’s the ROI on hugging your mom?” Bulloch said. “It’s important, but how do you put a metric around that? You know you just need to hug your mom every chance you get.”

Good KPIs: • Provide objective evidence of progress toward a desired result • Measure what is intended to be measured to help inform better decision-making • Offer a comparison that gauges the degree of performance change over time • Can track efficiency, effectiveness, quality, timeliness, governance, compliance, behaviors, economics, project performance, personnel performance or resource utilization • Are balanced between leading and lagging indicators Source: KPI.org

16 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

BANKING & FINANCE

The newly opened Lume store in downtown Traverse City.

HIGHS AND LOWS How 2024 could reshape the legal landscape around marijuana

By Craig Manning 2023 was a big year for local marijuana businesses, with the City of Traverse City finally adopting a recreational cannabis ordinance and issuing its first adult-use dispensary licenses. But 2024 could prove to be an even bigger year for cannabis culture at large, with numerous irons in the fire that could reshape the way weed businesses are regulated, taxed, and scrutinized on a national scale.

In October, when TCBN sister publication The Ticker touched base with Doug Hellyar, president and chief operating officer of Lume Cannabis Co., he pointed to the federal SAFER (Secure and fair Enforcement Regulation) Banking Act and its potential passage as a potential change for the American marijuana industry as a whole. (Lume officially joined

the Traverse City cannabis market in early September, opening a dispensary at 401 West Front St.) Legal or illegal?

Cannabis legalization has been a trend in the United States for more than a decade now. As of December 2023, 38 states, four territories, and Washington, D.C. have all legalized marijuana for medical use, while 24 – including two territories and the District of Columbia – have legalized the drug for recreational use.

Despite these changes, the use, sale, and distribution of marijuana remain illegal on the federal level, where the drug is still classified as a Schedule I substance under the federal Controlled Substances Act. Per Drug Enforcement Agency methodology, Schedule I classification means

a drug has “a high potential for abuse, no currently accepted medical use in treatment in the United States, and a lack of accepted safety for use under medical supervision.”

The Schedule I classification and federal illegality of marijuana pose numerous challenges for cannabis businesses throughout the U.S. – even those operating in compliance with their own relevant state laws. For one thing, the federal legal structure means that interstate commerce around cannabis is still prohibited.

Transporting cannabis across state lines risks federal criminal prosecution, thereby limiting the ability of a Michigan marijuana business to expand outside of the state.

The federal legal structure around weed has also created notable challenges for marijuana businesses looking for banking and loans, insurance, 401(k) accounts,

the ability to accept credit or debit card payments, or financial services. Technically, because cannabis is illegal on the federal level, banks could be penalized by federal regulators – or even charged with aiding and abetting a federal crime – if they choose to work with marijuana-related businesses. Other financial services providers, such as insurance companies, also see risks in working with marijuana businesses due to the legal uncertainty.

A pending piece of federal legislation called the SAFER Banking Act has the potential to resolve many of those barriers.

Per a document describing the bill on the Senate Democrats’ website, the legislation “would ensure that all businesses – including state-sanctioned cannabis businesses – have access to deposit accounts, insurance, and other financial services.”

Per Hellyar, the passage of the bill would

TRAVERSE CITY BUSINESS NEWS

DECEMBER 2023

17

BANKING & FINANCE have ramifications in allowing cannabis businesses throughout the state of Michigan to improve their ability to operate and sustain themselves.

If SAFER Banking passes, Hellyar says that bank accounts, lines of credit and loans will become accessible, in addition to employees’ accessibility to mortgages and checking accounts with traditional banks.

“I really think a change is looming, and it’s going to be a big step forward for the overall industry,” he said.

An uphill climb both ways That change has loomed a time or two before. The SAFER Banking Act is a descendant of the SAFE (Secure and Fair Enforcement) Banking Act, which was first introduced in the 116th Congress back in March 2019 – and which was, itself, a successor of similar bills that had been floated in the federal legislature since at least 2013.

The House of Representatives has repeatedly shown strong bipartisan support of SAFE/SAFER Banking, passing seven versions of the bill since 2019. But each version ultimately died in the Senate.

Earlier this fall, it looked like the SAFER Banking Act was finally headed for law. Introduced in the Senate this time around, the bill was advanced by the Senate Banking Committee in September,

marking the first time any version of the legislation has been cleared for a floor vote in the upper legislative chamber.

More than two months on, the bill has yet to see that floor vote, despite a pledge from Senate Majority Leader Chuck Schumer (D-New York) to bring the SAFER Banking Act to the Senate floor with “all due speed.”

For his part, Nick Piedmonte – CEO of the Traverse City-based cannabis company Dunegrass – suspects the bill will now face an uphill climb in the House of Representatives, led by House Speaker Mike Johnson (R-Louisiana).

“So, after all these years and machinations to get the legislation situated in the Senate, we finally get to the point where it’s cued up to meet the 60-vote threshold,” he said. “And now, we don’t have a Speaker to bring it back to the House of Representatives.”

Johnson, who was elected Speaker in late October after weeks of turmoil inside the House, has an anti-cannabis voting record: Since entering Congress in 2017, he’s voted twice against legislation that would have protected financial institutions in their ability to provide services to state-sanctioned marijuana operators. And last year, he cast a vote against a bill that would have streamlined cannabis research.

In contrast, Johnson’s predecessor – Rep.

Eric and Nick Piedmonte

“”We pay huge sums of money to the federal government every year for taxes because we don’t get taxed the same as any other business in America.”

– Nick Piedmonte, CEO, Dunegrass Kevin McCarthy (R-California), who Republican House members ousted from the Speaker role on October 3 – had previously voted in favor of cannabis banking reform.

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Alternate routes But while Piedmonte predicts that SAFER Banking is now off the table “at least

18 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

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until after the election next year,” he says he hopes that shifts could still happen in 2024, with President Joe Biden directing the Department of Health and Human Services secretary to review the scheduling of cannabis as it relates to the Controlled Substances Act. HHS heeded that request, and in August published a memo recommending that cannabis be reclassified from a Schedule I controlled substance to a Schedule III controlled substance.

“That would make it more like Tylenol (in terms of restrictions and regulations) and less like heroin,” Piedmonte said.

The matter now goes to the Drug Enforcement Agency, which will decide whether or not to heed the HHS recommendation.

Piedmonte says that rescheduling cannabis would have important tax implications for marijuana businesses. Because marijuana companies like Dunegrass are technically trafficking a Schedule I narcotic under federal law, they don’t get to recog-

nize expenses to reduce obligations, he says.

“And as a result, our tax rates are astronomically high,” he said. “We pay huge sums of money to the federal government every year for taxes because we don’t get taxed the same as any other business in America.”

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News broke in October that several major cannabis companies had hired famed attorney David Boies to sue U.S. Attorney General Merrick Garland in federal court. The lawsuit, filed in Massachusetts, challenges the very ability of the federal government to criminalize marijuana, arguing that the matter should instead be a states’ rights issue.

Boies is known for leading the federal prosecution of Microsoft in a landmark 2001 antitrust case and for representing Al Gore in the Supreme Court case that decided the 2000 presidential election – among other major cases.

If the plaintiffs win, then federal bans on marijuana would effectively disappear, Piedmonte says.

“It would leave it up to the states to decide,” Dunegrass CEO Nick Piedmonte said. “Just like abortion now that the Supreme Court overturned Roe v. Wade, marijuana would become a states’ rights matter, according to the law of the land.”

That outcome would also eliminate the need for cannabis legislation to move through the legislature, and would even render the push for rescheduling cannabis irrelevant.

“If the Controlled Substances Act no longer applies to state-licensed cannabis businesses, then I can go get a bank account with Bank of America, and I can know that I don’t have to worry about being taxed differently,” Piedmonte said.

“It would cover pretty much everything.”

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20 DECEMBER 2023

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By Eric Braund, columnist If you’re like us, you recognize that the world extends far beyond the lines of your immediate family, and perhaps you hope to make a lasting impact on others. But wouldn’t it make the most sense if you could help yourself while at the same time helping others?

Let’s explore a few strategies to save more money while gifting to your favorite causes.

Set up a Donor-Advised Fund (DAF) This is a strategy that isn’t put into play often enough, quite likely because many people don’t know about it. A DAF acts as a philanthropic savings account. You put money into it for the purpose of giving to charity and let it sit there until you are ready to give. Unlike a savings account, all contributions are irrevocable. Once you put an asset into a DAF, you can’t take it back.

Because you can’t take back your contributions, they are considered complete charitable gifts and immediately tax-deductible. You can take the tax deduction right away even if you wait several years to pass the money on to charity. Though you don’t technically retain ownership when you put money or assets into a DAF, you are still able to guide, request, and recommend where the money goes. You get to name your DAF account, advisors, successors, and beneficiaries, and the holder of the DAF makes the ultimate

Cash in Kind: Charitable giving can help the donor as well as the cause

decision on where the funds go. If you’re worried about relinquishing the reins on your money, know that most DAF holders will honor donor wishes as long as the recommendation complies with legal and tax requirements and grant-making policies.

Donate your RMD using a QCD

Did you know you can support charitable causes using funds from your IRA? If you’re 70½ or older, you may have the option to donate all or part of your required minimum distribution (RMD) directly to a charity. It’s called a qualified charitable distribution (QCD). Even before reaching the RMD age, you can make charitable distributions from your IRA. While the Secure Act raised the RMD age for individuals to 73, the QCD age remains at 70½.

Here’s how they work: RMD distributions necessitate withdrawing a specific percentage each year, ensuring the government collects income taxes on those funds. This presents an opportunity to optimize your charitable giving. If you don’t require the funds from your IRA and had planned to make charitable donations anyway, you can opt for a qualified charitable distribution.

Additionally, using a QCD as part

of your strategy enables you to donate directly from your IRA to a qualified public charity, bypassing the need for it to be considered a taxable distribution.

By doing so, you can exclude the donated amount from your taxable income, providing potential tax benefits for your philanthropic endeavors. It offers the advantage of donating up to $100,000 tax-free, which means not only does this result in tax savings, but by avoiding the RMD, your income will remain lower for Medicare calculations, potentially preventing a rise in your premiums.

You also have the option to donate all or a part of your RMD to charities. For instance, if your RMD is $5,000, you can choose to give $3,000 to a charity and keep $2,000 for yourself, only paying taxes on the $2,000. Alternatively, you can decide to donate the entire $5,000 to charity, which means you won’t owe any taxes on your RMD for that year.

The main benefits of this strategy include: • You have the ability to fulfill your RMD without increasing your taxable income.

• You don’t have to itemize deductions to enjoy the tax benefits of a QCD. • QCDs maximize the impact you

make on charitable causes.

By leveraging QCDs, you not only contribute to the causes that matter to you, you also navigate your tax obligations intelligently.

Work with a professional We understand that giving to charity is a top priority for you. You’re going to give regardless, so why not do so in the most efficient way possible? Contact your Certified Financial Planner® professional to discuss the relative benefits of a donor-advised fund or a QCD for your own financial portfolio and enjoy the gift of giving wisely.

Eric Braund, CFP®, CRPC® is the founder and CFO at Black Walnut Wealth Management, a financial advisory firm providing counsel and fiduciary financial services to individuals, families, and private foundations throughout the Traverse City and northern Michigan region. Contact him at (231)4217711 or visit BlackWalnutWM.com. Braund is an investment advisor representative with Dynamic Wealth Advisors dba Black Walnut Wealth Management. All investment advisory services are offered through Dynamic Wealth Advisors.

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DECEMBER 2023

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ACCOUNTING INSURANCE & LAW

Isles

Johnson

Vogler

SUNSET LAW Lawyers embrace small towns in northern Michigan for lifestyle reasons

By Ross Boissoneau

According to the National Association of Counties, 20% of the nation’s population live in rural communities, but just 2% of all lawyers practice there. The other 98% may be missing out.

Whether it’s for property questions, legal entanglements, family law or other reasons, there are plenty of people in places like Beulah or Frankfort, Empire or Elk Rapids who want and need legal representation.

Scott Isles moved home after years of living and practicing in the Saginaw area. He says he’d “had enough,” and the Kalkaska High School graduate returned to his hometown.

“I was living in Midland; I can practice from anywhere,” he said.

Anywhere? Pretty much. Attorney Brian Johnson of Elberta proved that location is practically irrelevant when he lived and worked in Zagreb, Croatia, for almost four months this year. Utilizing Zoom, Teams and cell phone, Johnson was able to maintain his work presence despite being a continent away.

Lisa Vogler’s experience was similar.

The Beulah-based attorney grew up in Benzie County and returned there after practicing in the Detroit area. With two young children and two aging parents, she decided to move back home.

The advances in technology have made it easier for her to work from anywhere, she says.

“Geography doesn’t matter,” she said.

