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Pioneer Valley Christian School Provides a Unique Perspective
Timothy Duff (left) and Gary Coombs

Timothy Duff (left) and Gary Coombs say Pioneer Valley Christian School adopts a unique and effective philosophy on education.

When Timothy Duff stands before his sociology class for the first time each year, he takes two sets of glasses out of his pocket, asking his students to think about how they view the world.

“You can see it as a world created and controlled by God, using your Christian faith as the lens through which you view life,” he says, wearing one set of glasses.

Then he switches to the second set, adding, “or, you can view it as a world of chance, devoid of any faith.”

Duff is the headmaster at the Pioneer Valley Christian School on Plumtree Road in Springfield, a private educational institution with 265 students in preschool through grade 12.

Housed in the former Ursuline Academy, PVCS is a partnership between families and staff members who want students exposed to a Christian worldview in a setting where faith trumps doubt in every arena of life.

“Some people think a Christian school shortchanges students,” Duff said. “Our school does not. Students analyze all views, including evolution.”

Parents make a strong commitment to the school, and many are graduates. They drive their children to PVCS from cities and towns that include Southwick, Granville, Westfield, Brimfield, Hadley, South Hadley, Enfield, and Somers, Conn. to follow in the footsteps of past generations.

For this issue, BusinessWest takes a close-up view of the mission of PVCS and its ambitious plans for growth despite a turbulent economy.

Setting a Course

The school was conceived by a group of concerned parents at First Baptist Church in East Longmeadow in 1970, and opened its doors to 50 students in 1972 as the East Longmeadow Christian Day School.

“These parents wanted an alternative where God could be at the foundation of learning, as they felt faith should be an integral part of the learning process,” said Duff.

In its early years, the school was housed within the church. But in 1975, a new church was built, the old 1840s building was designated as a high school and renamed the Pioneer Valley Christian School, and younger students were moved to the new church building on Parker Street.

By 1983, the population had outgrown the space, so for one year, kindergarten through grade 4 was taught in Church of the Nazarene on Wilbraham Road in Springfield, and grades 5 through 8 were housed in Bethesda Lutheran Church on Island Pond Road, a short distance away.

Although it presented a challenge, administrators and parents remained committed to PVCS, and in the spring of 1984, negotiations began with the Ursuline Order of Nuns to purchase the well-kept Ursuline Academy, set on 25 acres at 965 Plumtree Road.

At first, it appeared financially impossible, but parents pledged $300,000 annually over a three-year period, and in August 1985, PVCS made the $900,000 purchase.

That year, enrollment increased from 135 to 225 students, and a preschool was added. The population continued to grow, and during the next three years the school received prestigious accreditations and added staff and administrative positions.

During the ’90s, enrollment stabilized, fund-raising efforts continued, the second mortgage was paid off, and the first mortgage was reduced.

In 1999, PVCS instituted a long-range, four-phase strategic plan for growth. The first phase, completed in 2003, was an elementary wing with six classrooms.

Phase two kicked off late in 2007, and ground was broken in May 2008 for a 20,000-square-foot, $2.5 million, state-of-the-art Center for Science and the Arts, along with 12 new classrooms that include a chemistry and computer technology lab and visual arts space.

The addition increased the size of the building by 50%, and volunteers pitched in to defray costs, saving the school about $250,000.

Duff says donor generosity is a cornerstone of PVCS, and parents have built four tennis courts, the soccer and baseball fields, and repaved and enlarged the parking lot.

School officials are excited about the addition, and Director of Development Gary Coombs says it will enhance the quality of the courses offered and allow for continued growth. With the added space, PVCS can accomodate 450 students. “We built it that way, as we expect to grow,” Coombs said.

It will be at least three years before phase 3 is initiated. It calls for a $3 million new gymnasium with lockers, showers, a weight room, and additional classrooms. Down the road, phase 4 will expand the cafeteria, as the present ‘cafetorium’serves as both lunchroom and gymnasium.

Study in Commitment

PVCS suffered a drop in enrollment this fall, reducing the number of students from 315 to 265. It’s a loss of about $400,000 in tuition, but no reductions in staff were made, and the student-to-teacher ratio stands at 15-to-1 or lower.

Tuition ranges from $4,000 for two half-days of preschool to $9,300 for high-school students, with optional programs available for students with cognitive and learning disabilites.

Many students receive financial aid from a fund fed by donors. “Tuition reductions are based on financial need,” said Coombs. If families still can’t meet the cost, they can apply for scholarships.

Five years ago, MassMutual included the school in its scholarship program, and 10 students were given full, four-year scholarships. That program has ended, but Duff and Coombs hope other companies will come forward to assist them.

Although the drop in enrollment is a cause for concern, “we expect when the economy gets better, our enrollment will increase,” Coombs said.

Principles of Christian faith are built upon in every class and incorporated into the curriculum. But Duff is quick to explain that students receive a quality, rounded education and are exposed to every side of the issues they study. Still, they are constantly reminded they have the choice of viewing things from a Christian tradition.

That suits their parents. “Parents find harmony between what is taught at home, at school, and in their houses of worship,” Coombs said, referring to morals and the faith elements of Christianity.

