Tag Archives: arizona business

shopping

Economy’s Q3 Growth Boosts Local Businesses

The U.S. economy grew faster than expected in the third quarter as businesses restocked shelves, and Arizona businesses are noticing the uptick. A 2.8% boost from July to September has Valley business owners optimistic about the holiday season and the first quarter of 2014. Local restaurants, retail, real estate and even purveyors of luxury goods and services report a steady incline of consumer spending, some even reaching pre-economic downturn levels.

Dr. Daniel Shapiro, a Scottsdale-based plastic surgeon reports nearly 35% growth in 2013 over 2012. “As a board-certified sugeon that’s been practicing for 22 years, my schedule stayed busy despite the economic downturn…but over the last few months we’ve been forced to reinstate a waiting list that spans several months for surgery as well as a consult fee,” he said. “It’s evident that people have more money to spend now, and are more confident spending it,” he said.

Shapiro is just one Valley business owner that says the economy is on the upswing. Restaurant owners, many hit hard by the economic downturn are also saying that business is booming again. “Having owned restaurants in Arizona over the last 20 years, it’s easy to spot a trend when it’s happening,” said Dave Andrea, owner of Brat Haus in Old Town Scottsdale. “First it’s small things like patrons adding another round of drinks, or ordering dessert, when before they’d forgo those things in an effort to save money,” he said,

Both Andrea and Shapiro agree that people are splurging on themselves a little more now, whether it’s a long awaited nip and tuck or just a well-deserved dessert.

What’s fueling the Valley’s economic stability? The labor market continued to improve, but at a snail’s pace, government data showed. Across the country, gross domestic product expanded at a 2.8 percent annual rate, the quickest pace since the third quarter of 2012, the Commerce Department said on Thursday. It was an acceleration from a 2.5 percent clip in the second quarter and beat economists’ expectations for a 2.0 percent rate.

DECO Communities, a Scottsdale-based real estate development company just announced completion of two new urban renewal projects which transform infill properties into stylish and modern apartment homes called Cabana Modern Apartment Homes. With 4 properties completed in the last 16 months, the company says real estate is on the upswing as well. “There is a high demand for the kind of development we are doing,” said Rob Lyles, partner for DECO Communities, “And the outlook for real estate development and growth in Arizona next year is exceptionally promising,” he said.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, expanded at a 1.5 percent rate, slowest pace since the second quarter of 2011. It grew at a 1.8 percent rate in the April-June period.  With the news of economic growth at the start of the holiday season and the ‘high-season’ for Valley tourism, business owners are exceptionally optimistic about the Q1 2014 economic reports as well.

shopping

Economy's Q3 Growth Boosts Local Businesses

The U.S. economy grew faster than expected in the third quarter as businesses restocked shelves, and Arizona businesses are noticing the uptick. A 2.8% boost from July to September has Valley business owners optimistic about the holiday season and the first quarter of 2014. Local restaurants, retail, real estate and even purveyors of luxury goods and services report a steady incline of consumer spending, some even reaching pre-economic downturn levels.

Dr. Daniel Shapiro, a Scottsdale-based plastic surgeon reports nearly 35% growth in 2013 over 2012. “As a board-certified sugeon that’s been practicing for 22 years, my schedule stayed busy despite the economic downturn…but over the last few months we’ve been forced to reinstate a waiting list that spans several months for surgery as well as a consult fee,” he said. “It’s evident that people have more money to spend now, and are more confident spending it,” he said.

Shapiro is just one Valley business owner that says the economy is on the upswing. Restaurant owners, many hit hard by the economic downturn are also saying that business is booming again. “Having owned restaurants in Arizona over the last 20 years, it’s easy to spot a trend when it’s happening,” said Dave Andrea, owner of Brat Haus in Old Town Scottsdale. “First it’s small things like patrons adding another round of drinks, or ordering dessert, when before they’d forgo those things in an effort to save money,” he said,

Both Andrea and Shapiro agree that people are splurging on themselves a little more now, whether it’s a long awaited nip and tuck or just a well-deserved dessert.

What’s fueling the Valley’s economic stability? The labor market continued to improve, but at a snail’s pace, government data showed. Across the country, gross domestic product expanded at a 2.8 percent annual rate, the quickest pace since the third quarter of 2012, the Commerce Department said on Thursday. It was an acceleration from a 2.5 percent clip in the second quarter and beat economists’ expectations for a 2.0 percent rate.

DECO Communities, a Scottsdale-based real estate development company just announced completion of two new urban renewal projects which transform infill properties into stylish and modern apartment homes called Cabana Modern Apartment Homes. With 4 properties completed in the last 16 months, the company says real estate is on the upswing as well. “There is a high demand for the kind of development we are doing,” said Rob Lyles, partner for DECO Communities, “And the outlook for real estate development and growth in Arizona next year is exceptionally promising,” he said.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, expanded at a 1.5 percent rate, slowest pace since the second quarter of 2011. It grew at a 1.8 percent rate in the April-June period.  With the news of economic growth at the start of the holiday season and the ‘high-season’ for Valley tourism, business owners are exceptionally optimistic about the Q1 2014 economic reports as well.

Diane Brossart - Fifty Most Influential Women in Arizona Business

Diane Brossart – 50 Most Influential Women in Arizona Business

Diane BrossartPresident and CEO, Arizona Forward

Brossart joined the nonprofit civic group — which aims to move Arizona forward environmentally, economically and socially — as a member 30 years ago. She was appointed to her leadership role in 1991, when Valley Forward focused exclusively on Maricopa County. Rebranded as Arizona Forward is 2012, its expanded statewide sustainability agenda includes: land use, transportation, air quality, energy, water and environmental education.

Surprising fact: “I believe my mother who passed away nearly 10 years ago lives as a rabbit in my backyard.”

Biggest challenge: “Taking Valley Forward statewide after 43 years as the Valley’s voice for balance. I’m bringing the best and brightest talent around Arizona together to help make the Grand Canyon State the greatest place in America to live.”

Fifty Most Influential Women in Arizona Business – Every year in its July/August issue Arizona Business Magazine features 50 women who make an impact on Arizona business. To see the full list, read the digital issue >>

Karen Abraham - Fifty Most Influential Women in Arizona Business

Karen M. Abraham – 50 Most Influential Women in Arizona Business

Karen M. Abraham – Senior vice president and CFO, Blue Cross Blue Shield of Arizona

Abraham oversees eight departments including finance, taxes, facilities and risk. With 30 years worth of experience at BCBSAZ, she works directly with the CEO on the development of long-range plans and policies.

