Tag Archives: economic downturn

Tumbleweed Logo

Tumbleweed Center Relocates Phoenix Headquarters

Tumbleweed Center for Youth Development will expand and relocate its headquarters from Downtown Phoenix to Siete Square II, 3707 N. 7th St. in Midtown, according to Cushman & Wakefield of Arizona, Inc.

Tumbleweed was established in 1972 with a mission to provide a safe space for collaborating with youth and young adults in the community who are vulnerable or experiencing homelessness.  The organization serves more than 3,000 young people each year, ages 12 to 25 years.

“Tumbleweed made a very shrewd decision to expand and relocate its headquarters at this time, locking in to today’s historically low rates.  This allowed us to lower occupancy costs over the long term,” said Paul Andrews of Cushman & Wakefield.  “This strategy cut thousands of dollars in future rent expense that now can be redirected back into the organization’s much needed programs that serve Metro Phoenix’s teenage youth.”

The local non-profit has leased 13,047 square feet at the garden office complex and will locate from 1419 N. 3rd Street in fall of 2013.

Siete Square II is one of four buildings within the larger Siete Square garden office complex.  The Indiana Farm Bureau owns Siete Square II.  Paul Andrews of Cushman & Wakefield of Arizona, Inc. represented Tumbleweed Center for Youth Development in its lease negotiations.

Phil Breidenbach and Lindsey Carlson of Colliers serve as exclusive leasing agents for Siete Square II, representing the Indiana Farm Bureau.

WellsFargoLogo

Wells Fargo Plans 410,000 SF Expansion in Chandler

By Eric Jay Toll, Senior Correspondent for Arizona Builder’s Exchange |

Special to Arizona Commercial Real Estate magazine

 

Wells Fargo unveiled its 410,000-square-foot Chandler campus expansion to a neighborhood meeting in the East Valley September 16. Arizona Builder’s Exchange broke the story Monday night that the bank filed a rezoning application with the city to allow a pair of four-story buildings on the northwest corner of Price and Queen Creek roads in the Price Corridor.

More than 2,500 additional employees will work in the new Wells Fargo buildings, bringing campus employment to more than 5,000 workers.

The bank has selected an architect, but has not named the contractor for the project. A formal announcement with construction schedule is expected shortly. AZBEX reports sources saying the project could cost as much as $90 million.

The building shapes, design and materials are intended to mirror Phase I of the campus. The offices will rise to 64 feet. Three more buildings and parking garages are projected for future phases. The city has not set a hearing date for the zoning. Wells Fargo has not yet announced its construction schedule.

Read the original story here.

 

Eric Jay Toll is the senior correspondent for Arizona Builder’s Exchange. His freelance work appears in a number of regional and national publications, including upcoming stories in AZRE and AZ Business.

Cameron2head

Cameron Carter Named Partner at Rose Law Group

Cameron CarterArizona’s largest female owned law firm is proud to announce the appointment of Real Estate and Transactional Attorney Cameron Carter as the firm’s new partner at Rose Law Group pc (RLG).

Carter, who specializes in Real Estate Transactions, Acquisition, Due Diligence, Real Estate Finance, Development/Redevelopment, Land Use/Entitlements and Development Agreements, first joined RLG as a law clerk in 2006 while finishing law degree at the Sandra Day O’Connor College of Law at Arizona State University.

After passing the Arizona State Bar, Carter began practicing Real Estate law assisting clients with numerous acquisitions and depositions of the purchase and sale of land, multifamily and commercial properties.

Since 2007, Carter has also been advising clients on Development Impact Fees, Commercial Leasing, Closings, Investments, Landlord/Tenant, Tax Liens, Trustee’s Sale/Foreclosure, Construction, Municipal Law, Renewable Energy, Business Transactions and Community Associations.

He’s represented farmers, investors, developers, local and national home builders, REITs, charter schools, landlords and non-profit corporations in a variety of real estate transactions and other real estate and business matters.

“This has been a long time goal of mine to be a partner at Rose Law Group,” said Carter. “I enjoy helping clients add value by tackling complex real estate and development issues.  I’m thrilled to continue helping founder Jordan Rose implement her vision for providing exceptional service to our clients.”

While at Rose Law, Carter has worked to solve a number of issues involving development impact fees, building permits, eminent domain, right of way acquisition, rezoning cases, and use permits. Carter also works on a variety of election law matters including initiative and referendum, political committees, candidate qualification and campaign finance issues.

Jordan Rose founded Rose Law Group in 2000 and the firm quickly developed the reputation as being of one Arizona’s most innovative firms in the state.  Since its inception, Attorneys Court Rich and Ryan Hurley have also become partners.

Rose said Carter’s unique background of serving as a commercial construction manager at Jokake Construction, and holding a real estate broker’s license allows him to provide solid legal advice and makes great real estate business sense.

“I have seen a lot of great real estate attorneys, but never have I met one with the extensive real life real estate business background of Cameron Carter,” said RLG founder Jordan Rose.  “Cameron lives real estate and has a rare gift. He is both precise in transactional work, and a great land use and zoning attorney.  From the moment he walked in our doors 7 ½ years ago, I knew he was the future of Rose Law Group.  We are really blessed to have Cameron as a partner.”

As part of the new appointment, Carter will also head the Transactional Real Estate Department and with the upturn in the economy, Carter welcomes the challenge.

“The economy is rebounding, and we have to continue helping clients increase values, getting deals closed, recognizing risk, mitigating risks, and just exceeding their expectations on every acquisition,” said Carter.

Carter is a Cactus High School graduate and a fifth generation Arizonan. He feels strongly about serving the community. He has worked as a volunteer leader with the Boy Scouts of America and currently serves on the Board of Directors of the McCormick Ranch Property Owner’s Association, but his most important job is serving as a husband and father of four children.

 

Phoenix Convention Center

Conventional Wisdom – Catering To Phoenix Visitors

Debbie Cotton has gone from helping people travel around Phoenix to trying to convince people to travel to Phoenix.

Cotton, the former director of the Phoenix Public Transit Department, is about six months into her role as director for the Phoenix Convention Center.

“The biggest difference for me is that each day is very different,” says Cotton, who replaced John Chan, who became community and economic development director for the City of Phoenix. “Each customer of the Convention Center has their own set of individual needs, so we have to come in here and reinvent ourselves every day so that we can fulfill our clients’ needs.”

Catering to convention-goers’ needs are more important than ever. To compound the hit that the economic downturn placed on the convention industry, Arizona’s tough stance on illegal immigration has put the state in a negative light in some decision-makers’ eyes, and an incident where a lesbian couple was asked to leave a downtown restaurant ignited a social media firestorm.

“People are very aware of some of the social unrest we’ve had in the community,” Cotton says. “That is one of the things that people have questions about when we talk with them about coming to Phoenix.”

If you look at the numbers, the controversies don’t seem to have an impact on tourism’s bottom line. A report from Dean Runyan Associates shows that gross sales at state hotels have increased more than 12 percent since 2010, and travel spending in Arizona has increased 7.9 percent since 2009. Gov. Jan Brewer signed SB 1070 — the strictest anti-illegal immigration measure in recent history — into law in 2010.

“In the next five years, we will have 900,000 delegates come through the Convention Center doors with an economic impact of $1.3 billion,” Cotton says. “That is a slight increase from the previous five years.”

A $600 million expansion project that tripled the size of the Convention Center and was completed in 2009 has raised the profile of both the center and the convention industry in Phoenix. In 2010, the Convention Center received the Inner Circle Award from Association Meetings Magazine, which ranked the facility as one of the 15 best Convention Centers in the nation for service excellence. And in April, the Phoenix Convention Center was ranked seventh among the best U.S. convention centers by Business Review USA.

“The addition of ASU and CityScape have given downtown more vibrancy and a youthful exuberance that has really made a difference for visitors,” Cotton says. “People want to play and have fun here. We need more of that.”

To get the Convention Center to the next level, Cotton and her staff plan to launch a redesigned website and use social media — Twitter and Facebook — to engage their customers and increase their speed to market.

“One of the things that we’ve found creates a more dynamic experience for visitors are the Downtown Phoenix Ambassadors,” Cotton says of the orange-shirt-wearing, information-wielding walking concierges of downtown. “We want to get them more involved on the front end so that we differentiate ourselves from other communities. Once we get them here, we know they will come back.”

To help fill some of the vacancies the Convention Center has on the books, Cotton instituted a sales training program that will complement the comprehensive guest experience training that the staff has undergone since the center was expanded.

“We have been so busy over the last few years with our growth, that we didn’t have time to slow down and focus on some of the finer details,” Cotton says. “Now that things have slowed down and our expansion is complete, we have more time to incorporate training, build leads and close deals. Now it’s time for us to become the best of the best.”

For more information on the Phoenix Convention Center, visit the Phoenix Convention Center’s website at phoenix.gov/phxpccd.html.

Marketing mistakes

Beware of Blunders: Common Marketing Mistakes To Avoid

The economic downturn has left many companies struggling to retain existing business, scrambling for ways to attract new business and seeking opportunities to cut costs. Decreasing marketing budgets seems to be a common solution — just look how many publications, creative agencies and printers have gone out of business due to a lack of revenue.

While cutting costs may be a necessity, halting your marketing efforts when business slows can make things worse. Be smart. Think smart. Market smart. Send an email instead of a letter; create and send a postcard instead of a catalog; change your marketing mix, and stay in front of your customers if you wish to maintain and grow your business.

Once business picks up, time may be at a premium; but once again, that’s no excuse for allowing marketing efforts to slip. Keeping a constant presence in the marketplace will ultimately even out your sales swings.