Every student takes a Bible class each year, and all subjects are viewed from both a secular and Christian perspective. “We teach both, but use the values and virtues taught in the Scriptures to analyze even subjects like literature,” Duff said. “The principles of the Bible serve as a backdrop to how we look at life.”

Christian beliefs are put into action, and every high school student has to complete 20 hours of community-service work to graduate. Elementary students host clothing and food drives and collect soda-can tops for the Ronald McDonald House, as well as supporting children in third-world countries and needy area families. “It goes back to the biblical belief that we must love our neighbors as ourselves,” said Coombs.

Academics are stressed, however, and high-school foreign-language offerings embrace French and Spanish, while advanced-placement courses include mathematics and sciences. English students enter a variety of competitions in science, art, music, spelling, mathematics, athletics, creative writing, and speech, bringing home awards.

Last spring, every graduate went on to college, and the school’s graduates have attended a prestigious line of educational institutions, including the U.S. Naval Academy in Annapolis, Md.

That generates pride, but the biggest graduation gift they receive is knowing they have a choice of viewing their lives, sorrows, and joys through a lens which shines with faith — or one which simply shows things as they are.

Sections Supplements
Shielding Your Estate from Taxes Using Annuities and Life Insurance

The growth of IRA funds accumulated for retirement now exceeds more than $4.75 trillion in the U.S. This figure is sure to increase over the coming years as age and retirement planning come to the forefront for a larger segment of the population.

In many cases, people who have no use of an IRA account for retirement income may have the intention of passing these funds onto their heirs, but are unaware of the tax consequences that may ensue.

While the initial contributions and earnings growth are tax deferred, the distribution is another matter entirely. Because the money used to create the IRA was never taxed, an IRA distribution is subject to income tax and, as a large portion of a person’s estate, may also be subject to estate taxes, increasing the tax burden. This is where a knowledgeable adviser can be a real asset.

Additional Advantages with

Life Insurance

The easiest way to pass wealth on to the next generation is through the use of life insurance. This vehicle carries two main advantages in the transfer of wealth; first, life insurance benefits are tax-free to the beneficiary, and second, the increase of cash value is tax-deferred.

Taking Advantage of Your IRA

One way in which you can pass more of your estate on to your heirs is by using your IRA. You can use the funds in the IRA to purchase a fixed annuity, and then use the income stream from the annuity to purchase life insurance. The annuity is set up for guaranteed lifetime income in order to assure the ongoing maintenance of the life-insurance policy.

Calculate the amount of income needed to purchase the insurance, taking into account the affects of taxation. The after-tax income is used to pay the policy premiums, with the heirs named as the beneficiary for the life-insurance policy.

At the time of death, the annuity has no value; therefore there are no taxes due. The death benefits are paid to the beneficiary tax-free. Compare this to a situation with no planning, and the IRA being fully taxable at death, and it’s easy to see the benefits.

You will, of course, be paying income taxes on the annuity income, but with the estate taxes eliminated, the end result should be a tax burden much lower than the combined income tax and estate tax that would be in effect without the proper planning.

Create a Trust Account

Finally, the establishment of the insurance policy should be done within a trust in order to avoid the inclusion of the death benefits as part of one’s estate.  There are additional tax and legal issues that should be considered.

If you are interested in this concept, you should consult an attorney and tax advisor specializing in estate planning to ensure that your financial plan is structured to meet your particular situation and objectives.

Marco Amato is the President of Dowd Financial Services, LLC and has been in the financial-service business for more than 30 years. Dowd Financial Services is a full-service financial division of the Dowd Agencies, with more than 50 years of combined monetary experience. The Dowd Agencies has four offices in Western Mass. Amato can be reached at (413) 538-7444;[email protected]

Sections Supplements
That’s How to Get More of What You Want From Your Financial Institution

In the movie Caddyshack, Ty Webb (played by Chevy Chase) offers a piece of sage advice to his caddy: “Danny, there’s a force in the universe that makes things happen. And all you have to do is get in touch with it, stop thinking, let things happen, and be the ball.” Ty then blindfolds himself, walks up to his ball, and sticks it stiff to the pin.

In the spirit of that famous line, when you want to score a great deal and cultivate a longstanding business relationship with your banker, be the banker. Think like a banker. If you were the banker, what would make you sleep like a baby or give you nightmares?

As a certified public accountant, I advise my clients that there are several important characteristics a banker evaluates before lending you money. These characteristics can be broken down into three categories: financial, management, and environmental.

Financial characteristics include cash flow, collateral, and the availability of liquid assets to cover unanticipated losses. Management issues take into account the integrity, history, and reputation of the management team, as well as the ability to include additional guarantors on the note and the existence of a compelling strategic business plan. Environmental characteristics could include national and local economic conditions and legal and regulatory issues impacting the financial health of the business.

Let’s start with financial characteristics, and your first opportunity to be the banker. What do cash flow, collateral, and the availability of liquid assets have in common? They determine a business’s ability to repay a loan. Now, can you really blame a banker for being concerned about your ability to repay a loan? Any viable business needs to ensure that their customers can pay their bills. Banks are the same way.