Surprising fact: “My mother was a bookkeeper and at an early age recognized that I liked math. By  the  8th grade, I actually knew what a CPA was and I wanted to make it my job.”

Biggest challenge: “I’ve worked through difficult economic times, operating losses and much government regulation. I have wonderful relationships with many talented colleagues who have helped me through challenging times.”

Fifty Most Influential Women in Arizona Business – Every year in its July/August issue Arizona Business Magazine features 50 women who make an impact on Arizona business. To see the full list, read the digital issue >>

Steve Koeppelle, Owner, Scottsdale Jean Company - AZ Business Magazine June 2010

Steven Koeppel, Owner Of Scottsdale Jean Company, Comes Out On Top By Selling Bottoms

Steven Koeppel
Scottsdale Jean Company
Title: Owner
Est: 2005  |  www.scottsdalejc.com

“You can never learn too much and you can never be too smart – ask a lot of questions.” – Steven Koeppel, owner of Scottsdale Jean Company

When it comes to battling with the best in the retail clothing world, Scottsdale Jean Company is Arizona’s largest, successful independent retail store, standing strong against big guys like Macy’s and Nordstoms.

Despite its name, Scottsdale Jean Company carries more than jeans. While jeans make up 55 percent of the business, men’s and women’s clothing collections, jewelry, accessories, and sunglasses make up the rest. More than 100 designer brands, including Michael Stars and True Religion, fill the 10,000-square-foot store in the Scottsdale Airpark. The store also carries the exclusive line of skin, hair and body products, Kiehl’s.

Scottsdale Jean Company began when Koeppel sold his automobile business in the New York City area in 2004. He then moved to Arizona with a few ideas, but saw a void in the market for the business he has since established.

Even though moving from cars to clothes may have been a difficult transition, Koeppel learned that “business is business.” His experience running a large chain in New York proved to be invaluable when opening up Scottsdale Jean Company. Koeppel self-funded his Arizona business from the beginning and was successful from day one.

“If you have a good foundation you can do anything,” Koeppel says.

Although the company closed a second store in Peoria, Scottsdale Jean Company has 18 employees and is still staying profitable during this economic downturn.

“We have a very well-run, viable business. It is just a matter of waiting through these times, doing what we have to do, and wait for things to turn,” Koeppel says.

Plans for the future consist of expanding the store out of state and rebuilding the company website.

“We are now one of the premier stores in the country and we put a great name in the industry. We do sizeable business online and we ship all over the world, which has helped us to develop and build a name not just in Arizona, but everywhere,” Koeppel says.

The company’s website features a personal shopper and live, online help to answer any questions while visitors browse the site. The website is a marketing tool that can track where most of the traffic is coming from and how it got there. According to Koeppel, this is a great way to gear specific advertising toward that market.

“The most important thing in Internet marketing and online sales is people finding you. We optimize keywords and are getting about 1,000 visitors a day at this point,” Koeppel says.

When all is said and done, Koeppel’s No. 1 advice to fellow business owners is to “make sure you have a thorough business plan. Not everyone opens their doors and is successful the moment they open.”

Arizona Business Magazine June 2010

Minnesota flag

Adding Leverage To Going Green At Arizona Businesses

Minnesota is kicking our butt. No, I’m not talking ice hockey or the fact that they have 10,000 lakes — yes, it’s not just their state motto. Rather, I’m talking about their killer support for their environment — hey, they have 10,000 lakes to keep pristine remember? But seriously, Minnesota is leaving us in the dust when it comes to supporting the environment through workplace giving. What’s that you ask? Workplace giving is just that – where employees in companies, cities, counties, universities, or really any organization can give to charities through their workplace, usually via payroll deduction.

For decades, the United Way has been the biggest player on the block. But more recently, other groups, called federations, have joined in looking for an equal piece of the workplace giving pie, representing other nonprofit sectors including the environment. EarthShare is the granddaddy of environmental federations and has 19 state affiliates across the country. There are however a few of us ‘rogue’ independent greenies, like our own Environmental Fund for Arizona, but the Minnesota Environmental Fund is one that we Arizonans would be wise to emulate.

In a little over 15 years, MEF has established itself in 140 campaigns across the state, including private companies as well as cities and counties, and now brings in on average $900,000 in donations annually for its 25 environmental group members. No matter how you slice it, that’s a nice chunk of change for MEF members to help continue their missions.

Now contrast this to how Arizona is matching up…or not. Just 17 workplaces across the entire state currently include a ‘green’ choice in their workplace campaigns. For those of us who connect the environment, smart growth, and sustainability to the health and vitality of Arizona’s future, not to mention who believe in the ‘spirit of philanthropy,’ you’d think offering an environmental choice to workplaces would be easier. It’s not. Unfortunately, sometimes long-standing tradition trumps common sense and cool ideas.

Why is ‘giving green’ at work so darn great and why should Arizona take notice? I’ll tell you. Not only does it introduce hundreds, if not thousands of folks to smaller environmental nonprofits who might not have access to companies themselves, but do amazingly cool work for our environment, but it allows Arizona employees to learn about the significant variety of environmental issues being tackled across the state, and helps them to get involved. Think Sonoran Institute and their work with Superstition Vistas. Think Audubon Arizona and their recent opening of the Nina Mason Pulliam Rio Salado Audubon Center, the gateway to a lush Sonoran riparian habitat used by over 200 species of birds and other wildlife. And don’t forget Grand Canyon Trust. They’re our champions of Arizona’s – and the nation’s – spectacular treasure, the Grand Canyon and the Colorado Plateau. These are just three of 29 organizations that make up EFAZ. Here’s another reason — one that is ridiculously obvious. Arizona is pushing ‘green’ in a big way, no not just to save the planet but for more practical reasons, like recharging our state’s economy with green jobs. Solar energy, water issues — we’re all over it. Why wouldn’t companies, cities, counties, and universities welcome a green choice into their campaigns?

So, what’s the moral of the story? Let’s not let Minnesota keep kicking our environmental butt. Aren’t the Grand Canyon and the Sonoran Desert worth saving? I say ‘wake up Arizona and smell the organically-grown, fair trade coffee.’


www.efaz.org
www.mnenvirofund.org

Legal Aide

Key Legal Considerations And Strategies Businesses Should Consider In An Economic Downturn

Virtually all Arizona businesses, but disproportionately small and medium-sized enterprises, have been significantly impacted by the recession. The current financial climate has and will undoubtedly continue to have countless business ramifications. Often overlooked, however, are the legal considerations that should be proactively evaluated by companies in a challenging economic environment. Legal strategies should be employed not only to manage present challenges, but also to take advantage of opportunities that present themselves in this ever-evolving business landscape. It is important to carefully consider the key legal variables in play.