They’re among the admittedly few attorneys who see the benefits of living and working in small towns. “(The move back home) relieved stress

so much,” he says from his home office outside Kalkaska. “I live 20 miles from town and live on a beautiful glacial lake. I practice out of my house.”

He still has ties to the Thumb and may work on cases there or elsewhere, but even that sometimes is done from home.

“Most of court is done by Zoom meetings,” Isles said. “I’ve got a case in Sault Ste. Marie. I have to be there for testimony and arguments, but not a five-minute hearing.”

Charlevoix, all over,” said Vogler. She’s still available to meet with clients even while visiting family in Texas.

And appear in court.

“A lot of courts are still doing Zoom,” she said, though she does prefer to attend court in person when it’s practical.

Is it possible to accrue the advantages of both working from home and with a larger firm in a city? To a degree, yes.

Johnson says he bounced back and forth from working in Traverse City and

“My specialty is anything that walks through the door.

In a small town in a one-person shop, (it’s) any litigation cases, real estate, divorce, domestic cases. It’s broad.”

– Lisa Vogler, attorney While his previous practice provides him with a source of references, Isles says that as the only attorney living in Kalkaska, he gets calls from people passing through who find themselves in need of a local attorney.

“I end up with a lot of cases where people are here vacationing and get in trouble. They may be from downstate or Colorado,” he said.

He says these kind of clients don’t want to spend the time and money to return to the area and rely on Isles to handle their cases.

“They pay with a credit card. There are times when I never meet my client,” he said.

The advances of technology and the flexibility spawned by the pandemic have enabled people like Isles, Johnson and Vogler the freedom to work from other cities, other states, even abroad.

“I have cases in Benzie, cases in

working from home before settling into a hybrid practice.

“When I started practicing law, my wife and I lived in Traverse City and I worked for a firm there. A couple years later we found property in the Frankfort area. I continued to commute to Traverse City until she was pregnant,” he said.

He then began working from a home office, but when work dried up following the Great Recession, he returned to working in Traverse City before once again reverting to working from home in Benzie County. Conversations with a firm in Traverse City looking for someone experienced in real estate and estate planning led to his current situation: Today he works part-time for Pezzetti, Vermetten & Popovits, PC, and part-time in his own practice.

That allows Johnson to find the best of

both worlds, including working abroad.

The impetus came from his soccer-playing son, who took advantage of Croatia’s zeal for the sport.

“We couldn’t do it without the support from my wife and from Pezzetti,” he said.

Technology enabled him to work with clients, even in court.

“I did a hearing from the car at (his son’s) soccer club. I did many from my kitchen in Zagreb,” he said.

Those working from and in smaller communities see some unique opportunities. For one thing, being the sole lawyer in town can mean establishing long-term relationships with local businesses and residents.

Another is the chance to explore numerous facets of the profession.

“Practicing in a small town allows you to choose many different areas of law,” said Tyler Wickman, writing for the Marquette University Law School. In an article in the Michigan Bar Journal, Amy Stikovich noted the same thing: most attorneys in rural areas handle more than one area of law. Their work may encompass everything from estate planning, tax law, criminal law and family law to personal injury, bankruptcy, civil litigation and municipal law.

That can be a draw.

“Small town law is interesting. It’s everything: Divorce, real estate, estate planning, criminal (cases),” said Frankfort-area attorney Brian Johnson.

Beulah’s Lisa Vogler concurs.

“My specialty is anything that walks through the door,” she said. “In a small town in a one-person shop, (it’s) any litigation cases, real estate, divorce, domestic cases. It’s broad,” she said.

24 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

ACCOUNTING INSURANCE & LAW

Elhart

CRIMINAL MINDS Local defense attorneys on their purpose and practice

By Art Bukowski The way Craig Elhart sees it, his criminal defense work has implications that reach far beyond the alleged lawbreakers he represents.

Elhart, who has practiced law in Traverse City for almost five decades, says that criminal defense attorneys are the “foot soldiers of the Constitution.” Their work, he said, is one of the most important bulwarks against oversteps by the government.

“To be a defense attorney is to be an instrument that attempts to reduce the great unbalance between the awesome power of the government and those that are governed: the people,” he said. “The constitutional rights of all people are protected by the work that we do.”

As with other professional services in northern Michigan, Traverse City is the home base for a relatively large number of attorneys practicing in a variety of areas. In fact, State Bar of Michigan data shows that on a per capita basis, Grand Traverse County ranks behind only Oakland and Ingham counties in terms

of the number of registered attorneys.

But not everyone does criminal work.

The relatively few that practice criminal law do it on a retained (hired) or court-appointed basis, and they’re responsible for handling the hundreds of felony and misdemeanor cases that wind through

is of absolutely no consequence to me. We all have a right to a defense.”

Foot soldiers of the Constitution Mattias Johnson is a Traverse City native who’s practiced law for about 10

“The constitutional rights of all people are protected by the work that we do.”

– Craig Elhart, defense attorney

local courts each year. All are proud of the work they do, during which they doggedly fight for the clients they represent.

“You need an advocate who is going to be the one person who stands by your side throughout the proceedings, come hell or high water,” said local defense attorney Janet Mistele. “It doesn’t matter if the person quote-unquote ‘did it’ or not. That

years, and most of his work is criminal cases. Like Elhart, he speaks about the checks and balances that defense work provides.

“I’ll talk to high school classes about the idea of the rule of law, and we have the rule of law because we didn’t like having the law of rulers,” he said. “I think we have great prosecutors around here, but if they don’t have anybody pushing back on the other

side, it’s not a fair system.”

Mistele said her defense work often uncovers trampled rights, misunderstandings and situations in which a person is unfairly charged.

“So many people don’t even understand their right to remain silent, for example. It’s just shocking to me in this day and age that so many people are advised of their Miranda rights, but they still talk,” Mistele said. “So the right to counsel of course is crucial in all of this.”

Most criminal cases in northern Michigan are handled by public defenders, which are reserved for defendants who cannot afford to hire their own attorney. Some counties such as Benzie and Manistee have an actual public defender’s office (think of it as the opposite of the prosecutor’s office), while Grand Traverse and others rely on a stable of private practice attorneys that also take court-appointed work (funded by taxpayer dollars) in addition to retained work.

Local defense attorney Paul Jarboe’s office has a contract to manage court appointments for all the criminal cases

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25

ACCOUNTING, INSURANCE & LAW in Grand Traverse, Antrim and Leelanau counties, tapping into a list of about 15 attorneys to represent those defendants.

“Lawyers that do this work also have their own private practice, and this is just a part of their work, which in my view is the right business model for northern Michigan,” Jarboe said. “It gives them more experience, and they’re not limited to certain areas and getting burned out.”

Johnson has been on that list since he struck out on his own and started his own practice. While he’s taken on more retained cases over the years, the bulk of his work remains court-appointed.

“It was certainly beneficial to me at that point in time to have that steady flow, that recession-proof amount of business that’s going to keep coming. It’s not going anywhere. I think a lot of us wish it would go away, but the reality is that it isn’t,” Johnson said. “So it’s a very good sort of supplement to any practice.”

But don’t let the appreciation for steady work get confused for a lack of dedication. Jarboe contends that Johnson and the other attorneys in his little black book are among the best around.

“I would stack my lawyers up against anybody that’s retained,” Jarboe said.

“These are high-quality lawyers, they are dedicated, they are experienced.”

For his part, Johnson is very passionate about court-appointed work. This is because those who cannot afford an

attorney are often in the most need of dedicated, effective assistance, he said.

“They’re charged with a crime, but it’s often in combination with something else.

It may be a mental health issue. It may be an addiction issue. It may be physical health. It may be past trauma,” he said.

Johnson adds that disadvantages listed above are compounded in the courtroom.

“They don’t understand the process.

They don’t understand their rights,” he said. “So it’s critical that those folks have a very good counsel, which is something we’ve taken pride in.”

Mistele agrees.

“Nine times out of 10, they need more than just a criminal defense attorney,” she said. “They need someone who sees and hears about their other underlying issues that clearly have contributed to the situation they’re currently in.”

Defending the indefensible?

Local defense attorneys mostly chuckle if they’re ever asked how they can stomach defending criminals, particularly those charged with particularly heinous crimes.

“People will say, ‘Gee, how do you represent these types of people?’ And then invariably within a week or two, I’ll get a call from a law enforcement officer whose spouse, son or relative got in trouble and they need help,” Jarboe said. “Personally,

“We’re not magicians. We can’t change what happened. But we can help manage it and put it in context and perspective.”

– Paul Jarboe, defense attorney I’ve represented police officers and judges.

When they need help, they also turn to our office to get someone who’s experienced in providing that help.”

Johnson has heard comments of disapproval from time to time as well. But like Jarboe, he’s also represented folks who don’t fit the stereotypical criminal mold on plenty of occasions.

“Sometimes you get a sense of betrayal or anger from other people because you’re on this person’s side, you’re in

their corner,” he said. “But the reality is that if those people that are making those comments were in the exact same situation, they’d certainly like to have somebody in their corner as well.”

Besides, Johnson says, representing someone doesn’t mean an attorney condones what a defendant has done or is accused of doing.

“There are cases where it is difficult to be at the same table as somebody. But if we don’t, then the process is fundamentally bro-

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ACCOUNTING, INSURANCE & LAW Johnson

Mistele ken,” Johnson said. “Somebody has to do it.”

Elhart said that regardless of a person’s guilt or innocence, it is still vital to make the prosecution prove its case beyond a reasonable doubt. And like the others, he sees his clients as deserving of a spirited defense, regardless of the charge or charges they face.

“We find humanity in the people we represent,” he said. “All of us are flawed, some more than others, but we are all still human.”

That humanity is also what draws Mistele to her work.

“I do not look at the client as nothing more than the (criminal) complaint that’s issued by the prosecutor. They are so

much more than that,” she said. “They have strengths, they have weaknesses, and they have an absolute, God-given right to have someone in their corner when they’re facing the worst days of their life.”

How to find a good one For those that find themselves in a pinch, particularly for felony cases in which prison or other substantial punishment may be an outcome, it’s important to shop around.

“There’s some very capable lawyers in this town, very capable,” Elhart said.

“But I tell this to people all the time – we’re like plumbers or car mechanics or

anybody else. There are good ones and there are bad ones.”

Elhart says preparation is important, but experience perhaps more so. In most years he takes more cases to trial (as opposed to accepting a plea deal) than any other attorney in the area.

He loses plenty of those trials, but he believes his thousands of hours of trial experience give him an important edge in the cases he wins.

“That’s the first thing you should ask: ‘Have you ever done one of these cases before? When was the last time you tried a case?’” Elhart said. “Most lawyers will have a difficult time telling you the last time they tried a case.”

Jarboe says any potential choice should be vetted and carefully researched.

“If you’re going to retain, ask for referrals.

Word of mouth is the best way. Anybody that wants to spend the money can have as much advertising and make it as high profile as they want,” he said. “Don’t base it on an internet ad, or how many clicks somebody has. You’ve got to do your due diligence.

That attorney might be the only friend you have for a while.”

Something to remember, however: Even the best lawyer can’t alter the past.

“We’re not magicians. We can’t change what happened,” Jarboe said.

“But we can help manage it and put it in context and perspective.”

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ACCOUNTING INSURANCE & LAW

By Alex Zelinski, columnist We live in an increasingly digital age where criminals are becoming more sophisticated in their methods of stealing and extorting. Many businesses of varying size across nearly all industries are at some risk of suffering a loss from a cyberattack.

Businesses that process, store, handle or work with sensitive and private information should have a robust cyber liability insurance policy as part of its overall risk management strategy.

Cyber liability insurance can help businesses protect themselves from a financial loss associated with the various and ever-changing forms of cyberattacks.

Some of the more common methods and tactics that cyber criminals are using now include: phishing, ransomware, malware, man-in-the-middle attack, and denial-of-service attack.

According to a study done by the University of Maryland, a cyber attack occurs roughly once every 39 seconds. A sound risk management strategy should include a robust cyber liability component. It is crucial when selecting a cyber insurance program for one’s business that first and third-party losses are included in the policy. First-party cyber insurance can help with covered claims when there is a data breach that happened to the company named on the policy (the named insured).

Third-party cyber insurance helps provide liability coverage for a business that is responsible for someone else’s information, data and more. Including first- and third-party coverage will help ensure that the business is thoroughly covered.

There are a variety of cyber insurance coverage options available to businesses today. The best coverage for a particular business will depend on its specific industry, size, vulnerabilities, needs and risks.

Data Breach Coverage: This coverage pays the costs associated with a data breach, such as notification, credit monitoring, investigation and remediation.

Cyber Extortion Coverage: This coverage pays the cost of a ransom demand to cyber criminals to unlock encrypted data or prevent them from releasing stolen data.

Business Interruption Coverage: This coverage pays the cost of lost revenue and profits due to a cyberattack that disrupts daily business operations.

