COIlI'OIATl I'IOl'UTIlS, LTD.

Corn'astone Alliance

R'ed~ve'opment Propaties

Cities oof St. Joseph 6- Benton Harbbr, Michigan

MARKETING R E COM M °E N 0 A T ION

 TABLE OF CONTENTS

PAGE
SECTION NQ..

I. EXECUTIVE SUMMARY 1

A. PRESENT SITUATION

B. ECONOMIC AND MARKET CONDITIONS

C. REUSE OF THE ST. JOSEPHIBENTON HARBOR PROPERTIES 15

D. REUSE AL TERNATIVES FOR THE PROPERTIES 17
E. PROPOSED REDEVELOPMENT FINANCIAL FEASIBILITY 20
F. REDEVELOPMENT AND DISPOSITION RECOMMENDATIONS 22
G. DISPOSITION ALTERNATIVES 25
H. DISPOSITION RECOM:MENDATION 28
I. IMPLEMENTA TION OF THE DISPOSITION RECOMMENDATION 29

II. GENERAL INFORMATION 31

A. THE STATE OF MICHIGAN 31

B. THE BERRIEN COUNTY/ST. JOSEPHIBENTON HARBOR REGION 40
C. SUMMARY 49

III. DEMOGRAPIDC AND ECONOMIC CHARACTERISTICS 50

A. DEMOGRAPHICS OF THE STATE OF MICHIGAN 50

B. ECONOMIC CHARACTERISTICS OF THE STATE OF MICHIGAN 53
C. DEMOGRAPHIC CHARACTERISTICS OF THE BERRIEN COUNTY/ 61
ST. JOSEPHIBENTON HARBOR AREAS

D. ECONOMIC CHARACTERISTICS OF THE BERRIEN COUNTY/ 67

ST. JOSEPHIBENTON HARBOR AREAS

E. SUMMARY 74
 IV. THE INDUSTRIAL, COMMERCIAL, AND RESIDENTIAL 77
REAL ESTATE MARKETS
•
A. THE INDUSTRIAL MARKET 77

B. THE COMMERCIAL MARKET 85

C. THE RESIDENTIAL MARKET 107

D. SUM1v1ARY 114

V. PROPERTY EVALUATION 117

A. DESCRIPTION 117

B. LEGAL AND FINANCIAL STATUS 124

C. PHYSICAL CONDITIONS OF THE PROPERTY 131
D. CONCLUSIONS 141

VI. REUSE OF ST. JOSEPHIBENTON HARBOR PROPERTIES 142

A. PREVIOUS STUDIES 142 r
..I
B.

C.
PROPERTY CHARACTERISTICS

FACTORS AFFECTING REUSE

146
147
} ,
L
D. REUSE ALTERNATIVES FOR THE PROPERTIES 150
!
E. FINANCIAL ANALYSIS 161 i
VII. REDEVELOPMENT AND DISPOSITION ALTERNATIVES 177 r,
!

AND RECOMMENDATIONS i

A. ISSUES AFFECTING PROPERTY REDEVELOPMENT 177

~
B. DISPOSITION ALTERNATIVES 183
C. DISPOSITION RECOMMENDATION 187 L

D. IMPLEMENTATION OF THE DISPOSITION RECOMMENDATION \ 88

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I
t
 LIST OF ILLUSTRATIONS
PAGE
N(L

REGIONAL MAP 119

LOCATION MAP 120
LOCUS MAP 121
PARCEL MAP 122
OWNERSHIP MAP 130

ZONING MAP 134

FIRM MAP 137

REDEVELOPMENT PLAN-PARCEL ONE NORTH 152

REDEVELOPMENT PLAN-PARCEL ONE SOUTH 153

REDEVELOPMENT PLAN-PARCELS TWO & THREE 155

REDEVELOPMENTPLAN-P AReEL FIVE 158

REDEVELOPMENT MASTER PLAN 160

of >. . ". ".'.~

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 SECTION I: EXECUTIVE SUMMARY

A. PRESENT SITUATION

Corporate Properties, Ltd. (CPL) was retained by Cornerstone Alliance to generally evaluate the
redevelopment feasibility of approximately 450 acres of land in the cities of St. Joseph and
Benton Harbor and develop recommendations for disposition.

CPL began this assignment in January, 1997. Included in this report are the results of extensive
economic, demographic, and real estate market research and analyses; a comprehensive property
review and preparation of redevelopment plans; budget cost estimating and financial analysis;
and numerous interviews and discussions with local, regional, and national consultants, advisers,
govef?I11ent agencies, political officials, professional associations, real estate brokers and
appraIsers.

B. ECONOMIC AND MARKET CONDITIONS

1. Demographic And Economic Characteristics Of Michigan And The Berrien

County/St. JosephlBenton Harbor Area

Michigan has a population of approximately 9.5 million people as of 1995. Between

1990 and 1995, Michigan's population grew only 2.7%, compared to the United States
population growth of 5.6%. ·Projections through the year 2025 show Michigan's
population growing only 1.4% between 1995 and 2000, and only 4.1 % between 2000 and
2025 compared with the United States' growth of 4.5% and 21.9%, respectively.

Only 12.5% of the state's population is over 65, compared to 12.8% in the U.S., and
almost 62% of Michigan's population is of working age. For 1995, this translates to
approximately 5.7 million people. Michigan's younger population profile insures a
balanced long-term employee pool. . However, Michigan's slow population growth may
dampen long term economic growth within the state if availability of labor becomes an
issue in the future. Companies looking to locate or expand in Michigan will first consider
the areas with the largest population and available labor pools.

Michigan's metropolitan areas have lower population growth rates, above average
household incomes, lower unemployment rates, and above average costs of living in
comparison to the other metropolitan areas. Per capita income has risen slightly above
the national average, reflecting a stable economy and an employed workforce. The
state's per capita income compares favorably to other midwest states and the U.S.
Similarly, Michigan's average annual pay is above the U.S. average and has grown
16.4%, compared with the U.S. growth of 14.1 %, between 1990 and 1994. Michigan's
manufacturing wage rates are the highest among the six neighboring midwest states.

Michigan's ability to attract new residents and workers is directly related to the various
income measures. Given the state's favorable position when comparing these measures
to other states and the national averages, Michigan should be able to attract people to the
state. However, the state's higher wage rates will slow expansion or relocation projects
involving new jobs in the state.
1
Michigan ' s economy has rebounded after the last recession as measured by Gross State
. . ... Product (GSP), a measure of a state's total output, or output of a specific industry sector.
Michigan and its neighboring manufacturing industrial states of Illinois and Ohio,together
comprise about 12% of the national GSP.

The state has an extremely proficient exporting capacity which is a major factor in the
state's economic stability. The state ranks fourth nationally in total exports. The key to
Michigan' economic status, however, is still transportation related. Michigan is the
nation's largest exporter of transportation equipment.

These factors have given Michigan, long considered the rustbelt state of the nation, a
revitalized and healthy economy in the 1990' s. Across all industries, real growth and
diversity are clearly evident. With a 1996 average of 4.7%, Michigan has one of the
lowest unemployment rates in the nation (1996 national average was 5.3%).

Underscoring the strength of the state's manufacturing economy is the fact that Michigan
accounted for almost 21 % of the 102,000 new manufacturing jobs created nationwide
between 1994 and 1995, and in the final quarter of 1995, Michigan generated 1 in every 3
manufacturing jobs in the United States.,

The state's industrial base, which includes agriculture, manufacturing, tourism, finance
and mining, has become much more diversified. Although the Michigan economy was
built on automobile manufacturing and it is still the number one manufacturing sector, the
economy is not as dependent on the automobile industry as it was in the past.

Michigan hasa stable, diversified, and slowly growing economy supported by a growing
employment base. The state's economy survived the effects of the most recent recession,
and, by most measures, is expected to expand, albeit slowly. The presence of a large
number of manufacturing companies and the move away from dependence on the
automotive industry is indicative of the strength of the general business climate. The
state economic and demographic characteristics are a positive influence on the
redevelopment of the St. JosephlBenton Harbor properties.

Berrien County ranks 12th in population, 10th in size, and 11 th in population density out
of Michigan's 18 counties with the largest population.

The cities of St. Joseph and Benton Harbor are the central cities of the Benton Harbor
MSA. , The Benton Harbor MSA has a total population of approximately 162,000. Die
urbanized area, of which the two cities are the center, contains 57,712 people from the
adjacent municipalities of Benton Township, St. Joseph Township, Lincoln Charter
Township and a portion of Sodus township.

The demographic characteristics of the Berrien County/St. JosephlBenton Harbor area are
unique. Despite the growth occurring in Michigan, Berrien County's unemployment rate
remains 50% higher than that of the rest oithe state. Manufacturing employment is up
and per capita income is growing, but there has been a significant loss of population from
1980 to 1990.

According to the 1990 census data, the population of the area declined substantially
between 1960 and 1990 as people left to find jobs and opportunities elsewhere. Between
1980 and 1990, Berrien County's population decreased 5.8%, St. Joseph's decreased
4.2%, and Benton Harbor's decreased 12.4%.

2
The county's inability to supply sufficient employment opportunities to keep and attract
young adults will negatively impact the quality of its labor force. This situation is more
acute in the St. JosephlBenton Harbor areas.

While Berrien County's total population dropped 5.8% between 1980 to 1990, the
number of county residents in various age groups changed more dramatically. Berrien
County experienced an out-migration of young adults during the 1980's and forecasts
suggest that the trend will continue during the 1990's. From 1980 to 1990, the number of
county residents between the ages of 20 and 30 years of age dropped nearly 22% from
28,020 down to 22,991. Moreover, the Michigan Department of Management and
Budget forecasts that by the year 2000, the number of county residents in their twenties
will decline by another 10.4% to 20,598, and these trends are expected to continue
through 2010, suggesting a decreasing population and labor supply, both countywide and
in the two cities. The growing population of retirees and elderly can be expected to have
~ncreasing health care and personal service needs as well as increasing disposable
Incomes.

Between 1980 and 1990, the ethnic composition of the remaining residents in Berrien
County, St. Joseph, and Benton Harbor has changed as well. Berrien County's White
population has decreased by almost 11,000, or 7.5%, between 1980 and 1990, accounting
for all of the total population decrease over the period. Similarly, the decrease in the
populations of St. Joseph and Benton Harbor are due almost entirely to decreases in the
White populations.

The lack of similarity in the ethnic characteristics of the County and the two cities has
created friction within the County. In addition, the City of Benton Harbor's huge
percentage of youth has generated greater demands for social services.

The Michigan Department of Education measures performance using the Michigan

Educational Assessment Program (MEAP) test. While students in the St. Joseph and
Lakeshore School Districts have scored well above the state average, students in the
Benton Harbor School District have not. Of Benton Harbor Area 10th and 11 th grade
students, less than 6% received a satisfactory grade in math,. less than 14% in reading, and
less than 14% in science compared to almost 44%,54%, 'and 60%, respectively, for St.
Joseph students.

The recently released state report for 1995-96 shows that the Benton Harbor Area School
District recorded the lowest test scores in the state, and was the only district to record 1.0
(out of a possible score of 100.0) in the science skill assessment. .

Michigan's crime rate is higher than the average for the United States, and higher than
four of the five other neighboring Midwest states. Only Illinois has a higher crime rate
among the six states, while Berrien County's crime rate is comparatively higher than all
six states and the United States.

The quality of the public education system in the Benton Harbor Area Schools coupled
with the high incidence of crime presents a very negative impression. As important
measures of the quality of life, these negative factors are a strong concern for anyone or
any company 100Jcing t6 expand or locate in the area.

Total Personal Income, Disposable Personal Income, Personal Income Per Capita, and
Disposable Personal Income Per Capita figures for Berrien County indicate steady five
year incremental increases averaging 30% for each five year period. These increases are
projected to continue through 2010.

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1
However, there are wide historical discrepancies in these same measures within the St.
JosephlBenton Harbor area. While Per Capita Income rose in Berrien County. the City of
St. Joseph, and St. Joseph Township 12.1%, 18.7%, and 19.9%, respectively, between
1979 and 1989, it increased by less than 1% in Benton Township and declined almost
11 % in Benton Harbor.

The wide discrepancies in the various income measures in the St. JosephlBenton Harbor
area further indicate a decaying urban core. Benton Harbor's income figures are only
300/0-50% of the County averages, and even less than those of the immediately
surrounding communities. This tends to isolate the community and create increasing
social service demands on the Benton Harbor budget.

During the early 1900's, the St. JosephlBenton Harbor area established a strong base of
manufacturing, metal fabricating plants, and as a distribution center for fruit. By 1920,
the City was also a popular tourist destination. By 1950, Benton Harbor was the area's
leading center for manufacturing, retail and wholesale trade.

Unfortunately, like many of the largest midwestern cities in the manufacturing belt,
thousands of jobs were lost between 1970 and 1985 due to cost efficiency relocations and
downsizing. Businesses abandoned the center city for more commercially attractive
suburbs in outlying townships. Manufacturers began to move centers of operation to
locations where labor and material costs were lower. New industry opted for newer
industrial park settings. Metal refiners and fabricators employed newer technologies
requiring fewer, but more highly skilled labor force members.

The City of St. Joseph's recent employment losses from major plant closings contributes
to the economic stagnation in the area Together, the statistics for the St. JosephiBenton
Harbor area reflect a declining economy.

The Berrien County unemployment rate has trended up and down during the 1990's, as
did the state's and the nation's. St. Joseph is essentially at full employment with an
unemployment rate of 2%, while the unemployment rate in the City of Benton Harbor has
.' not dipped below 20% since the 1970's, and has,soared to the mid to high 30% range
during the early to mid 1980's and again in the early 1990's.

The composition of the job market in Berrien County, as elsewhere in the midwest, has
shifted away from manufacturing toward low-skilled sales and service jobs.

Employment levels directly impact the real estate market. An increasing employment
base indicates the potential for increased consumer spending. Increased income and
spending generate many benefits for any area including increased tax revenue (increasing
municipalities' ability to pay for services), increased employment (as demand for goods
and services increases, jobs are created), and stable or growing real estate markets (as an
increasing number ·of workers require more office, retail, and industrial space and more
residential units).

The opposite also holds true. A decreas~g employment base can cause municipal
spending cutbackS or increases in taxes, reduced demand for goods and services, and
increasing vacancy rates in all sectors of the real estate market.

Based on the most recent employment trends, CPL believes that the St. JosephiBenton
Harbor area employment base will grow very slowly, with very little positive impact on
the real estate market. .. ~ I

4
 Berrien County's economic base is divided between manufacturing industries, which
represent approximately 30%, and service industries, which represent approximately 50%
of total County employment. The retail trade and service industries account for 35% of
all jobs and 80% of the County's non-manufacturing employment. The Government
sector and self-employed individuals account for the remaining 20% of the economic
base.

The manufacturing sector is heavily dependent on metal working and machine related
industries, which account for almost 75% of all manufacturing jobs in the County.

Tourism is one of the leading economic base industries in Berrien County due to its
location along the shores of Lake Michigan and proximity to the Chicago metropolitan
area. Visitors to the county bring thousands of dollars into its economy.

The impact of tourism on the county economy is evident. The county's expenditure-to-
income ratio in eating and drinking places is well above that in similar metropolitan
areas. Other positive indicators include increases in the room tax receipts from county
motels and other lodging places, the number of visitors to the county's state parks, and in
the seasonal traffic volume along the county's major roads.

Agricultural production is also a significant element in Berrien County's economy.

Berrien County is noted for its fruit crops, particularly apples, pears, peaches, berries, and
grapes. The Benton Harbor Fruit Market is one of the largest distribution outlets for fruit
produce in the world.

Employment ii1 the manufacturing sector in the Berrien County area is projected to
remain at or near current levels. Services and trade will show moderate growth.
Restructuring in the banking, healthcare, communications, and utilities industries may
affect the local economy, but only minimally due to the small concentration of
employment in each these sectors. Growth in the retail and service sectors, as well as in
the tourism subsector, may provide support for new development in the region.

The area economy has diversified away from the auto industry somewhat, which should
partially insulate it from volatile economic swings in the future. Overall, the trend of
slow economic growth is projected to continue. However, the continuation of a static
business climate will dampen the business and investment outlook over the long-term.

Based on virtually all economic indicators, the area economy still lags badly behind the
U.S. recovery which began in 1993. Job growth has been minimal in the area, and the
City of Benton Harbor has had chronic unemployment levels above 20% for more than 25
years.
The region's strengths include its location between Chicago and Detroit, its small but
diverse manufacturing base, its natural attractions and role as a tourist destination, and its
potential as a regional retail center.

Long term groWth depends on the area's ability to attract new industries and residents.
Without a growing labor pool, there will be fewer and fewer opportunities to attract new
businesses and industries.

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 2. The Regional Industrial Real Estate Market

The re<;overy in the U.S. industrial markets has advanced more quickly than the recovery
of the office markets. Not only were industrials less overbuilt, but industrial revival in
.durables has stimulated demand for assembly and distribution space for a wide variety of
suppliers and subcontractors, at the very same time that corporations are cutting middle
management and banks are merging thousands of jobs out of existence.

There has been an exceptional recovery in American basic industry. Led by high
technology industries, but joined by traditional industries like automobiles, machine
tools, and heavy equipment, the recovery from the recession of the early 1990's has been
carried by the durables manufacturing sectors.
f
The tone and tenor of the national industrial market, in short, has become much more
enthusiastic and optimistic over the year. This property type has come a long way since
the depths of 1992. r
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~ Overall vacancies declined by 8.6 million s.f. and the overall vacancy rate declined by
0.3%, from 7.4% to 7.1%. The continued drop in the U.S. industrial property vacancy
rate represents a four-year vacancy rate improvement of3.8 percentage points from
10.9% at the market bottom of 1992. i
Strong durables manufacturing performance played to the strength of the industrial
Midwest in 1996. The Midwest has experienced extraordinary absorption for warehouse
facilities in geographic locations having an ample supply of high cube space for
I
manufacturers, distributors, and retailers to accommodate the consumer demand for
goods, and to provide lower-cost goods through greater distribution efficiencies. r
Several of the major midwest metropolitan industrial markets, Chicago, Cleveland, I I
Detroit and Milwaukee, as well as the secondary markets of Dayton, Fort Wayne, Grand L
Rapids, Lansing, and South Bend, influence the St. JosephiBenton Harbor industrial -
market.

The Chicago MSA posted the highest totals both for absorption and construction of all
the East North Central Region submarkets in 1996, but Cleveland's absorption of 12.2
million s.f. and Detroit's 7.6 million s.f. were notable signs of the regional progress as
well. Eight of the ten markets experienced significant decreases and Detroit had r
vacancies increase. The amount of construction increased in most markets, as did i
absorption. All but two of the markets had single digit vacancy rates, while the
GarylHammondlEast Chicago and Lansing markets had vacancy rates of 12.2% and r
14.8% respectively. i
'-

South Bend's vacancy rate of 1.5% and Grand Rapids' 4.0% vacancy rate are good
indications of a healthy industrial market in the area. Both markets have less than two I
years worth of available supply and absorption has outpaced construction.
l

Sale and lease prices of midwest industrial buildings and land held steady between 1995
and 1996. Average building sales prices ranged from $15/s.f. to $28/s.f. in 1996,
[
compared to $17/s.f. to $27/s.f. in 1995, and the average sale price increased only $0.11
to $21.89/s.f. Average industrial lease rates ranged from $2.60/s.f. to $3.70/s.f. in 19%, r
compared to $2.40/s.f. to $3.60/s.f. in 1995, and the overall average lease rate increased L
only $0. 15/s.f., or 5%. Similarly, average land sale prices increased $0. 19/s.f. to
$1.54/s.f. or $66,800/acre.
~. ",", "1

6
 The Berrien County industrial market is largely comprised of manufacturers and
assemblers, and manufacturing space makes up the majority of the County's industrial
base.

Plenty of land is available for development in this relatively undeveloped industrial

market. Undeveloped sites "ranging from a single acre to 820 acres, offering highway
access, highway frontage and room for expansion are available in Berrien County, at
prices ranging from $1.00 per site in the Urbandale Industrial Park to $7~500 per acre for
sites located in industrial parks with immediate access to 1-94 interchanges.

The County has fifteen major industrial parks, three classified as Certified Industrial
Parks by the Michigan Professional Industrial Development Association. Located
throughout the region are numerous fully-serviced individual industrial sites, as well as
vacant and shell buildings of varying sizes.

Discussions with local appraisers, real estate brokers, owners, and local and County
assessment and economic development professionals confinned the lack of industrial
market activity in the St. JosephiBenton Harbor area.

More than 1.0 million square feet of good industrial" space is available for sale or lease in
the greater St. JosephlBenton Harbor"area. This does not include buildings such as the
Superior Steel or Malleable Steel properties, which represent almost 200,000 s.f., nor the
older industrial buildings in the North of Main area. The movement of commercial and
industrial activities away from the city has left many buildings vacated and abandoned.

Good industrial space is available for lease at annual rates ranging from $0.60/s.f., triple
net to $2.75Is.f., triple net. Nearly 1.0 million s.f. of industrial or commercial/industrial
space is available for sale, with asking prices ranging from $3.04/s.f. for an older 115,000
s.f. industrial building to $54.96/s.f. for a newer office and light industrial facility.

There have been very few industrial land sales in the St. JosephiBenton Harbor area for
more than three years. Recent activity in the local market is encouraging. Several
. companies, representing 1.2 million s.f. of required industrial space, are currently
considering locations in the St. JosephlBenton Harbor area.

3. The Regional Office Market

Office is actually a "hot property type" nationally as pension funds, REIT's and life
insurers are back in the market, developers are building new office product, and leasing
and investment brokers are busy.

Investors are committing more than $1 billion each quarter to office properties across the
U.S. Commercial office buildings are capturing the highest share of real estate
investment dollars, approximately 35% oftota! property sales recorded nationally in the
first three quarters of 1996. Foreign purchasers have returned to the market, real estate
investment trusts and limited partnerships have committed substantial volumes of capital,
and small, private investors have matched the big players in aggregate sales price volume
by completing hundreds of moderate-sized transactions.

On a nationwide scale, the drivers of absorption reflect key employment sectors. White
collar employment was up by 1.8 million jobs during 1996, with managerial and
professional workers accounting for most of the gains.

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A number of office-intensive industries showed strong job growth in 1996. Despite
forecasts of several years ago which predicted that technological advances would be a
negative force on office demand, communications companies added 59,000 jobs and
computer services firms added 120,000 positions. Over the past 12 months, commercial
banks added 10,000 jobs, insurance employment is up 20,000, and the securities &
commodities sector has generated 46,000 jobs. Real estate itself has added 45,000
positions (not counting construction jobs), and engineering and architectural firms added
31,000 new jobs.

The national office vacancy rate dropped below 13% for the first time in more than a
decade. The 11.6% vacancy rate for 1996 reflects a 2.1 percentage point drop over
1995's 13.8% office vacancy rate.

The industrial heartland in the Great Lakes states benefited from the excellent
performance of the U.S. auto industry over the past several years, as well as the generally
strong activity in the durable goods manufacturing sector. SIOR figures show that 1996
vacancy rates for the sixteen markets reporting in the East North Central region this year
fell from 1995's.13.9"/o level to a current 10.3%. Moreover, the gains in occupancy were
achieved even as repOrted construction activity rose.

However, double-digit vacancies at the national level are still too high. They repres~F1t a
375 million s.f. block ofunutilized space, an enormous amount of unproductive capital
for the U.S. investment community. But the improvement is real and its extent
significant.

Many of the midwest office markets improved dramatically between 1995 and 1996,
including Chicago, Fort Wayne, Grand Rapids, Lansing and South Bend. Chicago's
vacancy rate dropped more than 30% to 9.5%, Fort Wayne's dropped 13% to 10.8%,
Grand Rapids' dropped 40% to 8.0%, Lansing's dropped 13% to 9.5%, and South Bend's
dropped 17% to 7.7%. Cleveland, Dayton, Detroit all have continuing softness in their
office markets, with vacancy rates still above 13%, but all of the markets have shown
improvement. However, absorption is declining in most of the markets, with the
exception of Fort Wayne, South Bend, and Lansing. Six of the nine markets reported
modest increases in construction, suggesting further confidence in the local office
markets.

Office building sale and lease prices in the midwest have improved as well. Lease rates
range from $ 12.00/s.f. in Grand Rapids to $26.00/s.f. in Chicago, and sale prices range
from $60.00/s.f. in Fort Wayne to $175.00/s.f. in Chicago.

Clearly, the local area office market has not benefited from the county's job growth.
Many existing office buildings are currently underutilized or vacant in and around the St.
JosephiBenton Harbor Main Street corridor, most of which are older rehabilitated
buildings. No new office space has been constructed in the immediate area during the
past year.

Office leases in the area range from $6.00/s.f. to $14.00/s.f. plus common area charges.
. The minimal demand for office space and the competition for the few new office users
that exist has kept lease rates low by comparison to other metropolitan areas.

8
 4. The Regional Retail Market

Several changes are taking place in the national retail industry. Among the primary
reasons are the spending and saving habits of consumers. Retail analysts suggest that
previously high retail activity was due, in part, to consumer access to' cash through
mortgage refInancings which occurred between 1992 and 1995. Individual credit card
debt is at an all-time high, with average balances of$4,000. Americans are saving an
average of only 4% of their income, and their incomes are growing at or near the level of
inflation. As a result, retail market activity is projected to decline through 1997, with
increasing vacancies and decreasing absorption.

For several years, a substantial amount of retail spending by area residents has been done
in Kalamazoo and South Bend. In addition, other market studies have indicated shoppers
frequent Chicago and other metropolitan areas seeking purchases of more upscale items
than typically found at merchants in the St. JosephfBenton Harbor area.

The reasons that customers shop outside of the trade area are the larger selection of
merchandise available, the number of stores available, the quality of merchandise
available, and prices. The preferred place for shopping is a shopping mall or discount
center.

A significant number of shoppers frequent the downtown shopping areas from out-of-
region and out-of-state locations. The St. Joseph downtown area indicates 30% of its
patronage originating from this group of shoppers, as opposed to 7% for the trade area as
a whole.

Downtown Benton Harbor serves the smallest trade area. The retail services are locally
orientated and designed to provide goods and services to residents and workers in the
immediate area.

Downtown St. Joseph serves the largest trade area, larger even than that served by
Orchards Mall and Fairplain Plaza, due to customers from out-of-state and from the larger
geographic area. St. Joseph serves as the primary restaurant, recreational shopping
district and the tourist entertainment center of the metropolitan area.

The Orchards Mall area functions as the regional shopping center. The geographic trade
area reflects the midpoint of travel time to competing regional shopping centers located in
surrounding metropolitan population centers such as Kalamazoo, Grand Rapids, and
South Bend.

Recent retail activity has centered around the Orchards Mall area, which has been
partially offset by the decline at Fairplains Plaza. Target stores has committed to locating
a 110,000 s.f. store, creating nearly 600 new jobs, between the Fairplain Plaza and
Orchards Mall, contingent upon local funding of a roadway which would provide access
from the Mall area to the Plaza area. Fairplain Plaza, meanwhile, is essentially vacant,
awaiting complete demolition and/or redevelopment.

Retail space in the St. JosephiBenton Harbor area ranges from $8.50/s.f. to $10.00/s.f. on
a triple net basis. Rates in the downtown areas are lower, while those in the Orchards
MalllRoute 1-94 area are higher. .

If the·amount of sales within the area can be increased, the fInancial viability of existing
businesses and shopping districts will improve. Further, increased sales can be used to
.' '·-1

9
recruit additional retailers to specific shopping areas to capture additional retail spending
and create new job opportunities and investments in the St. JosephiBenton Harbor area.

s. The Regional Residential Market

The market area for primary and second home demand for the southern Lake Michigan
shoreline draws not only from the local area, but from the southern Chicago metropolitan
area and the metropolitan areas of Indianapolis, South Bend, Kalamazoo, Battle Creek
and Grand Rapids as well.

According to the Southwestern Michigan Board of Realtors, the total number of

residential sales in Berrien County has averaged approximately 1,966 units annually from
1991 through 1996. The St. Joseph and Lakeshore school districts captured
approximately 30%, or 578 residential unit sales annually, and the Benton Harbor school
district captured approximately 14% during the same period. Sales of condominium
units, included in the Berrien County total, averaged 52 units annually countywide .
•.
Average sale prices increased 34% to $110,418 for all of Berrien County from 1991 to
1996, 28% to $149,054 for the St. Joseph and Lakeshore districts, 17% to $56,536 for the
Benton Harbor school district, and only 6% to $140,890 for condominiums.

According to the Realtors Association, the St. Joseph-Lakeshore School District market
area's sales volume jumped to $89.2 million in 1996 from $66.0 million in 1995, and the
average home price increased to $149,054 from $126,586. The area had the top sales
volume of the association's 11 market areas and second-highest average price behind the
Bridgman-to-New Buffalo's average price 0[$153,029.

Generally, housing prices in the City ofSt. Joseph range from $125,000 to $175,000.
New houses in recently completed subdivisions have sold for as much as $275,000-
$325,000. Housing with frontage on Lake Michigan can sell for more than $1 .0 million,
especially in the area north of the St. Joseph River, locally known as the Ridgeway
neighborhood. However, the housing adjacent to Ridgeway, which has no water access
or views, sell for $60,000-$70,000 for a one to two story, 2-3 bedroom, bungalow-style
house. Houses in established neighborhoods sell for $90/s.f.-$120/s.f., while houses on
the water sell for $200+/s.f.

Discussions with real estate brokers and developers indicted shoreline housing in the area
is being demanded primarily by young professionals (specifically, couples with double
incomes and no children), empty-nesters, retirees, and individuals seeking income
property. Real estate prices in the area are lower than those in more well-known second
home locations.

Local buyers are willing to purchase a condominium as a primary residence. However,

price sensitivity is often displayed by this group. Those from outside the area find the
area's condominiums attractive as second homes, due to the security and maintenance
provided by the condominium associations. For buyers from outside the area, the
optimum selling season is during the spring and summer seasons.

6. Commercial Port

As Michigan's second largest river system, the St. Joseph River has provided a natural
highway for transporting settlers, goods, and industry to and from the Benton HarborlSt.
Joseph area, and because of its proximity to Chicago and the Mississippi River Valley,
the St. Joseph River Harbor became a prominent lakeport in the 19th Century. '.' ," I

to
 Since 1987, the St. Joseph River Harbor experienced a peak in tonnage of 694,494 net
tons in 1994, compared to the low of461,216 tons in 1989. The port's all-time low was
in 1975, when only 244,963 tons were received.

The harbor currently serves a variety of uses. Industrial development is a significant land
use on the harbor's waterfront with several operating industrial concerns and additional
industrial sites available in Benton Harbor directly northeast of the harbor.

Upgrading the St. Joseph River Harbor as a major lakeport has been a development goal
considered for many years. A port development study was conducted for the Twin Cities
Chamber of Commerce in 1961, which was not optimistic about the feasibility of port
. development at that time.

The Board of Harbor Commissioners reconsidered port development in 1979, due to the
rapid escalation in energy costs, the emergence of sources of State and Federal assistance,
and the need to provide the region with superior transportation facilities. The creation of
a multi-modal transportation facility, linking rail, water, and highway systems, as part of
Berrien County's commercial and industri~ development efforts, was seen as enhancing
the County's ability to attract and retain job providing industries.

A preliminary market study was conducted in conjunction with the site evaluation and
selection study, which indicated that under appropriate conditions a public facility located
at the selected site would reach an average annual potential commerce of 380,000 tons
within five years of operation. The majority of the cargo would be bulk, with the
remainder being containerized.

The fmancial feasibility analysis estimated facility revenues and operating and capital
costs. The analysis assumed 50% of the facility operating budget would be provided for
by the State of Michigan as permitted under the Port Authority Act of 1978.

The financial projectionS indicated that the facility would eventually be able to cover its
share of operating costs· and repay debts incurred during acquisition and construction. As
with any public investment project, it becomes the role of the St. Joseph River Board of
Harbor Commissioners, the County, and the surrounding communities to evaluate
whether the economic development benefits to the community of port development
justify the fmancial risk and low rate of return associated with the public port
development in the St. Joseph River Harbor.

7. Recreational Marinas

In 1994, the Department of Park, Recreation and Tourism Resources at Michigan State
University completed a study of Michigan's Marinas (Clean Vessel ActfMichigan
Boating Study 1994-95, Great Lakes Marina Census and Marina Needs). The 1994
census of Michigan's Great Lakes marinas and assessment of current needs for Great
Lakes marinas in Michigan describes the distribution, ownership and facilities of
Michigan's marinas and provides an assessment of the state of the market for rentals of
seasonal spaces at Michigan's marinas, a market segmentation analysis for this market
and gives conclusions on needs for additional marinas.

The assessment of marina needs indicated no strong general needs for additional seasonal
spaces in public and commercial Great Lakes marinas in any region, although it indicated
strong demand for certain specific types of marinas in all regions .
. ..../ .. }

II
 All regions have unfilled space available for seasonal rental. Over 20% of seasonal
spaces are unfilled in most regions. However, all regions also have marinas that are filled
to capacity. Therefore, although there is little demand for new marina spaces in general,
demand is strong for at least some particular types of marinas.

Marina needs have changed sharply since 1986. The most important cause seems to have
been the decline in Michigan's Great Lakes salmon and trout fishery. However, an
increase in numbers of non-angler marina renters has been offset by a decrease in angler
numbers, so the total number of marina users has remained about constant.

The most successful marinas are within walking distance to downtown shopping areas.
New Buffalo, Saugatuk, and South Haven are good examples. The most important
marina attributes for seasonal renters selecting a marina are "hospitality" items such as
theft and vandalism security, clean, well-maintained facilities, presence of restrooms and
showers, and prompt and friendly service.

Marinas still have a tremendous economic impact on their communities. Expenditures by

_ seasonal renters of public and commercial marinas in the marina vicinity and the marina
"community" were estimated at about $7,000 per boat.

The study identified 20 marinas in Berrien County with a total of2,626 slips, 8 moc'rings,
and 149 dry spaces. Of the 2,564 slips identified, occupancy rates declined with
increases in slip size. Marina occupancy rates range from 80-87% in Berrien County.

Berrien County ranks 2nd in the number of marina slips, 2nd in the number of registered
watercraft, and 4th in the number of boater days of all of Michigan's counties.

Recent data'indicates a growing number of boats registered in Berrien County. Between

1993 and 1995, the total number of boats registered increased by 1,079, or 8.7%. The
number of boats over 23 feet in length grew by 116, or 12.2%. Typically, boats under 23
feet are trailered, while boats over 23 feet are kept in marinas.

. , . The growth in hoating in the area is similar to other areas in the State of Michigan, which
- have seen increased demand in the past three years. If growth in County registrations
continues at the current pace, approximately 500 boats per year will be added to this
market. Occupancy rates are marinas in the St. JosephfBenton Harbor market generally
range from 85% to 98%.

The bulk of the St. Joseph market are sport fishermen. Most of the marinas in the St.
JosephlBenton Harbor market are on the wrong side of bridges, creating some delays
when going out to Lake Michigan. However, the local marina market is healthy, with an
85% to 95% occupancy rate for well-located and serviced marinas.

8. Tourism
Travel and tourism is the second leading overall industry in Michigan, but in most
counties it's actually the top industry. According to Ernst & Young, travel and tourism is
recognized as an increasingly important sector of the economy in the State of Michigan.
The industry creates substantial direct and indirect expenditures, employment and fiscal
benefits which have a positive impact on the economic growth and competitiveness of the
state.

T otirism brings in $8 billion anmially to the state and $3.7 billion in the West Michigan
area from the Indiana state line to Mackinac Island. In 1993 (the most recent year that

12
figures were available), Berrien County took in $136.7 million in direct tourism dollars
and an estimated $106.6 million in "indirect" spending according to the West Michigan
Tourist Association. "Indirect" spending is money taken in by tourism businesses and re-
spent inside the county.

Tourism puts people to work, pays them a living wage and contributes directly to the
local, regional and national economy. Criticism that tourism related jobs are relatively
low paying is unfounded, unless one is only counting the entry levels jobs and comparing
those to high paying jobs in the auto industry. However, there are almost as many jobs in
supervision and management positions as entry level positions in the tourism industry.
Moreover, manufacturing jobs tend to employ more people, but tend to be clustered in a
few areas.

In Berrien County, tourism accounted for 4,506 jobs in 1993. According to the
Southwestern Michigan Tourist Council, the total number of hotel and motel rooms has
doubled from 1986 to 1996. Approximately 1,475 rooms available in the immediate area
today in major hotels and motels.

A 6% room receipts tax is levied Qn all hotel/motel room rentals, of which 2% goes to the
Southwestern Michigan Tourist Council. The 2% room rental tax receipts have increased
approximately 5% annually from 1987 through 1996. .

