Traverse City Record-Eagle

January 5, 2014

Top local business stories of 2013

BY GLENN PUIT
gpuit@record-eagle.com

---- — EDITOR’S NOTE: 2013 marked a year of economic recovery, renewal and, at times, reflection in the Grand Traverse region. The following are among the top local business stories covered by the Record-Eagle in 2013.

Hotel Indigo

The Hotel Indigo development is considered a harbinger for future development of the old Warehouse District in Traverse City, but the project at Hall Street and Grandview Parkway ran into delays in 2013 when cyanide was discovered in groundwater beneath the former industrial complex.

Measurements of cyanide at the Indigo site measured as high as 1,200 parts per billion on June 21. The cyanide is not a threat to public health, but those levels are considered problematic to the health of nearby Grand Traverse Bay.

“It’s significant,” said local environmental consultant Chris Grobbel. “We have rules and laws in place to prevent this type of thing because we care about the health of our waterways.”

The findings sparked an extensive scientific investigation into the source of the cyanide and what it will take to clean it up. The test results also translated into taxpayers paying a lot more to make the Indigo a reality. The Grand Traverse County Land Bank Authority secured $600,000 for on-site remediation of the cyanide as part of a brownfield redevelopment project that previously received a $1 million loan from the Environmental Protection Agency. The Land Bank Authority will seek more public dollars on Jan. 16, when officials ask for $600,000 from the Michigan Land Bank to assist the investigation.

“As you go down on the Grandview Parkway, it’s going to be the same issue,” said Jean Derenzy, deputy director of Grand Traverse County’s Planning & Development Department. “There’s water coming underneath all of those properties, and that’s what we are trying to stop so we are not having to do this again and again.”

Indigo Developer Jeffrey Schmitz said the luxury hotel is scheduled to open in spring 2015.

“We want the community to understand we are very much appreciative of all the help from the county, the state, the Environmental Protection Agency and (the Michigan) Department of Environmental Quality to make this project possible,” Schmitz said.

Economic growth and anti-regionalism

Several communities in northern Michigan are tired of waiting for new jobs to materialize, as evidenced by efforts in 2013 to get organized about the region’s economic development strategy.

The bedroom community of Kingsley worked with the Traverse Bay Economic Development Corporation to complete a lengthy study on what it will take to spark job growth for Kingsley and surrounding areas. Kingsley now seeks to capitalize on its assets, including a largely unused industrial park, its lower housing costs and its close proximity to Traverse City to foster community growth.

Benzie County is doing the same thing: the rural county contracted with the Traverse Bay EDC on what it will take to get Benzie primed for job growth.

“Benzie County’s biggest export is its children,” said county commission Chairman Don Tanner. “It’s a huge frustration of mine. We don’t have the kind of work that can hold people in the area and pay meaningful wages. We have some, but not enough.”

Not all northern Michigan communities are in the partnering mood, though, when it comes to economic development. The Leelanau County Board of Commissioners rejected a formal contract with the Traverse Bay Area EDC and disbanded the Leelanau County Economic Development Corporation in 2013 because they said it wasn’t working.

“They had no goals, no organization and they were floundering around,” said board of commissioners Chairman Tom Van Pelt.

Comments from three other members of the Leelanau County Board of Commissioners at a public meeting indicated some don’t seem to want growth in Leelanau. County business leaders criticized comments from commissioners Melinda Lautner, Debra Rushton and Karen Zemaitis because those business leaders worried the county had embarked on a path of isolation. Lautner also faced criticism for her rebuke of the Northwest Michigan Council of Governments, which works to promote a regional strategy for job growth.

Lautner questioned if the COG is wasting public money on excessive perks and benefits for COG employees.

The Record-Eagle subsequently highlighted how Lautner received more than $222,000 in government wages, taxpayer-financed health insurance benefits and public sector employment perks since 1999 during her time as a county commissioner.

Northwestern Bank upheaval

Its been a rough ride for Northwestern Bank in the aftermath of the Great Recession.

The bank lost money from bad commercial loans during the recession, including defaulted real estate loans tied to a group of 19 separate limited liability companies collectively controlled by members of the Nielson family of Generations Management LLC and Generations Realty. The loans represented almost half of the bank’s Tier One, or core capital investments.

The bank entered into a consent agreement with federal regulators because of failures in some of Northwestern’s commercial loans in 2012. In September 2013, the Federal Deposit Insurance Corporation alleged Northwestern Bank’s former president, Harry “Scrub” Calcutt, and two other bank executives tried to hide in excess of $38 million in loan defaults by the bank’s largest borrower from the bank’s board of directors and government regulators.

Calcutt denied the allegations.

New bank President Daniel Terpsma said the bank is back on track.The bank continues to work with regulators on a plan to work itself from the consent agreement and he’s optimistic the bank will do so this year.

The bank wrote off in full losses on bad commercial loans, Terpsma said. The bank continues to sell other real estate holdings secured from failed deals, and Terpsma said the end result is the bank is on firm financial footing.

