Home 2012 November
Features
42 design fab Puts on a Display of Entrepreneurship

Todd Harris, left, and Jack Kacian

Todd Harris, left, and Jack Kacian look over one of 42 design fab’s many creations, this one an ‘alien life form’ for the company’s booth at a trade show.

It’s called the “walk-in tree,” and that name pretty much explains what this exhibit would be.

“This is a tree that people could literally walk inside,” said Todd Harris, co-owner of 42 design fab in Indian Orchard, who came up with the concept while working as a consultant for a company called the Holbek Group on a master-plan project for the Harry C. Barnes Memorial Nature Center in Bristol, Conn. “People could learn about a tree from the inside out — how the tree works, the insect life, and much more.”

The Barnes Center hasn’t created the walk-in tree yet — it is still exploring funding options for this and many other items in the plan — but it has contracted with 42 design fab, the company Harris started with model builder Jack Kacian (formerly with the Holbek Group), on several other projects, from outdoor signage shaped like a broken tree to the gift shop.

And these items have become part of a growing portfolio that includes everything from displays for the Basketball Hall of Fame (such as the ‘vertical leap’ exhibit and a tribute to Bob Cousy) to trade show booths for Fortune 500 companies. Expanding and diversifying that portfolio are the top priorities for Harris and Kacian as they look to take this unique design-and-fabrication company — hence the name — they started together in 2010 to the next level.

And to do so, they’ll attempt to maximize their own talents and those of the six other team members now working in a large space on the fourth floor of the Indian Orchard Mills.

Harris, who was a CAD program instructor at Holyoke Community College years ago, has extensive background in strategic planning and project management, working as an independent consultant for nearly two decades on everything from SAP implementation to a large Y2K initiative, to the building of a few chemical plants in Saudi Arabia. Kacian, meanwhile, is an artist and designer who has been involved in several signature projects in the area, including the so-called Money Tree in Greenfield — an ATM built into a 25-foot-high artificial tree that was designed and fabricated by the Holbek Group for Greenfield Savings Bank — and the model of a GeeBee airplane, built in Springfield in the late ’40s, that now sits in the Springfield History Museum after residing for years in the Visitors Center near the Hall of Fame.

Todd Harris

Todd Harris stands beside one of the many exhibits 42 design fab has created for the Basketball Hall of Fame.

Together, the two partners look to shape a winning business strategy grounded in finding solutions for clients and creating new and different ways to convert their imagination and skills into reliable revenue streams.

“We want to be the most creative, most versatile design-fab shop around,” Harris said, “whether it’s custom furniture or trade-show items, restaurant interiors, or corporate offices.”

For this issue, BusinessWest goes behind the scenes — both literally and figuratively — at a company that certainly has designs on continued growth and an international reputation for imaginative solutions.

 

In the Right Mold

As he talked about some of the work 42 design fab has done for natural-history museums and facilities like the Barnes Center, Harris went over to a bookcase filled with some of the sculpted flora and fauna that have become part of various dioramas and exhibits.

There’s a giant slug that’s much larger than what actually appears in nature, a centipede (again, much larger than real life), the top half of a chipmunk (this one was coming up out of the ground), and a large eel built for the Shelter Island Nature Conservancy on Long Island, which went to great lengths to make sure the item was anatomically correct.

“They actually brought up a dead eel and said, ‘we want it to look just like this,’” said Harris, adding that the company was able to comply with that request, which is one of the keys to earning the repeat business and referrals that are the lifeblood of the business.

How Harris and Kacian joined together to design and fabricate eels, insects, trees, and Hall of Fame exhibits in this business venture is an intriguing story that blends elements of entrepreneurship, timing, and market opportunities.

Harris told BusinessWest that he enjoyed his consulting work, but certainly not the long hours and time away from home that his assignments demanded. “It was tough being a road warrior … you lose a bit of yourself with every job,” he explained, adding that, on the positive side, his consulting work introduced him to what he called “the museum world,” largely through work with Tor Holbek, an exhibit designer and former student of his at HCC who eventually started the Holbek Group and hired Kacian as his art director.

“Over the years, as a consultant, designer, and engineer, when I was between other gigs, I would stop and stay in touch with Tor,” said Harris. “I’d help him out with design projects here and there. It was interesting work — you never think about where things come from in a museum, but someone has to design and build them.

“Museum work fascinated me, and I got to know Jack over the years … and one thing just led to another,” he continued, fast-forwarding through some intervening years during which he worked on some project-management initiatives at museums and art galleries, and became increasingly drawn to that little-understood business.

When asked if his consulting work was lucrative, Harris joked, “more lucrative than starting a design and fabrication company in the middle of a recession.”

What propelled him forward, despite those challenges, was that aforementioned fascination he had with the museum realm, as well as confidence that he and Kacian, with whom he had worked on several projects, and who had by then won acclaim nationally for his model-building exploits, could mold an effective business model.

The Money Tree project in Greenfield helped shape Kacian’s reputation — it earned headlines in many different kinds of publications — as did the GeeBee initiative, undertaken by the city of Springfield. Kacian remembers working on a shoestring budget and stretching his imagination to make the model as authentic as possible while also controlling cost.

“That was a great job for me because it involved something I was really interested in,” he explained, adding that he did extensive research on the plane, which included a few trips to the attic of the widow of the man who built the original plans and blueprints. “The challenge was to build it as realistic as possible, and I used every trick in the book I could think of to fabricate it.

“I used a lot of foam, including with the wings,” he explained. “We sanded them and covered them with craft paper soaked with white glue, which gave it stiffness and a nice, smooth finish. The fuselage itself was built like a big model airplane.”

Kacian remembers installing the 400-pound model in the Visitors Center, taking instruction from a city official driving back and forth on I-91 via cell phone. “She kept saying, ‘pull it up a little in front,’ or ‘take it down a little in the back,’ trying to get the angle just right so people could see it from the road.”