Here are a few:

1. Renegotiate contracts
Unfortunately, parties oftentimes neglect to consider the details of their contractual relationships until such time as they are presented with challenges. It is therefore a good practice to closely scrutinize and reevaluate one’s contracts in advance of problems arising, and with an eye toward possibly negotiating more favorable terms. It is essential that businesses look to all of their contractual relationships and incorporate contractual provisions that allow for flexibility during fluctuating economic times and properly allocate business risks, including the protection of payment streams, dealings with vendors and clients, termination provisions, and dispute-resolution mechanisms.

2. Employment policies and procedures
Perhaps the area that presents the greatest challenge for small and medium-sized businesses concerns the legal aspects of employment. Particularly in economically challenging times, companies need to be aware of the potential for employment litigation. Companies should regularly ensure that employment policies are updated and consistent with their operations and the regulatory environment, and should be attuned to the potential impact of their employment-related decisions.

3. Corporate documentation
Reviewing and maintaining the proper business entity and structure for your business is vital to securing proper limited-liability protections, mitigating exposure associated with business and employment disputes, and ensuring the most advantageous tax treatment. Many factors influence the choice of a particular entity, including the number of owners, the source of capitalization, employee and immigration needs, management structure, the size of the organization, taxes, and personal asset protection. Limited-liability protection is particularly important in economically challenging times, when the number of disputes rises dramatically. Businesses should be extraordinarily prudent and diligent in the management and oversight of their corporate formalities to preserve the benefits of their entity status.

4. Intellectual property protection
Patents, trademarks, trade secrets and copyrights are species of intellectual property that can and should be protected under state, federal and international law, as applicable. The use and effectiveness of covenants not-to-compete and confidentiality agreements should also be evaluated. It is critical to assess intellectual property regulations and enforcement mechanisms on a regular basis before engaging in any activity that may jeopardize your business’ intellectual property rights.

5. Pursuing litigation
The prospect of business litigation should be approached with the goal of creating optimum value for the business. Businesses should be cognizant of the significant expense associated with litigation, the time horizon associated with the pursuit of claims through the judicial system, and the prospects, if any, of ultimately collecting on a favorable settlement or judgment. Litigants and their counsel should be acutely aware of the costs and benefits associated with pursuing and defending civil claims. The question should be asked: What is the value proposition in each alternative approach to resolving a dispute?

6. Consider bankruptcy alternatives
Bankruptcy can sometimes provide relief for a struggling enterprise. There are various strategies that can provide a “fresh start” for a business that has been impacted by this economy. A bankruptcy expert can assist in evaluating the utilization of bankruptcy to determine the best course of action. Alternatives to bankruptcy do exist, i.e. “work-outs” with lenders, and these options should also be fully explored in advance of filing for bankruptcy protection.

7. Dispute resolution
It is imperative to plan in advance to manage disputes that may arise in the course of business. Absent a contractual designation by the parties of a governing set of laws, forum or dispute resolution process, there may be uncertainty as to how, when and where disputes will be resolved. This uncertainty can translate into resources being unnecessarily expended. Parties should, at the very least, make efforts to agree in advance to a choice of law and forum to manage disputes, including the use of arbitration and/or mediation to provide for resolution. Businesses should be cautioned not to rush to agree to arbitration, however. In many instances, litigation in the judicial system may be a better option.

8. Identify a lawyer
It is important to seek the assistance of legal counsel who has a keen understanding of how to best structure your business or to help you in confronting your business’ challenges. The lawyer should have the ability to call upon a network of advisors who can provide particularized knowledge of the issues that confront your business, whether the goal is strategic planning or dispute resolution.

Recessionary economic conditions provide for challenges, as well as opportunities. The costs to those businesses that fail to adequately consider the legal ramifications of their actions in this environment can be substantial. These legal issues are best navigated and managed through proper planning, which will in turn maximize your business’ ability to capitalize on available opportunities.

Olivier A. Beabeau, a senior associate at Galbut & Galbut, contributed to this report. He can be reached at obeabeau@galbutlaw.com.

AZ Companies to Watch

Celebrating Second-Stage Entrepreneurial Companies

Presented by the Arizona Small Business Association in conjunction with the Edward Lowe Foundation

Gov. Jan Brewer

The businesses of the 2009 class of Comerica Bank Arizona Companies to Watch represent the determined, innovative spirit necessary to advance our great state. I am especially pleased to extend my congratulations and gratitude to this year’s recipients.

This prestigious recognition celebrates second-stage companies that employ from 10 to 100 people and generate between $750,000 and $100 million in gross annual revenue. These businesses are beyond the startup phase, possessing the capacity for significant growth, generating jobs and innovating new products and services. They make extraordinary contributions to our economy and to our communities.

The focus I have both as governor and as an Arizonan is where our state will be in the coming decade with regard to economic opportunities for our children and families — this is very real to me. Cultivating and sustaining stable jobs must be our highest priority. We must continue to take care of Arizona companies so they stay and grow jobs in our state.

Arizona, the nation and the world have been impacted by slowing economic conditions. It presents significant challenges — but also opportunity. Many of the companies we recognize today are seeing positive results. These companies are vital contributors to Arizona’s economic health and are critical to the well-being of the Arizona business community.

Arizona is a unique landscape ripe with opportunities for businesses. Please join me in honoring the 2009 Comerica Bank Arizona Companies to Watch recipients. We celebrate your current achievements and look forward to your future successes.

With appreciation,
Janice K. Brewer
Governor, State of Arizona

Edward Lowe Foundation

When Ed and I founded the Edward Lowe Foundation in 1985, we wanted to encourage entrepreneurship and a vibrant U.S. economy. In recent years, the foundation has concentrated its efforts on two key audiences: 1) Second-stage companies powered by entrepreneurs that have moved beyond the startup phase and are focused on growth issues rather than survival; and 2) entrepreneur support organizations (ESOs) that assist second-stage businesses and are the catalysts for growing their economies from the inside out by helping existing companies in the community.
To serve these audiences, we have developed a variety of tools and initiatives. In many ways, Companies to Watch creates a pipeline for these programs by identifying outstanding second-stage companies.

Celebration and recognition — Companies to Watch generates greater visibility in the marketplace, drawing attention to second-stage companies as a whole and to individual businesses. Honorees tell us that the program has boosted confidence levels for them with existing customers and suppliers. It has led to new opportunities for many firms. And for second-stage CEOs who spend so much time cheering on the troops, the award is a rare pat on their backs.