“We are different than many banks that have to shrink their way out (of a consent agreement) because they don’t have sufficient capital,” Terpsma said. “We have not had that. We have enough capital. We could lend $200 million more into northern Michigan if we can see the right deals over the next six months. A lot of banks under a consent agreement can’t do that.

“Our message is to say to business owners, we are still a great bank,” Terpsma said. “We might have had a few issues, but that’s not going to impact you. If you want to grow and double your size and you need an extra million dollars – if it makes sense, we will be there for you.”

Record year for real estate

It was a banner year for residential real estate sales in northern Michigan.

Statistics from the Traverse Area Association of Realtors (TAAR) documented the comeback in sales for residential properties. The sales numbers were at times red hot, particularly in downtown Traverse City.

“It’s a great market if your house is priced right,” said Ken Kleinrichert, an associate broker at Coldwell Banker Schmidt Realtors. “It’s equivalent to 2006 when things were peaking, as far as activity.”

The final numbers for 2013 are the best since TAAR started tracking sales data, said Kimberly Pontius, executive vice president of TAAR. In 2013, 2,897 residential unit sold in the region covering Grand Traverse, Benzie, Leelanau, Antrim and Kalkaska counties. The sales figure represents a 7 percent rise from 2,705 units sold the year prior.

The average selling price of residential units rose, too. TAAR statistics show the average residential sales price in 2013 was $216,268, up nearly 6 percent from 2012.

“This will be the benchmark year,” Pontius said. “Inventory issues are starting to emerge even with waterfront and luxury properties because we are starting to deplete the inventory.”

Building permits skyrocket

Another economic indicator of northern Michigan’s economic health -- building permits -- witnessed a strong comeback in 2013.

Grand Traverse County issued 908 building permits in 2013, up 23 percent from 2012. The estimated value of the new construction was placed at $123 million for 2013, up 74 percent from the year prior.

Garfield Township saw a similar spike in building permits. The township issued 175 permits for the year, with single family dwelling units doubling from 2012. Total construction in the township rose 56 percent from the prior year.

“This year, I would say, the economy turned,” said Gary Jurkovich, owner of Pathway Homes. “There is a huge amount of pent-up demand.”

The increase had builders scrambling for skilled construction labor. The demand for such workers hasn’t been seen in the region since before the economic downturn.

“The beginning of the year and the last part of last year, the repo market evaporated in town,” said Jurkovich. “As the inventory of repo houses came off the market, people still wanted to buy a home. All of a sudden (the market) just switched.

“We’ve gone from six employees to 26 employees,” Jurkovich said. “Its been huge and they (the new jobs) have come in the form of management, project managers, sales people and labor to keep up with the demand.”

Kathy Maisonville, executive officer of the Homebuilders Association Grand Traverse Area Inc., said the building permit numbers are great news for the region’s economy.

“The statistics from within the county are pretty powerful,” Maisonville said.

Bryan Crough’s death

Downtown Traverse City’s shopping district is known for its diversity of stores, restaurants, and theaters; it offers an alluring landscape many small Midwestern cities would love to call their own.

The man oft-credited with shepherding downtown’s transformation from struggling city core to charming urban center was Bryan Crough, director of the Downtown Development Authority. Crough died June 16, at age 59, of a heart attack. Crough’s death caused the city to reflect on how far it’s come in the last three decades and on his contributions.

“When you look at the vision he had, he saw a booming downtown when no one else saw it,” said Mayor Michael Estes. “Bryan could see where he wanted to go, and embarked on that path.”

Crough hailed from Salina, Kan., and moved to Traverse City in 1980. He became executive director of the DDA in 1990, at a time when downtown was far different than today. A JCPenney store had departed, the former State Theatre was shuttered, there were no parking decks and many storefronts sat empty.

“He was the kind of person who would make people and programs fit together to get things done,” said Attorney Chuck Judson, who served on the DDA board that hired Crough. “He was just so interconnected to the community.”

Crough worked as executive director of the Old Town Playhouse and was a strong supporter of the arts. He served on the city commission from 1985 to 1990 and served a single year as mayor. Crough was not immune to criticism, either. He was questioned about his advocacy for three Federated Property development projects, which later fell apart in 2006 when voters overwhelmingly rejected a proposal to sell up to $16 million in bonds to pay for a parking deck and infrastructure improvements.

Crough’s legacy, though, is one of big dreams for a small city that came true.

“Bryan Crough: When we look down this street, we will always see you,” read the marquee of the State Theatre following his death.

Cherries, apples rebound

What a difference a year makes for northern Michigan fruit growers.

Cherry growers in 2012 endured what was arguably the worst year on record for growing cherries, thanks to a bizarre spring heat wave and subsequent freeze that destroyed much of the crop. It wasn’t a whole lot better in 2012 for growing apples.