In a perfect banking relationship, the banker lends money; the customer lives by the covenants of the loan and repays the loan. But sometimes the banking relationship becomes less than perfect, and the customer defaults on the loan. In the event of a default, the banker will want to sell the assets that were used to collateralize the loan.

So put on your banking shoes and say to yourself, “I don’t really want to get stuck with a bunch of assets that are valued less than the loan … I don’t really want to get stuck with any assets at all. I just want my customer to repay their loan. On the other hand, I’d sleep better knowing that if my customer defaulted, I’d have some way to recover my losses and make my bank whole.” Valuable, saleable collateral and back-up sources of liquid assets make bankers happy.

With a focus on management issues, be the banker again. As a banker, why would you be so interested in the integrity, experience, history, and reputation of the management team? The management team makes most all of the decisions impacting day-to-day and long-term operations. If the management team makes well-thought-out decisions, the business will probably be successful and have the ability to repay its debts. If the management team makes poor decisions, the business will suffer — it may fail — and be unable to repay its debts. If I’m the banker, I’d feel a lot better lending money to an experienced management team with a good track record.

Moreover, the ability to add additional guarantors to the banking relationship helps your banker sleep at night. Additional guarantors provide another safety net for a banker. If you and your business are unable to meet the obligations of the loan, the bank would have another option to seek repayment. That being said, an individual would only agree to be a guarantor if they believed in you and your business. Guarantors are typically stockholders of the company or family members. Many times, you’ll need to present your strategic business plan to potential guarantors to persuade them to sign their name on the dotted line. This is yet another reason to write an intelligent strategic business plan.

A good management team alone does not make for an attractive customer to a banker. It’s easier for a banker to lend money to a management team with a compelling strategic business plan than to lend money to a management team with scribbles written on Post-it Notes. A talented, experienced management team armed with a clear, compelling strategic plan is a winner in the eyes of most bankers.

So how can you get more of what you want from your bank? As a business leader, think as a banker thinks and make decisions as a banker makes decisions.

  • Before initiating conversations with a banker, I advise my clients to take some of the following steps:

  • Strengthen your cash position. Start now, as this may take time;
  • Build a solid management team. Be prepared to talk about their track record;
  • Dust off and update your strategic business plan. Make sure it’s presentable;
  • Carefully examine your operating environment. Be ready to talk about strengths, weaknesses, opportunities, and threats;
  • Plan for the unknown. Aggressively project expenses and conservatively project revenues;
  • Conduct a valuation of your assets. You may have to hire a business-valuation professional;
  • Line up additional guarantors who believe in you and your business model; and
  • Retain earnings in the business or personally to protect the business in challenging times. It’s good business sense, and bankers really like seeing that cushion.
  • Want a great deal from your banker? Of course you do. A banker wants to reduce the risks associated with writing a deal. A banker wants you to repay your loan. A banker wants to protect himself if you default on the loan. If you think your business will need access to funds sometime in the future, start preparing it now. And think like a banker. n

    Umberto Santaniello is a member of the firm and the quality control group at Kostin, Ruffkess & Co., LLC, a certified public accounting and business advisory firm. Beyond traditional accounting, auditing, and tax consulting, the firm also specializes in employee benefit plan audits, litigation support, business valuation, succession planning, business consulting, forensic accounting, wealth management, estate planning, fraud prevention, and information technology assurance; (413) 233-2300;www.kostin.com


    Cradles to Crayons

    Comcast’s Western New England Region is a lead sponsor of the Cradles to Crayons (C2C) Backpack program. Through Comcast’s support, C2C delivers back-to-school backpacks throughout Western Mass. to children in key communities. C2C volunteers were recently in Springfield for a drop-off event at Square One’s Faith Church Children’s Center. Following a short speaking program, Comcast and C2C volunteers presented 140 backpacks to children. At left, Doug Guthrie, senior vice president of the Western New England Region, and Joan Kagan, president and CEO of Square One, are presented with a thank-you gift from the children at Faith Church, Elizabeth Diaz (left) and Karaun Taylor. Above, everyone is all smiles as Jen White, director of development for Cradles to Crayons, shows Quah’mar Hazel Todman, left, and Christina Brazoban their new backpacks.

    Memory Stroll

    A purple pathway of balloons framed a parade of 90 seniors, caregivers, volunteers, and staff led by Jewish Geriatric Services Board of Directors Chairman Michael Hurwitz on the recent JGS Alzheimer’s Memory Stroll around the JGS campus. Hurwitz was the grand marshal of the Third Annual Stroll and is pictured here with Ginny Sinkoski of the Alzheimer’s Association of Massachusetts. The Memory Stroll is held to raise awareness of Alzheimer’s Disease and generate support for the Massachusetts Alzheimer’s Association Memory Walk later this month.

    Sections Supplements
    60 Congress St. Gets a Facelift and a Clean Slate
    Bob Greeley, left, and Zane Mirkin

    Bob Greeley, left, and Zane Mirkin say the accessibility of 60 Congress St. should help fill the building, even in a down economy.

    While speculative building is certainly risky in this economy, Zane Mirkin and Jerry Gagliarducci thought they were on solid ground when they acquired 60 Congress St., aka the ‘Hooters Building.’ They’re off to a strong start with the signing of the Pioneer Valley Planning Commission as lead tenant, and believe they can fill what’s left quickly due to the building’s great location and a facelift that is making its past use a distant memory.