Life beyond the awards ceremony — Honorees have taken advantage of other Edward Lowe Foundation programs, such as our PeerSpectives roundtables and leader retreats at Big Rock Valley in Michigan. In fact, we’ve created a retreat format especially for Companies to Watch that gives newly named and past honorees a chance to meet and learn from each other.

Finding peers — This kind of networking is important because second-stage companies typically fly under the radar screen. By their very nature, second-stage entrepreneurs are fixated on their businesses, pressed for time and skeptical of joining groups. This makes it hard for them to find peers to share best practices.

It also make it difficult for ESOs to reach out to second-stagers. And even though many ESOs originally focused on startups, more organizations — such as the Arizona Small Business Association — are starting to target second-stage companies because of their immediate, sustainable impact on the economy. Through its application and nomination process, Companies to Watch helps ESOs discover new clients to serve, better assess their needs and tailor resources especially for these growing businesses.

What’s more, Companies to Watch creates a ready-made pool for researchers and policymakers to study second-stage entrepreneurs and track their impact. This is especially true in Arizona, which now counts four classes of honorees.

By helping second-stage entrepreneurs on their growth journey, and by helping ESOs expand their reach and capacity, the foundation hopes to be a catalyst for innovation and change. For even though Ed supported entrepreneurship broadly, he always believed that it was the second stage that was the greatest source of job creation. He would be delighted with the foundation’s focus on this important group, because the success of second-stage companies benefits not only the local communities i, n which they do business, but our entire nation.

Darlene Lowe
Chairman,
Edward Lowe Foundation

ASBA

The Arizona Small Business Association (asba) is honored to present the 2009 Comerica Bank Arizona Companies to Watch awards program. The program celebrates second-stage entrepreneurs and is done in association with the Edward Lowe Foundation. A special thank you to all our sponsors, including the event title sponsor, Comerica Bank.

Congratulations to this year’s remarkable honorees. This award is given to high-performing, second-stage businesses that boost economic growth and generate jobs in Arizona. It highlights the significant impact of second-stage companies on the state’s economy.

Over a four-year period ending in 2008, this year’s recipients have generated nearly $630 million in revenue and added 460 employees, a 148-percent increase in revenue and an 83-percent increase in jobs. That translates into 36 percent annual revenue growth and 23 percent annual growth in employees since 2005. If 2009 projections hold, these companies will have generated $849 million in revenue and added 559 employees in five years.

This has been a tough year for many businesses. There are many attributes that contribute to a company’s success. Perhaps the most important reason for small businesses’ survival is flexibility. When course correction needs to be made, small companies can pivot quickly. This ability to rapidly adapt and deploy new strategies often affords them a competitive edge over their larger corporate counterparts.

On behalf of all the members, staff and board of directors at asba, we extend our enthusiastic congratulations. We admire your courage, creativity and resiliency in these challenging times. Thank you for making Arizona a more vibrant place to work and live.

All the best,
Donna Davis
Chief Executive Officer
Arizona Small Business Association

Moving Valley Arizona 2010

Moving the Valley and Arizona Forward

Oh, give me land, lots of land
Under starry skies above.
Don’t fence me in.

That little tune written by Cole Porter and Montana engineer Bob Fletcher has served as the unofficial song of the West for almost 75 years. It’s captured the lure of the West; with all this room, there’s no need to grow up — grow out!

Despite warnings dating back decades, Western cities have been growing out at a rapid clip. Now we have to face the fact that our resources cannot sustain this type of urban sprawl.

It’s estimated that the state’s population will swell to 10 million by around 2040. Eight million of those residents will be living in the “megapolitan” Sun Corridor, a swath of land stretching from the middle of Yavapai County to western Cochise County to the Mexican border.

Fortunately, one organization, Valley Forward Association, has been working steadily on this problem for 40 years. Valley Forward’s mission is to bring business and civic leaders together in order to find ways to improve the environment and livability of Valley communities.

One of Valley Forward’s signature events, the Environmental Excellence Awards, takes place this weekend. The awards program is the state’s oldest and largest environmental competition. The program, now in its 29th year, recognizes buildings and structures, site development and landscape, art in public places, environmental technologies, environmental education/communication, environmental stewardship and livable communities that promote the cause of sustainability. The event is held in partnership with SRP.

While Valley Forward has long been at the forefront of the sustainability movement in the region, several others now have joined the cause. In recognition of that, the U.S. Green Building Council is holding its prestigious Greenbuild International Conference and Expo in Phoenix, Nov. 11-13. The keynote speaker is Nobel Peace Prize winner,  former Vice President Al Gore.  AZ Big Media is a proud in-kind partner of Greenbuild.

Another sustainability event that’s making its presence known is AZ BIG Media’s own Southwest Build-It-Green Expo & Conference, presented by SRP. The second annual event takes place March 18-20, 2010.

This year’s inaugural BIG Expo & Conference made good on its promise to be the Southwest’s largest annual event on sustainability for the commercial and residential marketplace. Nearly 9,000 people attended the BIG Expo at the Phoenix Convention Center, visiting the up to 300 exhibitors from commercial and residential businesses that offer sustainable products and services that affect everyday life.

The conference portion of the BIG Expo brought together industry experts, Valley leaders, instructors from Arizona State University’s Global Institute of Sustainability and members from such organizations as Valley Forward, Valley Partnership, BOMA, SRP, APS, the U.S. Green Building Council and many more.

While Arizona has made significant progress in the sustainability movement we have to remember to keep moving forward.

Janet Perez
Editor-in-Chief
Arizona Business Magazine

www.valleyforward.org
www.greenbuildexpo.org
www.builditgreenexpo.com

The Business Community Is Ringing A Cautionary Bell On Further Cuts To The State’s Education System

The Business Community Is Ringing A Cautionary Bell On Further Cuts To The State’s Education System

Good schools are good for business. It’s that simple. Contrary to popular belief, incentives and tax breaks aren’t necessarily the only things businesses take into account when considering a move to Arizona or an expansion of a local operation. Sure, they want to make money, but the quality of the education system, from K-12 through colleges and universities, also is a key element in the decision-making process.

In early July, $3.2 billion in budget funding for the K-12 public education system was restored after initially being cut by Gov. Jan Brewer in a line-item veto. The education budget was also increased by $500 million, which now qualifies the state for $2.3 billion in federal stimulus money. Despite dodging that bullet, schools remain under the threat of future budget cuts, and that has caught the attention of business leaders. But paying attention isn’t enough. They need to be more involved in the process, insiders say, establishing and maintaining working relationships with state legislators who control the purse strings.

The business community has a stake in education on two fronts, says Chuck Essigs of the Arizona Association of School Business Officials (AASBO), which provides professional development opportunities for individuals working in all jobs in the education field.