THIEF IN THE NIGHT:

Sophisticated cyber criminals warrant liability insurance Liability Coverage: This coverage pays for the cost of defending against lawsuits from customers, employees and other third parties who are harmed by a cyberattack.

A recent Forbes article shared an alarming statistic that as of May 2023, nearly 340 million people have been affected by publicly reported data breaches or leaks according to a public data breach tracker created by the U.K. news site, The Independent. Since the start of the COVID-19 pandemic in 2020, which allowed more people to work remotely, cyber crime rates have increased by 300%. Cyber liability insurance will continually become more important as technology becomes even more ubiquitous.

Protecting Your Business There are a number of proactive and protective measures that businesses should implement to keep would be cyberattacks at bay. Keep in mind the attack surface of your business, or taking stock of the entire ecosystem that could potentially be an exposure for a business. Now more than ever, there are many different devices being used for work and play: cellphones, tablets, laptops, desktops and more. These are all potential targets for cyber criminals.

The good news is there are new and effective methods to make a business more cyber-resilient. Here are a number of protective methods and tactics a business

can and should consider utilizing: Multi-Factor Authentication (MFA): This practice is becoming standard across many industries, technologies and systems. MFA provides another layer of security to help ward off would-be intruders by utilizing at least two check points before allowing a user to enter.

Think Before Clicking: It can sometimes be difficult to slow down and resist clicking emails, prompts and website links, but pausing before we click can help ward off cyberattacks. Reviewing a prompt before clicking is an excellent way to ward off a potential cyberattack.

Strong Password Management: Updating passwords on a regular basis and using strong passwords can make a big difference. There are practical remedies to get beyond that bad habit of using easy passwords to crack. Do not use default passwords on your devices. When you do create passwords, make them complicated. Consider long phrases, sequences, alphanumeric combinations with letters, numbers, and characters, or even math problems.

Protective Tools: For better protection a business should use firewalls, virtual private network, remote desktop protocol, and adding antivirus and anti-intrusion detection software to devices, networks and systems.

Update and Backup: Updating and backing up the business network consis-

tently is crucial. Segmenting and encrypting sensitive data are vital.

Incident Response Plan: Last but not least, it is imperative for larger and more vulnerable businesses to create a formal and written incident response plan. This plan should include a tabletop simulation. Practicing a run-through with key team members is highly recommended and practical. This exercise will help find gaps and weak spots that can be fixed before a real cyberattack happens.

According to Check Point Research, global cyberattacks increased by 38% in 2022, compared to 2021. Businesses should do everything in their power to prevent, prepare for, and practice a cyberattack event. Avoiding and mitigating the risk of a cyberattack requires an assessment of the overall exposure.

As cyber criminals continue to evolve and adapt their methods and techniques so, too, will businesses need to adapt and respond to ensure that all stakeholders are well-protected and covered. Cyber insurance can be a valuable asset in a business’s overall risk management strategy. Consult with your insurance agent for coverage options that can be tailored for your business’s specific needs.

Alex Zelinski is a commercial account executive with Ford Insurance Agency. He can be reached at azelinski@fordinsurance.net or (231) 941-0450.

30 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

ACCOUNTING INSURANCE & LAW

‘SIX-FIGURE PROBLEMS’ Why restaurants, including TC’s Barrio, can run afoul of the Fair Labor Standards Act

By Craig Manning Small mistakes can have big consequences, especially in the world of wage and hour law.

The Fair Labor Standards Act (FLSA) is designed to protect the labor rights of American workers, stipulating everything from minimum wage rates to overtime pay rules to youth employment standards.

In practice, though, the FLSA can also be an unexpected minefield for employers – especially in sectors like hospitality, where wages often depend on one particularly tricky area of wage and hour law: gratuity.

Anders Gillis, an employment law attorney for the local firm Parker Harvey, meets almost daily with business owners daily to discuss the ins and outs of that complex federal law.

Every year, the U.S. Department of Labor investigates thousands of violations of the FLSA nationwide. During the 2022 fiscal year alone, the department pursued nearly 14,000 cases over alleged minimum wage or overtime violations. Those cases concerned nearly $150 million in back wages and affected more than 140,000 employees.

Sometimes, those cases strike close to home. In September, the U.S. Department of Labor announced that it had filed a federal lawsuit against a Michigan-based Barrio Tacos franchise. Barrio is a restaurant chain with locations in six states, including a three-restaurant franchise in Michigan. Owned by business proprietor Jacob Hawley, the Michigan franchise encompasses restaurants in East

Lansing, Grand Rapids and downtown Traverse City. The Labor Department suit has accused Hawley and his franchise of FLSA wage violations at all three Michigan locations.

Specifically, the lawsuit alleges that Barrio and Hawley have, for the past two years, utilized an illegal tip-sharing structure that has unlawfully deprived some workers of wages. That wage approach required tipped workers to give up a portion of their tips to managers, who then redistributed gratuities to non-tipped employees.

The lawsuit also holds that Barrio failed to pay tipped employees the federal minimum wage of $7.25 per hour, and

return the TCBN’s requests for comment on the matter.

While the Barrio case has been splashed across the headlines in Michigan this fall, Gillis is quick to push back against the suggestion that the lawsuit is much of a scandal. For restaurants especially, Gillis says wage and hour violations are common, with almost all of those violations stemming from tips.

“When it comes to restaurants, I’d say that tip pooling is definitely one of the most common pitfalls that business owners run into,” Gillis said.

Tip pooling is meant to spread gratuities evenly among a restaurant’s tipped staff. Rather than having each waiter or

...(I)f you have enough employees and you go back two to three years with a flawed practice, it’s really easy for these issues to spiral into six-figure problems.”

– Anders Gillis, attorney, Parker Harvey that the business also calculated overtime wages for tipped workers based on the tip credit rate rather than the federal minimum wage rate. Finally, the suit asserts that Barrio failed to comply with FLSA record-keeping requirements.

In total, the Department of Labor is seeking $823,000 in back wages and damages for 177 Barrio workers impacted by the policies, including workers in Traverse City. Representatives from Barrio did not

bartender collect and keep their own tips, a tip pool combines gratuities and divides them evenly among the tipped staff. In theory, the tip pool helps ensure that front-of-house staff who have less direct face time with patrons – such as hosts, bussers, or food runners – get to participate equally in tips. A tip pool can also help reduce the impact of a single poor-tipping customer or a waiter’s shift.

According to Gillis, tip pooling is an

Gillis elevated risk for restaurateurs.

Here’s one hypothetical scenario Gillis shares to explain the risk: A waiter calls in sick and needs someone to cover their shift, and the restaurant manager decides to step in for the evening. The manager works as part of the front-of-house team for the night, collaborating with other waitstaff and support staff to handle the dinner rush. Because they are waiting tables, the manager collects tips throughout the evening. And because the standard operating procedure is for everyone to pool their tips, the manager’s gratuities go into that pool as well.

It’s here, Gillis said, that things can get sticky. The manager, while they’ve been acting as a member of the front-of-house team all night, is not a tipped employee.

Instead, the manager is still receiving their standard hourly wage – even while working outside of their usual responsibilities – and is therefore not eligible to participate in a tip

TRAVERSE CITY BUSINESS NEWS

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ACCOUNTING, INSURANCE & LAW pool meant for tipped employees. Therefore, if the manager takes their share of the tip pool, that taking can constitute wage theft under the FLSA, even though the manager technically did the work and earned the tips.

“The manager might even be contributing way more (to the tip pool) than they’re taking out,” Gillis noted. “But the FLSA is a pretty technical law, which means these companies can get into a lot of hot water really quickly with that sort of situation in the hospitality industry.”

To avoid FLSA violations in the situation above, the manager would either have to forfeit their share of the tips once they go into the tip pool, or keep their share separate from everyone else’s. But as Gillis noted, the FLSA is a highly technical law, and even the latter solution can bring problems given how collaborative most restaurant staffs are.

“The manager can keep tips if they’re not in the tip pool, but only if they’re receiving the tips directly from the customers for services that they directly and solely provide,” Gillis said. “The key there is that it has to be for services they ‘directly and solely provided.’ So, if some bus boy comes along and is pouring water, that could be a bit of a problem there.”

The nuance of this kind of situation, Gillis noted, is illustrative of how the FLSA works. While stories like the Barrio case are often presented in the news as issues of alleged wage theft, they often boil down to simple situations like the one above, with someone making a seemingly innocuous mistake in how tips are divided.

“With most wage and hour lawsuits, the business owner thinks they are doing things right,” Gillis said.

“They’re genuinely not trying to rip anyone off.”

Gillis saysCLINICS that most headlines DENTAL NORTHare misleading.

“...(I)t’s very rare that an employer is actually trying to steal from their employees,” he said. “They’re usually actually trying to do the right thing. It’s just that they get caught up on some nuances of federal or state law.”

Good intentions or not, Gillis stresses that wage and hour violations can be costly for hospitality businesses that commit blunders with tip pools, overtime calculations, record-keeping, or other aspects of FLSA law.

Business owners not only must pay back the wages to the employees, but also must pay “liquidated damages,” an amount equal to the lost wages. “...(I)f you have enough employees and you go back two to three years with a flawed practice, it’s really easy for these issues to spiral into six-figure problems,” he said.

In the Barrio lawsuit, for instance, the Department of Labor is seeking $411,662 in back wages and an equal amount in liquidated damages, equating to the total of $823,324.

So, how can owners of restaurants, bars, and other hospitality businesses avoid their own costly FLSA lawsuit? Beyond recommending annual sit-downs with an attorney to review wage policies and payroll, Gillis advises his clients to have policies in place and listen to the people most likely to spot wage and hour errors: the employees themselves.

“Because if employees notify the business owner – and if they know that they can do that without any fear of retaliation – then that gives that business owner an opportunity to figure out if there really is a problem and then get it fixed,” he said. “Trust me, if there is a problem, it’s much better to hear about it from your own employee than from an opposing attorney.”

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THE MISCLASSIFYING ISSUE While tip pooling is perhaps the most common source of FLSA violations, Gillis said employers in northern Michigan also frequently make the classic mistake of treating employees as exempt salaried employees who are not entitled to overtime when they should be non-exempt employees who have their hours carefully tracked.

The FLSA outlines five categories of employees that are exempt from receiving overtime pay. These include: • Administrative employees, such as managers or directors • Computer employees, such as programmers, software engineers, or computer systems analysts • Executives, such as CEOs or other C-suite employees • Outside sales personnel • Professional employees, a category that includes both learned professionals (such as accountants, architects, doctors, lawyers, engineers, teachers, or professors) and creative professionals (such as artists, actors, musicians, composers, writers, or graphic designers).

Sometimes, Gillis says, employers will misclassify workers into one of these categories to claim an overtime exemption, which can in turn lead to an FLSA violation.

“The classic example is when someone is an assistant manager at a restaurant, or has or has some fancy title, but in reality, their job is more focused on things like cooking, cleaning, and serving,” Gillis explained. “This is what we call a misclassification issue, when an employee is claimed as exempt and not entitled to overtime, when they are more likely non-exempt.”

32 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

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ACCOUNTING INSURANCE & LAW

By Jon Sluis, columnist Selling a business is a significant milestone for any entrepreneur, and it requires careful planning and preparation to ensure a smooth and profitable transition. To achieve a successful sale, business owners must pay attention to several critical factors.

There are four life phases of the business, cash flow, and the quality of the business’s assets. Understanding the life phases of your business is crucial in the context of selling.

These phases typically include: Start-Up Phase: A business in the startup phase is in its infancy. It is not tested and there is a high risk of failure associated with this phase. It is characterized by high-growth potential but often limited cash flow and profitability. To prepare for a sale, focus on demonstrating your business’s scalability, market potential, and innovation.

Growth Phase: In the growth phase, a business is expanding, and it may be generating substantial revenue. If your business is really taking off, it may be attracting the attention of competitors. Decide how to set yourself apart from your competitors. Concentrate on improving operational efficiency, profitability, and building a strong management team.

Maturity Phase: If your business is in the maturity phase, it may have plateaued in terms of growth. However, maturity offers stability. Businesses in this phase are steady and predictable, which can lead to a higher valuation. To make your business attractive to buyers, emphasize stability, a loyal customer base, and a proven track record of consistent profits. You want to look for a buyer who will either embrace the stability or take your business to the next level. Work to keep your business relevant in the business landscape and up-to-date with any technology associated with the business.

Decline/Renewal Phase: In the decline phase, your business might be facing challenges or declining revenues. Showing that your business may be a diamond in the rough, and looking for someone

Exit Right: When it’s time to sell, careful planning and preparation are key to infuse it with new energy in order to obtain new synergies, is a great strategy. To maximize its value, consider restructuring, reducing costs, and showcasing any assets that remain valuable.

