Home 2011 January (Page 2)
Sections Supplements
Stock Market Expected to Grow Along with Economy in 2011

Paul Valickus calls it “the Christmas-tree analogy.”
“Christmas tree sales over this past Thanksgiving weekend were up 12% year over year,” he said — and then wove that fact into his stock-market outlook for 2011. “That may sound a little silly, but it tells me that people were more confident and wanted to start celebrating a little earlier, to spend a little more money. It was an indicator of hope, if you will.”

President Michael Matty,

Paul Valickus (left), with St. Germain Investment Management President Michael Matty, says all signs point to a strong year on Wall Street.

It may be a small point, said Valickus, chief investment strategist at St. Germain Investment Management in Springfield, but it’s one of many larger trends — a decline in business vacancy rates and an uptick in employment among them — that point to rising confidence in a slowly improving economy, and that bodes well for the stock market in the coming year.
“I normally don’t make market forecasts, but I think this is an easy one,” Valickus said. “I think the economy and the stock market are going to do much better than most pundits are expecting.”
He cited last month’s Barron’s magazine forecast, which gathers the projections of 10 market experts, most of whom expect stock-market growth around 10%. “For me, that’s kind of a chicken forecast. A rise of 10% is what the market averages, trendwise, going way back. I think they’re just afraid to stick their necks out.”
Coming off the strong market surge late in 2010, George Keady hears the positive drumbeats, too, but has a different take. “That concerns me,” said the senior vice president and branch manager of UBS Financial Services in Springfield. “Don’t forget that what went on in November and December may have been an early 2011 gift. A lot of the movement in equity prices was a little premature.
“We’re expecting a moderate recovery in the economy — not a strong recovery, and not a double-dip,” Keady added. But because the market is all about expectations, he explained, that optimism has already been factored in. “When you see stocks move to the degree they moved in one month, that’s pretty optimistic. We have a positive outlook for next year, but part of next year happened in December.”
Boston Globe columnist Steven Syre agrees, noting that “a good deal of economic enthusiasm is already baked into the market. The S&P 500 index has climbed 21% in just the past four months.”

Changing of the Guard
Valickus, however, believes the upward movement is far from over, and he traces that belief back to the midterm elections two months ago, arguing that businesses spent the past two years in limbo in terms of their expectations about taxes, regulations, and other issues affected by the goings-on in Washington.
“Where I differ from a lot of people is, I think the economy will do a lot better than people expect, and I think the biggest catalyst is the November elections; people have a little more confidence in the business outlook now that Democrats lost their majority in the House.
“There’s a lot of pent-up demand out there,” Valickus added. “People were just afraid to do anything with certainty; they’re most comfortable having a Republican Congress going forward. Whether the Republicans are successful or not, there is that hope out there that maybe we’ll see a little more discipline in Washington. What the market abhors is uncertainty, and things now look a little more certain. Nothing is written in stone, but people are a little more comfortable.”
Writing in Barron’s, Kopin Tan sums up the view of the analysts who spoke with the magazine, noting that their modest projections about market performance bely a much more positive long-term outlook on the economy.
“A majority see 2011 as the year when a sustainable economic recovery takes root, winning over skeptics and persuading both companies and consumers to relax their stranglehold on squirreled-away cash,” Tan writes. “Improving confidence and low interest rates bode well for corporate profits. Meanwhile, the Federal Reserve remains hell-bent on propping up asset prices, and wages and prices of goods aren’t rising enough to sound an inflation alarm that would lead the central bank to alter its course of aggressive benevolence.”
Specifically, the strategists projected stock-market gains ranging from 7% to 17%. And while progress could be set back by global flareups such as trade tensions and conflicts in places like Iran and the Korean peninsula, Tan notes, “the market has started to flinch less at each flare-up of risk.”

