TOPICS > Economy

In Ann Arbor, Michigan Finds Its ‘Life Preserver’

December 8, 2009 at 12:00 AM EST
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Michigan is home to few bright economic spots these days -- with the exception of the college town of Ann Arbor. Ray Suarez reports.
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JIM LEHRER: Finally tonight: Patchwork Nation, our on-air and online collaboration with The Christian Science Monitor.

This week, Ray Suarez is reporting on how the recession is affecting different types of communities across the United States. Tonight, he reports from what the Patchwork Nation project calls a campus and career center, the college town of Ann Arbor, Michigan.

RAY SUAREZ: Let’s say I wanted to take you to a city with a vibrant downtown, a cutting-edge information technology incubator, filled with smart young entrepreneurs, and a deli packed with foodies waiting to buy $40 cheese.

WOMAN: I’m also going to give you a taste of another one, so you can compare.

RAY SUAREZ: You might be surprised to find yourself in Ann Arbor, Michigan. The city is like a life preserver, floating in a state whose economy has been sinking for a decade.

Michigan is home to the nation’s highest unemployment rate, 30 percent in Detroit, and a full-blown collapse of its manufacturing economy. But, Ann Arbor, built around the University of Michigan campus is literally buzzing with activity.

MAN: That’s not a neuron, or that is a neuron?

RAY SUAREZ: In the basement of a nondescript office building, Greg Gage and Tim Marzullo are tinkering with a machine that records the neural activity of a cockroach’s leg.

So, this that I’m hearing, this kind of sort of Geiger counter sound…

MAN: Yes, exactly.

RAY SUAREZ: … is coming from this little leg here?

MAN: Exactly. Exactly.

MAN: These are the cockroaches we’re using.

RAY SUAREZ: Gage and Marzullo, an engineer and a neurobiologist, teamed up as Backyard Brains to build inexpensive equipment for students to measure electrical activity in nerve cells. They hope their invention will soon be used in high school biology classes across the country.

They are among a group of some 30 student entrepreneurs who make up TechArb, an incubator funded partly by the University of Michigan for students and recent graduates who want to turn their classroom projects into businesses.

Although TechArb opened just this summer, some of its firms, like Mobiata, which makes travel applications for iPhones, are already making money.

MAN: We’re on target to do over a million in revenue for the first year.

RAY SUAREZ: Venture capitalist Marc Weiser and U.M. Professor Thomas Zurbuchen started TechArb with the idea that Michigan needs more homegrown entrepreneurs to propel the state’s economy.

MARC WEISER, RPM Ventures: If Michigan is going to reinvent itself, it’s going to start by trying to diversify ourselves and reinvent ourselves across the board. And that takes a change of mind-set. And the best place to change that mind-set is within a university environment, where you have got young minds who are eager, who have an opportunity in front of them, and they’re still looking forward, not looking backwards.

THOMAS ZURBUCHEN, University of Michigan Center for Entrepreneurship: What we want to be at the university is a place that is a — really a change agent in our environment.

RAY SUAREZ: In a speech to students and faculty in October, university president Mary Sue Coleman said U.M. is capitalizing on the economic downturn.

MARY SUE COLEMAN, president, University of Michigan: Just as we are recruiting great scholars, when other universities have all but shuttered their employment offices, we are moving forward with a research expansion unlike any other.

RAY SUAREZ: Coleman points to the Pfizer research and development campus in Ann Arbor. When the pharmaceutical giant left town, so did 2,500 high-paying jobs, along with an annual $4 million in tax revenue for the city. When no commercial buyer was interested, the university bought the 174-acre site.

That’s counterintuitive in tough times to make such an audacious play, to spend that kind of money. We’re not talking about a million or two.

MARY SUE COLEMAN: Yes.

RAY SUAREZ: It’s a big, big purchase.

MARY SUE COLEMAN: Yes. Well, it was $108 million. Let me give you a relative value here. To build that kind of lab space costs $600 a square foot. We got it for less than $50 a square foot. So, for us, it was a huge bargain. We’re making investments in the future. And we’re making the investments at a good price that we believe is going to be an enormous return.

RAY SUAREZ: Coleman is betting she can fill the lab space by attracting private companies and nonprofits looking to partner with the university. Ann Arbor has already captured more than $100 million in federal stimulus funds for research into products like new car batteries.

Across the country, cities like Ann Arbor, homes to big public universities, are well-positioned to survive economic downturns. They bring in tens of thousands of students, all with money saved, earned and borrowed in other places to be spent right here.

JOHN HIEFTJE, mayor, Ann Arbor, Michigan: This is all a historic district.

RAY SUAREZ: Ann Arbor’s mayor, John Hieftje, sees his job as making sure the city remains a desirable place to live. If it is, he says, talented researchers, along with their out-of-state dollars, will continue to come to the university and settle their families in Ann Arbor.

JOHN HIEFTJE: People who are doing this type of research have the world to choose from. We need to maintain a very high quality of life in our city to be able to attract the — frankly, the brilliant people that we need to — to keep things moving forward.

RAY SUAREZ: One attraction is a high concentration of gourmet food eateries. And no visit to Ann Arbor is complete without a stop at Zingerman’s Deli, a local institution for 27 years.

A Frank and Kathy’s half Italian sub.

EMPLOYEE: Absolutely. Would you like a large or the small?

RAY SUAREZ: Can I have the large, please?

EMPLOYEE: Sure.

RAY SUAREZ: Even in the midst of a recession, people still flock here and shell out as much as $16 for a sandwich.

ARI WEINZWEIG, Zingerman’s Delicatessen: When people do spend their money, they want to spend it on something really good.

RAY SUAREZ: A simple enough formula. Zingerman’s co-founders, Ari Weinzweig and Paul Saginaw, concede, the recession has hit the bottom line. But they’re still hiring new people and rolling out new product lines.

ARI WEINZWEIG: So, are we impacted? Absolutely. Do we go to go out and make a living anyway? Absolutely.

RAY SUAREZ: Zingerman’s, which has weathered tough times before, has grown into a group of 11 distinct businesses, with $34 million in annual revenue and more than 500 employees.

It would have been easy to begin moving pieces of a growing business to cheaper parts of the country or to franchise. But Weinzweig and Saginaw have stuck to their original vision statement.

ARI WEINZWEIG: And, in that vision, among other things, it specifically says that we aren’t going to open anything outside the Ann Arbor area.

RAY SUAREZ: Mayor Hieftje says Ann Arbor reaps the benefits of that fierce loyalty. But he also warns that successful local businesses can only buoy the city’s economy for so long.

JOHN HIEFTJE: The tide that is sweeping through the state, if somehow that wave doesn’t turn around five years from now, eventually, it will just wear us down. So, it’s going to be difficult, but we will, we will certainly be doing our best to make sure that we stay above that wave.

RAY SUAREZ: Still, campus and career centers like Ann Arbor are poised to prosper once an economic recovery does take hold, says Dante Chinni, director of the Patchwork Nation project.

DANTE CHINNI, project director, Patchwork Nation: They’re riding out the recession better, but I also think, in the long run, once we get past the recession, which — and we’re still going to have a good 10 years of kind of sorting through a bigger economic, you know, restructuring we have to do in this country — these places are kind of well-positioned to kind of rise above all that.

RAY SUAREZ: And keep the campus and career counties attractive to coming generations of highly educated, highly skilled workers who can choose where to live.

JUDY WOODRUFF: Tomorrow, Ray reports from America’s heartland on how farmers are faring in the recession.