Eventually, Harris, who desired a second career, and Kacian, who was looking for a setting in which he could better flex his design muscles, came together in a venture they called 42 design fab, with 42 being “the answer to the ultimate question of life, the universe, and everything” in Douglas Adams’ The Hitchhiker’s Guide to the Galaxy.

Since the start, their hope has been to make their company the ultimate answer for a wide array of museums and companies who need something visual — and educational — to inform people and promote themselves.

The Shape of Things to Come

More than two years later, a team is in place, and a game plan is coming together.

It calls for the company to exploit its uniqueness as a firm that handles both design and fabrication (most do one or the other), and create the portfolio diversity that is necessary to maintain steady cash flow and survive fluctuations in the economy.

A look at one wall in the office area of the company’s facilities at the mill reveals that it is making solid progress with those goals.

On it are images from various projects, both completed and in progress.

That latter list includes some recent initiatives undertaken for the Basketball Hall of Fame, including new exhibits to tests visitors’ rebounding skills and gauge their wingspan — the distance between the fingertips when one’s arms are spread apart.

Over the past few years, the company has undertaken a number of projects for the Hall of Fame, including the Cousy exhibit, the display dedicated to Dennis Rodman after his enshrinement in 2011 — one that showcases one of the many dresses he’s worn over the years — and a large display called the “MAAC Experience,” which tells the story of the Metro Atlantic Athletic Conference.

There’s also work for former Boston Celtic Ray Allen’s Rays of Hope Foundation — specifically, his ‘Wall of Hope,’ a display of his sneakers meant to inspire young people to realize their full potential — as well as contributions to a Department of Homeland Security campaign.

A few photographs capture projects undertaken for various natural-history museums, such as a diorama chronicling the life of an acorn. Meanwhile, there are drawings for a new trade-show booth for the Harold Grinspoon Foundation.

Overall, projects have been undertaken for a host of museums and institutions, ranging from the Puget Sound Naval Museum — one of the company’s first clients — to to the Quadrangle in Springfield.

The Basketball Hall of Fame and the Environmental Learning Centers of Connecticut (ELCCT) are both good examples of the type of client the company wants to attract and add to its portfolio, said Harris, noting that, in each case, there is an ongoing relationship and opportunities to handle a wide range of work.

The ELCTT operates two facilities — the Barnes Nature Center and the Indian Rock Nature Preserve, both located in Bristol. For the former, 42 design fab has created designs for many potential new exhibits — with names like “Interactive Wetland Diorama,” “Everything About Beaks and Feet,” “Nest and Egg Educational Module,” and the aforementioned walk-in tree — and has already completed several interior and exterior projects, including the signage and new gift shop.

And for the Indian Rock facility, it has a created, among other items, a waterfall that essentially camouflages an elevator shaft. Built in three sections, the waterfall reaches the top of the 18-foot ceiling in the center’s Great Hall and comes complete with fish, turtles, and seats for visitors.

 

Imagination — on a Large Scale

The projects undertaken for both the hall of fame and the ELCTT are also good examples of how 42 design fab works with the client to help it achieve specific and long-term goals, said Harris, returning to the Barnes Center once again, and the desire among administrators there to create learning opportunities on a number of levels.

“They balance funding availability with educational objectives,” he said, adding that the company works in partnership with the center to maximize its resources and create a number of different learning experiences.

As an example, he cited a planned magnetic wall within the center that would have several teaching curricula on it.

“An educator would stand there and work with a class of students on subjects like water cycles,” he explained. “They might put clouds up here to show how rain comes down and flows here. They can show what happens next, or what results if the rain doesn’t happen. There are many things you can do with a wall like this.”

Looking forward, the two partners say their primary objectives are to build their portfolio through strong word-of-mouth referrals while also diversifying, in terms of both the type of project and the size.

And they see some potential opportunities on the horizon for accomplishing both.

One is the casino industry, which will, in all likelihood, be coming to the Bay State and, more specifically, Western Mass., within the next few years. Harris said casino builders are known for incorporating elaborate designs into everything from their main entrances to their themed restaurants, which could add up to opportunities for the company.

“If there’s any casino action, we’d like to get a piece of that,” he said, “whether it’s the tree or rock work, or, if not, the retail and dining areas. Maybe they’ll want a western-themed saloon or restaurant; that’s something we could get into.”

Another potential source of new business is a different kind of gaming industry — the video-game sector, which is also known for creating imaginative workspaces.

“We’d like to see some of those kinds of projects through,” he said, “where you have a successful, fast-paced, super-creative startup that wants a custom space.

“If someone comes in and says, ‘I want my office to look like a submarine interior,’ we can do that,” he continued, citing an actual case he heard about in California, adding, “we’re just dying to find the clients out here who will do it.”

One of the company’s broad goals is to optimize its design-fabrication workflow through digital fabrication, said Harris, thus quickening the pace of taking something from the drawing board to the museum floor or trade show floor, bringing benefits for both the company and its clients.

“The faster we can go from a digital model in the computer to the CNC routers and efficiently fabricate the core of the components, the better it will be for us,” he explained. “We need to get better at that game because that lets us free up the high-value artistic labor to do the final touches.

Another broad goal is to create steady revenue streams — perhaps year-round or at least steady production of various lines of furniture — to smooth out some of the ebbs and flows that are part and parcel to the kind of project work the company handles.

“We’re looking down the road at ways to manufacture inventory,” he explained. “There has to a be a mix, because when you’re a project-oriented company, it’s either feast or famine. As one of our colleagues in the industry says, ‘you’re exactly one of two sizes in this business — you’re either too big or two little; one project coming in is not enough to keep the lights on, and three will kill you.”

 

Numbers Game

When asked to describe their transition to business owners, both Harris and Kacian used the phrase ‘learning experience’ to describe their first few years.

