TRAVERSE CITY -- There were plenty of ups and downs in 2007 during a challenging year for northern Michigan's economy and its businesses.
The state's battered manufacturing sector and the highest unemployment rate in the country made it tough for residents and businesses to stay afloat. Property values were stagnant, and foreclosure rates in Michigan were among the highest in the country.
State lawmakers struggled with revenue shortages, and partisan battles over balancing the state budget forced a brief state government shutdown this fall. Next year's budget picture looks equally bleak.
High gas prices also chipped away at family budgets and spending money for visiting tourists, and businesses also grappled with higher fuel costs.
But it wasn't all bad news in 2007. The region's grape and wine industry had another banner year, with soaring wine sales, more wineries opening and another bountiful grape harvest. There also was a solid cherry crop in northern Michigan, although some farmers and growers struggled with drought conditions over the spring and summer.
Warm, dry weather brought plenty of tourists to the region, and downtown Traverse City received a major commerce boost when filmmaker Michael Moore re-opened the State Theatre on a year-round basis on the heels of another highly successful Traverse City Film Festival. The region also landed in the national spotlight when the National Governors Association summer conference arrived at the Grand Traverse Resort & Spa in Acme.
The Record-Eagle's top 10 business stories of 2007 include:
1. Real estate market lags and region struggles with a surge in foreclosures
The best thing to be said about the area's real estate market in 2007 is that it was a good year to be a buyer.
"There's just a lot more (housing) inventory that's out there," said Kimberly Pontius, who took over in mid-October as executive vice president of the five-county Traverse Area Association of Realtors. He replaced longtime director Judith Lindenau.
Pontius said area real estate agents are reporting consistent sales numbers this year compared to 2006. But real estate values stayed flat in 2007 and double-digit land value increases of the 1990s remained a distant memory.
"I think we've seen a market stabilization, as far as prices are concerned," Pontius said.
Land values in northwest Michigan were more stable than other parts of the state, but few corners in Michigan escaped the financing crisis in housing that ate away at vast sections of the country and eroded several national and international financial markets. Michigan had almost 30,000 property foreclosures in the first quarter of 2007, up nearly 30 percent from the first quarter of 2006, according to RealtyTrac, a California-based data service.
In the first nine months of the year, Michigan led the country with an estimated $185 million in credit losses, the mortgage company Fannie Mae reported. In December, RealtyTrac said there were almost 400 pending mortgage foreclosures in northwest Michigan, with almost 30 percent of those in Grand Traverse County.
Pontius is hopeful the worst of the real estate and housing woes are in the past.
"I think next year, as we get through the national crisis in foreclosures and the mortgage industry, we'll probably see some more stability," he said.
2. New construction falls off as part of state's continuing economic woes
A major downturn in new construction continued in 2007, a trend that started in 2006 when Grand Traverse County experienced a nearly 20 percent reduction in new construction that forced some local governments to lay off some building inspectors.
The new building slump continued in 2007. Reports from the county's Construction Code office through November showed less than 1,000 new building projects throughout most of the county, down more than 16 percent from the soft year of 2006. The estimated value of those projects, nearly $124 million, is off nearly three percent from last year. New commercial building and renovations are ahead of last year's pace, but new residential construction is off sharply from last year. The county only issued 263 new home permits through November, off 40 percent from 2006, while the estimated value is down more than 28 percent to around $49 million.
3. Revamp of Michigan business tax and other tax proposals keep businesses guessing
Businesses in Michigan had to keep an eye on Lansing in 2007 to stay abreast of potential changes to their tax structures after Michigan's much-maligned Single Business Tax ended. But then state lawmakers struggled to find a politically palatable replacement.
"I think the most positive thing I can say about the 2007 legislative session is that it's over," said Rich Studley, executive vice president of the Michigan Chamber of Commerce. "There was so much uncertainty about taxes, spending and the regulatory climate."
State legislators fought to close an estimated $1.75 billion gap in the state's general fund budget in the face of an Oct. 1 deadline and a threatened state government shutdown. The deadline was missed by a few hours and a massive government shutdown averted, but the budget deal included an estimated $600 million-plus in revenue from a sales tax on services that had widespread implications for northern Michigan's service-related economy. The state income tax also increased for residents while some state services were cut or reduced.