Mixed Signals
At a time when rising interest rates are expected to weaken the bond market in 2 011, stocks are justifiably generating enthusiasm, but Keady pointed out that the picture is not rosy across the board.
For instance, he explained, while technology and consumer staples remain strong, health care and energy are charting a flatter course, and more than 30% of the companies in the S&P 500 overall were actually down in 2010.
Analysts note that prolonged cost-cutting and increasing consumer confidence, among other factors, point to long-term economic growth, but Keady said these market fundamentals still have to catch up with equity prices.
But in the short term, much of the market’s performance will depend on increasing confidence, and how long it can be maintained.
“What most people don’t understand is that the market can go up without the economy doing anything,” Valickus said. “People say, ‘wait, unemployment is 10%; how could the market go up?’ But it’s not what happened today; it’s what will happen tomorrow. That’s where a lot of people get confused.”
Still, judging by those Christmas trees in November — as well as plenty of other positive signs — confusion is giving way to confidence, and investors are putting more stock in the market.

Joseph Bednar can be reached at [email protected]

Sections Supplements
What the Recently Passed Tax Legislation Means for You

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the 2010 Tax Relief Act) was signed into law Dec. 17, 2010, avoiding what would have been one of the largest tax increases in history if Congress and the president had not compromised.

Terri Judycki, CPA, MST

Terri Judycki, CPA, MST

As background, in 2001 and 2003 Senate Republicans were not certain they could pass permanent tax cuts with the required votes. As a result, both the 2001 and 2003 tax cut acts were passed as reconciliation bills that needed fewer votes. Under the ‘Byrd rule,’ bills passed under reconciliation may not alter federal revenue for more than 10 years. Consequently, the 2001 and 2003 tax cuts were scheduled to sunset after 2010.
The 2010 Tax Relief Act extends the Bush-era individual income tax cuts for all taxpayers and makes many other changes. A brief description of some of the provisions follows.

Individual Income Tax Rates
The sunsetting of the tax cuts would have resulted in tax rates of 15%, 28%, 31%, 36%, and 39.6%. Under the 2010 Tax Relief Act, individual income-tax rates will remain at the current levels for 2010 and 2011: 10%, 15%, 25%, 28%, 33%, and 35%.

Capital Gains/Qualified Dividends
The maximum rate of 15% for long-term capital gains and qualified dividends have also been extended through 2012. Taxpayers in the 10% and 15% tax brackets continue to pay 0% on this income. Had this provision been permitted to expire, the maximum rate of tax would have been 20% on long-term capital gains, 39.6% on qualified dividends.

Itemized Deduction and
Personal Exemption Limitations
Higher-income individuals would again have found their itemized deductions and personal exemptions reduced. Under the 2010 Tax Relief Act, higher-income taxpayers will receive benefit of the full deduction through 2012.

Marriage Penalty Relief
This refers only to the tax penalty. The expiring tax provisions provided that the standard deduction and the 15% tax bracket for married couples filing jointly were double that of a single filer. This is extended through 2012.

Alternative Minimum Tax (AMT)
The 2010 Tax Relief Act includes an AMT patch for 2010 and 2011. The patch provides increased exemption amounts to avoid impacting many middle-class taxpayers.

Charitable Incentives
The Tax Relief Act extends several charitable incentives, including tax-free distributions from IRAs to charitable organizations.

Individual Tax Credits
The act extends various credits through 2012, including the $1,000 child tax credit and the American Opportunity Tax Credit for higher education expenses.

Individual Tax Extenders
Expiring at the end of 2009, the following were extended for 2010 and 2011: state and local sales-tax deduction, higher-education tuition deduction, and teacher’s classroom-expense deduction.

Payroll Tax Cut
For 2011 only, the employee portion of the Social Security tax is reduced from 6.2% to 4.2%. The self-employment tax rate is also reduced by 2%. In 2009 and 2010, the Making Work Pay credit provided a $400 credit to single filers and $800 to taxpayers filing jointly, subject to phaseout for higher-income taxpayers. This new payroll tax ‘holiday’ has no income limitation. Therefore, jointly filing taxpayers who make more than $40,000 will receive more under the new holiday, while those public employees who do not pay into Social Security will not receive any benefit.