Occupancy rates generally range from 100% in the summer to 50-60% in January.
However, increased business use in the off-season has increased the overall occupancy
rates. In general, Bemen County has a healthy hotel industry.

Silver Beach County Park is a popular regional recreation resource and destination area
drawing over 150,000 visitors annually. Both the number and percentage of out-of-town
visitors at Silver Beach is growing. During the summer of 1996, 51 % of all day passes
sold to persons residing outside of Berrien County.

9. Conclusion
The steady improvement in the midwest and metropolitan industrial and office markets
will provide fertile ground for new construction activity in the midwest in 1997 and 1998.
In the near term, however, while the availability of capital is greater than it has ever been,
40% to 50% preleasing requirements still will be required, depending on the developer.

The health of the national and international economies will affect the pace of industrial
activity throughout the 1990's. Industrial property remains relatively strong in some
areas of the country, and because its economic base is more diverse than it was a decade
ago, the midwest is well positioned to handle new development.

The state of the commercial office and retail markets is a fair indication of the future
focus of the capital markets. The suburban markets will be among the strongest,
increasing in popularity as vacancies tighten further and rents move higher. In contrast,
activity and interest jn the downtown and second and third tier markets, except for
"vulture funds" will remain flat, despite the lower values.

The miIllmal activity in the St. Joseph/Benton Harbor office market is almost entirely
generated from within the area. Virtually no office users of any significant size from
outside the area have located in St. Joseph or Benton Harbor recently, however, there has
been increased interest. Quality of life and labor availability issues may continue to
impact the office market.

13
 'The retail market has slowed regionally, but has strengthened locally as a result of the
Orchards Mall development. The Mall area has become a regional shopping destination
and, retail occupancy rates and development activity have increased. We expect this
growth to continue.

The area's tourism industry is growing, and with it the hotel and marina markets have
continued to expand. As more and more people look for vacation and second home
locations, the area can expect continued growth in the tourism industry.

The residential market is healthy and growing in St. Joseph, but is depressed in Benton
Harbor.

Exhibit 1-1 summarizes the real estate market information developed by CPL as it
influences the St. JosephiBenton Harbor properties.
Exhibit 1-1
R~al Estat~ Mark!.:! Sum mao:
Estimated Estimated
Midwest Market Property
Valac Value Total Value Implied '¥~II:~e
Ra~e Range Acres Range Value §/Ac'{e
Industrial
Sale
LandSlAcre $22,000-$217,000 $1-S4,500 126.0 $126-$567,000 $252,000 S2,OOO
Modem Bldgs SlS.F. SI5.00-$28.oo S9.00-S18.OO
Older Bldgs. SlS.F. S3.00-SI2.oo S3.oo-S5.oo
Lea.sc
M<>4em Bldgs. SlS.F. SI.75-S5.OO $1.00-$2.75
Older Bldgs. SlS.F. SO.5O-S 1.50 SO.50-S 1.00
Qf1i«
LandS/Acre
Sale SlS.F.
.' $50,000-$ 150,000
S60.00-$ 175.00
S15,OOO-$25,OOO
$20.00-$40.00
25.0 $375,ooO-S625,ooo $400,000 SI6,OOO
Lease SIS.F. SI2.00-$26.oo S6.00-$14.oo
Retlil (D!lD-[~hmll)
Land 5/Acre $240,000-$80,000 S20,OOO-$40,OOO 5.0 S I 00,OOO-S200,OOO SIOO,OOO $20,000
Sale SlS.F. $40.00-S120.OO S30.00-S75 .00
Lease S/S.F. S8.90-S26.00 S8.50-S14.00
H!I.W
Land S/Acre • S40,ooO-S220.000 S I 0,000-$40,000 20.0 S200,OO-5800,OOO 600,000 30,000
Sale SlRoom S3S,ooO-S I 2S,OOO S60,OOO-S80,Ooo
.; . Lease SlRoomlNight S29.00-S 150.00 S39.OO-S99.OO
Ma.riu
Land SlAcre $4,000-$40,000 S I O,OOO-S20,000 6. 2 562,000-$ 124,000 $124,000 520,000
Sale S/Slip $ I 0,OOO-S30,OOO 512,000-517,000
Lease SlSlip $1,000-S3,500 51,250-S2,250
Qlbcr C!lmmc[l:ill
Land SlAcre $20,000-S80,000 59,000-520,000 24.5 5220,500-$490,000 5220,500 $9,000
Residentill
Land SlAcre
Waterfront S7S,OOO-S3oo,000+ S30,OOO-S60,ooO 24.0 snO,OO0-5 I ,440,000 5nO,ooo S30,OOO
Interior $4,OOO-S 150.000 5S,OOO-S 1S,OOO 56.5 5282,500-S847,500 S565,OOO 510,000
Housing: SlS.F.
Waterfront S I 50.00-5350.00+ 5150.00-S175.00
Interior $60.00-S 150.00 590.00-S 120.00
287.2 S I ,960,126-55,093,500 52,981,500 510,381

Therefore, based solely on the real estate market information presented in this section, the
property values range from $2.0 million to $5.1 million, with an implied value of $3.0
million. This assumes a sale of all of the properties without a discount to reflect current
market absorption characteristics, the bulk nature of the development parcels, or the time
value discount of development costs, carrying costs, and market timing. These factors
can discount the value by as much as 50%.

14
 This value does not include the 53 acres of wetland and fill in the Northeast quadrant of
the St. Joseph properties, the 104 acres south of the CSX tracks and north of West Main
Street in Benton Harbor, or the cost of environmental remediation. In addition, the costs
of infrastructure improvements to the M-63 interchanges, some of the roadway and
infrastructure improvements both inside and outside the project areas, and the commercial
port facility are expected to be funded through Federal, state, and local monies.

C. REUSE OF THE ST. JOSEPHIBENTON HARBOR PROPERTIES

Several factors contribute to the analysis of possible reuse alternatives.

1. Access To Interstate Highways

The properties offer good access to local and regional roadway, air and rail transportation
routes. Access to M-63 and Business Loop 1-94, which connect with Interstate 1-94, is
less than 112 mile from any of the properties. Interstate 1-94 is the major east/west route
connecting Detroit, 180 miles east, with Chicago, 90 miles to the west.

Interstate 1-196, which .connects 1-94 with Grand Rapids and Interstate 1:.96 to the -north,
begins in the St. JosephlBenton Harbor ar~a. ··

Route 31 passes through the area, connecting with Interstates 1-80 and 1-90, and South
Bend, 35 miles to the south.

2. Economic And Demographic Characteristics

The economic and demographic characteristics of the area are not favorable. The
population has declined significantly, as has the job base. However, long term growth in
both population and employment is forecast, rather than a continued decline. CPL
believes that, as the re~evelopment proceeds, and as the area grows as a tourist
destination, more people andmore companies will move to the area, and employment
will grow.

3. The Regional Industrial Market

The midwest has experienced tremendous growth in warehousing and distribution space
requirements, and continued growth in the manufacturing sectors has added to demand
for good industrial space.

Based upon our survey of the St. JosephlBenton Harbor real estate market, as well as our
discussions with local brokers, appraisers and public officials, the existing supply of good
manufacturing, assembly, R&D, office, or warehouse/distribution facilities for sale or
lease is high, given the lack of demand historically for space in the area.

However, the regional growth in warehousing, distribution, and manufacturing, combined

with the area's locational attributes; should create an increasing need for warehouse,
distribution, .and manufacturing space and justifies industrial reuses.

4. The Regional Office Market

Office activity in the region is focused primarily in the Grand Rapids and South Bend
markets, which have improved dramatically over the past year. Space is still available in
those markets, which have greater pools of workers available as well.

15
The St. JosephiBenton Harbor office market is static, with no new product added and no
significant absorption over the past several years. The market appears to be able to
absorb a minimal 20,000 s.f. - 40,000 s.f. annually, based on historical trends.

The St. Joseph waterfront offers an attractive location for commercial office users. A
small scale office development is probably feasible, serving the legal and professional
community. If a larger office user is secured, the development program could be adjusted
accordingly.

5. The Regional Retail Market

The area retail market began to plateau in 1996, after strong growth in previous years
supported by a growing transient population with strong purchasing power. The § t.
JosephiBenton Harbor area has seen continued growth in commercial and retail
establishments along Route 31 and Pipestone Road. Recent growth has predominantly
occurred in the Orchard Mall area, which serves as the regional shopping area. Including
the "big box" retailers, approximately 200,000 s.f. of multi-tenant retail space was
absorbed or committed to in 1996, at rates ranging from $8.00/s.f. to $14.00/s.f., triple
net. Large anchor tenant lease rates are generally $6.00/s.f. - $8.00/s.f., triple net.

The St. Joseph properties present a limited opportunity for retail development, but only in
conjunction with and in support of waterfront, residential, and recreational development
in the area.

The Benton Harbor properties along West Main Street also present limited opportunity
for retail development, and only as the area redevelopment creates the critical mass
necessary to support local retail.

6. The Regional Residential Market

The local residential market is getting stronger, supported in part by increased interest in
recreational/second home buyers, as well as retirees. Recent developments north and
south of St. Joseph, as well as home sales in the St. Joseph and Lakeshore school
districts, confmn the strength of the market.

The residential market strength, together with the locational amenities of the St. Joseph
properties, support residential reuse of the St. Joseph properties. .

The Benton Harbor properties do not have good residential characteristics and have not
been considered for residential reuse.

7. The Regional Hotel Market

The hotel market in the area has doubled in size in less than 10 years, with little impact to
the overall occupancy rates. Discussions with several national conference center
operators indicated interest in the St. Joseph location, but require a full feasibility study,
which 'CPL reCommends undertaking.

S. The Regional Recreation Market

As an adjunct to the growing tourism industry, several recreation venues have been
established in Berrien County. The state and county parks have experienced growth in
. . .. )

16
 use, and activities including waterparks, go-cart tracks, and archery are available in
Berrien County for the local and tourist contingents.

The St. JosephiBenton Harbor area has only limited passive recreational opportunities,
primarily at the beaches. According to the Southwestern Michigan Tourist Council, the
area needs an attraction which will provide year-round family-oriented recreational
opportunities for both regional residents and out-of-state visitors.

CPL surveyed several ice, indoor soccer, and other sports venues in the Grand Rapids,
Kalamazoo, and Lansing markets, as well as projects in Illinois and Ohio. A recreation
sports complex would serve as a regional draw. Nationally, the fastest growing sports are
hockey, soccer, and in-line hockey. Preliminary surveys indicate strong support from
area schools for an ice hockey complex, as well as indoor soccer. Approximately 3,000
adults and children have been identified as participants in a hockey program, and 2,400
children currently participate in soccer in the St. Joseph and Lakeshore schools.

Strong interest has been expressed by several developers. Again, a full feasibility study is
required and recommended.

9. Environmental Conditions
The environmental conditions of the properties have not been fully delineated. However,
the redevelopment of all of the properties will require that the properties be brought to
acceptable environmental standards.

10. Political Considerations

Both the cities are supportive of redevelopment of the study properties, and both would
like to improve the tax base, the quality of life, and the employment base in the area.
Historically, it has been difficult to get the area townships and cities to work together, but
this, hopefully, is changing.

11. Marketing Period

CPL believes that a reasonable marketing period, assuming the disposition prices
recommended in this report, will be between 12 and 18 months. Nationally, this type of
property generally requires a period in the range of 18 to 24 months. It is our opinion that
a 12 to 18 month period will be sufficient.

D. REUSE ALTERNATIVES FOR THE PROPERTIES

CPL reviewed the site's redevelopment potential and developed reuse plans based on our
conclusion's regarding the property and our market research. The nature of the regional and
local real estate markets and the property characteristics suggest that the facilities are best suited
for several different uses, as described below.

CPL's proposal encompasses numerous uses in response to the variety of factors influencing the
site, including the following: - .

• Market Conditions-
• Demographics
• Surrounding Land Uses
• Geographical Conditions
.r ...· ... ·.,...... !
• Environmental Conditions

17
 Conceptually, we are proposing a mixed use re-development of the property incorporating the
. following uses:

• Waterfront Park
• 2 Marinas - 188 slips total
• 100 Residential Townhouses
• 150 -200 Room HoteVConference Center
• 136,800 s.[ OfficelR & D Buildings
• 300,000 s.f. Recreation Sports Complex
• 63,500 s.f. Retail Stores
• 110 Lot Residential Subdivision
• 5 Barge Commercial Port Facility
• 700,000 s.[ Industrial Park

In conjunction with the proposed redevelopment, there is a significant amount of infrastructure

work, which includes the following:

• Reconstruct M-63, bringing it to grade north of the CSX tracks and reconstructing the
Upton Road and Klock Road interchanges. -
• New Access Roads in St. Joseph and Benton Harbor.
• Reconstruct 8th St. Bridge in Benton Harbor.
• Shoreline Bulkhead & Breakwater for Marinas and Port Facility.
• Water, Sewer, Sto~ Gas, Electricity, and Telephone Infrastructure.

The proposed redevelopment includes residential~ office, retail, marina, recreational, industrial,
and open space uses. .

The recreation sports complex will draw from the local and regional communities, and provide
an additional draw for enhancing the local tourism industry. A well designed and managed
facility would become a significant community focal point not only for the homes proposed in
the area, but also for the users of the proposed commercial, office, retail, marinas,
hoteVconference center.

The combination of a marina and recreation sports complex will enhance the recreational
opportunities of the new home and second home buyers targeted for the proposed housing, as
well as visiting tourists. A future hoteVconference center will provide further exposure of the
area to companies and individuals coming to stay at the center.

The office and retail uses are compatible with residential development, will provide jobs, and
improve the tax base for the community.

Similarly, the industrial, commercial, and port development in Benton Harbor will provide badly
needed jobs, an increased tax base, and an improved image for the city.

The proposed redevelopment accomplishes the following planning tasks:

• Locates compatible uses adjacent to the existing residential area. The residential
subdivision and the neighborhood scale office and retail component compliment dIe
existing uses.

• Maximizes the potential of the waterfront as a setting for marina-oriented residential and
commercial development. Relocation of the M-63lUpton Road ramps is a critical
·•· .• ··<·1
component.

18
 • Creates a water amenity for the internal portions of the residential subdivision.

• Provides sites for employment and commercial uses as well as an appropriate mixture of
residential products.

• Provides buffers along the major roadway and rail corridors, with landscaping, buildings,
and minor roadways.

• Provides new access into the site from M-63 . A new road offM-63 provides convenient
access for the proposed redevelopment, while mitigating the potential increase in traffic
on Upton Drive.

• Responds to the on-site environmental constraints with appropriate land uses. The most
contaminated portion of the site, the southern portion of Parcel One, will be developed
with commercial uses, which require a lower level of remediation. Further, the
development essentially caps the site with buildings and parking, eliminating future risk
of exposure.

• The wetlands are preserved as <?pen spaces, and Jean Klock Park will be more fully
utilized by area residents providing excellent beachfront opportunities for community-
wide recreation.

• Landscaped buffers are anticipated to separate the residential areas from the major road
and rail corridors and the utilitY substation. Additionally, the six smaller-scale
office/retail/residential buildings along Upton Drive and the new road between Upton
Drive and M-63 will provide a buffer between the recreational sports complex and its
associated parking and the surrounding residential areas . .

• The hotel conference center proposed for the St. Joseph riverfront takes advantage of its
location near the sports complex, the waterfront amenities (including the proposed marina
and open space), and downtown St. Joseph.

Exhibit 1-2 summarizes the proposed land uses for the various parcels and the total project.
"1:' .,. •. ; ':, : ~ -2
B,edgv!o:IQPm!o:ot Land Us!o:s And A[!o:3
Renais.
Open Zone Total
Parcel S~ace Indus. Office Retail Marina Recrea. Hotel Res' I. Overlal: Acres
One 11.5(1) 12(2) 2.0 24.5 56.5 20(3) 95.0
Two 3.0 3.5 24.0 30.5
lbree 7.0(4) 8 0.7 3.0 24 35 .7
Four 53 .0 53 .0
Five 126 50 126.0
71.5 126 20 5.7 6.5 24.5 24 80.5 70 340.2

(1) included in residential.

(2) includes office/retail Buildings A-F and associated parking.
(3) 7 acres are residential (12 lots), 13 acres are commercial (portion of recreation complex and Bldgs. A-C).
(4) included in office and hotel.

.... ' ·,-1

19
Exhibit 1-3 summarizes the density of development for the various parcels and the total project.
Exhibit 1-3
Redevelopment Uses and AmQunts
Parcel Indus. Office Retail Marina Recrea. Hotel Res'l
One 45,000 s.f. 52,500 s:f. 300,000 s.f. 110 lots
Two 10,000 s.f. 104 slips 100 units
Three 91,800 s.f. 1,000 s.f. 84 slips 146,000 s.f.
150-200 TID
Four
Five 700 z000 s.f.
700,000 s.f. 136,800 s.f. 63,500 s.f. 188 slips 300,000 s.f. 150-200 rID . 210 units

E. PROPOSED REDEVELOPMENT FINANCIAL FEASIBILITY

1. Construction Costs

The projected square foot and total project costs for the various proposed uses are
presented in Exhibit 1-4. All of the costs are in 1997 dollars.
Exhibit 1-4
CQDstrl.l!:tiQD Costs
Total
S/Unit S/Unit Construction
Reuse Total Units Range Used Cost
Industrial 700,000 s.t: $20-$35 $25 $17,500,000
Office 136,800 s.f. $75-$100 $80 $12,312,000
Retail 63,500 s.t: $45-$75 $60 $3,810,000
Hotel SlRoom 150-200 rIDS. $80,000-SI20,000 S90,000 SI3,500,000-
SI8,000,000
Recreational 300,000 s.f. S30-S120 S75 $22,500,000
Residential
Single Family Lots 110 lots $10,000-S30,000 S15,000 SI,650,000
Townhouses 100 units $80-$140 $120 SI5,400,000
(1,400 s.t: avg.)
Marina 188 slips S6,000-$20,000 S15,000 $2,820,000

2. F'na cial Feasibility

To evaluate the feasibility of each reuse of the facility, we constructed the multi-year
discounted cash flow analyses, as shown on pages 164-170, based on the income and
expense assumptions and the construction cost estimates presented previously in Section
VI.

. .. j

20
 As shown in Exhibit 1-5, the net present values of the reuses for the study properties,
based on the assumptions outlined herein range from ($2,492,492) to $1 ,812,410.
Exhjbjt 1-5
St. JosephlBenton Harbor Properties
Net Present Value of Reuses

Reuse Net Preseot Value

Parcel One North 5316,863
Parcel One South 5318,206
Parcel Two 5772,114
Parcel Three (5562,061) - 5385,094
Parcel Four -0-
Parcel Five-Industrial (53 ,337,614) - 520,133
Parcel Five - Port -0-
(52,492,492) - 51,812,410

This range of value, combined with the market information range of values, suggests a
maximum value of approximately $1 .9 million.

3. Summary

Given the projected construction costs, the fmancial assumptions, the lease rates and the
lease up period as outlined in this report, redevelopment of the properties for the
proposed uses is feasible under certain conditions. Parcels One and Two are feasible
redevelopment projects for third party private developers under the redevelopment
scenarios outlined herein. Parcels Three and Five are feasible redevelopment projects
only if users are secured to purchase the land and develop it for their own use (i.e. hotel
company, office user, or industrial user).

While the net present values would equate to a sale price for the properties, it may IlQt
necessarily result in an all-cash sale at that price since financing for speculative real estate
acquisitions is difficult to obtain in today's financial marketplace. It is realistic to expect
that some seller financing would be required to achieve this value. Alternatively, the
investor/developer may have to fmance the acquisition with private capital, which carries
much higher interest rates than does traditional bank or institutional financing. This
v; ) ~ . ~ ',"er the ri:e an investor/developer could pay for the property.

The redevelopment analysis assumes that the mUltiple privately owned parcels will be
controlled by a single entity for purposes of negotiation and disposition for
redevelopment. The values attributed to the various parcels assume that the sites are
delivered free of environmental remediation requirements.

The development plan requires public investments in environmental cleanup,

infrastructure, road improvements, and the port facility. It is hoped that environmental
cleanup, infrastructure, and road improvements can be funded with federal and state
monies, and that the port facility can be funded with state, county, and local funds.

The cities of St. Joseph and Benton Har1J9r will benefit from the project in many ways.
Economic development benefits include job generation and tax base expansion. Also
important will be the psychological benefit and increased confidence in the local
economy from having seen derelict properties on a prominent and highly visible site at
the community's waterfront entrance redeveloped to an active mixed-use project.

" "-'j

21
 These development projects will have a significant impact in stimulating confidence in
other development and pent-up investments. In addition, investments will occur in
existing businesses in order to provide materials and services to these projects during the
construction period and during operation. These investments will result in new
businesses and expansions locally that will, in turn, produce increased tax flows.

Direct employment benefits are estimated from 400 to 800 construction related jobs
associated with all site development and construction activities during the project period.
Pennanent on-site employment created by the project is estimated to be 1,460 jobs, of
which as many as 1,000 jobs could be oriented towards unskilled and semiskilled labor,
service and support jobs, and clerical and administrative categories.

Local governments in Michigan derive the vast majority of their tax revenues associated
with real estate development projects from real and personal property taxes. Increases in
the resident population as a result of development also result in increases in the
percentage of tax rebates which Michigan municipalities receive from the State. The
primary source of these taxes are sales, income and single business taxes.

Property tax benefits to the cities have been estimated using the 1996-1997 portion of the
taxes which goes to the cities' operating budget, or 16.96 mills for St. Joseph and 28.67
mills for Benton Harbor. The net annual property tax benefits to the cities are projecied
at approximately $800,000 for St. Joseph and $225,000 for Benton Harbor. .

Therefore, the cities could commit up to $1.0 million annually of future incremental
property tax receipts in this development as a means to generate the economic
development .a nd increased employment which the projects represent.

F. REDEVELOPMENT AND DISPOSITION RECOMMENDATIONS )

1. Issues Affecting Property Redevelopment

Redevelopment of the study properties must respond to current economic, demographic,

and market conditions in the area. Over the last twenty years, manufacturing plants have
been closed, jobs have been lost, people have moved away from the area, population has
declined, and economic stagnation has occurred. Without substantial public and private
investment in the area's economic and market infrastructure, continued stagnation is
likely.

The St. Joseph properties offer a good opportunity for a mixed-use residential,
commercial, and recreational waterfront development. The properties have good
waterfront and transportation access, Renaissance Zone designation of a portion of the
properties, and Whirlpool's continued commitment to the area.

The Benton Harbor properties offer a good opportunity for a quality industrial and
commercial redevelopment project. The existing infrastructure, the Renaissance Zone
designatio~ the availability of rail, and the potential for commercial port access all
support industrial redevelopment of the Graham Avenue area. The character of the West
Main Street corridor will support commercial and retail redevelopment, provided
economic growth occms in the area

However, none of the projects will be successful without the coordinated attention of
public and private leaders, the commitment of the surrounding communities to the overall

22
 redevelopment plan, and the allocation of local, regional, state, and federal financial
resources.

Implementation of any proposed redevelopment projects requires coordinated, aggressive,

and sustained action by the public and private sectors. Issues which need to be addressed
prior to proceeding with any redevelopment are presented below. Some of these are
recurring themes which have been raised by previous studies; highlighted at the March
10-11, 1997 workshop conducted by Cornerstone Alliance and the Great Lakes
Environmental Finance Center (GLEFC); included in prior Cornerstone Alliance
redevelopment efforts; or mentioned by various private organizations and community
groups.

a. Regional Commitment To Redevelopment Plan Concept

Public and private leadership should agree on the redevelopment plan for the St.
Joseph and Benton Harbor properties and publicly endorse its implementation.
Consensus and support of the general public should be achieved on the overall
development concept, including the redevelopment of the Business Loop 1-94
corridor. Any necessary zoning changes should be implemented.

The communities surrounding St. Joseph and Benton Harbor should be involved
and committed to the project, as the proposed redevelopment will benefit not only
St. Joseph and Benton Harbor, but the surrounding region as well.

A well organized regional marketing and promotion program should be

implemented to promote the redevelopment and attract residents, businesses and
visitors. .

b. Regional Development Authority

The successful redevelopment of the study sites depends upon the cities' abilities
to create a long-term vision and master plan for regional revitalization. The
creation of a redevelopment authority as a means to spur regional redevelopment
with coordinated planning and investment guidelines would provide a framework
for municipal cooperation and reduce the need for constant consensus-building
among multiple municipalities with potentially conflicting needs and goals.

c. Site Control

Presently, there are approximately 159 individual parcels within the study area,
with as many individual property owners. It is imperative to the successful
redevelopment of the study area that one entity control the redevelopment and
disposition of the multiple properties. A Redevelopment Authority would be an
appropriate entity to invest control of the redevelopment. The acquisition of
property by donation, acquisition, or eminent domain could be accomplished by
the Authority.
d. Redevelopment Phasing

The phasing of development should take advantage of existing opportunities such

as available utilities and infrastructure, access, market strengths, and economic
development incentives such as the Renaissance Zone designations.
'.- ....... .

23
The redevelopment plan for both the St. Joseph and Benton Harbor properties
takes advantage of the Renaissance Zones as much as possible. In St. Joseph, a
portion of the Recreation Sports Complex, three of the six office/retail buildings,
and fourteen of the 110 residential lots have been located to take advantage of the
Zone. Similarly, most of the new industrial buildings in the Graham Avenue area
of Benton Harbor are located within the Zone.

Redevelopment activities should occur first within the Renaissance Zones as an

additional incentive for those initial uses. Activity on the sites needs to be
generated to further spur investment and development in the area, and the most
obvious locations are the most visible - the existing waterfronts and streetfronts.

Finally, outside interest needs to be generated for the area. This will be
accomplished through the combination of expanded marina and recreational
boating opportunities included in the redevelopment plan, but the largest regional
draw is expected to be generated by the Recreation Sports Complex.

e. Funding

The redevelopment of the study area will require external funding, as the net
present values of many of the parcels do not support the necessary investJtnent in
environmental remediation, infrastructure improvements, or even, in some ca.ses,
site acquisition.

However, the benefits of increases to the tax base, new jobs, and a revitalized
economy justify public, quasi-public, private foundation, and private investment
in the redevelopment. It is anticipated that DEQ funds will be available for
environmental remediation; that DOT funds will be available for roadway
improvements; that DNR funds will be available for recreational and waterfront ).
improvements; and that traditional federal, state and local funding sources will be
utilized in support of the project. Specific funding sources that may be utilized in
the redevelopment include:

• Community Development Block Grants;

• Tax Increment Financing;
• City Bonds (General Obligation or Revenue);
• Tax Incentives and Abatement Programs;
• Section 108 Loans;
• Small Business Administration Loans and Guarantees;
• Special Grants and Appropriations from State and Federal agencies, the
County, the business community, and private foundations;
• State of Michigan Environmental Protection Bond Implementation Act;
• Debt Financing;
• Equity Investments; L
• Real Estate Loan Guarantees;
• Working Capital Loans; and
• Brownfield Site Assessment Grants.

f. Environmental

The environmental status of the entire study area is undocumented, although the
DEQ is completing a thorough site investigation and characterization of the
fonner Auto Specialties site. Redevelopment will require complete

24
 environmental information for all of the properties and agreement with the DEQ
prior to any redevelopment activities.

CPL recommends that complete environmental information and testing of the

buildings and land be completed to determine what, if any, environmental liability
exists. If contamination is present, plans to either clean the contamination to
acceptable levels or, if appropriate, indemnify the buyer against future liability
related to the contamination must be developed and implemented.

Finally, a "No Further Action" letter from the state will be required for
redevelopment to proceed. The existing Michigan Department of Environmental
Quality and Whirlpool assessments can be used to expedite this negotiation for
the St. Joseph properties, and similar assessments will be necessary for the Benton -
Harbor properties.

g. Recommended Action Plan

In order to move forward with the redevelopment of the properties, the following
actions are recommended:

(i.) Promote the Redevelopment Plan to both public and private sector leaders.
(ii.) Finalize community and regional support for the Redevelopment Plan,
including the Corridor for Development Plan.
(iii. ) Implement regional zoning changes.
(iv.) Create Regional Development Authority.
(v.) . Identify and pursue project funding sources.
(vi.) Gain control of the redevelopment properties.
(vii.) Initiate a process to attract local, national and international developers.
(viii.) Initiate a comprehensive marketing program promoting the residential,
commercial, and industriallocational and economic advantages of the
redevelopment areas as well as the region.
(ix.) Monitor and bring to closure with DEQ the environmental requirements
for redevelopment.
(xi.) Secure a "No Further Action" from DEQ for the entire redevelopment
area.
(xii.) Secure a release of the $4.0 million lien on the former Auto Specialties
site.
(xiii.) Complete negotiations with the DOT regarding state roadway
improvements, including relocation of Upton Drive connector ramps,
rebuilding Klock Road interchange, and lowering M-63.

G. DISPOSITION ALTERNATIVES

There are six alternative methods to achieve the disposition and redevelopment of the properties,
once the site control, environmental, and funding issues are resolved. A summary of the
alternatives and CPL's recommendation for achieving the disposition and redevelopment of the
properties.are presented in this section.
1. Redevelopment Of The Properties And Sale At Stabilized Occupancy
Under this disposition alternative, a single development entity, such as the
Redevelopment Authority discussed previously, would assume the costs of redeveloping,
managing, and marketing the properties until sold.

25
The risks to this approach are several. The properties could cost more to redevelop than
estimated or take longer to sell than expected, and the market could change, either )
increasing or decreasing the marketability of the properties. Moreover, the
Redevelopment Authority would be exposed to these risks until the properties sold, and
Redevelopment Authority personnel would be required to oversee the projects. This
could take several years, depending on the length of time it takes to redevelop and sell the
properties.

Although this disposition alternative potentially represents the highest long term return, it
also represents a long term commitment of funds and personnel, is the highest risk
disposition alternative, and is not recommended by CPL.

2. Minimum Bid Auction

A minimum bid auction is the fastest alternative to property disposition other than an
absolute sale auction. Under this approach, a minimum price is established, an auction
date is set, sale documents, promotional, and informational materials are distributed to
potential bidders, the auction is advertised, and a high bidder is identified on the auction
date. Immediately thereafter, sale documents are executed by the high bidder and the
seller which detail the terms, conditions, and date of closing.

The risks to this approach are several. The expenses assoCiated with preparing for an
auction do not guarantee that the minimum bid will be met or that there will be any bids.

Setting the price too high is a risk, and setting the minimum bid at a lower figure still
d~es not guarantee a sale and risks disposition of the property at a deeply discounted
pnce.
)
Once an auction is publicized, the property is assumed by the market to be distressed,
further hindering alternative marketing approaches if the auction is unsuccessful.

Although this is the fastest disposition alternative, it does not guarantee a return and is
not recommended by CPL.

3. Targeted Marketing And Brokerage

The targeted marketing and brokerage sales approach is the disposition strategy which
could take the longest time, other than redeveloping and selling the properties, but is the
most appropriate strategy for disposition of the properties. Under this approach, a broker
is hired to market the property, an asking price is established, the property is advertised,
sale documents, promotional, and informational materials are distributed to potential
buyers, and a fmal disposition agreement is negotiated.

The risks to this approach are several. The marketing expenses committed to the sale
effort do not guarantee that a buyer will be found. Again, setting the asking price do~s
not guarantee a sale and risks disposition of th~ property at a discounted price if set too
low; and risks lack of activity and continued carrying costs if the asking price is set too
high. Additionally, market conditions may, or may not, deteriorate over the marketing
period.

The benefit of the targeted marketing approach versus the auction approach is that the
seller maintains control of the process. If a buyer' s offer is too low, the seller has the

26
option of rejecting the offer and continuing the marketing effort, negotiating for a higher
price, or accepting the offer. -

This is the slowest shorter term disposition alternative, but it does represent a method for
controlling the sale price and terms under uncertain market conditions, thereby achieving
the highest shorter term achievable sale price.

The sale would take approximately eight to twelve months to accomplish, assuming no
serious environmental issues are discovered. This disposition alternative presents some
risk, but it also has the highest potential value for a short term sale.
4. "Request For Proposals" Bid-Type Sale Of The Property

Because there is some activity in the area residential market, a Request For Proposals
(RFP) process would be another appropriate way to sell the properties planned for
residential development quickly, other than a Minimum Bid Auction. Under the RFP
approach, an asking price is established, sale documents, promotional, and informational
materials are distributed to potential buyers in a Request for Proposals format, and the
property is advertised.

The RFP sets a date for bidders to submit "last and [mal" bids. Once the final bids are
received, the seller can then negotiate with the top three bidders, accept an offer, or reject
all offers.

The risks to this approach are less than either the auction or targeted marketing
approaches. Although the marketing expenses committed to the RFP effort do not
guarantee that a buyer will be found, the seller is not exposed to an indefinite marketing
period. Again, setting the asking price does not guarantee a sale and risks disposition of
the property at a discounted, price if set too low, but the risks due to lack of activity and
continued carrying costs are minimized by setting a date certain for all final bids.
Additionally, if the RFP effort is successful, the seller is not exposed to possible
deteriorating market conditions, as the RFP process is typically only 2 to 3 months
between initiation and [mal bid date.

This disposition method presents a large amount of risk if the RFP process fails to
produce a buyer, but it also has the highest potential value for a short term sale if
successful.

Parcels One and Two are good candidates for an RFP-type disposition, as they have
readily determinable redevelopment potential. However, the RFP process may not
achieve the highest possible disposition value.

5. Donation Of The Properties

As an alternative to selling, the private landowners can donate property to a suitable tax-
exempt organization. The benefit of this approach is that the landowners can deduct up to
10% of their taxable income each year (for up to 5 years) until the total deductions equal
the qualified appraised value of the donated property.

The risk to this approach is that an appraisal will be required, as a donation requires an
appraisal of the property within 60 days of the date of donation. The appraisal will cost
approximately $3,000-$10,000 per property and may not generate the value necessary to
produce a higher return to the property owners than the recommended disposition
alternative.

27
 6. Bargain Sale And Donation Of The Property
This alternative combines the benefits of a donation with the RFP-type sale of the )
property. In essence, an appropriate tax-exempt organization is identified, an agreement
is structured with the organization, a buyer is identified through an RFP-type marketing
program and a sale price is negotiated. The sale proceeds, after deducting the property
owner's adjusted tax basis and the sales and donation costs, are then subject to the
corporate or personal tax rate, depending on the type of ownership. The difference
between the sale price and the appraised value is considered a donation, and can be
deducted as described previously.

This alternative allows property owners the tax benefits of a donation insofar as the
appraised value exceeds the ultimate sale price. In this way, the owners can be assured
that the combined property disposition value is the highest achievable within the time
period. Again, the costs to achieve the bargain sale/donation will reduce the proceeds,
but similar costs would be incurred if the property were simply sold.

A Bargain Sale and Donation of several of the larger parcels may generate the highest
value.

The sale would take approximately eight to twelve months to accomplish, assuming no
serious environmental issues surface. This disposition alternative presents some risk. but
it also has the highest potential disposition value for a short term sale of a few of the
parcels.

H. DISPOSITION RECOMMENDATION
CPL recognizes the Minimum Bid Auction process as the fastest disposition method, but
)!
recommends the Targeted Marketing And Brokerage process as the best method to achieve the
highest value and most appropriate developers for the properties. Additionally, the Donation or
the Bargain Sale and Donation process should be explored with a few of the larger property
owners as the best method to achieve the highest disposition values. CPL is prepared to
implement the dispositions upon approval by the appropriate parties.

If the property owners wish to maximize the short term value and dispose of the properties
quickly with as little risk as possible. CPL recommends that a Tar~eted Marketin~ and Brokera~e
approach be pursued. Althou~h redevelopment by the property owners could represent a bigJlg
disposition value. the investment. leasin~, timin~, and market risks could erode the difference
substantially. In addition, the financial and personnel resources necessary to achieve a
redevelopment of the property would further erode anY additional value.

If one or more of the property owners choose not to pursue the Tar~eted Marketin~ and
Brokera~e alternative, CPL recommends pursuin~ disposition via the Bar~ain Sale and Don.ati.Qn
process. Finally, if the Ba[iain Sale and Donation cannot be accomplished then CPL
recommends pursuin.: the disposition by Donation. A donation ~tees a disposition ya!J.lt<
and minimizes the property owner's risk and deiUee of involvement.

28
I. IMPLEMENT ATION OF THE DISPOSITION RECOMMENDATION
Depending on the chosen course of action, CPL will undertake to either dispose of the properties
through a Targeted Marketing and Brokerage, Bargain Sale and Donation, Request For
Proposals, or Donation process. The steps to implement these alternatives are outlined below.