To use your time and marketing dollars wisely, and steer your business toward growth, take note of six common marketing mistakes to avoid:

Mistake #1: Marketing without a plan

It doesn’t have to be long or elaborate, but a “road map” of how to market your business is nothing short of essential.

Mistake #2: Muting the agency

Even if you pride yourself on your marketing prowess, don’t override your agency’s recommendations. This can, and often will, lead to disaster. Listen to the hired experts providing recommendations based on sound research and experience.

Mistake #3: Multitasking collateral

Don’t expect one marketing piece to meet too many objectives. Doing so can muddle your message and lose or confuse your prospect or customer.

Mistake #4: Cluttered collateral

Filling every inch of a marketing piece with words or pictures is a turn-off. White space rests the eye, is more inviting and entices your audience to read, making key messages easy to find and digest.

Mistake #5: Focusing on features before benefits

Features define your product, but benefits sell. Focusing on the benefits defines your unique selling proposition, sets you apart from the competition and helps you to sell a product or service.

Mistake #6 Keeping your team in the dark

The fastest way to waste hard-earned marketing dollars is forgetting to inform your staff on how to communicate marketing offers and information to customers and prospects. Consider the sales clerk who doesn’t know about a current promotion to help sell additional products to existing customers. Or the courier in the supply room who might have a friend interested in the current offer or coupon. Always include the entire team in your marketing plan by engaging them in how to use each tactic to increase business.

Finally, don’t find yourself falling into the trap of W4TP2R marketing. Give up? This stands for the marketing approach known as Waiting for the Phone to Ring. Just because you send out letters, emails and press releases, place ads, or launch a new website doesn’t mean that merchandise will fly off the shelves right away. Effective marketing takes diligence, persistence, repetition, follow-up, follow-through and time to bake.

Give your programs a chance, stay consistent and work it. Eventually, you will see results and reap the rewards.

On April 10 the marketing community and the world suffered a great loss when Sherri May’s life was taken abruptly. Her marketing know how, spirit, and words of wisdom live on and inspire through her team at Sherri May & Co.

West Coast based companies, were surveyed on their predictions for 2011 in terms of cutbacks and staff reorganization.

Firms Forecast Fewer Job Cutbacks in 2011

After the housing market housing burst in late 2006, the economy has seen its worst years since the Great Depression.  As our country struggled with enormous financial dishonesty, billions in bailout money, an astronomically high national debt, and over 9% unemployment, job security has seemed to be wildly unstable — until now.

According to a recent survey by Right Management, the worlds largest career and talent management consulting firm,  few cutbacks are predicted for the new year.

Over 700 national firms, of which 83 are West Coast based companies, were surveyed on their predictions for 2011 in terms of cutbacks and staff reorganization.  Of the surveyed companies, 22% of western firms forecast fewer cutbacks in 2011, and not a single national firm predicted a significant number of cutbacks.

Forecast Fewer Job Cutbacks

Right Management has offices in over 50 countries and more than 80% of Fortune 500 companies currently utilize the company to work efficiently and increase productivity.

In hopes to revive the economy, business growth is the first step.  An expansive job market would provide the American people with a feeling of economic growth and stability, of which they haven’t felt in over four years.

President Obama’s address last Monday to the U.S. Chamber of Commerce spoke directly at business owners across the country.   “Make government an ally rather than an obstacle to companies as they emerge from the worst economic downturn in generations” said Obama, according to the Washington Post.  In a direct challenge to the American people, Obama urged the need for  business’s to put their employee’s first, and start hiring again.

“An organization’s people are, in the end, the only differentiators that may be sustained” said Douglas Sietsema, Right Management’s talent leader in the Western region.  Sietsema believed 2011 needs a “coherent strategy around talent in order to deliver on increasingly aggressive business goals”.

For more information, visit Right.com

After A Long Recession, Over-Spending May Be Tempting

After A Long Recession, Over-Spending May Be Tempting, But Consumers Beware

The desires of the American consumer have changed over the last few years. This concept is not difficult to imagine since the United States has suffered it’s worst economic downturn since the Great Depression. People have been forced to appropriately distinguish the difference between needs and wants.

Prior to the recession, the American consumer was living an unsustainable lifestyle while real estate prices were escalating. People were spending money as if they had their own personal printing press. In reality they did, it was called a home equity line of credit. Excess access to money created an irrational consumer, one who boasted of the ability to customize goods, cars, clothes, jewelry, etc. Consumers got to the point where they became addicted to the process of buying something new, just because they could.

Today, most people feel the opposite; they have a new respect for money and they feel that less can be more and that frugality is the new chic. Perhaps a near-death experience, economically speaking, is just what the consumer needed in order to fully respect the tremendous responsibility of proper money management.

Unfortunately, many people have a short-term memory. They will quickly forget their valuable lessons as the economic landscape slowly improves. They will feel they sacrificed when they had to, but now that things are economically improving, they will feel they can reward themselves. As wrong as this rationale is, millions of consumers will have a sense of entitlement as we enter this holiday season.

Target, the nation’s second-largest retail chain, told the Financial Times recently that it predicts this holiday season should be its best in three years. Target bases its prediction on the enormous pent-up demand of the consumer.

Consumer spending of course is a double-edged sword. On one hand, you want consumers to spend; they represent 66 percent of the nation’s GDP. On the other hand, you want Americans to save more because it creates more economic stability.

This holiday season will be interesting to follow. My hope is that the consumer spends prudently and does not fall back into the same spending trap as before.

Misgana Kebede Company - Accent Transportation Services - AZ Business Magazine Nov/Dec 2010

A Dream Becomes A Reality for Ethiopian-Born Small Business Owner Misgana Kebede

Misgana Kebede
Company: Accent Transportation Services
Title: Owner | Est.: 2008
Web: www.transaccent.com

In May 2008, during the roughest stretch of the recession, a husband-and-wife team made a bold decision to start their own transportation business. Misgana Kebede and his wife, Bilen, started Accent Transportation Services, which specializes in executive car service around the Phoenix area.

Kebede moved to the U.S. from Ethiopia and was drawn to the tourism industry early on. In fact, he worked at various hotels and theme parks after high school and during college. Kebede eventually earned degrees in finance and logistics, transportation and supply chain management.

Prior to the creation of Accent Transportation Services, Kebede was working for Honeywell Aerospace in the supply chain department. Although he was learning a lot about the business, Kebede realized he wanted something more than to work in a cubicle.

“I had the dream of becoming a business owner, and a desire to serve others from the heart,” Kebede says.

When Kebede first started his business, the transportation industry was being hit hard by the economic downturn.
Companies were cutting down on travel costs, and car and limo services weren’t in demand. Despite the challenges, Accent Transportation managed to stand out to clients. Accent Transportation gains most of its business from repeat customers, and has grown from one vehicle to a seven-vehicle fleet within two years.

“Building a repeat customer base tells us we’re doing something right,” Kebede says. “Seventy to 75 percent of our business is repeat customers.”

Accent Transportation retains its customers because it continually focuses on improving the level of service it provides. It offers easy, online registration and account management. Customers can choose from Lincoln sedans, SUVs, stretch limos and a mini-coach. Kebede also emphasizes the importance of being on time.

Another major part of customer retention is that Kebede’s employees have excellent customer service skills. When looking to hire new employees, Kebede looks for people who already have spent time working in the hospitality business.

“If you know how to serve people, anything else can be learned,” Kebede says.

Kebede knows that building a business from the ground up is especially hard right now, but he is committed to his work.

“The first and foremost thing is to have a passion for what you do,” Kebede says. “Plan your days, weeks and months. Think about what will grow your business, not just what will help you get by.”

Arizona Business Magazine Nov/Dec 2010

The idea of starting your own business can be frightening with the recession - AZ Business Magazine Nov/Dec 2010

6 Tips To Launching Your Own Business In A Down Economy

The idea of starting your own business can be frightening, particularly with the recession stubbornly choking the Arizona economy. However, by following a few tips for getting started, launching your own company doesn’t need to be scary.

In fact, there are a few advantages to launching a business during an economic downturn. Commercial space is available at extraordinarily good prices. Talented professionals are looking for work. Goods and services can be found at discounted prices. And, depending on your industry, competition may be scarce.

1. Practice Due Diligence
It’s critical to objectively evaluate your proposed venture. Asking yourself some hard questions may discourage you from pursuing your first venture, but that is not a negative or pessimistic approach. It’s a useful tool for evaluating your business. Start with these questions: Is there a genuine need for the product or service you are offering? Is that need already being met by established companies? If so, what improvement or unique feature are you bringing to the table? Do you have the necessary skills and resources to start your business? If not, are you prepared to bring in the people with the skills and capital that are needed, and possibly give up some ownership?

2. Prepare a Business Plan
Too often, entrepreneurs articulate a great idea and foresee success, but gloss over the hard work. That hard part is thinking through the idea for your business and writing it into a plan, including the steps you’ll need to take to implement your idea. Start with an outline and consult a book or online guide about writing business plans. It’s important that your end result is a completed plan that includes a budget for your business.

3. Determine Capital Requirements
Most small businesses are funded with the business owner’s own money and funds from family and friends. A venture capitalist or angel investor may provide the necessary capital in exchange for part ownership of your business. It’s critical to focus on the amount of money you will need to start and operate your business, including at each stage of the company’s development.

4. Create a Board of Advisers
Creating a network of advisers can be a tremendous asset to a start-up business. It’s helpful if that board consists of advisers with a diverse array of professional backgrounds. That diversity will ensure you receive insights from a wide range of perspectives. Good choices for advisers may include your attorney, accountant, suppliers, customers, bankers and realtors.