    Bob Greeley calls it “changing the mass.”

    That’s a development industry term (sort of), he said, that is used to describe the process of dramatically altering a building’s appearance so that no one will know what it was before — or care.

    To say that the mass has been changed at 60 Congress St. in Springfield would be a real understatement, at least in light of some the anecdotes shared by Greeley, president of the R.J. Greeley Co., who helped orchestrate this highly visible project.

    60 Congress St. — before, during, and after.

    “I’ve had a lot of people ask me if this a new building,” he said of the structure, which was built nearly a century ago and has seen a number of uses, including, most recently, home to a certain chain restaurant noted for its provocatively dressed waitresses. “And one person said to me recently, ‘this was the Hooters building?’”

    That’s exactly the kind of comments Greeley and the two partners/developers in this endeavor, Zane Mirkin and Jerry Gagliarducci, had in mind when they demolished one section of the four-story structure, completely gutted what was left, built a small addition, and put on a new façade.

    Actually, the real goal was and is to remove the phrase ‘Hooters building’ from the local lexicon — and sooner rather than later.

    “We certainly don’t use that term anymore,” said Greeley, referring to those at his firm who call it simply, ‘60 Congress St.’ He believes that with time, and perhaps not much of it, that will become the name commonly used in Greater Springfield. And to help move matters along, the developers have affixed the numeral 60 (five feet high) to all four sides of the building.

    They can be seen by a great many people, said Mirkin, president of Associated Building Wreckers, who, while offering a tour of the facility along with Greeley, gestured with his hand while looking out huge windows facing south, west, and north. With that view, people can see cars traversing Routes 91 and 291, as well as Main Street and other major arteries. “This is a very visible, very accessible site.”

    It is this attractive location that inspired Mirkin and Gagliarducci to undertake what amounts to speculative development at the height of the worst recession in 70 years, and it prompted optimism from Greeley as he discussed the task of filling the remaining space.

    The Pioneer Valley Planning Commission (PVPC) has taken the first two floors, or roughly 60% of the 30,000 square feet available, and Greeley says there’s been a good deal of interest in floors three and four, which can accommodate one or several tenants each within their 6,000 square feet.

    “We’ve had some interest from the medical sector,” he said, noting that there are many medical offices within a few blocks of the building, as well as the close proximity of Baystate Medical Center and Mercy Medical Center. “But we’re seeing it from many other sectors as well; I’ve had a lot of calls.”

    New Lease on Life

    Recalling his Springfield history, Greeley told BusinessWest that 60 Congress St. was long home to the American Linen Supply company and was the only building in a three- or four-block area of the North End not to be razed during what became widely known as the ‘bulldozer era’ of urban renewal in the early and mid-1960s.

    “It managed to survive all that somehow,” he explained. “It was a solid building, in pretty good shape — so they let it stand.”

    More than four decades later, it’s still there, although no one would recognize it — which is exactly the point of the exercise undertaken by Mirkin and Gagliarducci, president of Gagliarducci Construction, with a little coaxing from Greeley.

    He has worked with those businessmen on several commercial real estate developments in Greater Springfield, and saw, in 60 Congress St., what he considered another excellent opportunity.

    Greeley told BusinessWest that he had been “chasing” the building for some time, meaning that he had been monitoring the situation — the building had been vacant for some time after Hooters and another restaurant on that site closed down — and watching for circumstances to come together for practical reuse.

    He approached Mirkin and Gagliaducci to discuss what he considered to be vast potential at the site, but said he really didn’t have to sell them on the idea.

    “Instead, it pretty much sold itself,” he continued, adding quickly that, despite some structural challenges and the softened economy, the property had what he called “all the right ingredients” for success, including visibility, accessibility, and abundant on-site parking.

    Together, these provided more than enough selling points for Mirkin and Gagliarducci, who prevailed at the second of two auctions on the property roughly a year ago.

    This would become latest in a string of real-estate endeavors for the two partners. They came together for a development of an office complex on Dwight Road at the Longmeadow/East Longmeadow line, and also on a property on Brookdale Drive in Springfield that became home to Branford Hall. They also worked together on a project involving a former Peter Pan bus-repair facility on Arnold Avenue in Springfield.

    What the two saw in 60 Congress St. was a chance to breathe some life into a North End landmark that had somehow fallen into dormancy, and they took what amounted to a considerable risk given the economy and a soft real-estate market that has flooded the region with vacancies and ‘for-lease’ signs.

    But they were helped tremendously by the plight of the PVPC. The agency had been located on the top floor of the municipal office building in West Springfield for more than 20 years, but was informed in 2007 that the city needed that space. It was only a few months after Mirkin and Gagliaducci purchased the building when talks commenced about the agency about moving to that address.

    By then, the partners had already engaged the architectural firm Caolo & Bieniek and Saloomey Construction Co. to design to execute this “changing of the mass” that Greeley described.

    A small portion of the original structure was demolished, and a new entrance element, featuring an elevator, stairwell, and common space, was added. A number of structural changes were made to bring the 99-year-old edifice up to modern building codes (earthquake-proofing it, for example), said Mirkin, and the property was essentially gutted to its four walls.