1. Market Property For Sale Through Either A Targeted Marketing and

Brokerage Or Request For Proposals Process

a. Present Materials To Qualified Investors And Developers

CPL will actively market the property. We will utilize the research, analysis, and
financial projections contained in this report to the benefit of the property owners
throughout the marketing process.

b. Conduct Property Inspection Tours For Prospective Buyers

CPL will organize and conduct property inspection tours for all interested buyers.

c. Receive And Analyze Buyer Submissions

CPL will assemble and review all bids, request clarifications and additional
qualifications if necessary, analyze the financial implications, and present the bids
with a recommendation.

d. Negotiate Final Sales Agreement With Buyer

CPL will negotiate the final sales agreement on the property owner's behalf and
oversee completion of the sale of the properties.

2. Bargain SalelDonation

If a bargain sale and donation of selected properties is elected, CPL will act on the
property owner's behalf to manage the process, as outlined below.

a. Interview And Select Appraiser

CPL will interview, select, and supervise a qualified appraiser to generate the
highest possible value of the property.

b. Identify A Tax-Exempt Organization And Complete The Donation

CPL will actively solicit interest from appropriate organizations. This must
happen concurrently with the appraisal and prior to the marketing processes.

Once an appropriate organization is identified, CPL will complete the donation

and sale of the property.

c. Present Materials To Qualified Investors And Developers

Simultaneously, CPL will actively market the property. We will utilize the
research, analysis, and financial projections contained in this report to the benefit
of Oak throughout the marketing process.

29
 ,
d. Conduct Property Inspection Tours For Prospective Buyers

CPL will organize and conduct property inspection tours for all interested buyers. )
e. Receive And Analyze Buyer Submissions

CPL will assemble and review all bids, request clarifications and additional.
qualifications if necessary, analyze the financial implications, and present the bids
with a recommendation.

f. Negotiate Final Sales Agreement With Buyer 1

CPL will negotiate the fmal sales agreement. ,
3. Donation Of The Property

If a donation of any of the properties is elected, CPL will manage the donation process, as
outlined below.

a. Interview And Select Appraiser

CPL will interview, select, and supervise a qualified appraiser to generate the
highest possible value of the property.

b. Identify A Tax-Exempt Organization And Complete The DO Illl21~ion

CPL will actively solicit interest from appropriate organizations. This can happen
concurrently with the appraisal process.
)
Once an appropriate organization is identified, CPL will complete the donation t
transaction.

r
I
t

30
 SECTION II: GENERAL INFORMATION

A. THE STATE OF MICHIGAN

1. General Information

The first settlers of Michigan were the Algonquin Indians, who inhabited "michi gami"
(large lake) long before Europeans arrived. Samuel Champlain, Lieutenant governor of
New France, heard of the Algonquin's large supply of furs, but was also interested in
finding copper and a short cut to the Far East when he sent Etienne Brule to explore the
area in the early 1600' s. Other explorers and missionaries soon followed.

Father Jacques Marquette established Michigan' s first permanent settlement in Sault

Sainte Marie in 1668, and another mission at the straits of Michilimackinac in 1671.
Antoine de la Mothe Cadillac convinced King Louis to provide him with soldiers, priests
and other men to begin colonization, and in 1701 La Ville d'Etroit was founded . The
village quickly became an important trading post, attracting fur traders, businessmen, and
farmers. Detroit, the first city in Michigan, was thus established.

Control over the Michigan area was claimed at various times by the French, the British,
the colonists, and the Algonquins. In 1783 the Treaty of Paris awarded the area to the
newly independent United States. Michigan became the 26th state in 1837.

By 1840, more than 200,000 people lived in Michigan. Agriculture was the dominant
industry, with more than 75% of the population involved in farming. Lumber was an
important industry as well, and the furniture and paper industries flourished. By the late
1800s. the Kellogg, Dow Chemical, and Upjohn companies were established, furthering
the industrial development in the state.

The advent of the automobile, and the industrial beginnings of Ford Motor Company,
General Motors, and Chrysler made Detroit, and Michigan, the industrial capital of the
midwest by 1925. Perhaps due to Ford's revolutionary moving assembly line, or the
plenitude ohvood and ore, manufacturing concentrated in Michigan over the next forty
years.

2. Geographic Regions

Michigan has a land area of 58,527 square miles divided into 84 counties. Four of the
five Great lakes - Erie. Huron, Michigan. and Superior - border Michigan on the east,
north and west sides. Ohio and Indiana border the Lower Peninsula to the south. and
Wisconsin borders the Cpper Peninsula to the south.

The Lower Peninsula is 277 miles long and 195 miles wide. The terrain is relatively low
and gently rolling, with numerous lakes and marshlands. The Lower Peninsula rises from
the flat plains in the southeast and the Saginaw lowlands to a moderate plateau in the
north. Sand dunes reach 600 feet in elevation along the western shore, while the eastern
shore has beaches along the southern portion but is cliffbound to the north. The major
rivers in the Lower Peninsula - Grand, Kalamazoo, Manistee, Muskegon. and S1. Joseph -
all flow into Lake Michigan.

The Upper Peninsula is more rugged, with hills rising from the flat southeastern tip. The
hills in the southern portion are relatively low, while those along the north coast rise to

31
nearly 2,000 feet in elevation in Baraga County and create picturesque cliffs along Lake
Superior. The Menominee River defines the eastern half of the border between the Upper
Peninsula and Wisconsin, and flows into Lake Michigan. The state ' s wealth of copper
and iron ores come fr om the three ridges of the Marquette iron range that angle through
the western portion 0 f the Upper Peninsula into Wisconsin.

3. The Business Environment

Michigan is still a leader in the manufacture of automobile parts and engines, truck
trailers, conveyors, sporting equipment, steel springs, refrigerators, hardware, and
industrial products, and accounted for 20% of the nation' s new manufacturing jobs
created in 1994-95. Computer-aided design and other advances in auto manufacturing
have spawned a high-tech corridor in southeast Michigan.

Also of importance to ~tichigan' s economy are tires and rubber goods, chemicals.
pharmaceuticals, lumber. furniture, paper products, steel, iron and coke. The state ranks
second only to Minnesota in the production of iron ore, and is among the nation' s leading
producers of natural salines. Other mineral resources include petroleum, natural gas,
clay, lime and limestone.

Michigan is the fourth largest exporting state, and is home to more than 900 foreign-
based companies. The state's International and National Business Development (INBD)
office, within the Michigan Jobs Commission, provides import and export assistance to
both foreign and domestic firms . The INBD has offices in Europe, China, Hong Kong,
Japan, Canada, Mexico. and South Africa.

Tourism is a growing industry in the state, with numerous convention centers, resorts,
and seasonal facilities which attract hundreds of thousands of national and international
visitors annually.

Finally, agriculture continues to play an extremely important role in the Michigan

economy. The state ranks first in the production of cranberries, navy beans, cucumbers.
potted geraniums and Easter lilies, blueberries and hanging baskets and ranks second in
dry beans, bedding plants, and gladiolus. Once covered with forests , Michigan now relies
upon nurseries and extensive reforestation programs to maintain its lumbering industry.

a. Business Incentives

Michigan administers several programs to assist and enhance business

development. including:

• Community Development Block Grants,

• Tax Exempt Industrial Development Revenue Bonds.
• Taxable Revenue Bonds,
• Michigan Strategic Loan Fund,
• State Venture Capital,
• Capital Access Program,
• Research Grants,
• Private Industry Council,
• Economic Development Administration Funds,
• Michigan Transportation Economic Development Fund,
• Small Business Administration SBA 504 Program,
• Freight Economic Development Project Loans and Grants,
• Michigan Transportation Economic Development Fund.

32
 • Air Quality Small Business Assistance Program,
• Urban Land Assembly Program,
• Business and Industrial Development Corporations, and
• Michigan Department of Commerce Loan Guarantees.

Numerous private capital programs tailored to the needs of small and medium.-
sized businesses are grouped under the Michigan Strategic Fund program.

Other incentive programs available through local economic development agencies

include :

• Industrial Property Tax Abatement,

• Economic Development Corporations,
• Tax Increment Financing,
• Local Development Financing,
• Enterprise Zones, and
• Land Acquisition Programs.

i. Job Training Assistance

In addition to job retention, expansion, and training programs on a Federal

basis, the state of Michigan offers employee training resources to
companies through the Economic Development Job Training program.

Economic Development Job Training (EDJT): EDJT provides direct

financial assistance for training new or retraining existing employees. The
program provides grants, and the employer must match 25% of the state
grant, for on-the-job training conducted by the employers or training at
educational institutions. Grants average $2,000 per employee.

b. Taxes

Michigan has some of the most innovative tax programs in the nation, and has
granted more than 20 business and personal tax cuts in the last five years.
Signiticant reductions in property taxes, the Single Business Tax, and Worker's
Compensation costs together with available tax abatements for ne\v job creation
have brought Michigan's tax burden to 9% below the national average.

Michigan's key state taxes are the Single Business Tax (the only general state tax
for business), property taxes, and sales and use taxes.

Michigan's tax structure compares favorably with other states. Average state and
local taxes for selected cities are compared in Exhibit 2-1.

Exhibit 2-1
Average Annual State and Local Taxes
Per Household in Selected Cities

City Tax
New York $6,100
Washington $5,000
Boston $4,100
. , Detroit $3,900
Los Angeles $3,800
Chicago $3,100

33
i. Personal Income Tax

Michigan decreased its flat personal income tax from 4.6% to 4.":'°-0 in
1994. The reduction makes the state's average tax per person 7Q) below
the national average. Among the six neighboring midwest state~.
Michigan's personal income tax is higher than Illinois' and Indima' s, but r
below \1innesota, Ohio, and Wisconsin, as shown in Exhibit 2-:.
Exhibit 2-2
t 995 Personal Tax Rate

MI IL IN MN OH WI
6.0 to 0.743 to 4.9 to 1t
4.4% 3.0% 3.4% 8.5% 7.5% 6.93% ~

ii. Single Business Tax (SBT) .

•
t
&
Michigan's general tax on business is the Single Business Ta.'\( (SBT),
which is a modified value added tax. Businesses are not required to file
SBT if their gross receipts are less than $250,000 per year. The SBT is
based on value added during the production process, measured by total I..
compensation, profits, net interest paid, and depreciation - all apportioned
to Michigan.

The SBT rate is 2.3%, however, with deductions and adjustments. the rate
f
can vary. The most recent figures (1991) show that the average rate for all
businesses was 0.37% of gross receipts, calculated before the most recent
tax reductions were adopted. r
An alternative tax of 2% on adjusted business income is availab:c to I
eligible small businesses. \
.i.

The Single Business Tax is a tax on payroll and profits. The Si~gle
Business Tax rate was lowered from 2.35% to 2.3%. effecti\'e O~tober 1.
1994. For ta.'\( years beginning after December 31 , 1994. 1995 P'.lblic Acts
1 and 6 eliminated, respectively, an employer's FICA contributions
(Social Security and Medicare), and an employer's workers' compensation
and state and federal unemployment compensation fund contributions
from the SBT tax base.

As shown in Exhibit 2-3 , Michigan's corporate income tux compares very

favorably to other midwestern states.
Exhibit 2-J
t 995 CorpQrate IncQrne Tax

MI IL IN MN OH WI ~

0.0 to 5.1 to
2.35% 4.8% 3.4% 9.8% 8.9% 7.9%

*Corporation in Indiana are also subject to a 4.5% supplemental ta"'( on the difference
between their adjusted gross income tax payment.

Source: Commerce Clearing House Inc ., State Tax Handbook, 1995 through 1991

34
iii. Inheritance Tax

Michigan's inheritance tax was repealed in 1993 .

iv. Sales Tax

Retail purchases of tangible personal property are subject to a state sales

tax of 6.0%. Local sales tax are not allowed in Michigan.

The following items and services are exempt from the sales tax; food,
prescription drugs, medical devices, newspapers and periodicals, water,
and commercial vessels, sales for resale. property in interstate or foreign
commerce, computers used in industrial processing, custom computer
software. computer infonnation services, railroad rolling stock, air or
water pollution control facilities, energy fuels, and machines and materials
used directly in a manufacturing process.

Michigan's sales tax is 20% higher than other midwestern states, as shown
in Exhibit 2-4.
E~bibit 2-4
Sal~s Ia~

1991 1992 1993 1994 1995

Michigan 4.00% 4.00% 4.00% 6.00% 6.00%
Indiana 5.00% 5.00% 5.00% 5.00% 5.00%
Ohio 5.00% 5.00% 5.00% 5.00% 5.00%
Wisconsin 5.00% 5.00% 5.00% 5.00% 5.00%

Source: Commerce Clearing House Inc., State Tax Handbook, 1995 through 1991

v. l'tility Taxes

Michigan does not impose a tax on those in the business of selling,

distributing, supplying or furnishing electricity or natural gas for use or
consumption.

vi. Property Taxes

Michigan reduced its property tax in March 1994. As a result, Michigan ' s
per person property ta'( burden is now 9.2% below the national average.

• Businesses pay 24 mills in school property taxes.

• Michigan's property tax is assessed at the state and local levels and can
be abated at either or both levels.
• Taxable value of real and personal property is 50% of current market
value.

Property tax exemptions for businesses can be given for:

• qualifying tools, patterns, etc. used in manufacturing;

• electricity and natural gas used in manufacturing; and
• air and water pollution abatement equipment.

35
Annual property assessment increases are limited to the lesser of 5% or the
rate of inflation.

vii. Unemployment Insurance

An unemployment compensation tax is applied to the first $9,500 in wages

paid to each employee annually. The rate for new employers is 2.7% for
the first and second years. For firms with no layoffs, the rate falls to 1.8%
and 1.0% for the third and fourth years, respectively. As of 1997, the
minimum rate can fall to as low as 0.3% for companies with no layoffs
after five years, and will be lowered to 0.2% in 1998 and 0.1 % in 1999.

Michigan' s maximum weekly benefit amount has been frozen for three
years. and changes were implemented in 1994 which significantly reduced
paperwork and streamlined the system.

The C.S. government levies a 0.8% federal unemployment insurance tax

(FUT.-\.) on nearly all companies.

Michigan's unemployment insurance cost as a percent of taxable income

were dramatically higher than other midwestern states, and almost 90%
higher than the US average, as shown in Exhibit 2-5 .

Exbibit 2-5
Un!i:mpIQ)::m!i:nt Insyrance CQst
Average EmplQ)::er Tax As A P!i:rcent Of Taxable IncQm!i:

1990 1991 1992 1993 1994

Michigan 3.63 3.74 4.03 4. 18 4.46
Indiana \.34 1.22 \.34 \.37 \.37 )
Ohio 2.44 2.35 2.80 2.82 2.77
Wisconsin 2.39 1.98 2.04 2.15 2. 18
U.S.A.. 1.95 1.92 2.20 2.51 2.55

Source: ETA Handbook Annual Reports ; W.E. Upjohn Institute for Employment
Research

viii. Tax Incentives

Michigan ' s state legislature enacted a series of changes to the tax laws in
1996 \\ihich further improved the state ' s business and economic
development climate. Some of the changes include:

• A Single Business Tax credit, beginning in the 1997 tax year. for 10%
of the cost of investment in brownfield zones;

• A Single Business Tax credit for legal business activity in Renaissance

Zones; and

• A youth employment credit under the Single Business Tax, beginning

with the 1997 tax year which allows a taxpayer to claim up to 50% of
the salary, wages, and fringe benefits paid for the benefit of an ·
apprentice, as well as 100% of the costs of classroom instruction. The
credit may not exceed $2,000 for each apprentice trained in the tax
year. " ..•....j

36
.'vfichigan Renaissance Zones(RZ): Enacted in June 1996 to promote
economic growth in economically distressed areas, RZ's have been
designated in eleven communities.

State taxes waived for businesses and residents within the RZ included:
Single business tax (SBT), personal income tax, and the 6-mill state
education tax. Local taxes waived include real and personal property tax
on operating mills, and utility users tax. In addition, the Act amended the
Income Tax Act to exempt, for tax years beginning in 1997, income
earned while the taxpayer was a resident of a Renaissance Zone. The
exemption would not apply to interest and dividends, capital gains. and
income received from the lottery if the taxpayer was not a resident of the
zone on the date of the drawing .

The state will reimburse each of the school districts in the Renaissance
Zone for all tax revenue lost as the result of the exemption of property
under this legislation.

RZ designation varies from 10-15 years, and the tax relief phases out
during the last three years in 25% increments.

A1ichigan Economic Growth Authority (MEGA): Enacted in 1995 to

promote economic growth and job retention, the MEGA legislation allows
eligible companies engaged in manufacturing, research and development,
wholesale trade, or office operations to receive a tax credit against the
Michigan Single Business Tax (SBT). The credit is applied to the
incremental SBT liability attributable to an expansion/new location project
and/or the amount of personal income tax attributable to new jobs created.
Each credit may be awarded for up to 20 years and 100% of the attributed
amount.

viii. Environmental Assistance

,'vfichigan Department of Environmental Quality (DEQ) : Michigan

consolidated environmental protection, regulatory, and permitting
functions into the newly created DEQ in 1995. Prior to 1995, these
functions were done by the Department of Natural Resources (DNR),
which retained oversight and operation of the state's resource management
programs such as wildlife, fisheries, forest management, and parks and
recreation.

The DEQ provides assistance with permits. technical advice, information

and funding for contaminated site cleanups and redevelopment, pollution
prevention. and training programs. Recently enacted environmental laws
allow companies to purchase "brownfield" sites without assuming prior
owner liability, provided a Baseline Environmental Audit (BEA) is
completed and approved by the state .

.Michigan Brownfield Redevelopment Authority: To promote the

redevelopment of brownfield sites, Michigan enacted the Brownfield
Redevelopment Financing Act. A qualified business can claim a credit on
the Single Business Tax liability equal to 10% of the investment made on
a brov.nfield site up to $1.0 million. In addition, the allows for the use of
tax increment financing to pay for environmental cleanup activities.

37
 ix. Intangibles Tax

The intangibles tax imposes a tax of 3 .5% of income but not less than
0.1 % of face or par value on income-producing intangibles such as stocks,
bonds. or land contracts.

x. Income Tax

The Michigan individual income tax is a direct flat-rate on the federal

adjusted gross income of individuals, estates, and trusts . Interest income
from state and local obligations other than Michigan is also subject to the
state income tax. Adjustments re made with respect to estate or trust
income. The Michigan income tax rate was reduced from 4.6% to 4.4%,
effective May 1, 1994.

c. Utilities

More than 94% (10.8 billion gallons per day) of the state's residential and
industrial water comes from its rivers and lakes, including Lake Michigan, one of
the largest lakes in the world. Ground water supplies approximately 5% (596
million gallons per day), but is the source of water for 380 public water supplies
and approximately 43% of all residential water in the state.

Coal and nuclear power are Michigan's chief energy sources, accounting for 97%
of electrical generating capacity.
).
Exhibit 2-6 ranks Michigan's electric costs for the state as a whole, which are
10% lower than Pennsylvania' s. 25% lower than California' s, and 29% lower than
New York's. Overall, the state ranked 15th most expensive in terms of electricity
pricing and only 6% above the national average.
Exhibit 2-6
Electricity Price Ranking

Ranking Among Price Per

50 States State Million BTU
2 New York $29 .86
6 California 28 .39
13 Pennsy lvania 23 .61
14 Illinois 22 .61
15 Michigan 21.24
~1 Wisconsin 16.12
43 Indiana 15 .59
U.S. Average 20.06

38
Exhibit 2-7 compares selected Michigan cities' with other U.S. cities' electric
costs, and Exhibit 2-8 compares costs for selected Michigan cities.
Exhibit 2-7
Comparison of Select National Cities'
Industrial Electric Rates (995)

Cents
per
City KWH
Charlotte. NC 4.4
South Bend, IN 4.5
St. Joseph, MI 4.8
Columbus. OH 4.8
Detroit. \11 5.3
Chicago. IL 6.0
Akron, OH 6.2
San Jose. CA 6.9
New York, NY 12 .3

Source: Edison Electric Institute 1995

Exhibit 2-8
Comparison of Select Michigan Cities'
Industrial Electric Rates (995)

Cents
per
Michigan City KWH
Sault Ste. Marie 3.3
Lansing 4.5
St. Joseph 4.8
Detroit 5.3
Grand Rapids 5.4
Ka lamazoo 5.4
Midland 5.4
Source: Edison Electric Institute 1995

As shown. the St. JosephiBenton Harbor area electric rates compare very
favorably, both nationally and within the state.

Michigan has an extensive natural gas pipeline network. and ranks tenth among
the states in the production of oil and gas. The state ' s natural gas storage capacity
is the largest in the midwest, with more than 650 billion cubic feet of storage
capacity. Exhibit 2-9 compares gas prices in selected states.
Exhibit 2-9
Com parison of Gas Utilitv Prices by State

Dollars Per
State Million BTU's
Illinois $3.49
Georgia 3.72
Wisconsin 4 .01
Michigan 4.16
California 4.54
New York 4 .90

Source: Energy User News, May 1992

39
 Michigan was the first major state to deregulate its business telecommunications
services, has the most technologically advanced telecommunications
infrastructure. and has become the model for communications-related legislation
nationwide. . -

The state' s telecommunications network incorporates over 425 ,000 miles of fiber
optic cables, more than twice that of Illinois and more than four times that of
Indiana. The '\lichigan Telecommunications Act of 1992 (and further improved
in 1995) enabled telecommunication companies to offer service and pricing
flexibility una\-ailable in other states.

B. THE BERRIEN COCNTY/ST. JOSEPHIBENTON HARBOR REGION

1. Introduction

Historically, Berrien County ' s early growth can be attributed to its natural features,
attracting tourists from the Chicago area to its beaches and other natural attractions.
Later, companies such as Whirlpool, Automotive Specialties, Superior Steel, and
Malleable Steel developed large manufacturing facilities. employing thousands and
generating significant economic growth. As these major employers shut down their
factories, the area's growth and prosperity lagged behind the rest of the state and the
nation.

2. General Information

Berrien County, part of the Benton Harbor Metropolitan Statistical Area (MSA). is
located in southwest comer of Michigan' s Lower Peninsula. The county is 580 square )
miles in area, and the county seat is located in the City of St. Joseph.

The climate in the Berrien County area is continental with cold winters and warm
summers. However. Lake Michigan has a moderating influence on temperature extremes.
The average annual daily temperature is 49.2° Fahrenheit (OF). The highest average daily
temperature is 72°F in July, and the lowest average daily temperature is 25°F in January
(NOAA, 1990). Average annual rainfall is 37 inches. and average annual sno\\1all is 70
inches.

St. Joseph and Benton Harbor trace their roots to the Miami Indians who long ago
established a community in the St. Joseph River valley. The tirst white settler to the area
was explorer and missionary Father Jacques Marquette who discovered the river on a
return voyage from the Mississippi Valley in 1675. Marquette was followed by French
explorer Rene LaSalle. who built Fort Miami at what is no'.v the city of St. Joseph in
1679.

Fort Miami served as LaSalle ' s base for exploring the region and by 1769 the fort at the
mouth of the river began to serve as a center of trade between Native Americans and
European immigrants~ The area remained unsettled until 1785 when William Burnett
established a trading post and became the first permanent settler. The new settlers named
the river the St. Joseph - a patron saint of Canada - after the Jesuits established a mission
of that name near the current town of Niles. The settlement grew into a village which
was originally called ~ewberryport in honor of a prominent businessman. The village
'.vas incorporated on ~larch 7, 1834 and was renamed St. Joseph. In 1891 , the village
-. 1
onicially became the City of St. Joseph by state charter. The City of St. Joseph became
the permanent seat of County government in 1894.

40
During the 19th Century. the river to'Wn played a vital role in the European settlement of
Michigan's interior, as people and supplies were transported across the Great Lakes and
shipped inland up the river. By the mid-1800's, transportation had become a major
component of the to\,m' s economy. Also during that era, another economic opportunity
blossomed. Peach trees planted in the valley thrived and steamships began making daily
trips from Chicago for the fuzzy fruit. Other varieties of fruit and vegetables also adapted
well to the area. and it is a major contributor to Michigan's status as the second major
fruit-producing state in the nation.

Industry also prospered in the City. Steamers, freighters , and pleasure boats found the St.
Joseph River to be an ideal Lake Michigan port.

The City of St. Joseph prospered by encouraging a balanced mixture of industry,

commercial, and residential development. By the 1890's, tourists had discovered St.
Joseph. Hotels were erected and the Silver Beach Amusement Park \vas opened. This
park remained a popular tourist attraction until the late 1960' s. Although no longer an
amusement park, Silver Beach (now a county park undergoing extensive revitalization) is
once more a tourist attraction. The first full season of operation after the recent
expansion and improvement has resulted in exceeding all expected attendance records.

St. Joseph is v.iell-knov. .n for its beautiful location on Lake Michigan, its abundance of
beaches and parks, its affluent community, and high quality public schools. Due to the
presence of large employers such as LECO Corporation. Mercy Memorial Medical
Center, Whirlpool Corporation and the Berrien County Courthouse, the population of St.
Joseph nearly triples on the average workday. The ideal location of St. Joseph has
attracted many second-home buyers, mainly from the Chicago area.

The history of Benton Harbor began with the purchase of 160 acres of land by Eleazar
Morton in a portion of Benton Township. In 1836, Morton and his son, Henry, planted
orchards and prospered from the sale of fruit.

To establish a market for the convenience of farmers on the east side of the St. Joseph
River. Sterne Brunson. along with Charles Hull and Henry Morton. undertook the
building of a mile-long canal through the wetland between the river and the future Benton
Harbor. Because of this well-known resident's venture. the town was founded as
Brunson Harbor in 1860. The canal was opened in 1862. and within a year the dry land
belo\v the bluff was planed and fifty-foot lots were sold.

The new settlement grew rapidly and was incorporated as a village in 1866. Brunson
Harbor became Benton harbor in 1875. The canal had made Benton Harbor a lake port
and by the 1870's ships were loading more than 300.000 packages of fruit per year.
Sav"mills and basket factories lined the canal. Evidence of rapid gro'W1h was indicated by
the establishment of a college (1866), a high school (1872), a street railway (1885), an
opera house (1885), and a national bank (1888). The City of Benton Harbor was granted
a charter in 1891.

In the 1890' s, huge numbers of tourists deluged the area seeking relaxation and
amusement. Numerous hotels offered mineral baths as they were believed to have health-
giving benefits. In 1903. the Israelite house of David. a communal society, was founded
by Benjamin and Mary Purnell. Located on a large tract ofland east of the city, their
amusement park and baseball team became famous nationwide and attracted thousands of
visitors.

~1
In 1905, the Benton Harbor Development Company was organized to attract industries to
the City. Land grants and financial aid induced numerous industries to locate in the City.
The Roaring Twenties were boom years and inspired the building of new hotels, office
buildings, schools and churches.

Beginning in the 1960's, Benton Harbor's fortunes began to decline. Industries and
residents moved out of the city due to problems which were being experienced
nationwide in inner-citv environments. The deterioration continued to escalate until late
in the 1980's. . "

3. Transportation And Infrastructure

Michigan's transportation system utilizes air, ground transportation, rail, waterways and
telecommunications technologies to provide direct routes to every U.S. market and
international ports.

a. Highways

Michigan has more than 9,628 miles of state highway. Six interstate highways (1-
27, 1-69, 1-75, 1-94,1-96, and 1-196) pass through Michigan. 1-75 begins at the
Canadian border and runs to southern Florida, and 1-94 begins at Michigan's
eastern border with Canada and goes through both Detroit and Chicago on its way
to the west coast. In all, 1,860 miles of interstate highway serve Illinois.

The St. JosephlBenton Harbor area is halfway between Detroit and Chicago, with
Interstates 94 and 196 providing convenient access to more than 50% of the
nation's major markets. Several major expressways and interstate highways serve
the St. JosephlBenton Harbor area. 1-94 is the main route to cities along the East-
West corridor. 1-196 provides access to the north. US Route 31 and State Routes
63 and 139 service the St. JosephlBenton Harbor area and Berrien County. US
Route 12 and State Routes 51 , 62, and 140 provide access to other areas of the
county.

US-31 serves as the primary route between the St. Joseph/Benton Harbor and
South Bend, Indiana urbanized areas. The combination of high volumes and
limited sight clearance has resulted in this route being noted for its high accident
rate. To remedy the situation, the Michigan Department of Transportation is in
the process of relocating the existing two-lane US-31 to a freeway alignment from
the Michigan/Indiana state line north to 1-94 and 1-196, east of Benton Harbor,
connecting with the East-West corridor connecting Chicago and Detroit and the
North-South corridor to Grand Rapids. Ramps will be relocated with local access
roads paralleling freeway ramps. The construction is to be divided into four
phases. A new ramp that allows eastbound 1-94 traffic to exit on westbound
Business Loop 1-94 is included in the plans. This complete interchange is
currently scheduled to be completed when the new US-31 bypass connects with 1-
94 at Benton Harbor.

42
Distances to major regional metropolitan areas are shown in Exhibit 2-10.
Exhibit 2-10
Distance From St. Joseph/Benton Harbor

Miles from
City St. JosephlBenton Harbor
Chicago, IL 90
Cleveland. OH 240
Des Moines, IA 375
Detroit, MI 180
Grand Rapids, MI 80
Kalamazoo, MI 47
Lansin2:. MI 135
Toledo: OH 180
South Bend, IN 35
Indianapolis, IN 160
Louisville, KY 265
Madison, WI 270
Milwaukee, WI 190
Minneapolis/St. Paul, MN 490
Pittsburgh, PA 340
Rockford, IL 180
St. Louis, MO 340
Source: AAA

According to the W.E. Upjohn Institute, roadway conditions in Berrien County

are inferior to those in fifteen similar metropolitan areas. Fewer of the county ' s
federally-funded highways are interstates or freeways; pavement conditions on the
area's roads are worse; fewer of the area's roads can be widened; and area drivers
face more peak-hour congestion than in the comparable metropolitan areas.

b. Trucking Services

Thirteen motor freight carriers serve the St. Joseph/Benton Harbor area. Twelve
freight terminals. 4 public warehouses, and cold storage are available in the area.

c. Rail Service

Statewide. twenty-three rail freight companies. including five Class I interstate

carriers, provide freight service to every part of the U.S. Freight service is
provided to Berrien County and St. Joseph/Benton Harbor by the CSX railroad.
This freight rail line is very active, providing service from Chicago and beyond to
Grand Rapids and Detroit.

Amtrak provides statewide and coast-to-coast passenger rail service directly to the
St. JosephlBenton Harbor area, running one train southbound in the morning and
one train northbound in the late afternoon.

d. Airport Facilities

Michigan has more than 21 airports providing commercial air passenger and
freight service, with major facilities at Grand Rapid's Kent County International
Airport and Detroit Metropolitan Wayne County International Airport. Five
international carriers provide nonstop/round-trip service to major cities around the
world. Sixteen Michigan airports provide customs services.

43
Detroit International Airport is North America' s 9th busiest airport, with more
than 1.200 flights per day on 26 domestic and international passenger carriers, and
is Northwest Airline ' s North American hub. Detroit is also the state's largest air
cargo facility . handling 177,000 tons in 1995 on 25 cargo-dedicated air service
lines.

Southwest Michigan Regional Airport, located in Benton Harbor, provides

commercial passenger and air freight service to the region. allowing access to
national and international opportunities.

Commercial passenger service is also available at Michiana Regional Airport in

South Bend, Indiana and Kalamazoo International Airport in Kalamazoo. General
Aviation Airports are located in Berrien Springs, Niles, and Watervliet.

e. Public Transportation

Greyhound Bus Lines and Indian Trails Motorcoach provide intrastate and
interstate transportation services to the area. Berrien Bus Company provides
transportation services within Berrien County, and Benton Harbor Dial-A-Ride
provides specialized services within the community.

f. Seaports

Major shipping ports in Detroit, Saginaw, and the Upper Peninsula provide full
services, including Customs Services, for all types of shipping. The Soo Locks
and the St. La\VTence Seaway provide a navigational connection to the Atlantic
Ocean, east coast, and European markets. Ports on the west coast, including St.
Joseph, are part of the Mississippi River Barge System, providing a navigational
connection to the river valley and the Gulf of Mexico.

The St. Joseph River Harbor provides a fundamental component on an extensive

waterway system linking the area to world markets. In 1995. the C .S. Coast
Guard approved a route allowing river barges to enter Lake Michigan through
Chicago's Calumet River. This provides direct access not only to the Port of
Chicago, but to all southern points along the Mississippi River. as well as
international destinations through the Gulf of ~lexico .

g. Utilities

Indiana Michigan Power Company, owned by American Electric Power Company

(AEP). provides electric service and Michigan Gas Utilities Company provides
gas service to the St. Joseph/Benton Harbor area. Both the electric and gas utility
rates are among the lowest in the state.

Ameritech provides telecommunication services to St. Joseph/Benton Harbor.

Both the cities of Benton Harbor and St. Joseph water supplies are drawn fro m
Lake Michigan. The Twin Cities Sewer Authority provides \vastewater treatment
for both cities, as well as the surrounding area. The present wastewater treatment
capacity is 13 .0 million gallons per day, while the current demand is 9.5 million
gallons per day .

44
 Exhibit 2-11 summarizes St. Joseph/Benton Harbor utilities information.
Exhibit 2-11
St. JosephfBenton Harbor Utilities Information

Electric Indiana Michigan Power Company (AEP)

Gas Michigan Gas Utilities Company.
Telephone Ameritech
Sewer Twin Cities Sewer Authority serves both St. Joseph and Benton Harbor. .
Sewer Capacity 13 .0 MGD treatment plant--present demand 9.5 MGD .
Water Individual Municipal Water Supplies
Water Capacity/ St. Joseph - 16.0 MGD capacity/4 .7 MGD Average Use.
Average Use Benton Harbor - 16.0 MGD capacity/5.3 MGD Average Use.

4. Government

The City of St. Joseph operates under a Commission/City Manager form of government.
Members of the Commission are elected by the general pUblic. The Commission consists
of four commissioners and the Mayor, who is elected from among the Commission
members immediately after the general election. The City Manager is a full time, paid
professional reporting directly to the Commission.

There are 20 full-time police personnel, and the fire department has 12 full-time firemen
and 15 part-time paid employees.

The City of Benton Harbor operates under a City Council/Town Manager form of
government, \vith a Mayor and eight city councilors. The Mayor and the councilors are
elected by the general public.

There are 24 full-time police personnel, and the fire department has 10 full-time firemen.

5. The Business Environment

St. Joseph and Benton Harbor are located within 500 miles of 54% of the total US
manufacturing base and 65% of Canada' s, and 26% of the U.S. population, or 63 million
people. Within the same radius are $350 billion worth of annual retail sales and 48% of
all U.S. retail sales. One hundred million people are a one-day truck drive away from the
St. Joseph/Benton Harbor area.

Already home to more than 350 industries, including national and international
companies such as \Vhirlpool Corporation, All-Phase Electric Supply Company, and
Heath Company, new businesses, including suppliers to the automotive industry such as
Da\vson Manufacturing Company and Atlantic Automotive have located here in recent
years. Other companies located in Berrien County include manufacturers, distributors.
service industries, banks and financial institutions, corporate headquarters, branches and
service centers.

In 1992 there were 1,312 farms in Berrien County utilizing 140,851 acres of cropland.
The county ranks first of the 21 fruit-producing Michigan counties in grapes, peaches,
nectarines, strawberries. raspberries, and blackberries, and leads the state in broccoli and
eggplant production. Other crops and agricultural products include asparagus, sunflower,
vegetable, and flower seeds, apples, pears, sweet peppers, specialty grains, popcorn,
forages, squash, and nursery/greenhouse products.

45
Retail development has occurred in the area, primarily centered around Interstate 1-94
locations. Orchard Mall, a major shopping center, Meijers. KMart, Wal-Mart, Lowe's
and other retail operations, along with numerous nationally known hotels and restaurants,
have located in Berrien County along the 1-94 corridor in Benton Township, S miles from
St. Joseph.

St. Joseph' s State Street is the central business district of the city and includes a variety of
specialty retail shops and restaurants. Other commercial areas are located within the city
in the secondary business district on Niles Avenue.

Cornerstone A.lliance. an investor driven, non-profit corporation located in Benton

Harbor, works through partnerships to generate economic growth and promote civic
development in the community. They market the St. Joseph/Benton Harbor area,
promoting its location. competitively priced sites, low construction costs, belo"'.: national
average manufacturing wages, one of Michigan' s lowest electric utility rates, tax
incentives and benefits such as the multi-modal transportation network. Cornerstone
receives approximately 15 calls each week from firms requesting information about the
area.

