Home 2006 April
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Government often finds itself in a position of outlining parameters in which businesses and individuals must operate. For the most part, government does this well. Legislation dictating safe working conditions, limits on hours and days of work, speed limits, exposure to chemicals and other elements, are all good examples of this.

But when government puts itself in the position of dictating very specific aspects of businesses and individuals, it often finds itself incapable of success and instead inviting disaster. ‘Acceptable’ styles, food, drink, prices, are all better set by the marketplace.

Individuals will gravitate to those areas — and numbers — they are comfortable with.

So why would government feel it should dictate the wage a person must receive without taking into consideration all factors associated with jobs: Skills, level of complexity, opportunities for advancement, and other benefits associated with the position?

The Affiliated Chambers of Commerce’s position is that setting a minimum wage is done through the marketplace in the private sector. A worker is judged by his or her ability and how well he or she can compete with other candidates for the job. The vast majority of the chamber’s members pay wages above that set by the government as a minimum wage. They do this for many reasons, not the least of which is the people they employ have a value above that minimum wage level, and they want to retain the employees. To do so they must offer competitive wages and benefits.

The state Legislature is contemplating increases to the minimum wage. The current hourly rate is $6.75, compared to the federally set wage of $5.15. One part of the chamber’s position is that a state-set wage puts Massachusetts businesses at an unfair competitive position. If a minimum wage level was to be set by government, it should be set at the federal level, putting every business in every state at the same starting point.

Currently, 29 states use the federally set minimum wage as their own. Only 11, including Massachusetts, have a minimum wage higher than the federal wage. If the proposed increases in Massachusetts become law, Massachusetts would have the highest minimum wage level in the country.

The strongest disagreement the Cham-ber has with the proposal concerns a provision that would guarantee yearly increases using some cost-of-living index. Common sense alone should dictate what a bad idea this is. Only two other states have such a provision.

Imagine a scenario we have all seen and probably will again, with high inflation and a very competitive marketplace. During this period, if the automatic increase provision is accepted, the minimum wage would dramatically increase. Because wages are one of the largest cost factors for any business, in order to stay competitive companies would have to reduce costs. Therefore, the very jobs that advocates for increases say they are fighting for would no doubt be the jobs eliminated due to high costs.

In summary,

• the marketplace works; let it work;
• a minimum wage should not be forced upon the private sector by government;
• if government disagrees with this premise, to ensure fair competition state to state, the federal government should take control with this issue;
• automatic increases in this minimum wage are counter-productive to ensuring better wages, and could indeed cost the jobs of these lower-level workers.

Legislators could soon vote on this issue. It is up to business owners to inform legislators of the level of wages they pay, the benefits that go with those jobs, and the competitive pressures they are facing. With this message, maybe we can get government back to what it should be doing and let businesses do what they do;

rovide our residents with a quality way of life and create more jobs for more people.-

Jeffrey Ciuffreda is vice president of Governmental Affairs for the Affiliated Chambers of Commerce of Greater Springfield; (413) 755-1312.

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What’s in Store?
Additional Retail Proposed for Holyoke’s Ingleside Section

Jeff Hayden says there is an unofficial policy in Holyoke not to locate retail centers on the west side of I-91 in the Ingleside area of the city.

The four-lane boundary line, spelled out on city zoning maps, essentially divides two zones — one called IG (Industrial-General) and the other IP (Industrial Park). The former, defining much of the property east of the highway, is quite broad, allowing nearly every type of commercial venture, including the Holyoke Mall. The latter, however, limits development to industrial ventures, offices, or, with a special permit, a hotel, said Hayden, director of the Holyoke Office of Economic and Industrial Development, who cited traffic concerns and a desire to maintain the residential nature of that area as the reasons why.

Thus, a zone change will be needed if the Holyoke-based O’Connell Development Group is to move forward with preliminary plans to transform the site of the former Atlas Copco air compressor manufacturing facility into a specialty retail center. Specifically, the company is exploring creation of a facility similar to Holyoke Crossing, home of Barnes & Noble, Circuit City, and several other stores, only a few blocks away on the other side of the interstate.

O’Connell developed the Holyoke Crossing project, and Andy Crystal, the company’s vice president, believes a similar retail center will likely represent the best re-use of the 29-acre Atlas Copco property.

“We think that would be the best alternative for that site,” he said, adding quickly that what a zone change will provide is options for redevelopment — and O’Connell intends to explore all of them.

That’s good, because additional retail in that corridor may be a tough sell.

There is already considerable traffic moving on and off I-91 and other roads in that area, with the Holyoke Mall and Holyoke Crossing being common destinations. Adding more retail to the mix would exacerbate that situation, some argue.

But Crystal told BusinessWest that a retail center could actually generate less traffic than a manufacturing operation — and certainly less truck traffic. Meanwhile, a venture similar to Holyoke Crossing would generate roughly $650,000 in annual tax revenues, about four times the amount yielded from Atlas Copco, and a retail center would generate more than 100 full- and part-time jobs.

“And these would be ‘new’ jobs to the region,” said Francesca Maltese, development manager for O’Connell, noting that manufacturing positions generated at the site would likely be relocated to that address from other area communities.

There are many, similar arguments that will be made in what could become a compelling debate in Holyoke. BusinessWest looks this issue at what’s at stake for the Atlas Copco property — and the Ingleside section as a whole.

Space Exploration

As he talked with BusinessWest about the parcel at 161 Lower Westfield Road, Crystal gestured toward the large, nearly empty parking lot of the plant, and then well beyond it, to the corners of Ingleside.

“We understand this area, and we have a big stake in it,” he said, with the we being O’Connell, which, in addition to Holyoke Crossing, has also developed the Crossroads Business Park off Bobala Road. “As a local company, we recognized the importance of what happens on this corner, and that’s why we wanted to be the ones to redevelop this site.”