“One,” he says, “is the ability of the education system, both elementary and secondary and the universities, to prepare an adequate work force, and to make sure schools are adequately funded so they can carry forth their mission of having an educated population. So when the business community hires people, they’re hiring people who have the skills and training to be productive workers.”

The second aspect involves Arizona businesses that are recruiting workers from out-of-state or businesses that are considering an expansion to Arizona from elsewhere.

“If those workers have school-age children, they want to know what the school system is like,” says Essigs, AASBO’s director of government affairs. “If they feel that their kids are not going to get a quality education, it might make them hesitant to leave where they are. They might think twice about taking a promotion and putting their kids at a disadvantage in a school that’s not up to the standards they want.”

Robert E. Mittelstaedt Jr., dean of the W.P. Carey School of Business at Arizona State University, says most businesses are far more concerned about the general education environment.

“I remember a bank official in Philadelphia 25 years ago saying he couldn’t find a receptionist who could read and write,” Mittelstaedt says. “You still hear that. Companies expect to have an education system that graduates students who are qualified to enter the work force in some minimally accepted level.”

If the public schools fall short, perhaps because of inadequate funding, the option of sending children to private schools becomes a cost factor for employees.

Javier Rey, vice president-operations for State Farm Insurance’s Tempe operations center, says it’s critical that Arizona’s youth are better prepared for higher education, so they can contribute to the nation’s and state’s civic, economic and social advancement.

“The quality of schools is a factor that businesses look at when considering relocating or expanding,” Rey says.

Christopher Smith, manager of government and regulatory affairs for Cox Communications, calls education “critical to economic development.”

“It is an essential ingredient in the lifeblood of our economy, both nourishing the supply of talented workers and attracting and retaining the customers they serve,” Smith adds. “Education ranks high on the various lists of important factors in location/relocation decisions, not only due to the increasingly critical competition for knowledge workers, but also because executives making these decisions care deeply about the education of their own children.”

Smith gives Arizona’s education system reasonably satisfactory grades, but says the status quo is not good enough to meet today’s challenges.

“We need to break the mold a bit and unleash more of what made America so great — liberty, bold innovation, inspired risk-taking, creativity, robust competition and an unflagging entrepreneurial spirit,” he says.

Susan Carlson, executive director of the Arizona Business & Education Coalition (ABEC), a nonprofit K-12 education policy advocacy organization, says the business community needs to be more involved in the school-funding process.

“Business needs to be engaged in the conversation,” she says. “They need to watch what the Legislature is doing. We can’t keep saying ‘no’ around tax reform and ‘yes’ around increased skills for students. It may take more money, if money is allocated to the right things. It’s going to take being focused on research-based strategies. Educators are willing and committed to support research-based strategies, and redirecting some of the funding that exists.”

AZ Big Media 25 years

Arizona Business Magazine Celebrates Its 25th Anniversary

An important lesson in the launch of any business or new product is to learn everything you can about your target consumer, and that’s exactly what Mike Atkinson did when he bought the Office Guide to Phoenix 25 years ago. He approached leaders in the community in such industries as health care and law, and asked them what they wanted and needed from a local business magazine.

“I took reams of notes and what came out of it was Arizona Business Magazine,” Atkinson says. “The research led me down a path of this is how it should look and read.”

Atkinson was inspired to enter the publishing arena because it presented the chance to exercise his artistic abilities. He wanted to create “a product that was fundamentally art-related and a product that could help inspire, excite and help educate,” he explains. “I’m an artist at heart, so the magazine’s pages were like my mini-canvases.”

Initially, Atkinson was the sole employee of the publication — he wrote the stories, shot the photos and sold the ads. Today, however, the company has increased to nearly 30 employees and publishes an additional six titles, including AZRE: Arizona Commercial Real Estate, Ranking Arizona, Experience AZ, People to Know, Creative Designer and Scottsdale Home & Design. The flagship publication has also undergone many changes over the years, including its frequency, which has gone from quarterly to bimonthly, and in February 2008, to monthly. The company has evolved as well, and last year was re-named AZ Big Media.

Atkinson didn’t limit his creativity to the magazines, however. In 1991, the company launched its first Arizona Home & Building Expo, which is now in its 18th year. AZ Big Media also hosts a series of awards and events that honor various segments of the business community, from health care to finance. In March 2009, the company held its inaugural Southwest Build-it-Green Expo & Conference. AZ Big Media’s newest venture, the Home & Design Idea Center, opens this summer. The company is also building a strong presence online with its new Web site, www.azbigmedia.com, where readers can find many of the stories featured in each magazine.

“If you go to our Web site, you’ll see ‘online’ is where we’re heading in the future,” Atkinson says. He adds that the future will include more home shows when the market is ready for them. He also hints of possibly even adding a radio station.

If he could go back in time and change one thing, Atkinson says, it would involve the company’s interaction with its audience online.

“At the time, we were just learning about the Internet, and I remember one of my editors came in my office and said ‘Guess where I was today? I was on the computer and I was talking to people all the way in Italy!’ and he began to describe how it took him to different places,” he says. “I thought that was pretty cool, but I didn’t have the foresight to say, ‘This computer Web thing just might turn out to be something really big!’ ”

Looking back on the past 25 years, Atkinson says his success is due to two key things: “Hard work and surrounding myself with the right people.”

Here’s to one day cashing in this 25-year silver achievement for gold.

Hidden Tax Revealed Chart

Hidden Health Care Tax Hits Workers

The Arizona Hospital and Healthcare Association (AzHHA) and the Arizona Chamber Foundation are joining forces to stop what we call a hidden health care tax on businesses and consumers. According to a study released by the Arizona Chamber Foundation, which is associated with the Arizona Chamber of Commerce and Industry, Arizona employers and the state’s 3.5 million privately insured consumers pay 40 percent above cost for hospital services, primarily because the state and federal governments significantly underpay hospitals for those same services.

“This study shines a light on what Arizona business and health care leaders refer to as the hidden health care tax,” says Suzanne Taylor, executive director of the Arizona Chamber Foundation. “The study demonstrates that when state or federal lawmakers reduce hospital payment levels to below their costs, Arizona businesses and consumers pick up the tab in the form of higher health insurance premiums.”

The study, An Analysis of Hospital Cost Shift in Arizona, was conducted by the nationally recognized Lewin Group. It found that in 2007, private insurance payments for Arizona hospital services exceeded costs by $1.3 billion in order to offset underpayment from:

  • State government — The Arizona Health Care Cost Containment System (AHCCCS), Arizona’s Medicaid program that paid 79 percent of hospitals’ costs for providing services, underpaid Arizona hospitals by $407 million.
  • Federal government — Medicare, which paid 89 percent of Arizona hospitals’ costs for delivering services, underpaid Arizona hospitals by $481 million.