All of the community's major development projects are unified in the Cornerstone
Alliance Corridor for Development, a comprehensive land use plan covering a wide
corridor bet",..een 1-94 and the Lake Michigan shoreline.

The City of Benton Harbor is the only state-designated Enterprise Zone in Michigan,
allowing businesses \vithin the Zone exemptions from the Single Business Tax and Sales
Tax on purchases of goods for their business use. In addition, businesses within the Zone
receive up to 65% reduction in real and personal property taxes. The Enterprise Zone
designation and incentives are effective for ten years, and have encouraged an increase in
business activity in the city. Applications have been closed as of December 31 , 1996, and
the current Enterprise Zone designation will expire in 2004.

Joint application by Benton Harbor, St. Joseph and Benton Charter Township for
Renaissance Zone designation was approved in December 1996. As described
previously, a Renaissance Zone is a geographic area, designated by the state and local
government. which provide incentives to establish or maintain residences, retail
shopping, industrial activity. and other forms of development consistent with local zoning
requirements. The Renaissance Zone status will exist for up to 10 years. with state and
local tax relief being phased out during the last three years in 25% increments.

Four geographic areas were approved for the area including a 20 acre strip in the
Edgewater area in the City of St. Joseph; The Elisha Gray Enterprise Park, in both the
City of Benton Harbor and Benton Charter Township; The Graham AvenuelNorth of
Main area located on the Pa\v Paw River and Ox Creek in the City of Benton Harbor; and
the Fairplain South Development area located in Benton Charter Township between a.n
underutilized and deteriorating strip mall (the Fairplain Plaza) and a major regional
shopping center (the Orchard Mall).

Employers in the area also enjoy a variety of federal, state and local industrial start-up
and incentive programs. Infrastructure grants for municipalities as well as workforce
training grants are available from the State, and Berrien County has a Revolving Loan
Fund which can provide short and long term loans ($20.000 maximum) for land
acquisition; machinery. equipment, supplies, and materials: rehabilitation and
construction of industrial property; and working capital. ' .. j

46
Locally run apprenticeship training programs in areas such as statistical process control,
computer training, Total Quality Management, and international trade seminars serve to
enhance the skills of the local labor force available to industry.

In addition, the City of Benton Harbor receives $750,00 annually in CBOG grant
allocations and currently has over $3.0 million in CBOG funds backlogged which can be
utilized to spur economic development in the city.

a. Financial Institutions

Seven financial institutions are headquartered in the Berrien County area.

representing over $800 million in combined deposits and more than $600 million
in loans, and six other banks or credit unions have branch facilities in the area, as
shown in Exhibit 2-12.
Exhibit 2-12
St. JosephfBenton Harbor Fjnancial Institutions

St. Joseph
Berrien Teachers Credit Union
First of America
First Resource Federal Credit Union
Lakeland Credit Union
Michigan National Bank
NBD Bank
Old Kent Bank
Peoples State Bank
Shoreline Bank
SJS Federal Savings Bank
Standard Federal Bank
Twin Cities Federal Credit Union

Benton Harbor
First of America
Michigan National Bank
NBD Bank
Old Kent Bank
Peoples State Bank
Shoreline Bank
Twin Cities Federal Credit Union
United Federal Credit Union

b. Hospitals

Five hospitals with 1,136 beds, 9 extended care facilities with 926 beds, and 231
physicians provide a full range of health services in the Berrien County area, as
shown in Exhibit 2-13.
Exhibit 2-13
Berrien County - :\'ledical Facilities - 1991

Total
Number Beds
Hospitals in County 5 1,136
Extended Care Facilities 9 926
Physicians (MD's & DO's) in County 231

Source: Southwestern Michigan Commission

47
The City of St. Joseph has 69 physicians, 2 nursing homes/extended care
facilities, 2 medical clinics, and 27 dentists. The City of Benton Harbor has 20
physicians, 4 nursing homes/extended care facilities, 2 medical clinics, and 7
dentists.

c. Education

Michigan has 15 public universities, 51 independent universities and colleges, and

29 community colleges. Total enrollment in 1995 was 549,000 students. The
state's colleges and universities are major players in the research of industrial
products and processes.

The C niversity of Michigan is the number one public university in the C .S. for
research expenditures. Funding for this research comes primarily from industry
and from the C .S. governrnent. Michigan's doctorate-granting institutions are 7th
in the U.S. in the amount of research funding they receive from industry.
amounting to S-l5 million annually (National Science Foundation report NSF 94-
303).

Lake ~1ichigan College, Sienna Heights College. and Andrews University are all
located in Berrien County. University of Notre Dame, St. Mary's College, and
Indiana University at South Bend are within 35 miles, and Western Michigan
University and Kalamazoo College are within 60 miles of the St. JosephIBenton
Harbor area, as sho'vVll in Exhibit 2-14.
Exhibit 2-14
Colleges and Universities
Distance
From
St.
Enroll- JoelBenton
College ment Harbor
Andrews Universitv
Berrien Springs. \-11 2,964 15 miles
Indiana University
South Bend, IN 7,600 -l5 miles
Lake \-fichigan College
Benton Harbor. \fJ 3,404 -l miles
Siena Heights College
Benton Harbor. \fJ 125 15 miles
Notre Dame UniVersity
Notre Dame, IN 10,351 40 miles
Purdue University North Central
Westville, IN 3,400 44 miles
Southwestern Michigan College
Dowagiac, MI 3,337 30 miles
St. Marv's Colle£e
Notre Dame, IN - 1,574 40 miles
Western Michigan University
Kalamazoo, MI 22,715 50 miles
Western Michigan University
St. Joseph, MI 340 2 miles

St. Joseph public school system's 1994-95 operating budget was $14.8 million
with an enrollment of approximately 2,700 students. The Benton Harbor Area
public schools had a budget of $35.3 million and an enrollment of approximately
7.100 students. The Twin Cities area also has 17 parochial schools.

48
C. SUMMARY

The State of Michigan is an established manufacturing center with a central geographic location,
a good transportation system. a well trained work force, and numerous cultural, educational, and
recreational resources . Overall. the state compares favorably to other midwestern states in
several categories such as available business incentives, corporate and personal income tax, and
utility costs. The state has good access to markets and raw materials, and has improved its
government climate.

The Berrien County/St. Josep h/Benton Harbor area has a fair transportation system, a good
geographic location between Chicago and Detroit, good work force training opportunities, and
numerous recreational resources. The area has fair access to markets and raw materials.

The City of St. Joseph continues to be an attractive area in which to live and work. The city
government is pro business and development, but careful to maintain the positive quality of life
that has attracted tourists, second-home owners, young families , and retirees.

The City of Benton Harbor is a depressed area. Unemployment is high and businesses are
closing. However, the city administration is pro-business and development and is working to
encourage and stimulate economic development in the city.

Overall, the general geographic, transportation and utility infrastructure and costs, taxes and
incentives, and governmental climate characteristics of the area are fair. However, the depressed
condition of the City of Benton Harbor presents a strong concern to businesses and industries
considering expansion or a new location in the area. Similarly, people from outside the area
considering moving to the area will be concerned as well.
······ ·"·1
" .." .. /
 SECTION III: DEMOGRAPHIC AND ECONOMIC CHARACTERISTICS

A. DEMOGRAPHICS OF THE STATE OF MICHIGAN

1. Introduction
State and local demographic and economic trends provide information concerning general
market influences on, opportunities for, and constraints to potential redevelopment of the
property. CPL evaluated the demographic and economic characteristics of the State of
Michigan, the Benton Harbor Metropolitan Statistical Area (SMSA) which includes all of
Berrien County, and Benton HarborlS1. Joseph areas. Information was obtained from a
variety of public and private sources. For reasons of comparability, U.S. Government
sources were used whenever possible, supplemented by state and local data.

In some cases, data for the Berrien County and S1. Joseph/Benton Harbor areas was either
non-existent or incomplete for the years 1991 - 1996. As a result, CPL has used the most
recent information available for purposes of economic and demographic analysis. Where
possible, data was extrapolated from previous studies, government projections and
estimates, and local informational sources.

2. Population
Michigan has a population of approximately 9.5 million people as of 1995. Between
1990 and 1995, Michigan's population grew only 2.7%, compared to the United States
population growth of 5.6%. Projections through the year 2025 show Michigan's
population growing only 1.4% between 1995 and 2000, and only 4.1 % between 2000 and
2025 compared with the United States' growth of 4.5% and 21.9%, respectively, as
shown in Exhibit 3-1.
Exhibit J-I
Po~ulation
% growth % growth % growth
1990 1995 2000 2025 1990-1995 1995-2000 2000-2(}25
Michigan 9.295 9.549 9.6 79 10,078 2.7% 1.4% 4. 1%
U.S. 2-l8.718 262,755 274.635 335,048 5.6% 4.5% 21.9%

Source: State Profile From U.S. Bureau of the Census; Statistical Abstract of the U.S .. 1996

As shown in Exhibit 3-2. 26.4% of Michigan's population is below the age of 18, similar
to the U.S .. w'ith 26.2% under 18 years old. With only 12.5% of the state' s population
over 65 , compared to 12.8% in the U.S. , almost 62% of Michigan' s population is of
working age. For 1995. this translates to approximately 5.7 million people.
Exhibit 3-2
Population
1990 1995
Percent Under 18
Michigan 26.5% 26.4%
U.S . 25 .7% 26.2%
Percent Over 65
Michigan 1\.9% 12.5%
U.S. - 12A% 12.8%

Source: State Profile From U.S. Bureau of the Census; Statistical Abstract of the U.S .. 1996

50
The general demographic characteristics of several of Michigan ' s metropolitan areas are
compared with other metropolitan areas in the midwest in Exhibit 3-3 . With the
exception of the Grand Rapids area, the Michigan metropolitan areas have lower
population growth rates, above average household incomes, lower unemployment riltes,
and above average costs of living in comparison to the other areas.
Exhibit 3-3
DemQgraphic CQmpariSQI!S
.L222
Median
Population Household Unemployment Cost of
Market Area Population Growth Rate Income Rate Living
Chicago, IL 7,784, 107 0.64% 41.59 5 5.0% N/A
Cleveland, OH 2,227,977 0.05% 34,422 4.5% 103.8
Dayton,OH 956,738 -0.05% 34,311 4. 1% 10l.5
Detroit. MI 4,336,626 0. 12% 38 ,928 4.0% N/A
Fort Wayne, IN 474,524 0.48% 34,697 3.2% 90.5
Gary-Hammond-East Chicago 626,797 0.44% 35 ,966 5.0% N/A
Grand Rapids, MI 1,010,591 1.02% 34,704 3.8% 100.1
Lansing, MI 439,076 0.09% 35 ,543 3.3% 106. 1
Milwaukee, WI 1,462,015 0.20% 37,672 3.6% 104.2
South Bend, IN 260,278 0.68% 31 ,915 4.0% 90.8

In comparison to surrounding states, Michigan's younger population profile insures a

balanced long-term employee pool. In 1995, nearly 100,000 high school graduates and
vocational education students entered the workforce, and Michigan' s 4-year colleges and
universities (graduated more than 45,000 with bachelor degrees, 15,000 with masters'
degrees, and 1,500 with doctorates.

However, Michigan· s slow population growth may dampen long term economic growth
within the state if availability of labor becomes an issue in the future. Companies looking
to locate or expand in Yfichigan will first consider the areas with the largest population
and available labor pools.

3. Income

Michigan' s per capita income has risen slightly above the national average, reHecting a
stable economy and an employed workforce. The state's per capita income compares
favorably to other midwest states and the U.S. , as shOVvTI in Exhibit 3-4.
Exhibit 3-4
Per Capita IncQme CQrnparisons

1995 Per
Capita Income
United States $22. 788
Illinois $24.763
Indiana $21 ,273
Michigan $23 .551
Ohio $22.021
Wisconsin $21.839

Source: U.S. Department of Commerce, Bureau of Economic Analysis

', .. " I

51
Similarly, Michigan's average annual pay is above the U.S. average and has grown
16.4%, compared with the U.S. growth of 14.1%, between 1990 and 1994. Although the
state' s personal income per capita is roughly the same as the U.S.'s, the state's has grown
more than twice as fast as the U.S., 11.6% compared to 5.5%, respectively. The state's
household income, $35,284, almost exactly mirrors the U.S.'s, $35,264, and the growth
rates were exactly the same, 3.9%, between 1990 and 1994, as shown in Exhibit 3-5 .
Exhibit 3-5
In~ome Growth 1990-1995
Mi~bigan & U.S.
1990 1995 % Change
A vg. Annual eav
Michigan $25,376 $29,541 * 16.4%
U.S . $23,602 $26,939* 14.1%
P~r:iQnal [ncQme P~r Capita
Michigan $19,629 521,898 11.6%
U.S. $20,090 $21,188 5.5%
Mi~higan HQusehQld Income
Michigan $33,945 $35,284* 3.9%
U.S. $33,952 535,264* 3.9%

* 1994
Source: State Profile From U.S. Bureau of the Census; Statistical Abstract of the U.S., 1996

Although income gro\\th in Michigan lagged the nation's in the late 1980' s, the state still
ranked in the top 16% of all states. By 1993, Michigan's income growth rates had
surpassed the nation's and the growth continued through 1995.

Excluding benefits, of all Michigan's part-time, full time, hourly, and salaried workers,
40% earn less than $8.85 an hour, 40% earn more than $12.50 per hour, and 20% of all
wage earners make $6 .00 or less per hour, as shown in Exhibit 3-6. Median earnings per
hour are $10.68.
Exhibit 3-6
Michigan Wage Rates
& Percent of Workforce

% of
Wages Workforce

<S6 .00 20° '0

$6.01-S8.84 20° '0
$8.85-S 12.50 20°0
$12.51-$18 . 13 20°'0
>$18 . 14 :20°'0

Source: Current Population Survey. U.S. Bureau of the Census. as reported by the Michigan
Employment Security Commission

Michigan's manufacturing wage rates are the highest among the six neighboring midwest
states, as shov.n in Exhibit 3-7.

Exhibit 3-7
Average Hourly Manufacturing Wage
Mav, 1995

MI IL IN MN OH WI
SI6.23 $12.59 $13 .77 S12.75 $14 .35 $12.72

52
 From 1985 to 1995, ~1ichigan ' s unionized workforce has decreased at a faster rate than
the national average. 1995 studies show that of Michigan' s private sector employment,
less than 18% of workers are unionized. The vast majority of union workers are
employed by Ford, Chrysler, General Motors, and the Auto Alliance. In fact, if these
largest auto makers are factored out, Michigan' s private-sector workforce has a lower
percentage of union membership (11.7%) than the U.S. average (12 .3%) .

Most of the business gro\.\'th taking place in Michigan in the last 20 years has been in
small and medium sized businesses (500 or fewer employees), and these firms have
largely relied on informal worker-management relationships rather than on unions .

Michigan's ability to anract new residents and workers is directly related to the various
income measures. Given the state ' s favorable position when comparing these measures
to other states and the national averages, Michigan should be able to attract people to the
state. However, the state ' s higher wage rates will slow expansion or relocation projects
involving new jobs in the state.

B. ECONOMIC CHAR.\CTERISTICS OF THE STATE OF MICHIGAN

1. Background

Michigan ' s economy has rebounded after the last recession as measured by Gross State
Product (GSP), a measure of a state's total output, or output of a specific industry sector.
Michigan and its neighboring manufacturing industrial states of Illinois and Ohio together
comprise about 12% of the national GSP. Michigan's GSP increased 44% from 1977 to
1992 (the last year for which figures are available) to a current total of more than $204.5 ,\ .
billion. However, Michigan's projected GSP growth rate of 1.8% through the year 2000
is the lowest of the six midwest states and below the U.S. average rate of2.0%, as shown
in Exhibit 3-8.
Exhibit 3-8
Projected Average Annual
Growth in Gross State Product -1992-2000

USA MIlL IN MN OH WI
2.2% 1.30.0 2.0% 2.3 % 2.2% 1.9% 2. 3%

The state has an extremely proficient exporting capacity which is a major factor in the
state ' s economic stability. The state ranks fourth nationally in total exports. The key to
Michigan' economic status. however, is still transportation related. Michigan is the
nation' s largest exporter of transportation equipment.

Michigan's gross total budget for 199611 997 is $28.5 billion (general fund budget portion
is $8.5 billion) and the state has a provision in its state constitution mandating a bal3nced
budget. In addition to maintaining a balanced budget, the state also has a Budget
Stabilization Fund (Rainy Day fund) which has a balance in excess of $1 billion-
amongst the largest in the nation.

Michigan's inflation rate historically has been within 711 0 of a percentage point of the
national average. In -l- of the past 5 years, Michigan' s cpr has been below the national
average . .,...... V' !

53
 These factors have given Michigan, long considered the rustbelt state of the nation, a
revitalized and healthy economy in the 1990' s. Across all industries, real growth and
diversity are ckarly evident.

2. Employment/l..:nemployment

Michigan ' s total labor force exceeds 4.7 million persons, more people than the total
population of 31 other states in the nation. From 1985 to 1995, Michigan saw
employment gro\V1h equal to or greater than the national average in all industrial sectors.

Several industries have shown significant growth within the state recently including
metalworking. metal fabricating, equipment manufacturing; and automotive, including
vehicle research and development. Employment in furniture and fixtures , plastics,
printing, publishing and the lumber and wood products sectors grew at twice the national
average between 1985 and 1995, and Michigan is 35% less dependent today on auto jobs
in manufacturing employment than it was in the 1980's.

Between 1990 and 1996, Michigan' s civilian labor force has grown 5.3% while
employment has grown 8.6%. As a result, the total number of people unemployed has
dropped 34.8% and the unemployment rate has dropped 38 .1% to 4.7%, as shown in
Exhibit 3-9.
Exhibit 3-9
Mi!;higan EmpIQ\' m~nt
(Data in ThQusands)

1990 1991 1992 1993 1994 1995 1996 %Chg.

Civilian Labor Force 4,596 4,577 4.659 4,706 4,761 4,745 4,841 5.3%
Employment 4,246 4,152 4,245 4,374 4,480 4,491 4,613 8.6%
~ ... ?
Unemployment 350 425 414 JJ_ 281 254 228 (34 .8%)
Rate 7. 6 9.3 8.9 7.1 5.9 5.3 4.7 (38 . 1%)

Source: Michigan Employment Security Agency , Research and Statistics, Information and Reports
Section

During 1996. \1ichigan recorded its lowest monthly unemployment rate in history at
4.4%. With a 1996 average of 4.7%, Michigan has one of the lowest unemployment rates
in the nation (1996 national average was 5.3%). However, because of the size of the
state's population, a 4.7% Michigan unemployment rate still means 228.000 people
available to \york.

The increase in employment between 1990 and 1996 has been broad-based across all
employment sectors, \vith the exception of the Federal and State governments, as shown
in Exhibit 3-10. Service Producing Industries realized a 10.9% increase in employment,
While Goods Producing Industries employment increased 3.9%. The largest increase in
employment. 22.7%, came in the Private Services sector, which includes such areas as
hotels, personal services, business services, automotive services, amusement and
recreation. health and legal services, educational and social services, and engineering,
accounting, and management services.

Notably, the Federal Government decreased employment in the state by 8.1 % and the
State Government employment fluctuated between 163.000 and 166,000, while Local
Government increased only 2.5% over the same period .
..... .',.": .. ..;,

54
Exhibit 3-10
Mi!:higan Eml2IQvml:nt
(Data in thQusands)

1990 1991 1992 1993 1994 1995 1996 % Chg.

Total Wage & Salary Emp. 3,970 3,891 3,928 ·+.006 4.148 4.252 4,325 8.9%
Goods Producing Industries 1,095 1,035 1,038 1.050 1, 103 1.137 1, 138 3.9%
Construction and Mining 152 138 137 141 151 162 175 15.1 %
Manufacturing 944 897 901 908 952 975 962 1.9%
Durable Goods 710 670 671 674 709 729 718 1.1 %
Nondurable Goods 234 227 230 234 242 246 24-+ 4.3%
Service Producing Industries 2,874 2,856 2,890 2.956 3,045 3.115 3,188 10 .9%
Private Sector Service Indus 2,240 2,220 2,251 2.317 2,405 2,476 2,550 13 .8%
Transp. , Commun. & L'tilities 158 154 154 157 163 166 169 7.0%
Trade 949 931 926 943 97 1 1.000 1,0T 8.2%
'W'holesale Trade 202 199 197 200 206 211 216 6.9%
Retail Trade 748 732 728 743 764 789 811 8.4%
Finance, Ins .. Real Estate 191 190 191 195 197 196 197 3.1'%
Private Services 942 946 980 1.022 1.075 1.114 1, 156 22 .7%
Government 634 636 639 639 640 638 638 . 0.6%
Federal Government 61 58 58 57 57 57 56 (8.1%)
State Government 166 166 163 164 165 166 166 0.0%
Local Government 406 412 417 419 418 415 416 2.5%

Note: Private Services includes Business, Auto, Health, Educational. Social and Other Services

Source: Michigan Employment Security Agency, Research and Statistics. Information and Reports
Section

Betvveen 1990 and 1995, Michigan increased its ' percentage of civilians employed by
1. 7%, while the U.S. percentage increased by only 0.1 %. Similarly, while the percentage
of civilians 'employed in the U.S. manufacturing sector declined 1.6%, Michigan' s
declined only 0.9%, as shov,oTI in Exhibit 3-11.

Exhibit 3-11
Eml2IQ),:ml:ot

1990 1995 %Chg.

% Civilian EmplQved
Michigan 60.6% 62.3% 1.7%
U.S. 62.8% 62 .9% 0.1%
% Manufgcturin~
Michigan 23.8% 22.9% 0.9%
U.S. 17.4% 15 .8% 1.6%

Source: State Profile From U.S . Bureau of the Census; Statistical Abstract of the U.S., 1996

Between 199-l and 1995. Michigan' s manufacturing employment rose by 2.2%. while the
nation' s increase was only 0.5%, as shown in Exhibit 3-12 .

Exhibit 3-12
Manufa!:turing Emplovment

1994 1995 Total Change % Change

United States 18,304.000 18,406,000 102,000 0.5%
Michigan 949.400 970 ,400 21,000 2.2%
% of U.S. 5.2% 5.3% 20.6%

Source: Michigan Employment Security Commission

55
Underscoring the strength of the state' s manufacturing economy is the fact that \fichigan
accounted for almost 21 % of the 102,000 new manufacturing jobs created nation\vide
between 1994 and 1995. and in the final quarter of 1995, Michigan generated 1 in every 3
manufacturing jobs in the United States.

Within the broad based industrial sectors, several major employment subsectors are
responsible for more than 26% of the total civilian employment in Michigan, as shown in
Exhibit 3-13 .
Exhibit 3-13
1995 Major Industry Sector Employment

Industrv Emplovment % Major % State

Agricu lture/ forestrylfish in g 14,000 1.26% 0.33 %
Chemicals 45,000 4.04% 1.06%
Electronic/electrical equ ipment 34,000 3.05% 0 .80%
Fabricated metals 129,000 11.59% 3.03%
Food and kindred 45,000 4.04% 1.06%
Furniture 39,000 3.50% 0.92%
Industrial machinery 117,000 10.51 % 2.75 %
Nonelectrical machinery 134,000 12.04% 3. 15%
Primary metals 37,000 3.32% 0 .87%
Print/publishing 44,000 3.95% 1.03%
Rubber/plastics 66,000 5.93% 1.55%
Transportation equipment 294,000 26.42% 6.91%
Trave l/tourism 115 ,000 10.33 % 2.70%
Major Sector Employment 1, 113,000 100.0% 26 . 18%
Total State Employment 4,252,000 100.0%

The Transportation Equipment subsector is by far the largest single employment

subsector, employing approximately 294,000 in 1995, 26.4% of the Major Sector
employment and 6.9% of the Total State employment. The next closest employment
subsector, Non-Electric \iachinery, employed 134,000 people, 12.0% of the Major Sector
employment and 3.1% of the Total State employment.

Michigan has added more than 250,000 jobs and its unemployment rate has dropped
continuously since 1991. Job creation and employment are expected to continue
growing, but at a relatively slow pace compared with the rest of the nation. If the state's
job creation grows faster than the available pool of workers, inflationary pressures on
wage rates may exacerbate the wage differential between Michigan and the neighboring
states, drawing companies out of Michigan for expansion or relocation projects.

3. Economic Sectors

The state· s industrial base, which includes agriculture, manufacturing, tourism, finance
and mining, has become much more diversified. Although the Michigan economy was
built on automobile manufacturing and it is still the number one manufacturing sector, the
economy is not as dependent on the automobile industry as it was in the past.

Michigan ' s agriculture is among the most productive in the world. The state is the
number one producer of blueberries, cucumbers, red tart cherries, and several types of
bean. For 59 products, ranging from varieties of flowers to potatoes, Michigan is one of
the nation' s top 10 producers.

Companies located or headquartered in Michigan dominate a variety of industries

throughout the world. 360 R&D facilities focusing specifically on industrial technology
call Michigan their home. The representative companies listed in Exhibit 3-14 are either

56
located or headquartered in Michigan, and/or have annual sales in excess of $2 .0 billion,
and/or have more than 6,500 employees.
Exhibit 3-14
Michigan Companies

CompanY Note
American Axle & Manufacturing Inc. 1
Ameritech 2
Amway Corporation I
Blue Cross Blue Shield of 'vtichigan 1, 2, 3
Chrysler Corporation 1, 2,3
Chrysler Financial Corporation 1
CMS Energy Corporation 1
Comerica Bank 1,2,3
Consumers Powers Co. 2,3
Dayton Hudson Corporation 2
Delphi Automotive Systems 1
Detroit Edison Co. 1,2,3
Domino ' s Pizza Inc . I
Dow Chemical Co. 1, 2,3
EDS Corp. 2
Ford Holdings Inc . 1
Ford Motor Company 1, 2,3
Ford Motor Credit Company 1
General Motors Acceptance Corp. 1
General Motors Corporation 1, 2,3
Henry Ford Health Systems 2, 3
J C Penney Co. Inc . 2
Kellogg USA Inc. I
Kelly Service Incorporated 1,2,3
KMart Corporation 1,2,3
Lear Corporation 1
Masco Corporation 1
Meijer Inc . 1, 2, 3
National Bank of Detroit t 1st Chicago-NBD) 2, 3
Northwest Airlines Inc. 2
Penske Corporation I
Phannacia & Upjohn Inc . 1, 2,3
Sears. Roebuck & Company 2
Spartan Stores Inc. I
Steelcase Inc . 1, 2,3
The Kroger Company 2
United Parcel Service 2
UT Automotive Inc. I
Volkswagen of America Inc . 1
Wal-Mart Stores 2
Whirlpool Corporation 1
William Beaumont Hosp ital 2, 3

:Yotes:
I. Each of these companies. publicly or privately held, has annual sales in excess of$2 Billion.
2. Each of these private sector employers has more than 6,500 employees
3. World or U.S. Headquarters

57
During the last decade. Ylichigan' s annual exports have tripled in value from below $10
billion to $28.4 billion. as shown in Exhibit 3-15 .
Exhibit 3-15
1985-1995 Export Value - :\,lichigan
(In Billions of Dollars)

Year EXQort S

[985 $9 .0
[986 $[ [ .0
[987 $[3 .5
[988 $[4 .2
[989 $[5 .0
[990 $[8 . [
[99[ $2l.0
[992 $23 .-+
[993 $25 . [
[994 $28 .2
[995 528.4

A growing international market for a variety of Michigan produced goods has made
Michigan the United States' 4th largest exporting state, as sho\\-'Il in Exhibit 3-16.
Exhibit 3-16
1995 Top 10 Export States Dollars

1995 1995 1995

Rank State Exports % of US EXQorts
[ California 596.572,987,000 [6.73%
2 Texas S68,8 [8 ,6 [4,000 [ l.92%
3 New York S3 7.089, 140,000 6.42%
~ Michigan S28,~30,731,OOO 4.92%
5 Illinois S25,572,688,OOO 4.43%
6 Washington S24,847.378 ,000 4.30%
7 Ohio 523 ,764, [27 ,000 4. [2%
8 F[orida S23 ,67 [, [49,000 4. [0%
9 Louisiana S21 ,059,453,OOO 3.65%
[0 North Carolina 516,820, 102,000 2.9[%

Source: MISER, U.S. Department of Commerce, Bureau of the Census

Michigan is the nation' s largest exporter of transportation equipment, annually exceeding

$15 billion. Historically. the top three export destinations for Michigan products are
Canada, Mexico and Japan as shown in Exhibit 3-17 . Michigan exports more in value
and volume to Mexico and Canada than any other state in the nation, and the State of
Michigan is Canada's largest world trading partner.

58
Exhibit 3-17
Michigan's Export Markets - 1995

Rank Country
I Canada
2 Mexico
3 Japan
-+ Germany
5 Austria
6 United Kingdom
7 Belgium-
8 Kor-ea
9 France
l O A ustralia

Source: MISER. U.S. Department of Commerce, Bureau of the Census

The total value of Michigan exports in 1995 was $28.4 billion dollars, as shown in
Exhibit 3-18. Almost 14% of the total exports were to the European Union (EU)
countries, and of those. 45.4% was transportation equipment.

Exhibit 3-18
Michigan ExPQrts - 1995
(Value in 5 millions)
1995 Value Percentage 1995 Value %OfEU % EU Exports of
Industr:y of Ex~orts of Total EU Im~orts Im~orts Indust!:I Ex~orts
Transportation Equipment $15,057.4 53.0% 1,807 45.4% 12.0%
Industrial Machinery, Computer Equip. $3.917.9 13.8% 550 13.8% 14.0%
Chemicals, Rubber & Misc. Plastics $2,518.9 8.9% 746 18.8% 29.6%
Electronic, Electric Equipment 51,316.4 4.6% 176 4.4% 13.4%
Fabricated Metal Products 51 ,087.7 3.8% 110 2.7% 10. 1%
Primary Metal Industries 5923.1 3.2% 114 2.8% 12.3%
Furniture and Fixtures 5657.4 2.3% 40 1.0% 6. 1%
Instruments and Related Products 5601.3 2.1% 122 3.0% 20.1%
Other (23 Categories) 52.350.6 8.3% 311 7.8% 13.2%
528,430.7 100.0% 3,976 100.0% 13 .9%

Source: MISER. U.S. Department of Commerce, Bureau of the Census

.... "j

59
Germany, Austria, the United Kingdom, and Belgium together represent more than 70%
of Michigan's exports to the European Union (EU), as shown in Exhibit 3-19.
Exhibit 3-19
Michigan Ell EXPQrts By CQuntr):
(In MiIIiQns Qf Dollars)

Rank Country Value % of Ex(!orts

I Gennan:: $803 20 .2%
2 Austria $800 20 . 1%
3 United Kingdom $696 17.5%
4 Belgium $537 13 .5%
5 France $374 9.4%
6 Netherlands $213 5.3%
7 Italy $188 4.7%
8 Spain $169 4.2%
9 Sweden $52 1.3%
10 Ireland $40 1.0%
II Portugal $38 0.9%
12 Greece $21 0.5%
13 Denmark $20 0.5%
14 Luxembourg $13 0.3%
15 Finland $12 0.3%
Total EU Exports 53,976 100.0%

The 15 nations of the EU comprise a market of over 368 million customers and have a
combined gross EU product of over $6 trillion. Michigan exports in dollars to the EU
have increased 54% o\-er the last 4 years.

As of January 1996, there were more than 900 companies in Michigan with foreign
parents, representing 26 countries and encompassing all industry and service sectors, as
shov.-n in Exhibit 3-20. Japan is Michigan's number one foreign investor, with 308
Michigan-based Japanese businesses employing more than 32,000 people. Foreign based
companies in Michigan employ nearly 130,000 people.
Exhibit 3-20
FQreign-Owned Michigan CQmpanies

Number of % of
Parent Company Michigan Foreign
Country Com(!anies Com(!anies
Japan 308 32.8%
Canada 162 17.3%
Gennany 150 16.0%
United Kingdom 79 8.4%
France 56 6.0%
Other 21 Countries 184 19.5%
939 100.0%

Source: Michigan International and National Business Development Office

Michigan has maintained offices in Europe and Asia for 25 years, aiding non-U.S.
companies with establishing business relationships in the state, as well as providing
assistance to Michigan companies wishing to do business abroad.

4. Summary

Michigan has a stable. diversified, and slowly growing economy supported by a growing
employment base. The state's economy survived the effects of the most recent recession.
and. by most measures. is expected to expand, albeit slowly. The presence of a large

60
 number of manufacturing companies and the move away from dependence on the
automotive industry is indicative of the strength of the general business climate. The
state economic and demographic characteristics are a positive influence on the
redevelopment of the St. JosephlBenton Harbor properties.

C. DEMOGR..\PHIC CHARACTERISTICS OF THE BERRIEN COUNTYI

ST. JOSEPHIBENTON HARBOR AREAS
1. Introduction

The U.S. Office of Management and Budget (OMB) includes all of Berrien County in the
Benton Harbor Metropolitan Statistical Area (MSA). Consequently, the information in
this subsection includes information on both the cities of St. Joseph and Benton Harbor
\vhere available, and Berrien County where specific information on the cities was
unavailable. In addition, information gathered by the W.E. Upjohn Institute and
presented in their Benchmarking Data System Report, completed in June 1996, has been
included.

The demographic characteristics of the Berrien County/St. Joseph/Benton Harbor area are
unique. Despite the growth occurring in Michigan, Berrien County's unemployment rate
remains 50% higher than that of the rest of the state. Manufacturing employment is up
and per capita income is growing, but there has been significant loss of population from
1980 to 1990.

2. Population

Berrien County ranks 12th in popUlation, 10th in size, and 11 th in population density out
of Michigan's 18 counties with the largest population, as sho\\-TI in Exhibit 3-21.
Exhibit 3-21
Mi!;higan CQuntie:i Qver 100,000 PQl2ulation-199S
1995 Square Persons/
County Po~ulation Rank Mile Rank Sg. Mi. Rank
Bav 111,529 18 446 18 250 14
Berrien 162,623 12 580 10 280 11
Calhoun 140,689 15 709 6 198 18
Genesee 436,381 5 642 8 680 4
Ingham 277,889 7 559 14 497 6
Jackson 154,010 14 705 7 118 16
Kalamazoo 127,973 8 567 12 402 8
Kent 525,355 4 862 2 609 5
Livingston 133,601 17 570 II 234 15
Macomb 733,607 3 458 17 1.602 1
Monroe 139.550 16 557 15 151 13
Muskegon 164,459 II 504 16 326 10
Oakland 1.153,461 2 877 I 1,315 3
Ottawa 110,389 10 564 13., 373 9
Saginaw 112,295 9 812 .J 261 12
St. Clair 154,231 13 740 4 208 17
Washtenaw 192,609 6 716 5 409 7
Wayne 1.055.500 I 607 9 3,386 I
Total of 18 Counties 7.186,151 11,475
Total Michigan 9,549,353 57,176

'-','- ,,"

61
The cities of St. Joseph and Benton Harbor are the central cities of the Benton Harbor
MSA. The Benton Harbor MSA has a total population of approximately 162,000. The
urbanized area. of which the two cities are the center, contains 57,712 people from the
adjacent municipalities of Benton Tov.nship, St. Joseph Township, Lincoln Charter
Township and a portion of Sodus tov.nship.

According to the 1990 census data, the population of the area declined substantially
between 1960 and 1990 as people left to find jobs and opportunities elsewhere. Between
1980 and 1990, Berrien County's population decreased 5.8%, S1. Joseph's decreased
4.2%, and Benton Harbor' s decreased 12.4%, as shown in Exhibit 3-22.
Exhibit 3-22
Population Trends

Total Population 1980 1990 %Chg. 2000 %Chg.

St. Joseph 9.622 9,214 (4.2%) 9,400 2.0%
Benton Harbor 1-t,6 37 12,818 ( 12.4%) 13.000 1.4%
Berrien County 171 ,276 161 ,378 (5.8%) 159,919 (0.9%)

Source: Southwestern Michigan Commission

While St. Joseph and Benton Harbor are expected to increase in population 2.0% and
1.4% respectively by 2000, the County is expected to decrease, but by less than 1%.
According to Berrien County forecasts shown in Exhibit 3-23 , the County population is
projected to begin to increase between 2005 and 2010, but only by less than 1% and, even
then, the County population in 2010 is projected to be less than it is today .
Exhibit 3-23
Berrien County Forecast

1991 1992 1993 1994 1995 2000 2005 2010

Population 16 1.500 160.935 160.752 160.768 160.869 159.919 159.85 7 160. 2-l-l

The forecast to 2010 is based on an integrated population/economic model which results

in a tendency for the model to not let employment in a declining area decline indefinitely,
based on the phenomena that as jobs decrease, the cost of labor tends to decline over time
which \vill tend to trigger new employment growth. Similarly, in a county that is
growing rapidly, the cost of labor increases, putting a dampening affect on long term
rapid employment gro\\1h.