Such desire eventually led O’Connell to form 161 Lower Westfield Road, LLC, the venture that acquired the property last summer for $4 million, and is now actively engaged in finding a new use for it.

Once agricultural land, the property, adjacent to Tannery Brook, had been home to Atlas Copco since the mid ’60s. The company, which expanded its operations several times over the years, relocated its manufacturing operations to South Carolina in 2004, and moved administrative and sales employees to Westfield last year.
It is the site’s location, only a few hundred yards from interchanges off I-91 and only a few blocks from the mall and Holyoke Crossing, that intrigued O’Connell, said Maltese. She told BusinessWest that a specialty retail center – also known within the retail community as a lifestyle center – on the site could make the Ingleside area a larger, even more vibrant shopping destination.

Elaborating, she said there are many national chains of retail stores and restaurants that would be attracted to such a location. And a mix could be generated, she believes, that would not compete with the mall or Holyoke Crossing, but instead complement and benefit them.

“A specialty retail center would give people from a wide area more reasons to come to Holyoke,” she explained, noting that the mall attracts shoppers from several New England states and New York. “And that would benefit the city and the region as well.”

Both the merits and potential problems to be generated by such a retail hub will be debated over the next several weeks, said Hayden, who told BusinessWest that there are many issues to be weighed. These include traffic, job creation, tax revenue, and, overall, crafting a re-use plan that works for both Ingleside and the community as a whole.

He acknowledged that traffic concerns will be at the center of debate (which will ensue at a public hearing later this month), but they should be just part of the discussion.

He said city officials have been working diligently in recent years to diversity the city’s job base, and the future of the Atlas Copco property will play a role in such efforts. Holyoke has been hurt by the closing or relocation of several large manufacturers in recent years, including Atlas Copco, Ampad, Kodak Polychrome, and others, he explained, adding that while many new jobs in manufacturing have been created, more diversity is desired.

“Our economy is much different now than it was 20 years ago,” he said. “Back then, people would say of Holyoke, ‘if it loses any of those manufacturers, it’s in big trouble. That’s not the case anymore because we have been able to diversity our jobs base.

“We have a strong base in health care, in retail, in other types of commercial services, and even in government,” he continued. “We have to continue moving in the direction of greater diversity.”

Maltese said O’Connell has looked at a number of options for the Atlas Copco property and concluded that specialty retail makes the most sense for that site — and the community itself.

She told BusinessWest that large manufacturing operations such as the Atlas Copco plant are not being drawn to the Pioneer Valley; instead, they are leaving it. Holyoke’s manufacturing base remains strong, she said, but it is now dominated by smaller shops, many of them now located in the paper and textile mills that gave the city its heritage.

The Atlas Copco site — specifically, the roughly 15 acres that can be developed — could, theoretically, be subdivided into smaller parcels for manufacturing or office use, she said. However, there is already a sizable inventory of existing facilities and land designated for such uses.
This includes the Crossroads business park, which currently houses a 22,000-square-foot office building for American Honda Financial Corp. and another parcel currently under contract.

“We can accommodate these smaller manufacturers at Crossroads and other locations,” she said. “We could, and we should, put this site (Atlas Copco) to a different use.”

The End Zone

Like Crystal, Hayden said the requested zone change, if approved, will provide O’Connell, and Holyoke, with greater flexibility as it creates a re-use plan for the Atlas Copco site.

Whether retail emerges as that best option remains to be seen, he said, but such a venture would help the city further diversify its economy while also gaining additional tax revenue and jobs.

“This property is an asset for the city,” he continued. “And any redevelopment plan should focus on making the best use of that asset.”

George O’Brien can be reached at[email protected]

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What is now the Hampshire Hospitality Group started small, with a Howard Johnson’s Motor Lodge on Route 9 in Hadley. It has grown over the past 40 years into one of the largest hotel groups in the region with six — soon to be seven — properties and nearly 500 rooms. The philosophy guiding the company now is the same one employed in 1966 — smart, conservative growth.

Curt Shumway says the Hampshire Hospitality Group has owned the parcel on the south side of Route 9 in Hadley — home over the years to a driving range, restaurant, tire outlet, and the Hangar nightclub — for more than 20 years.

Since acquiring the parcel, the group’s plan has always been to put a higher-end hotel there, Shumway, HHG’s chief operating officer, told BusinessWest. “But whenever we asked ourselves if the local economy was ready for something like that, the answer was always ‘not quite.’”

In his view, that’s still the answer, but HHG is moving ahead anyway with plans for a 96-room Courtyard by Marriott, the seventh property in the group’s inventory and in many ways its most intriguing venture, and calculated risk, to date.

“We just decided that since there would be never be a perfect time to do this, we might as well do it now,” said Shumway, adding that ground was broken for the project last week, and the new hotel should open its doors for business in about a year — a time chosen to coincide with commencement at the area’s colleges.

When the Courtyard does open, the HHG will have more than 500 rooms at a collection of sites in Northampton, Hadley, and Amherst, a corridor that includes the Five Colleges, a number of cultural and tourist attractions — and a highly competitive hospitality sector.

The portfolio includes a Clarion Hotel and Autumn Inn in Northampton, a Holiday Inn Express Hotel & Suites, Econo Lodge, and Howard Johnson’s hotel in Hadley, and the University Lodge in Amherst.

The breadth and depth of that stable of facilities gives HHG a competitive edge in that in that it has virtually all segments of the market covered, providing options for corporate and leisure customers, Shumway explained. And an edge is needed, because while there has been some growth in the region’s tourism sector, the business market has remained fairly stagnant and a number of new hotels have come onto the market over the past several years.