5. Tap Into Available Resources
There are myriad advisers, consultants and nonprofit agencies that will assist you in developing your business — marketing it, creating websites and raising capital — who work for free or a nominal fee. The Small Business Administration (SBA), for instance, is a valuable and cost-effective resource. Moreover, SCORE: Counselors to America’s Small Business, provides free advice and mentoring for small business owners. If you pay for a similar service, be sure to get recommendations from a trusted adviser. Then, check that company’s references.

6. Listen
The more you listen — the more you truly hear an adviser’s ideas — the more advice you will be able to translate into actionable plans for your company.

Still, while these recessionary times may present a good opportunity for entrepreneurs, there are several considerations to keep in mind.

Select an industry that is doing well, despite the recession. The health care industry, senior care and information technologies are financially better off than many other industries.

Choose a business sector with a bright future — Businesses that tap into growing consumer demand for green or sustainable products may be an avenue worth pursuing. There was a 41 percent increase in consumer purchases of green products and services from 2004 to 2009, according to the research firm Mintel. Moreover, there may be federal or state subsidies or tax credits available for green companies.

Select a company with low capital requirements. Home-based businesses with low start-up costs may be good choices, notably because the ongoing credit crunch will likely make it tough to get a loan to cover these expenses.

If you are considering starting your own business, you will be in good company. More than half the companies listed on the Fortune 500 in 2009 were launched during a recession, according to the Ewing Marion Kauffman Foundation.

Moreover, in 2009, an average of 558,000 new businesses were launched each month in the United States.

The trick to joining these ranks is to get started. There’s no better time than now, recession or not.

“The critical ingredient is getting off your butt and doing something,” Nolan Bushnell, founder of both Atari and Chuck E. Cheese, once said. “It’s as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.”

Arizona Business Magazine Nov/Dec 2010

woman sitting on a red chair on stage - AZ Business Magazine Sep/Oct 2010

Q&A With Laura Scheller, President Of Arizona Sunbelt Chapter MPI

Laura Scheller, CMP
President of the Arizona Sunbelt Chapter of MPI
President and CEO, Solomonte Hospitality

How has MPI responded to the economic downturn?
It has been a difficult year for the hospitality industry. Not only have we had to overcome the poor economy and negative media, but here in Arizona we also added controversial politics. The MPI Foundation is focusing on research that provides hard facts about the return on meetings. For instance, for every dollar spent in business travel, companies realize $12.50 in incremental revenue.

MPI as an organization is working to educate local and national business, politicians and media about the positive impact strategic meeting management makes on the economy, not just statewide, but nationally. Obviously the whole issue of SB 1070 is extremely frustrating. Regardless of where you stand on the issue, boycotting meetings is not the answer. This is affecting 300,000 employees whose families’ lives are dependent on our industry jobs — many of whom are immigrants whose only goal is to work hard and provide excellent service. … Certainly, we as a chapter are encouraged to hear that the governor is looking into creating an ad campaign in support of travel to the state.

What are your members experiencing?

Our membership is down. The hotels and resorts are cutting staff in response to lower operating budgets. Meeting planners are being laid off as companies minimize the number, size and scope of their meetings and events. On the positive side, the relationships created by our fellow MPI members are more critical than ever in securing business and jobs. The chapter’s Career Connections is an active job bank completely free to our members.

Is MPI working with other organizations?
One of our goals as a chapter this year is to bring an elevated level to our membership. We hope to work more closely with the Fiesta Bowl Committee and the Arizona Tourism Alliance to create more opportunities for our local members. We have some outstanding talent and expertise, yet often, when large events such as the Super Bowl come to town, outside companies are brought in rather than utilizing local products and services.

How is MPI helping its members?

One of the programs we are very proud of is the Global Community Challenge. … The challenge, developed from the expressed needs of chapter members, encourages members to use their MPI connections to supplement their current business. Through the program, over 286 business-to-business meetings took place, 87 lead referrals were produced and more than $1.3 million in sales was credited to the business relationships developed.

What trends are you seeing?
While some properties are starting to increase rates, others are still focusing on occupancy. Programs are being streamlined. Meeting planners are more accountable to the C-suite for budgets and measured results. Also, while room rates remain somewhat level, food and beverage pricing continues to rise. Of particular note are the gratuity fees that are as high as 25 percent at some resorts. That can make a significant impact on a budget.

Any predictions?
What I see is that there has been a pent-up demand for meetings, and thus things are starting to happen again in the industry. However, I also believe the economy will remain stagnant for the next couple of years. I recommend keeping an organization’s booking window as short as possible.

Arizona Business Magazine Sept/Oct 2010

AzHHA’s 2010 Annual Membership Conference - AZ Business Magazine Sept/Oct 2010

AzHHA’s 2010 Annual Membership Conference Is Aimed At Helping Members Prepare For Change

With the health care field on the brink of a major upheaval, the Arizona Hospital and Healthcare Association’s (AzHHA) 2010 Annual Membership Conference offers members information on what to expect in the future.

The theme, Bringing the Future into Focus, incorporates a mix of topics and speakers intended to appeal to a diverse hospital audience. Attendees will hear from leading economists, patient safety experts, health care visionaries and others.

LeAnn Swanson, vice president of education services for AzHHA, says the conference is the ideal venue to bring the new health care reality into full focus.
“Some of the best minds in the industry will be providing hard-hitting education and thought-provoking commentary,” she says. “This conference is intended for the entire hospital family, including the C-suite leadership team, hospital trustees, legal counsel, operations, quality, patient safety, human resources, and marketing officers.”

This year’s conference, Oct. 14-15 at The Buttes Resort in Tempe, kicks off with a keynote session featuring Lowell Catlett, Ph.D., regent’s professor, dean and chief administrative officer at New Mexico State University’s College of Agricultural, Consumer and Environmental Sciences. He will speak on the present and future of the economy.

Catlett notes that economic downturns are common — with 14 recessions during the past 80 years — and provide a means for society to re-balance what it deems to be important.

“Every recession leads to a spurt in new business starts, reformulation of business practices and new technological adaptations,” he says. “This current pause is no exception as we focus on what we value most. Get ready for phenomenal growth in health care, energy and lifestyle markets. For those willing to embrace the opportunities, the next decade will be successful beyond any in history.”

Immediately after Catlett’s presentation on Oct. 14, the general session will feature Ron Galloway, director of the documentary “Why Wal-Mart Works and Why That Makes Some People Crazy,” and the newly released “Rebooting Healthcare.” His topic, Wal-Mart and the Future of Healthcare, covers in-store health care clinics that offer everything from eyeglasses to flu shots to urgent care.

Galloway says the discount retailer aims to leverage its 4,000 stores into the largest force in American health care.

At the Oct. 15 breakfast meeting, sponsored by the American College of Healthcare Executives (ACHE), Chris Van Gorder, president and CEO of Scripps Health in San Diego and ACHE 2010-2011 chairman, will offer a look at Scripps’ medical response team. Van Gorder will describe the team’s efforts in the Hurricane Katrina-ravaged Gulf of Mexico, San Diego after its massive wildfires and quake-stricken Haiti.

Concurrent breakout sessions will look at the key drivers of physician behavior and the natural tension that exists in doctor-hospital relationships; trends and technologies that are “re-forming” health care in unexpected and beneficial ways; and the notion of being in a health care bubble with a high potential for a correction over the next five years.

The closing session will feature John Nance, author of “Why Hospitals Should Fly,” which was named the 2009 book of the year by the ACHE. Based on his book, Nance offers some solutions to the patient safety and quality-care crises that resonate deeply with all health care audiences.

The conference also will feature AzHHA’s annual awards luncheon, and a president’s reception that will give attendees an opportunity to say goodbye to the organization’s longtime president and CEO, John Rivers, as he nears retirement. The reception also will serve to introduce AzHHA’s new leader, Laurie Liles.

Along with the conference, during the upcoming year AzHHA also will offer a series of webinars and other events of interest to members of the hospital and health care industry, as well as representatives of the business community, Swanson says. The emphasis will be on compliance-related topics, including rules and regulations of the Centers for Medicare and Medicaid Services, the Health Insurance Portability and Accountability Act (HIPAA), and the Federal Emergency Medical Treatment and Labor Act, also known as EMTALA.

To learn more about upcoming education opportunities from AzHHA and to register for conference events, visit www.azhha.org/educational_services and click on education events.

    Arizona Hospital and Healthcare Association’s
    2010 Annual Membership Conference

    Oct. 14-15
    The Buttes Resort
    2000 Westcourt Way, Tempe
    www.azhha.org

Arizona Business Magazine Sept/Oct 2010

It appears the Chicago Cubs’ spring training facility will remain in Mesa - AZ Business Magazine Jul/Aug 2010

A Threat By The Cubs To Leave Arizona Has Cactus League Sites Scrambling

Update:
It appears the Chicago Cubs’ spring training facility will remain in Mesa. Team officials recently notified a group from Naples, Fla., attempting to lure the Cubs to the Grapefruit League that they plan to continue to negotiate exclusively with the city of Mesa. Mesa, meanwhile, reportedly is looking at four sites for the new facility: Recker Road and the Loop 202; the Riverview area; a downtown site; and near the Gaylord resort, planned for the GM Proving Grounds site. According to published reports, the Riverview area appears to be the leading contender for the facility.Spring training baseball in Arizona, a cash cow for Valley communities, is in need of another source of revenue to build new stadiums and refurbish existing facilities. The estimated 1.47 million fans who attended games played by the 15 teams that trained in Arizona this year contributed more than $300 million to the state’s economy, according to Cactus League Association estimates.

That’s the good news. The not-so-good news is that owners of the Chicago Cubs, the biggest draw in the Cactus League, have threatened to move their spring home from Mesa to Naples, Fla., if they don’t get a new stadium and training facility.