According to the W.E. l'pjohn Institute study completed in June 1996, the county ' s
inability to supply sufficient employment opportunities to keep and attract young adults
will negatively impact the quality of its labor force. This situation is more acute in the S1.
Joseph/Benton Harbor areas.

3. Age and Ethnic Characteristics

While Berrien County' 5 total population dropped 5.8% between 1980 to 1990, the
number of county residents in various age groups changed more dramatically. As shown
in Exhibit 3-24, the population below the age of25 dropped 18.9%, or almost 14,000, and
its percentage share of the overall popUlation dropped from 42.5% to 36.7%. The
population between the ages of 25 and 65 increased by less than 1%, 628 people. while its
percentage share of the overall population increased from 46 .3% to 49.6%. Finally, the
popUlation over the age of 65 increased 16.9%, or 3,248 people, and its percentage share
of the overall population increased from 11.2% to 13 .7%.

62
Exhibit J-24
Berrien Countv Age Cohorts

%Chg.
Age 1980 % 1990 % 1980-90
< 18 55 ,7'+ I 32 . 5~ /o 45,929 28.5% Inc!.
18-2'+ 17.20.+ 10.0% 13 ,242 8.2% (18.9%)
25-4.+ 45,128 26.3 0 /0 48,2 72 29.9% Inc!.
45-64 34,306 20 .0% 31 ,790 19.7% 0.9%
>65 18.897 11 .2% 22,145 13 .7% 16.9%
Total 171,276 100% 161,378 100% (5.8%)

Source: Southwestern Michigan Commission

Berrien County experienced an out-migration of young adults during the 1980' 5 and
forecasts suggest that the trend will continue during the 1990's. From 1980 to 1990, the
number of county residents between the ages of 20 and 30 years of age dropped nearly
22% from 28 .020 dO\\'n to 22,991. Moreover, the Michigan Department of Management
and Budget forecasts that by the year 2000, the number of county residents in their
twenties will decline by another 10.4% to 20,598 , and these trends are expected to
continue through 2010.

The aging of St. Joseph is even more pronounced, as shown in Exhibit 3-25. \Vhile St.
Joseph's total population dropped 4.2%, the population below the age of 25 dropped
18.5%, or almost 584, and its percentage share of the overall population dropped from
32.7% to 27.8%. The population between the ages of25 and 65 increased by 2.3%, 109
people, while its percentage share of the overall population increased from 47.3% to
50 .6%. Finally, the population over the age of 65 increased 3.5%, or 67 people, and its
percentage share of the overall population increased from 20.0% to 21.6%. St. Joseph's
median age was 37.2 in 1990.

Exhibit 3-25
St. Joseph Age Cohorts

%Chg.
Age 1980 0/0 1990 %
1980-90
< 18 2.069 21.5% 1,774 19 .3% Inc!.
18-24 1,081 11.2°'0 792 8.5% 18 .5%
25-.+4 2,379 24 .7° ° 3.040 33 .0% Inc!.
45-6'+ 2.175 22.6% 1.623 17.6% 2.3%
>65 1.918 :20.0°0 1.985 21 . 6~ 'O 3.5%
Total 9,622 100'% 9,21~ 100% (4.2%)

The city of Benton Harbor population has remarkably different age characteristics, as
shown in Exhibit 3-26. While the city's total population dropped 12.4%, the population
below the age of25 dropped 17.9%. or almost 1,490. and its percentage share of the
overall population dropped from 57% to 53.5%. The population between the ages of25
and 65 decreased by 3.9%, 200 people, while its percentage share of the overall
population increased from 35.2% to 38.6%. Finally, the population over the age of 65
decreased 11.3%, or 129 people, but its percentage share of the overall population
increased from 7.8% to 7.9%. Benton Harbor's median age was 22.8 in 1990.

',.-, I

63
E~bibit 3-26
Benton Harbor Age Cohorts

%Chg.
Age 1980 0/0 1990 0/0 1980-90
< 18 6,802 46.5~'o 5,599 43 .7% [nci.
18-24 1,539 10.5 ~o 1,252 9.8% (17 .9%)
25-44 3,051 20 .8% 3,171 24.7% [nci.
45-64 2,105 14.4% 1,785 13 ,9% (3.9%)
>65 1.140 7.8% 1,01 I 7.9% {I 1.3%2
Total 14,637 100% 12,818 100% (12.4%)

These trends suggest a decreasing population and labor supply, both countywide and in
the two cities. The gro\ving population of retirees and elderly can be expected to have
~ncreasing health care and personal service needs as well as increasing disposable
Incomes.

Between 1980 and 1990. the ethnic composition of the remaining residents in Berrien
County, St. Joseph, and Benton Harbor has changed as well, as shown in Exhibit 3-27.
Exhibit 3-27
Ethnic CQhorts
Berrien St. Benton
1980 Countl: 0/0 Jose[!h 0/0 Harbor 0/0

White 144,007 84 . 1% 9,357 97 .2% 1,938 13 .2%

Black 24,817 14.5% 171 1,8% 12,693 86,7%
AmeL Indian, Eskimo &
Aleutian 593 0.3% 30 0.3% 38 0.2%
Asian & Pacific Islander . 822 0.5% 40 0.4% 7 0.04%
Other Races 1,037 0.6% 24 02% 3I 0.2%
Hispanic Origin : 2,088 12% 66 0.7% [39 0.9%
Total 171,276 9,622 14,637

Berrien St. Benton United

1990 County 0/0 Jose[!h 0/0 Harbor 0/0 States %
White 133,259 82 ,6% 8,743 94.9% 930 7.2% 80 .3%
Black 24,872 15.4% 283 3. 1% 11 ,817 92 .2% 12.1%
AmeL Indian, Eskimo &
Aleutian 685 OA% 20 0.2% 18 0.1% 0.8%
Asian & Pacitic [slander 1,487 0.9% 142 1.5% 6 0.04% 2.9%
Other Races 1,075 0.6% 26 0.2% 47 0.4% 3.9%
Hispanic Origin 2.683 1.7% 113 1.2% 122 0.9% 9.0%
Total 161,378 9,214 12,818

Note : Population of Hispanic origin can be of any race

Source: Southwestern Michigan Commission

Berrien County, St. Joseph, and Benton Harbor have less ethnically diverse popUlations
than the United States. as shown in Exhibit 3-27. In the 1990 Census, 82 .6% of the
County popUlation was White, compared to 80.3% of the United States. St. Joseph's and
Benton Harbor's ethnic composition of their populations are almost exact opposites. St.
Joseph's population is almost 95% White, while Benton Harbor is almost 93% Black. In
Berrien County and in both cities as well, the combined White and Black popUlations
comprise 98% or more of the population, compared to 92% nationally.

Berrien County's White population has decreased by almost 11,000, or 7.5%, between
1980 and 1990, accounting for all of the total population decrease over the period. The
County's other ethnic populations have remained relatively level in number. with the
exception of Asian and Pacific Islanders, which increased by 665. or 80.9%.

64
Similarly, the decrease in the populations of St. Joseph and Benton Harbor are due almost
entirely to decreases in the White populations. St. Joseph's White population decreased
by 614. or 6.6%. while all other ethnic populations increased. Benton Harbor's White
population decreased by 1,008, or 52%, and the city ' s other ethnic populations decreased
as \vell.

The lack of similaritv· in the ethnic characteristics of the Countv and the two cities has
created friction withIn the County. In addition, the City of Be~ton Harbor's huge
percentage of youth has generated greater demands for social services.

4. Educational And Community Characteristics

While almost 85% of St. Joseph ' s residents have high school degrees and 28% have
college degrees, only -+ 7% of Benton Harbor residents have high school degrees and only
3% have college degrees, as shown in Exhibit 3-28.
Exhibit 3-28
Educational Attainment

Benton
Harbor St. Joseph
High School Degrees 47.4% 84.4%
College Degrees 3.3 % 28 . 1%

The W. E. Upjohn Institute study indicated that Benton Harbor Area School's
expenditures per student were somewhat below the average of other similar metropolitan
areas ($5,755/student versus $5,800/student), the student /teacher ratio was above average
(23.2 students/teacher versus 16.5 students/teacher), and the dropout rate was higher ).
(11.9% versus 4.4% in 1993-94). On average, less resources are being spent in the
Benton Harbor Area Schools than in the school districts in the comparison areas .

The Michigan Department of Education measures performance using the Michigan

Educational Assessment Program (MEAP) test. While students in the St. Joseph and
Lakeshore School Districts have scored well above the state average, students in the
Benton Harbor School District have not. Of Benton Harbor Area 10th and 11 th grade
students, less than 6 ~o received a satisfactory grade in math, less than 14% in reading , and
less than 14% in science compared to almost 44%, 54%, and 60%, respectively, for St.
Joseph students.

The recently released state report for 1995-96 shows that the Benton Harbor Area School
District recorded the lowest test scores in the state, and was the only district to record 1.0
(out of a possible score of 100.0) in the science skill assessment. The area' s average
score in the MEAP test has remained below the state' s average for the past three years.

65
 Michigan's crime rate is higher than the average for the United States, and higher than
four of the five other neighboring midwest states, as shown in Exhibit 3-29. Only Illinois
has a higher crime rate among the six states, while Berrien County's crime rate is
comparatively higher than all six states and the United States.
Exhibit 3-29
1994 Crime Rate
Per 100.000 Population

Berrien Countv MI IL IN MN OH WI USA

7.232 5,4'+5 5,625 4 ,592 4 ,341 4 ,461 3,944 5,37'+

Source: State Profile From U.S . Bureau of the Census; Statistical Abstract of the U.S ., 1996
FBI Uniform Police Reports; W.E. Upjohn Institute for Employment Research

Berrien County ' s total number of crimes dropped 8.4% between 1990 and 1994. and St.
Joseph Township ' s declined 7.2%. While total crimes committed in Benton Township
increased 10.1%, St. Joseph's only increased 2.7% and Benton Harbor's increased by
only 2.3%, as shown in Exhibit 3-30.
Exhibit 3-30
Total Crime

1990 1994 % Change

Berrien County 32.-+23 29,697 (8.4%)
Benton Harbor 5,609 5,736 2.3%
Benton Township 6.288 6,921 10.1%
St. Joseph 1.502 1,543 2.7%
St. Joseph Township 694 644 (7.2%)

The quality of the public education system in the Benton Harbor Area Schools coupled
with the high incidence of crime presents a very negative impression. As important
measures of the quality of life, these negative factors are a strong concern for anyone or
any company looking to expand or locate in the area.

5. Income And Buying Power Characteristics

Total Personal Income. Disposable Personal Income, Personal Income Per Capita. and
Disposable Personal Income Per Capita figures for Berrien County indicate steady five
year incremental increases averaging 30% for each five year period. These increases are
pwjected to continue through 2010, as shown in Exhibit 3-31.

Exhibit J-JI
Berrien Countv Forecast

% Chg. % Chg. % Chg. % Chg.

1991- 1995- 2000- 2005-
1991 1995 1995 2000 2000 2005 2005 2010 2010
Total Personal
Income (5MM) 52,676 53.294 23 . [% $4,310 30.8% $5.752 33.4% $7.504 30.4%
Disposable
Personal Income
(5MM) 52.338 52.862 22.-+% $3.744 30.8% 55.003 33 .6% $6.539 30.7%
Personal Income
;, .. ,., ...:,... Per Capita $16.5 70 520.-+76 23 .6% $26.951 31.6% $35.982 33.5% $46.829 30. 1%
Disp. Pers.
[nco me Per
Capita $14,4 7; $17. 791 22 .9°/0 523,412 31 .6% 31.297 33 .7% $40.807 30.3%

66
 However, there are wide historical discrepancies in these same measures within the St.
Joseph/Benton Harbor area, as shown in Exhibit 3-32 . While Per Capita Income rose in
Berrien County, the City ofSt. Joseph, and St. Joseph Township 12.1%, 18.7%. and
19.9%. respectively. between 1979 and 1989, it increased by less than 1% in Benton
Tovmship and declined almost 11 % in Benton Harbor.
Exhibit 3-32
Per Ca~ita and Median HousehQld IncQme
1979 and 1989
1979 Percent
Adjusted Change in
for Constant
1979 Inflation 1989 Dollars
Per Ca pita I nCQm~
Berrien Counrv S6,723 $11,268 512,636 12.14
Benton Harbor City 3. 766 6,312 5,622 (- 10.93)
Benton Town ship 5A30 9,101 9, 189 0.97
St. Joseph City 9,257 15,515 18,421 18.73
St. Joseph Township 9.138 15,315 18,361 19.89

M~dian HQusehQld Income

Berrien Counrv 516.274 $27,275 527,245 (-0.11 )
Benton Harbor City 9.074 15 ,208 8,866 ( -41.70)
Benton Township 12 ,390 20,766 18,240 (-12 .16)
St. Joseph C ity 15. 151 25,393 28,566 12.50
St. Joseph Township 2·UI2 40,747 41,303 1.36

Source: U.S. Census Bureau; Southwestern Michigan Commission

Median Household Income increased in the City of St. Joseph and St. Joseph Township
by 12.5% and 1.4%, respectively. while it fell less than 1% in Berrien County but more
than 12% in Benton TO'VVTIship and almost 42% in Benton Harbor

The wide discrepancies in the various income measures in the St. JosephlBenton Harbor
area further indicate a decaying urban core. Benton Harbor's income figures are only
30%-50% of the Countv averag:es, and even less than those of the immediatelv
surrounding communities. Thfs tends to isolate the community and create increasing
social service demands on the Benton Harbor budget.

D, ECONOMIC CHAR,,-CTERISTICS OF THE BERRIEN COUNTY!

ST. JOSEPHIBENTON HARBOR AREAS

1. Background

During the early 1900' s, the St. Joseph/Benton Harbor area established a strong base of
manufacturing, metal fabricating plants, and as a distribution center for fruit. By 1920,
the City was also a popular tourist destination. By 1950, Benton Harbor was the area' s
leading center for manufacturing, retail and wholesale trade.

In 1956, the Whirlpool Corporation completed a new administrative center on a 100-acre

site just north of the city in Benton Township. As the company grew and became an
international operation. more and more jobs came into the community. They were the
mainstay of employment for local residents.
··•·.. ·'1

67
Unfortunately, like many of the largest r:::J.idwestem cities in the manufacturing belt,
thousands of jobs were lost between 19- 1) and 1985 due to cost efficiency relocations and
dO\\TIsizing . In 1983, Whirlpool annour:.:ed a phase out of washer assembly at its St.
Joseph plant and all washer production 'xas moved to Clyde. Ohio. Then in 1986.
'Wbirlpool closed most of its St. Joseph ::::>ivision and nearly all of its remaining
manufacturing operations in the area. in-:luding those in downtowTI Benton Harbor. The
\\Ibirlpool closings were just one of se\'~:-al major manufacturing job losses for the area.

Businesses abandoned the center city fo:- more commercially attractive suburbs in
outlying to\\TIships. Manufacturers beg::..'1 to move centers of operation to locations
where labor and material costs were low~r. 1\ew industry opted for newer industrial park
settings. Metal refiners and fabricators ~mployed newer technologies requiring fewer, but
more highly skilled labor force members .

The City of St. Joseph ' s r~cent employcent losses from m<~ior plant closings contributes
to the economic stagnation in the area. Together. the statistics for the St. Joseph, Bentoll
Harbor area reflect a declining economy .

2. Employment And Unemployment Characteristics

The Berrien County unemployment rate has trended up and down during the 1990' s, as
did the state's and the nation's, as show::l in Exhibit 3-33 .

Exhibit 3-33
Un~m12IQ~m~nt T[~nds (%)

1990 1991 1992 1993 1994 1995 1996

Berrien County 7.7 9.2 8.8 7.2 6.0 5.5 5.8
Michigan 7.6 9.3 8.9 7.1 5.9 5.3 4.7
U.S.A. 5.5 6.7 7.~ 6.8 6.1 5.7 5.3

Source: State Employment Security Commiss i(' ns; W.E. Upjohn Institute for Employment Research

The total labor force in Berrien County :'as increased by 1.600. or 2.2%, between 1991
and 1996. Employment has grown by :.900. or 3.8%. the number of unemployed has
dropped by 1.000. or 17.2°'0. and the une:-nployment rate has declined more than 19%
from 7.7% to 5.8%. as sho\'vTI in Exhibit 3-34.

Ho\\·ever. the County's labor force rate or

increase \vas only 41 % of the state's rate and
the gro\'v1h rate in employment was only 44% of the state' s rate. while the number of
unemployed and the unemployment rate for the county have improved only half as fast as
the state' s.

Exhibit 3-3~
Berri~n CQunt'V Em12IQvrnent
(Data in ThQusands)
%Chg.
1990 1991 1992 1993 199~ 1995 1996 90-96
Civilian Labor Force 80.9 80.3 81.3 82.4 83.4 81.8 82.7 2.2%
Employment 75.1 72.9 74.2 76.4 78,4 77.3 78.0 3.8%
l'nempIoyment 5.8 7.4 7. 1 5.9 5.0 4.5 4.8 (17 .2%)
Rate 7.7% 9.2% 8.8% 7.2% 6.0% 5.5% 5.8% (19,4%)

68
Further, the Berrien County MSA performance has been 15%-27% less robust than the
Kalamazoo MSA, and 76%-83% less than the Grand Rapids MSA, as shown in Exhibit
3-35 .
Exhibit 3-35
EmplQyment
% Chg.
1990 1991 1992 1993 1994 1995 1996 90-96
Grand Rapids-
Muskegon -
-Holland MSA
Labor Force ~91 , 600 494,000 506,000 519.600 534,600 538,700 554,100 1_.
- - 0°
Employment 461 , 100 454,500 467,300 490,700 510,600 516.800 532.200 15,..+" "
Cnemployment 30.500 39,500 38,700 28,900 24.000 21 ,800 21.900 (28 .::°0)
Rate 6.2% 8.0% 7.6% 5.6% 4.5% 4.1% ~.O % (35 ? o)
Kalamazoo-Battle
Creek MSA
Labor Force 217.700 216,700 219,500 223.100 226,000 223 , I 00 223.400 :: .6 0 0
Employment 203,400 200,400 204,800 211,200 215 ,200 212,900 213 ,900 _.-
"' -'0 °

Unemployment 14,300 16,300 14,700 11,900 10,800 10,200 9,500 (336°'0)

Rate 6.6% 7.5% 6.7% 5.3% 4.8% 4.6% 4.3% (3 . +.3 0 0)

Source: Michigan Employment Security Agency, Research and Statistics, Information and Reports
Section

As shown in Exhibit 3-36, the labor force and employment figures for the cities of St.
Joseph and Benton Harbor have changed very little between 1990 and 1996. S t. Joseph' s
labor force increased by 175 people, or 3.6%, while the number of jobs increased by the
same amount. The number of unemployed people in St. Joseph fell by 25 . The increase
in the labor force and in the number of jobs combined with the drop in the number of
unemployed resulted in a 20% improvement in the city's unemployment rate. St. Joseph
is essentially at full employment with an unemployment rate of 2%.

Benton Harbor' s labor force decreased by 100 people, or 2.5%. while the number of jobs
increased by the same amount. The number of unemployed people in Benton Harbor fell
by 200. The decrease in the labor force and the increase in the number of jobs. combined
\vith the drop in the number of unemployed, resulted in a 16% improvement in the city ' s
unemployment rate . However. with a 1996 unemployment rate of24%, more than four
times higher than the national. state, and county rates, Benton Harbor's chronically high
unemployment rate is disastrous.
Exhibit 3-;26
EmplQx ment
% Chg.
1990 1991 1992 1993 199'" 1995 1996 90-96
St. Joseph City
Labor Force 4.900 4,800 4,875 5.000 5,100 5.025 5.075 3.6° '0
Employment ~.800 4,650 4,750 4,875 5,000 4.950 4.975 3.6 0/0
L'nemployment 125 150 150 125 100 75 100 (20.0° '0)
Rate 2.5% 3.1% 3.0% 2.5 % 2.0% 1 . 5~/0 2. 0% (20.0%)
Benton Harbor City
Labor Force 3,925 4,125 4,125 3,975 3,875 3,750 3,825 (2.5 0/0)
Employment 2,800 2,700 2,750 2.850 2,925 2.875 2,900 3.5%
Unemployment 1.125 1,425 1,375 1, 150 950 850 925 (1 7.8%)
Rate 28.7% 34.3% 33.1% 28 .6(% 24.7% 23 . 1% 24.1% (16.0%)

69
The unemployment rate in the City of Benton Harbor has not dipped below 20% since the
1970's, and has soared to the mid to high 30% range during the early to mid 1980's and
again in the early 1990·s. Those figures do not count people who have given up looking
for a job.

The composition of the job market in Berrien County, as elsewhere in the midwest, has
shifted away from manufacturing toward low-skilled sales and service jobs, as shown in
Exhibit 3-37.
Exhibit 3-37
Demographics
BentQ[l HarbQr ;\,tSA
(Data in thQu~ands)
1990 1996 · % Chg.
1990 % ErnE 1991 1992 1993 1994 1995 1996 % ErnE 90-96
Employment 75.1 100.0% 72.9 74.2 76.4 78.4 77 .3 78 .0 100.0% 3.8~'0
Wage & Salary Emp. 67.8 90.2% 66.0 66 .6 67.6 70 .0 70.9 7 1.0 91 .0% ·U%
Goods Producing Indus. 23.7 31.5% 22.4 22 .0 21.8 22.8 23 .5 23 .2 29.7% (2. 1(%)
Construction and Mining 1.9 2.5% 1.8 1.9 1.8 2.2 2.1 2.2 2.7% 15 .8%
Manufacturing 21.8 29.0% 20 .6 20. 1 19.9 20.7 21.4 21.0 27.0% (3.6%)
Durable Goods 15.8 21.0% 14.9 14.5 14.5 15 . 1 15 .8 15 .6 20.0% ( 1.2%)
Nondurable Goods 6.0 8.0% 5.7 5.6 5.4 5.5 5.6 5.5 7.0% (8 .3%)
Service Producing Indus. 44.1 58.7% 43.6 44 .5 45 .8 47 .2 47.4 47.8 61.3% 8.4%
Private Service Indus. 35 .2 46.9% 34.7 35 .5 36 .8 38 .3 38 .6 38 .8 49.7% 10.2%
Transp. , Comm . & Util. 2.7 3.6% 2.7 2.8 2.8 2.9 3.0 2.9 3.7% 7.4%
Trade 14.3 19.0% 14.1 l·tO 14.6 15.4 15.6 15 .9 20.4% 11 .2%
Wholesale Trade 2.4 3.2% 2.3 2.0 2.3 2.4 2.4 2.5 3.2% 4.1%
Retail Trade 11.8 15.7% 11.8 11.8 12.3 13.0 13 .2 13.4 17.2% 13 .5%
Fin. Ins., Real Estate 2.7 3.6% 2.6 2.6 2.6 2.7 2.6 2.6 3.3% (3 .7%)
Private Services 15.6 20.8% 15.2 16.1 16.7 17.3 17.6 17.5 22.4% 12.2%
Government 8.9 11.8% 8.9 9.1 9.1 8.9 8.8 9.0 11 .5% 1.1%
Federal Government 0.5 0.6% 0.4 0.5 0.4 0.5 0.5 0.5 0.6% 0.0%
State Government 0.6 0.7% 0.6 0.5 0.5 0.5 0.6 0.6 0.7% 0.0%
Local Government 7.8 10.3% 7.9 8.1 8. 1 7.9 7.8 7. 9 10.1 % 1.3%

Note: Private Services includes Business, Auto. Health. Educational, Social and Other Services.
Source: Michigan Emplo: ment Security Agency, Research and Statistics, Information and Reports
Section

The 23.000 manufacturing jobs in the Benton Harbor MSA represented 27% of all jobs in
1996. down from 29% in 1990. Service producing industries went from 59% of all jobs
in 1990 to 61 % in 1996. Within the service sector. retail trade employment increased
13.5%, representing 17.2% of all jobs, and private services employment increased 12.2%,
with 22.4% of all jobs in 1996.

Employment levels directly impact the real estate market. An increasing employment
base indicates the potential for increased consumer spending. Increased income and
spending generate many benefits for any area including increased tax revenue (increasing
municipalities' ability to pay for services), increased employment (as demand for goods
and services increases, jobs are created), and stable or growing real estate markets (as an
increasing number of workers require more office, retail, and industrial space and more
residential units).

The opposite also holds true. A decreasing employment base can cause municipal
spending cutbacks or increases in taxes, reduced demand for goods and services, and
increasing vacancy rates in all sectors of the real estate market.

70
Based on the most recent employment trends, CPL believes that the St. Joseph/Benton
Harbor area employment base will grow very slowly, with very little positive impact on
the real estate market.
3. Economic Sectors

Berrien County's economic base is divided between manufacturing industries, which

represent approximately 30%, and service industries, which represent approximately 50%
of total County employment. The Government sector and self-employed individuals
account for the remaining 20% of the economic base.

The manufacturing sector is heavily dependent on metal working and machine related
industries, \vhich acc ount for almost 75% of all manufacturing jobs in the County.

The retail trade and service industries account for 35% and 45%, respectively, or 80% of
the County's non-manufacturing employment. Employment in wholesale trade. finance
and real estate, construction, and transportation, communications and utilities each
account for between 5% and 10% of the non-manufacturing employment total.

Tourism is one of the leading economic base industries in Berrien County due to its
location along the shores of Lake Michigan and proximity to the Chicago metropolitan
area. Visitors to the county bring thousands of dollars into its economy.

The impact of tourism on the county economy is evident. The county's expenditure-to-
income ratio in eating and drinking places is well above that in similar metropolitan
areas. Other positive indicators include increases in the room tax receipts from county
motels and other lodging places, the number of visitors to the county's state parks, and in
the seasonal traffic volume along the county's major roads.

The area offers many recreational opportunities, and several major festivals held
throughout the spring and summer, such as the Blossomtime Festival, the Krasl Art Fair,
the Venetian Festival. the Tri-State Regatta, and the Harbor Fest attract tens of thousands
of visitors annually.

Berrien County offers numerous golfing opportunities, as shoWTI in Exhibit 3-38.

Exhibit 3-38
Golf Courses

Point O'Woods Golf & Country Club 18 holes

(private)
Benton Harbor
Berrien Hills Country Club (private) 18 holes
Benton Harbor
Paw Paw Lake Golf Club 18 holes
Watervliet
Blossom Trails Golf Club 18 holes
Benton Harbor
Indian Hills Golf Course 27 holes
Eau Claire
Lake Michigan Golf Hills & Pro Shop 18 holes
Benton Harbor
The Oaks 18 holes
St. Joseph

71
Pebblewood Country Club 18 holes
Bridgman .
Pipestone Creek Golf & Tennis Club 18 holes
Eau Claire
Brookwood Golf Course 18 holes
Buchanan
Indian Lake Hills 27 holes
Pipestone Township
Par3 9 holes
Benton Charter Township
Orchard Hills Country Club 18 holes
Niles Township
Plym Park 9 holes
Niles
Point O'Woods 18 holes
Benton Charter Township
Signal Point Club 9 holes
Niles

Agricultural production is also a significant element in Berrien County's economy.

Berrien County is noted for its fruit crops, particularly apples, pears, peaches, berries, and
grapes. The Benton Harbor Fruit Market is one of the largest distribution outlets for fruit
produce in the world.

The majority of large employers in the County are unionized, while the majority of
smaller firms (less than 100 employers) are not. Past surveys have indicated that area
labor costs are very competitive with other regional and national manufacturing areas.

All-Phase Electric Supply Company has its national headquarters located in St. Joseph
Charter Township, the international headquarters Gast Manufacturing Corporation, an air
pump manufacturer, is in Benton Charter Township, and the national headquarters of
electronics retailer Heath Company is in Benton Harbor.

Whirlpool headquarters remain in the area, and the company' s Tech Center, which
provides 450 highly skilled jobs, is located in St. Joseph. All that remains of V/hirlpool' s
machining operation is the small Benton Harbor Division.

Several industries located in the area have relocated or closed operations. One recent
closing was Zenith Data Systems, a loss of over 600 jobs. Smaller spin-off business
services and suppliers to these large manufacturers continue to close.

Of the 191 employers in the County, 61 companies have less than 50 employees. 21 have
between 50 and 100 employees, 41 have between 100 and 200 employees, and 68
companies have more than 200 employees. The list of Berrien County's largest
employers includes retailers, as well as food-processing, transportation, consumer
products. education, telecommunications, healthcare. and city and county government
employees. as shown in Exhibit 3-39.

72
Exhibit 3-39
Berrien Count'· EmploHrs
200 or More Employees

No. of
CompanY Product Employees
Whirlpool Corporation Appliances 3,000
Lakeland Reg . Health Systems Healthcare 2,200
Mercv Memorial Medical Center Healthcare 1,800
Andrews University Education 1,700
Allied Chemical Auto parts 1,400
Indiana Michigan Power Co. Nuclear power 1,300
Leco Corporation Instructions, engineering & scientific 1,:200
American Electric Power Electric Utility 1,185
Allied Signal Braking Systems Auto & truck parts 1,000
Benton Harbor Public Schools Education 1,000
Berrien County County government 900
Zenith Data Systems Corp . Computers and equipment 800
Gast Manufacruring Corp . Compressors, pumps, motors 580
Niles Community Schools Education 550
Imperial Printing Company Printing 500
Meijer Inc. Retail trade 500
Pawating Hospital Healthcare 500
Tyler Refrigeration Corp. Refrigerated display cases 475
Modem Plastics Plastic products 460
Berrien Generai Hospital Healthcare 450
Atlantic Automotive Automotive interior trim components 400
Harding's Markets West Inc. Retail grocery 400
Wal-Mart Stores Retail trade 400
Weldun International Inc. Metalworking machinery 400
Wollin Products Inc. Plastic products 400
Beacon Servic~s Inc. Personnel supply services 350
Lake Michigan College Education 350
Simplicity Pattern Co., Inc. Dewing patterns 350
Curtice Bums Inc. Food processing 300
Lakeshore Public Schools Education 300
McDonalds Restaurant Restaurant 300
New' Products Corp. Foundries, aluminum 300
St. Joseph Public Schools Education 300
Whirlpool Financial Corp. Financial services 300
Shoreline Bank Banking 290
Hughes Plastics Inc. Molded- thermoplastics 280
Ausco Inc. Transportation equipment 250
Berrien County ISD Education 250
Berrien Springs Public Schools Education 250
Buchanan Community Schools Education 250
Coloma Community Schools Education 250
Electro Voice Inc. Audio equipment 250
K-Mart Corp. Retail trade 250
National Standard Co. Steel wire drawing 250
Peg Williamson Employment Personnel supply services 250
Scope Services Inc. Personnel supply services 250
United Fixtures Co. Office furniture 250
United Technologies Auto System Urethane steering wheels 250
Consumer Concrete Corp. Concrete/concrete products 240
D&W Foods Retail grocery 240
Joanna Corporation Custom interior wood louvered shutters 210
Adco Die Cast Corp. Die castings 200
All-Phase Electric Supply Electrical equipment wholesale 200

.. ..... . ,/
-,
73
 No. of
Company Product Employees
Brandvwine Public Schools Education 200
Burger King Restaurant 200
Clean America Corp. Building services 200
Community Hospital-Watervliet Healthcare 200
Corporate Staffing Resources Personnel supply services 200
Health Care at Home Plus Inc . Home healthcare services 200
J.c. Penney Co. Retail trade 200
Peoples State Bank St. Joseph Financial services 200
Pizza Hut Restaurant 200
Sassano Inc. Auto service 200
Stanley Smith Security Inc . Guard services 200
Wood Personnel Services Personnel supply services 200

Employment in the manufacturing sector in the Berrien County area is projected to

remain at or near current levels. Services and trade will show moderate growth.
Restructuring in the banking, healthcare, communications, and utilities industries may
affect the local economy, but only minimally due to the small concentration of
employment in each these sectors. Growth in the retail and service sectors, as well as in
the tourism subsector, may provide support for new development in the region.

E. SUMMARY

The area economy has diversitied away from the auto industry somewhat, which should partially
insulate it from volatile economic swings in the future. Overall, the trend of slow economic
grovvth is projected to continue. However, the continuation of a static business climate will
dampen the business and investment outlook over the long-term.

The W.E. Upjohn Institute identified the following key economic attributes important to
businesses when making capital expenditures decisions. These attributes, similar to those
identified by manufacturing executives in the annual corporate surveys published by Area
Development: Site and Facility Planning, include the availability of a qualified workforce; an
infrastructure capacity to support growth, including government solvency; availability of
industrial sites; a growing and diversified economy; a good quality of life including the level of
criminal activity; and the tax structure of the area.

Measured by these criteria and compared to other similar MSA' s, the Institute found few
strengths and many weaknesses in the Berrien County/St. Joseph/Benton Harbor area, as
highlighted below.

Strengths

• Since 1990. per capita income in Berrien County has improved relative to the average for
the comparison areas.

• For the past six years. employment growth in Berrien County's manufacturing sector has
exceeded the average of the comparison group

• Earnings in Berrien County's trade sector have grown faster than the comparison group ' s
average since 1991.

- ... -,j

74
 • According to the Berrien County's Michigan Employment Security Commission's
Employment Service rolls, there are nearly 1,000 individuals actively looking for work in
the broad field of machine trades. Of all individuals looking for machine trade positions
during a current 18 month period, 72% had a high school education or better, and over
40% had four or more years of experience.

• From the first quarter of 1991 to the first quarter of 1996, employment in Berrien
County ' s goods-producing sector increased 4% relative to the nation.

• Except for the City of Benton Harbor, the fiscal capacity of the local governmental units
in the Benton Harbor area, as measured by their expenditures to State Equalized Value
(SEV) ratio , is strong .

• The Benton Harbor area offers an excellent selection of industrial sites for new and
expanding businesses .

Weaknesses
• Berrien County's unemployment rate has remained above the average for the comparison
metropolitan areas.

• Berrien County ' s population growth from 1990 to 1995 lagged behind all but one of the
comparison metropolitan areas.

• Except in the tourism-related eating and drinking sector, Berrien County's retail industry
has been unable to retain as high of a percentage of the area' s income as its counterparts
in the other {:omparison metropolitan areas.

• Berrien County ' s small business sector (firms employing 20 or fewer workers) has been
less dynamic than in the comparison areas.

• The cost of living in Berrien County is slightly higher than in the comparison areas.

• The crime rate in Berrien County, both in an outside of the City of Benton Harbor, is
higher than the average for the comparison group of metropolitan areas.

• The tax structure, unemployment insurance costs, and workers ' compensation in
Michigan are not as competitive as in other states.

• Enrollment levels in several of Lake Michigan College's (LMC) machining technical

programs have declined in the past several years, including a 32.5% drop in electronics
technologies and a 23 .6% decline in Machine Tool Technology from 1991 to 1995.
Overall, enrollment a selected LMC technical programs having a manufacturing focus
increased 6.2% during the four-year period.

• Although growing slightly above the state's overall rate, the Benton Harbor area' s SEV
per capita remains below that of the state and for the rest of Berrien County.

• While unemployment rates have been dropping in the Benton Harbor area during· the past
three years, there remains a wide discrepancy between the lack of employment
opportunities facing the residents of Benton Harbor and those living in the area's other
governmental units.

75
Populations in the County, as well as in the cities of St. Joseph and Benton Harbor, declined
significantly over the past fifteen years and are not expected to change in the foreseeable future.
The county's total population fell 5.8% during the 1980's and is expected to inch up only 0.6%
during the 1990's.

National demographic trends and the aging of the baby-boomers are part of the reason for the
county ' s population decline during the 1980' s, however, the estimated drop during the 1990' s is
due largely to economic factors. According to national trends, more educated, highly skilled
workers have a higher propensity to move than less-educated, unskilled individuals. The
inability of the county to supply sufficient employment opportunities to keep and attract young
adults has negatively impacted the quality and quantity of its labor force.

Based on virtually all economic indicators, the area economy still lags badly behind the U.S.
recovery which began in 1993 . Job growth has been minimal in the area, and the City of Benton
Harbor has had chronic unemployment levels above 20% for more than 25 years.

The region's strengths include its location bet\veen Chicago and Detroit, its small but diverse
manufacturing base, its natural attractions and role as a tourist destination, and its potential as a
regional retail center.

The area's employment base averaged an anemic 0.3% annually for the last six years. Further
limiting the area's growth will be structural declines in manufacturing related to productivity
advances, as well as slow population and labor-force gains, and business costs, which can harm
the area's attractiveness to both future businesses and residents.