“I would say the Springfield market is over-saturated and the Hampshire County market is nearly saturated,” said Shumway, who left a career in banking to join the venture started by his father, Robert, and two other partners in 1994. “It’s very competitive out there right now.”

In such an environment, companies looking to continued growth must be aggressive and entrepreneurial, said Shumway, noting that HHG is doing so in several ways, including the new Marriott, but also the recent hiring of Michelle Boudreau, most recently director of convention center sales for the Greater Springfield Convention and Visitors Bureau, to a position as director of Sales and Marketing.

In that capacity, she will lead a team tasked not only with filling hotel rooms and booking meeting and banquet room dates for the Marriott, but positioning the entire roster of HHG properties for continued growth, said Shumway.

“This was a real coup for us,” he told BusinessWest. “She’s knows this market and the players in it, and she’s going to help us get where we want to go.”

BusinessWest looks this issue at how the HHG continues to expand its portfolio and succeed in a challenging hospitality market by responding intelligently to the laws of supply and demand.

Pillow Talk

Shumway told BusinessWest that the Marriott has long been intrigued by Hampshire County, and specifically the stretch of Route 9 that connects the bustling college communities of Amherst and Hadley.

But the company has long adhered to strict guidelines about the look of its hotels, and didn’t want to acquiesce to Hadley officials’ insistence on an old New England/Colonial look that defines many of the properties in the old farming community. Eventually, however, the promise of the Amherst-Northampton market, coupled with HHG’s prodding, compelled Marriott to “bend,” as Shumway put it.

Thus, the Maryland-based chain’s flag will soon fly over a Courtyard hotel depicted in a large sign erected in what was the parking lot of the former night spot/restaurant/driving range.

As he talked about the Marriott and the decision to bring more rooms into what most consider to be a saturated market, Shumway said the decision-making process was influenced by the same principles that guided his father, Ray Vincunas (now deceased) and Ed O’Leary, when they built a 60-room Howard Johnson’s motor lodge on Route 9 in Hadley in 1966.

“Each project has to make sound business sense,” he said, adding that the partners certainly thought their first acquisition fit that criteria. Likewise with their next venture, purchase of the 20-room University Lodge on North Pleasant Street in Amherst in the early ’70s, and with a 40-room expansion of the Howard Johnson’s in 1994.

A year later, the partners rolled the dice on a tired property off I-91 in Northampton known then as the Quality Inn. Originally a Hilton, the facility had deteriorated to the point where it lost its franchise, said Shumway, who joined the company just prior to that acquisition.

The partners gave the property a new name, the Inn at Northampton, undertook extensive renovations, and eventually became part of the Clarion chain of hotels in 2002.
“It’s still a challenging property,” said Shumway, adding that it has seen several renovations over the past several years, and has been a solid performer with room nights, banquets, and meetings.

The growth process continued with the construction of a 100-room Holiday Inn Express Hotel & Suites on Route 9 in Hadley in 2000, and the purchase of the 32-room Autumn Inn in Northampton (what Shumway described as a cross between a large bed & breakfast and a small hotel) in 2001.
By this point, the company decided an umbrella group to properly manage the growing collection of properties was needed, and thus the Hampshire Hospitality Group was created.

That entity continued its expansion initiatives with the purchase of the Country Bell hotel on Route 9 in Hadley in 2002. That property was then torn down and replaced with a 63-room Econo-Lodge in 2003, giving HHG more than 430 rooms, a variety of banquet and meeting facilities, and locations near all five colleges in the area.

No Reservations

But there was room for additional expansion, said Shumway, noting that the decision to add the Marriott Courtyard also fits the basic tenet of ‘making sense,’ although some say the Route 9 corridor was already packed with hotels — a 90-room Hampton Inn was opened on Bay Road in early 2005, making it the latest addition to the inventory.

There was, and is, a need in the marketplace for a higher-end room, a small step over the Holiday Inn, he explained, noting that the Marriott name is very popular among travelers and business people alike.

“We thought there was a small gap in the market that we could fill — we had many people calling us looking for a nicer hotel,” he told BusinessWest. “My first reponse to that has been that the Holiday Inn is a much nicer hotel. Some agreed and said they really like that brand, but there were continued comments to the effect that they wanted something even nicer. I think the Marriott flag will be very popular.

“I’ve heard some people say we’re growing too fast and moving too quickly,” he continued. “Actually, we’re being fairly conservative and growing in a controlled fashion.”
With the addition of the Marriott, HHG could attract more banquets and meetings, especially from the colleges in the area, he said, and also take better advantage, from a room nights perspective, of the seven-month season (May to November) when all area hotels must make hay.

And the group can do so without taking business away from its other properties, he said.

“We believe we’re going to be generating new business with the Marriott, while also giving people more options for their stay here,” he explained. “The market is a little saturated, and we know we’ll be pushing the limit with the Marriott, but we see an opportunity for growth and we’re definitely thinking long term.”

He told BusinessWest that most hotels in the Pioneer Valley are averaging occupancy rates of about 60% to 70% annually (they go higher in peak periods) and that HHG’s properties are right in that ballpark and won’t trend downward with the addition of the Marriott.

Boudreau agreed. She said she left the GSCVB and a position selling the new convention center because she was impressed with HHG’s track record and aggressive approach to further growth.

“It’s an exciting company, and this is a great opportunity for me,” she told BusinessWest, adding that in her newly created position she hopes to create more awareness of HHG and its various facilities — and then move those products.

In the Marriott, she sees a vehicle for seizing more of the opportunities presented by area businesses and colleges.

“Many of the colleges have meetings and conduct professional-development programs off-campus,” she said, adding that the Marriott will have a number of function rooms to handle such events. “And there are many businesses in this area that do a lot of business in Amherst and Hadley and just haven’t had the facility in this part of Hampshire County to conduct meetings and events.