Cash Flow Analysis You’ve heard the phrase, “Cash is king.” If you don’t have the cash, you’re going to fail. Cash flow determines value, so the more cash-rich a business is and can prove that over time, the better.

Understanding your cash flow, being able to show historical cash flow and good projections for the future is going to increase the valuation of your business. Potential buyers will scrutinize your financial statements and cash flow projections.

Here’s how to prepare your business in this context: • It is essential to make sure your historical cash flow statements are on point.

What this means is that you want to have accurate records of how money has been flowing in and out of your business over the years. This can really boost the confidence of potential buyers or investors.

They want to see that you’ve been managing your finances well in the past.

• Looking into the future, you’ll want to create some cash flow projections.

These are basically educated guesses about how you expect money to come in and go out of your business in the coming

months or years. It’s important to be realistic here. You want to show that you’ve thought about the business’s growth potential, demonstrating your ability to plan ahead and make wise decisions.

Now onto working capital management. This is all about managing your day-to-day financial operations. You want to be smart about how you handle things like inventory and receivables. If you have a lot of inventory sitting in your warehouse, that’s money tied up. And if you are not getting paid promptly by your customers, that can cause cash flow problems. So, streamline your working capital management, optimize your cash flow, and improve your financial health. It’s all about using your resources efficiently.

Quality of the Business’s Assets The quality of your business assets helps to drive the purchase price. Your business assets go beyond your physical desks, equipment and computers. They include the following: Workforce: Having a strong and capable management team in place is an intangible but valuable asset. Highlight their skills and contributions to the business’s success.

Intellectual property: Protect and showcase your intellectual property, including patents, trademarks, and proprietary technology, to add value to your business.

Customer base, customer and vendor

contracts: The size and engagement of your customer base makes a difference, so make sure to talk this up. Review the terms of your contracts with customers and vendors. Secure long-term relationships where possible, as this can enhance the business’s appeal to buyers.

Technology: In today’s digital age, technology is a vital asset. Make sure your business leverages the latest tech to stay competitive.

The reputation of your business: Do not underestimate the value of your business’s reputation. A solid reputation can be a major selling point. Positive customer reviews, industry awards, and a strong online presence can enhance your business’s attractiveness to potential buyers.

Preparing your business for sale is a meticulous process that involves considering the four life phases of the business, optimizing cash flow, and enhancing the quality of the business’s assets. By paying attention to these key factors, you can set yourself up for a successful and lucrative business transition.

Jon Sluis, CPA, is president of Intrust CPA in Traverse City. With a background in public accounting and private industry, he has more than 20 years in the industry. Specific areas of expertise include federal taxation law, tax credit financing, long-range strategic and financial planning, entity structuring, financial improvement measures, and financial reporting. For more information, call (231) 935-1590 or visit www.intrustcpa.us.

34 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

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PHILANTHROPY

HOLIDAY WISH LIST Nonprofits think outside the box for non-cash donations

By Craig Manning Years ago, one of the most popular annual traditions at the TCBN was the nonprofit wish list. Each November or December, our team would round up a slate of local nonprofits and ask them to share some of their biggest wishes or needs as the holiday season approached. The tradition fell away sometime around 2019, but this holiday, we’re bringing it back.

For those who remember the feature, we’re keeping the format intact, which means we encouraged local orgs to think about their needs in small (less than $100), bigger (less than $500), and biggest (sky’s the limit) categories.

The caveat, then and now, is that organizations can’t just wish for cash. While straight donations are the most common ask from nonprofits – especially during big fundraising drives around this time of year – we encouraged organizations to think outside the box for other things they need right now. Because who knows? Sometimes, wishes really do come true.

Cherryland Humane Society Cherryland Humane Society seeks to provide a safe harbor for the animals entrusted to its care, all while striving to find those animals responsible, loving, and permanent homes. In addition, the organization works with current and prospective pet parents in making good adoption choices that meet their specific circumstances, as well as helping people keep their companion animals by giving them the tools and resources for success.

Less than $100: Shelter cleaning supplies, such as OdoBan, bleach, disinfectant wipes, garbage bags, and hand sanitizer; gift cards to Chewy, a popular online retailer of pet food and other pet-related products.

Less than $500: Cat beds from the brand Koranda; dog walking supplies, including leashes and treat pouches; more Chewy gift cards.

Sky’s the limit: An event tent customized with the Cherryland Humane Society logo and branding for use during community outreach events.

For Love of Water For Love of Water (FLOW) seeks to ensure the waters of the Great Lakes Basin are healthy, public, and protected for all. The Great Lakes watershed not only represents 20% of the world’s fresh surface water, but is also held in public trust, which means it belongs to everyone and is owned by no one. FLOW works to raise awareness about the public trust doctrine and to educate the public about their rights to water protection. In addition, the organization serves as a watchdog to prevent leaders and

special interest groups from ignoring or violating the public trust. Collectively, that work is intended to protect the waters against systemic basin-wide threats, increased water conflicts, diversions, and climate change impacts.

Less than $100: Assistance in growing FLOW’s online platform, whether by following the organization on social media, subscribing to FLOW’s YouTube channel, signing up to receive a twice-monthly e-newsletter, and keeping an eye on the organization’s latest volunteer opportunities.

Less than $500: Credits for Blink electric vehicle charging stations, to help offset the FLOW team’s cost of getting to and from Lansing to update Michigan’s leaders; FLOW-branded burgees (a type of flag that typically bears the emblem or colors of a sailing club) for visibility at popular Great Lakes sailing races; an upgrade for FLOW’s conference room teleconferencing technology; a lighting kit to improve production value on FLOW webinars.

Sky’s the Limit: A new multi-suite office space to serve as FLOW’s headquarters.

ing and hygiene products to be included in welcome home gift baskets (given to those who are finding home and in need of the basics), such as brooms, mops, laundry and dish washing soap, bathroom cleaners, shower curtains, laundry baskets, bathmats, and towels; items to help with Food Rescue operations, including pruning shears and fruit-picking aprons or buckets.

Under $500: Storage solutions to aid in the operation of Goodwill Northern Michigan’s e-commerce store, including chrome wire shelving units and vented container bins; Zebra-brand wireless Android handheld barcode scanners for use in Goodwill thrift stores; a half-dozen (or more) 15-foot-tall feather flags emblazoned with “Food Rescue Volunteer Here.”

Sky’s the limit: Warehouse equipment for a newly-opened Goodwill store in Petoskey, including a Big Joe-brand 2,200-pound-capacity straddle stacker and a Global Industrial-brand 5,000-pound-capacity pallet jack; a fuel card loaded with $500 (or more) for the Food Rescue team.

Goodwill Northern Michigan

Grand Traverse Regional Land Conservancy

Goodwill Northern Michigan is a community-owned nonprofit that works to bring food to neighbors and to help people find home throughout a 19-county region that reaches from Wexford to Cheboygan. Local programs – which include things like Food Rescue, Street Outreach, the Goodwill Inn, the Basic Needs Coalition, Supportive Housing, Good Meals, and Good Partner vouchers – help combat issues like poverty, homelessness, and child hunger. Donations and sales at Goodwill’s local thrift stores help generate funds for the organization’s programs.

Under $100: Personal care items for the Basic Needs Program, including soap, toothpaste and toothbrushes; feminine hygiene products; disposable razors; underwear; socks; backpacks; and winter coats or gloves; housekeep-

The Grand Traverse Regional Land Conservancy (GTRLC) has been working to protect and care for the region’s natural, scenic, farm, and forest lands for the past three decades. Across a five-county region that includes Grand Traverse, Antrim, Kalkaska, Benzie, and Manistee counties, GTRLC has so far protected nearly 47,000 acres of land and 153 miles of shoreline along local rivers, lakes, and streams.

Less than $100: Supplies for GTRLC’s two invasive-species-munching goat herds, including livestock scratch brushes, yearling-sized braided rope halters, and hay feeders.

Less than $500: After a productive first year, GTRLC’s native plant greenhouse – which grows native plants for restoration and stewardship efforts throughout the

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PHILANTHROPY organization’s five-county service area – is in need of additional tools and supplies, including tubs for storing seeds, tools for planting native plant seedlings, carts to haul supplies and materials, and additional native seeds or plant materials from local native plant nurseries.

Sky’s the limit: How about new lands to add to the GTRLC portfolio? Per the organization, a legacy gift of $823,172 would complete seven critical land protection and restoration efforts, protecting water quality, and restoring habitats in Antrim, Benzie, and Grand Traverse counties. GTRLC is also looking to match a $200,000 challenge grant offered by the Morrissey family, which would help it add 342 acres of land and an entire lake to the existing Upper Manistee Headwaters/Milock Family Nature Preserve in Kalkaska County.

supplies, groceries for home dedications, or gas to pick up Habitat ReStore donations; one month of utilities or phone bills; computer monitors; a beverage sponsor or donor for events; a 16-foot aluminum scaffolding plank; a Milwaukee-brand impact driver tool; a CPR training package.

Sky’s the limit: A 16-foot box truck; a new HVAC system for the Habitat ReStore pole barn; painting services for the exterior of the ReStore building; window, door, shingle, or truss packages for two new homes; an advertising package, including radio, television, and billboard promotional opportunities; construction equipment, including a skid-steer loader and a SkyTrak telehandler.

Habitat for Humanity Grand Traverse Region

Housing North was formed in 2018 to serve as northwest Lower Michigan’s regional lead for the Statewide Housing Plan.

By raising awareness, influencing policy, and actively expanding housing capacity, Housing North has a mission to remove barriers to housing so that communities in the 10-county northwest Michigan region can create housing solutions that meet their unique needs.

The organization’s long-term vision is to make northwest Michigan a place where families of all income levels can find homes that are safe and affordable.

Less than $100: An annual membership supporting Housing North’s housing ready program.

Less than $500: Housing North has a “Zoning Reform Toolkit,” a 55-page booklet that details 15 tools to expand housing choice and supply in northern Michigan.

According to Housing North Executive Director Yarrow Brown, someone taking it upon themselves to have that resource printed and delivered to all the units of government in one county could have a powerful impact on local housing policy.

Sky’s the limit: A $5 million endowment for Housing North’s regional housing fund, which Brown said would

Founded in 1986 as an affiliate of Habitat for Humanity International, Habitat for Humanity Grand Traverse Region serves three local counties – Grand Traverse, Leelanau, and Kalkaska – working in each to bring people together to build sustainable homes, communities, and hope. The organization will have several new home ownership opportunities available in the region in 2024. In addition to building affordable houses for local families, Habitat GTR also operates Habitat ReStore, a thrift store whose proceeds support the nonprofit’s local operations.

Less than $100: Cleaning supplies, paper towels, and toilet paper; reams of office/printer paper; rolls of postage stamps; financial coaching for a new homeowner client; a new six-foot level for building projects; coffee pods for volunteers at home-building job sites; lunch for a team of volunteers.

Less than $500: A dumpster or trailer for garbage removal from construction sites; gift cards for tools and

Housing North

enable the organization to provide gap funding for housing projects in our 10-county region through low-interest loans and grants.

United Way of Northwest Michigan United Way of Northwest Michigan (UWNWMI) seeks to advance the common good across a seven-county service area by bringing together a mix of donors, volunteers, and organizational partners to address the most pressing issues of local communities. Those issues include healthcare, childcare, food security, transportation, utility assistance, literacy, and more. One specific project example is the brand-new United We Smile Dental Clinic in Traverse City, which offers free care to children, pregnant women, veterans, and those with developmental or cognitive disabilities.

Under $100: A range of supplies for the new dental clinic, including infant changing pads, prescription toothpaste, wave/sound machines and light displays for sensory/quiet rooms, ultraviolet light covers, noise-canceling headphones, LED light strips, and sensory/fidget toys. Many of these supplies, UWNWMI said, will help the clinic serve patients in need of sensory accommodations or those who experience nerves or anxiety about going to the dentist.

Less than $500: Two basic refrigerators, where dental clinic interns and volunteer dentists can park their sustenance every day; a small lounge chair for the clinic’s lactation room; six bar-height stools for the clinic’s dictation room, where volunteer dentists and interns work on patient charts.

Sky’s the limit: A 12-passenger bus to get patients who struggle with transportation barriers to the United We Smile clinic; a new building to serve as a local hub for early childhood care, education and family support.

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PHILANTHROPY

Kate Pearson is a major gifts officer at the Grand Traverse Regional Land Conservancy.

FOR THE CAUSE Fundraisers generate big bucks for local nonprofits

By Art Bukowski Anthony Rupard was happy right where he was as a professor and dean of students at Georgetown College in Kentucky, building relationships with young learners and helping them reach their full potential year after year.

So it was mildly perturbing when the college president persistently approached Rupard in an effort to move him from instructing to fundraising. Rupard politely told the president it was “the last thing” he wanted to do.

“It just sounded awful, having to ask people for money,” Rupard recalled. “I just wasn’t interested.”