There’s irony there, because that’s exactly what the company also creates, whether it be for Hall of Fame visitors looking to measure how high they can jump, or grade school students paying a visit to something approximating the forest floor at the Barnes Center.

It all comes back to that number that’s now on the company’s letterhead, said Harris, referring again to a host of literary and cultural references.

“While we don’t know what your challenge is,” he told BusinessWest, “we know the answer is 42.”

 

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

Opinion
Holyoke’s Time Is Now

 

While much of the attention locally has been fixed on the issue of a Western Mass. casino, where it will go, when, and with what impact, there is an intriguing story being written just a few miles up I-91 from Springfield in Holyoke.

It’s not complete yet — in fact, it’s just getting started — but some of the chapters in progress are enough to warrant optimism in a city that has a rich industrial history but a turbulent recent past and status as one of the poorest communities in the Commonwealth.

As the story on page 44 reveals, there is considerable momentum building in what’s known as the Paper City, and there may be some important lessons here for those communities that don’t wind up with a casino — and even for those that do.

Holyoke is rebuilding itself the old-fashioned way, if you will, going one block, sometimes one building, at a time, using the creative economy as a way to create vibrancy and interest, and building a reputation as a place where technology and green-energy-related businesses can take hold.

As we said at the top, there is a long way to go in this, the nation’s first planned industrial city, but the signs of a strong comeback are there, and the elements for continued progress are in place or in the works.

Start with stories like Steve Porter’s. He was working and living in New York, and looking to take a traveling DJ business and expand it into a video-production venture. Real estate in New York was well out of his reach, so he started looking for another setting in which to set up shop. He found an oddly shaped building in a former textile complex known colloquially, and within Porterhouse Media, as the ‘wedge.’ Not much to look at on the outside, the building has become home to cutting-edge studios and offices with tight corners and unique square footage.

In many ways, Porter and his building represent the essence of the emerging Holyoke story — a small business finding a good home in a piece of property that many people wouldn’t bother to look at. It’s a story that could be replicated dozens of times, and that’s the simple message that Porter wants to leave with anyone who hears of how he came to Holyoke.

As he retells it, it wasn’t simply the price tag on the property that attracted him — although that was a big part of it. There was also a sense that something interesting, something exciting, was happening in Holyoke, and he wanted to be a part of it.

Vitek Kruta and Lori Devine felt the same way when they, like Porter, assumed a large amount of risk by opening Gateway City Arts in the former Judd Paper complex on Race Street.

Describing themselves as enablers, Devine and Kruta have a host of things going on in their complex — from tango classes to painting lessons; from performances and lectures to an incubator facility currently with a handful of tenants and potential for about 20 more.

The broad goal is to use the arts as a way to bring people to Holyoke, create energy and vibrancy, and perhaps give birth to some businesses that will repurpose more old mill space and put people to work.

As these stories and others unfold, the pieces of a puzzle are coming together for Holyoke. Creative-economy initiatives are introducing the city to more people and business owners, while the Green High Performance Computing Center, a collaboration involving several universities and technology corporations, give the community “affirmation,” as one entrepreneur out it, while also showing what this city can do. Rail service is returning on a limited basis, and old mills like Open Square continue to add new tenants and bring more vibrancy to the heart of the city.

Holyoke’s comeback story is far from complete, and there are many challenges ahead, but all the signs are there for a turnaround that will be real — and very inspirational.

Opinion
The Dangers of Our Budget-deficit Minuet

The day after Barack Obama was re-elected, the Dow Jones lost 312.96 points. It wasn’t just that investors were hoping for the lower taxes and further deregulation that would have come with a Romney win. The news from Europe was bad, and pundits were obsessively focused on the ‘fiscal cliff’ of mandatory budget cuts that will drive the economy into a new recession unless Congress jumps off its own budgetary cliff first.

For once, the markets are right. But the news from Europe entirely contradicts conventional assumptions about the fiscal cliff.

Greece, which has dutifully cut its budget as demanded by the leaders of the European Union and the European Central Bank, is deeper in depression than ever. The latest reports show that its economy has shrunk by more than 20% over four years and that the more that it cuts its deficit, the more its national debt grows.

How can that be? Budget cutting in a depression just deepens the depression. The deeper the depression, the less revenue the government takes in.

So if the U.S. does not want to become like Greece, cutting the deficit in a still-depressed economy is the wrong way to go.

The ravages of Hurricane Sandy, with rising oceans forecasted to worsen in coming years, suggests that we will need to spend hundreds of billions of dollars on rebuilding coastal infrastructure — a policy that will also create jobs and stimulate a recovery.

But the deficit-reduction minuet is proceeding as if Sandy never happened.

President Obama and House Speaker John Boehner are on track to cut a deal that Wall Street has been slavering over for a decade — a small dollop of revenue increases, mainly through loophole closings, coupled with massive spending cuts, including in Social Security and Medicare, adding up to $4 trillion to $5 trillion of budget cuts over a decade.

Obama is convinced that this sort of grand bargain is necessary because financial markets expect it. Yet the same financial markets are happy to lend the government money for 30 years at less than 3% interest.

If Obama and the Republicans do make such a deal, growth will slow to a trickle.

Ironically, the president, having humiliated the Republicans on Election Day, holds most of the cards.

He can declare that he has no intention of cutting Social Security or Medicare and instead propose new, must-pass infrastructure legislation. And he can insist that any budget deal needs to include higher taxes on the rich. (California Gov. Jerry Brown just demonstrated that such a stance is good politics. The initiative that he sponsored and worked for, raising taxes on the rich to increase funding for California’s public schools, was approved by the voters.)

Time is on Obama’s side. On Jan. 1, taxes increase on everybody, and automatic spending cuts of $1.2 billion kick in. He needs to set up the Republicans to take the blame because of their wildly unpopular conditions for a deal. Bill Clinton, who won a similar game of chicken with Newt Gingrich in 1996, can give Obama lessons in the art of the bluff.