Adding to the financial dilemma is that funding from the Arizona Sports and Tourism Authority, which among other things supports spring training baseball, has virtually dried up, due in some measure to the economic downturn. The agency receives most of its money from tourism-related taxes on hotels and car rentals.

A legislative proposal to add a surcharge to all Cactus League tickets to help pay for a new Cubs stadium was as welcome as a blazing fastball from Randy Johnson in his prime. Efforts to push House Bill 2736, sponsored by House Majority Leader John McComish, basically struck out.

“We need to find ways to not only keep the Cubs in Maricopa County, but use those creative funding mechanisms to preserve and expand other spring training facilities in the entire West Valley,” says Jack Lunsford, president and CEO of WESTMARC. “Keeping the Cubs is important, as well as making sure a funding mechanism for the Cubs can be applied, as necessary, in the West Valley.”

Stepping to the plate, Peoria officials proposed a possible solution — the creation of special bonding districts. John Schell, intergovernmental affairs director for Peoria, explains his city’s interest.

“Without much discussion with the other teams or other affected entities, they (key legislators) added a surcharge to tickets and rental cars,” he says. “The ticket surcharge got us more involved because of the adverse impact it would have to our revenue-sharing agreement with the two teams that train in Peoria, the Seattle Mariners and the San Diego Padres. It was not feasible for us.”

The Peoria agreement, not unlike those of other Valley cities that host spring training teams, including Goodyear and Surprise, provides that if the state or some other entity puts a surcharge on tickets, Peoria would have to make up the difference.

“That would have cost us close to $300,000 a year to build a stadium in Mesa — with no ownership,” Schell says. “Imagine how the taxpayers in Peoria would have felt about that. So we were drawn into the discussion to try to identify some sort of funding solution.”

Schell notes correctly that the Arizona Legislature doesn’t have much of an appetite for new taxation, especially in the current economy. He and Peoria City Attorney Steve Kemp met with other host cities throughout the Valley and representatives of Major League Baseball to discuss options.

“It’s not a complete solution and it doesn’t involve any public funds,” Schell says. “We worked closely with the bond counsel for Major League Baseball and came up with a concept we called the revenue allocation authority.”

It was too late to be introduced at the Legislature this year, but Schell says there likely will be discussions on the topic even before lawmakers reconvene next January. It calls for the establishment of a district to issue bonds to pay for improvements or new construction of spring training facilities. Each district would have to be approved by voters living in the district and would not have taxing authority, Schell says.

“It’s a very strong tool,” Schell says. “It would use increment financing. It would capture the growth in the district. It would not become a general obligation of the city, and it won’t affect property taxes. People won’t feel the impact. It’s a unique way of financing.”

Schell says Major League Baseball, which helped prepare the proposal, is supportive.

Baseball insiders say they don’t think the Cubs will follow through with their threat and move to Florida. Although relocating to an Indian reservation, which is what the Arizona Diamondbacks and Colorado Rockies will do next spring, is an option, the Cubs have not expressed an outward interest in going that route. Others say if a deal with Mesa falls through, other Valley cities will make their pitch for the popular Chicago team.

Peoria Mayor Bob Barrett bluntly says the ticket surcharge proposal was a disaster and that he is adamantly opposed to such a scheme. On the possibility of the Cubs leaving Arizona, Barrett says he hopes they remain.

“They ought to talk to the tribes,” he says. “But, if they do leave, the world will continue to turn and the Cactus League will not disappear. The 14 other teams will survive.”

www.cactusleague.com | www.peoriaaz.com

Arizona Business Magazine Jul/Aug 2010

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

Man rock climbing with another man on belay and a woman standing nearby

Courting The Locals Could Be The Key To Keeping Arizona’s Struggling Tourism Industry Viable

For years, state tourism and hospitality enjoyed a healthy dose of success. As the population boomed, so did travel, with out-of-state visitors increasing steadily from 2002 through 2007. But the recession, coupled with a decline in corporate meetings, made 2009 a very difficult year for the tourism and hospitality industry.

Arizona resorts and hotels that promoted staycations as a way to ride out the slow summer months, are now counting on them year-round to remain viable until the economy improves significantly.

“It’s not either/or; what we’re trying to communicate is that a staycation IS a vacation.”
– Debbie Johnson, Arizona Hotel & Lodging Association

“We are seeing more local and regional business to the resort throughout the entire year than ever before,” says Michael Stephens, general manager of the Hyatt Regency Scottsdale. “If ever there was a time to take advantage of some really great offers in-season, this is the year.”

To stimulate in-state travel and help ease the pain of a sharp decline in occupancy, local tourism representatives are turning to residents and spreading the message about the allure of staycations.

“Staycations have been and will continue to be one of the vacation elements that many of our state residents enjoy,” says Rachel Sacco, president and CEO of the Scottsdale Convention & Visitors Bureau. “It’s such a rewarding experience. Throw something in the car and go, but you feel like you’re a million miles away.”

Industry insiders hope that by providing extra incentives and cost-saving measures to local travelers, tourism will get the boost it needs to get through the economic downturn.

“If embraced and harnessed correctly, tourism is the state’s strongest weapon against further economic woes,” says Debbie Johnson, president and CEO of the Arizona Hotel & Lodging Association. “If you’re tired of the economic slump and wish you could do something about it — take a trip, go out to a restaurant, and change the way we think about companies holding meetings. It’s the best way to personally affect the economy and get us moving back in the right direction.”

And the local market is one that can be deeply mined. According to the Arizona Office of Tourism’s (AZOT) year-end summary, the second largest tourist segment was comprised of state residents, with 9.8 million overnight visitors. Although domestic non-residents still made up the largest share of overnight visitors, Arizonans logged an impressive 33 percent of the state’s domestic overnight visitors in 2008.

Industry professionals are sending the message to locals that a staycation is a cost-effective alternative to out-of-state travel — no matter the season.

“Why spend tons of time and money on flights or inflated gas prices when we have such an incredibly diverse state with attractions and amenities that other people travel the globe to experience,” Johnson asks. “It’s not either/or; what we’re trying to communicate is that a staycation IS a vacation.”

Economic Impact

In AZOT’s year-end summary it was reported that direct travel spending in Arizona in 2008 was $18.5 billion. Travel spending also generated 166,900 direct jobs paying $5 billion in earnings. The report also stated that Arizona visitors staying overnight in paid lodging accounted for 41.2 percent of all visitor spending in 2008.

“Choosing a staycation keeps hard-earned money in our state, which generates tax revenues that trickle through the entire Arizona economy,” says Jennifer Wesselhoff, president and CEO of the Sedona Chamber of Commerce.

From the Greater Phoenix area to Tucson and Flagstaff, in-state travel is important to every county, although some rely on it more than others. According to AZOT, travel spending is more critical to the economies of Arizona’s rural counties.

To help Arizona communities and tribal entities with their tourism development and marketing efforts, AZOT is coordinating an educational outreach program called Arizona Tourism University. The university conducts free workshops on tourism topics and offers advice on marketing plans, style guidelines and more.

Last year, AZOT also partnered with the Arizona Hotel & Lodging Association to launch a Web site, www.valueaz.com, dedicated to helping individuals find the best travel deals available.

“We’re trying to help our members get the word out about their great deals, and educate residents that they can and should feel good about spending their money on in-state travel,” says Johnson, who is also president and CEO of the Valley Hotel and Resort Association in addition to serving as the executive director of the Arizona Tourism Alliance.

Deals for Locals

Along with the limping economy, a sharp drop in corporate meetings since 2008 has forced resorts to diversify their brands and market staycations. To that end, hospitality establishments across the Valley and state are pushing incentives aimed at the local community.

“We have chosen to be creative in positioning ourselves with a variety of different package options,” says Michael Hoffman, managing director of the Boulders Resort & Golden Door Spa.

The Boulders has created a series of adult-centered activities, including rock climbing, hiking and spa treatments, to lure Arizona’s adult community.

Even resorts that are synonymous with exclusive luxury are now a more affordable option for locals.

“The staycation enhances our business,” says David Richard, area director of sales and marketing for Starwood Hotels, a hotel and leisure company that owns the Phoenician. “(Staycations) are more important than ever in building occupancy. They serve as a catalyst for increasing business across the entire resort.”

Richard also notes that staycations allow the local community to experience the Phoenician at a much more attractive price point.

And the Valley staple is not the only high-end resort to recognize the importance of attracting residents during these dismal economic times. The Arizona Biltmore — a presence in the Valley since 1929 — also has set its sights on increasing its staycation market.

“We actually started marketing toward the Arizona market even before the downturn,” says Andrew Stegen, general manager of the Arizona Biltmore.

In addition to traditional advertising, the Biltmore has successfully utilized social media and Internet specials as a way of alerting locals about deals and promotions.

“It creates an opportunity for a lot of people to visit our resorts who in other circumstances see it as inaccessible because of price,” Stegen says.

Beginning on May 22, summer rates for the luxurious resort start at $99 a night. In addition to these reduced rates, the Biltmore offers numerous cost-saving options, including all-inclusive golf packages, spa specials and restaurant deals. Stegen is certain that with more exposure, staycations will change the way residents view travel.

“It’s helped us introduce a great luxury product to people who have not thought of us as a vacation destination before,” he asserts.

The Sanctuary Camelback Mountain Resort & Spa also has developed many promotional efforts focusing on staycations. Special deals are e-mailed exclusively to individuals who follow the resort online.

“The value is so great right now,” says Michael Surguine, general manager of the Sanctuary. “(With a staycation) you wind up getting a lot more vacation hours for your buck.”