“Our goal is to fill every facility within the hotel, from the sleeping rooms to the meeting rooms to the banquet hall,” she continued. “And we have an exciting game plan to do that.”

Staying the Course

Reflecting on the fact that it took what is now HHG two decades to move ahead with its plans for a hotel on the former Hangar sight, Shumway returned to the laws of supply and demand in the hospitality industry.

“The time just never seemed right to do it — and it’s still not really right,” he explained. “But we know this market better than anyone, and we decided that this time was as good — or bad — as any other.

“I’ll let you know if we made the right decision in a few years,” he told BusinessWest with a laugh. “In this business, you do your homework, gauge the market, and make what you believe are smart choices.”

That’s a game plan has served HHG well for its first 40 years in business.

George O’Brien can be reached at[email protected]

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Some might look at the price tag and says it’s way too much for a city on the brink of receivership, a community where hard-working municipal employees have-n’t had raises in years.

But the $120,000 that Springfield will soon commit to an economic development study to be undertaken by a panel from the Urban Land Institute might be the best money this struggling city has spent in years.

The institute, or ULI as it’s called, has undertaken hundreds of similar studies through its Advisory Services department in cities in every region of the country. In the Northeast, they’ve been conducted in Lowell, Mass., Bridgeport, Conn., and others. These communities are, in many ways, like Springfield, and sought help from the ULI to gain some fresh perspective on how to move forward, attract jobs, and improve quality of life.

What they were given was a sense of direction on subjects broad and specific, and a road map for achieving progress.

Springfield could definitely use one of those.

Indeed, while there some business success stories to record and signs of encouragement in the Control Board’s efforts to pull the city back from the economic abyss, the economic development picture looks chaotic at best.

Despite claims to the contrary, it would seem that the city has no real plan (or plans) for economic development. Instead, its leaders have goals.

They want to expand development of the riverfront area, for example. They also want to find a new use for the York Street Jail, determine the best way to utilize the industrial park to be built near Smith & Wesson to attract new jobs to the city, and turn long-vacant Union Station into some kind of transportation/retail center.

pringfield also wants a downtown hotel to complement the recently opened Mass-Mutual Center, and it desires some way to turn the tide downtown and develop market rate housing that will balance, or replace, the thousands of subsidized units there.

But there is no real plan for doing any or all this, or even affirmation that these are the directions in which the city should be moving.

There are many voices — this magazine among them — who believe the city is wasting precious time, money, and energy trying to convert Union Station into something it can’t be — a destination. Meanwhile, the ‘Jail for Sale’ sign facing I-91 has become a permanent part of the downtown landscape, and there seems little hope for re-using the landmark. The downtown hotel project is stalled, and efforts to make Springfield into a telecommunications or biotechnology hub have yet to get off the ground.
For all these reasons, some assistance from the ULI couldn’t hurt — and it may very well help.

From what BusinessWest has gathered from Urban Land Institute spokespeople and officials in Lowell, the ULI process is not a master plan or a vision plan. Rather, it is an intense, week-long effort to gain perspective on where a community is and where it could, and should, go.

Springfield’s leaders will be able to set the agenda for the ULI panel and pinpoint specific areas of concern and opportunity. Volunteer panels, staffed with professionals across a broad spectrum of land use and development disciplines, will generate a dialogue about Springfield and, hopefully, create a consensus for how best to move forward.

Some in Springfield are undoubtedly worried that the Control Board is spending $120,000 that the city doesn’t have to hear a group of experts tell people here some things they already know. Meanwhile, others are concerned that the ULI report will become yet another document to gather dust on shelves in the Planning Department office.

While these are legitimate fears, we will take the optimistic view that the study process will yield some positive benefits that will take the city and its development leaders out of neutral and into a higher gear.

The ULI has a proven track record for success, and the city should take full advantage of this opportunity.

Departments

Business Market Show 2006

The Affiliated Chambers of Commerce staged its 2006 Business Market Show Conference and Exhibition on April 5 at the MassMutual Center. The event featured more than 200 exhibitors and drew hundreds of visitors.

Some scenes from the show:

 

Sharing time at the Elms College booth are, from left, Pat Burden, director of Development; Bernadette Nowakowski, assistant director of Development, and alumnus Gretchen Dooley
Marylynn Ostrowski, director of Health Programs and Community Relations helps a visitor check his blood pressure at the HNE booth, which featured the company’s Wellness Van
Jeffrey Casey, project manager with Forish Construction, staffs the company’s booth

ACCGS President Russell Denver, left, stops at the Associated Builders booth to chat with Peter Wood, the company’s vice president of Marleting

Nancy Urbchat, left, owner of TSM Design, chats with Eugenie Sills, publisher of The Women’s Times

Bob Alves, territory sales manager with Coffee Pause based in Agawam, served up free cups of joe to Market Show visitors

 

Blazing a Trail

Cecelia Gross, right, a history professor at Springfield Technical Community College, was recently awarded the 13th annual Dorothy J. Pryor Award, presented to “living treasures in the Greater Springfield community,” for her work to create an African American Heritage Trail in the city. Gross (seen here with Pryor and STCC President Ira Rubenzahl) and several of her students have been researching sites in Springfield that became part of a critical link along the Underground Railroad. Rubenzahl recently announced that, in an effort to commemorate those individuals who helped slaves reach freedom, the college is promoting a self-guided walking tour with permanent markers in Springfield, beginning in the downtown area. At right is a sample marker.

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Getting the Job Done

Merger of Workforce Training Agencies Will Create New Efficiencies

Bill Ward says discussions about merging Hampden County’s Regional Employment Board and Employment and Training Consortium had been waged for years.
Evidence of overlapping services was mounting, Ward, executive director of the REB, told BusinessWest, adding that the word redundant was being used with increasing frequency as the agencies and their roles were referenced.