    The signing of the PVPC as the primary tenant provided a real sense of urgency and moved matters along very quickly, said Greeley, noting that the developers set and met an aggressive timetable to have the agency moved in by Sept. 1.

    As for the task of filling the remaining space, Greeley told BusinessWest that he had been reluctant to show prospective tenants a work in progress or architects’ renderings of what a renovated 60 Congress St. would look like. But now that the work is essentially completed, he’s making up for lost time.

    “I wanted to wait until it was finished,” he explained. “It’s hard to sell people on a drawing. Now that people can see what’s been done, it will be much easier to sell them on this address.”

    Success Stories

    As he walked across the fourth floor of 60 Congress St., admiring the views of downtown Springfield that it provides, Greeley conjectured that it wouldn’t be long before the top two floors of the building — which have gone virtually unused for two decades — would again be teeming with activity.

    And by then, the phrase ‘Hooters Building’ should be that much closer to being a term out of use.

    That’s what happens when a building’s mass is changed — not to mention its fortunes.

    George O’Brien can be reached at

    [email protected]

    Sections Supplements
    Fully Digesting What the Terms ‘Ordinary,’ ‘Necessary,’ and ‘Reasonable’ Mean

    It is early one evening, and you’re finishing a great dinner at a local restaurant with a colleague. The waitress brings the check, and you reach for your wallet. As you ponder which credit card to put it on, business or personal, you probably don’t realize the complex, sometimes contradictory rules that apply to deducting business meals and entertainment expenses.

    These rules go far beyond the IRS limitations which allow only a 50% deduction for meals and entertainment expenses. There are many rivers to cross before that bridge.

    The deductibility of any cost incurred for business entertainment or meals is governed by the long-established requirement that the expenditure be an ‘ordinary,’ ‘necessary,’ and ‘reasonable’ expense bearing a proximate relation to the taxpayer’s business or income-producing activity. Under an equally well-embedded principle, however, no deduction is allowed with respect to personal or family expenses.

    Over the years the courts have struggled to balance these countervailing principles by attempting to distinguish those expenditures that are business-related and deductible from those that are personal in nature and thus non-deductible.

    The term ‘ordinary and necessary’ does not lend itself to a ready definition. Countless cases that have attempted to determine whether an expense was in fact ‘ordinary and necessary’ with respect to a particular taxpayer have considered whether a hard-headed businessman would have incurred it under the circumstances. This common-sense test lends a degree of objectivity to the statutory formula, and is helpful in rationalizing the occasionally inconsistent results reached by the courts. If the taxpayer is an employee and incurs unreimbursed entertainment costs to benefit his employer, the expenditure, to be deductible on the individual level, must be an ‘ordinary and necessary’ expense of the taxpayer’s earning his salary as an employee. In general, this requires a showing that the employer required or expected the employee to bear these expenses himself and that the expenditures were not reimbursable by the employer.

    With respect specifically to promotional costs, including those for entertainment or meals, the case law recognizes as a general proposition that providing amenities of this nature to customers, clients, or business colleagues of a taxpayer is generally conducive to bettering the taxpayer’s business, and that this is not an unusual or uncustomary occurrence. Nevertheless, the taxpayer must be prepared to demonstrate that, with reference to the particular business conducted by the taxpayer, the expense was ‘ordinary.’ For an employee, generating goodwill falls short of the necessary requirements.

    The term ‘necessary’ means that the expenditure must be appropriate and helpful for the development of the taxpayer’s business. Under this definition, the expenditure need not be indispensable to one’s business, but it must be made with the intention of securing a business benefit. If the taxpayer can demonstrate that a business benefit was intended or resulted from the expenditure, any incidental personal benefit is disregarded; conversely, if the expenditure was primarily of personal or social benefit and only incidentally business-related, it is not deductible. Since expenditures for entertainment or meals are usually of mixed business and personal benefit to the taxpayer, they are especially susceptible to attack as lacking a business relationship.

    Perhaps you are feeling positive that the expense passes the ‘ordinary and necessary’ requirements. You are not yet insured a tax deduction. To be deductible, the expense must be not only ‘ordinary and necessary’ but also be either ‘directly related’ to or ‘associated with’ the active conduct of the taxpayer’s trade or business.

    Directly related entertainment usually involves a business discussion that should result in income or some other business benefit at some specific time in the future. This discussion can take place during the entertainment or in a clear business setting.

    ‘Associated with’ requires that a substantial business meeting must have taken place before, between, or after the entertainment activities and that the entertainment was associated with the active conduct of a trade or business.

    IRS rules state that entertainment or food and beverage expenses incurred in a ‘clear business setting’ directly in furtherance of the taxpayer’s trade or business are deemed ‘directly related.’