Another resort offering incentives to residents is the Hyatt Regency Scottsdale Resort and Spa at Gainey Ranch. Last year, the resort launched its Shades of Summer program, which offered deals to families, including free meals, Camp Hyatt activities for kids and giveaways. The resort is planning to have similar incentives this summer.

“Our success was really built on adding value,” aknowledges Michael Stephens of the Hyatt Regency Scottsdale. “I will say that the Hyatt Regency Scottsdale has never been this affordable all year round than this year.”

Arizona Amenities

Thanks to the deals now being offered at local hotels and resorts, Arizonans can take advantage of the state’s abundant natural endowments. According to AZOT, exploring the state’s wonders is one of the top activities for resident travelers. Overnight residents were more likely to take part in hiking or backpacking — 15.1 percent versus 11.4 percent for overnight, non-resident tourists. Residents also led the pack in camping and fishing activities.

“Our diversity offers everything from the desert, lush forests, riparian terrain and mountains, to lakes and streams, and some of the most beautiful backdrops in the Southwest,” says Wessellhoff of the Sedona Chamber of Commerce.

Wessellhoff adds that while staycations help Arizonans save money, they also allow residents to experience things they typically take for granted or simply never had time to fully appreciate before.

Heather Ainardi, director of the Flagstaff Convention & Visitors Bureau agrees: “In economic downturns, people often look for more ‘real’ and natural experiences, and Arizona is very well positioned to offer travelers an authentic experience.”

The Future of Staycations

While the economy begins its slow trek back, staycations remain a viable option for local individuals and families looking for a special travel experience at affordable prices.

More importantly, it is this type of local travel that can stimulate the hospitality industry and help it survive the recessionary downturn. From Phoenix residents escaping the summer heat of the Valley for a cooler retreat in Flagstaff or Sedona to Tucsonans heading to the Valley’s golf resorts and restaurants — every destination has something to offer local travelers.

“Regardless of the economic climate, or perhaps because of it, people will want to get away from it all and enjoy some leisure time,” says Richard of Starwood Hotels.

Valuations For Financial Institutions Are Falling — And Presenting New Opportunities For Estate Planning

“Strange,” “Nothing like it before,” “Astonishing” are a few ways to describe what has transpired in the financial institution industry over the last several months. As liquidity and asset concerns for financial institutions have become magnified, national economic trends have exacerbated the situation.

Despite all of this gloomy news there is at least one silver lining: If you own stock in a financial institution and need to do some estate planning, now is a great time to consider gifting some of those shares to family members or other beneficiaries. While gifting has many advantages, one of the most important benefits is the removal of assets from your estate and lowering your future estate tax.

Valuations of shares in financial institutions (and many other privately held businesses) are likely to be lower than in recent years due to many factors.

Some of the external factors include the uncertainty and volatility of the public stock markets, the effects and duration of the current economic downturn, the potential estate tax law changes that will occur with a new administration in the White House, and U.S. Treasury programs that are still being finalized from the financial-system bailout.

Each financial institution is unique and specific facts will dictate whether a substantial decline in value exists for each institution. The following are some noteworthy items that should apply when determining the value of any financial institution in today’s environment.

Liquidity and capital concerns may lead to financial institutions tightening their distribution policies to ensure capital levels are maintained.

Distribution policies can significantly impact the value of an entity. If lower distribution levels are expected to be maintained for a significant period of time, lower values for an entity can be substantiated.

There have been 139 bank failures since July 1, 2008, according to the FDIC’s Web site. As many as 115 of those bank failures have occurred in 2009. To put this in perspective, from 2001 through 2007, there were only 24 bank failures. This trend suggests that problems are more prevalent with financial institutions than in the past and that earnings expectations for future years may be lower than in recent years. Lower future earnings generally equate to lower valuations of stock prices.

The ability to achieve recent historical earning levels for financial institutions may prove to be difficult. According to the FDIC’s quarterly banking profile for the fourth quarter of 2008, annual net income for all financial institutions was at its lowest level since 1989, and return on assets for the industry (0.08 percent) has not been this low since 1987. During the second quarter of 2009, the FDIC noted that more than one in four institutions was unprofitable and industry assets declined by $238 billion. With future earnings unlikely to mirror recent historical earnings (prior to 2008), valuations for shares in financial institutions should be lower.

Many valuations of privately held financial institutions rely on publicly traded information as benchmarks for establishing values. While the markets have rebounded since early 2009, the publicly held banks are still trading at considerably lower levels. Specifically, a review of publicly traded banks in Yahoo! Finance’s Pacific and Southwest Regional Banks category indicates the average price-to-book value for the 184 publicly traded banks was 0.70 as of October 31, 2009. This is considerably lower than price-to-book ratios prior to 2008, and will likely impact buyers of private financial institutions leading to lower valuations.

The private marketplace is another source of information that appraisers rely upon when determining the value of financial institutions. The amount of activity in mergers and acquisitions of private financial institutions in the Southwestern U.S. significantly dropped during 2008 and 2009. Of the 20 transactions in 2008, only five were announced in the second half of 2008. Like the publicly traded banks, private banks in the Southwest also have seen a decline in the average price-to-book multiple above 30 percent from 2007.

Moving shares at lower values seems counter intuitive, but the tax advantages may be beneficial in planning your estate. With the current potential for lower stock valuations of financial institutions, owners may be able to gift more shares for the same dollar amount than they would have been able to gift in the past. These conditions should reduce the applicable gift tax and/or unified credit that would be used in connection with a gift. While the timing may be right for gifting shares of stock in your financial institution, be sure to visit with your financial advisers to determine when gifting is the best option for you.


Arizona Business Magazine

February 2010

Q&A With Michael Bidwell, Chairman Of GPEC, President Of The Arizona Cardinals

Michael Bidwill
Chairman, GPEC
President, Arizona Cardinals

Why did you opt for a second term as GPEC chairman?

It is an honor to serve a second year as chairman of GPEC. The organization is doing meaningful work, and I wanted to help build upon that work. I think it’s also important to provide consistency in leadership, particularly during times like this. Over the last year, GPEC has made impactful contributions to Arizona’s economy, including our work on the renewable energy incentive program (SB1403). We have much more to do and serving another year as chairman will allow me to continue to work closely with the governor, Legislature and business community on vital economic development issues.

You have been GPEC’s chairman during one of the worst economic downturns the Valley has seen in decades. What lessons have you taken from this experience and what have you learned about the business community?
Our state was unprepared for the slowdown in the economy and the ramifications are going to be sobering in 2010 for those not following the state budget cuts. It is clear that the business community needs to lead the effort to diversify our industry base. And it is equally clear that we have many talented, passionate business community members who are ready to step forward and provide new leadership. Like in football, we need a game plan and players on the field to execute it.

Economists say the recession has made Arizona more affordable again, and thus more attractive to relocating companies. Do you agree with this assessment, and how is GPEC making sure the Valley maximizes its competitiveness?
I believe it is one factor, but not significant enough to be a game changer. Arizona needs to understand that we compete for business expansion and relocation with our Mountain West competitor states. Decision makers who decide where these projects (and jobs) are located factor many things: an educated work force, cost of and access to capital, business operating environment and an ability to attract and retain talent. Housing costs play a role, but our competition has a leg up on Arizona in many of the other areas. We need to stress to our elected officials that we need a game plan to recover from this downturn and diversify our economic base.

GPEC has targeted the renewable energy industry as a source of new business opportunities. How do Arizona’s efforts to attract green companies compare with those of other states? How would you assess any progress the state has made?

With the passage of SB1403 last session, we are well positioned to land new solar and renewable energy companies. But Corporate America is going green too and looking for green or LEED-certified buildings. Arizona needs to develop new programs to bring our commercial buildings to LEED certification. There is no doubt this will help in our effort to land new projects.

What are some of the goals and initiatives GPEC is taking on this year and how will it go about achieving those goals?

We have several efforts. First, we are providing analysis to the Legislature on how rewriting the state’s Enterprise Zone legislation will stimulate job creation and fill some of the empty commercial space. Second, we have renewed our focus on marketing Greater Phoenix with an emphasis on positive business news and opportunity. We’ve created a new Web site called opportunitygreaterphoenix.com that showcases the region and unique opportunities businesses and people have here. Next, we are organizing executive missions to Washington, D.C., and New York, where we’ll meet with leaders who can help influence positive economic activity for Arizona. And of course, we’ll continue to work hard to bring solar and renewable energy companies to Arizona under the new incentive legislation passed last summer. It will be a busy year and we are committed to doing all we can to improve the Valley’s economy and bring jobs to this region.

www.azcardinals.com


Arizona Business Magazine

February 2010

ATA Profile: Mark Grenoble

Mark Grenoble
President, Enchantment Group
www.enchantmentgroup.com

Not many professionals can say they grew up in their industry. Mark Grenoble is one of the few who can. He has worked in some capacity in the tourism industry since he was a teenager, and aside from a few years in real estate, he has never left the industry.

From humble beginnings as a hotel banquet waiter, Grenoble has risen to the ranks of president of the Scottsdale-based Enchantment Group, a company that provides spa and resort property development and luxury hotel management services. He founded the firm with senior executives of Enchantment Resort and Mii amo, a destination spa that has been ranked No. 1 in the world by Travel & Leisure. Yet, Grenoble doesn’t think his story is very unique.

“There are so many stories just like mine; started at 15, 16, 17 and have grown up in the business, have a passion for it and enjoy it,” he says. “I like the resort side of the hotel business even better. Everyone wants to be there. The business is fun in general. Most people in this business are very passionate about what they do.”

That passion has helped Grenoble etch out a successful career in an industry that has undergone many changes during his 25 years and counting. All his hard work and dedication has not gone unnoticed. Last year, Grenoble was named the Tourism Champion of the Year at the Arizona Governor’s Conference on Tourism.