About 15 years later, with many millions of dollars raised under his watch, Rupard is the first to dispel the misconceptions that made him leery of that profession in the first place.

“One of the big myths is that you’re taking something from somebody by asking them for a gift, but instead you’re inviting them to make a decision about transforming their community or their world, or something they’re passionate about, and that’s really powerful,” said Rupard, who now runs

a local consulting business with a focus on nonprofit fundraising.

The Grand Traverse region is filled with organizations that depend on philanthropy to fulfill their missions.

And while a big part of that is annual giving – picture the snail-mailed solicitations that ask you to check a gift level box – the most transformative and impactful donations are procured by fundraisers who build personal relationships with donors and ask them for major gifts.

‘What makes their eyes sparkle’ Kate Pearson is a major gifts officer at the Grand Traverse Regional Land Conservancy. She says the name of the game is building strong, genuine relationships with donors, which starts with listening.

“A really big part of fundraising is listening, and what you’re listening for is an expression of their values – it can be something as simple as them saying they like rivers, or it could extend into deep conversations about what gives life mean-

“There are more people raising money, and they are more professional and more experienced when asking folks to lean into their causes.”

–John Bogley, vice president of philanthropy and engagement, Interlochen Center for the Arts

“People give to things they care about, and they give much bigger gifts through people they trust and know,” Rupard said. “People will make lots of smaller gifts impulsively, but when they think about stretching, making a large gift, what they’re looking for is someone at the organization they know well.”

ing for that person,” she said. “You’re listening and watching for what makes their eyes sparkle.”

Rupard, who served as the fundraising director at GTRLC from 2014 until 2020 – overseeing that organization’s $94 million Campaign for Generations with Pearson

on his team – said the relationship between donor and fundraiser is critical for a variety of reasons. The fundraiser can better connect the donor with the right giving opportunity, for example, and can best explain how their gift is actually being used to make a difference.

“People don’t naturally stretch on their own to make larger gifts. You have to lead them to that point of reflection and consideration,” Rupard said. “It’s typically through the relationships with staff members and experiences with organizations where they’ve become more passionate, where staff members invite them to think bigger and help them understand what a bigger gift would do.”

Pearson says the personal connection also makes a potential donor appreciate the organization much more, which is imperative for successful fundraising.

“Simply knowing someone takes the wall of mystery away, and the staff person can be a conduit to a deeper understanding of how we do our work and why it’s important,” she said.

So how do fundraisers find these major donors? To put it simply, the prime targets will be those who have a strong enthusiasm for an organization’s mission while also

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PHILANTHROPY possessing the wealth to make a major gift.

“The key to success is first trying to understand various people’s affinity for what we do,” said John Bogley, vice president of philanthropy and engagement at Interlochen Center for the Arts. “How have they interacted with Interlochen? Have they attended performances on campus, made a previous gift, been back to campus if they were a student? We look at those myriad actions and say, ‘Here’s who we want to focus on.’”

From the wealth perspective, organizations scour available data to estimate a person’s net worth, sometimes even using online services that examine and compile this information. They’re also looking for people who have already shown a willingness to give big gifts to various causes.

“Certainly at the major gifts level, we’re focusing on those individuals who we believe have the financial wherewithal and the philanthropic inclination based on what we can find out about them in publicly available sources to make (major gifts),” Bogley said.

Regardless of what the data shows, avoiding assumptions is important, fundraisers said. Rupard cited an Ivy league study from a few years back that looked at seven-figure gifts to a school. In the majority of those cases, the first gift those million dollar-plus donors gave was less than $200.

“It’s very dangerous to assume that if the donor’s first gift is small that you already know the long-term philanthropic impact they could have on your organization. And you’re not going to know that until you start building a relationship with them and asking questions,” Rupard said. “A $1,000 donor might never give you more than that, and a $100 donor might give you a million dollars.”

Rupard also says that his nonprofit clients are often wringing their hands about connecting with young people. While it’s important for them to have affinity for the organization, data suggests that chasing them around for dollars won’t yield the best return on investment.

“We really caution organizations when they feel that if they don’t get 30- and 40-year-olds, they’re not going to be donors when they’re 60, 70 or 80. It’s just not true.

You can’t back that up statistically,” Rupard said. “They may not even have lived in your community when they were younger, or they may not have even heard of you.”

Challenges, changes and gratitude Perhaps one of the biggest challenges inherent for fundraisers is the highly variable aspect of what donors want and need in terms of interaction.

“People are dynamic, they’re different.

Rupard

“One of the big myths is that you’re taking something from somebody by asking them for a gift, but instead you’re inviting them to make a decision about transforming their community or their world, or something they’re passionate about, and that’s really powerful.”

- Anthony Rupard, principal, The Solvent Group And they’re at different stages of life, processing different things. Some people are facing death, they might be ill. They might be thinking about the next generation, or they might not be – they might have already taken care of the next generation,” Rupard said. “And people also have very different needs from a relationship standpoint.”

Rupard says it’s best to be self-aware, and to build a relationship with somebody on their terms.

“As humans we have different love languages, and that comes into play as you’re building these relationships. What do they enjoy hearing about? What means the most to them?” he said.

Time management is also a challenge in

a business built on personal rapport.

“I think part of being a fundraiser is you never really feel like the job is done or you’re getting it right. It’s a relationship business, and I can always think of someone that I should be in touch with right now that is not getting to my calendar,” Pearson said.

“So there’s this constant sense of anxiety.

With a workload this heavy, the prioritizing has to be pretty specific.”

Fundraising has also become a much more competitive space over the last 10-20 years, those in the space say, as organizations have greatly stepped up their game and combined to bombard and sometimes overwhelm donors with options.

“They’re getting hounded by so many

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PHILANTHROPY nonprofits trying to get their attention that they’ve become much more judicious and guarded,” Rupard said. “When we talk about the art and science of fundraising, this is where the art becomes ever more important – the art of the ability to build authentic relationships.”

Bogley agrees.

“The range of options that people have to make a difference philanthropically has grown,” Bogley said. “The number of organizations and the professionalism of those organizations has grown. There are more people raising money, and they are more professional and experienced when asking folks to lean into their causes.”

For organizations like Interlochen, that means a strong push to show that among dozens of other charitable causes, their work is just as important from a humanitarian standpoint.

“In an environment where the world may be looking in other directions, our job is to make sure that folks understand or at least hear our message that the arts make the world a better place in areas far beyond the arts themselves,” Bogley said.

Other societal shifts are coming into play as well. Rupard said that major wealth is being consolidated to fewer and fewer people as the middle class gets crunched. That means that even though overall giving amounts continue to

increase, fundraisers are competing for a smaller pool of major donors.

Both Pearson and Rupard said the baby boomers are also a different breed. Whereas the previous generation gave freely because it was “the right thing do to,” the boomers needs a bit more convincing about the impact of their gifts.

“The boomers are more metrics driven.

They want more proof in the form of data.

I don’t want to say the older generation had more faith or trust, because that’s not quite it, but they really didn’t need to see those metrics,” Pearson said.

Part of that can likely be attributed to a much more competitive philanthropic space, Rupard said.

“They’re just more cautious, they don’t give just because it’s the right thing to do – they want to understand more data,” Rupard said. “They want to know where the money’s going to go and how it’s truly going to make a difference.”

When it’s all said and done, genuine gratitude is perhaps more important than anything. Pearson said the old rule of thumb is that you should thank someone seven times before you ask them for another gift.

“In our society, we tend to be more focused on the gathering of wealth as opposed to giving our resources away, so giving is a pretty radical thing,” she said.

“Donors need to know in their heart of

Bogley

hearts that they really are appreciated, and that the gift made an actual difference.”

Pearson says she will never cease to enjoy spending time with the donors in her portfolio, she said, and that has very little to do with their net worth. They’re interesting, generous, passionate, thoughtful and kind – the types of folks that are deeply enjoyable to be around.

“The people who give are just really nice to know. They share their thinking about the future, their community, their thinking about the world, and it really appeals to me,” Pearson said. “I like talking to these people who feel passionate enough to open up their wallets and give until it hurts. I talk with people who give until it hurts.

Isn’t that crazy?”

GIVING BY THE NUMBERS • $499.3 billion nationwide • 64% came from individuals • 21% came from foundations • Top charitable causes: religion (27%), human services (14%) and education (10%) • Average donor age: 64 Source: 2022, Lilly Family School of Philanthropy at IUPUI and Double the Donation

42 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

Welcome, William!

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PHILANTHROPY

ALL TOGETHER NOW Rotary Charities, Community Foundation collaborate on regional initiatives

By David Mengebier, columnist

By Sakura Takano, columnist

What does it take to create and support a thriving community? As local funders, we’ve learned firsthand through our decades of work with grant partners, supporters and community leaders that there isn’t a single metric, innovation or organization that can push us toward a thriving region that benefits everyone. Rather, it’s the work we do together that contributes to this vision. That’s how both of our organizations – the Grand Traverse Regional Community Foundation and Rotary Charities of Traverse City – strive to impact the people and places of our region. By working in frequent partnership with each other, we know we can do better by our communities.

Together on an equity and inclusion journey One of the ways we’re aiming toward a thriving vision for our region is by supporting each other’s equity and inclusion efforts, and those of our community partners. In 2021, the Community Foundation launched its Diversity Equity and Inclusion (DEI) Fund, which champions organizations led primarily by people of color, LGBTQ+, immigrant, neurodiverse, veteran, and disability community members. That same year, Rotary Charities made an organizational commitment to embed equity at the core of its culture, operations and strategy. Both of our organiza-

tions believe that supporting historically marginalized voices helps to create communities where people of diverse backgrounds and needs can belong.

Translating intentions into action, Rotary Charities made a $35,000 contribution from the Rotary Endowment at the Community Foundation to the DEI Fund. With the support of this investment – and that of other donor partners, including Consumers Energy Foundation – the Community Foundation’s DEI Fund has had a big impact in just over two years. To date, the Foundation has awarded more than $116,000 in grants to over 45 different organizations, from Immigration Law & Justice Michigan and Up North Pride to Grand Traverse Industries and Michigan Indian Legal Services, among others.

Building capacity across our region Alongside our shared commitment to equity and inclusion, our organizations offer different, yet complementary funding and partnership opportunities that collectively build the capacity of our region. At Rotary Charities, there’s an intentional focus on community leadership development through the Leadership Coaching and Leadership Learning Lab. Both programs offer a reflective, tailored approach to lead-

ership growth, which is critical given today’s rapidly evolving landscape of community needs. Through Leadership Coaching, leaders gain a trusted partner to navigate challenges and chart a course toward their goals. In addition, with Leadership Learning Lab – a comprehensive year-long program supported by the Community Foundation and other northern Michigan foundations – leaders are equipped with collaboration, time management, and capacity-building skills, strengthening both their own organizations and the communities they serve. The program has engaged with over 75 leaders in Antrim, Benzie, Grand Traverse, Kalkaska and Leelanau counties since 2018.

Along a similar path of building resiliency, the Community Foundation is focused on developing its collection of flexible, responsive funds called Community Funds, which are not designated for a specific organization or cause. Given this, one of the unique roles that Community Funds can play is by providing general operating support – an underfunded yet incredibly important funding source for our nonprofit and community partners. This year, the Foundation awarded more than $238,000 in Community Funds grants, including general operating support, to 14 organizations.

44 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

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PHILANTHROPY Connecting partners and leveraging resources for greater impact In addition, our two organizations regularly work together through grant referrals and as members of the Northwest Michigan Community Development Coalition. The Community Foundation, for example, often connects grant applicants to Rotary Charities’ Learning Fund, which aims to empower change-makers and their teams to pursue professional development, ensuring that the seeds of change are nurtured and cultivated at a staff and organizational level. Through our partnership, grant referrals have amounted to nearly $8,000 in support from the Learning Fund for DEI-focused leadership and learning efforts. Without such referrals, our grant partners may not have otherwise accessed this funding to meet their needs.

Moreover, through the Northwest Michigan Community Development Coalition – convened by the Community Foundation – we collaborate closely with nearly 40 other business, nonprofit, and governmental partners

to advance economic, societal, environmental improvements for our region.

These improvements include increasing the number of working families here, improving regional water quality, improving youth mental health, and increasing the average wage per employee, among other objectives as noted

Both of our organizations believe that supporting historically marginalized voices helps to create communities where people of diverse backgrounds and needs can belong. on our Regional Scorecard (nwmicommunitydevelopment.org). This year, as Coalition members, we’ve supported a number of initiatives and pieces of legislation. Notable advocacy efforts have included support for: • An amendment to the Elliott

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• Increasing the subsidy for childcare providers in Michigan as part of Governor Gretchen Whitmer’s 2025 fiscal year budget proposal.