Businesses and their lobbying groups assailed the new service tax, which applied to some products and services like ski lift tickets and landscaping services, but not on other items like golf course fees. It was slated to begin Dec. 1 before being repealed by the Legislature, but not before some businesses, including area ski resorts, collected it for several hours. The planned revenue from the expanded service tax was replaced by a surcharge to be added to the new Michigan Business Tax.
Businesses soon will find out how they're impacted by business tax changes that take effect Jan. 1. Business lobbies are worried the new business tax is just as complicated as the old SBT, and may increase taxes on some companies, including those in service industries that are widespread in northern Michigan.
"I think the jury is still out on whether it's an improvement or not," said Studley.
4. New Munson Medical Center emergency room part of medical building surge
It was full speed ahead in 2007 for the region's largest hospital, which opened a new $10 million emergency room Feb. 1 as part of an aggressive expansion effort that will continue into next year.
Ed Ness, president and CEO of Munson Medical Center, said the nearly 40,000-square-foot facility significantly improved operations in the emergency room and helped handle an 8 percent increase in patient visits there this year. Patient survey scores also improved significantly, Ness said, an indication that people needing treatment are pleased with the expansion.
"We've been very busy over there and we've been fortunate to be able to accommodate that," Ness said.
In early 2008, Munson will open a new $3.8 million breast health center in the Copper Ridge development along Silver Lake Road in Garfield Township with state-of-the-art mammogram and ultra-sound equipment to expand its breast cancer screenings. By fall, it will open the last phase of its $10 million heart center, to include new laboratories and other facilities on the sixth floor of the new ER building.
Two more operating rooms will be built within the hospital's existing footprint next year, and Munson also is building a back-up computer and data center to retain records in case of a catastrophic emergency.
"It's going to be a very busy year," Ness said. "We're continuing to grow."
Meanwhile, the city and neighboring Garfield Township continue with spin-off development related to the hospital, including a new medical office to be built at the long-dormant southwest corner of Front and Division streets.
5. Leelanau County winery takes over top spot in state production during another big year for area vintners
Northern Michigan's wine and grape industry remained a beacon of success in 2007 in the region's challenging business climate. A handful of new vineyards and wineries opened in the region, demand remained strong for vineyard acreage and the warm, dry summer made for another successful growing season and a solid harvest in fruit quality and yield.
Michigan Liquor Control Commission records show Omena-based Leelanau Wine Cellars took over the top spot among Michigan wineries for in-state wine sales last year from long-time leader St. Julian Wine Co. in southwest Michigan. Wine sales at Leelanau Wine Cellars increased by 47 percent from 2005, and the winery is increasing its lead in Michigan sales, according to state excise tax reports for 2007. Chateau Grand Traverse of Old Mission currently ranks third in sales in Michigan, where six of the top 10 wineries are from Grand Traverse or Leelanau counties.
But with growth comes growing pains, and local wineries found themselves embroiled in a lawsuit in late 2007 after Peninsula Township granted a variance to Leelanau County-based Black Star Farms to produce wine on Old Mission Peninsula with grapes from Leelanau County. The decision prompted a legal challenge from the Wineries of Old Mission Peninsula and the case is pending entering 2008.
6. National Cherry Festival sells building, revamps business plan
Executive Director Tom Menzel crossed several major items off his "to do" list in 2007, the most significant being the sale of the festival's headquarters building at Sixth and Union streets in Traverse City, a move that allowed the organization to rid its budget of more than a half-million dollars of building debt.
"We had too much tied into fixed assets," the festival's executive director said. "It was a good move for us."
The festival temporarily set up shop in a downtown office building while officials look for a long-term home. In 2008, Menzel also hopes to come up with a long-term agreement with the city for use of public facilities that will cost the festival less money.
"The last big challenge for me is to get this Open Space agreement worked out," Menzel said. "We have to get this done this year."