Though he thoroughly enjoys the industry and his role within it, Grenoble is very frank about the future. Recent challenges have plagued this industry and Grenoble’s role in the Arizona Tourism Alliance is to educate the public on the value of tourism.

“Our leadership in the industry needs to be active and advocate. We need to educate business leaders and elected officials on the value,” he says. “We’re a major industry in the U.S. and the state. Millions are employed nationwide. It’s an industry that is an economic driver; it’s a career path and we need to educate people on the value of it.”

Tourism is a huge part of the state’s economy, especially in smaller, rural communities. Sedona is one example. The city does not have a property tax because tourism funds services for the town.

“Tourism drives the economy for the town and real estate values. It adds a quality of life. Sedona has a population between 10,000 and 15,000 people. All the activities, art galleries, etc. — as a resident you would never be able to do that without the tourism aspect of it,” Grenoble says.

One positive thing that has occurred as a result of this downturn, he adds, is that communities, and even some elected officials, are willing to invest in tourism dollars. They have begun to understand the value of it and the long-term benefit of the cities and the state as a whole.

Grenoble also was instrumental in adding a communications position to the Arizona Hotel & Lodging Association, a move that proved itself to be an excellent resource during last year’s trying times. The position bridged the gap between the industry and the public, and helped communicate the value of tourism.

“We’re trying to engage the public, elected officials and our membership, all the constituents of the tourism industry. We need to understand what we’re doing as an industry,” Grenoble says.

One way that Grenoble hopes to accomplish this is to include outside industries in tourism advocacy. The goals and missions for all industries is to bring economic stability to the state, and the best way to do so is to recognize the value of each industry and work together.

“We’re all intertwined, and that’s why we need to build alliances and bridges with those outside industries,” he says.

Another cause that Grenoble thinks could be helpful in aiding the tourism and travel industry in its recovery is a regulated school calendar that doesn’t begin until after Labor Day.

“It’s had a very positive uptick in taxes for states that have mandated school start after Labor Day,” Grenoble says.

He is currently lobbying supporters for this, but he remains focused on the main goal of tourism helping lead the state out of the economic downturn.

“I think the state has a lot going for it and I see the lights at the end of the tunnel,” Grenoble says.


Arizona Business Magazine

February 2010

A Solid Health Management Program Can Be A Good Investment For Any Company

Many population health management programs face closer scrutiny when a company is faced with difficult budget decisions during a tough economy. But health and health care costs are a strategic priority for every business whether they acknowledge it or not — and most readily do.

In times of economic downturn, companies might want to consider increasing their spending on health and wellness initiatives. Why? Because in an economic downturn, maximizing productivity and reducing costs are more important than ever.

The true cost of poor health includes indirect costs, as well as the more obvious direct cost of medical claims. The more bad health habits or risks employees have, the lower their productivity; and health risks directly equate to higher health care costs, both direct and indirect. A number of medical conditions, if left unmanaged or poorly managed, become catastrophic, ending in hospitalization and reduced functioning, thereby reducing productivity. Lastly, health and wellness programming is a relatively low cost and important item. It decreases disease, but also influences whether employees like their jobs and feel cared about by an employer, which in turn affects productivity and absenteeism.

There are some key preventive measures a company can take that help keep people from slipping into a high risk, high-cost category. First, know what the most common or costly conditions are in your population and offer programs targeted to help your people manage these conditions. Encourage the local medical community to be an active partner with innovative management tools and strategies. Also increase the employees’ stake in the equation, but not regressively. Again, making disease management easy and affordable will likely save money. Lastly, look for quality in the medical care your employees get. Help your employees find quality care for catastrophic, high-cost conditions, and make helpful, quality information easy to access. There are now a number of good Web-based sources of quality medical information, such as the Centers for Disease Control and Prevention (CDC), National Library of Medicine, and mayoclinic.com.

When prioritizing program elements during tough economic times, companies can minimize downstream health costs and productivity impacts if they focus on initiatives that prevent the onset of high-cost, productivity-lowering diseases such as diabetes. In most health promotion and disease prevention programs, we know there is a three-to-one return on your investment, and you get the pay back in one to two years.

For mild conditions such as high blood pressure, high cholesterol, and Type 2 diabetes, company policies should make it easy to treat these conditions, and encourage medication and behavioral approaches. Make common medicines cheap to the end user, and encourage regular use of prescribed medications. Back it up with multimodal messages throughout the year. Make talking to a human easy when people have questions about their condition or medications with telephonic coaches, disease management professionals, group classes, or an onsite nurse.

Online personal health managers are a new consumer tool that will likely play a key role in helping people take their medications and manage their conditions. Using an online personal health manager also forms a bridge to doctors, and can give personalized day-to-day support and guidance to people via the Internet.

Keep healthy people healthy to prevent downward risk migration that can make health costs jump, and engage as many of your employees as possible in something positive. The first step is to get their attention. A health assessment tool provides a teachable moment and a jumping off point for engaging people in the wellness options you may offer.

Tracking data can often represent a significant time and dollar investment that may be difficult to keep up with during lean budget times. But the old adage of you can’t manage what you don’t measure is true in population health management. Maintaining a database of health status and trends is critical for making informed decisions on what interventions will have the most impact for your particular population. It also helps you justify the expenditure by showing whether you’re making a difference over time.

Use a health assessment as your baseline data set. It allows immediate feedback to the individual and gives group data for needs assessment and program development. It allows tracking of change over time, an early warning system and modeling of pay back from various program options. And it’s low cost, especially the online versions.

When faced with difficult budget decisions, if you are contemplating cuts to your health and wellness programming, stop and think about the downstream implications. Preserving these programs not only will help you keep your bottom line healthy, but also may improve your employees’ health, productivity and morale.

Arizona Business Magazine

February 2010

The Valley’s Health Care Industry Held Its Own During The Recession And Looks Toward Expansion In The Recovery

In an economic downturn that has plunged Arizona into its worst financial crisis in decades, one sector of the state’s economy that remains vibrant and growing is the health care industry. Consider recent developments driven primarily by population growth: the Creighton University partnership with St. Joseph’s Hospital and Medical Center; the newly opened Cardon Children’s Medical Center, a Banner Health facility in Mesa; the M.D. Anderson Cancer Center scheduled to open in Gilbert in late 2011; and a major expansion of Phoenix Children’s Hospital.

The academic affiliation between Omaha-based Creighton and St. Joseph’s will bring nearly 30 percent of Creighton’s medical students to Phoenix for two years of clinical studies. Since 2005, Creighton has sent relatively few medical school students to St. Joseph’s for one-month rotations. Under the new agreement, 42, third-year Creighton students will arrive at St. Joseph’s in 2012 and in 2013, for a total of 84 students on the new campus, to be known as the Creighton University School of Medicine at St. Joseph’s Hospital and Medical Center. Creighton will provide an associate dean and several administrative support staff, but faculty instructors will be St. Joseph’s doctors and other medical personnel.

Linda Hunt, service area president of Catholic Healthcare West Arizona, president of St. Joseph’s and chair of the Greater Phoenix Economic Council’s Healthcare Leadership Council, says the goal is to retain many of the students in Arizona for residency and eventually have them set up practices here.

“We’re a large population and when you compare us to the rest of the country we have to import our physicians,” Hunt says. “We need the capacity to educate and to care for more of the population.”

The Cardon Children’s Medical Center, which opened Nov. 9, provides comprehensive pediatric care for children. The facility has 248 beds and works with 225 physicians. Top specialties include cancer, neurology, emergency services, surgery, and a level-III neonatal intensive care unit.

“Children often need special help coping with acute and chronic illness,” says Peter Fine, Banner Health president and CEO. “We know Cardon Children’s Medical Center will make a difference in the lives of countless children and their families. Its opening will offer a new option for outstanding pediatric care that is clearly needed by the Valley’s growing population.”

Meanwhile, the University of Texas M. D. Anderson Cancer Center joined forces with Banner Health on Dec. 1, launching construction of a facility intended to deliver an unprecedented level of cancer care to patients in Arizona. Along with treating cancer patients, M. D. Anderson, based in Houston, also offers access to therapeutic clinical research exploring novel treatments.

Fine calls the relationship with M.D. Anderson “a major milestone in the vision of our two organizations to provide access to a new level of cancer care in Arizona.”

The $107 million, 76-bed center will be a 120,000 square foot, three-story building focusing on outpatient services, including physician clinics, medical imaging, radiation oncology, infusion therapy and many support services. Inpatients will be treated on two floors inside Banner Gateway Medical Center.

“M.D. Anderson is not and will not be something similar to what exists in the Phoenix market today,” Fine says. “We are bringing the No. 1 cancer center in the country to Arizona and to have them run it as closely as is possible. There will be significant amounts of automation tying in all their clinicians in this marketplace to clinicians in their Houston campus. For research purposes, protocol purposes, they will in essence be one clinical business on two campuses.”

In 2008, Phoenix Children’s Hospital broke ground on a $588-million expansion that includes an 11-story patient tower scheduled for completion by 2012. As of December 2009, Phase I marked its halfway point, was on-budget and on-schedule. The project will increase the number of its licensed beds to 626 from 345.

Bob Meyer, president and CEO of Phoenix Children’s Hospital, says research indicates Maricopa County has more than 1 million children today and by 2025, an additional 500,000 to 700,000 youngsters will be living in the Greater Phoenix area.

“If you believe those numbers,” Meyer says, “deficits in pediatric capacity are astounding. Estimates are that we will be short 800 pediatric beds by 2025, and short about 400 pediatric specialists.”