Striving for a thriving region While both Rotary Charities and the Community Foundation provide a variety of support through our grant-making, initiatives and programs across the region, we know there is still a long way to go to achieve thriving communities that benefit everyone. And so, we leave you with this invitation: As a community member, how can you foster collaboration within your network, workplace, or sector to accomplish more, together?

David Mengebier is the president and CEO of the Grand Traverse Regional Community Foundation, which supports the people and places of Antrim, Benzie, Grand Traverse, Kalkaska and Leelanau counties as well as the Grand Traverse Band of Chippewa and Ottawa Indians, a federally recognized tribe.

Sakura Takano is the CEO of Rotary Charities of Traverse City, a place-based public charity that provides funding, learning, and connections to address our region’s complex problems and create community assets for all.

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48 DECEMBER 2023

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REAL ESTATE & CONSTRUCTION

TITLE PIRATES Land scams on the rise in northern Michigan and nationwide

By Craig Manning What if you bought a piece of vacant property and started building a house on it, only for someone to come out of the woodwork weeks or months later to say the land actually belonged to them?

This scenario isn’t a joke, or a bad dream, or even a far-fetched possibility.

Instead, it’s an example of the latest trend in real estate: land scams, or crimes where so-called “title pirates” manage to list and sell property that never belonged to them in the first place. It’s a growing nationwide problem since the start of the COVID-19 pandemic – and an issue that local experts say is here.

In land scams, bad actors use public records to find parcels of land they could pass off as their own for long enough to walk away with the proceeds of a sale.

The scammer poses as the landowner, approaches a real estate agent or brokerage to list the property, and often suggests listing the property at a below-market-value price point.

Scammers are typically looking for vacant land that has no mortgage, has

been owned by somebody for a long time, is not already for sale, and the owner doesn’t live in the area or even in the state, says Stephanie Koppe, president of the Aspire North Realtors association and a Bellaire-based realtor with Real Estate One.

including the realtors, the buyers, and the land’s actual owners – realizes that anything was amiss.

The aftermath of these cases can be extremely messy. A recent article in Business Insider told the story of a doctor in Connecticut who returned to a vacant parcel

“I’ve had several of these (scam inquiries), and they never want to talk on the phone. Once I make it clear that we’re not going to go any further with listing a property until we talk on the phone, they always disappear.”

– Mercedes Davidson, realtor, Century 21 Northland In situations where scam properties actually hit the market, the low prices attract attention quickly – especially in competitive, low-inventory markets like northern Michigan. That extra attention can lead to multiple cash offers and quick sales. If all goes according to plan, the scammer is able to close the deal and vanish with the money before anyone –

he owned only to find someone else building a $1.5 million, 4,000 squarefoot house there. The doctor, who still held legal title for the land, sued the LLC that had “purchased” his property. The LLC, in turn, defended itself by arguing that it had been the victim of fraud.

This anecdote illustrates the difficulty with land scams: They leave two victims

instead of just one, and they also leave no clean or simple recourse to make both parties whole again. Meanwhile, the perpetrators disappear on the wind, leaving little trace beyond fake email addresses and burner accounts.

The common question, of course, is how a real estate scam could ever go all the way to a sale. After all, the industry has numerous protections in place that are intended to verify identities and ownership and make sure everything about a transaction is above-board. Even when those systems fail, the confluence of people involved in a typical real estate transaction – including buyers, sellers, real estate agents, banks, title companies and notaries – should, in theory, raise multiple red flags.

But even with those safeguards in place, there is no doubt that real estate fraud is on the rise. According to the FBI, losses from real-estate-related scams totaled more than $350 million in 2021 alone, up 64% from the year before. In 2022, losses increased another 13%, to more than $396 million.

What’s behind those jumps? Accord-

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REAL ESTATE & CONSTRUCTION

Koppe

ing to Koppe, it’s a mix of COVID-19 impacts and technological evolution.

“These types of scams probably happened here and there before the pandemic, but not anywhere near as much as we’ve seen since 2020,” Koppe said.

When everything went virtual, it opened a door for scammers. Suddenly, it wasn’t unusual for all of the communication between realtors and their buyers to happen over email, text, phone or video call. That dip in face-to-face, in-person activity made it easier for bad actors to run their scams without ever revealing their true identities.

Technology, Koppe said, is only going to make things worse. Already, scammers are getting more sophisticated in terms of what they can fake, from driver’s licenses to title documents. Online property database sites, meanwhile, unwittingly help fraudsters get a leg up by revealing a whole lot of information about a property. Who is the owner?

Where do they live? How is the property taxed? Does the land have a mortgage attached to it? All these questions can be answered by perusing public records, and the answers can tell a title pirate if a property is ripe for a land scam and who they need to impersonate to make the fraud convincing.

As a result, Koppe says Aspire North is preaching due diligence more than ever before. Background checks, address checks, identity verifications, title checks: All these steps can help shine a light through any holes in a scammer’s story. Often, Koppe will even pick up the phone and call the person whose name comes up on a title search, to see if they are actually the same person contacting her about selling a piece of vacant land.

Sometimes they are; increasingly, they are not.

Aspire North and its member brokerages are also working with local agents to educate them about common land scam warning signs. Mercedes Davidson, a realtor with Century 21 Northland, said she’s grown accustomed to watching for one red flag in particular whenever a new client reaches out about listing a property.

“I’ve had several of these (scam inquiries), and they never want to talk on the phone,” Davidson said. “Once I make it clear that we’re not going to go any fur-

Davidson

ther with listing a property until we talk on the phone, they always disappear.”

But there is no golden rule that realtors can follow to avoid scam traps entirely. While title pirates prefer communicating via email or text, some do consent to talk on the phone, and a few will even agree to FaceTime or Zoom calls.

In one recent local case, Koppe says an agent met with a seller over Zoom and felt confident they were legitimate.

Not only had the person shown their face, but they’d also known certain very specific details about the property that wouldn’t have come up on a typical land database listing. The agent signed a listing agreement, took photos, and put the property up for sale. A few days later, the actual owner of the land called the agent.

“Their neighbor had reached out to them and said, ‘Oh, we didn’t know you were selling your property,’” Koppe said.

“They called the listing agent right away and got the listing taken down.”

In rare cases, particularly bold title pirates will even meet with their agents face-to-face.

“Down in southeast Michigan, there was a case where they actually had a closing date scheduled for a property, and at the last minute, the agent told the seller, ‘Oh, something happened and we can’t do a remote closing; you need to come into the title company,’” Koppe recalled.

“And it was actually a sting operation.

They had the police and Homeland Security in the room, waiting for this person to get up after signing a document that wasn’t real.”

Koppe is worried that land scams and other types of real estate fraud are only going to get worse in the years to come.

She’s particularly wary of how advances in artificial intelligence could make title scam operations even more sophisticated than they already are.

If there’s a silver lining to the whole situation, Davidson says, it’s how the rise in fraud has brought the local real estate sector together. Around town, colleagues and competitors alike have grown accustomed to sharing their close calls, all to help other realtors avoid falling prey to similar situations.

“We’re all getting good at saying, ‘Hey, this happened to me, so be on guard,’” Davidson said.

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50 DECEMBER 2023

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REAL ESTATE & CONSTRUCTION

Kevin Endres Three West Commercial Real Estate

Don Fedrigon RE/MAX of Elk Rapids

Erika Nita The Mitten Group/ Your Home Cupid

Jon Oltersdorf Oltersdorf Realty

Shawn Schmidt Smith Coldwell Banker Schmidt

Jon Zickert Real Estate One of Beulah/Frankfort

REAL ESTATE RUMBLINGS

Area agents weigh in on what 2024 will bring to the local market

By Art Bukowski

The regional real estate market’s wild ride – marked by soaring prices and homes being snapped up for cash – could be slowing down. For further insight, the TCBN asked several local agents to weigh in on what’s coming for 2024.

What trends or developments do you expect to see in local real estate in 2024?

Endres: We hit the peak of the curve between a seller’s market and a buyer’s market within the commercial real estate sector in 2023. I believe inflation and high interest rates have caught up with buyers. We saw the gap between the value sellers want for their properties and what buyers can afford widen this past year. A lack of inventory and a steady demand in our area is creating a proverbial standoff between sellers and buyers.

Unlike residential real estate, commercial real estate is simply a financial numbers game – it either works or it doesn’t. I think we will need to see some relaxation

of pricing in 2024 to bring the commercial real estate market in line with what is happening in other sectors and in the general economy. Those sellers who have been waiting to maximize their investment may have missed the peak, but there are still plenty of buyers in the market where the transactions can still be a win-win for both parties.

Oltersdorf: My prediction is that the luxury real estate market in Leelanau County will remain steady throughout 2024. We still have an unprecedented amount of demand from people ready to buy today, especially for direct waterfront homes near the entry-level price point (which is now $800,000 or more). Waterfront home inventory has been severely

lacking for the past few years. Even if the economy changes quickly, it could take a few years before the market catches up to this much demand. Almost 65% of Leelanau home sales over $1 million this year were cash purchases – a staggering number. These wealthy individuals just haven’t been impacted yet by mortgage rates approaching 8%; they also feel that real estate in our area can be a great inflation hedge. In contrast, the non-luxury market will continue to slow as affordability becomes very difficult for those trying to purchase near the median home sale price as mortgage rates and taxes are pushing monthly payments to people’s limits. I think that inventory will slowly climb, there will be fewer showings, houses will take longer to sell, and we

will definitely have fewer unpredictable bidding wars than we’ve had. Realtors and mortgage lenders will continue to find new and creative ways of financing to get deals closed.

Fedrigon: We are a year into the ‘silent recession’ that no one wants to talk about. Higher interest rates and the general state of the economy are impacting some potential buyers, and we are not seeing the typical trend of home prices decreasing with higher interest rates. The high cost of construction and replacement will impact the future real estate market; building materials and labor costs could adjust but are still historically high. We are seeing a rise in clients choosing to place their money in

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REAL ESTATE & CONSTRUCTION

real estate rather than the stock market, and I suspect this will continue in 2024.

Nita: In 2024, I am anticipating that there will still be some cautious buying patterns with the election year and uncertain interest rates. I also believe buyers are starting to settle in terms of interest rate shock, and feeling some relief from the ultra-competitive situations that we saw when rates were much lower. The average home will need to be priced right to sell efficiently, and sellers will need to lower their expectations to accommodate for this. A great sale can still be had! Buyers continue to gain more leverage in their purchases, but may still find themselves in competitive situations for highly desirable homes.

Zickert: Over one-third of September’s new pendings were fresh listings that went under contract within 10 days or less. A significant pool of buyers who have been actively looking but have yet to find what they are seeking continues to monitor new listings closely. The most appealing properties continue to be snapped up swiftly.

Be sure your home is ready for sale. This trend will continue into 2024. As the market gets more confusing, you will need a trusted advisor on your side. One of the

many things we do for our clients and the communities in which we’re active is to demystify the real estate market — especially your local real estate scene.

Smith: In northern Michigan the trend of unit sales – the number of properties being sold – will continue to slightly lag while property values will (mostly) hold. Popular areas like downtown, the smaller villages like Suttons Bay and Elk Rapids, and both peninsulas will remain popular for buyers, so that trend will remain strong. The end of October saw off-water sales ending strong, while private water sales dropped significantly.

Interest rates softened a bit, which is helping stabilize the local market.

What advice do you have for those who are buying or selling in the coming year?

Endres: For sellers, we believe now is the time to sell to capitalize on the greatest return for their properties. The total volume of commercial real estate sold in 2023 is down 35% from 2022, and if that trend continues, prices will have to drop. For buyers, be ready. As we start to see prices come down, we expect activity

Erica Mackey | Escrow Officer

to rise. When a quality property hits the market, they tend to turn over quickly.

Start talking to your banker now so that you know what criteria are required to get a loan. Financing and due diligence timing are two of the biggest contingencies in a purchase agreement that can either make or break the deal.

Oltersdorf: As a buyer, it is okay to be patient. You don’t need to reach on something, but make sure that you are well-organized so that if your future home comes on the market, you are ready and able to move quickly with a clean offer. People from around the country want to move to our area for our lifestyle, and I don’t see that changing anytime soon. It’s paradise here! For sellers, home maintenance is key. Buyers/ realtors/home inspectors know when a house has been well maintained and they will pay extra for it. You likely won’t be able to get away with buyers turning a blind eye to immediate repair items as has been the case the past few years. Buyers are more educated than ever before, and they know the cost and time it takes right now to get quality contractors.

Nita: Going into the coming year, sell-

ers will have to understand they may not see the types of sales that their neighbors saw in the last few years. A great sales strategy will still produce great results, and along with that, these sellers will likely be able to gain some leverage on a new purchase. Because of the intense market in the last few years, values have skyrocketed and the equity in their home is probably very strong, (which) will be a great tool to offset a higher interest rate on the new purchase. Buyers will continue to get some more options with inventory and will certainly have options with financing to combat a high interest rate along with leveraging an offer with the seller to make terms more attractive for all. Lots of new construction is going on here locally to feed the supply and demand chain.