What was lacking, he explained, was the political will to fold the consortium, essentially a city department, into the REB, a quasi-public nonprofit corporation. Springfield Mayor Charles Ryan filled that void, said Ward, and, in the process, led the drive to a merger of the entities that will take effect July 1, the start of the new fiscal year.

The merger, or absorption of the consortium into the REB, will result in a direct savings of more than $200,000 annually — through consolidation of the administrative structure, reductions in rent, and other steps — money that will be re-deployed, as Ward put it, to direct services for the REB’s many types of customers in Hampden County.

But there will be other benefits, as well, he continued, noting that the merger creates a single point of contact for funders, vendors, and customers, as well as unified accountability of performance, which will result in a reduction in contracting and payment processing time of at least 75%.
And beyond that, the new agency — and the region as a whole — will gain some respect among government agencies and other funding sources for workforce development initiatives, he told BusinessWest.

“We’ll be showing people that we’ve got our act together,” said Ward, noting that there are 14 other regional employment boards across the Commonwealth, and all or most of them still have redundant public agencies such as the consortium. “We’re going to be more efficient now, and we’re going to be able to serve clients better, and people are going to notice that.”

Hire Ground

As he talked about the merger and how it finally came to be, Ward described the consortium as an agency that had a specific purpose when first formed more than 30 years ago — administration of programs and contracts that were part of the Comprehensive Employment and Training Act (CETA) — but remained in existence long after that need was gone or being addressed by other organizations.

“In business, and especially in government, programs come up and new entities emerge to address the needs of those programs,” he explained. “What happens over the years is that these things just continue to pile on top of one another and you create a situation where nothing ever goes away.
“Some things just get a life of their own,” he continued. “Even in business that happens, and when it does, you have to step back and say ‘where did these structures come from?’ and ‘is this the best way to be organized?’

That’s the conversation that began about five years ago with regard to the REB and the consortium, he said, adding that, in addition to the redundancies in services between the two entities, the consortium was going through a tumultuous period marked by scandal involving top administrators.

The agency’s former director, James Asselin, and its former compliance officer, James Krztofik, were both sentenced to prison terms after pleading guilty to swindling more than $600,000 in bogus consulting fees and travel from a taxpayer-funded, non-workforce-development-related loan fund.

Still a number of factors, but primarily politics, kept matters from moving beyond the discussion stage, said Ward, adding that talks were renewed when Ryan took office in January, 2004. What the new mayor wanted was a sound case for melding the agencies and deciding which should be the surviving entity.

So Ward made one.

In a proposal presented in late March, he petitioned for a restructuring of the workforce development system in Hampden County, one that would create a single administrative entity for workforce development by merging all consortium administrative functions into the REB, which would serve as the consolidated fiscal, planning, and oversight organization for the county.

The plan also called for moving the 25 consortium employees off the city payroll, with 11 transferring to the REB and another 12 to the area’s two one-stop career centers, Future Works and CareerPoint, and leaving two vacant positions unfilled.

Keeping current staffers employed was a key consideration in the proposal, said Ward, noting that an agency focused on workforce development and job retention can’t endorse proposals that put people out of work.

Still, the new entity to result from the merger will be much more efficient than the two-headed monster that will exist for another 10 weeks, he said.

Savings to be derived from the merger, as outlined in a line-item budget comparison include a reduction in total salaries from the current $1.6 million for the two separate entities to $896,506; a reduction in employee benefits from $468,557 to $256,286; a drop in total rent payments from $115,067 to $75,067 (the REB, now located in the Regional Economic Development Center within the TD Banknorth building, will move into larger quarters there, while the consortium’s offices will close); and a reduction in auditing, legal, and insurance costs from $36,000 to $26,000.

Factoring in the additional cost of consortium personnel to be transferred to the career centers ($765,000), as well increases in phone, parking, chamber management fee, and other expenses, the net savings is $200,000, said Ward, adding that this money will still will coming to Hampden County, but will be directed toward services, not salaries and administrative costs.

“There are a lot of things we can do with $200,000,” he explained. “We can train many more people and provide more services; there are some very real benefits to this beyond saving money on rent.”

And the overall gains in efficiency and value from state and federal funding will eventually turn some heads in those circles, he explained.

“We’ll be sending a message across to funders that we’re operating with sound management principles and efficiency,” he continued. “We won’t just be saying, ‘give us more money’; we’ll be saying, ‘give us more money because we know how to spend it in the most efficient manner.’”

Survival of the Fittest

Summing up the merger of the two workforce development entities and the benefits to the region, Ward referenced management guru’s Peter Drucker’s philosophy of ‘organizational abandonment.’

In a nutshell, the management strategy, first introduced in the ’80s and endorsed by GE’s Jack Welch, among others, calls for businesses and non-profit entities to become more efficient — and more profitable — by not trying to be all things to all people. It calls for eliminating, or abandoning, those products or programs that do not move an organization forward, and becoming more efficient by being smaller and more focused.

“That’s what we’re doing here,” said Ward, adding that by essentially abandoning the consortium, or at least the redundant services it provided, Hampden County will receive better, more efficient workforce training services.

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Understanding the Cap Rate
Know the Risks Before You Invest in Commercial Real Estate

You are an investor who recently sold a small income-producing property. To defer capital gains, you want to re-invest in another income-producing property. But where is the best place for your investment?

Should you pay more for a newer property to enjoy an established tenant such as Walgreens or should you pay less for an older property and take on a less-established tenant like XYZ Plumbing Supply? To answer this question you have to think about — and understand — the capitalization rate, or cap rate.