    IRS rules provide for an objective, rather than a subjective, standard to determine whether there was a clear business setting for the entertainment or meals. Thus, entertainment occurring in distracting circumstances is presumed not to have occurred in a clear business setting and is deemed socially, rather than commercially, motivated. IRS guidance cites the following examples of settings which might not be a clear business setting:

    • A meeting or discussion taking place at a nightclub, theater, or sporting event, or during essentially social gatherings such as a cocktail party; or

    • A meeting or discussion, if the taxpayer meets with a group that includes persons other than business associates, at places such as cocktail lounges, country clubs, golf and athletic clubs, or vacation resorts.
    • However, the Congressional Committee Reports indicate by way of illustration that Congress intended to allow the deduction of entertainment expenses as ‘associated with’ the active conduct of a trade or business if the taxpayer conducts substantial negotiations with a group of business associates and that evening entertains them and their wives at a restaurant, theater, concert, or sporting event. In this case, the entertainment expenses are considered ‘associated with’ the active conduct of the business, and are deductible, even though the purpose of the entertainment is to promote goodwill.

      So, having that said, a sporting event or theater would not be ‘directly related’ but would be ‘associated with.’ No wonder taxpayers get lost in these rules.

      IRS rules create a rebuttable presumption that the ‘active conduct of trade or business’ is not the principal character or aspect of combined business and entertainment activity on hunting or fishing trips, or on yachts and other pleasure boats, and requires the taxpayer to clearly establish to the contrary, to meet this test under those circumstances.

      Assuming a taxpayer meets the threshold tests of demonstrating that the entertainment or meal cost represents an ordinary and necessary business expense and then shows that the expense satisfies (or is excepted from having to satisfy) the ‘directly related’ test or the ‘associated with’ test, it must still meet the rigorous substantiation requirements. In essence, the rules bar any deduction for an expenditure on the basis of the unsupported testimony of the taxpayer or on the basis of his approximations.

      Accordingly, to secure any portion of the deduction, the taxpayer must substantiate all entertainment and meal expenses by adequate records or sufficient evidence corroborating his own statement as to (1) amount, (2) time and place, (3) business purpose, and (4) business relationship of the person entertained. The substantiation requirements are strictly construed, and the taxpayer’s failure to satisfy their particulars entails complete disallowance of the deduction.

      All this said, don’t forget that most meals and entertainment expenses, if deductible, are limited to a 50% deduction. Additionally, expenses related to an entertainment facility or membership are not deductible at all, but the cost of separately stated expenses incurred at such a place may be deducted subject to the above limits including the 50% rule.

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

      A Step to Manage Health Costs

      Massachusetts’ managed care organizations lead the nation in quality of care and consumer satisfaction. So it is no surprise that the percentage of people in the Commonwealth’s private health insurance market who use managed care is the highest in the nation.

      But 325,000 of the 750,000 Massachusetts residents receiving full benefits under the federal Medicaid program are not enrolled in managed care plans. These individuals are enrolled in a fee-for-service plan, called the Primary Care Clinician plan. Moving enrollees from the Primary Care Clinician plan into managed care plans would achieve two important outcomes: improve their care and, according to three recent studies, save the Commonwealth anywhere from $600 million to $1 billion over five years, easing the fiscal pressures of paying for health care reform.

      Medicaid will cost the Commonwealth $8.6 billion this year, and the costs are increasing much faster than either economic or overall budget growth. Between 2001 and 2006, costs grew at an average of 8 percent annually. The result was that 35 cents of every new tax dollar went to pay for Medicaid. Clearly, the status quo is unsustainable.

      With a deep recession making new revenue a pipe dream, Massachusetts faces a clear choice. We must either find a way to make Medicaid more efficient, or choose from among a slate of unappealing options like eliminating coverage for some, limiting services or cutting provider reimbursements.

      Under the Commonwealth’s landmark 2006 health care reform law, almost 240,000 formerly uninsured residents have signed up for state-subsidized health insurance, either through Medicaid or the Commonwealth Care program. Finding a way to pay for that coverage makes the need to improve the efficiency of Medicaid service delivery even more urgent.

      Managed care provides efficient, high-quality care by aligning financial incentives with clinical outcomes. It combines prevention and wellness services with programs to help individuals address specific conditions like obesity, diabetes, asthma and smoking that drive up health care costs. Patient outcomes are carefully tracked.

      Massachusetts organizations have proven adept at combining access to quality care and cost control. Their quality outcomes are among the best in the nation as measured by prevention data, patient satisfaction and outcomes. In 2007 and 2008, Fallon Community Health Plan was rated the country’s top Medicaid health plan by the National Committee for Quality Assurance.

      Despite high quality and the overall acceptance of managed care, Massachusetts has lower managed care penetration among Medicaid recipients than most other states do.

      Eliminating the Medicaid PCC plan would yield an additional $40 million in savings over two years by foregoing the cost of infrastructure and program enhancements needed to bring the plan up to par with existing managed care programs. It suffers from limited accountability and lacks a reliable mechanism for ensuring coordination among various providers. It also would appear to support the efforts of the Commonwealth’s Payment Reform Commission to move away from fee-for-service reimbursement arrangements.

      Savings wouldn’t come at the cost of patient care, as the Commonwealth’s Medicaid Managed Care providers consistently outperform the fee for service plan on many quality of care measures.

      Massachusetts’ goal of universal coverage requires that we maximize the efficiency of services offered under Medicaid. Dismantling the Commonwealth’s fee-for-service Primary Care Clinician plan and moving all recipients of full Medicaid benefits to a managed care model would do just that. Even more importantly, it would improve the quality of care for some of our most vulnerable citizens.