Uncompensated care — Arizona’s hospitals absorbed $390 million in 2007 — 4.4 percent of their total costs — for services they delivered, but for which they received no compensation.

Public insurance programs such as AHCCCS and Medicare are the primary drivers behind the hidden health care tax, paying hospitals below what it costs to treat patients. To cover these costs, hospitals shift the burden to private health insurers by negotiating higher rates to provide coverage.

“In this downturn, the hidden health care tax is particularly harmful to the economic well-being of our state,” Taylor says. “Employers throughout Arizona are grappling with incredible challenges ranging from declining revenues to shrinking credit. The hidden health care tax is another weight on businesses that want to continue providing employer-based insurance to their employees.”

Arizona employers and their employees typically share the cost of health insurance coverage, with employers paying an average of 81 percent of a single policy and 75 percent of a family policy for workers enrolled in their respective health plans. According to the study, in 2007 inadequate payment by AHCCCS and Medicare, as well as uncompensated care, increased private health insurance premiums in Arizona by 8.8 percent or $361 for every privately insured person.

The study revealed that public program underpayment in 2007:

  • Added $1,017 — $324 of which is due to AHCCCS underpayment — to the annual price tag of a typical family health insurance policy, bringing the cost to $11,617.
  • Increased by $396 — $126 of which is due to AHCCCS underpayment — the annual cost of a single health insurance policy, bringing the price tag to $4,519.

Underpayment by public insurance programs for hospital services exacts a steep price on employers, their workers and private purchasers of health insurance. In 2007, the cost shift due to AHCCCS, Medicare and uncompensated care cost: employers an additional $941.7 million, $301.3 million resulting from AHCCCS underpayment; employees an additional $292.8 million, $93.7 million of it due to AHCCCS underpayment; and private purchasers of health insurance an additional $41.4 million, $13.2 million of it resulting from AHCCCS underpayment
AHCCCS payment rate freeze.

  • Five percent AHCCCS payment rate reduction.
  • Disproportionate share hospital payments.
  • Graduate medical education.
  • AHCCCS payments to rural hospitals.
  • State savings of  $95 million.
  • Lost federal funds of $250.4 million.

Total dollar increase in private insurance premiums due to the cost shift of $1.48 billion in 2009 and $1.63 billion in 2010.
Individual increase in premiums of 19 percent for privately insured Arizonans due to the cost shift.

Wist Office Products - Best of the Best 2009 presented by Ranking Arizona

Best of the Best Awards 2009: Business Services

Business Services Honoree: Office: Supply Companies

Wist Office Products


Wist Office Products - Best of the Best Awards 2009 presented by Ranking Arizona

Photograph by Duane Darling


Wist Office Products has been providing superior service and the highest-quality products to Arizona businesses since 1955. The office supply industry has changed significantly since that time, and through the changes, Wist has emphasized keeping the focus on the customer. It strives to be a solution provider for its customers. As the largest independent office supplier in the Southwest, Wist has been a leader in developing the technology needed to efficiently manage inventory, as well as process and track orders. It has also incorporated various green product lines featuring both supplies and furniture. Many companies are looking for environmentally safe products, which is why Wist incorporated them.

The Wist name has been synonymous with the office product industry in Arizona, when founder Martin Wist started the business in 1922. The present company has been active since 1955. As a locally owned business, Wist is positioned to meet customers’ needs, as well as directly support the local economy.

107 W. Julie Drive, Tempe
480-921-2900
www.wist.com

Year Est: 1955 AZ Staff: 57
Principal(s): Ileene Wist,
Robert Wist, Ian Wist


Business Services Finalist: Employment: Temporary Large

Corporate Job Bank Personnel Services

In a time when technology has replaced the personal touch, Corporate Job Bank Personnel Services continues to grow and is dedicated to finding a job for every person who walks through its doors. They understand the value in creating a lasting relationship, not only with their clients, but with all candidates as they change and grow in their careers. Corporate Job Bank Personnel’s core competencies are in mortgage and banking, accounting and finance, call centers, office and clerical staff, municipalities, IT, distribution and warehousing.

1955 E. Broadway Road, Tempe
480-966-0709
www.corporatejobbank.com


Business Services Finalist: Employment: Leasing/PEOs

Diversified Human Resources Inc.

The perennial market leader in Arizona and one of the premier PEOs in the U.S., Diversified Human Resources (DHR) helps simplify client businesses by handling much of the administrative functions and paperwork associated with having employees. Services include human resources administration, payroll processing and management, employee benefits planning and administration, and workers’ compensation services for many industries within the business community. The key to DHR’s success is an intense focus on service and the ability to tailor programs specifically for each client.

3020 E. Camelback Road, #213, Phoenix
480-941-5588
www.dhr.net


Best of the Best Awards 2009 presented by Ranking Arizona

Keith Maio President and CEO National Bank of Arizona

CEO Series: Keith Maio President and CEO National Bank of Arizona

Keith Maio
President and CEO
National Bank of Arizona

Assess the current state of the banking industry in Arizona.
It looks pretty tough. The economic environment is difficult. What we deal with in Arizona is that we have a real estate-dominant economy, so many of the local banks are heavy in real estate lending. And — as we all know and see and live in our homes every day — assessed values and real estate valuations have declined dramatically, and that puts pressure on banks. That’s starting to trickle through to the consumer segment and small business segment. Everybody is feeling impacted. That being said, I would tell you that the banks in Arizona, the vast majority, are highly capitalized. So they’ve got the capital base to weather the storm.

In terms of the storm, are you seeing any light at the end of the tunnel?
I haven’t seen the light yet. I know it’s there, but I haven’t seen it yet.

How has the turmoil at the nation’s largest banks affected Arizona-chartered banks?
I think it’s a little bit anecdotal in nature. Some of the problems that the big banks feel are not felt directly by the more local, Arizona banks. Local banks tend to be a little higher capitalized, which is a good thing, and their exposures are more direct-lending exposures versus securities investments and off-balance sheet vehicles.

At the end of the day it’s all about credit contraction, so it impacts people different ways. But the local banks are more direct lenders, so it’s what happens directly in their market.

Do you think that’s a positive thing?
I think it’s a positive thing, other than the fact that we have been impacted so badly in Arizona relative to the rest of the country. So that makes it tougher. But at least when you have direct exposures, you are able to assess on an individual basis what that exposure is.