A much misused and misunderstood method for judging the value of a property, the cap rate, put simply, is the net operating income divided by the sales price, or the value of the property expressed as a percentage. The lower the selling price, the higher the cape rate, and, conversely, the higher the selling price, the lower the cap rate.

The cap rate is based on rates of return that are typical in the marketplace for similar properties and is intended to reflect the investment risk associated with a particular property — investors expect a larger return when investing in high-risk income-producing properties.

Determining a property’s value using its cap rate seems like an easy process – divide the cap rate it into an income stream and get an indication of the property’s value. But it’s not as simple as that.

Let’s look at an example. Let’s say the owner of a relatively new, Class A investment property has Walgreen’s paying $350,000 per year to lease the space. With a cap rate of .07%, the indicated value would be $5 million. Now, compare that to a 30-year-old Class C office building with the same income stream. With a cap rate of .15%, that property has an indicated value of only $2.3 million.

Why such a big difference for identical income streams? Because risk is rate.

The rate of capitalization is determined by the amount of risk associated with that income stream such as:

• Financial strength (credit worthiness) of the tenant;
• The length of firm term on the lease by the occupant;
• Future marketability of the property (sale or re-lease)
• The residual value of the property at the end of the firm term — will there be a renewal and if so, at what rate? How does that compare with the market? What is the sale-ability of the property at the end of the firm term?
• Age and condition of the physical assets.

By applying these risks to the earlier example, it’s obvious which property is the better investment.

By owning a building with Walgreens as the tenant, the investor has a lower cap rate for a property in better physical condition, which limits landlord expense. Just as important, the physical condition of the building will be in better shape at the end of the holding period than the Class C building.

Investors need to understand the cap rate so they don’t apply the same cap rate for a national tenant in a new building in a super location and a 16-unit apartment building in an older part of the city. The investor wouldn’t be comparing apples to apples.

Cap rates should come from the market and need to be extracted from extremely similar situations in order to be an appropriate method of valuation for a property.

Bob Greeley is owner of R.J. Greeley Company, LLC., a full-service real estate firm with extensive experience across the spectrum of commercial, industrial and telecommunication real estate transactions; (413) 734-792

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Government often finds itself in a position of outlining parameters in which businesses and individuals must operate. For the most part, government does this well. Legislation dictating safe working conditions, limits on hours and days of work, speed limits, exposure to chemicals and other elements, are all good examples of this.

But when government puts itself in the position of dictating very specific aspects of businesses and individuals, it often finds itself incapable of success and instead inviting disaster. ‘Acceptable’ styles, food, drink, prices, are all better set by the marketplace.

Individuals will gravitate to those areas — and numbers — they are comfortable with.

So why would government feel it should dictate the wage a person must receive without taking into consideration all factors associated with jobs: Skills, level of complexity, opportunities for advancement, and other benefits associated with the position?

The Affiliated Chambers of Commerce’s position is that setting a minimum wage is done through the marketplace in the private sector. A worker is judged by his or her ability and how well he or she can compete with other candidates for the job. The vast majority of the chamber’s members pay wages above that set by the government as a minimum wage. They do this for many reasons, not the least of which is the people they employ have a value above that minimum wage level, and they want to retain the employees. To do so they must offer competitive wages and benefits.

The state Legislature is contemplating increases to the minimum wage. The current hourly rate is $6.75, compared to the federally set wage of $5.15. One part of the chamber’s position is that a state-set wage puts Massachusetts businesses at an unfair competitive position. If a minimum wage level was to be set by government, it should be set at the federal level, putting every business in every state at the same starting point.

Currently, 29 states use the federally set minimum wage as their own. Only 11, including Massachusetts, have a minimum wage higher than the federal wage. If the proposed increases in Massachusetts become law, Massachusetts would have the highest minimum wage level in the country.

The strongest disagreement the Cham-ber has with the proposal concerns a provision that would guarantee yearly increases using some cost-of-living index. Common sense alone should dictate what a bad idea this is. Only two other states have such a provision.

Imagine a scenario we have all seen and probably will again, with high inflation and a very competitive marketplace. During this period, if the automatic increase provision is accepted, the minimum wage would dramatically increase. Because wages are one of the largest cost factors for any business, in order to stay competitive companies would have to reduce costs. Therefore, the very jobs that advocates for increases say they are fighting for would no doubt be the jobs eliminated due to high costs.

In summary,

• the marketplace works; let it work;
• a minimum wage should not be forced upon the private sector by government;
• if government disagrees with this premise, to ensure fair competition state to state, the federal government should take control with this issue;
• automatic increases in this minimum wage are counter-productive to ensuring better wages, and could indeed cost the jobs of these lower-level workers.

Legislators could soon vote on this issue. It is up to business owners to inform legislators of the level of wages they pay, the benefits that go with those jobs, and the competitive pressures they are facing. With this message, maybe we can get government back to what it should be doing and let businesses do what they do;

rovide our residents with a quality way of life and create more jobs for more people.-

Jeffrey Ciuffreda is vice president of Governmental Affairs for the Affiliated Chambers of Commerce of Greater Springfield; (413) 755-1312.

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In many ways, the history of what is now The Williston Northampton School has been inexorably linked to Easthampton’s manufacturing sector — it was created by a fortunate button maker based in the mill town. Its early function was to provide educational opportunities for the common working man. Times, the fortunes of the mills, and the school’s demographic reach have all changed (it is now co-ed) but the basic mission hasn’t.

The story goes that Emily Graves Williston had a houseguest from Europe sometime in the early 1800s.

She noticed the buttons on his waistcoat were covered in bright fabric, and when evening fell, she crept into his room, snipped one of the buttons from the vest, and took it apart to see how it was made. She shared the discovery with her husband Sam Williston, an Easthampton-based button manufacturer whose business had begun to struggle.