The festival also is working on organizational changes to modify its nonprofit status as part of a new business model that a blue-ribbon panel helped develop this year, steps to allow it to do more in the area of scholarships and foundational work. He also wants to improve local festival promotions and emphasize its economic and cultural importance to the area.
"We've not done a good job highlighting the value of the National Cherry Festival from a historical and business perspective to the people of our area," Menzel said.
Menzel isn't wavering on earlier statements that the 2008 festival will be his last. He signed a three-year contract that expires in March 2009 and expects to step down when it expires.
7. NGA annual meeting brings business, lobbying and tight security to Northern Michigan
Around three dozen of the nation's governors converged on Traverse City for the National Governors Association's 99th annual meeting, returning to the Grand Traverse Resort & Spa in Acme that also hosted the event in 1987.
But it was hard to keep up with who was there and what they were doing, as the weekend-long event largely was cloaked in secrecy. There were open policy sessions on issues like global climate change, education and economic topics. But the public and media were kept away from several events, including an evening party on Old Mission Peninsula that was open to the governors and conference "sponsors," including scores of lobbyists from around the country.
One media report said more than $3 million in cash and services were provided by more than 80 businesses and individuals that contributed sponsorship money, including $150,000 each from the Big Three automakers.
8. State, neighbors resolve long-standing issues at Williamsburg Receiving and Storage
A long-negotiated settlement in a lawsuit between the state Department of Environmental Quality and Williamsburg Receiving and Storage stemmed a series of environmental problems and complaints at the cherry processing plant north of M-72 in Whitewater Township. The conflict stretched back at least five years.
"This year went pretty well," said Christopher Bzdok, an attorney for a group of neighbors who joined the state's lawsuit. "We have seen a major improvement in the situation out there."
The DEQ filed suit in February 2006 and the case was settled in January 2007. It included $350,000 to settle damage claims with neighbors, $100,000 in fines to the state, plus an agreement by the company to install a "wet scrubber" and other odor control equipment at the plant. The company also agreed to monitor hydrogen sulfide levels.
Bzdok said there were "a couple of incidents" of odor problems at the plant over the summer, but those were resolved without further court action. The company also has kept up its payment schedule to the state and neighbors, said Bzdok and officials at the state Attorney General's office.
"Overall, we've had significant forward motion toward meeting all of the obligations, and significant improvement in the odor situation," Bzdok said.
In late November, Grand Traverse County's Economic Development Corp. voted to foreclose on two loans that went to another company related to WRS. It was the first such action taken by the county EDC board that makes low-interest loans to local businesses, although county officials said the two loans were paid off by mid-December.
9. Leelanau preservation group closes on Fishtown deal
Back in February, a newly formed local nonprofit group called Fishtown Preservation Society formally closed on the $3 million purchase of Fishtown, a tourism magnet and historic site in Leland, from long-time fisherman Bill Carlson and his family. The group, through a massive fundraising effort, paid $2.8 million for the real estate in the historic fishing village and $200,000 for two fishing boats, their equipment and fishing licenses. The group also secured two major grants for their efforts and is working on other grant proposals, said Amanda Holmes, administrative director for the group.
Fundraising will continue in 2008 so the group can pay off the mortgage for the property, and set aside funds for the preservation and renovations to the old fishing shanties on the property, plus maintenance and operating expenses for some of its planned attractions.
10. Traverse City wants more brownfield say from Grand Traverse County
Fallout from the overhaul of the Traverse City commission by city voters in November quickly moved to the county's Brownfield Redevelopment Authority. The revamped city commission, including new Mayor Michael Estes, pushed county officials for more representation on the county's BRA board, reasoning that most of the county's current brownfield projects are within the city limits. Some city officials also criticized the county's decision to continue proceeding with a proposed mixed-use development project at 145 W. Front St. involving Federated Properties, despite city voters crushing a request last year for city bond money to pay for public parking within the project.
Some county officials initially balked the city's request at a meeting in December, challenging the move as political "grandstanding" and "theatrics." A joint meeting between the city commission and county board is expected in early 2008 to discuss the stalemate.
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