Section 179 Expensing
Under Section 179, a business meeting certain limits can currently expense the cost of asset purchases. The 2010 Small Business Jobs Act increased the expense limit to $500,000 for businesses with maximum investment for the year of $2 million for 2010 and 2011. The 2010 Tax Relief Act provides for a 2012 limit of $125,000 for businesses with a maximum investment of $500,000, indexed for inflation. Setting the 2012 limit now may permit businesses to budget capital improvements.

Bonus Depreciation
Under the 2010 Small Business Jobs Act, businesses could claim 50% bonus depreciation on qualified assets. Under the Tax Relief Act, bonus depreciation is increased to 100% for qualifying assets placed in service between Sept. 9, 2010 and Dec. 31, 2011. For assets placed in service during 2012, 50% bonus depreciation will apply. While 100% bonus depreciation sounds like Section 179 expensing, bonus depreciation is not subject to limitations for businesses that make large capital-asset purchases and is not subject to the Section 179 income limitations. Unlike Section 179 expensing, bonus depreciation can create or increase a net operating loss. On the other hand, many states do not allow bonus depreciation, but do allow Section 179 if claimed on the federal return.

Tax Credits
Several credits were extended, including the research credit that had expired at the end of 2009, as well as various energy credits.

Estate and GST Taxes
The 2001 tax cut phased out the estate and generation-skipping transfer (GST) taxes so that they were fully repealed in 2010. In 2009, there was a $3.5 million estate/GST tax exemption and a 45% estate-tax rate. In 2010, in lieu of estate taxes, a modified carryover basis would apply to assets owned by a decedent. In 2011, the estate/GST tax was scheduled to return with a $1 million exemption and estate tax rates up to 60%.
The 2010 Tax Relief Act reinstates the estate tax for decedents dying after Dec. 31, 2009, but with a $5 million exemption and a 35% estate tax rate. Estates of decedents dying in 2010 have the option to elect either the new estate tax or the modified carryover basis. There are also significant opportunities for GST tax planning, but those changes are too technical for this article. Suffice it to say that many wealthy taxpayers should be funding new GST trusts by the end of 2010. The new estate-tax regime is once again temporary and scheduled to sunset at the end of 2012.

Conclusion
The 2010 Tax Relief Act also included temporary extension of unemployment insurance, with the total cost estimated at about $858 billion by the Joint Committee on Taxation.
The new law allows taxpayers to plan through 2012, a presidential election year. One of the bigger battles this year concerned extending the tax cuts for higher-income taxpayers, not just those making less than $200,000 if single ($250,000 if filing jointly) as proposed by the Obama administration. It’s reasonable to expect that debate to resurface in 2012. n

Terri Judycki, CPA, MST, is senior tax manager with the certified public accounting firm Meyers Brothers Kalicka, P.C., based in Holyoke; (413) 536-8510.

Briefcase Departments

Denver Stepping Down as Chamber President
SPRINGFIELD — After 14 years as president of the Affiliated Chambers of Commerce of Greater Springfield, Russell F. Denver recently announced he is leaving that post in the coming weeks to pursue other professional opportunities. Denver, an attorney, noted that he feels now is the opportune time to step down and bring in someone else with a fresh perspective. Citing his accomplishments, Denver noted in particular the Urban Land Institute’s work that has been done in the city. Before leaving his post, Denver plans to complete work on zoning revisions for the city, as well as the new “Make It Happen” marketing campaign for Springfield. Jeffrey S. Ciuffreda, vice president of government affairs for the Affiliated Chambers, will serve as interim president. Currently, the Affiliated Chambers of Commerce have approximately 1,200 members and an annual budget of $300,000. The Affiliated Chambers include the Springfield Chamber of Commerce, the West of the River Chamber of Commerce, the East of the River Chamber of Commerce, and the Professional Women’s Chamber of Commerce.