Zickert: It is a common misconception that home inspections are only of value to the buyer or real estate agent, not the seller of a property. In fact, there are many benefits of having a pre-selling home inspection on your property before you put it on the market. A pre-listing report will serve to detect any structural issues and repairs needed before the selling date arrives.

This way, you can show that the proper-

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52 DECEMBER 2023

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REAL ESTATE & CONSTRUCTION

ty is safe and sound, which will attract more potential buyers and may raise the initial listing price. Having this inspection will assist both the seller and their Realtor in the valuation of the property, whether to be prepared to negotiate in terms of immediate repair cost, or make market value adjustments prior to listing. This will allow you to sell your home with complete peace of mind. It will also make buyers more comfortable with the home-buying process.

Fedrigon: Owning a home is the greatest wealth-builder known to man and it keeps the rain off the kids! Save up a 20% down payment so you can weather the storms which we know will come. If you are selling real estate in 2024, seek the advice of a professional Realtor to get the most up-to-date information on current market trends and the best marketing strategies.

Smith: Real estate is a long game.

Don’t wait for interest rates to go down.

When that happens, you will be competing once again with a plethora of buyers.

Appreciation over the long run is where to focus. Because of inventory scarcity, real estate will continue to perform over

time. Just be sure to choose carefully what you buy. For sellers, continue to keep your property up and in good shape. Take care of the exterior grounds as well. If you do this and there is pride of ownership, it absolutely has a notable effect on your bottom line as a seller.

There are so many local realtors.

What should people look for when hiring one?

Endres: We work in the commercial real estate market and not in the residential arena, but in general, make sure you are working with someone who actually has experience and expertise in that property type. Residential transactions and commercial transactions can be like comparing apples and oranges. Even within those sectors, different property types transact differently. Choose someone with a reputation of honesty, integrity, hard work and who has a history and track record of being able to close the deal.

Oltersdorf: Responsiveness and trust is important, but local expertise and proven success getting deals done in this local market can be invaluable. Talk to a

few Realtors and find out how well they know the local market. Once you establish a relationship, they should return your calls, texts and emails in a timely matter.

They should be well-organized and thorough by providing value outside of what you can find yourself online. Like any occupation, there are professionals that offer different levels of value. If you aren’t satisfied, it’s okay to fire them and find a new Realtor that’s a better fit!

Fedrigon: Look for a pro with experience, honesty and integrity. A relationship that starts with that is always a benefit to the client. Masterful negotiation and attention to details will ensure a seamless transaction. Find someone who will work tirelessly and enthusiastically for you!

Nita: When hiring a Realtor, I really truly believe you need to work with somebody who matches your needs and goals.

The service standard is not uniform. Hire an agent who will ask the questions others won’t, spend the time and put in the extra effort that others may not, and simply have a ‘whatever it takes’ approach to ensure that the buyer or seller has the best home buying or selling experience possible!

Smith: Experience. Detail orientation.

Has your agent worked through other business cycles, including down markets and recessions? Have they investigated the option of assuming seller’s loans on your behalf? You want someone who has worked in it all and a company that has seen it all. Do they have support staff behind them? You are hiring a company, not just a person. The right agent is imperative in getting the most value on selling your home, and time and time again will be instrumental in getting your offer accepted in a competitive market that has low inventory.

Zickert: Selling a home is a big decision, and it should be something you feel ready for and excited about.

And that’s where a trusted expert comes in. When it comes time to sell your home, you have two key decisions to make: whom to list your home with (agent/firm) and at what price to list your home. These two decisions should be made separately from each other.

Your choice of agent and firm should be based on their marketing plan and strategy and not on the price recommendation.

54 DECEMBER 2023

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REAL ESTATE & CONSTRUCTION

HOUSE CALL

Housing industry continues to face pandemic-era challenges

By Ross Boissoneau It’s no secret the pandemic disrupted numerous industries, reshaping the way we live. Or in many cases, where we live and work.

“The market is different because of the pandemic,” said Kim Pontius, CEO at Aspire North, the association of Realtors serving the five-county area.

The initial lull in home sales at the start of the pandemic in spring 2020 quickly turned into a white-hot seller’s market by that summer.

The rise of remote work and school allowed city dwellers to pick up and move to more rural areas such as northern Michigan.

Realtor Meg Zammit of Century 21 Northland said the pandemic opened up the opportunity for people to choose where to live because of remote work options.

Zammit is a member of the Northern Navigators and Creative Coast, the effort

by Traverse Connect to attract more young professionals to the area and diversify the workforce. It markets to those who had vacationed here with their families, to those who had grown up here, and to those who might not be aware of northern Michigan.

The sudden boost from the possibilities of remote work, remote schooling, and a breather from student loan debt all helped their target audiences suddenly envision a new future.

“They’re putting down roots rather than renting an apartment in the big city,” she said.

Zammit is not alone in her observations.

“I’ve sold a few properties to people who work at home,” noted Mark Hagan of Coldwell Banker Schmidt Realtors.

The market had already seen increased desirability in the wake of Sleeping Bear Dunes National Lakeshore being cited by Good Morning America as “The Most Beautiful Place in America” a decade ago.

Plus there was already a limited number of homes for sale due to the Great Recession, which prompted many skilled workers to leave the state or the industry and created a downturn in the number of homes built.

“We’re dealing with prices going up and the inventory being way down,” said Pontius. “When demand outpaces supply, prices go up.”

So prices were already increasing, and the influx from the pandemic drove them

Pontius even higher.

Pontius says in a typical market, there would be an inventory count of 6,000 to 9,000 homes for sale, as many as 10,000 in the five-county region.

“In this market, it’s week-to-week around 4,000. That includes vacant land,” he said.

On the good side, Pontius says that for every home sold, there is one coming on the market.

Zammit ”We’re holding ground,” he said.

But that doesn’t address the challenge of finding a home for those who want to move here or are tired of renting. Those who want to upgrade or downsize face the challenge as well: Even if they can sell their home for more than they could have just a few years ago, there’s no place for them to move to.

“It’s gridlock,” said Zammit.

Perhaps no segment has been as diffi-

TRAVERSE CITY BUSINESS NEWS

DECEMBER 2023

REAL ESTATE & CONSTRUCTION cult to find as entry level or starter homes.

Builders see more profit from building higher-end homes, so there is little incentive for them to build homes with prices at $200,000-$250,000 or below.

“The poor entry-level people got hammered,” Hagan said. “It’s tough for entry level.”

Zammit agrees.

“There’s a growing divide,” she said.

“Homes at less than $500,000 are not being built.”

A recent check of homes for sale at $200,000 or under noted only one such property. All the other listings at that price point were for vacant land or a fractional ownership of a condo.

Pontius believes the pendulum will eventually swing back the other way and the market will correct itself. But he says it won’t happen anytime soon.

“In my estimation, it will take five years to get a balance of housing for the workforce,” he said.

Even with the increasing prices and interest rates, Pontius says there is interest from outside the region from those who want to move, vacation or invest here.

He follows other markets similar to this one, like the Monterey/Carmel area of California; the Florida panhandle; Savannah, Georgia; and Charleston, South

Hagan Carolina as comparable, particularly in terms of their economic drivers.

“We still represent a veritable bargain.

Cost there is around $850 a square foot.

Here it’s more like $300 to $450,” he said.

While Pontius suggested the region’s prices represent a better value than comparable homes in other places, Hagan says he isn’t sure he completely agrees with that assessment.

“This is the only market I know, and ‘bargain’ does not come to mind. But I can’t think of a better place to live,” he said.

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COVID’s effects on commercial real estate The pandemic’s impact on the housing industry bled over to commercial real estate. People moved to less urban areas such as northern Michigan to escape the big cities, especially as many could work remotely from home.

Commercial real estate agent Dan Stiebel of Coldwell Banker Schmidt Realtors says some of those moving to the area have sought out businesses to buy, but that’s been the exception, not the rule.

“People with profitable businesses tend to keep them not sell them,” said Stiebel.

Another trend: The decline in demand for office space. According to Mark Hagan, the pandemic exposed this locally.

“The pandemic taught us we don’t need as much office space as we had,” said Hagan, who works in both residential and commercial sales at the company.

Stiebel agrees there are fewer people working in offices, which has led to fewer restaurants being open to serve workers or visitors.

“Downtown is not as busy as it was.

There are fewer restaurants (for) lunch.

Smaller restaurants and food trucks have been popular,” Stiebel said.

Larger establishments, however, have cut their hours, and even re-leased their spaces. Stiebel says people are returning

Stiebel

to office spaces, in many cases they are finding they don’t need as much space.

As a result, smaller offices have become more profitable, to the extent larger offices have downsized, subdividing into more, smaller offices.

“That’s been a shift,” he said.

On the other hand, while online shopping has put many brick and mortar locations out of business, Stiebel says an influx of new people has turned the tide the other way locally.

“People coming up here start new businesses, whether retail or services,” he said.

He’s also seen a trend of turning old retail space into service or entertainment spaces. He points to the old Cherryland Mall as an example.

“Kmart to curling, Sears to a go-kart franchise,” he said.

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55

IN MEMORIAM

56 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

Nine leaders who left their mark on the region

By Ross Boissoneau

The Traverse City Business News would like to acknowledge the legacies of some noteworthy local leaders who left us in the past 12 months, and left their mark on the region.

Hal Van Sumeren

Van Sumeren guided the local business community as the executive director of the Traverse Area Chamber of Commerce for 37 years. He promoted new initiatives and services that led to growth at the chamber and the city. He also broadened the area’s economic growth beyond tourism to include education, transportation, manufacturing, and arts and culture. The Traverse City Convention and Visitors Bureau leadership development program Leadership Grand Traverse came to fruition during his tenure. The unassuming Van Sumeren was active on state and national Chamber boards and went on to work as a mentor for Service Corps of Retired Executives following his retirement in 2002.

Marlis Mann

Barb Lemcool

A survivor of the second world war, Mann studied French at the Sorbonne in Paris and at the University of Lyon. She was a pioneer stewardess for Flugdienst, Condor and Lufthansa. In 1958 she married David Mann and moved to Chicago; when he retired in 1988, the couple moved to Leland. There she volunteered as the Youth Exchange Officer of the Suttons Bay and Leland Rotary Club.

In 1996 she became the first female president of the club and became an American citizen.

She served on the board of the Glen Arbor Arts Association, the Leelanau Share Care board and for 12 years was a member of the board of the Traverse Symphony Orchestra, where she and her husband helped bring in Music Director Kevin Rhodes. In more recent years she joined the board of the Leland Community Center while she and her second husband Tom Skinner continued to travel.

During her 20-year career as a legal secretary, Lemcool helped start the family law clinic, coordinated the Legal Secretary Council in Traverse City, was president of the Legal Secretaries Association, and was named Executive Secretary of the Year. It was her volunteer efforts that set her apart, however. She was the co-founder of Helplink, an organization developed to help people navigate human service systems; coordinator for the Grand Traverse Community Collaborative, which brought together various non-profits; served as interim executive director of United Way where she started the Volunteer Center for greater Grand Traverse area. Her involvement with the United Way led her and her husband Herb to be instrumental in bringing 211 to the area. Lemcool was a longtime supporter of the National Cherry Festival, serving as president in 2001 and director of the Junior Royale Parade for eight years. When the Cherry Festival needed sustainable funding, she created the Cherry Festival Foundation to ensure the festival would continue for years to come. She was one of the founders of the Poverty Reduction Initiative in Northwest Michigan.

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DECEMBER 2023

57

IN MEMORIAM

Bruce Rogers The longtime business owner of Bartling’s women’s apparel co-founded the Downtown Development Authority in the late 1970s.

He became known as a champion of retail in Michigan and served on the board of the Michigan Retailers Association in Lansing for 20 years. Rogers was also active in the Traverse City Rotary Club for 48 years. As Chairman of the Board of Directors of Rotary Charities, he was involved in the purchase of the Park Place Hotel from bankruptcy in 1990 and reopening it in 1992. He served as president of Rotary Center, which operated the hotel for four years in partnership with Northwestern Michigan College. Rogers worked in development and property management at Schmidt-Rogers Management and was a member of the National Cherry Festival board of trustees for many years. He served as a director of the Traverse City Chamber of Commerce, receiving the Chamber’s Distinguished Service Award in 2009. He was inducted into the Traverse City Business News Hall of Fame in 2018.

Charlie Chamberlain

Carol Duvall

Best known for his eponymous restaurants, Charlie Chamberlain, Jr. was a veteran of the U.S. Army who owned several Standard Oil gas stations in the Detroit area before moving to Traverse City in 1970. He first operated a snowmobile store, Chuck’s Sport Shop, which later evolved into a pinball arcade, The Robin’s Nest. In 1975 he bought Gladwill’s and opened his first restaurant, Charlie’s Basket. That led to the opening of Charlie’s Deli, in the then-new Cherryland Mall in 1978. In 1980, he opened Chamberlain’s Restaurant on Garfield Avenue.