We are hearing more about the role off-bank balance sheet structures have had in the sharp decline in capitalization among the larger national banks. What type of exposure to such off-bank balance sheet structures do local banks have?
Local banks don’t have much exposure there, and what it allows those banks to do is to assess their risk on a transaction-by-transaction basis, rather than market valuations on pools of securities. So it’s a little easier to assess their risk. Local banks have a little bit more capital to weather the storm, but their exposures on the lending side tend to be a little bit greater than the large national banks.

What challenges and opportunities does the current financial crisis hold for local banks in general, and National Bank of Arizona in particular?
Having been through this before, I think there is an opportunity — and as a CEO you’ve got to always look at the long run, not just the short run. You need to manage what we’re all in the middle of today, but you need to keep an eye on the long run. In getting through this, these tough times actually make people and good organizations better. You’ll learn, ‘What could I have done better before,’ and people who want to improve will improve.

Organizations that can improve end up much better off in the long run. And generally, anytime you have a market disruption — which this is — there’s turmoil in the market and there’s disruption. However, over the long run it presents market-share opportunities to banks. I think that’s an opportunity a lot of us have in the long run — to resettle what the market shares look like at the end of this. For the survivors, it’s a very good thing.

At the end of the day it’s all about credit contraction, so it impacts people different ways. But the local banks are more direct lenders, so it’s what happens directly in their market.

Do you think that’s a positive thing?
I think it’s a positive thing, other than the fact that we have been impacted so badly in Arizona relative to the rest of the country. So that makes it tougher. But at least when you have direct exposures, you are able to assess on an individual basis what that exposure is.


We are hearing more about the role off-bank balance sheet structures have had in the sharp decline in capitalization among the larger national banks. What type of exposure to such off-bank balance sheet structures do local banks have?

Local banks don’t have much exposure there, and what it allows those banks to do is to assess their risk on a transaction-by-transaction basis, rather than market valuations on pools of securities. So it’s a little easier to assess their risk. Local banks have a little bit more capital to weather the storm, but their exposures on the lending side tend to be a little bit greater than the large national banks.

What challenges and opportunities does the current financial crisis hold for local banks in general, andNational Bank of Arizona in particular?
Having been through this before, I think there is an opportunity — and as a CEO you’ve got to always look at the long run, not just the short run. You need to manage what we’re all in the middle of today, but you need to keep an eye on the long run. In getting through this, these tough times actually make people and good organizations better. You’ll learn, ‘What could I have done better before,’ and people who want to improve will improve.

Organizations that can improve end up much better off in the long run. And generally, anytime you have a market disruption — which this is — there’s turmoil in the market and there’s disruption. However, over the long run it presents market-share opportunities to banks. I think that’s an opportunity a lot of us have in the long run — to resettle what the market shares look like at the end of this. For the survivors, it’s a very good thing.

    Vital Stats





  • Executive vice president, Zions Bancorporation, parent company of National Bank of Arizona
  • Joined National Bank of Arizona in 1992
  • Has served as president since 2001; appointed CEO in 2005
  • Current chairman, Arizona Bankers Association board of directors
  • Bachelor of Arts, University of New Mexico; graduate, Pacific Coast School of Banking
Arizona Businesses Succeeding

Arizona Businesses That Are Succeeding Despite The Recession Offer Lessons And Hope

Economists are the uncomfortable bearers of bad news. In recent weeks, they have been unhappily explaining that these are dark days indeed for Arizona’s business community.

But don’t tell that to businesspeople who have uplifting stories to tell amid the downdraft of Arizona’s recession.

While it’s true that Arizona’s economy is out for the count, many businesses are hardly on the ropes. They are succeeding, each in their own way.

But first, a look at that pesky economy.

It’s surprising some businesses are doing well because the experts are hard pressed to find any corner of Arizona’s economy that is untouched by the recession.

“I wish I had something positive to say,” says Tim James, a professor of economics at the W.P. Carey School of Business at Arizona State University. “It’s quite difficult to see any sector doing well … What could possibly happen to make things worse than they are? I can’t think of anything.”

James does point to one exception — discount stores such as Wal-Mart, Costco and Sam’s Club that sell the necessities of daily living. They are prospering, but “nobody will be immune to any of this at the end, as even the Wal-Marts will suffer,” James says.

Also apologetic is Marshall Vest, an economist at the University of Arizona’s Eller College of Management. Asked if there is any sector of the state’s business community that is well positioned and poised to take advantage of the recession, Vest responds, “The short answer is I don’t know. Most industries are feeling the effects of the recession.”

Yes, it’s tough out there. But there are success stories and those businesses offer lessons on how others can ride out this rough economy.

When Robert Meyer joined Phoenix Children’s Hospital in 2002 as president and CEO, the nonprofit medical center for acutely ill pediatric patients was juggling several urgent problems. Arizona was in a recession, a shrinking investment portfolio had eroded the hospital’s capital base, cash reserves were dangerously low and the organization was facing a $46 million loss for the year while incurring the cost of moving from its location within another Phoenix hospital to its own free-standing building at 19th Street and Thomas Road. Meyer, who had been through five prior recessions in health care, focused on two areas — internal operations and strategic planning — and took steps that got the hospital back on its feet.

The hospital had no internal billing-and-collection procedures, no budgeting system and a few outsourcing contracts that were axed because they offered little value in Meyer’s eyes.

“We developed our own patient accounting department, which yielded tremendous improvement in our ability to bill and collect money,” Meyer says. “We started a budgeting system. The hospital had done a lot of outsourcing with a lot of companies and some of them were terminated.”

Meyer wanted a short, simple strategic plan that covered 18 months to two years — as compared to hospitals’ standard five years — and looked outside the health care industry for a sound planning tool. He found it at The One Page Business Plan Company in Berkeley, Calif. Soon, each of the hospital’s major programs had a one-page plan within a relatively brief strategic plan, and progress was tracked online against milestones.

The payoff came as early as 2003, when the hospital generated $3 million in net income. With its books in the black, the hospital took steps in 2004 to cement future success by implementing several new clinical programs. Profits grew to $49 million in 2007.

In today’s recession, Phoenix Children’s Hospital’s primary business offers opportunities for new growth. Meyer says the number of children in the Valley is expected to increase from 900,000 in 2003 to between 1.5 million and 1.7 million in 2025. To meet the needs of its growing patient base, the hospital began rolling out a $588 million main campus expansion in 2008 — only six years after nearly succumbing to financial ruin.

Paragon Space Development Corporation, a small aerospace engineering and technology development firm in Tucson, is succeeding in tough times because most of its business comes from NASA.

“We’re a little bit out of the consumer economy’s ebb and flow,” says Taber MacCallum, CEO and chairman of the board. “What we are going to feel is the federal government’s response to the recession, not so much the recession itself.”