The fate of northern Michigan fruit growers turned like the weather in 2013. Cherry farmers observed a resurgence in their yields, with some estimates labeling the 2013 Michigan cherry crop the best in decades.

“With the crop loss of 2012, any fruit on our trees this year would have been a positive sign,” said Nikki Rothwell, district horticulturalist for the Northwest Michigan Horticulture Research Center. “Both the tart and sweet cherry crops were of exceptional quality, partially due to a crop size that was neither too big nor too small, but also because of the cool temperatures during harvest.”

It was good news for apple and grape farmers as well, with 2013 a record-setting year for apples and strong yields for grapes.

“The crop is as close to a 100 percent crop as I’ve ever seen in our orchards,” said apple farmer John King of King Orchards in Central Lake. “The quality and size are excellent. Last year we had just one third of a crop, and no cherries, peaches or apricots, so it’s euphoric to see the beautiful size of the apples already.”

The Michigan apply industry set new shipment records for two consecutive weeks in October. The industry set its first record the week of Oct. 5 when it shipped 411,973 boxes of apples. The following week another record was set with the shipment of 414,702 boxes. For comparison, the industry’s prior shipping record for the second week of October was at 378,933.

“Based on our storage figures, it’s one of the largest crops we’ve ever had in the state,” said Diane Smith, executive director of the committee. “The last largest was 1995; it’s definitely one of the largest we’ve ever seen. Our estimate is 30 million bushels.”

Cherry growers received additional good news in 2013. the federal government expanded crop insurance for cherry growers, and the additional insurance gives farmers more options in protecting themselves against the type of losses experienced in 2012.

“No farmer should be wiped out because of a few bad days of weather, and this new coverage will help Michigan’s growers manage their losses without losing the farm,” said U.S. Sen. Debbie Stabenow of Michigan.

Banks, financial institutions expanding

The business of banking is getting increasingly crowded in Traverse City.

Traverse City State Bank christened new office space downtown when officials opened a new headquarters and downtown branch at 333 W. Grandview Parkway. Bank leaders said significant growth prompted the move to an 18,000-square-foot office space from its prior location on West Front Street.

“The new location was the perfect opportunity for us,” said Ann Bollinger, president and chief financial officer. “We are in the whole first floor and almost all of the second floor. It has a much nicer work flow, and we’ve done a bit of a build-out.”

First National Bank of America demonstrated a long-term commitment to the northern Michigan market by opening a local headquarters on Division Street. The bank started doing business in Traverse City in April 2011, and leased office space at 333 W. Grandview Parkway. First National Vice President Todd Gignilliat said the purchase of a building at 315 N. Division makes it clear First National found a permanent home in the Grand Traverse region’s already-crowded financial market.

“We are committed to the Traverse City area market and are putting down roots,” said Gignilliat. “That’s what we’ve done here at 315 N. Division. We have seven employees right now.”

Traverse Bay Area Credit Union is building its new headquarters at the corner of East Front and Hope streets. The goal is to open by spring.

Tourism impacts, festival fatigue and taxes

The Traverse City Convention and Visitors Bureau renamed itself Traverse City Tourism in 2013 as the agency released a new report that detailed the profound impact tourism has on the northern Michigan economy.

Among the highlights: tourism dollars pumped into the local economy jumped by nearly $300 million in just six years and the industry provided a $1.2 billion economic boost to the Traverse City area in 2012. That represents an approximate 28 percent jump from $937 million in 2006.

But tourism prompted intense discussion in the Traverse City region about how much is too much. Traverse City commissioners voted to limit summer festivals at the Open Space from a maximum of six down to four. The limits were imposed after residents repeatedly voiced concerns about excessive noise and strains on city infrastructure because of what they saw as too many large events at the Open Space.

“We are limiting one event at one park,” Commissioner Jeanine Easterday said. “We are not eliminating events for Traverse City.”

Questions also surfaced in 2013 about the tax-exempt status of property housing Traverse City Tourism after its leader, Brad Van Dommelen, lobbied against fee increases for Open Space festivals. Mayor Michael Estes questioned why the Traverse City Area Chamber of Commerce pays property taxes on its building but Traverse City Tourism does not.

“I can’t see a whole big community benefit difference between what the chamber does and what the Visitor’s Center does,” Estes said. “I believe it’s time to update the commissioners on the tax exempt status of the Visitor’s Center and to explore options available to the city.”

City Commissioner Barbara Budros -- an advocate for increased fees for festivals on city property -- questioned whether the tourism industry is doing enough to help cover the costs of its impact on costs to municipal infrastructure.

“Tourists come here and put money into the area’s businesses; they don’t put any money into the city’s general fund,” Budros said. “I agree tourism is an economic driver here, but we have to be careful with balancing this so we are not ruining our city.”

Van Dommelen countered the criticism, citing the impacts tourism has on the overall economy.

“I understand the pressures on the city, but they have to understand we are growing our economy here,” he said.