Services will remain the most active employment sector. Demographic changes in the age mix
of the population will generate some growth in health-related sectors. The 45-64 year old cohort
will be the fastest-growing age-group over the next 10 years. At the same time, changes in
staffing and other managerial strategies may increase employment in business service sectors
such as personnel supply and data processing. Meanwhile, social services should see additional
gro\\l1h, as more resources are directed towards job training activities and the aging population.

State and local government payrolls will expand moderately, due to the need to bridge the gap
between demand for public services and reduced federal spending.

Financial industry employment is expected to continue to decrease in the next few years. but
inwstment and securities businesses are likely to see some job grow1h, due to increased demand
by an aging population with increasing disposable income for financial planning and
management services.

Employment in the combined transportation. communications, and utilities sector will also
advance slowly over the next few years. Gains in transport-related sectors are expected to offset
job losses in utilities and communications due to industry-w"ide restructuring efforts.

Long term growth depends on the area's ability to attract new industries and residents. Without a
growing labor pool. there will be fewer and fewer opportunities to attract new businesses and
industries.

76
 SECTION IV: THE INDCSTRIAL. COMMERCIAL. AND RESIDENTIAL REAL ESTATE
MARKETS

A. THE INDUSTRIAL ~IARKET

The recovery in the L.S. industrial markets has advanced more quickly than the recovery' of the office
markets. Not only were industrials less overbuilt, but industrial revival in durables has stimulated
demand for assembly and distribution space for a wide variety of suppliers and subcontractors, at the
very same time that corporations are cutting middle management and banks are merging thousands of
jobs out of existence.

The U.S. has been reinvesting in its plant and equipment at a 5.0% compound rate since 1990,
increasing its share 1.8 percentage points as a component of the real GOP. This commitment to future
productivity is key to :\merica' s competitiveness in an increasingly global economy. Much of this
investment has been high-tech in nature, but as all manufacturing employs advanced technology like
numerically controlled machinery, precision robotics, and even bar-coded inventory tracking
throughout the production run. traditional industrial centers continue to playa role in manufacturing' s
revival.

There has been an exceptional recovery in American basic industry. Led by high technology
industries, but joined by traditional industries like automobiles. machine tools, and heavy equipment.
the recovery from the recession of the early 1990's has been carried by the durables manufacturing
sectors. Many of the criticisms leveled against U.S. corporations in the 1970's and 1980's - their focus
on short-term earnings rather than long-range investment; their inattention to quality, management' s
distance from the factory floor and from customer needs, and their lack of concerted response to
offshore challengers--have been addressed. As a nation, we are doing much better on all these fronts,
and industrial real estate is reaping the benefit.

The general return of capital to the real estate markets, after the liquidity drought earlier this decade.
has unquestionably been helped by the intermediation of funds in securitized investment vehicles.
Commercial banks now hold more than $700 billion in non-farm, non-residential mortgages, and
private mortgage conduit holdings have grown from $15 billion in 1992 to $51 billion in 1996.
Clearly, institutional investors and lenders are becoming more comfortable with new mortgage
commitments. Loan-to-value ratios were back up to almost 74%, and cap rates for industrial property
investments were dO\\TI 30 basis points, to 9.87%. Financing has clearly been available.

The tone and tenor of the national industrial market, in short, has become much more enthusiastic and
optimistic over the year. This property type has come a long way since the depths of 1992.

SIOR data on approximately 9.7 billion s.f. of industrial inventory in 124 U.S. markets in 1995, and
approximately lO.O billion s.f. of industrial inventory in 129 U.S. markets in 1996. indicates steadily
improving utilization of the nation's industrial inventory and a solid improvement in new construction
of light manufacturing. warehouse/distribution, and high tech/R&D facilities .

• ,','... '",j

77
Exhibit 4-1 provides a regional summary of U.S. industrial markets in 1995 and 1996.
Exhibit ·H
Regional Summaries--l".S. Industrial Markets

1995 Inventory Vacant Vacancy Construction Absorption

Region (MMs.f.) (MMs.f.) (%) (MMs.f.) (MMs.f.)
East i'Jorth Central 2.299.8 141.2 6.1% 27.7 59.0
East South Central 465.0 16.8 3.6% 5.5 18.7
Middle Atlantic 1.318.8 122.4 9.3% 4.9 16.6
Mountain 538.0 30.2 5.6% 12.5 26 .6
New England 225.3 27.3 12.1% 1.0 6.0
Pacific 1.992.6 169.7 8.5% 14.2 63.4
South Atlantic 1,265.8 112.3 8.9% 28.1 47.4
West North Central 659. 1 37 .3 5.7% 4.3 11.4
West South Central 941 .2 64.8 6.9% 10.2 25 .5
Totals 9.705.6 722.0 7.4% 108.4 274.6

1996
Region
East North Central 2,473.6 151.1 6.1% 31.9 70.0
East South Central 491.3 19.9 4. 1% 7.2 11.7
Middle Atlantic 1,412.8 137.5 9.7% 8.5 16.5
Mountain 582.6 33 .5 5.8% 16.0 24.4
New England 172.4 16.7 9.7% 0.7 4.2
Pacific 2,064.1 149.1 7.2% 15.5 45.5
South Atlantic ". 1,197.4 111.5 9.3% 25 .3 39. 1
West North Central 665.1 28. 1 4.2% 5.4 18.0
West South Central 965 .0 66.0 6.8% 18.3 19.4
Totals 10,024 .3 713.4 7.1% 128.8 248.8

source: SIOR

Nationally. absorption continued to outpace inventory increases in 1996. Although the difference in
total inventory between 1995 and 1996 was 318.7 million s.f., as shown in Exhibit 4-2. five new
markets repre'senting approximately 132.0 million s.f. were added to the SIOR survey.
Exhibit 4-2
Regional Industrial Markets
1995 - 1996 Change

Inventol!' Vacant Vacancy Construction Absorption

Region (MMs.f.) (MMs.f.) (%) (MMs.f.) (MMs.f.)
East ~orth Central 173 .8 9.9 0.0% 4.2 11.0
East South Central 26 .3 3.1 0.5% 1.7 (7.0)
Middle Atlantic 94.0 15.1 0.4% 3.6 (0.1 )
Mountain 44.6 3.3 0.2% 3.5 (2.2)
New England (52 .9) (10.6) (2.4%) (0.3) ( 1.8)
Pacific 71.5 (20.6) (1.3%) 1.3 ( 17.9)
South Atlantic (68.4) (0.8) 0.4% (2.8) (8 .3)
West North Central 6.0 (9.2) (1.5%) 1.1 6.6
West South Central 23 .8 l.2 (0.1%) 8. 1 (6 . 1)
Totals 318.7 (8.6) (0.3%) 20.4 (25.8)
".W

78
Overall vacancies declined by 8.6 million s.f. and the overall vacancy rate declined by 0.3%, from
7.4% to 7.1 % . The continued drop in the U.S. industrial property vacancy rate represents a four-year
vacancy rate improvement of 3.8 percentage points from 10.9% at the market bottom of 1992, in a
market survey that now encompasses over ten billion s.f. of space.

New construction activity increased 20.4 million s.f., or 18.4%, during 1996, to 128.5 million s.f.,
compared to 108.5 million s.f. in 1995 (a 22.8% increase over 1994), and 18.6 million s.f. in 1992.
The continued increase in development represented only a 1.3% inventory expansion. However,
absorption declined by 25.8 million s.f., or 10.8%, from 1995's 278 million s.f. Last year's gains in
occupancy were equal to 34.8% of the 713 million s.f. of space still available in the industrial markets.
dov.n from 39% in 1995.

Strong durables manufacturing performance played to the strength of the industrial Midwest in 1996.
The Midwest has experienced extraordinary absorption for warehouse facilities in geographic locations
having an ample supply of high cube space for manufacturers, distributors, and retailers to
accommodate the consumer demand for goods, and to provide lower-cost goods through greater
distribution efficiencies.

The seventeen markets covering the Great Lakes states from Ohio to Wisconsin, the East North Central
region, have the largest total inventory of the nine regions reported by the SIOR. The 2.5 billion s.f. of
industrial property in this region make up 24.7% of the national industrial stock.

Net absorption of 70 million s.f. in 1996, following the 59 million s.f. absorbed in 1995, kept the
regional vacancy rate at 6.1 %, \vell below the national norm. This absorption represented an 18.6%
increase over 1995, which was a 59% increase in absorption compared with 1994. During the three-
year span, approximately 150 million s.f. of transactions took place, an average of 12.5 million s.f. per
quarter.

About two-thirds of the nation' s industrial property stock is located in suburban areas, though a still
substantial 3.3 billion s.f. is located in the central cities. Higher land prices and problems of traffic
congestion in central areas constrain development opportunities. Central City vacancy rates increased
from 8.2% to 9.3% over the course of the year, while suburban vacancy dropped from 6.8% to 6.3%, as
sho\\TI in Exhibit 4-3.
Exhibit 4-3
U.S. Industrial Vacancy Rates

Central City Suburban

1989 7.9% 8. 1%
1990 9.5% 8.5%
1991 10.2% 10.0%
1991 1\.6% 10 .3° /0
1993 10.4% 9.9° /0
1994 9.2% -;".9 %
1995 8.2% 6.8%
1996 9.3% 6.3%

With suburban vacancy below 50 million s.f. nationally, and 1996 absorption for out-of-the CBD
markets at approximately 182 million s.f., suburban construction represented 79.4%, or 102 million
s.L compared to 87 million s.f. in 1995. The recovery of the construction sector is still mainly in
build-to-suits, but speculative development is underway in many markets and actively planned in many
more.

79
Several of the major midwest metropolitan industrial markets, Chicago, Cleveland, Detroit and
Milwaukee, as well as the secondary markets of Dayton, Fort Wayne, Grand Rapids, Lansing, and
South Bend, influence the St. JosephlBenton Harbor industrial market.

Exhibit 4-4 provides a two year picture of the activity in these markets. The Chicago MSA posted the
highest totals both for absorption and construction of all the East North Central Region submarkets in
1996, but Cleveland's absorption of 12.2 million s.f. and Detroit' s 7.6 million s.f. were notable signs of
the regional progress as well. Eight of the ten markets experienced significant decreases and Detroit
had vacancies increase. The amount of construction increased in most markets, as did absorption. All
but two of the markets had single digit vacancy rates, while the GarylHarnmondiEast Chicago and
Lansing markets had vacancy rates of 12.2% and 14.8% respectively.
Exhibit 4-4
Indu~trial Submarkets
1995 - 1996

l2.2.S
Market Area Inventory Vacant Space Vacancy Construction Absorption
Chicago,IL 7~O , 700,000 55 ,664,000 7.5% 7.797,000 19,536,000
Cleveland, OH 297,000,000 27,300,000 9.2% 3,220,000 4,450,000
Dayton,OH ~6 , 290,000 4,440,000 9.6% 750,000 350,000
Detroit, MI 196,437,706 10,593 ,614 5.4% N/A 9,771 ,581
Fort Wayne, IN 33 ,140,000 4,730,000 14.3% 325,000 570,000
Grand Rapids, MI 73.240,000 3,295 ,000 4.5% 2.000,000 1, 197,600
Gary-Hammond-East Chicago ~8.000 , 000 7,800,000 16.3% 200,000 1, 100,000
Lansing, MI ~ . OOO,OOO 645,000 16.1% N/A N/A
Milwaukee, WI 200,000,000 1,204,854 0.6% 350,000 4,295,146
South Bend, IN 52.750,000 1,000,000 1.9% N/A 2,500,000

1996
Chicago, IL 858 .814,000 58,478,000 6.8% 11.093 ,000 26,470,000
Cleveland. OH 303.050,000 2 1,136,000 7.0% 3,325,000 12,214,000
Day1on,OH ~ 7. 040.000 4,120,000 8.8% 600,000 1,070.000
Detroit, MI 206.199,304 12,762.390 6.2% 2.000,000 7.592,822
Fort Wayne. IN 33.140.000 2,000,000 6.0% 520,000 2.730 ,000
Grand Rapids, MI 75.000,000 3,000,000 4.0% 1.500,000 2.055,000
Gary-Hammond-East Chicago ~8.350 , 000 5,900,000 12.2% 375,000 2.250,000
Lansing, MI 3.366,196 498,015 14.8% 20,000 N/A
Milwaukee, WI 200,500.000 8,075 ,689 4.0% 520,000 2.744,311
South Bend. IN 56.600,000 900,000 1.5% 120,000 800,000

South Bend's vacancy rate of 1.5% and Grand Rapids ' 4. 0% vacancy rate are good indications of a
healthy industrial market in the area. Both markets have less than two years worth of available supply
and absorption has outpaced construction.

Sale and lease prices of industrial buildings and land held steady between 1995 and 1996, as shown in
Exhibit 4-5. Average building sales prices ranged from $15/s.f. to $28/s.f. in 1996, compared to
$17/s.f. to $27/s.f. in 1995, and the average sale price increased only $0.11 to $21.89/s.f. Average
industrial lease rates ranged from $2.60/s.f. to $3.70/s.f. in 1996, compared to $2.40/s.f. to $3.60/s.f. in
1995, and the overall average lease rate increased only $0.15/s.f., or 5%. Similarly, average land sale
prices increased $0.19/s.f. to 51.54/s.f. or $66,800/acre.
..• 'J
";/

80
Exhibit 4-5
Su!.2ur!.2an Midwest Industrial Mark!:ts
Land> 10
Buildings>
40,000 s.f. Acres
1995 Sale S/s.f. Lease Sis. f. Sale S/s.f.
Market Low High Low High Low High
Chicago,IL $23 .00 $36.00 $3 .60 $3 .80 S2.00 $3.50
Cleveland, OH $16.00 $26.00 $2 .60 $3.40 SI .OO S2 .50
Dayton.OH $11.00 S23 .00 S2 .00 $3 .00 SO .50 SO .75
Detroit, MI $25 .00 S45 .00 S3.50 S5 .00 S2 .00 S3 .25
Fort Wayne, IN S15 .00 $20.00 $1.75 S3 .50 SO.40 $0.50
Grand Rapids, MI $ 22.00 S29.00 $2 .65 $2 .95 Sl.l5 $1.45
Gary/Hammond E.Chicago $10 .00 $20.00 $2 .00 $3 .2 5 SO .80 SI.25
Lansing. MI N/A N/A $2.00 $4.50 SO .25 N/A
Milwaukee, WI $14 .00 $24.00 $2 .00 S3 .50 SO .25 $1.00
South Bend, IN $15 .00 $18.00 S2 .00 $2.80 $0.70 N/A
Averages $16.78 S26.78 $2.41 $3.57 $0.91 $1.78

1996
Market
Chicago,IL $17.00 $36.00 $2 .75 $5.00 $1 .25 $5 .00
Cleveland,OH $20 .00 S28 .00 $2 .75 $3 .65 $l.l0 $2 .70
Dayton,OH $ [ 1.00 $23.00 $2.00 $3 .25 SO .50 $1.50
Detroit, MI $10.00 $45.00 S3 .00 $4 .50 S2 .00 $4.00
Fort Wayne, IN $15 .00 S20.00 $2 .25 $2 .75 SO .60 N/A
Grand Rapids, ~fI S22.00 S29.00 $2.60 S3 .00 Sl.lO SI.45
GarylHammondiE.Chicago $[0 .00 $24.00 $2.00 S3 .75 SO.80 $1.25
Lansing, MI N/A N/A $3 .00 S4.50 N/A N/A
Milwaukee, WI $[5 .00 $35 .00 $3 . [0 $4.00 $0.50 $1.35
South Bend, IN $[6.00 $[8.00 $2.35 $2.50 $0.33 N/A
Averages $[5 . [ [ $28 .67 $2 .58 $3.69 SO .9[ $2.[6

Source: SIOR

The Berrien County industrial market is largely comprised of manufacturers and assemblers, and
manufacturing space makes up the majority of the County's industrial base.

Plenty of land is available for development in this relatively undeveloped industrial market.
Undeveloped sites ranging from a single acre to 820 acres, offering highway access, highway frontage
and room for expansion are available in Berrien County, at prices ranging from $1.00 per site in the
Urbandale Industrial Park to $7.500 per acre for sites located in industrial parks with immediate access
to 1-94 interchanges.

81
The County has fifteen major industrial parks, three classified as Certified Industrial Parks by the
Michigan Professional Industrial Development Association, as shown in Exhibit 4-6.
Exhibit 4-6
Berrien Count\, - Industrial rarks

Total
Name Location Acres $/Acre
Andrews Farm Industrial Park* Buchanan 52
Bad gco Industrial Park Watervliet Township 34
Cornerstone Industrial Park Benton Harbor 74 $5,000
Eau Claire Industrial Park Eau Claire 80
El isha Grav II Business Park Benton Harbor 91 $5,000
Gali en Industrial Park Galien 44
Napier Industrial Park Benton Township 109
Ni les Industrial Park* )Jiles 48
No rth of Main Industrial Park Benton Harbor 51 $2,000
Nve's Industrial Park St. Joseph Township 42
Oid Orchards Industrial Park Benton Township 58
Orchard Hill Industrial Park Watervliet Township 129
Pipestone Industrial Park Benton Township 278
St. Joseph Industrial Park St. Joseph 80
u rbandale Industrial Park* Benton Township 43 $1
County Total - Industrial Parks 1,196

Other Sites :
"~o rthstar" Site Benton Twsp ./Sodus 820 $7,500

*Certified
Source: Southwestern Michigan Commission

Several industrial parks are located in the St. JosephlBenton Harbor area. Cornerstone Industrial Park
is located between M -63 and 1-196 with frontage off of Red Arrow Highway on North Crystal A venue.
Southwest Michigan Regional Airport is adjacent to the property and the park has easy access to
airport, rail, port and interstate highways.

El isha Gray II Enterprise Park for Commerce and Technology is located on Paw Paw A venue within
one mile ofM-63. I-l96, and South\vest Michigan Regional Airport. The park is a designated
Renaissance Zone. The Whirlpool Media Center is located in the park, and a major manufacturer of
rolled steel ceiling splines is considering locating in the park.

The North of Main Industrial Park is located between Main Street, Paw Paw A venue, Klock Road and
the Paw Paw' River in Benton Harbor. It is an area of many older industrial and commercial buildings
\\ith easy access to the CSX railroad facility , port facilities, Southwest Michigan Regional Airport, 1-
9-+ and to l ;S-3 1133. A portion of the area is a designated Renaissance Zone.

C rbandale Industrial Park is located in and owned by Benton Charter Township. It is adj acent to
Southwest Michigan Regional Airport. between Territorial Avenue and Business Route 1-94. and has
good access to 1-94.

The 820 acre "North Star" Development Site, which was an assemblage of smaller parcels located in
Benton Charter Township and Sodus offers the opportunity for a "greenfield" development for a large
industrial concern.

The StJ Joseph Industrial Park. located on Red Arrow Highway, is almost full y built-out. The park has
excellent access to 1-94, several sites are rail served, and industrial space is available for lease or sale.
','''1

82
Located throughout the region are numerous fully-serviced individual industrial sites, as well as vacant
and shell buildings of varying sizes.

Exhibit 4-7 identifies the number of parcels available ranging in size from less than 10 acres to more
than 40 acres.

Exhibit 4-7
Number of Parcels Available For Industrial Development
By Parcel Size

Size # Parcels 0/ 0

< 10 acres 51 37. 8%

10--Wacres 62 45 .9%
>40 acres 22 16.3%
Totals 135 100.0%

Source: Cornerstone Alliance

Industrially zoned properties represent approximately 22% of Berrien County ' s tax base, commercially
zoned properties represent 10%, uses such as golf courses, camp grounds, and other miscellaneous uses
represent another 10%, agricultural properties are 4%, and residentially zoned properties make up more
than half, 54%, of the County' s property tax base.

Discussions with local appraisers, real estate brokers, owners, and local and County assessment and
economic development professionals confirmed the lack of industrial market activity in the St.
JosephlBenton Harbor area.

More than 1.0 million square feet of good industrial space is available for sale or lease in the greater St.
JosephlBenton Harbor area. This does not include buildings such as the Superior Steel or Malleable
Steel properties, which represent almost 200,000 s.f., nor the older industrial buildings in the North of
Main area. The movement of commercial and industrial activities away from the city has left many
buildings vacated and abandoned.

Good industrial space is available for lease at annual rates ranging from $0.60/s.f. , triple net to
$2 .75/s.f., triple net. Recent activity has centered around the Zenith Data Systems and Cro\\-TI Cork &
Seal buildings, which together represent more than 680,000 s.f. of total building space, and more than
500.000 s.f. of available space. Two recent leases at the Zenith building are summarized in
Exhibit 4-8 .

Exhibit ~-8
Industrial Buildings Leasing Activity

Address Date Activitv Company Term Type Rate

Zenith Building 1997 40K s.f. Eagle Technologies 3 yr. Whse S\.75/s.f. 3N
1997 25K s.1'. Design Fulfillment 3 yr. Whse S\.75/s.f. 3N

83
Nearly 1.0 million s.f. of industrial or commercial/industrial space is available for sale, with asking
prices ranging from S3 .04/s.f. for an older 115,000 s.f. industrial building to $54.96/s.f. for a newer
office and light industrial facility, as shown in Exhibit 4-9.

Exhibit 4-9
Available Industrial Buildings

Asking
Address Bldg. ~ame Size(s.f.) Acres Price S/s.f. Comments
Hilltop Road Ze:nith Bldg 532.000 29.7 57.500,000 51~ . 09
No rth oo.,lain 115.000 9.2 $350,000 53 .04 50%-60% leased
Riverview Dr. He:ath Bldg. 90.972 I 1.1 55.000,000 55~ .9 6 fully leased
Zoschke: Rd. Saluto Pizza 31,200 75 5500,000 516.0 2 fully leased
Lake:shore Dr. Crow n. Cork 148.400 19.2 Nego. l'i e:go. lc:asing 5060-S 1.00/5. f.
Ri ve:rv iew Dr. Honda Bldg. 16,000 4 .5 $750,000 $46.88
Main St. Kitchen 'vlart ~5 , 000 $285 ,000 56.33 5125 .000 IRS Lien
Britain Ave: . 10.000 535 ,000 53.50
Britain Ave. Chevrolc:t Dlr. 33 ,000 5.0 5300,000 59 .09
Main St. Ideal Plumb. 60,000 5300.000 55 .00 part leased
Rivervie:w Dr. 108,000 5.7 51 ,495,000 $13 .74

There have been no recent sales of existing industrial buildings larger than 20,000 s.f. Pending sales of
t\\lO older industrial buildings. both greater than 100,000 s.f., indicate sale values of $1. 73/s.f. to
$5.00/s.f.. as shown in Exhibit 4-10.

Exhibit 4-10
Industrial Buildings Sales Activitv

Sale
Address Bldg. Name Size(s.f.) Acres Price $/s.f. Comments
Paw Paw Avenue ALRECO 114.000 64 5300,000 5 I. 73 5 I.l M Sale includes Mach.
& Equip.
Empire St. Madar I ~O.OOO 13 $700.000 55. 00 S2.5M Sale includes Mach.
& Equip.

There have been very few industrial land sales in the St. Joseph/Benton Harbor area for more than three
years. Only two sales of parcels greater than 10 acres have occurred, and none since 1994, as shown in
Exhibit 4-11 .

Exhibit 4-11
Industrial Land Activitv

Address Date Activitv Company Price S/Acre

Cornerstone Industrial 1993 20 acres Atlantic Automotive SIOO.OOO $5,000
Cornerstone Industrial 1994 20 acres Dawson Mfg. SIOO.OOO $5 ,000
Elisha Gray II Park 1994 5 acres Whirlpool S25 ,OOO $5,000

...... ·.,l
I

84
Recent activity in the local market is encouraging. Several companies, representing 1.2 million s.f. of
required industrial space, are currently considering locations in the St. JosephlBenton Harbor area, as
shown in Exhibit 4-12.
Exhibit -'-12
Current Activitv

Requirement T\'pe/# ,Jobs Use Companv Activity Status

800 Acres In dustrial Foreign .-\uto Considering North Star Site, Kentucky, Iowa Indiana. Pend ing
Mfg.
10 Acres Industriall7S Cold rolled steel Worthington Steel Considering Elisha Gray ll- 10 acres @ S7.5GO/acre Negctiating
Infrastructure (approx. S450,OOO) to be paid by City
and State.
150,000 sf Industrial/IS O Paper ; ;mverting Oakbrook/Nu Way Considering Crown. Cork- $ . SO,S.60 . S . 7S /sf.]~ thru Nego tiating
Paper 9/30/2000, then SI .OO/sf. SI . IS/sf 5 year ea.
Zenith bldgs.- SI .2S/sf 3yr SI .75/sf bal., 3N -CA:-.t
S.50/s f
100,000 sf Industrial Tissue ;onverting Great Lakes Tissue Considering B.H. Engineering - see notes # I Negcti:lting
8-10 Acres Residential Elderly housing Chicago Developer Considering Edgewater for high end, market rate Pending
elderly and assisted care facility
-10 Acres Residential Residential rental Developer Agreement to purchase 40 acres/approx. S40.000 in Negotiating
Benton Twsp . for 80 attached townhouse style units
21S,OOO sf Industrial Furniture Amerwood Requested quote for Zenith Building Pending
distributor
110.000 sf Commercial Computer systems Digital Interface Considering Zenith Building office area - S3 .25/st: 3N Pending
office Systems
600,000 sf Industrial Gypsum USG Considering Graham Avenue Pending
wallboard
IS.OOO s.f. Commercial Office Whirlpool Considering Zenith Bldg. office area Pending

I. Cornerstone is currently negotiating to purchase 107,000 sfJ7 Acres $400,000-$450.000. will lease to GL T @S.90/sf, 3N 10 yr term.
includes 15 year bonded roof @ $216.000 to be paid by Cornerstone Alliance.

B. THE COMMERCIAL MARKET

1. Office

Construction data from the U.S. Department of Commerce begin to sketch the broad outlines of
the national office market revival. Restricted development enabled many markets to reduce the
considerable vacancies of the early nineties. At the same time. the value of new office
construction put in place has exceeded $20 billion (measured in constant 1992 dollars) in each
of the past several years. and many markets are now seeing cranes on the horizon for the first
time in this decade.

Office is actually a "hot property type" as pension funds , REIT's and life insurers are back in
the market, developers are building new office product, and leasing and investment brokers are
busy.

Landauer's monitoring of transaction volume indicates that investors are committing more than
$1 billion each quarter to office properties across the U.S. Commercial office buildings are
capturing the highest share ofreal estate investment dollars, approximately 35% of total
property sales recorded nationally in the first three quarters of 1996. Foreign purchasers have
returned to the market. real estate investment trusts and limited partnerships have committed
substantial volumes of capital, and small, private investors have matched the big players in
aggregate sales price volume by completing hundreds of moderate-sized transactions.

85
On a nationwide scale. the drivers of absorption reflect key employment sectors. White collar
employment was up by 1.8 million jobs during 1996, with managerial and professional workers
accounting for most or" the gains. Middle-and-upper management jobs, the targets of previous
downsizing efforts, are now being restaffed. In fact, corporations are recalling as many as 20%
of their laid-off staffs to exactly the same jobs that were eliminated in efforts to cut costs and
boost stock prices. Some have been rehired while others are now " independent contractors"
without corporate benefits. In terms of office space demand, the results are the same. Layoffs
did not necessarily equate to vacant space.

A number of office-intensive industries showed strong job growth in 1996. Despite forecasts of
several years ago which predicted that technological advances would be a negative force on
office demand. communications companies added 59,000 jobs and computer sen'ices firms
added 120,000 positions. Over the past 12 months, commercial banks added 10.000 jobs,
insurance employment is up 20,000, and the securities & commodities sector has generated
46,000 jobs .. Real estate itself has added 45,000 positions (not counting construction jobs). and
engineering and architectural firms added 31,000 new jobs.

The national office vacancy rate dropped below 13% for the first time in more than a decade .
The 11.6% vacancy rate for 1996 reflects a 2.1 percentage point drop over 1995's 13.8% office
vacancy rate.

Four of the eight regions of the country had single-digit vacancy rates, led by the East South
Central's and South Atlantic ' s 9.0% availability rate, as shown in Exhibit 4-13.
Exhibit 4-13
Regional Summaries - C.S. Office Markets

1995 Inventory Vacant Vacancy Construction Absorption

Region (~l"ls.f.) (MMs.f.) (%) (MMs.f.) (MMs.f.)
East North Central ~56.3 49.7 13.9% 3.2 7.3
East South Central 33.9 8.0 9.5% 1.7 2.9
Middle Atlantic -63.1 115.2 15 .1% 1.1 3.3
Mountain 129 .7 11.7 9.0% 2.9 .+.2
New England 175.3 24.0 13 .7% 0.1 2.8
Pacific ~66 . 9 63...1 13.6% 1.7 11.8
South Atlantic 545 .7 65 .3 12.0% 8. 1 13 .2
West North Central 151.2 16.8 11.1% 0.4 0.5
West South Central ~69.0 67 .0 18.2% 0.2 4 .5
Total ~O41.1 421 . 1 13.8% 19.4 50.5
1996
Region
East North Central 379.1 38.9 10.3% 2.7 4.0
East South Central 94.1 8.4 9.0% 2.8 3.7
Middle Atlantic 737.7 110.8 14.1% 2.4 13 .7
Mountain 148.9 13 .0 9.3% 4. 1 4. 1
New England 135.2 19.0 10.2% 1.2 4 .0
Pacific 402.0 50.4 12.5% 2.9 9.3
South Atlantic 745.6 66.9 9.0% 10.3 20.4
West North Central 116.0 11.2 9.7% 1.1 7.8
West South Central 379.3 55.9 14.7% 1.0 16.0
., ... I
Total 3237.9 374:5 11.6% 28 .5 83.1

86
As shown in Exhibit 4-13, the industrial heartland in the Great Lakes states benefited from the
excellent performance of the U.S. auto industry over the past several years, as well as the
generally strong activity in the durable goods manufacturing sector. SIOR figures show that
1996 vacancy rates for the sixteen markets reporting in the East North Central region this year
fell from 1995's 13.9% level to a current 10.3%. Net absorption was nearly 4,000.000 s.f., with
only 2.7 million s.f. of new supply added to the submarket.

Moreover, the gains in occupancy were achieved even as reported construction activity rose
once again. Perhaps the best measure of revival is the construction total. Most of this is "build-
to-suit" space, commitments on the part of America's business to modern, more productive
facilities even as a body of older, less expensive space remains on the market. Office
development jumped to 28 .5 million s.f., up from 19.4 million s.f. in 1995 and less than 14
million s.f. in 1994. Net absorption, defined as the change in occupied office space from period
to period. increased to 83.1 million s.L 65% higher than 1995's net absorption of 50.3 million
s.f.

All major market segments, CBD and suburban, Class "A" and Class "B" properties
participated in the vacancy decline. All four categories have sustained a pattern of occupancy
gains since the national office market began its turn in 1991-1992. Prime space in the suburbs
dropped to 8.8%, down from 11.1 % twelve months ago . Top quality downtown offices also
registered a major availability decline. with an 11.1 % vacancy in September 1996. compared
with 13 .0% in the previous year.

However, double-digit vacancies at the national level are still too high. They represent a 375
million s.f. block of un utilized space, an enormous amount of unproductive capital for the U.S.
investment community. But the improvement is real and its extent significant.

The Chicago metro area made great strides over the year, especially in its suburban markets.
Detroit is riding the boom in its key industry, with the GM move to downtown's Renaissance
Center. an example of how even manufacturing sector forces can affect office property markets .
Dayton and Toledo, hO\\'ever, were struggling with negative net absorption and \'acancies in the
teens.

As shown in Exhibit 4-1-+, many of the midwest office markets improved dramatically between
1995 and 1996, including Chicago, Fort Wayne, Grand Rapids, Lansing and South Bend.
Chicago's vacancy rate dropped more than 30% to 9.5%, Fort Wayne's dropped 13% to 10.8%.
Grand Rapids' dropped -+0% to 8.0%, Lansing's dropped 13% to 9.5%. and South Bend's
dropped 17% to 7.7%. Cleveland, Day10n, Detroit all have continuing softness in their office
markets, with vacancy rates still above 13 %, but all of the markets have shown improvement.
Exhibit -t-14
Class A Midw!:st QfIi!;e Market

1995 Vacant
Market Area Inventory Space Vacancv Construction Absorption
Chicago,IL 145,768.768 21,872,942 15 .0% 221,456 1.687,570
Cleveland,OH 35,719.8.t1 5,463.178 15 .3% 0 1.385,714
Dayton.OH 11,631.924 1,503,649 12.9% 20,000 277,893
Detroit, MI 56,299.220 8,266,479 14.7% 98,548 1.849,144
Fort Wayne, TN 5,400.800 659,863 12.2% 0 (35,243)
Grand Rapids. MI 8,347.600 1,569,700 18.8% 0 571,300
Gary-Hammond-East Chicago. IN 3,043.000 175,050 5.8% 30,000 87,750
Lansing, MI 5,608A96 605,652 10.8% 180.000 (548.356)
South Bend. IN 3,750.000 340,000 9.1° ~ 0 55,000

87
1996 Vacant
Market Area Inventor~ S~ace Vacanc~ Construction Absor~tion
Chicago, IL 203 ,868,947 19,440,257 9.5% 300,000 1.297,256
Cleveland, OH 35,719,841 5,135,963 14.4% 263 ,000 327,215
Dayton.OH 11.651.924 1,570.515 13.5 ~/o· 0 (-l6 ,866)
Detroit, MI 13 ,708,088 1,802,962 13 .2% 0 1148,071)
Fort Wayne. IN 5,400 ,800 584,699 10.S% 0 75 , 164
Grand Rapids, MI 3,093 ,000 709,000 8.0% 203 ,000 81 ,800
Gary-Hammond-East Chicago, IN 8,892,900 170,700 5.5% 35 ,000 54,350
Lansing, MI 6,047,419 571 ,801 9.5% 220,000 -l72,774
South Bend, IN 3,955,000 306,000 7.7% 35 ,000 239,000

However, absorption is declining in most of the markets, with the exception of Fort Wayne.
which experienced negative absorption in 1995 and only modest absorption in 1996; South -
Bend, which had absorption equaling almost 2/3rds of the available space in 1996; and Lansing.
which had a dramatic turnaround from 1995's negative absorption of 548,356 s.f. to 1996 's
positive absorption of 1,021 ,130 s.f., as shown in Exhibit 4-15.

Six of the nine markets reported modest increases in construction, suggesting further
confidence in the local office markets.
Exh ibit 4-15
Midwest Office Markets
Changes: 1995-1996
Vacant
Market Area Inventory S~ace Vacancv Construction Absor~tion
Chicago,IL 58, 100, 179 (2,432,685) (5.5%) 78,544 (390.314)
Cleveland, OH (327,215) (0.9%) 263,000 (1 ,058.-l99)
Dayton,OH _ 20,000 66,866 0.6% (20,000) (32-l .759)
Detroit, MY . (42,591 , 132) (6,463 ,517) (1.5%) (98 ,548) (1 ,997,115)
Fort Wayne. IN (75 , 164) (1.4%) 110.407
Grand Rapids. MI (5,254,600) (860,700) (10 .8%) 203 ,000 (489.500)
Gary-Hammond-East Chicago, IN 5,849,900 (4,350) (0.3%) 5,000 (33.-l00)
Lansing, MI 438 ,923 (33 ,S51) (1.3 %) 40,000 1.021.130
South Bend, IN 205 ,000 (34,000) ( 1.4%) 35,000 IS-l.OOO

Office building sale and lease prices have improved as well. Lease rates range from $12 .00/s.f.
in Grand Rapids to $26.00/s.f. in Chicago, and sale prices range from $60 .00/s.f. in Fort Wayne
to $175.00/s.f. in Chicago, as shown in Exhibit 4-16.
Exhibit 4-16
Class A Midwest Office ;\"farket
Buildings Larger Than 40,000 s.f.

1996 Sale S/s.f. Lease Si s. f.

Market Low High Low High
Ch icago, IL $115 .00 $175 .00 $22.00 $26.00
Cleveland,OH 565 .00 511 2.00 $15.00 $22 .00
Dayton,OH N/A N/A $14.00 $19 .25
Detroit, MI * $ 65 .00 $139.00 $18 .00 $23 .50
Fort Wayne, IN 5 60.00 5 90.00 $13 .00 $16.00
Gary/HammondlE.Chicago 575.00 $120.00 $13 .00 $18 .00
Grand Rapids, MI $ 65 .00 $120.00 $12.00 $17 .25
Lansing, MI N/A N/A $14.00 $18 .00
South Bend, IN N /A N /A $15.50 $IS .50

* eBD Only •••• j

88
Demand for new commercial and industrial land buildings is inseparable from new job creation.
Historic job growth patterns in the area and projected growth in the future are used as measures
of future demands, as office space demand is a function of job growth as well as the supply of
office space a\·ailable in the market area. The Abonmarche Group conducted a study in 1989
which forecast office space demand from 1989 through 1995 . Select future employment
sectors were analyzed to predict the demand for office space.