He expects his company’s work with NASA will continue. But things weren’t so rosy during the last downturn. Founded in 1993, Paragon initially booked more commercial than government work and was hit hard by the 2002 recession. It began playing out a variety of business what-ifs to help it prepare for bad times, and business has grown 30 percent to 50 percent annually the last three years.

“You’ve got to create your business model and then run good-and-bad scenarios and make sure you don’t cut so deep that you can’t respond to the recovery,” MacCallum says. “We call them down-and-out and milk-and-honey scenarios. You can do that with a small retail shop and you can do that with a large industry.”

Taber recommends taking advantage of opportunities that arise when other businesses downsize or close.

“This economy has presented a tremendous opportunity for us,” he says. “We’ve been able to pick up new employees and manufacturing equipment from other companies that have had to sell.”

There is also a beacon of hope in the rubble of Arizona’s mortgage industry. On Q Financial, a Scottsdale-based mortgage banking company, is growing as it serves buyers of condos and single-family homes and arranges residential property refinancing. In 2008, it opened new offices in Phoenix, San Diego and Seattle, and its Valley staff grew from 20 in 2007 to 50. In business since 2005, On Q zeroes in on what it can control, says John Bergman, president and owner.

“Every day, month and quarter, we focus on improving things internally that we can control,” Bergman says. “We can’t control the market.”

On Q strives to hire talented operations staff and constantly troubleshoots internal systems, processes and timelines. Business owners must have a firm grip on their financial performance, Bergman says.

“Every month, have financials reported to you in a manner you can use,” he says. “Look at them. You can always adapt and change according to what’s going on.”

On Q also pays close attention to customer service and market share. “We are really aggressive in offering great products to the consumer, and we negotiate for good pricing for our clients,” Bergman says. “No matter what the market does, there is always an opportunity to take a bigger piece of the pie.” Bergman says it’s critical to keep employees energized.

“Let them know that the tougher things get, the better things are when they turn around,” he says. “So you want to focus on the positives in your industry.”

Reeling financial markets commonly create a phenomenon known as the flight to quality — money moves from the stock market to the safety of bank accounts and certificates of deposit. Such is the case with the current recession, and Northern Trust Bank has seen a resulting increase in deposits and new banking relationships, which in turn has generated increased lending.

“We have, in many respects, been in a very nice situation when there has been a flight to quality in the banking business,” says David Highmark, chairman and CEO of Northern Trust’s Arizona bank. “The flip side during this liquidity crisis is that our loan volume is two to three times our normal amounts. Our earnings will be very strong, because today we are collecting so many new relationships that will materialize into new earnings down the road.”

Highmark emphasizes the importance of successful companies staying focused on their core business, a theme also repeated by Paragon and On Q Financial. Northern Trust’s primary business is lending to and managing assets for wealthy individuals and companies.

“We have never wavered from that core business,” Highmark says. “If there is a formula to survive in bad times, in our case — and I think in general in all industries — it is sticking to your knitting. Don’t vary from your core business.”

Wall Street Rescue 2010

Wall Street’s Rescue Package Is Changing Tax Laws For Businesses

The recent financial rescue package signed into law by President Bush on Oct. 3 contains not just $700 billion in federal assistance, but also a number of tax measures that are significant for Arizona businesses.

Renewable energy tax incentives
The renewable energy tax incentives extension was widely anticipated by the industry. Many states, including Arizona, are adopting or expanding their renewable energy standards, and these provisions are designed to make the conversion to renewable energy more tax-efficient.

The 30 percent investment tax credit, particularly the eight-year extension of the Section 48 credit for solar energy, is especially important given Arizona’s potential for solar and alternative energy-related businesses. These incentives are expected to not only continue current investment levels, but also to attract new business investment in Arizona’s alternative energy efforts.

It’s key to note that the energy tax incentives apply to businesses that use them — not to solar energy manufacturers. For example, mixed-use developments adding solar panels to parking garages, construction firms building LEED (Leadership in Energy Efficient Design)-certified structures, and retail centers adding solar roof panels will benefit from the incentive.

Another aspect of the energy credit changes is the elimination of the public utility exception. Two years ago, the Arizona Corporation Commission ruled that regulated electric utilities must generate 15 percent of their energy from renewable resources by 2025. However, utilities have been unable to benefit from this incentive. Regulated utilities may now obtain a 30 percent investment tax credit from their investment in qualifying property.

For instance, if APS purchases solar panels and installs them on your property to provide your electricity, APS will be allowed to take the credit. This provision allows public utilities to own and operate solar and other energy tax credit facilities and include them in their rate base for rate-making purposes.

Research and development credit
The bill extends the research and development tax credit through the end of 2009, increases the alternative simplified research credit from 12 percent to 14 percent for the 2009 tax year, and repeals the alternative incremental research credit for the 2009 tax year.

Given the current economic conditions, this retroactive extension potentially creates both cash benefits and earnings-per-share benefits. Businesses will need to consider the financial statement effect of the research credit now available for 2008, as well as the effect of the retroactive extension on their estimated tax payments for the 2008 tax year. Fiscal-year taxpayers who have already filed their 2007 tax year returns should consider filing amended returns to claim research credits for the period for which the credit had expired. In light of increasing IRS scrutiny, consider your approach and your documentation for the research credits you take. This retroactive extension also provides the opportunity to consider a pre-filing agreement with the IRS for the research credit for the 2008 tax year and beyond.

Alternative minimum tax (AMT)
The AMT is a separately computed tax that eliminates many deductions and credits that are allowed in computing regular tax liability for individuals, estates and trusts. In recent years, Congress has repeatedly enacted a temporary “patch” that significantly raised the applicable AMT exemption amounts. The AMT exemption amounts are phased out for higher-income taxpayers.

The AMT patch for 2008, without which more than 20 million taxpayers would have been hit with AMT liability early next year when filing their 2008 returns, was included in the financial rescue legislation. The legislation also increases the AMT refundable credit amount for individuals with long-term unused credits for prior year minimum tax liability, eliminates the income phase-out, and abates any underpayment of tax (including interest) outstanding on Oct. 3 related to AMT that was generated from the exercise of incentive stock options.

Changing tax law, increased IRS audits and the direct negative ramifications that follow from financial statement restatements mean that achieving certainty in tax positions is more important than ever. Many taxpayers are planning upfront and substantiating all their positions. As companies experience flat or negative results, tax considerations become more important to the bottom line. Tax departments are being asked to find efficient ways to maximize cash and strengthen balance sheets. The new legislation can benefit businesses in this challenging time.

Wayne Hoeing is a partner with Ernst & Young LLP in the firm’s Phoenix office.