The introduction of what became known as the Williston fabric button was the boon he needed to revive his finances — and part of his fortune went to found the Williston School, now known as Williston Northampton, in 1841.

The school’s current headmaster, Brian Wright, Ph.D. explained that Sam Williston wanted to provide educational opportunities to the ‘average working man,’ the types of men working in his then-bustling factory. In that way and many others, the history of the school is intertwined with Easthampton’s business community, he continued, adding and both have had many ups and downs.

Easthampton, for one, is seeing massive change demographically, only recently changing its distinction from a town to a city.

But more importantly, the school’s history mirrors the community-based model for education and collaboration that has become the hallmark of Williston Northampton, as well as the specific challenges that small, private schools face in today’s world.

Community Fabric

Wright said Williston controlled the school throughout his life, and consequently, its success rose and fell with his own finances. It flourished when Williston began producing those fabric-covered buttons, but it also suffered when the manufacturing heyday of Easthampton and of Western Mass. as a whole drew to a close.

“By the late 19th to early 20th century, the manufacturing sector in Easthampton started to decline, and he was no longer the force he had once been,” Wright said. “The school began to decline along with the town, and there was no institutional framework for fundraising because it was Williston’s school, and for a very long time he wanted to do things his way. This school has never been a wealthy one.”

In the 1950s, the Williston homestead was donated by the Williston family to the school, which, under the direction of then headmaster Phillip Stevens, soon became the new home to the school on Payson Ave.

“Stevens was charged with devoting much of the school’s resources to that moving of the school from the center of town to the Williston family property,” explained Wright. “When he started, the school was already somewhat behind the eight ball. After the move, it had virtually no endowment.”

Wright said Williston continued to struggle financially throughout the ’50s and ’60s, as did the nearby women’s school, the Northampton School for Girls. In 1971, Wright said Williston and Northampton followed a national trend among boarding schools and small colleges and merged to become one co-educational institution, still located on the Williston grounds.

“Like many schools, it was time for us to go co-ed,” he said, noting that while such mergers can solve some financial issues, they can create others. “It can spur setbacks in terms of the financial model. Northampton brought with it some debt, and we maintained a minimal endowment well into the 1980s.”

Indeed, even today the school remains largely tuition driven, while still offering substantial scholarship and financial aid packages to 40% of its 500-plus students. Those students are enrolled as boarders from 15 different countries and 26 states, and as day students from Massachusetts and Connecticut, in grades 7 through 12, with about a dozen post-baccalaureate students. He said the school has maintained its focus on providing a “triple-threat” education – academics, athletics, and the arts – to a wide range of students hailing from various socio-economic backgrounds and cultures, in keeping with Sam Williston’s original goal of providing education to the masses.

“We try to provide depth and strength in all areas of education,” Wright said, “and try to avoid giving students a narrow focus on any one discipline at an early age, which is actually a trend in many boarding schools today.”

While all types of students are still encouraged to apply to the school, Wright did note that admission policies are more stringent today than ever before at Williston Northampton, due in part to the school’s commitment to providing aid to a large percentage of students balanced against tuition costs. A boarding student now pays $37,000 in tuition, and the school’s day program, which includes about 135 local students, costs $26,500 (middle school enrollment is slightly lower). Both aid and admission are based largely on a student’s overall merit.

“Our job is to continue to offer top-notch programs, but to do that, we need to make every dollar dance,” he said.

Climbing Times

Wright, who took on the headmaster’s post six years ago, said his predecessor, Dennis Grubbs, managed the school’s finances very carefully, in an effort to stabilize and grow its endowment, and currently it’s Wright’s challenge to build on that base.

He’s spearheaded a $36 million fundraising campaign, focused largely on strengthening that endowment and procuring unrestricted gifts to boost financial aid packages and faculty salaries, as well as funding for some capital improvements on campus.

“When I arrived (in 1999), the school’s endowment stood at about $30 million, and it declined somewhat in 2000 and 2001. We are at about $38 to $39 million right now, and that’s still inadequate.”

Wright said similar, established boarding schools across the country such as Phillips Academy in Andover and Phillips Exeter in Exeter, N.H., often have endowments in excess of $300 million, and that’s a level Williston has never reached in its 165-year history.

“It’s a little daunting. We also don’t have a hugely wealthy alumni base, so fundraising becomes a dance in which we are constantly making far-reaching plans that will move us ahead steadily.”

One way the school is doing that is by drafting specific plans for improvement ahead of time, in order to provide to potential contributors a menu of choices when considering financial gifts. Williston Northampton recently completed a master plan, for instance, which details several goals for fundraising, construction, and programming in the coming years.

Wright cited a long-range plan to centralize the school on one side of Main Street to alleviate safety and traffic issues students now face when crossing the increasingly busy street to come and go from dormitories. “There’s no set date for that, we need a donor first. But that’s one major reason for the master plan – we all need a good, clear picture in our minds and real, concrete plans to get people excited enough to give money.”

The excitement seems to be growing; Williston just passed the half-way mark in terms of that $36 million goal, and has also secured a handful of grants for programming improvements, including a $50,000 matching grant from the E.E. Ford Foundation that has been used to augment the school’s writing center.

“The school has come a long way,” Wright told BusinessWest. “When we look at those schools that are our competition, we don’t compare in terms of endowment. But when we look at ourselves in terms of being part of the Western Mass. and the Easthampton community, it’s a different story. We’re one of the largest employers in town, and the community still has a very deep connection to the school. Some people still see us as ‘the wealthy school in a manufacturing town.’ We don’t see it that way, but we are careful to work closely with the city in ways that are appropriate.”