Springfield Leadership Institute Registration Underway
SPRINGFIELD — Registration is underway for this year’s Springfield Leadership Institute (SLI), which represents a 37-plus-year collaboration between the Affiliated Chambers of Commerce of Greater Springfield and the Western New England College School of Business. Institute alumni represent many accomplished and distinguished leaders in business, education, government, and nonprofit communities. The 2011 Springfield Leadership Institute, which begins on Feb. 17, will challenge participants to think in new ways and to analyze their own strengths and organizational challenges within a dynamic economy. SLI is taught by Western New England College faculty, who will introduce participants to emerging leadership theory and best practices. A segment on ‘Leadership Presence’ is being added this year along with the institute’s continued emphasis on problem-solving at the executive level. Case studies have also been updated for the 2011 program. The program meets every Thursday from 1 to 4:30 p.m. in the TD Bank Conference Center, 1441 Main St. Participants in SLI learn how to be more effective leaders and how to have the power to make an important difference both in the workplace and in the community. Contact Lynn Johnson at (413) 755-1310 or at [email protected] for more information.

2011 Woman of the Year Nominations Sought
SPRINGFIELD — The Professional Women’s Chamber of Commerce, a division of the Affiliated Chambers of Commerce of Greater Springfield, is seeking nominations for the 2011 Woman of the Year Award. The award has been presented annually since 1954 to a woman in the Western Mass. area who exemplifies outstanding leadership, professional accomplishment, and service to the community. The nominee’s achievements can be representative of a lifetime’s work or for more recent successes. Any woman in the Pioneer Valley is eligible for nomination, and a chamber affiliation is not required. To obtain a nomination form, visit www.professionalwomenschamber.com or e-mail committee chair Michelle Cayo at [email protected] The deadline for nominations is Feb. 11.

Call for ADDY Award Submissions
SPRINGFIELD — The Advertising Club of Western Massachusetts (ACWM) welcomes submissions for its 2011 ADDY Awards from individuals and organizations throughout Hampden, Hampshire, Franklin, and Berkshire counties. The annual competition recognizes creative excellence in all media, including print, broadcast, interactive, out-of-home, and public-service advertising. The ADDY Awards competition is a three-tier (local, regional, and national) competition conducted annually by the American Advertising Federation (AAF). ACWM is the only AAF-member club in the New England district. A panel of advertising experts will select winners in Springfield on Feb. 11. All entries must be registered online. For information on submission guidelines and a direct link to commence the submission process, visit www.submitandrepresent.com. The deadline for mail submission is Jan. 31. In-person submissions will be accepted on Feb. 4 from 9 a.m. to 5 p.m. in the Berkshire Bank community room, 1259 East Columbus Ave., Springfield. For more information, call the Ad Club at (413) 736-2582.

Unemployment Hits 20.7% in Construction Sector
WASHINGTON — Despite a slight drop in the nation’s unemployment rate, the construction industry ended 2010 with a jobless rate of 20.7%, according to the Jan. 7 report by the U.S. Labor Department. The construction industry lost 16,000 jobs last month and 93,000 jobs, or 1.6%, compared to December 2009. While the unemployment rate was up from 18.8% last November, it is down from 22.7% in December 2009. The average annual unemployment rate for the construction industry in 2010 was 20.6%, compared to 19.0% in 2009 and 10.6% in 2008. The non-residential building construction sector lost 400 jobs in December, but was up by 5,700 jobs, or 0.8%, from the same time one year ago — the first year-over-year growth since August 2008. Employment in that sector was 688,300 in December on a seasonally adjusted basis. Employment in heavy and civil engineering construction decreased for the second straight month, down 12,700 in December. However, employment in that sector was up by 18,100 jobs, or 2.3%, from December 2009. Specialty trade contractors gained 3,300 jobs last month, but the segment is down 79,000 jobs, or 2.2%, from the same time last year. The residential-building construction sector shed 5,900 jobs for the month and 37,000, or 6.2%, for the year. The nation gained 103,000 jobs in all industries in December, with the bulk of job growth in leisure and hospitality, up 47,000 jobs; education and health services, up 44,000 jobs; and trade, transportation, and utilities, up 31,000 jobs. Year-over-year, the nation has gained 1,124,000 jobs, or 0.9%. The nation’s unemployment rate dropped to 9.4% in December from 9.8% the previous month. “The nation’s construction industry should be glad to see 2010 in the rearview mirror, as the sector ended the year on a dismal note,” said Associated Builders and Contractors Chief Economist Anirban Basu in a prepared statement. “It is noteworthy that heavy and civil engineering has lost jobs for two consecutive months, which may be a reflection of the steadily slowing impact of federal stimulus spending. For much of the past year, that segment had been adding jobs. The expectation is that the nation will continue to add jobs. However, the construction sector is poised to underperform in the year ahead due to a number of factors, including dwindling direct impact from stimulus spending and the ongoing malaise in commercial real estate. With a national unemployment rate now at 9.4% — the lowest rate since May 2009 — this is an indication that the labor market is improving reasonably quickly. However, this does not seem to be the case with the construction industry, as today’s numbers may be a reflection of numerous factors in the economy, including still-subdued confidence among business owners and decision-makers.”