Re-elected presidents often face a jinx in their second terms. The worst possible start for President Obama would be to agree to a deal that harms the economy and sells out the people who just re-elected him.

If there is one thing worse than a fiscal cliff, it is a fiscal cave. This is no time for Obama to cave into Republican and Wall Street pressure for a budget deal that will leave history to remember him as the Democrat who presided over eight years of a depressed economy. v

 

Robert Kuttner is co-founder and editor of The American Prospect.

Holiday Hints Sections

Wilson “Hope” Golf Box Set: $299.99
Dave DiRico’s Golf Shop and Racquet Center
A pink golf set made for the starter or intermediate woman golfer; a portion of proceeds go towards breast-cancer research.
21 Myron St., West Springfield, MA 01089
(413) 734-4444; www.davediricogolf.com

 

iSound Fire: $29.99
Ideal for iPod, iPhone, iPad, and any audio device with a 3.5mm output; powerful built-in speaker allows music to be heard with depth and clarity; built in Li-ion battery (5-hour life at 70% volume).
2078 Memorial Dr., South Hadley, MA 01075
(413) 535-0200; www.familywireless.com
(See website for other locations)

 

explorenorthampton.com Gift Card:
Any Denomination
Greater Northampton Chamber of Commerce
Honored at more than 60 Northampton shops, restaurants, salons; purchase at the Northampton Visitors Center or online; reload funds at any time and check balance online.
Northampton Visitors Center
99 Pleasant St., Northampton, MA 01060
(413) 584-1900; www.explorenorthampton.com

 

Old World Italian Gift Basket: $100
Frigo’s Foods
From the northern village of Dolo, Italy, the Frigo family has been serving Western Mass. since the 1950s; the Old World Italian basket holds a mix of seasonal gourmet products; other baskets in different prices available
90 William St., Springfield, MA 01105; (413) 732-5428
159 Shaker Road, East Longmeadow, MA 01028
(413) 525-9400; www.frigofoods.com

 

Kia or Volvo Remote Car Starter Kits:
$350 – $595
Fathers & Sons Dealer Group
Kia and Volvo factories now offer factory-brand car starters that are compatible with each car’s wiring system; can be ordered with new car purchase or as a gift accessory.
Kia: $350-$595 installed (depending on year of car)
468 Memorial Ave., West Springfield, MA 01089
(877) 484-3442
Volvo: $519 installed
989 Memorial Ave., West Springfield, MA 01089
(877) 332-8579; www.fathers-sons.com

 

The GET Skiing Program: $89
Jiminy Peak Mountain Resort
Guaranteed Easy Turns (GET) program offers a learn-to-ski class and free lift ticket for gift giver.
37 Corey Road, Hancock, MA  01237
(413) 738-5500; www.jiminypeak.com

 

Family Sports Basket: Various Prices
Create your own sports basket for a family by purchasing tickets or gift cards/promotions from these local museums and sports teams (based on a family of four):
 

Naismith Memorial Basketball Hall of Fame: $76 Family Four Pack
Children 4 and under free
1000 Hall of Fame Ave., Springfield, MA 01103
(413) 781-6500; www.hoophall.com

 

Springfield Falcons Hockey: $40
Falcons’ Dunkin’ Donut Holiday Hat Trick Package; $80 value includes two hats, two Falcons tickets for any game, two $5 Dunkin’ Donuts gift cards.
45 Falcons Way, Springfield, MA 01103
(413) 739-3344; www.falconsahl.com

 

Springfield Armor: $49
All-You-Can-Eat Four-Game Plan includes tickets to four basketball games (Jan. 5 and 26, Feb. 9, March 23) two of which include all-you-can-eat hot dogs, popcorn, and soda (Jan. 26 and March 23); one Springfield Armor hat; one Springfield Armor t-shirt; starts at $49; team plays at MassMutual Center.
One Monarch Place, Suite 220, Springfield, MA 01144
(413) 746-3263; www.armorhoops.com

 

Family Fun History Basket: Various Prices
Create your own history and educational basket for a family by purchasing tickets or gift cards/promotions from these local museums and organizations (all based on a family of four):

 

Zoo in Forest Park and Education Center: $23 Family Four Pack
Adults: $6.75; senior citizens: $4.75; children ages 5-12: $4.75; children up to age 4: $2.50
302 Sumner Ave., Springfield, MA 01138
(413) 733-2251; www.forestparkzoo.org

 

Historic Deerfield: $34 Family Four Pack
Adults: $12; children 6-17: $5; children under 6: free
84B Old Main St., Deerfield, MA 01342
(413) 774-5581; www.historic-deerfield.org

 

Springfield Museums: $46 Family Four Pack
Adults: $15; seniors: $10: college students: $10: children 3-17: $8; children 2 and under: free
21 Edwards St., Springfield, MA 01103
(800) 625-7738; www.springfieldmuseums.org

Custom Holiday Floral Centerpiece: $20 and up
A New Leaf Flower Shop
A social enterprise of the nonprofit Center for Human Development (CHD); people with mental health and developmental challenges grow beautiful plants and create fabulous flower arrangements; full-service florist, handcrafted jewelry and specialty items.
50 Warehouse St., Springfield, MA 01118
(413) 733-2179; www.chd.org/anewleaf

 

1st Timer Learn to Ski Package: $75
Ski Butternut
With lift ticket, rentals, and lesson included, it’s a $135 value for only $75. Then keep coming back for more lessons, also with lift tickets and rental included, for only $100 per session.
380 State Road, Great Barrington, MA 01230
(413) 528-2000; www.skibutternut.com

 

Troy Rear Folding BattleSight: $119.00
Troy Industries
Durability and dead-on accuracy have made Troy Industries Folding BattleSights the hands-down choice of special ops and tactical users worldwide.
151 Capital Dr., West Springfield, MA 01089
(413) 788-4288; www.troyind.com

 