      Eric Schultz is president and chief executive officer of Fallon Community Health Plan. Jim Stergios is executive director of Pioneer Institute.

      Sections Supplements
      Hampden Bank Continues Its Growth Pattern
      Tom Burton

      Tom Burton says tough times have chased people from investments markets and toward safer options like a strong community bank.

      Last year was a rough one for financial institutions everywhere, but a good one for Hampden Bank, which was well-capitalized following its conversion to a publicly traded company in 2007 and, like most local banks, free of the toxic loans weighing down the industry on the national level. After turning a slight profit in 2008 (no small feat), the bank continues to thrive, looking for further growth opportunities — and further ways to brighten each customer’s day.

      As part of its current marketing campaign, Hampden Bank says it wants to brighten each customer’s day. Thomas Burton’s day is brightened just by thinking about the timing of its transformation to a publicly traded company in 2007.

      “Obviously, our timing was very good,” said Burton, the bank’s president and CEO. “When we first decided to go public, in late 2005, we were at a point where we needed capital to continue to grow the bank — and we raised a lot of capital, more than we really needed.” In fact, the first initial public offering in 2007 netted about $50 million.

      “So we ended up with a lot of capital going into a period of time, last year, when the capital markets essentially collapsed, and you couldn’t get capital if you wanted to,” he continued. “We were very fortunate that we continued to grow, and we went through this difficult time in very, very good shape. We actually made a small profit last year.”

      Hampden Bank has more than weathered the storm; well-capitalized and free of the toxic assets that have cripped many national banks, the institution saw its deposit accounts grow tremendously last year, and commercial loan volume increase by 8% — a remarkable figure at a time when the recession has dissuaded many companies from expanding and making capital investments.

      “I have satellite radio in my car, and I hear these national ads from loan brokers saying that banks aren’t lending,” Burton told BusinessWest. “Well, we’ve been lending. Our underwriting standards haven’t changed, and 8% growth is a good year when there hasn’t been a lot of economic expansion. I think it’s unrealistic for people to think they can’t get a loan in this day and age; certainly we’ve been lending on a consistent basis.”

      In this issue, BusinessWest examines why, at an uncertain time for the economy as a whole and especially financial services, Hampden Bank’s future is looking bright.

      Successful Surge

      In rocky financial times, people gravitate toward local institutions they trust, said Rick DeBonis, senior vice president of marketing at Hampden Bank. While any bank can bring in money by raising CD rates, he explained, Hampden significantly raised its core deposits over the past year because people felt like that’s where their money should be.

      “This past year, we saw one of our largest deposit growth years ever,” Burton said. “There’s been a flight to safety, with taking money out of the markets and going back to their local banks, and we benefited from this. We need the deposits to continue to grow.”

      “It was a remarkable year, and that came from a cross-section of checking accounts, money markets, and some CDs,” added DeBonis. “We employ what is called a ‘surge marketing’ technique and focus on a two- to three-mile radius around each branch, and that seems to be working well for us. Of course, you’ve got to have the right products, too.”

      Burton said the bank’s marketing efforts have focused on Hampden’s position as a local, community bank, “where you have access to real people, where you can call in during business hours and not get an answering machine, but get a real person. My office is right off the lobby, and I certainly expect to see customers — and, believe me, they don’t hesitate to drop in.”

      But that community emphasis extends beyond mere courtesies and carries a tangible economic benefit for Greater Springfield, he explained.

      “It’s what we call our ‘circle of prosperity,’” he told BusinessWest. “We’re getting these local deposits, and they are lent back into the community — whereas, if you put your money into a national bank headquartered somewhere else, like Charlotte, or Canada, those deposits may or may not stay local.”

      “We say that deposits made here go to work here, which is an important distinction,” DeBonis said. “Also, an important focus of our advertising starting last year has been to use Tom as the key spokesperson. We feel that’s important in this environment, that peole want to know the president of the bank, that he’s accessible to them. He’s always had an open-door policy, and that gives people an added measure of comfort and peace of mind, knowing the president of the bank is right here, addressing their issues.”

      One of those issues, Burton said, is simple customer anxiety — specifically, the fear last fall that their deposits weren’t safe as bank failures dominated the news. Like other area institutions that remained essentially healthy (in large part because they had not abandoned basic underwriting standards to take on risky loans), Hampden Bank was proactive in getting the word out that, between the Federal Deposit Insurance Corp. increasing coverage from $100,000 to $250,000 of each bank account and Massachusetts guaranteeing the rest, people’s money was safe.

      Then there’s the bank’s marketing slogan of the past year: “How can we brighten your day?”

      “Our people answer the phone that way, and they mean it,” DeBonis said. “It’s not just a slogan, but something we’re trying to live,” whether that means easing someone through the mortgage process or helping someone to their car with an umbrella when it’s raining. “It’s going above and beyond and brightening a customer’s day.”

      Burton said customers want that kind of treatment given the economic turmoil of the past year. “It’s been the worst of times and the best of times,” he noted. “We’ve done well capturing new customers, especially from the larger banks, and that has allowed the bank to continue to grow. Word of mouth is the best advertising, and not a week goes by when I don’t get a letter from someone who had a pleasant experience doing business here. That’s encouraging, that people would take the time to write about their experience. It makes my day when that occurs.”