Uptick in Car Sales Sends Optimistic Sign
DETROIT — U.S. automakers will take a victory lap at the Detroit auto show this month after a measurable recovery from years of losses, a shrinking of market share to Asian rivals, and the bankruptcy troubles of Chrysler and General Motors (GM), according to Edmunds.com. GM posted a $2 billion third-quarter profit and then launched a public stock offering in November, while Chrysler increased its market share in 2010 and will introduce two new models this month at the auto show. Also, Ford was able to regain the number-two spot in the U.S. market from Toyota in 2010 when it saw its share grow for the second consecutive year. Overall, U.S. auto sales rose 11% last year to 11.6 million vehicles. Sales forecasts predict sales of 12.5 to 13.5 million units in 2011, and Toyota hopes its prospects are good for big gains despite its recent recalls. “If [the Detroit Three] can make money at depression-level sales, it tells you something dramatic has changed,” said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., in a prepared statement. “If we get back to 13, 14, 15 million units, this is going to be an astonishingly profitable business.” In the coming months, automakers are also expected to revamp their lineups with ‘green’ cars that will meet new emissions standards. Toyota will be expanding its Prius hybrid with the introduction of a new wagon, Tesla will be showing a luxury electric sedan, and GM launches its subcompact, the Chevy Sonic, as well as a compact Buick and the plug-in hybrid Chevy Volt. However, “the risk to the marketplace is that consumers aren’t asking for these,” said Rebecca Lindland, an analyst with IHS Automotive. Hybrid auto sales fell last year to 2.4% of the U.S. market from 2.8% in 2009, according to Autodata. The North American International Auto Show is open to the public Jan. 15-23.

Link to Libraries Receives Grant
EAST LONGMEADOW — The Service League of Springfield (Philanthropic Management–Bank of America) has made a $1,000 grant to Link to Libraries Inc. The organization will use the grant to offer Senior Connections, a Link to Libraries read-aloud program for children in the Holyoke and Springfield areas who are enrolled in preschool programs. The program is conducted in collaboration with Loomis Communities and Reeds Landing residents. The residents will team up with Link to Libraries educators and volunteers to offer preschool-age children reading programs locally during the spring and fall. Susan Jaye-Kaplan, co-founder of Link to Libraries, noted in a statement, “this collaboration is yet another partnership with local residents and agencies to enhance the reading skills of children of all ages and to make a connection with talented adults who reside in our community and want to remain active.” The Link to Libraries Senior Connection will be managed by Roberta Hillenberg-Gang of Longmeadow, who serves on the organization’s advisory committee. For more information, visit www.linktolibraries.org or call (413) 224-1031.

Sections Supplements
How Do Banks Decide Where to Direct Their Charitable Giving?

Tom Brown

Tom Brown says bank executives and employees see charitable giving as part of their corporate responsibility.

Virtually all banks, particularly ones with deep roots in the communities they serve, make a point of giving to nonprofits and other organizations and events that benefit a wide variety of people; in fact, they’re required by law to disburse a specific percentage of their charitable assets each year. And with community needs so great, especially in sluggish economic times, banks must develop strategies to determine which causes to support. Those decisions are not always easy.