Cellulite-reducing Clay Mask Treatment: $65
SkinCatering at Bella Vita Salon
Deluxe body mask targets the cellulite on hips and the backs of thighs and includes a relaxing therapeutic back massage; results last 7-10 days.
491 Granby Road, South Hadley, MA 01075
(413) 539-0793; www.skincatering.com

 

Brightside Angel Kringle Candle: $18
Brightside for Families and Children
New Brightside Angel Kringle Candle features a vanilla lavender fragrance offered online and at O’Connell’s Convenience Plus locations; proceeds directly benefit more than 400 local children and their families with in-home counseling and family support.
271 Carew St., Springfield MA 01102
(413) 748-9920; www.brightsideangels.com

 

A Nonprofit Donation in Someone’s Name: Any Denomination
Community Foundation of Western Massachusetts
Give a gift in honor of a family member, friend, or colleague to the Community Foundation of Western Massachusetts’ Annual Fund. Gifts to the Annual Fund help the Foundation support the region through scholarships for students and grants for nonprofits.
1500 Main St., Suite 2300, Springfield, MA 01115
(413) 732-2858; www.communityfoundation.org

 

Petra Azar Necklace: $235
Hannoush Jewelers
A brand-new collection; great for any age (even for those with shoulder or hand mobility issues); pendant is actually the magnetic clasp; comes in silver and gold; necklaces, bracelets, and rings.
1655 Boston Post Road, Springfield, MA 01129
(413) 439-2830; www.hannoush.com
(Check website for other locations)

 

Zip Line Canopy Tour: $94
Zoar Outdoor
The three-hour zip line canopy tour leads adventurers on an aerial trek though the woods by means of 11 zip lines, 2 sky bridges, and 3 rappels suspended in the trees (April 1 to Nov. 24, 2013); cost is per person.
7 Main St., Charlemont, MA 01339
(800) 532-7483; www.zoaroutdoor.com

 

Atkins Savory Suppers: $55
Atkins Farms Country Market
The Pioneer Valley’s first meal prep and assembly center; Savory Suppers allows one to prepare economical entrees quickly and easily with farm-fresh ingredients that can be taken home, frozen, and prepared when convenient; session includes 3 entrees to assemble or gift card can be purchased in any denomination.
1150 West St., South Amherst, MA 01002
(413) 253-9528; www.atkinssavorysuppers.com

 

Wine and Chocolate Tasting
Hosted by Michael Quinlan: $40
Table & Vine
Table & Vine will help one explore chocolate and wine together, with eight pairings. Cost is per person; reservations required.
1119 Riverdale St., West Springfield, MA 01089
(413) 736-4694; www.tableandvine.com

 

Collectible Children’s Patriotic Drum: $34.95
Noble & Cooley Drum
Tin-body drum, strung with white cord and leather ears, has patriotic theme of Uncle Sam surrounded by eagles, stars, and stripes (carrying strap and sticks included); dates back to 1906. Visit the museum, www.ncchp.org
42 Water St., Granville MA 01034
(413) 357-6321; www.noblecooley.com

 

Mudpie Sentiments Serving Collections: $26.95 – $56.95
Cooper’s Gifts and Curtains
Beautiful thoughts and sentiments on ceramic, brushed silver, and glass tableware.
161 Main St., Agawam, MA 01001
(413) 786-7760; www.coopersgifts.com

 

Manny’s Olive Oil: $15.99
Fresh from the tree to the bottle; cold-press olive oil straight from the Island of Crete, Greece; order online or purchase in local food outlets.
(413) 233-2532; www.mannysoliveoil.com

Banking and Financial Services Sections
Principals Say NUVO Has Become a ‘Proven Commodity’

Jeff Sattler

Jeff Sattler says NUVO is on target with its goals for assets, revenue, and gaining respectability in the local banking market.

Jeff Sattler says he feels an attachment to the small-business owners sitting across the conference room table from him, a bond that most commercial-lending officers probably wouldn’t understand.

That’s because he’s been in their shoes.

Indeed, five years ago, he was one of the principals trying to lure investors and amass the capital needed to launch the venture that would become NUVO Bank, which he now serves as president.

“When you’re dealing with a banker, most of them haven’t owned a business — they have to critique the business owner,” he told BusinessWest. “I started this thing with the same mentality as other entrepreneurs — ‘I’m going to do this; there’s a market, and I’m going to make this work.’ And I had the same growth pains, issues, challenges, and fears that any entrepreneur has. I can talk the same language as that business owner.”

This linguistic ability is one of the factors that Sattler and NUVO’s CEO, Dale Janes, believe have contributed to the bank’s steady growth and recent momentum. Like most of its commercial clients, NUVO’s primary objective has been to gain a strong measure of respectability and build a solid foundation for growth, said Janes, adding that, despite being launched just as the worst downturn since the Great Recession was taking hold, the bank has, in his opinion, achieved that goal.

Dale Janes

While other banks rush to add branches, Dale Janes says NUVO will stay with its business model and maintain one location.

“We’ve come a tremendous distance,” he said. “We are now what I call a proven commodity.”

Sattler agreed. “We’re profitable right on plan,” he said. “I don’t want to be the biggest in this market; I want to be the most profitable, and that’s return on assets, return on equity, efficiency ratios … key bank ratios that we want to be leaders in eventually, and we’re getting there now.”

Janes told BusinessWest that the institution’s first four-plus years in business have proven that its basic model — operating through one location with a reliance on technology that would ensure that most clients would rarely see that facility on the ground floor of Tower Square — works, and there is no need to change it.

“Our overhead is so low, we can afford to be aggressive on retail CD rates, savings rates, and the costs of accounts,” he said while citing the main advantages to being small and efficient. “The core of our model is small business, small business, small business — and it’s worked; about a year ago, it really started to kick in.

“With longevity comes credibility,” he continued. “So, more and more now, customers who used to do business with Jeff or with me are saying, ‘these guys are around, and they’re going to be here; let’s go check them out.”