Another key reason for the expansion, Meyer says, is that the existing hospital building, which was built in the late 1960s, does not have the floor-to-ceiling height to accommodate today’s newer technology.

Dr. William Crist, vice president of health affairs at the University of Arizona, says the ongoing expansion projects in Greater Phoenix really are thoughtful plans for growth and development of service for a city that’s expanding markedly — even though that growth has leveled off because of the recession.

Crist cites the aging baby boomer generation as the reason for an increasing need in expanded adult medical care.

“Potentially, most cancer occurs in older individuals,” Crist says. “The aging of our population is made possible by advances in health care. It keeps you alive long enough to develop chronic illnesses.”

www.creighton.edu | www.stjosephs-phx.org | www.bannerhealth.com | www.mdanderson.org | www.phoenixchildrens.com | www.arizona.edu


Arizona Business Magazine

February 2010

Nonprofits Need To Be Prepared When Asking Law Firms For Pro Bono Assistance

In these tough economic times, nonprofit organizations are increasingly being relied upon for services, even as contributions continue to drop. Doing more with less has become the norm. In this lean environment, what happens if a nonprofit organization hits a legal road bump that could require hours of work from an attorney or law firm?

If they are lucky, nonprofit directors have planned for this contingency. In reality, however, legal issues sometimes catch nonprofit managers off guard, unprepared and lacking sufficient funds to cover legal expenses. And, finding an attorney or a law firm that provides pro bono legal work can be a challenge. Here are some steps nonprofits can take when seeking pro bono counsel.

Research is key

Ellis Carter, an attorney with Fennemore Craig, suggests doing research.

“The nonprofit should find out whether the firm has a policy regarding accepting pro bono work,” says Carter, whose practice focuses on advising nonprofits, charities and other tax-exempt organizations with respect to corporate, tax and regulatory issues.

Many times, larger firms have policies, liaisons or committees that screen pro bono projects, she adds. The screening ensures that the firm has the appropriate resources and expertise within its practice to provide the legal work required for the project.

“Be cautious about asking a lawyer or a firm to give pro bono advice in an area that they do not ordinarily practice in,” Carter says.

It might be rewarding for an attorney to give back to the community through pro bono assistance, but in complex matters facing nonprofit organizations, such as federal tax laws or state law constraints, it is important that the attorney providing assistance understands these laws, Carter notes.

Be prepared
While some firms have pro bono committees, other firms work through established programs such as the Volunteer Lawyers Program or other community organizations, says Rachel Lewis, marketing coordinator for Bryan Cave.

Demand for pro bono services has increased during this economic downturn, making it especially important for nonprofits to be prepared when seeking pro bono representation, Lewis adds.

“Bryan Cave has seen an even greater need for pro bono and has encouraged its lawyers to expand their commitment,” she says.

That means attorneys providing pro bono services will need to have a clear picture of what types of pro bono services organizations need and how best to allocate resources in order to meet those needs.

Carter recommends that if a nonprofit organization is planning to approach a law firm to request pro bono legal services, it should be prepared to provide articles of incorporation, bylaws, financial statements, the organization’s IRS determination letter, the organization’s most recently filed Form 990, and a compelling story regarding how pro bono services will help the organization impact the community.

“Obtaining pro bono counsel directly from a law firm to which the organization has no prior connection can be a challenge,” Carter says. “Frequently, law firms take on pro bono cases for nonprofits because one of the firm’s lawyers or clients has a connection to the organization.”

She suggests contacting community programs such as the Volunteer Lawyers Program as a first step toward finding pro bono legal assistance.

Volunteering is encouraged

Don’t be discouraged when seeking pro bono legal counsel. Law firms and even sole practitioners are committed to helping when they can. It is even encouraged.

“We have a special obligation to make our professional skills and other resources available to those who cannot afford to pay for legal services,” Lewis says.

Both Fennemore Craig and Bryan Cave encourage their attorneys to give back to the community through pro bono work.

In Arizona, philanthropic training starts in law school through service learning. The Sandra Day O’Connor College of Law at Arizona State University encourages students to help those who cannot afford legal services, says Kristine Reich, director of pro bono programs and student life at the law school. Reich coordinates more than two dozen pro bono programs and facilitates community outreach efforts.

Programs such the Advocacy Program Against Domestic Violence (APADV) and Wills for Heroes are just two of the pro bono efforts at the law school.

Students volunteering for APADV visit women in domestic violence shelters and, on an informal basis, answer any legal questions they may have, says Michelle Guina, a second-year law student at ASU and one of the program coordinators.

“The chance to have a legal education is such a privilege,” Guina says. “Pro bono opportunities in law school give you the chance to use what you’ve been given to give back to the community early in your legal career.”

www.fclaw.com | www.bryancave.com | www.law.asu.edu | www.vlpmaricopa.org


Arizona Business Magazine

February 2010

Bob_Moran

CEO Series: Robert F. Moran

Robert F. Moran
President and Chief Executive Officer, PetSmart

How does the pet retail industry differ from the human retail industry?
First of all — passion. I’ve been in retail for 38 years and prior to coming to PetSmart, we use in retailing passion for the customer. But how can you be passionate about a shirt or a suit or a new coat? … I didn’t really discover passion in retailing until I came to PetSmart. … One of the things we focus on is how do we help pet parents help their pets, who have become members of the family, live long, happy and healthy lives? How can you not get behind that? … We’ve converted our environment not into, “How can I help you sir or help you ma’am,” but “Who are you shopping for today? I’m shopping for Buffy. Well, tell me about Buffy.” … All of a sudden you’re getting a life story and the conversation can go in a million different ways. Through that we’ve asked our store associates to be, pet detectives; find out how we can help, either aspirationally or inspirationally, to take care of some unfulfilled need they may have about a pet who has become a member of the family. … The other side of it is that we have enjoyed over the last 10 years within the pet retailing industry a growth of 5 to 6 percent. Probably the only sector in retailing that has been at that level has been electronics. Even in this recession we’re seeing it dip to 3 to 4 percent. So it’s a great growth industry. … This humanization of pets has really created this growth vehicle, not only for our industry, but for our company. We believe this will go on until about 2020. It’s a great industry to be in. I love the passion and it’s a great place to work …

Has the pet retail industry been able to weather this economic downturn better than the traditional retail industry, and why?
I think what has happened in this recession, which is the worst since the 1930s, is very similar to what happened after 9/11. What I mean by that is that people were sticking closer to home — we call it neighborhooding — they took staycations or no vacations at all, they found ways of not spending money but still having a good time. Pets played a role in that. The only way we suffered was in the housing side. What I mean by that is that there is a high correlation between pet acquisition and new houses. When that went into decline over the past two years that affected our industry. We have not been without problems. Within our industry, the hard goods side, the discretionary goods, the extra toy, the extra bed, the extra collar or leash has been deferred. So we had to find new ways to address the customer needs. I think we’ve been able to do that because of the humanization of pets, because of the neighborhooding, pets becoming, let’s call it, an affordable luxury in a roundabout way. … You’ll find ways to feed the dog, you’ll find ways to feed the cat because they’re members of the family. That’s probably why we’ve been more resilient than the human side.

PetSmart had to make some hard decisions last year in terms of the recession. What were those decisions and how have they helped the company?
Business is very dynamic and it’s always about gaining market share during good times and bad. We made a decision in the recession that cash was king; we had to watch our piggy bank, in a sense. What we ended up doing, because customers were not going to shop as much, we slowed down the number of stores, the number of pet hotels we were building. We also put an intense focus on expense management. … The other thing we did is we invested in the customer experience. A lot of companies didn’t do that. We increased payroll, we put an intense focus on customer satisfaction — the relationship with the customer — because we felt if we did that, as we emerged from this, we would be able to gain and pickup market share. … If you really look at other retailers during this time they cut back on payroll, they cut back on 401ks, they cut back on the quality of the associate life — they actually cut back on the customer quality of life inside a store. We didn’t do that at all.

Going forward, what does PetSmart see in terms of growth within its industry in general and what plans does the company have for the future?
We’re blessed to be in a great industry. We’re in an industry that will probably grow 3 to 4 percent. How do we take advantage of that? Not only can we bring in new customers, but we can also gain market share from some of our competitors. I do see that there will probably be a slow recovery. Now it’s anticipated that we won’t see the spending levels approaching the 2007 level until 2013 to 2014. But there will be a gradual recovery. Within there are opportunities to take advantage of. Customers are always looking for new things — innovation, services that in a sense fulfill some of their unfulfilled needs. … you can create points of differentiation. What frustrates me about retailers is that they don’t look at their point of differentiation for their business. They try to do a lot of “me too, me too,” and sometimes you don’t recognize the industry anymore because everybody is trying to do the same thing.

What advice do you have for someone who wants to follow the career path you made?
I have two things. One is don’t actually map out a career path. Seek out the knowledge and experience and the jobs you really need to work on so you can demonstrate accomplishments. If you do that the career path comes to you, especially if you are successful and are willing to make certain sacrifices along the way, it will come to you. My secondpiece of advice is, and it’s going to sound trite, treat your office as a prison and escape it as much as possible, because not everything is happening here. Everything is happening out there. The more you can roam, the more you can find out what’s going on, the more people you get to know. Early in your career you call it networking, but in networking you find opportunities. You can turn some of your knowledge and experience toward those opportunities. As you get older and start getting accomplishments and you get titles along with it, you find what’s going on and where you can prioritize the needs of the company and the resources of the company, and that becomes very important.