Abonmarche looked at the Transportation, Wholesale, FIRE, and Private Services subsectors.
and projected 300-1 ,700 new jobs in those subsectors in Berrien County between 1989 and
1995. Abonmarche then projected new office space demand of20,000 s.f. to 60,000 s.f.
annually based on 300-400 s.f.lnew employee.

Actually, between 1990 and 1995,4,800 new jobs were lost in those subsectors, as shown in '
Section III, v;hich would have translated to excess office space in those subsectors.

However, those subsectors do not reflect total net job growth of 3,400 for all private service
industries, including those lost in the selected subsectors. Retail trade generated almost 1,500
jobs countywide, which creates little demand for new· office space, leaving 1,900 new jobs
generating office space needs. This translates to 570,000 s.f. - 760,000 s.f. of new office space
demand for all of Berrien County, or 100,000 s.f. - 150,000 s.f. annually.

Clearly, the local area has not benefited from the county's job growth. Many existing buildings
are currently underutilized or vacant in and around the St. Joseph/Benton Harbor Main Street
corridor, most of which are older rehabilitated buildings. No new office space has been
constructed in the immediate area during the past year.

Office leases in the area range from $6.00/s.f. to $14.00/s.f. plus common area charges. The
minimal demand for office space and the competition for the few new office users that exist has
kept lease rates low by comparison to other metropolitan areas. The Social Security
Administration recently solicited proposals for a new 12,000 s.f. office building and numerous
competing responses were received. Private developers competed with non-profit economic
development organizations to get this prospect.

2. Retail

Several changes are taking place in the national retail industry. Among the primary reasons are
the spending and saving habits of consumers. Retail analysts suggest that previously high retail
activity was due, in part. to consumer access to cash through mortgage refinancings which
occurred ben.veen 1992 and 1995. Individual credit card debt is at an all-time high, with
average balances of $4.000. Americans are saving an average of only 4% of their income, and
their incomes are growing at or near the level of inflation. As a result, retail market activity is
projected to decline through 1997, with increasing vacancies and decreasing absorption.

For several years, a substantial amount of retail spending by area residents has been done in
Kalamazoo and South Bend. In addition, other market studies have indicated shoppers frequent
Chicago and other metropolitan areas seeking purchases of more upscale items than typically
found at merchants in the St. JosephiBenton Harbor area.

The reasons that customers shop outside of the trade area are the larger selection of
merchandise available. the number of stores available. the quality of merchandise available, and
prices. The preferred place for shopping is a shopping mall or discount center.

Real Estate .-\dvisory Services Inc. (REASI) conducted a Retail Market Analysis to determine
the amount of spending potential within the local retail trade area which is being spent outside

89
the trade area, termed "retail spending leakage". The final report, issued in November 1992,
found that the primary geographic area served by the St. Joseph/Benton Harbor retail trade are
includes Benton Harbor, St. Joseph, Berrien Springs, Coloma. Watervliet and Stevensville.
while the secondary trade area draws from an area which includes South Haven. Dowagiac.
Niles, Buchanan and Sa\vyer.

A significant number of shoppers frequent the downtown shopping areas from out-of-region
and out-of-state locations. The St. Joseph downtown area indicates 30% of its patronage
originating from this group of shoppers, as opposed to 7% for the trade area as a whole.

Do\\ntown Benton Harbor serves the smallest trade area. The retail services are locally
orientated and desig ned to provide goods and services to residents and workers in the
immediate area.

Downtown St. Joseph serves the largest trade area, larger even than that served by Orchards
Mall and Fairplain Plaza, due to customers from out-of-state and from the larger geographic
area. St. Joseph serves as the primary restaurant, recreational shopping district and the tourist
entertainment center of the metropolitan area.

The Orchards Mall area functions as the regional shopping center. The geographic trade area
reflects the midpoint of travel time to competing regional shopping centers located in
surrounding metropolitan population centers such as Kalamazoo, Grand Rapids. and South
Bend.

Several studies were conducted to determine the number of households residing within each of
the trade areas, their annual incomes and spending patterns. Additionally, estimates to 1996
were made to determine the anticipated growth of households in the trade area.

There were 62,066 households in the trade area in 1992, 36,045 in the primary and 26,021 in
the secondary areas ..-\ 5% growth was predicted between 1992 and 1996, resulting in 65.395
households in 1996. In 1992, 29% or 18,000, of the households had average annual incomes in
excess of $40.000, which was projected to increase by 37%, to 24,000 households in 1996.

The average household in the trade area annually spends $29.341 , $4,396 less than the national
average spending panern, in 1992 dollars . The difference in spending between the local trade
area and the national average was assumed to be spent outside the trade area and represents the
retail spending leakage.

Approximately 43% of total personal income is spent on goods and services in the trade area.
This is 8% greater than the state average, but within the expected range of 33% to 50%. Total
spending potential equaled $1.8 billion and the estimated leakage totaled $272.8 million in
1992. These were projected to increase to $2.3 billion and 5287.4 million respectively by 1996.

The leakage in 1992 amounted to approximately 13% of the total amount of spending potential
within the trade area.

The forecasts of future sales potential did not consider potential expansion of the trade area
beyond the current defined geographic boundary resulting from the creation of a "critical mass"
of retailers in one location resulting in extended retail drawing power in the future.
'"

Most area retail stores are slightly larger than the comparative midwest store size. The larger
store size and lower sales generation rates are related and in part explain the lower capture rate· ..
for the overall size of the total shopping area.

90
The shopping areas studied contain 4,016,944 s.f. of commercial and office space, of which
only 10.6% was vacant. as shown in Exhibit 4-17. Vacancy within various shopping areas
ranged from 2% in St. Joseph to 32% in the Fairplain Plaza/M-139 shopping area (now
virtually 100% vacant ).
Exhibit 4-17
Shopping Area Capture Rate Analysis

Benton Fairplain Orchard

Sho[![!ing Area Harbor Plaza Mall St. Jose[!h Trade Area
Total Number o f
Businesses 112 54 292 210 668
Commercial S.F. 358,905 240,711 1,693 ,034 440,665 2,733 .315
Office S.F. 320,580 25,704 112,944 399, 181 858.409
Vacant S.F. 119,823 123 ,835 164,602 16,960 425.220
Total S.F. 799,308 390,250 1,970,580 856,806 4,016.944
% Vacancy Rate 15.0% 31.7% 8.4% 2% 10.6%
$ Sales Captured (OOO ' s) $36,255 45,977 $191 ,067 33 ,066 $306.365
% Sales Captured in Trade .-\rea 11 .83% 15 .01% 62.37% 10.79% 100.0%
% Trade Area
Capture Of Sales Potential 2.83% 3.59% 14.91 % 2.58% 23 .90%
Source: REASI Field Survey, November 1992

Based on REASI's analysis and the amount of available building space , the amount of
spending captured in the shopping areas studied was estimated at $306 million, or 24% of the
sales potential available in the total trade area. (It should be remembered that the shopping
areas studied are only a portion of the available shopping space within the St. Joseph/Benton
Harbor area. Other smaller shopping districts, free-standing stores, and other communities
located within the trade area account for a substantial portion of the remainder of the retail
spending of the trade area households) .

Several conclusions were drawn. Retail sales account for approximately 43% of the total
personal income within the trade area. Total personal income was projected to grow at an
average annual rate of 2.2% per year during the period of 1992 through 1996. A larger
proportion of total personal income will be spent for selected retail goods and services in the
future due to changes in the composition of the population, households and their incomes. This
will occur due to the increased number of higher income households expected to reside in the
trade area in the future.

Increased spending is forecast to occur for the following store groups : general merchandise,
auto dealers & auto supplies, apparel & accessories, furniture & home furnishings , and
miscellaneous retail stores.

REASI found insufficient advertisement and promotion of the St. Joseph/Benton Harbor as a
shopping destination to markets outside of the trade area; negative perceptions of the shopper' s
safety in the trade area: insufficient numbers of retailers to create the "critical mass" of stores
necessary to draw customers to specific shopping locations ; and the existing shopping areas
lack definition as shopping destinations.

The REASI retail market study made specific recommendations designed to increase the
amount of retail spending potential captured within the shopping areas.

A Central Retail Council (CRC) representing the retail shopping districts was recommended to
coordinate and implement area-wide retail enhancement programs, as well as new local
" neighborhood" retail associations. The CRC would link the promotional efforts together into
a regional shopping area with more than 1,200,000 s.C allowing greater drawing power.

91
Programs recommended by REASI also included external advertising and promotion,
community signage program, local "neighborhood" autonomy and programs, improved 1-

communications within the retail community, a downtown development coordination council.

small business assistance service, and retail businesses recruitment.

Few of these recommendations have been successfully implemented. The only growth has
occurred in the Orchards Mall area, which has been partially offset by the decline at Fairplains
Plaza. If the amount of sales within the area can be increased, the financial viability of existing
businesses and shopping districts will improve. Further, increased sales can be used to recruit
additional retailers to specific shopping areas to capture additional retail spending and create
new job opportunities and investments in the St. Joseph/Benton Harbor area.

Recent retail activity has centered around the Orchards Mall area. Target stores has commined
to locating a 110,000 s.f. store, creating nearly 600 new jobs, between the Fairplain Plaza and
Orchards Mall. contingent upon local funding of a roadway which would provide access from
the Mall area to the Plaza area. Fairplain Plaza, meanwhile, is essentially vacant, awaiting
complete demolition and/or redevelopment.

Retail space in the St. Joseph/Benton Harbor area ranges from $8.50/s.f. to $1 O.OO/s.f. on a
triple net basis. Rates in the downtown areas are lower, while those in the Orchards MalllRoute
1-94 area are higher. Several retail buildings on State Street in St. Joseph, the retail shopping
district for the downto\'vTI area, are for sale. Asking prices range from $31.20/s.f. for the 17.600
s.L at 207 State Street to $75 .00/s.f. for the 11,000 s.f. building located at 306 State Street.

3. Commercial Port

As Michigan' s second largest river system, the St. Joseph River has provided a natural highway
for transporting settlers. goods, and industry to and from the Benton Harborl St. Joseph area.
and because of its proximity to Chicago and the Mississippi River Valley, the St. Joseph Riwr
Harbor became a prominent lakeport in the 19th Century.

The St. Joseph River Harbor was the center of a varied and colorful lake trade. Coal and
building materials were active. The port had a special role for the crosslake passenger trade and
was ideal for the short day cruise on Lake Michigan for the many luxury passenger ships based
at Chicago . The port was active in the fruit trade, in fisheries, and in other kinds of lake traffic .

In recent years. the role of lakeports began to diminish. Shipping services became consolidated
in the larger ports of Chicago and Detroit, while smaller lakeports serviced localized needs of a
few enterprises.

Since 1987. the St. Joseph River Harbor experienced a peak in tonnage of 694,494 net tons in
199 ..L compared to the low of461,216 tons in 1989. The port's all-time low was in 1975, \vhen
only 244.963 tons were received.

92
Exhibit 4-18 details tonnage from 1987 to the present.
Exhibit 4-18
St. JQSellb River Harbor Activit):
ImllQrt CQmmQditv in Ions

Limestone, Sand,
Gravel, Stone,
Year Aggregate Cement Salt Total

1987 322A77 122,186 55 ,340 480,003

1988 28-L606 132,884 91,217 517,761
1989 238.226 143 ,000 68 ,998 461 ,216
1990 24 7.255 170,000 64,713 514,563
1991 18 7.72 7 220,717 61 ,809 470,253
1992 305 .038 222,115 43 ,541 570,694
1993 253.283 227,208 480,491
1994 36-U90 270,700 59,404 694,494
1995 302.813 243 ,239 14,565 560,617
1996 269.847 233,430 66,677 569,954

Commercial fishing, which represented 211 tons in 1970, declined to 8 tons in 1975 and was
discontinued. Petroleum products, which represented 80,696 tons in 1970, declined to 16 tons
in 1983 and was discontinued.

LaFarge Corp. has represented more than half of the total traffic into the port from 1987
through 1996, as shown in Exhibit 4-19.
Exhibit 4-19
St, JQsellh River HarbQr A!:tivit):
.u~~r and tSYmb~r C!l[gQ~~

McCov Consumers LaFarge

Year Concre-te Asphalt Corp. Total
1987 16 16 39 66
1988 13 l-l -l6 73
1989 10 10 42 63
1990 13 12 45 70
1991 9 7 44 60
1992 6 17 42 65
1993 5 12 40 57
1994 12 16 51 79
1995 5 14 35 54
1996 11 12 32 55

According to the Harbormaster' s Annual Report from Robert J. Grimm to Frank Walsh, City
Manager, City of St. Joseph, dated January 3, 1997, the 1996 shipping season ended later than
usual, with the arrival of a load of cement after the first of the year.

The two commercial terminals in the city received a total of 399, 102 tons of cargo on 44
vessels. An additional 170,852 tons arrived in Benton Harbor aboard 11 ships delivering there .
The combined total for the port was 569,954 tons carried on 55 vessels. This was an increase
of 9,337 tons and 1 ship over the 1995 totals.

LaFarge had 32 loads of cement amounting to 233,430 tons, a decrease of some 10,000 tons
compared to the prior year, and delivered on 3 less ships.

93
McCoy had 7 loads of stone in the amount of 98,995 tons, an increase of some 20,000 tons
received last year, and 5 loads of salt, an increase of some 52 ,000 tons over the 14,565 tons
delivered by 1 ship last year.

Consumer' s terminal in Benton Harbor got in 170,852 tons of stone via 12 vessels, a decrease
from last year's 224,4.5.+ tons of approximately 54,000 tons that arrived on 14 ships.

Once again, the port was able to remain well above the half million tonnage mark that has been
the average in the last few years, as well as to have the same number of ships calL even though
in recent years they ha\·e been declining due to the larger class vessels now being used. The
port remains viable and with the dredging project to be done on the inner harbor this year, there
is a good chance that 1997 will exceed 1996.

The harbor currently serves a variety of uses. Industrial development is a significant land use
on the harbor's waterfront with several operating industrial concerns and additional industrial
sites available in Benton Harbor directly northeast of the harbor.

Recreational uses are also prominent. They include several public and private marinas, boat
docks, public parklands, and fishing sites. Commercial marinas, as well as the publicly owned
St. Joseph Marina, provide services to the boating public.

The St. Joseph River serves a variety of ecological functions including processing, cooling, and
waste assimilation. Sedimentation is a major concern in the harbor because it lowers water
quality, endangers fish habitats, and decreases channel depth. Much of the sediments are
deposited in the basin and the inner channel, and are generally classified as sandy polluted
sludge.

Upgrading the St. Joseph River Harbor as a major lakeport has been a development goal
considered for many years. A port development study was conducted for the Twin Cities
Chamber of Commerce in 1961 , which was not optimistic about the feasibility of port
development at that time.

The Board of Harbor Commissioners reconsidered port development in 1979, due to the rapid
escalation in energy costs, the emergence of sources of State and Federal assistance, and the
need to provide the region with superior transportation facilities . The creation of a multi-modal
transportation facility. linking rail. \-vater, and highway systems. as part of Berrien County' s
commercial and industrial development efforts, was seen as enhancing the County' s ability to
attract and retain job providing industries.

The most recent study of the commercial shipping characteristics was done in 1979 for the
Board of Harbor Commissioners by Johnson, Johnson & Ro ylinc . of Ann Arbor, Michigan,
Transportation and Economic Research Associates, Inc. of Arlington, Virginia, and Civil
Engineering Division. Smith, Hinchman & Grylls. Associates. Inc. of Detroit. Michigan,
entitled the "St. Joseph River Commercial Harbor Feasibility Study".

The purpose of this Study was to assess whether the present and future cargo potential of the St.
Joseph River Harbor was sufficient to warrant public investment in a port development.

The Study concentrated O!l four interrelated elements: an assessment of the need for port
facilities, the selection of a possible site for port development. a preliminary site engineering
study, and an analysis of financial feasibility.

The Study raised several issues which are highlighted belo\v: , .,.,,)

94
 a.) Compatibility of Recreational and Commercial Use of the Harbor

Several large vessels enter the harbor during the shipping season to load and unload
cargo at the numerous dock sites currently in operation.

An element of danger always exists when commercial, industrial, and recreational

activity occurs in the same vicinity. Navigational safety is also a concern when small
recreational craft operate in close proximity to large commercial vessels. However, if
properly coordinated, recreational and commercial uses of the harbor can co-exist in an
acceptable and safe manner. Practically all metropolitan areas with working waterfronts
include industrial and recreational uses.

b.) Veed for a Permanent Dredge Disposal Site

The Army Corps of Engineers maintains a deep draft harbor for the benefit of the
commercial shippers and recreational craft using the St. Joseph River Harbor. The
existing Federal Navigation project provides for the protection of the mouth of the St.
Joseph River Harbor by two piers and the maintenance of a deep draft channel and
turning basin through the harbor. This requires a program of periodic dredging by the
Army Corps of Engineers.

CPL interviewed Mr. Tom O' Brien of the Army Corps of Engineers. Exhibit 4-20 lists
the amounts of dredged materials taken from the inner and outer harbor between 1986
and 1992.
Exhibit 4-20-
Commercial Port - Dredging

Cubic Yards
Dredged Cubic Yards Cubic Yards
Outer Dredged Disposal Site
Year Harbor to Dis(!osal Site Removed Total Cost

August. 1986 Inc!. 14,564 21 ,912 5195,000

July, 1987 3,320 24,227 18,695 5266,965
June, 1991 52,513 10,225 5318,672
June , 1992 29,464 5293 ,097

Source: Army Corp Of Engineers

Mr. O'Brien indicated that the ACOE intended to dredge the inner and outer harbor
during the summer of 1997.

Littoral drift accumulation in the harbor entrance amounts to approximately 110,000

cubic yards per year. Much of the drift is sand, free of contaminants. It is dredged by
hydraulic pumping and used to replenish the beach area to the south. River sediments,
however, present a major problem because they contain contaminants that cannot be
disposed of in the open lake. These sediments, accumulating at a rate of about 30,000
cubic yards per year, must be disposed of in landfill sites. The U.S. Army Corps of
Engineers is currently depositing contaminated dredge materials in a temporary land site
near the mouth of the Paw Paw River. A permanent disposal site will have to be found
to allow for the current dredging program to continue.

The cities of St. Joseph and Benton Harbor have been working with officials of Berrien
.;' 1 .... oj

County in an attempt to find a permanent disposal site. An interim solution, to use the
fill as part of the airport expansion, has been approved. However, without a permanent

95
 disposal site, the dredging program will be halted and the resulting sediment
accu~ulation \vill reduce harbor depths and preclude commercial navigation, as well as
restnct recreational boating in the harbor.

c.) Extension of Federal Navigation Pr~ject Limits

The limits of the existing Federal Navigation Project extend from Lake \lichigan,
includes the turning basin, and continues to the mouth of the Paw Paw River and along
the Benton Harbor Canal up to Riverview Drive.

Extension of the Federal Navigation Project beyond the existing limits requires
legislative approval through an Act of Congress, limiting the possible choices of sites
for a commercial port facility.

The existing Federal Navigation Project calls for the maintenance of a project depth of
21 ' in the main channel from Lake Michigan to the mouth of the Benton Harbor Canal.
The channel in the Benton Harbor Canal and the turning basin has a project depth of
18'. The Army Corps of Engineers has maintained a controlling depth of 24' in the
entrance channel to the St. Joseph River.

The Study considered access, economics, physical site requirements, land use, and
environmental impacts as evaluation criteria for selecting the most appropriate site for the port
facility . The site must provide sufficient room for docks, loading and unloading areas, handling
equipment, storage areas, storage buildings, a marshaling yard, a maintenance building, an
administration building, roadways, railroad tracks, utility lines and parking areas .

The Study team recommended the selection of the site which includes the vacant Honda
dealership, as well as land currently owned by Whirlpool at the confluence of the Paw Paw
River and the Benton Harbor Canal, with the endorsement of the Board of Harbor
Commissioners. The site has sufficient area to accommodate the handling and storage needs of
a port facility. This site also provides the opportunity for expansion beyond the boundaries of
the site if the need should arise in the future. Frontage on the Benton harbor canal is adequate
to serve anticipated lewIs of vessel traffic. If future conditions warrant, additional frontage on
the Paw Paw River could also be developed.

The site is well situated for the development of a multi-modal transportation port facility .
Riverview Drive provides sufficient road access to Business Loop 1-94. The site can be readily
served by sidings from the CSX railroad lines. Ample water frontage and sufficient handling
and storage space provides the amenities necessary for the operation of a total intermodal
transfer facility.

Development costs for this site are low when compared to other sites considered. The site is
located within the limits of the Federal Navigation Project, thereby minimizing dredging costs.
The reuse of the dealership structure will necessitate minimal modification. The structure can
be used for a combination of office space, enclosed storage space, and for the consolidation of
container cargo. The site is served by all needed utilities.

A port facility would be compatible with surrounding land uses and local land use plans. Its
location is ideal for use by the current and future industrial concerns in the Graham Avenue
area.

A preliminary market study was conducted in conjunction with the site evaluation and selectio',:""j -
study, which indicated that under appropriate conditions a public facility located at the selectee.
site would reach an average annual potential commerce of 380,000 tons within five years of

96
 operation. The majority of the cargo would be bulk, with the remainder being containerized.
Of the total potential commerce, approximately 140,000 tons are anticipated to come from
future growth in trades that currently exist in the St. Joseph River Harbor (potash. aggregate
and salt). The remainder of the port's cargo potential, a total of240,000 tons, would be
generated from new trades in the harbor (scrap iron, pig iron, wood pulp, coal, coke, and frozen
produce). The market study stressed that these potentials can only be achieved with a
competent and aggressive marketing effort. The market study further indicated that the
intermodal capability of the site should be exploited. Specifically, the study suggested that the
port should pursue developing COFC (container on flat car) capability, TOFC (trailer on flat
car) .capability, and pursue the possibility of developing a truck terminal or consolidation
servlce.

According to a December 31 , 1996 letter to Cornerstone Alliance from John H. ~ ikolai ,

Principal Consultant at Nikolai & Associates Ltd. regarding carrier response to a limited load
line Lake Michigan route, two barge lines indicated a positive response to an offer of 250.000
net tons of barge freight. ETNA Supply indicted an interest in barge transportation for the pipe
so his numbers are included in the 250,000 net tons offering.

The financial feasibility analysis estimated facility revenues based on the projections of
commodity flows and estimated operating and capital costs based on the details of the proposed
first phase development plan. The analysis assumed 50% of the facility operating budget
would be provided for by the State of Michigan as permitted under the Port Authority Act of
1978 .

The financial projections indicated that the facility would eventually be able to cover its share
of operating costs and repay debts incurred during acquisition and construction. The facility
was projected to operate at a deficit for the first nine years of operation, even after subsidization
by the State. This operating deficit would become the responsibility of the constituent units
(Berrien County, the City of St. Joseph and the City of Benton Harbor). The operating deficit
cannot be financed by issuance of revenue bonds, but will need to be financed by raising
additional funds from issuance of debt or by subsidies from Berrien County, the City of St.
Joseph, or the City of Benton Harbor. The facility will be able to eventually repay any debt
incurred in the financing of the initial operating deficit. The facility will need initial funds for
development totaling 52.542,000 and will incur an initial cumulative deficit approaching
$1.077, 160. but will be able to repay all debts incurred by the thirtieth year of operations.

As with any public investment project, it becomes the role of the St. Joseph River Board of
Harbor Commissioners. the County, and the surrounding communities to evaluate whether the
benefits to the community of port development justify the financial risk and low rate of return
associated with the public port development in the St. Joseph River Harbor.

4. Recreational Marinas

In 1994, the Department of Park, Recreation and Tourism Resources at Michigan State
University completed a study of Michigan's Marinas (Clean Vessel ActlMichigan Boating
Studv 1994-95. Great Lakes Marina Census and Marina Needs). The 1994 census of
Michigan' s Great Lakes marinas and assessment of current needs for Great Lakes marinas in
Michigan describes the distribution, ownership and facilities of Michigan' s marinas and
provides an assessment of the state of the market for rentals of seasonal spaces at Michigan' s
marinas, a market segmentation analysis for this market and gives conclusions on needs for
additional marinas .
........ ...

The census attempted to enumerate all sanitary pumpout stations and dump stations reasonably
accessible to Great Lakes recreational boats, and to identify the number. locations, and features

97
of all Great Lakes marinas capable of harboring 10 or more recreational boats. While there
have been many estimates over the last three decades of Great Lakes marina numbers and
characteristics, none have been as extensive or as rigorous as this census.

The census included 626 "Great Lakes marinas" - marinas with a capacity of 10 or more boats
that regularly use the Great Lakes - plus one non-marina pumpout facility . At least 579 of these
were capable of harboring 10 or more permanent, seasonal, or transient boats.

Over half(339) of the 626 marinas are commercial marinas, 201 are private - generally yacht
clubs or condominiums not open to the general public - and 86 are publicly o\\ned, as shown in
Exhibit 4-21 .
Exhibit 4-21
Michigan Marinas

339 Commercially operated

86 Public operated
2..Q..l Private, non-commercial
626 Total Marinas

Source: MSU Census

Nearly 41 % of all marinas, 53% of seasonal marina slips, 56% of seasonal marina capacity, and
54% of total marina boat capacity are found in southeastern Michigan (Monroe, Wayne,
Macomb, and St. Clair Counties). Another 38% of marinas, with 31 % of total marina boat
capacity, are located on the west side of the lower peninsula, primarily in the West Central and
Southwest Regions.

The 626 marinas are capable of harboring nearly 60,000 boats, as shown in Exhibit 4-22.
Exhibit 4-22
Total Spaces in 626 Great Lakes Recreational Marinas

43 .50 I Seasonal & owned slips

11 ,070 Seasonal & owned moorings, dry stack and dry sail spaces
4.33ol Transient spaces
~ Day-only spaces
59.487 Estimated total
...:..QQQ Spaces occupied by commercial boats
58.82 I Total spaces for recreational boats

Source: MSU Census

Occupancy rates were down since the last statewide surveys in 1986, and the amount of Great
Lakes boating in 199-+ was about the same as that in 1986. Marina capacity has expanded since
1986 and the number of non-anglers renting seasonal marinas has continued to increase since
1986, but this has been offset by a sharp decrease in angler numbers. Apparently, the
unanticipated decline in Great Lakes angling is at least one factor permitting marina capacity to
"catch up" to demand.

The number of anglers renting seasonal spaces in marinas is sharply lower. The number of
boats kept in seasonal spaces in public and commercial marinas in 1994 was about the same as
that estimated in 1986. However, the number of boats kept in seasonal spaces by "non-anglers"
was 41 % higher in 1994, while the number kept by "anglers" was 53% lower in 1994.

Full service non-angler segment occupants were rare north of Port Huron and Muskegon,
including the upper peninsula: 7% or less of marina occupants, compared to 25% statewide.

98
Conversely, some angler segments were much more common in those same regions and rare
south of Port Hurorv1vluskegon. These differences apparently reflect differences in demand
rather than in marina supply because the rare segments reported only average levels of
dissatisfaction.

The census data indicated that pumpouts in the Southeast and East Central regions are in much
greater demand than other coastal regions of Michigan, even considering planned new
pumpouts.

The assessment of marina needs indicated no strong general needs for additional seasonal
spaces in public and commercial Great Lakes marinas in any region, although it indicated
strong demand for certain specific types of marinas in all regions.

All regions have unfilled space available for seasonal rental. Over 20% of seasonal spaces are
unfilled in most regions. Marina occupancy rates in non-public marinas are highest in the
Southwest and East Central Regions and in a few other counties. However, all regions also
have marinas that are filled to capacity. Therefore, although there is little demand for new
marina spaces in general, demand is strong for at least some particular types of marinas.

The ..<\ngler and Non-Angler segments differ from each other in expenditures, boat types, boat
use patterns, and other behavioral traits. The full service segments spend more and have larger
boats. Angler segments spend less, have smaller boats, and more outboards than corresponding
non-angler segments. No anglers had sailboats.

All regions except perhaps most of northeastern lower Michigan were identified as lacking
marina services by at least one of the indicators.

The study identified 20 marinas in Berrien County with a total of2,626 slips, 8 moorings, and
149 dry spaces, as sho\\TI in Exhibit 4-23.
Exhibit -'-23
Number of Owned. Seasonal Rental and
Transient Spaces - Berrien County
No. of Dry
Number Seasonal & Stack &
of Owned Transient Seasonal Transient Dry Sail
Marinas Slips Slips & Owned Moorings Spaces Total
20 2,564 54 8 8 149 2,789

* Numbers include estimated spaces in 16 marinas of unknown capacity

Source: MSU Census

Of the 2,564 slips identified, occupancy rates declined with increases in slip size, as shown in
Exhibit 4-24.
Exhibit 4-2-'
Number and Percent of Owned and Seasonal Rental Slips
Of Different Sizes Occupied in 1994 - Berrien County
Number Occupancy Number
of Slips Rate Occupied
Slips Under 20' Long 36 100% 36
Slips 20' -29' Long 268 80% 214
Slips 30'-39' Long 979 83% 817
Slips -l0 ' -49' Long 984 86% 843
Slips 50' Long/Longer 297 64% 191
All Owned/Seasonal Slips 2,564 82% 2, 101
Source: MSU Census

99
Other than the upper peninsula, the West Central and Southwest regions have the highest slip
occupancy rates. Counties with over 80% occupancy for non-public marinas are Charlevoix,
Emmet, Leelanau, Bay. Monroe, losco, Van Buren, Muskegon and Berrien.

Nearly all individual counties that have more than one marina have some marinas that are full y
occupied or nearly so. as well as some other marinas that have high vacancy rates. Marina
occupancy rates range from 80-87% in Berrien County, as shown in Exhibit 4-25.
Exhibit 4-25
Occupancy Rates Of All Seasonal Spaces
For Public and :"Ion-Public Marinas - Berrien County

No. Occupants Occupancy Rates

Seasonal
Total :'-10. Spaces Recreat'l Commer. Rec. Rec.&Com.
Public Marinas
Commercial &
-"' 87 76 0 87% 87%

Private Marinas 18 2,640 2,123 41 80% 82%

* Data include estimates for 16 marinas of unknown capacity and 61 marinas of unknown occupancy.
** Spaces includes all owned and seasonal-rental spaces, including slips, moorings, dry sail & dry stack.

The last statewide study of the Great Lakes marina market in 1986 found generally high marina
occupancy rates all along the lower peninsula coast. The current differences may indicate that
marina occupants are becoming quite "choosy," hunting for the marina that seems just right.
Only marinas that have locational advantages or that can attract and satisfy an appropriate-sized
market niche will have full occupancy.

Marina needs have changed sharply since 1986. The most important cause seems to have been
the decline in Michigan' s Great Lakes salmon and trout fishery . However, an increase in
numbers of non-angler marina renters has been offset by a decrease in angler numbers, so the
total number of marina users has remained about constant.

Low marina occupancy rates in general point to a "buyer's market" for marina renters. Marina
operators in many locations say they are under pressure to increase their occupancy rates.
However, there are still good opportunities for better serving seasonal marina customers,
including developing new marinas and refocusing the services offered by existing marinas. The
most successful marinas are within walking distance to downtown shopping areas. New
Buffalo, Saugatuk, and South Haven are good examples.

The most important marina attributes for seasonal renters selecting a marina are "hospitality"
items such as theft and vandalism security, clean, well-maintained facilities, presence of
restrooms and showers. and prompt and friendly service.

Marinas still have a tremendous economic impact on their communities. Expenditures by

seasonal renters of public and commercial marinas in the marina vicinity and the ma.rina
"community" were estimated at about $7,000 per boat, as shown in Exhibit 4-26. This estimate
does not include the costs of purchasing, financing, licensing, insuring, and much of the
maintenance of these boats, nor expenditures of all kinds at home or in other communities.
About 41 % of these expenditures were for personal items purchased on boating outings such as
food, auto fuel, clothing, and entertainment. The remaining expenditures were split nearly
evenly between slip-related costs (seasonal slip rental. boat storage, launching, etc .) and boat-
related costs (boat fuel. boat supplies, pumpouts, and emergency repairs).

100
Exhibit 4-26
Estimated Marina and Vicinity Expenditures
Qf User Segments At Public & Commercial Marinas

Average
or Total
Slip-Related Expenditures (at marina)
Slip rental spendinglboat $1,344
Launchi haulout costlboat $123
Storage costlboat $350
Utility costlboat $25
Other costslboat ~
Total slip related spendinglboat· $1,952

Boat-Related Expenditures
Fuellboat (at marina & vicinity) $1,411
Spent in vicinity only $609
Pumpout/boat (at marina & vicinity) $48
Spent in vicinity only $23
Emergency repair.'boat (at marina & vicinity) $96
Spent in vicinity only $83
Other supplieslboat (at marina & vicinity) $184
Spent in vicinity only $89
Other spendinglboat (at marina & vicinity) $500
Spent in vicinity only ~
Total boat related expend.lboat· $2,238
Spent in vicinity only $1 , 132

Personal Expenditures
Restaurants & barslboat (at marina & vicinity) $1,297
Spent in vicinity only $921
Grocerieslboat (at marina & vicinity) $585
Spent in vicinity only $366
Auto fuel & others/boat (at marina & vicinity) $211
Spent in vicinity only $119
Lodging/camping. boat (at marina & vicinity) $114
Spent in vicinity only $87
Clothing&supplies&souvenirs/boat (marina & vicinity) $407
Spent in vicinity only $313
Recreation & entertainment boat (marina & vicinity) $248
Spent in vicinity only $159
Other spendings,boat (at marina & vicinity) $\33
Spent in vicinity only ~
Total personal expendituresiboat· $2,889
Spent in vicinity only $1 ,958

Total Expenditures
Total expenditures/boat· (at marina & vicinity) $7,091
Spent in vicinity only· $3,089

* Items do not add to total because of treatment of missing data

Boating trends in the area have changed from a "Developers Market" in 1985-1988 to a
"Boaters Market" in 1990 with several significant changes in the market including boaters
moving their watercraft to newer marinas offering amenities and modem facilities; to ports
having less known environmental pollution and newer infrastructure; to cities which offer better
shopping, restaurants and recreational facilities within walking distance from their boats; and to
states and cities with lower registration fees and taxes.

101
Berrien County ranks 2nd in the number of marina slips, 2nd in the number of registered
watercraft, and 4th in the number of boater days of all of Michigan's counties, as shown in
Exhibit 4-27 .
Exhibit 4-27
Berrien Count,,· Recreational Water-Related Ranking

Number of Marinas 20
Number of Slips *2,714
Lake Michigan Rank 2
Number of Boater Days 440 ,000
Lake Michigan Rank 4
Registered Watercraft 13.400
Rank Lake Michigan 2
* Estimated
Records from the Michigan Department of State indicates that there were 1,069 boats greater
than 23 feet in length registered in Berrien County in 1995. Recent data indicates a growing
number of boats registered in Berrien County. Between 1993 and 1995, the total number of
boats registered increased by 1,079, or 8.7%, as shown in Exhibit 4-28. The number of boats
over 23 feet in length grew by 116, or 12.2%. Typically, boats under 23 feet are trailered, while
boats over 23 feet are kept in marinas.
Exhibit 4-28
Registration Data
Berrien Counn'

Year 1993 1994 1995 1993-95 1993-95 %

Total Boats , 12.321 12,842 13,400 1,079 8.7%
Greater Than 23' 953 1,037 1,069 116 12.2%

The growth in boating in the area is similar to other areas in the State of Michigan, which have
seen increased demand in the past three years. If growth in County registrations continues at
the current pace, approximately 500 boats per year will be added to this market. Of this.
approximately 60 boats will be greater than 23 feet in length. Since the area has nearly twice as
many slips as registered boats over 23 feet and does not have a 50% overall vacancy rate , it is
apparent that additional demand for marina slips comes from outside the area.