Doing some quick math, Sattler noted that NUVO, which just passed the $100 million mark in assets, has something approaching 1% of the regional market, and is by far the smallest bank in the region. While that number may not sound impressive, he said — while noting that doubling or tripling it would still give the bank only 2% or 3% of a market dominated by huge national and regional players — it is a solid base on which to build.

And as he surveyed the local banking market, especially the smaller, community institutions, Janes, who has been in the business for more than 30 years, sees ample opportunity to grow.

“There is going to be more consolidation within this market; it’s inevitable,” he said with a large dose of certainty in his voice. “And with that consolidation, there will be opportunities for banks with the right products and the right approach to customer service. We’ve positioned ourselves to be one of those banks.”

For this issue and its focus on banking and financial services, BusinessWest looks at how far NUVO has managed to come in four challenging years, and what the future could hold for the institution.

 

By All Accounts

As he prepared to talk with BusinessWest, Sattler was closing on another small-business loan, giving NUVO just over 80 such clients in its portfolio.

That’s another comparatively small number, especially when put alongside the other institutions with downtown Springfield mailing addresses, but Janes and Sattler both take a ‘glass is much more than half-full’ mentality.

“Every new customer is another dot on the map,” said Sattler, adding that the bank’s approach from the day it opened has been to achieve to measured, smart growth, while also carving out a specific niche in the market — in this case, what would be considered small, or even very small, loans.

And both officers believe the institution has achieved those missions, while also establishing the NUVO brand across Greater Springfield and into Northern Connecticut.

“This is the reason why we knew we were going to be successful — we have a niche,” said Sattler, referring to the small-business loans like the one he closed on that afternoon late last month. “Everyone thought we were going to fail, but we succeeded, because we created that niche.”

Both men said that virtually every bank in the region can write the kinds of small loans that NUVO has made its specialty, but most don’t have the need or desire to do so, and can’t do it as well.

“We’ll look at every single deal, no matter what the industry,” he explained. “I won’t say ‘yes’ to every deal, but if we can’t do it, then nobody can do it.”

Meanwhile, another advantage is the aforementioned ability to “speak the language,” as Sattler described it.

“I appreciate their passion,” he said of entrepreneurs. “They have a vision of where they want to take their company, and I can relate to that. I try to get under the tent with them and say, ‘how are we going to make this loan?’

“They say, ‘Sattler, I’m not talking to you like a banker,’” he continued. “And I’m not; I’m a business owner, not just a banker, who started the same way most of these businesses started.”

Overall, the bank has been “on target” with everything from asset growth to profitability to brand recognition, said Janes, adding that the current momentum has manifested itself in a number of ways.

For starters, there have been roughly 18 months of continued monthly profits, he said, adding that another commercial-lending officer, the bank’s third, was recently hired, and another addition is planned for the first quarter of next year. Meanwhile, the bank is planning another capital raise — the prospectus is currently being finalized — to provide the wherewithal to continue growing.

“We’re doing well against our original plan, and super well against our model,” Janes explained. “We have a lot of focus and a lot of discipline around the business model; we can’t be everything to everyone, and we’re honest about that.”

 

Balance Statement

Moving forward, Janes and Sattler said NUVO is in the process of scripting a new three-year strategic plan.

When asked what it will likely include, they said, in essence, there would be more of the same that has marked the bank’s four-plus years of existence — with the emphasis on more.

The planned additions to the commercial lending staff — “we’re now building a lending team,” said Sattler — and the capital raise are part of this strategic initiative, noted Janes. Overall, he believes that, given the bank’s steady growth and the current landscape in financial services, NUVO is well-positioned to add market share for the short and long term.

Elaborating, he said there are two trends in the marketplace that are working in NUVO’s favor. The first is a significant shift among consumers, business owners, and investors away from large regional and national banks and toward community banks.

“And why not? They’re just smaller, and they have more flexibility and more options for the small-business customer,” he told BusinessWest. “And we plan to take advantage of that, especially on the investor side, because as we grow, we’re going to need to raise more capital.”

The second trend, although it has slowed in recent years, is a movement toward greater consolidation, said Janes, adding that the many publicly owned regional and community banks serving Western Mass. are both candidates for additional expansion themselves or targets for acquisition. And both scenarios, which will be driven by shareholders and their desire for better returns, bode well for banks like NUVO that can take on customers left wary by such transactions.

“This is a very challenging time to provide a return to your shareholders,” he said of the situation facing the public banks. “Everyone’s had what amounts to a free pass because of the recession, because everyone made bad loans and business slowed down, but that free pass is going to get called in, and banks are going to have to start producing, either a dividend or growth in the market price of the stock.

“People are going to instigate,” he continued, “and get these banks to either perform better on an earnings-per-share basis through the organic nature of their business, or by selling.”

And while NUVO has plans for more lending officers, employees, loans, and assets, one thing there won’t be more of is branches.

“People keep asking me, ‘why don’t you open a branch here?’” said Janes, adding that there have been many suggestions when it comes to ‘here.’

“That’s not who we are or ever intend to be,” he continued. “We will never have a huge branch network, and probably will not have a traditional branch. We will expand our footprint; we will take our model and replicate it somewhere else, in a market where there are a lot of small businesses. That was our intent, and it’s still our intent. We’re not ready for it yet, but our three-year plan contemplates something like that.

“Right now, we just want to dominate where we are,” Janes went on, “and earn our keep in this region.”

Despite its lone location, NUVO has been able to grow its presence and build its brand through track record and word-of-mouth referrals. And with presence and referrals, the bank has opportunities to show what it can do, said Janes, which is an important component in the growth equation.

“Once we get in front of people,” he said, “we’re pretty good at bringing in some business.”

 

Brand Equity

Looking at the numbers compiled by area banks for assets, deposits, and loans (see pages 38 and 39), Janes and Sattler know they will be looking up at the rest of the region’s banking community for quite some time.