      Branching Out

      Burton said Hampden Bank has been growing by about a branch a year on average; its latest addition, on Shaker Road in Longmeadow, is that town’s second branch, but one that’s more accessible to residents of East Longmeadow as well as Suffield and Enfield, Conn., giving Hampden a foothold across the border.

      “We look for opportunities where we see weaknesses in the industry,” he said. “We’re always looking for opportunities to grow the bank, both geographically and in lines of business, and we have our eyes open and ears to the ground. Right now, coming out of a recession, is the best time to expand and make moves.”

      The bank’s online presence has also seen consistent growth, Burton said. “People recogize it as a convenience, and it becomes part of their life. You can pay bills and transfer funds wherever you have a computer and Internet. Look at me — I work a few feet from the tellers, and I rarely go there.”

      He doesn’t expect online banking to replace physical branches any time soon, though, or even reduce the need for them very much. “People go to the bank for a variety of reasons — to transact business, yes, but for some it’s a social experience. People are always welcome here, and they’re welcome online; we’re glad to have all these channels open to our customers.”

      Those efforts to brighten people’s day, wherever they choose to conduct business, is paying off, Burton said, as evidenced by the influx of new business as well as a high percentage of customers who have been with Hampden Bank for at least a decade.

      “Our focus now is on continuing to grow and leverage the capital we have, while making sure we don’t make any mistakes in the process,” Burton said. “We’ve seen that happen to too many banks that went from mutuality to stock ownership in the late ’80s, and we don’t want to make the same mistakes some of those made.”

      That means seeking out growth opportunities slowly and deliberately and reaping the rewards of greater lending power — the bank can make commercial loans up to $10 million — but also refusing to compromise its underwriting standards to make a quick buck.

      “We had one foreclosure this year — a condo that wasn’t even inhabited — and have another one in process, and that’s the extent of our foreclosures,” he said. “There’s two reasons for that. One, we correctly underwrote the loans in the first place, and two, those customers who have had financial problems or lost their job, we try to work with them to modify their loans to make them affordable or at least help them through the temporary difficulties in their household income.”

      It all goes back to developing lasting connections with the people to come through the front door seeking financial assistance.

      “We’re not transaction-oriented; we’re relationship-oriented,” Burton said. “We don’t just care about giving you a mortgage; we want customers to be with us for a long time, for their deposits, car loans, investment services, whatever. We’d like to be their financial institution of choice.”

      It’s a bright strategy — one that’s paying dividends even in uncertain economic times.

      Joseph Bednar can be reached at

      [email protected]


      It’s encouraging to see the state and this region taking such a keen interest in young people these days. Among the many other pressing matters at hand, elected officials and economic-development leaders have made the younger populations — and the challenge of keeping them within the confines of the Bay State — a top priority.

      Which is good, because as we’ve said many times, they are one of the keys to the relative health and well-being of both Western Mass. and the state as a whole.

      The focus on young people has manifested itself in a numbers of ways — from a video produced earlier this year to promote this region (it touts everything from the low cost of living to a high quality of life), to a new Web site— www.massitsallhere — that trumpets the Commonwealth and all it offers, to a series of forums designed to pick the brains of young people to find out what they like and don’t like about this state.

      The first of these forums was staged in Springfield last week, and a small group of area young people turned out to listen and offer some feedback.

      All this, as we said, is well and good, but the efforts to date seem to be focusing almost exclusively on marketing — putting a good face on both this region and state and reminding everyone of all the good things we have in Massachusetts, from fine colleges and culture to mountains and the seashore, separated by only a few hours.

      Marketing is important, but from our perspective, the way to plug or at least control the brain drain in this state comes down to one simple thing: jobs.

      It’s a fact that people don’t stay where they grew up like they did a generation or two ago, but the reason for this isn’t necessarily the cost of living or the quality of life (although those certainly play a role), Rather, it comes down mostly to job opportunities.

      People don’t flock to North Carolina for the weather or the school systems or the golf courses or the beaches or the health care facilities. They go there because that’s currently where the jobs are. People aren’t leaving places like Boston or Buffalo, or many other older industrial cities (yes, like Springfield and Holyoke) because they don’t like it there. They’re leaving because there are fewer opportunities.

      This is the message that people in government and economic development need to hear, and they’re not going to hear it from people who have decided to stay. That’s why they need to talk to the people who are leaving, as well.

      And they need to borrow a page or two from the script followed by North Carolina and other states that are seeing their populations increase, not decrease. They need to find ways to make this state and this region more business-friendly and create more opportunities.

      There are some opportunities in several fields, from health care to the biosciences, from education to sustainable energy, but simply not enough of them, and not across the broad spectrum of education and training levels.

      The proposed high-performance computer center, a decision on which is due from state and Holyoke officials in a few weeks, is an example of the type of job-creation work that the state needs to see more of in the years to come if it is keep more of its vital resource — young talent — within the Commonwealth.

      In the final analysis, marketing is good, and it’s no doubt a necessary part of this equation, but marketing won’t keep young people here or attract them to the Bay State from other regions.

      Only good, solid job opportunities can do that.