There’s a good reason why many nonprofits and other local causes approach banks for funding, said Tom Brown.
“That’s where the money is.”
But, more important, banks have also long established themselves as reliable, go-to donors for a host of community endeavors. Most banks have established foundations for that purpose and are required by law to donate at least 5% of those assets annually.
“The commitment of all the community banks in the Valley is important,” said Brown, senior vice president of retail banking at Easthampton Savings Bank (ESB). “In so many local projects, you’ll see that some bank is a lead sponsor. All community banks take that as our corporate responsibility.”
And the need, according to administrators at several area banks, has never been greater.
“This is a subject near and dear to my heart,” said Rick DeBonis, senior vice president of marketing at Hampden Bank. “We do a lot in the community with respect to supporting in terms of money and in terms of sweat and rolling up our sleeves. We’re very involved.
“We get requests on a daily basis, coming to me or someone else in the organization,” he continued, noting that banks must develop strategies to sort through what is often a sea of pitches. “We have certain guidelines we use, the first of which is the relevance to the bank’s mission statement and our overall objectives as a community bank.”
That means supporting causes that have a direct impact on the greatest number of area residents, said DeBonis, noting a few examples, including schools, youth athletic programs, and, increasingly, cultural events. “We’re looking for not just nonprofits, but things that bring the community together and could have a psychological benefit as well as a financial benefit, in many cases. It’s a broad spectrum of organizations and activities, and we are happy to be a part of it.”
Dena Hall, vice president of marketing and community relations at United Bank, said her institution focuses on specific areas of interest when sorting through grant requests, specifically education, health and human services, youth programs, and cultural programs.
“We will entertain proposals and review the proposals as a group and make decisions whether to fund it,” she said of United, which operates a foundation worth $5.5 million at last count — meaning a minimum annual disbursement of $275,000 to qualified nonprofits — and also a community-sponsorship budget that makes smaller donations to area causes and events.
In either case, “the organization has to operate in the communities we serve, and there are certain things we will not fund” — salaried positions, for example, seeing that the typical United grant of $5,000 to $10,000 wouldn’t cover a significant amount of a paycheck.
However, there have been larger contributions, including recent support of Baystate Medical Center’s ‘Hospital of the Future’ expansion project. “We felt the scope of that project was wide,” Hall said, and it covers a lot of the same areas where our customers live, and we felt it would benefit our customers in the region we serve, so we participated in this great campaign to give our region a wonderful new hospital.”
Doug Burr, senior vice president and director of marketing at Florence Savings Bank, said his bank’s giving is reflective of the communities it serves, so it contributes to 501(c)3 groups that do business in its market.
“We feel we should take on community needs,” he said. “We can’t take on national and international needs; we can’t make a difference there, but we certainly can make a significant impact here in the local community — with a local hospital, a local library, a local school. And we feel good about that.”
For this issue, BusinessWest visits several local banks to discover how they decide how to distribute a finite amount of money to deserving organizations — and why they consider it a crucial part of their community mission.

Getting the Vote Out
“Because of who we are and the fact that we’re a mutual bank, here since 1873,” Burr said, “one of our core principles really is community giving and taking care of our customers. We’ve always said that, being a mutual savings bank, we pay our dividends back to the community because we don’t have stockholders.”
With that reputation, he told BusinessWest, Florence Savings Bank is typically one of the first doors to get knocked on by organizations looking to boost capital campaigns or fund drives.
“Because we’re a local, community bank, we don’t have a really formal process for our giving program,” he said. “People who have a need sit down and talk to me, the guy that makes the actual decisions. That face-to-face can’t always be done in larger organizations, and it’s a real benefit.”
Nine years ago, FSB took that informal approach a step further, launching a program called Customers’ Choice Community Grants. That effort allows the bank’s customers to vote a share of $50,000 to their favorite local organizations, agencies, and schools. The money is allocated by percentage of votes; every organization that gets 1% of the vote gets a percentage of the money.
That often results in some good-natured lobbying among agency leaders, school principals, and others to persuade FSB customers to throw them a few votes — which, of course, serves as free advertising for the bank.
Burr said he and President John Heaps developed the idea as a way to determine if the bank’s giving patterns matched community priorities. For the most part, that has proven to be the case.
“It validated a lot of the giving we did in the past,” Burr said. “When I look at the top 100 vote-getters, they’re all organizations we’re familiar with and have helped. At first, I was amazed how many nonprofits are in our area — about 300 each got a vote — and it kind of answered our question, are we doing what customers would want us to do?”
The bank uses that data to shape the direction of its larger donations, he added, but it has also drawn new retail customers who appreciate the way the bank connects with its market communities through the voting program.
“It’s a powerful thing,” Burr said. “In one sense, it’s the right thing to do, but it’s also powerful from a business-development perspective. And our employees feel good about the bank supporting these organizations; this is their home, and we’re helping our friends and neighbors as well as our customers.”