But after four recession-riddled years, the bank is starting to see some real momentum. As Janes said, there is enough statistical and anecdotal evidence to show that the bank is indeed a proven commodity — and that things are truly looking up.

 

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

Accounting and Tax Planning Sections
Despite Ambiguity, This Is Still a Time for Tax Planning

We have a challenging year before us on the tax-planning front, with expiring provisions leading to uncertain future rates and pending elections leaving us with little in the way of legislative expectations.

Historically, the last few months of the year are used to implement tax-planning techniques to manage individuals’ tax liability for the current year with the relative certainty that comes from having the majority of the year behind us. This year, the only certainty appears to be everyone’s uncertainty.

Ambiguity in the tax realm can have a paralyzing effect on planning, but a wait-and-see approach can lead to lost opportunities or last-minute scrambles to seize the remains of an opportunity. Although the tax future remains unclear, planning opportunities remain. There are gifting provisions that are largely considered once-in-a-lifetime opportunities and rates that may be the lowest to be seen in a while. They provide an opening to make meaningful tax-planning decisions before 2012 comes to a close.

The focus in this piece is on tax-planning techniques that can be initiated during the remainder of 2012. But, depending on one’s facts and circumstances, these are just the beginning of the opportunities that might be available. If you think any of these strategies apply to you, be sure to contact your tax professional or advisor.

 

Changes on the Horizon

Despite the quiet year for tax legislation, significant changes are before us for 2013. Two years ago, when faced with a comparable series of expiring provisions, the can was legislatively kicked down the road. Conclusive action was deferred in favor of short-term extension solutions.

Here we stand, nearly two years later, with a similar collection of rate reductions, deductions, credits, and incentives set to expire as the calendar flips from one year to the next. In addition, two new taxes stemming from healthcare-reform legislation become effective in January.

Absent any late-year legislation, the significant changes on the horizon in 2013 are as follows:

• Two new taxes established under the Patient Protection and Affordable Care Act will go into effect on Jan. 1 — a 0.9% tax on wages and self-employment income, and a 3.8% contribution tax on investment income;

• Individual tax rates will universally climb, with the highest rate rising from 35% to 39.6% before accounting for the new taxes stemming from the act. Including the 3.8% UIMC tax, the top rate on investment income will rise to 43.4%. The current 10% rate bracket expires, reverting back to 15% as the lowest tax rate. The UIMC tax is explained below;

• Federal estate and gift-tax rates will increase from 35% to 55%, and the exclusion amount will drop from $5.12 million to $1 million;

• A series of tax rules designed to reduce what is commonly referred to as the ‘marriage penalty’ will sunset at the end of this year, raising taxes for many dual-income couples;

• Preferential tax rates on capital gains and dividends, currently 15% for most individuals, will expire at the end of the year, with the tax rate on long-term capital gains returning to 20% and qualified dividends losing preferential treatment altogether, returning to the ordinary income rates of up to 43.4%;

• Limitations on itemized deductions and personal exemptions will return in 2013 for higher-income taxpayers;

• It is anticipated that millions of additional taxpayers will become subject to the alternative minimum tax (AMT) with the expiration of the ‘AMT patch’; and

• The child tax credit will be reduced by half for 2013.

 

Business Tax Strategies

Kristina Drzal-Houghton

Kristina Drzal-Houghton

• Section 179 Expensing: IRS Code Section 179 provides businesses the option of claiming a full deduction for the cost of qualified property in its first year of use rather than claiming depreciation over a set period of years. For 2012, the Section 179 dollar limitation is $139,000, with a $560,000 investment limitation.

The dollar limitation for 2013 is scheduled to drop to $25,000, with a $200,000 investment limitation. Businesses might want to consider accelerating scheduled purchases into 2012 to take advantage of the higher limits.

Businesses with a fiscal year-end should note that the $139,000 deduction limit applies to property purchased and placed in service during tax years beginning in 2012.

• Bonus Depreciation: Property not qualifying for an immediate tax write-off under the expensing election may qualify for an increased first-year depreciation deduction under bonus depreciation rules. This deduction is equal to 50% of the cost of qualifying property purchased and placed in service by Dec. 31, 2012.

Unlike the Section 179 deduction, bonus depreciation is not limited in amount or by an investment limitation, and it can create a current-year net operating loss.

• Changes to Repair Regulations: Comprehensive repair and capitalization regulations issued by the IRS late in 2011 may open up planning opportunities.

A new de minimis expensing rule allows a business to deduct certain amounts paid or incurred to acquire or produce a unit of tangible property if the company has an allowable policy. There is an overall ceiling limiting the total expenses a company may deduct under the de minimis rule. Accounting policies and existing depreciation schedules should be reviewed to determine whether changes in accounting methods should be filed and adjustments taken. In many cases, the change will result in accelerated expensing.

• Corporate Dividends: Traditional C corporations face double taxation on distributed earnings. Profits are taxed at the corporate level, and dividends paid out to shareholders are again subject to tax at the individual level. With the maximum 15% tax rate for qualified dividends during 2012 rising to 43.4% for 2013, this may be the year to consider paying out accumulated earnings that the corporation is not otherwise using.

• Health Insurance Tax Credit: A tax credit is available for an eligible small employer to purchase health insurance for employees. To qualify as an eligible small employer, the company must:

— Pay for at least 50% of the premium cost for employees;

— Generally have no more than 25 full-time equivalent employees employed during the year; and

— Pay its full-time equivalent employees annual wages averaging no more than $50,000.

 

Individual Tax-planning Strategies

• Planning for the New Healthcare Taxes: Effective Jan.1, a 0.9% hospital insurance (HI) tax applies to wages and self-employment income, while a 3.8% Medicare contribution (UIMC) tax applies to investment income. Neither tax becomes applicable until income exceeds the established threshold noted in the table below.