Occupancy rates are marinas in the St. Joseph/Benton Harbor market generally range from 85%
to 98%, as shown in Exhibit 4-29.
Exhibit 4-29
Major Berrien County Marinas

Property :\0. of Slips Occupancy Occupied Slips

New Buffalo Market 629 95% 598
Pier 33 220 85% 187
Riverview 220 90% 198
Harbor Isle 197 95% 187
Brian ' s 212 98% 208
St. Joseph Municipal 80 95% 76
Royal Key Club 32 90% 29
Eagle Pointe 463 55% 255
Other 138 60% 83
Total 2, 191 1,821
Average Vacancy 16.9%
."' .:.~ ~' l

102
Although the a\·erage vacancy in the market is approximately 17%, the vacancy is concentrated
in several areas. The Eagle Pointe Marina, located several miles upstream on the S1. Joseph
River, and "other" locations which include fair quality marinas in residential areas, represent
the majority of the vacancies.

Exhibit 4-30 lists some of the marinas in the S1. JosephlBenton Harbor area and their rates .
Exhjbit 4-30
Competing Marina Rental Rates

Location Description Length Rent $/L F

Pier 33 , Anchor·s Way 220 slip full service marina. Inside & 30 $\ ,850 $61.67
St. Joseph outside storage. Service, fuel , sales. 35 $2,200 $62.86
Good condition. Inferior location adjacent 40 $2,550 $63.75
to aggregate operation and in Morrison 50 $3,250 $65 .00
Channel with heavy current.

Eagle Pointe Harbor Planned unit development with 67 acres 35 $\ ,806 $51. 00
2351 Niles Road and 443 slips. Inferior location 2.5 miles
St. Joseph upstream. Winter storage but no marina
services.

Riverview \000 ~tarina 220 slip marina, only 45 are rental slips. 30 $1,850 $6 \.6 7
\000 Riverview Drive Approx. 30 yrs ., in average condition. On- 35 $2,250 $64 .29
St. Joseph Twp. site commercial facil ities consisting of 40 $2,600 $65 .00
winter stg., fuel & service. Inferior
location.

Harbor Isle Marina \ ~3 slip marina located on an island. 30 $1,850 $61.67

143 Anchor's Way Similar location with the subject's 35 $2,250 $64.29
St. Joseph . although inferior for sailboats (bridge). 40 $2,600 $65 .00
Full service commercial marina with fuel, Outside stg. $22 .00
store, service & stg.

Distances to other competing recreational marina facilities and ports are shown in Exhibit 4-31 .
Exhibit 4-31
Southwestern Michigan Lake Shore
CommerciallRecreational Harbors

Approximate DistancelDirection
Location and Tvpe of Harbor From St. Joseph/ Benton Harbor
Manistee - Commercial/Recreational * 150 mi . N
Ludington - Commercial/Recreational * 130 mi . N
Pentwater - Recreational * 120 mi . N
Muskegon - Commercial/Recreational * 85 mi. N
Holland - Commercial 45 mi . N
Saugatuck Recreational 40mi. N
South Haven-Recreational ,. 23 mi. N
St. Joseph - Commercial/Recreational * o
New Buffalo - Recreational * 25 mi . S
*(State Sponsored)

The bulk of the St. Joseph market are sport fishermen. Most of the marinas in the S1.
JosephlBenton Harbor market are on the wrong side of bridges, creating some delays when
going out to Lake Michigan. However, the local marina market is healthy, with an 85% to 95%
occupancy rate for well-located and serviced marinas.

103
5. Tourism

Travel and tourism is the second leading overall industry in Michigan, but in most counties it's
actually the top industry, according to Donald Holecek, a professor and director of the Travel,
Tourism and Recreation Resource Center at Michigan State University (MSU) .

Tourism brings in $8 billion annually to the state and $3.7 billion in the West Michigan area
from the Indiana state line to Mackinac Island. In 1993 (the most recent year that figures were
available), Berrien County took in $136.7 million in direct tourism dollars and an estimated
$106.6 million in "indirect" spending according to the West Michigan Tourist Association.
"Indirect" spending is money taken in by tourism businesses and re-spent inside the county.

Van Buren County took in $33 million directly and $25 .8 million indirectly, and Cass County
$10.6 million directly and $6.3 million indirectly.

Tourism puts people to work, pays them a living wage and contributes directly to the local.
regional and national economy. Criticism that tourism related jobs are relatively low paying is
unfounded, unless one is only counting the entry levels jobs and comparing those to high
paying jobs in the auto industry. However, there are almost as many jobs in supervision and
management positions as entry level positions in the tourism industry. Moreover,
manufacturing jobs tend to employ more people, but tend to be clustered in a few areas.

In Berrien County, tourism accounted for 4,506 jobs in 1993 . In Van Buren County, 1,140
were employed by the tourism industry in 1993, and in Cass County, 375 . According to Ernst
& Young, travel and tourism is recognized as an increasingly important sector of the economy
in the State of Michigan. The industry creates substantial direct and indirect expenditures,
employment and fiscal benefits which have a positive impact on the economic growth and
competitiveness of the state. In addition, the company recommended development that reflects
the state ' s cultural and natural resources - freshwater aquariums, marinas, industry-related
interpretive centers, performing arts facilities and destination retail developments.

Certec, Inc. and the Travel, Tourism and Recreation Resource Center (TTRRC) at Michigan
State University contracted with the Michigan Travel Bureau to conduct a "Prime Market Area
Advertising Program Survey:' completed during the summer of 1996. The survey population
consisted of adults age 18 or older permanently residing in Illinois, Indiana. Michigan,
Minnesota. Ohio, Wisconsin or Ontario.

The most frequently mentioned destinations within Michigan were within the counties of
Wayne, Grand Traverse. Saginaw, Oakland. Mackinac. Chippewa, Washtenaw, Ingham,
Berrien, Gogebic, and yluskegon, and 89% of the sample reported that they used a car or truck
without camping equipment for transportation.

The most frequently cited months for pleasure trips were July (21%). August (15%). June
(13%), May (9%), March (7%). April (7%), and October (7%). The average travel party size
was 4.5 persons. Sixty-tive percent reported that they had traveled with family members .

Of the respondents who traveled in Michigan on pleasure trips, 85% reported that they stayed
overnight. The average duration of trips was about four nights, and an average of about $42 per
night was spent on commercial lodging. The most frequently used types of lodging were
hotel/motel/lodge (44%) and friend's or relative's home (28%).

Total expenditures per trip averaged about $531 . The reported distance traveled averaged about ..
246 miles. The most frequently cited activities respondents participated in while on pleasure ... "';
trips in Michigan were shopping (66%), outdoor recreation (60%), general touring (58%), and

104
visiting some "other anraction" (42%), followed by nightlife (35%), attending a festival or
event (28%), visiting an historic site (26%), visiting a museum or hall of fame (14%), casino
gaming (11 %), and fall color viewing (11 %). Seventy percent of respondents reported that
their trip was a vacation trip.

Lakes, lake shores, and other natural features were the predominant positive images of
Michigan as a pleasure trip destination; Detroit and the climate of Michigan were the
predominant negative images. The highest levels of agreement with a series of statements
about Michigan' s travel attributes generally pertained to the state' s natural resource base.
Lower levels of agreement pertained to Michigan' s man-made attractions. Fishing,
boating/sailing, and camping were the spring/summer recreation activities respondents were
most likely to say Michigan was known for.

Michigan's travel attri butes were all rated above the mid-point of a 10-point rating scale.
Moreover, Michigan ranked very favorably compared to its competitors with respect to
visitation levels and ratings of desirability. These results seem to suggest that Michigan is
perceived by the public as having a good travel product.

According to the Southwestern Michigan Tourist Council, the total number of hotel and motel
rooms has doubled from 1986 to 1996. Exhibit 4-32 identifies approximately 1,475 rooms
available in the immediate area today in major hotels and motels. Additional rooms are
available in smaller inns and bed and breakfasts in the area, and in other hotels and motels
throughout Berrien County.
Exhibit 4-32
Lodging

No. of
Hotel Rooms
Benton Harbor
Courtyard by Marriott 98
Comfort Inn Motel 53
Days Inn 121
Motel 6 109
Quality Inn 150
Ramada Inn 117
Red Roof Inn 109
Snow Flake Inn 56
Super 8 Motel 62
Total Rooms - Benton Harbor 875

St. Joseph
Boulevard All Suite Hotel 84
Best Western Golden Link 36
Holidav Inn , Bv the Lake 156
St. Joseph Inn' 56
Total Rooms - St. Joseph

Stevensville
Budgetel Inn 103
Hampton Inn 75
Park Inn International 90
Total Rooms - Stevensville 268
Total Rooms- 1,475

A 6% room receipts tax is levied on all hotel/motel room rentals, of which 2% goes to the
Southwestern Michigan Tourist Council.

105
The 2% room rental tax receipts have increased approximately 5% annually from 1987 through
1996, as shown in Exhibit 4-33.
Exhibit 4-33
2% Hotel/Motel Room Rental Tax

Year Total
1987 $150.000
1988 180.000
1989 190.000
1990 224.000
1991 210.000
1992 230.000
1993 232 .000
1994 253 .000
1995 254.000
1996* 233.000

* Through 11 /30/96
Source: Southwestern Michigan Tourist Council

On May 1, 1994 the rate for the lodging use tax increased from 4% to 6%. To ensure
comparability with tax collections figures for earlier time period, tax collections for May 1994
through December 1994 and all of 1995 were adjusted by dividing them by a factor of 1.5.
Occupancy rates generally range from 100% in the summer to 50-60% in January. However.
increased business use in the off-season has increased the overall occupancy rates. In general,
Berrien County has a healthy hotel industry.

The Southwest Michigan Tourist Council distributes fresh fruit and vegetables in season to
some 65,000 visitors annually at the Welcome Center in New Buffalo. In all, about 1.6 milliorl
visitors stop at the New Buffalo center every year. Berrien County ranked 17th in tourism and
trawler receipts in 1990, as shown in Exhibit 4-34.
Exhibit 4-34
Estimated Direct Expenditures of Tourists And
Travelers Expenditures, 1990
(In Thousands)

Rank Tourists All Travelers

Berrien Count'v· 17 537,251 577,911
Michigan . 52.265,063 55 ,786,346

Note: "Travelers" means all persons on trips of 50 miles or more away from home . "Tourists" means travelers
on trips primarily for the purpose of recreation.

Source: Stynes. Daniel 1. 1995. "Estimates of Traveler Spending in Michigan's Counties." Dept. of Park,
Recreation, and Tourism Resources. Michigan State University, East Lansing.

In 1991, Berrien County ranked 15th of all 83 Michigan Counties in the total number of public
golf holes (171), and 15th in number of second homes (4,448) in 1990. Berrien County ranked
11 th in total number of rental units (2,779) with 41 hotels/motels (2,107 rooms), 16
cabin/cottage with 391 rental units, 16 Bed & Breakfasts with 98 rooms, 3 condominium
buildings with 183 units in 1990. In addition, Berrien County had 1,399 campsites.

Silver Beach County Park is a popular regional recreation resource and destination area
drawing over 150,000 visitors annually. Both the number and percentage of out-of-town
visitors at Silver Beach is growing. During the summer of 1996, 51 % of all day passes sold to , .,,,,
persons residing outside of Berrien County.

106
 Berrien County is an important destination point for tourists. The tourism industry is growing
in the area, as indicated by the increased number of hotel rooms.

C. THE RESIDENTIAL :vtARKET

1. General Information

The market area for primary and second home demand for the southern Lake Michigan
shoreline draws not only from the local area, but from the southern Chicago metropolitan area
and the metropolitan areas of Indianapolis, South Bend, Kalamazoo , Battle Creek and Grand
Rapids as well.

Population and household growth trends in this larger market area are shown in Exhibit 4-35.
Between 1985 and 1995, the total number of households grew by 178,640, or 4.8%. During the
same period, Michigan ' s population in the market area grew by 13.2%.
Exhibit 4-35
Population & Households
Residential Market Area

1985-95 1985-95 %
State* 1985 1990 1995 Chng. Chng.
Michigan 1.543,900 1,698,000 1,748,400 204,500 13 .2%
Indiana 2,370,700 2,384.500 2,411,800 41,100 1.7%
Illinois 6,459,600 6,592,700 6.685,500 225,900 3.5%
Total 10.374,200 \0,675 ,200 10,881,700 507,500 4.9%
Households 3,65\,718 3,757,670 3,830,358 178,640 4.8%
* Selected counties within each state

Source: U.S. Bureau of the Census

According to the South\vestern Michigan Board of Realtors, the total number of residential
sales in Berrien County has averaged approximately 1,966 units annually from 1991 through
1996. The St. Joseph and Lakeshore school districts captured approximately 30%, or 578
residential unit sales annually, and the Benton Harbor school district captured approximately
14% during the same period, as shov.n in Exhibit 4-36. Sales of condominium units, included
in the Berrien County total, averaged 52 units annually countywide.

Exhibit ·hHi
Resid!:ntjal Sal~s
1991 - 1296

Total Avg.
Total Units Sold 1991 1992 1993 1994 1995 1996 91-96 Annual
Benton Harbor 2-3 /~
-))
- 272 305 305 282 1,672 279
St. Joseph &
Lakeshore 5'7'-+ 579 583 613 522 599 3,470 578
Berrien County 1,855 1,928 1,970 2,083 1,982 1,977 11 ,795 1,966
Condos.* N, A 25 41 53 70 69 258 52

* Countrywide, included in Berrien County Total

107
Average sale prices increased 34% to $110,418 for all of Berrien County from 1991 to 1996.
28% to $149.054 for the St. Joseph and Lakeshore districts, 17% to $56,536 for the Benton
Harbor school district. and only 6% to $140,890 for condominiums, as shown in Exhibit 4-3 7.
The average price of a condominium was 27% higher than Berrien County's overall average
housing cost. but 6% less than the St. Joseph and Lakeshore districts average cost in 1996. In
1992. residential units in St. Joseph and Lakeshore were 20% less expensive than the average
condominium in 1992.
Exhibit 4-J7
A verage Pri~~
0/0

Increase
1991 1992 1993 1994 1995 1996 1991-96
Benton Harbor 48. 137 68 ,754 52.134 55 ,88 7 57.2 16 56,536 17.4%
St. Joseph & 116,026 106,899 I 15,420 119,569 126,586 149,054 28 .5%
Lakeshore
Berrien County 82 .3 62 86.417 88,393 91 ,602 98.8 7 1 110.418 34 . 1%
Condos· N /A 132.517 132,578 145 ,013 13 7,231 140.290 5. 9%

* Countrywide. included in Berrien County Total

According to the Realtors Association, the St. Joseph-Lakeshore School District market area' s
sales volume jumped to $89.2 million in 1996 from $66 .0 million in 1995, and the average
home price increased to $149,054 from $126,586. The area had the top sales volume of the
association's 11 market areas and second-highest average price behind the Bridgman-to-New
Buffalo's average price of-$153 ,029.

Generally, housing prices in the City of St. Joseph range from $125,000 to $175 ,000. New
houses in res;ently completed subdivisions have sold for as much as $275,000-$325 ,000.
Housing with frontage on Lake Michigan can sell for more than $1.0 million, especially in the
area north of the St. Joseph River, locally known as the Ridgeway neighborhood. However, the
housing adjacent to Ridgeway, which has no water access or views, sell for $60.000-$70,000
for a one to two story. 2-3 bedroom, bungalow-style house.

Houses in established neighborhoods sell for $90/s.f.-$120/s.f. , while houses on the water sell
for $200+/s.f. House lots in the Newberry Hill subdivision in St. Joseph sold for an average
price of $30.000 for a 15,000 s.f. lot. Two 34,500 s.f. lots of the 7 lot subdivision have
riverviews and sold for $60,000 each.

Fev.: waterfront condominiums are currently available in St. Joseph. A recent sale' of a 1,200
s.f. unit for 5257,000 in the Waterfront complex indicates a value of approximately $200/s.f.
for waterfront/lakeview condominium units.

Residential lot sales generally range from $25 ,OOO/acre to $60.000 /acre, depending on their
location. size. and number of units planned.

108
The median sale price for lots under 1 acre in size in the City of St. Joseph was 530,000 in
1996, compared to $6,300 in the City of Benton Harbor, as shown in Exhibit 4-38 . Between
1992 and 1996. 41 lots under an acre sold in St. Joseph compared to 15 in Benton Harbor. The
5 year average median lot price was $43,000 in St. Joseph, and $9,160 in Benton Harbor.
Exbibit 4-JB
Land Sal~~ - Under 1 A!,;r~

St. Joseph School Average

District 1992 1993 1994 1995 1996 Total Annual Avail. 1997
Total Lots Sold 10 12 8 8 3 41 8 15
Days on Market 336 554 364 301 55 N/A 322 ':-4!A
Low S14,900 59,000 59,200 $10.650 520,000 N/A S 12.750 S2 7.000
High S 65,000 $329,000 595 ,000 $90,000 $38,000 N/A 5123.400 511 9'.000
Avg. Price S35,740 $64,575 $42,587 $32,014 $29,333 N/A S-+0.850 S66.600
Median Price S30,000 $40,000 $95 ,000 $24,000 530,000 N/A S-+3.800 S70.000

Benton Harbor School

District
..,
Total Lots Sold 2 .) 6 3 I 15 3 25
Days on Market 73 357 319 221 14 N/A 197 N/A
Low 59,000 $7,000 56,500 $7,000 56,300 N/A 57.160 53 .700
High 59,000 5 14,000 517,500 510,000 56,300 N/A 51.360 $230,000
Avg. Price 59,000 511 ,666 510,750 58,500 56,300 N/A S9.243 578.532
Median Price 59,000 514,000 58,000 58,500 $6,300 N/A 59. 160 51 ,720

The total number of residential lots between 1 and 40 acres sold between 1992 and 1996 in St.
Joseph was 54, compared to 55 in Benton Harbor. Average annual prices ranged from $11 ,640
to $91,800 in St. Joseph, and $6,660 to $151,540 in Benton Harbor. The average annual
median prices were $29,880 and $16,700 respectively, as shown in Exhibit 4-39.
Exhibit 4-J9
Land Sales - 1 A!,;re to 40 -\cres

St. Joseph School Average

District 1992 1993 1994 1995 1996 Total Annual Avail. 1997
Total Lots Sold 7 14 12 9 12 54 II 24
Days on Market 377 503 367 82 72 N/A 280 N/A
Low S21,000 $9,000 $9,200 $9,000 510,000 N/A $11.640 $42,900
High S-+2,000 $145,000 $125,000 $74,000 573,000 N/A 591.800 $2.000,000
Avg . Price S30,642 $38 ,600 $53,183 $33,105 $30,224 N/A $3 7.151 $227,977
Median Price 530,000 $29,500 $34,000 $30,000 525 ,900 N/A $29.880 5129.900

Benton Harbor School

District
Total Lots Sold 6 8 18 12 II 55 II 31
Days on Market 1-+7 269 164 216 156 N/A 190 N/A
Low 59,000 $7,000 $4,000 $7,000 56,300 N/A 56.660 $4,500
High 5150.000 562,500 $132,000 $103 ,200 $310,000 N/A $151.540 $700,000
Avg. Price $36,500 521 ,812 $28,754 $31,162 $68,954 N/A $37,436 $64,662
Median Price 510.000 514,000 $17,500 $18,500 $23,500 N/A $16,700 $39,000

There are 25 lots under 1 acre currently available in Benton Harbor and 31 lots from 1 to 40
acres ranging in price from $4.500 to $700,000. The median asking price for a lot under 1 acre
is $21. 720, and $39,000 for lots 1 to 40 acres in size, with asking prices ranging from $3 ,700 to
$230.000. In St. Joseph. 15 lots under 1 acre are available, at prices ranging from $27,000 to

109
$119,000, and 24 lots from 1 to 40 acres at prices of $42,900 to $12.0 million. The mediar:
asking price for a lot under 1 acre is $70,000, and $129,900 for lots 1 to 40 acres in size.

A total of 1,364 housing units were sold in St. Joseph between 1991 and 1996. or 273 annt:3.11y .
Average prices for the period ranged from $18,500 to $499,000 and the average annual mc-.:iian
price was $102,980, as shown in Exhibit 4-40. There are currently 162 houses available. kss
than the average annual absorption, at prices ranging from $47,900 to $950.000 . The med:3.n
asking price is $159,500.
Exhibit 4-40
House Sales
St. Joseph School District

.-\ verage ;\ vail.

1992 1993 1994 1995 1996 Total .-\nnual 1997
Total Res'l Units Sold 174 312 303 278 297 136~ 273 162
Days on Market 74 89 92 76 89 N:.-\ 8~ ~ /A
Low 535,000 $30,000 $27,500 $1 51 N/A S 18.500 $-!-.900
High S300,000 5485 ,000 $625 ,000 $500,000 5585 ,000 N/A S499 ~ 0 0 0 59~ O .000
Avg. Price 599,380 $109,384 $118,210 $122, 196 5145 ,803 N/A S 118.995 5206.851
Median Price 89,900 $92,000 $100,500 $110,000 5122,500 N/A S 102.980 51~ 9. 500

Average Avail.
1992 1993 1994 1995 1996 Total Annual 1997
Total Condo Units Sold 6 24 20 20 15 85 17 14
Days on Market 237 125 124 190 135 N/A 162 ~! A
Low 573 ,000 $76,000 $74,000 587,000 586,000 N/A S79.200 S92.900
High 5154;500 $320,000 $192,500 $174,000 5257,000 N/A S219,600 5::25.000
Avg. Price 5102,983 $118,054 $114,040 5125,797 5134,260 N/A S119.027 5169.47 1
Median Price 596,500 597,500 5104,000 5117,900 5114,000 N/A S105.980 515 7 .900

A total of 85 condominiums were sold between 1992 and 1996 in St. Joseph. or 17 annually.
with average prices ofS79,200 to $219,600, and a median price of$105 ,980, as shown in
Exhibit 4-40. There are 14 condominium units currently available, also less than the average
annual absorption, at prices ranging from $92,900 to $325 ,000. The median asking price for
condominiums is $157.900.

In Benton Harbor, 1.092 housing units were sold during the same period, or 218 annually.
Average prices ranged from $15 ,700 to $414,500, and the average annual median price was
$52,..1.00, as shown in Exhibit 4-41 . There are currently 171 houses available at prices ranging
from $6,000 to $1 ,150.000. The median asking price is $57.500.
Exhibit 4-.'1
Hou:ie Sale:i
B~ntQn HarbQr SchoQI District

Average A vail.
1992 1993 1994 1995 1996 Total Annual 1997
Total Res'l Units Sold 132 221 256 253 230 1092 218 171
Days on Market 86 71 70 73 67 N/A 73 N /A
Low 55,500 562,000 $4,000 $2,000 $5,000 N/A S15 .700 S6.000
High S260.000 5750,000 $250,000 5512,500 $300,000 N/A 5414,500
51.150,000
Avg . Price . 558,791 $54,093 $55 ,354 561 ,213 559, 112 N/.-\ S5 7.71 3 S-7.7 16
Median Price 551 ,500 $50.000 $51 ,000 556,000 553 .500 N,'.-\ S52,400 S5 7.500

110
 Average Avail.
1992 1993 1994 1995 1996 Total Annual 1997
Total Condo Un its Sold N/A 1 I 1 4 2
Days on Market 425 297 ?~
-~ N/A N/A 2.+8 )\;:\
Low $29,000 $29,000 $23 ,000 $25,000 N/A $26.500 525 ,900
High $29,000 $29,000 $23.000 $25 ,000 N/A 526.500 $325 ,000
Avg. Price 529,000 $29,000 523.000 525 ,000 N/A $26 .500 $175,450
Median Price $29,000 $29,000 $23 .000 $25,000 N/A $26.500 525.900

A total of 4 condominium units were sold in Benton Harbor between 1993 and 1996, or 1
annually, with an average price of $26,500. There are 2 condominiums available at $25 ,900
and 5325 ,000 each.

Several multi-unit residential condominium developments have occurred in St. Joseph,

beginning in the late 1980's. Waterfront condos usually are two-bedroom and appeal to young
couples without children, working "empty nesters," second home buyers, and retirees.
However, the market has been slow to develop in St. Joseph.

The Waterfront, along the St. Joseph River, was one of the more widely publicized projects. It
was to consist of four six-story buildings totaling 68 units and five villas in a three-story
building, plus 73 boat slips. Only 55 residential units and 53 slips were completed.

During The Waterfront' s II ' year history, the bank that financed the residential condominiums
foreclosed on the investor group. The group, which later went bankrupt, was forced to sell 24
of the 51 boat slips at bargain prices to help pay another bank, which financed the marina
portion of the project.

The Waterfront was one of four waterfront or lakeview condominium projects started in St.
Joseph in the late 1980·s. with the units selling for $140,000 - $250,000. The others include:

• Channel Bluff - \Vayne Street. dov,:ntown. Three. 8-unit buildings were planned, of which
t'vvo were constructed.

• South Cliff - Lake Shore Drive. Two, 16-unit buildings were planned, only one building
\-vas constructed.

• LaSalle's Shoreview - on Marina Island. Fifty units were planned. Three buildings and a
total of 10 units ha\'e been completed.

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Exhibit 4-42 summarizes the number of condominiums and associated marina slips in the above
mentioned projects.
Exhibit 4-42
Condominium Development
St. Joseph

Condo li nits Year Built

South Cliff 16 1986
Waterfront 55 1986
Waterfront Marina 53 1987
LaSalle 6 1988
Shoreview 7-10 1992
LaSalle Moorings II 1988
LaSalle Moorings 12-27 1992
Channel Bluff - 8 1986
Channel Bluff 9-16 1989

Conversely, the housing stock in Benton Harbor and portions of Benton Township is
deteriorating. Over the last decade, many individuals have simply not paid their property taxes
and ownership reverted to the city which is now the largest property owner.

The number of occupied housing units in the City of Benton Harbor declined almost 600 units
from 1980 to 1990. At the same time, the percentage of households renting their home instead
of owning has increased. In the ,City of Benton Harbor, 57% of the dwellings were rented in
1990, compared to 39% in the City of St. Joseph and Benton Charter Township, and 9% in St.
Joseph Charter Township, as shown in Exhibit 4-43. Similarly, only 33% of dwellings were
owner-occupied in the City 6fBenton Harbor, compared to 53% in the City of St. Joseph and
Benton Charter Township, and 88% in St. Joseph Charter Township.
Exhibit 4-43
Area Housing ~arket
St.
Benton Joseph
Benton St. Charter Charter
Harbor 0;'
0/0 JoseEh 0/0 TWE· 0/0 TWE·
Housing: (from 1990 Census)
Number of Dwellings 4,791 100 .0% 4,545 100 .0% 7,018 100.0% 3,793 100%
Owner Occupied 1,598 33.3% 2.396 52.7% 3,774 53 .7% 3,346 88 .20/0
Renter Occupied 2,736 57.1% 1,804 39.7% 2.784 39 .6% 350 9 . 2~
Other 457 9.6% 345 7.6% 460 6 .5% 97 2.6~ ,
Median Rent $262 $351 $290 $322
Median Home Value $19,600 _- $66.200 $33,300 $72,400

Median residential rents and home values are 50%-100% higher in the City of St. Joseph and
St. Joseph Charter TO\\'nship than in the City of Benton Harbor and Benton Charter Township.

Based on the past history of residential construction trends in the area, 77% of the dwelling
units were for single family homes and 23% were for multi-unit construction.

~. " ,

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 Between 1981 and 1986, approximately 322 single family homes and 94 multiple family
dwellings were built in the St. JosephiBenton Harbor area. This represents an annual average
of 69 units per year from 1981 to 1986, as shown in Exhibit 4-44. In 1987, 1988 and 1989, the
pace of construction increased to an annual average of 183 units per year.
Exhibit 4-44
Housing Construction Trends
Reported Permits Issued in Area
1981-1986

Single Multiple
Year Family Familv Total

1981 29 4 33
1982 13 4 17
1983 "'I
-'- 53 85
1984 63 0 63
1985 78 9 87
1986 107 24 131
Total 1981-86 322 94 416
1987 185
1988 219
1989 145
Total 1981-89 965
A verage Annual
Penn its Issued
1981-1989 107

Source: Southwestern Michigan Commission

Between 1990 and 1994, the average value of single family houses under construction in
Berrien County increased 32.5%, and the number of residential penn its issued grew at an
increasing pace year-to-year (except between 1990 and 1991), as shown in Exhibit 4-45 .
Exhibit 4-45
Housing Units Authorized bv Building Permit
Berrien County

1990 1991 1992 1993 1994

Average Value of Single Family
Housing Under Construction $84,620 $90,540 $102,830 $100,000 $112,140

Growth in the Number of Residential

Building Penn its Issued -15.0% 5% 9% 11%

Source: W.E. Upjohn Institute for Employment Research

In Lincoln Township, construction of Sable Shores' first 12 residential units started in 1989,
and all were sold within a year. Construction of another 9 units was completed in 1995, all of
which have been sold at prices ranging from $159,000 to S399,000. All units have a view of
Lake Michigan, but no direct access to the lake.

1
j
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 In Berrien and Cass counties, the growth of housing subdivisions is boosting overall home
construction. Where once few existed, about 60 projects are underway or proposed. Highest
concentrations are in Milton, Niles and Ontwa townships across the state line from the South
Bend-Granger area, and in areas surrounding St. Joseph, as shown in Exhibit 4-46.
Exhibit 4-46
Number Subdivision Lots
Approved & Pending

1995 1996
St. Joseph Twp. 32 0
Lincoln Twp. 198 82
Royalton Twp. 32 0
N iles Twp. o 84
OnIWa Twp. 14 46

A 27 acre parcel on Lakeshore Drive in Shoreham with almost 1.000 feet of frontage on Lake
Michigan sold in March 1997 for approximately $55,000/acre, or $29,000/unit for the 52 units
planned for the site. A 1.6 acre parcel with beachfront on Lake Michigan is currently for sale at
$700,000, or $437 ,500/acre.

Outside these growth areas, other townships are reporting increases in building permits,
whether in planned unit developments, condominiums or single famil y residential. As a result.
total residential sales in the two counties increased nearly 14% through October 1996 over a
year ago , according to the Southwestern Michigan Realtors Association. Proposal A made
Michigan more competitive with Indiana in property taxes, which attracted homebuilders.

Discussions with real estate brokers and developers indicted shoreline housing in the area is
being demanded primarily by young professionals (specifically, couples \vith double incomes
and no children), empty-nesters, retirees, and individuals seeking income property. Real estate
prices in the area are lower than those in more well-knov-.n second home locations.

Local buyers are willing to purchase a condominium as a primary residence. However, price
sensitivity is often displayed by this group. Those from outside the area find the area ' s
condominiums attractive as second homes, due to the security and maintenance provided by the
condominium associations. For buyers from outside the area, the optimum selling season is
during the spring and summer seasons.

D. SUMMARY
The steady improvement in the midwest and metropolitan industrial and office markets will provide
fertile ground for new construction activity in the Midwest in 1997 and 1998. In the near term,
however, while the availability of capital is greater than it has ever been. 40% to 50% preleasing
requirements still will be required, depending on the developer.

The health of the national and international economies will affect the pace of industrial activity
throughout the 1990' s. Industrial property remains relatively strong in some areas of the country, and
because its economic base is more diverse than it was a decade ago, the midwest is well positioned to
handle new development.

Although the national trend of continued downsizing remains a negative for the industrial market, a
further deterioration in the industrial base is unlikely. In general. the steady demand for space in the
midwest coupled with stabilized prices indicates evidence of a stable industrial market. We anticipate '
stable to slight increases in rents, land values, and sale prices.

114
I '

Most industrial land sales activity will likely be limited to user sales and smaller development sites
(less than 20 acres). Due to the ample quantity of fully or partially improved industrial sites available
in the area, we do not foresee significant activity or large land tract sales to developers.

Institutional investors continue to look for opportunities in industrial properties in order to diversify
their portfolios. However, they look for quality property, primarily bulk warehouse space in business
park settings, with growing local economies.

The general outlook for the industrial market is stable as industrial $pace demand is expected to remain
steady in the region. Assuming minimal new construction, slowly increasing absorption levels, and the
continued phase-out of older, obsolete space from the inventory, the near-term outlook should to reflect
continued improvement.

During the next 12-18 months, demand for space should center around moving goods, likely
manufactured outside the U.S., through distribution networks. Third party warehouse providers
typically provide the location, take the risk of occupancy and have efficient transportation hubs already
in place.

With improved access to intermodal transportation opportunities. the St. Joseph/Benton Harbor area
should be able to attract warehouse as well as manufacturing users.

The state of the commercial office and retail markets is a fair indication of the future focus of the
capital markets. The suburban markets will be among the strongest, increasing in popularity as
vacancies tighten further and rents move higher. In contrast, activity and interest in the downtown and
second and third tier markets, except for "vulture funds" will remain flat, despite the lower values.

The minimal activity in the St. JosephiBenton Harbor office market is almost entirely generated from
within the area. Virtually no office users of any significant size from outside the area have located in
St. Joseph or Benton Harbor recently, however, there has been increased interest. Quality of life and
labor availability issues may continue to impact the office market.

The retail market has slowed regionally, but has strengthened locally as a result of the Orchards Mall
development. The Mall area has become a regional shopping destination and, retail occupancy rates
and development activity have increased. We expect this growth to continue.

The area's tourism industry is growing, and with it the hotel and marina markets have continued to
expand. As more and more people look for vacation and second home locations, the area can expect
continued growth in the tourism industry.

The residential market is healthy and growing in St. Joseph, but is depressed in Benton Harbor.

115
Exhibit 4-47 summarizes the real estate market infonnation developed by CPL as it influences the St.
JosephlBenton Harbor properties.
Exhibit 4-47
Real Estate Market Summarl:
Estimated Estimated
Midwest Market Property
Value Value Total Value Implied Value
Range Range Acres Range Value S/Acre
Ind ustrial
S:>l!e
Land $/Acre $22,000-$217.000 $1-$4.500 126.0 SI26-$567.000 $252.000 S2.000
Modem Bldgs $/S.F. SI5 .00-$28 .00 $900-$18 .00
Older Bldgs . S/S.F. S3 .00-$12 .00 $3.00-$5 .00
Lease
Modem Bldgs . $/S.F. $1.75-$5 .00 $100-$2.75
Older Bldgs . $/S.F. $0 .50-$1 .50 $0.50-$1 .00
Q.!Ikt
Land S/Acre $50.000-$150.000 $15,000-$25,000 25 .0 S3: 5.000-$625.000 $400.000 S16.000
Sale $/S.F. $60 .00-$175 .00 $2000-$4000
Lease S.'S.F. $12 .00-$26 .00 $6 .00-$14 .00
R~tl!il {nQn-r~l:iQnall
Land $/Acre $240,000-$80.000 $20,000-$40.000 5.0 $1 00.000-$200.000 $100.000 $20.000
Sale $/S.F. $40.00-$120.00 $30.00-$75 .00
Lease $.'S.F. $8 .00-$26.00 $8 .50-$14.00
Hotel
Land $: Acre $40.000-$220.000 $10,000-$40,000 20.0 S2 (10. 00-$800. 000 600.000 30.000
Sale $fRoom $35.000-SI25 .000 $60,000-$80.000
Lease S'RoomINight $29.00-$150.00 $39.00·$99.00
Marina
Land $ Acre $4 .000-$40.000 $10,000-$20.000 6. 2 S62.000·$124.000 $124.000 S2 0.000
Sale $/Slip $10,000-$30.000 $12.000-$17.000
Lease $!Slip $1 ,000-$3 .500 $1 ,250-$2,250
Qther Commer~ial
Land $/Acre $20.000-$80.000 $9,000-$20,000 24 .5 $220.500-$490.000 $220.500 S9,000
Residential
Land $!Acre
Waterfront - $75 ,000-$300.000+ $30,000-$60.000 24 .0 $720.000-$1 ,440.000 $720.000 $30.000
Interior $4,000-$150,000 $5 ,000-$15 ,000 56.5 $282 .500·$847.500 $565.000 $10,000
Housing : S/S.F.
Waterfront $150 .00-$350.00+ $150.00-$175 .00
Interior $60.00-S 150.00 $90.00-$120.00
287 .2 $1 .960.1 26-$5.093 .500 $2,981.500 S1 0.381

Therefore, based solely on the real estate market infonnation presented in this section, the property
values range from $2.0 million to $5.1 million, with an implied value of$3.0 million. This assumes a
sale of all of the properties without a discount to reflect current market absorption characteristics, the
bulk nature of the development parcels, or the time value discount of development costs, carrying
costs, and market timing. These factors can discount the value by as much as 50%.

This value does not include the 53 acres of wetland and fill in the Northeast quadrant of the St. Joseph
properties, the 104 acres south of the CSX tracks and north of West Main Street in Benton Harbor, or
the cost of environmental remediation. In addition, the costs of infrastructure improvements to the M-
63 interchanges, some of the roadway and infrastructure improvements both inside and outside the
project areas, and the commercial port facility are expected to be funded through FederaL state, and
local monies.

'/.-.".,'.

116