Vital Stats

  • Joined PetSmart in 1999 as president of North American stores.
  • Appointed president and chief operating officer of in 2001.
  • Named president and CEO in June 2009.
  • Former president of Toys R Us, Canada.
  • Spent 20 years with Sears, Roebuck and Company.
  • www.petsmart.com

Arizona Business Magazine

January 2010

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.

tax day

Recovery Act Provides New Tax Benefits For Small Businesses

In response to an economic downturn the likes of which has not been seen since the Great Depression, President Barack Obama signed the American Recovery and Reinvestment Act of 2009 (commonly referred to as the Recovery Act) into law on Feb. 17. Intended to serve as a stimulus for the U.S. economy, the measures set forth in the Recovery Act are nominally worth approximately $787 billion.

Of those measures, roughly $288 billion are devoted to federal tax relief, with $51 billion aimed at providing tax benefits for small businesses. While the impact of the Recovery Act on individual taxpayers has been widely publicized, the beneficial tax provisions for small businesses and their owners have been overlooked. However, many of the Recovery Act’s new tax provisions offer significant tax savings opportunities for small businesses. Some of these provisions are highlighted below.

Election for longer net operating loss (NOL) carryback period
Currently, corporate taxpayers are allowed to use a NOL from one tax year to reduce taxable income in past or future tax years. Prior to the Recovery Act, NOLs could be carried back for two tax years and carried forward for 20 tax years. The Recovery Act now permits certain qualified small businesses to elect to increase the NOL carryback period from two years to three, four or five years for NOLs arising in a tax year beginning or ending in 2008.

Because many small businesses were profitable in tax years leading up to the current economic crisis, the extended carryback period provides small businesses with an opportunity to offset prior years’ taxable income with losses incurred in 2008. For purposes of the extended carryback period, qualifying small business are corporations whose average annual gross receipts are $15 million or less for the three-year period ending in 2008. As a result of the longer NOL carryback period, small businesses that experienced losses in 2008 likely can seek an immediate refund of income taxes paid in earlier years.

Expensing limits continued for another year
Before the enactment of the Recovery Act, the Internal Revenue Code’s expensing rules allowed businesses to deduct up to $133,000 of costs incurred in purchasing certain business machinery and equipment, instead of recovering those costs through depreciation deductions over a number of years. The Recovery Act increased that amount and now provides that, for tax years beginning in 2009, certain qualifying businesses have the option to deduct up to $250,000 of such costs. Although the increased expensing limits are subject to some limitations (for example, the $250,000 deduction is decreased dollar-for-dollar for purchases in excess of $800,000), any amounts that cannot be deducted because of these limitations can be carried forward to later years.

The more liberal expensing rules provided under the Recovery Act provide small businesses with the ability to take increased, current-year deductions for costs associated with acquiring business machinery and equipment, which should help to offset the often substantial economic outlays such purchases require.

Bonus first-year depreciation extended for another year
The Recovery Act also provides a one-year extension on the ability of businesses to take a “bonus” depreciation deduction for the first year new assets are placed in service. The bonus first-year depreciation deduction generally is equal to 50 percent of the cost of qualified property acquired and placed in service in 2009. Qualified property includes most types of tangible personal property, certain improvements to leased real property and most software. As with the increased expensing limits discussed above, the extension of the ability to claim a first-year bonus depreciation deduction may materially reduce the costs associated with acquiring new business property and equipment.

S corporation built-in gain holding period shortened temporarily
Typically, a Subchapter S corporation is not subject to an entity-level tax on its income. Rather, the S corporation’s income flows through to its shareholders, who then pay tax on their pro-rata share of the S corporation’s income. However, a business originally formed as a Subchapter C corporation, which later elects to be taxed as an S corporation, is subject to a built-in gain tax at the highest marginal corporate tax rate (currently 35 percent) on certain gains that are built-in at the time of the corporation’s S election.

These types of S corporations generally are subject to the built-in gain tax on the disposition of appreciated assets acquired during their C corporation period for the first 10 years after their S election. In other words, if the S corporation disposes of appreciated assets from its C corporation period during the 10 years following its S election, the corporation is subject to tax on the gain at the highest marginal corporate tax rate. Thanks to the Recovery Act, the built-in gain tax will not be imposed on any recognized built-in gain if the seventh year in the 10-year recognition period ended before 2009 or 2010. This provision will enable S corporations subject to the built-in gain tax to dispose of appreciated assets earlier in the recognition period without triggering the built-in gain tax on the transfer.

Deferred tax on debt forgiveness income
When debt is discharged or canceled, taxpayers generally must include the amount discharged in taxable, ordinary income. In order to reduce the economic hardships often associated with the recognition of this cancellation of indebtedness (COD) income, the Recovery Act now allows taxpayers to elect to defer the recognition of certain COD income that would otherwise be recognized in 2009 and 2010, until 2014 and then recognize the COD income ratably over five years. The type of COD income that may be deferred under the Recovery Act is COD income that results from the reacquisition or modification of certain business debt instruments during 2009 or 2010. This provision enables certain businesses that might otherwise have taxable income as a result of a debt modification to defer the recognition of that income into future, and hopefully better, tax years.

Kelly C. Mooney and Heather A. McKee are associates in the taxation department at Gallagher & Kennedy, www.gknet.com.

piggy bank

Cash Strapped Companies Seek Solutions

The economic downturn and volatility of the financial markets has left a large number of established businesses with difficulty managing cash flow. Cash-strapped businesses, big and small, are paying their bills more slowly than ever. It’s a cash flow river — or trickle in this case — that flows downhill, impacting the businesses below that require healthy cash flow to operate effectively.

As larger companies and small business owners have trouble paying their bills, they are quickly discovering fewer and fewer options. Banks are not lending and credit lines are stressed. What many businesses owners and managers don’t know or have not previously considered is the possibility of factoring.

For small to mid-size companies doing business-to-business or business-to-government transactions, factoring may offer a financial solution that will keep the doors open and even help them grow.

Factoring is a form of financing based on a company’s accounts receivables or billing invoices. A company with slow-paying customers who pay between 30 and 90 days will approach a factoring company to provide cash. The factoring firm will make an advance of 80 percent to 85 percent against the company’s billing invoices for a percentage less than they are worth. The factoring firm charges a fee for the advance, which is based on how long the advance is outstanding, then provides the company with cash as if the bill had already been paid, and the factoring firm collects on the invoice itself.

The result is the factoring firm can help close the cash gap by advancing funds on earned, unpaid invoices so the company can use the funds to pay daily operating expenses such as payroll and vendors. Factoring will usually give business owners more availability of funds than a bank. In addition, factoring funding can be available within a day or two after the application process is complete. The best factoring firms make factoring fast, easy and flexible.

Factoring differs from a bank because factors make funding decisions based on the credit worthiness of a business’ customers. Banks, on the other hand, make credit decisions based on a company’s financial history, cash flow and collateral. Most importantly, a factor makes funding decisions in days or hours, while banks generally take weeks or even months.

This was precisely the case for Phoenix-based American Printhouse, which provides design and screen-printed apparel and accessories to local and national accounts. Its clients include Chaps Ralph Lauren, Calvin Klein, Disney, Liz Claiborne, the U.S. National Parks Service, Sony Signatures, the Arizona Diamondbacks, the Phoenix Zoo and Discount Tire, to name a few. Garments created and screened at American Printhouse are then sold to 1,500 independent specialty retailers and larger clothing retailers such as Hot Topic, Urban Outfitters, Buckle, Dillard’s, Kohl’s and Target. The company offers 12 different types of printing options for its garments.

Despite employing a staff of 15 and securing an impressive book of accounts on a local and national scale, the company still found itself experiencing the effects of the tightened financial markets.

“We really started feeling the slowdown and clients began asking for net 60 (day) terms beginning in September,” explained Sam Akkad, president and CEO of American Printhouse. “Then we hit the slow season and I was looking at the possibility of layoffs and difficulties paying the rent.”

After multiple banks refused to give the company a loan, and they received notice that their credit card lines were significantly reduced, the building owner suggested factoring. After learning more about factoring in late 2008, the company received $75,000 against their receivables in January 2009, within days of submitting an application for funding. This got them through a rough spot and allowed Akkad to turn things around.

“We didn’t have to do layoffs and today our business is booming,” Akkad said. “We have experienced 125 percent increase in revenue, we are adding new lines of business and looking at hiring.”

Johnny Benson, president of USMX, likes the flexibility factoring allows. Benson joined the company in the 1990s and served as the general manager for a number of years. In early 2008, he purchased the company despite its large debt load due to slow-paying customers. Benson was familiar with factoring and knew the banks would not be favorable to providing a loan or line of credit given the nature of the business.

The company is an environmentally friendly tire recycling facility in Phoenix that fabricates raw product and sells it to be used in playgrounds, artificial turf, molded rubber piping and landscaping. The company picks up tires at retail outlets and other locations throughout Arizona. USMX also cleans up areas where tires have been dumped, both for the state and for private land owners.

The business is growing due to more stringent regulations in recent years pertaining to the disposal of tires. But in order to continue growing, better cash flow is required.

“Working with a factor that allows you to select which customers and which invoices you want to factor is the ideal situation,” Benson explained. “We use factoring as a tool to bring cash flow in order to run our day-to-day operations.”

Regardless of size, factoring can work for companies seeking to fill the gap between invoice payment and payroll, purchasing and other business expenses. If businesses work with a flexible factoring firm, they also have the option of making factoring a big or a small part of their working business plan. Also, while long-term factoring relationships do contribute to a healthy, prosperous business, it would be best to seek out firms that consider factoring a shorter-term relationship. They will be the firms to help get your cash flowing again.

Factoring 101

Questions to ask when considering factoring:

  • Do I have to factor all my invoices?
  • Do I have to factor a minimum amount each month?
  • How much can I factor?
  • Where do my customers send their payments?
  • What fees will I pay?