Educating the Public

Charles McCullagh, chief financial officer at Williston, said the school tries to remain as transparent and accessible to the town and the region as possible to continue to foster relationships. As a private school that does not pay property taxes, McCullagh said it’s doubly important to ensure residents, especially in a city growing and changing as quickly as Easthampton, that Williston Northampton takes its role in the community seriously.

“We try to be deliberate in making sure that the local community knows that we are working diligently with the town, not just within the town,” he said, noting that one of those deliberate actions to underscore what he calls the “town and gown” cooperation is an annual letter detailing various partnerships, contributions, and other financial data that impacts the area.

As of March 2005, for instance, the school employed 176 full-time and 50 part-time employees. That produced a payroll of $7,090,318, 74% of which went to Easthampton residents. Of the current student body, 33 hail from Easthampton, and were awarded a total of $522,300 in financial aid. The school also logged $577,000 in purchases of goods and services from businesses in Easthampton.

“Like most non-profit organizations, Williston Northampton has to be very mindful of multiple budget pressures,” added McCullagh. “Our health insurance increases, escalation in utility costs, and constrained income from the school’s endowment have made the last few years extremely challenging. Nevertheless, given the extensiveness of an operation such as this, there is bound to be some economic impact to Easthampton and the surrounding area.”

McCullagh listed a number of upcoming and ongoing programs taken on by the school to foster stronger relationships with the city, including a program that will donate 50 to 60 lap top computers, valued at $30,000, to the city every three years, beginning in 2007. The school also routinely donates or discounts the use of various athletic facilities and fields to the Easthampton Public School system, parks and recreation, and other departments. It also assists with the plowing and policing of roads that run through campus, and provides upkeep services for a portion of the Manhan Rail Trail.

“To remain community-minded without an incredibly wealthy donor base and not affect the quality of our programs is challenging, but also critical,” he said, noting that while partnerships between the city and the school often benefit the community, the school has been able to glean support – and, in some cases, shave expenses – through those collaborations.

McCullagh said one recent example was the renovation of Easthampton’s Whitebrook Middle School track, taken on by both the city and Williston Northampton at a cost of about $14,000. The renovation will provide a new track for the school, but also a practice space for Williston Northampton runners while the school’s Galbraith Field is renovated. In turn, Galbraith will be open to the public for a number of uses, from fundraisers to athletic events to use for the city’s annual fireworks display.

Buttoning Down

“That happens a lot,” he said. “There is a community reaction to financial realities, and subsequent constructive suggestions that are made to solve problems creatively, saving money, time, and energy.”

The school and the city in which it stands are no longer snipping buttons to make a dime, but the metaphor is not lost on many: bright ideas are often found in the most unlikely of places, large and small.

Jaclyn Stevenson can be reached at[email protected]

Uncategorized

Some might look at the price tag and says it’s way too much for a city on the brink of receivership, a community where hard-working municipal employees have-n’t had raises in years.

But the $120,000 that Springfield will soon commit to an economic development study to be undertaken by a panel from the Urban Land Institute might be the best money this struggling city has spent in years.

The institute, or ULI as it’s called, has undertaken hundreds of similar studies through its Advisory Services department in cities in every region of the country. In the Northeast, they’ve been conducted in Lowell, Mass., Bridgeport, Conn., and others. These communities are, in many ways, like Springfield, and sought help from the ULI to gain some fresh perspective on how to move forward, attract jobs, and improve quality of life.

What they were given was a sense of direction on subjects broad and specific, and a road map for achieving progress.

Springfield could definitely use one of those.

Indeed, while there some business success stories to record and signs of encouragement in the Control Board’s efforts to pull the city back from the economic abyss, the economic development picture looks chaotic at best.

Despite claims to the contrary, it would seem that the city has no real plan (or plans) for economic development. Instead, its leaders have goals.

They want to expand development of the riverfront area, for example. They also want to find a new use for the York Street Jail, determine the best way to utilize the industrial park to be built near Smith & Wesson to attract new jobs to the city, and turn long-vacant Union Station into some kind of transportation/retail center.

pringfield also wants a downtown hotel to complement the recently opened Mass-Mutual Center, and it desires some way to turn the tide downtown and develop market rate housing that will balance, or replace, the thousands of subsidized units there.

But there is no real plan for doing any or all this, or even affirmation that these are the directions in which the city should be moving.

There are many voices — this magazine among them — who believe the city is wasting precious time, money, and energy trying to convert Union Station into something it can’t be — a destination. Meanwhile, the ‘Jail for Sale’ sign facing I-91 has become a permanent part of the downtown landscape, and there seems little hope for re-using the landmark. The downtown hotel project is stalled, and efforts to make Springfield into a telecommunications or biotechnology hub have yet to get off the ground.
For all these reasons, some assistance from the ULI couldn’t hurt — and it may very well help.

From what BusinessWest has gathered from Urban Land Institute spokespeople and officials in Lowell, the ULI process is not a master plan or a vision plan. Rather, it is an intense, week-long effort to gain perspective on where a community is and where it could, and should, go.

Springfield’s leaders will be able to set the agenda for the ULI panel and pinpoint specific areas of concern and opportunity. Volunteer panels, staffed with professionals across a broad spectrum of land use and development disciplines, will generate a dialogue about Springfield and, hopefully, create a consensus for how best to move forward.

Some in Springfield are undoubtedly worried that the Control Board is spending $120,000 that the city doesn’t have to hear a group of experts tell people here some things they already know. Meanwhile, others are concerned that the ULI report will become yet another document to gather dust on shelves in the Planning Department office.

While these are legitimate fears, we will take the optimistic view that the study process will yield some positive benefits that will take the city and its development leaders out of neutral and into a higher gear.

The ULI has a proven track record for success, and the city should take full advantage of this opportunity.