The HI tax may be managed through withholding for employees, but in certain circumstances, such as for dual-income households or in years of employer transitions, withholding may not fully cover the wages subject to the HI tax.

For the purposes of the UIMC tax, net investment income has been defined to include dividends, rents, interest, passive-activity income, capital gains, annuities, and royalties. Specifically excluded from the definition are self-employment income, income from an active trade or business, gain on the sale of an active interest in a partnership or S corporation, IRA or qualified plan distributions, and income from charitable remainder trusts.

For individuals, the amount subject to the UIMC tax is the lesser of your net investment income, or the excess of your modified adjusted gross income, which is generally your adjusted gross income with certain foreign earned-income adjustments, over the applicable threshold amount.

For both taxes, the applicable thresholds are as follows:

Keep in mind that the UIMC tax applies if you have net investment income and your modified adjusted gross income is above the threshold. The impact of the tax may be minimized through shrewd management of your net investment income, proximity to the thresholds, or both.

 

Year-End Tax Planning Strategies

Bearing in mind the new Medicare taxes and the scheduled changes in tax rates, traditional year-end tax planning techniques may need to be reversed to take advantage of the known lower rates of 2012.

• Shifting Taxable Income Between Years: When you’re expecting stable rates in the future, the traditional year-end strategies are largely focused on deferring income and accelerating deductions. But with the rates set to rise for most taxpayers, the better tax answer may come from an opposite approach.

Income accelerated into 2012 could potentially result in a significantly lower rate than the same income recognized during 2013. Because rates remain relatively uncertain, now may not be the time to accelerate income. But having a plan in place should the rates hold will allow taxpayers to act deliberately as the rates become more certain.

• Managing the AMT: When undertaking tax planning, both regular and AMT tax liabilities need to be evaluated. At times, certain deductions may need to be shifted between years to manage the alternative minimum tax.

• Paying Estimated State Income Taxes: The payment timing of the fourth-quarter estimated state-tax payment, generally due Jan. 15, 2013, has some flexibility. It may be paid before year end for a current-year federal itemized deduction. The alternative minimum tax should be considered before employing this tax-planning tool because state income taxes are not deductible for AMT purposes.

• Fulfilling Charitable Goals: An alternative to cash donations is the contribution of appreciated assets. When contributing assets, you can deduct the fair market value of certain property and avoid paying taxes on the appreciation. However, if you would like to donate securities that have declined in value, you will likely want to sell them first to realize the loss and then gift the proceeds to your organization of choice. In some circumstances, particularly when there is expiring capital loss, a direct donation may not be the most effective tax-planning tool.

• Funding Retirement Plans: For retirement contributions to qualify for a deduction in 2012, contributions must be in place usually before the end of the year. The exceptions to the rule are IRAs and SEP (simplified employee pension) plans. An IRA can be created and funded by April 15, 2013, and a SEP by the extended due date of your tax return.

• Converting to a Roth IRA: Roth IRAs have long-term advantages over traditional IRAs because money grows and can be distributed tax-free. Some taxpayers find that the benefits of tax-free withdrawals in the future are in line to be greater than the tax cost on conversion.

Converting before-tax earning plans — 401(k)s, traditional IRAs, etc. — to the after-tax Roth IRA creates taxable income in the year of conversion. The upfront tax cost does not make conversion the right answer for every taxpayer, but for taxpayers with certain circumstances, conversion can be an extremely powerful tool.

• Paying with Credit Cards: As a reminder, paying tax-deductible expenditures, including charitable contributions, with a credit card secures the deduction in the current year, even if you do not actually pay the credit-card company until the following year.

• Deducting Losses from Pass-through Entities: If you are expecting a 2012 loss from a partnership, LLC, or S corporation, ensuring that you have sufficient tax basis will help to secure your ability to deduct the loss. You may be able to increase your tax basis prior to year end, but given the rates for 2013 as enacted, you might want to purposely avoid doing so until 2013 to push the loss into the higher rates of 2013.

 

Capital Gains and Losses

You should consider a few basic rules when planning for capital gain or loss transactions:

• Gains and losses from securities sales generally are recognized on the trade date as opposed to the settlement date. So a December trade will be a 2012 transaction, even if the settlement date is in the following year;

• Sales at a loss reduce other capital gains, and a net capital loss in excess of capital gains of up to $3,000 is available to be used to offset other income, with excess losses being carried forward to future years; and

• Before you sell an asset to recognize a gain, check your holding period. Capital assets held for over a year are eligible for a significantly lower tax rate than those held less than a year.

 

Estate- and Gift-tax Planning

Absent congressional action, the $5.12 million estate and gift-tax exemptions and current top tax rate of 35% will revert to a $1 million exemption with a top tax rate of 55% beginning Jan. 1, 2013. Moreover, the estate-tax exemption will no longer be portable between spouses.

Because of the reversion to a lower exemption and a higher tax rate, what could be a once-in-a-lifetime opportunity exists to transfer significant assets to the younger generation without incurring any estate and gift tax. Also note that:

• The annual gift tax exclusion for 2012 remains at $13,000. It is expected to rise to $14,000 for 2013;

• If you are married, you can avoid federal gift-tax ramifications by gifting up to $26,000 per donee, or recipient, in 2012 under the gift-splitting rules. Annual gifting is a relatively simple method to reduce your taxable estate; and

• Along with the high gift-tax exemption, the generation-skipping transfer-tax exemption is also $5.12 million during 2012. So, the door is open to bypass children and transfer significant wealth to future generations.

Developing an overall tax strategy under ambiguous circumstances can feel daunting. But the deliberate, informed implementation of a plan for what is known now can also protect against what remains to be seen — as what is unknown becomes known.

 

Kristina Drzal Houghton, CPA, MST, is partner-in-charge of Taxation at Meyers Brothers Kalicka, P.C. in Holyoke; (413) 536-8510.