His next venture was Downtown Charlie’s across from the Holiday Inn. After spending some years in Florida, he and his wife Joni returned to downtown Traverse City to open Charlie’s Deli and later opened Charlie’s Last Stand, a hot dog concession at Home Depot.

Chamberlain lived in Traverse City most of his life and was a longtime member of the barbershop group Cherry Capital Men’s Chorus.

Crafting queen Carol Duvall began her broadcasting career in 1951 at WOOD-TV in Grand Rapids, where she won a spot on a show for children. She moved to WWJ-TV in Detroit in 1962 where she worked for 18 years in various roles, including as a news anchor, co-producer, and host of her first craft-oriented show, Here’s Carol Duvall. That paved the way for her first national exposure on ABC as a craft expert on The Home Show, which aired from 1988-1994. Duvall then became host of The Carol Duvall Show on the fledgling HGTV, airing daily from 1994-2005. It later moved to the now-defunct DIY Network, where it aired until 2009. Duvall frequently appeared on the Lifetime shows Our Home and Handmade by Design as a craft expert and wrote two books on crafting. She moved to Cordia at Grand Traverse Commons in 2015 from her lakeside home south of Arcadia.

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58 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

IN MEMORIAM

Ken Schmidt

Kari Kahler

Bob Classens

Real estate pioneer Ken Schmidt represented the third of five generations of his family’s real estate company alongside his brother Fred.

During his tenure with the company he joined in 1968, it grew from its Traverse City location to more than 90 offices spread across three states and the U.S. Virgin Islands. It is one of the nation’s largest real estate firms, producing over $5 billion in sales volume. Despite its sprawling footprint, he worked to maintain its feeling of a hometown company, whether Traverse City or Grand Rapids, Cleveland or Amelia Island. Schmidt spent all of his life in his hometown, graduating from Traverse City High School in 1962, where he was All-State and a state champion football player. He was inducted into the Traverse City Central Hall of Fame for his contributions to the community and was a recipient of the Hall of Fame Award from Good News Media.

Kahler served virtually all facets of the college as a member of the Northwestern Michigan College community for more than 40 years. She joined NMC in 1982 as conference center coordinator and her career culminated with becoming associate dean of learning services in 2012. For more than a decade she oversaw academic and career advising, disability support services, the international college honors society Phi Theta Kappa, and tutoring. Kahler co-founded the College’s inaugural Rotaract group and the Blair Mentoring Project, which championed student leaders across campus and paired NMC students with fifth graders at Blair Elementary, respectively. She played an instrumental role in keeping the food pantry operational during the pandemic, served on the BBQ board, led the developmental education committee, and helped start the Empire Area Food Pantry. She was recognized by the college with its Foundation Excellence Award three times and was also recognized

by Phi Theta Kappa.

Bob Classens was a barber, restaurateur and Realtor by turns.

He was born in Frankfort and graduated from Frankfort High School, where he was a four-sport letter winner, all-conference in basketball and track and an all-state selection on the gridiron. Following his senior season in 1961, he was named to the high school All-American football team and attended Western Michigan University on a football scholarship. Classens owned and operated Robertson’s barber shop in Traverse City alongside his childhood best friend, Roger Argue, until 1974 when he and his wife Sylvia purchased the historic Sleder’s Family Tavern. After selling Sleder’s, he went on to a successful career in real estate with Real Estate One and Coldwell Banker Schmidt Realtors, never retiring.

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60 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

Open 10-5 until December 31

THE MARKET

INVESTMENT INSIGHT FROM THE LOCAL PROS

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EXPOSURES

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Eric Roberts, Justin Gauthier, Meg Zammit, Brittany VanderBeek, Jody Trietch, Jason Slade and Madison Ford took in the festivities at 20Fathoms’ 5th anniversary party in October.

Twelve chili chefs entered the Home Builders Association’s Chili Cook-Off last month and three went home winners: Jes Brezina, Highstreet Peterson McGregor Insurance, 1st Place and People’s Choice; Angela Rose, The Talon Group Title Agency, 3rd Place; and Jake Graham, Paul Davis Restoration, 2nd Place. Judges included Greg Lewis of Greg Lewis Insurance; Rene Hills of Real Estate One; and Krista Esckilsen of Traverse Connect.

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64 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

NEWSMAKERS

1 // WILLIAM CASS

2 // RENEE SOVIS

3 // ANNE PAGANO

4 // MATTHEW RICHMOND

5 // ELIZABETH VOGEL

6 // TAYLOR DAWSON

7 // DANIEL HADLEY

8 // LEE HORNBERGER

9 // MARAYA BUELL

10 // CHARLIE CARPENTER

>> BANKING & FINANCE 1 - William Cass has joined Honor Bank as manager of its Lake Ann branch. Cass brings several years of experience in financial services, sales, and insurance to his new position.

2 - Renee Sovis has been promoted to vice president at Neithercut Philanthropy Advisors, with offices in Traverse City and Detroit. Sovis joined the firm in 2019 and serves as the program officer for the Margaret Dunning Foundation and the Holtzman Wildlife Foundation. With this promotion, Sovis will assume additional management responsibilities for the firm.

>> GOVERNMENT 3 - Anne Pagano is the new city engineer for the City of Traverse City. Pagano brings more than 25 years of experience in engineering and infrastructure improvement. She replaces Tim Lodge, who recently retired.

4 - Matthew Richmond has been named police chief of the Traverse City Police Department. Richmond began his career with the city in 2004 and has served as a detective, sergeant, detective sergeant, lieutenant, captain of patrol services, and, most recently, interim chief.

5 - Elizabeth Vogel has been named the new city manager for The City of Traverse City. She will assume the role next month. Previously, she served as the administrator and CFO for Missaukee County since 2021 and before that as deputy supervisor for Michigan’s Clinton Township.

>> HEALTH CARE 6 - Taylor Dawson, M.D., has joined Traverse Heart and Vascular in Traverse City as an interventional cardiologist.

7 - Daniel Hadley, M.D., has joined Munson Healthcare Empire Family Practice. Most recently, he lived in northern Wisconsin while practicing medicine in Michigan’s Upper Peninsula.

>> LAW 8 - Lee Hornberger, a Traverse City arbitrator and mediator, has been inducted for membership into the National Academy of Arbitrators.The Academy is generally recognized as the preeminent organization of labor arbitrators in the United States and Canada.

>> REAL ESTATE 9 - Maraya Buell has joined EXIT Realty Paramount in Traverse City as a realtor.

10 - Charlie Carpenter, a licensed realtor for four years, has joined Serbin Real Estate in Glen Arbor.

Carpenter is a former advertising sales executive and most recently was vice president of sales at The Food Network for 18 years.

TRAVERSE CITY BUSINESS NEWS

DECEMBER 2023

65

NEWSMAKERS

11 // MATT DAKOSKE

12 // CLOVER KEYES ROY

13 // NICOLE CHARTER

14 // NICOLE DRAPER

15 // KIM NASH

16 // MIA AZPEITIA

17 // LEAH BELLOWS

18 // SARAH CHRISTENSEN

19 // COREY FARR

20 // BRAD MACKLER

11 - Matt Dakoske has been elected to the 2024 board of directors of Aspire North REALTORS. Dakoske, a three-time past president of the association’s board and a past multi-term director, leads Team Dakoske at RE/MAX Bayshore in Traverse City.

12 - Clover Keyes Roy has joined Team Dakoske at RE/ MAX Bayshore in Traverse City. She handles the team’s marketing, agent development, and event planning.

KW Northern Michigan in Traverse City recently announced the following personnel news: 13 - Nicole Charter has joined the company as a new agent.

>> OTHER 16 - Mia Azpeitia has joined 20Fathoms in Traverse City as its new director of operations. Azpeitia is responsible for the execution of key programs, management of the coworking space, key performance tracking, and event management. She brings a professional background working for top creative agencies, startup AI companies, worldwide advertising networks, and Fortune 500 companies.

17 - Leah Bellows has joined Traverse Body and Paint Center in Traverse City as the new administrative assistant. Bellows previously worked as a detailer at Sonny’s Body Shop, a sister company to Traverse Body and Paint Center.

14 - Nicole Draper is a new agent with the company.

15 - Kim Nash is a new agent with the company.

18 - Sarah Christensen has been named the new CEO of Oryana Community Cooperative. Christensen comes from Green Tree Co-op Market in Mount Pleasant, where she had been CEO since 2003. She

succeeds Steve Nance, who is retiring after more than 14 years at Oryana.

19 - Corey Farr is the new snowsports manager at Crystal Mountain Resort in Thompsonville. Farr comes to Crystal with years of resort experience in guest relations, office management, and snowsports instruction. She is a Level II PSIA-AASI certified ski and snowboard instructor, as well as a certified Alpine Resort Trainer.

20 - Brad Mackler has joined the board of directors of Big Brothers Big Sisters of Northwestern Michigan.

Mackler is president and managing partner of Milestone Partners, an executive recruiting firm.

Please send Newsmakers by the 10th of the month to news@tcbusinessnews.com

66 DECEMBER 2023

TRAVERSE CITY BUSINESS NEWS

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The acclaimed 2005 book “Small Giants” profiled 14 stellar companies that chose to be “great rather than big.”

Each of these fast-rising companies demonstrated a dedication to sustained success that customers and even competitors were drawn to. One of the businesses featured in “Small Giants” is the food phenomenon known as Zingerman’s of Ann Arbor.

Fast forward to 2020 when Michigan-based author Micheline Maynard set off to write “Satisfaction Guaranteed,” a profile of the Zingerman’s empire. Her original idea was focused on Zingerman’s history and management principles.

When COVID struck, how the business adapted and overhauled its operations became a major story line of “Satisfaction Guaranteed.”

For the unfamiliar, Zingerman’s Deli began in 1982 when founders Ari Weinzweig and Paul Saginaw started a traditional Jewish deli, similar to ones they had experienced in urban Detroit and Chicago. A few years after opening, their attention to product detail and the customers’ experiences made Zingerman’s Deli a thriving destination.

The deli’s popularity helped revive Kerrytown, which had been an undervalued section of Ann Arbor. With rapid success in a relatively small footprint came pressures from investors and others to expand. Instead of following the popular route at that time of replicating multiple franchises of the deli throughout the country, Weinzweig and Saginaw decided to grow laterally into a series of related business, accentuating quality food and team-driven processes.

Weinzweig and Saginaw’s overall success was formed through their concept of “visioning,” which maximizes an agreed-upon idea and then forming a sound concept that can be carried out and communicated well to employees. Eventually this distilled down into Zingerman’s Three Bottom Lines: great food, great service and great finances.

Maynard provides context to the business’s progressive growth, touching on Zingerman’s interconnected businesses, each with a consistent eye on outstanding customer service. With its series of food related sub-businesses, mostly within its Ann Arbor area footprint, the company maintained its renowned customer service, employee equity and financial success.

The Zingerman’s Roadhouse restaurant followed as a natural spinoff of its deli, allowing for a similar quality of food to take place in a larger sit-down restaurant atmosphere. Its Bakehouse includes both a retail store and baking classes. There’s a creamery, coffee company, confectionary, catering business, working farm, event venues, publishing arm, and a nonprofit founded to rescue local food and leverage state and nation-

SATISFACTION GUARANTEED

How Zingerman’s Built a Corner Deli Into a Global Community

By Micheline Maynard al food resources for hunger relief.

Zing Training, a later riff on Zingerman’s theme of quality operations, shares best practice processes for operating a business. Zing Training places an emphasis on maximizing the customer experience, leadership development, and open books management which reform the building blocks for businesses just starting out, in a serious growth phase, or more mature.

The company’s well-developed mail order program was a key piece of its response during COVID shutdowns that crippled many restaurants and food-related companies. The principles that Saginaw and Weinzweig founded the company on in the early 1980s served as guideposts for navigating through and thriving during the pandemic. Maynard’s description of this challenging time adds interesting depth and insight to the Zingerman story.

“Satisfaction Guaranteed” provides more than a running account of a corner deli in Ann Arbor that grew into a multi-million dollar business. The book will be of interest for both fans of the Zingerman’s and entrepreneurs.

Maynard demonstrates why Michigan is fortunate to have a value-based business that has been successful with its employees, community, and bottom line.

Chris Wendel works for Northern Initiatives, a mission-based lending organization based in Marquette, Michigan. Northern Initiatives provides funding to businesses throughout Michigan and online business resources through its Initiate program to small business owners throughout the United States. Wendel lives and works in Traverse City.

TRAVERSE CITY BUSINESS NEWS

DECEMBER 2023

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