Narrowing the Field
All banks have to develop strategies for distributing philanthropic dollars, and many, like United and Hampden, narrow their focus to a few areas of interest.
“One of the biggest questions is, what has the potential to positively impact the community in the broadest way; what affects the most people?” DeBonis said, noting that his bank gets input not only from the organizations themselves, but in many cases from employees who sit on their boards.
“Mix all these together, and we make decisions as to what makes the most sense. Like I’ve said, the need has never been greater, and we have found that we cannot say yes to everybody; there have to be some particular guidelines with respect to how we allocate those funds.”
Brown, at ESB, agrees.
“It begins with requests, which come in from a lot of different sources,” Brown said. “We try to focus on local organizations, and for us, the three predominant areas of our contributions would be education, human services, and arts programs. But the focal point is local; we’re not usually contributing to large, national organizations, but instead local, grassroots, homegrown entities within our market.”
The other priority is an organization that will benefit a large group of people, he added. That opens the door to some national agencies, like the United Way, that support a wide range of local constituencies, but still leaves room for annual support of efforts like sports teams and school yearbooks, as well as one-time community events.
“When the town of Hadley had its 350th, we were major sponsors of that,” Brown said. “When Easthampton has its bear festival, we’re major sponsors of that. If a community is building a new playground, we may decide to sponsor that. We’ve always looked at this as our community dividend. It’s our responsibility, as a community bank, to give back.
“And it’s not always just about money,” he was quick to add. “Most of our 170 employees are involved in some way with some organization in the community, with a wide range of activities, from raking and shoveling on cleanup day to serving as a board chair or board member. Many organizations have told us that’s as important as writing a check. If you look at the employees of the bank, from the president to the tellers, you’ll find them active in the communities in which we operate.”

Stretching the Dollars
Hall said she and other decision-makers want to be sure that United Bank’s charitable efforts benefit the largest group of constituents and that the projects it funds are viable. “We’re never the only funder, but we’re looking for organizations with multiple funders and track records of success.”
Although United has funded and will fund smaller organizations with smaller grants, she said, it focuses mainly on organizations that can make a long-term impact on its communities — for example, funding a new emergency-rescue vehicle for the Red Cross, afterschool programs at the YMCA, or textbooks for Ludlow schools’ ‘literacy closet.’
Like many banks, Hall makes a point of sharing news of such grants in United’s publication, Yankee Connections, which only leads to further requests. “When it comes out, I get calls from organizations asking, ‘can I get your guidelines?’” She has also moved to communicating giving news on the bank’s Facebook page. “I feel like we’re talking to a whole new group of nonprofit organizations by publishing there.”
Which, of course, only leads to more decisions to make. While Hampden Bank was recently honored by the Western Mass. Assoc. of Fundraising Professionals with its 200 Outstanding Philanthropic Corporation award — for its support of Mercy Medical Center’s ICU and surgical center projects, among other efforts — DeBonis lamented that more worthy causes exist than the bank can support, even just in its market communities.
“There are some things out there that we’d love to fund and sponsor, but we have to look realistically at the cost of participation in relation to the overall dollars available,” he said.
He and others who spoke with BusinessWest understand all-too-clearly that the sluggish economy, just now emerging slowly from a crippling recession, has put the squeeze on nonprofits and other charitable causes, and the size of the average request has grown.
“It’s important for everyone to realize that every bank has a limit on what they can give away,” Brown said. “We try to meet these needs, but we’re trying to spread around a finite number of dollars. It’s not a bottomless pit of money, and we’re trying to be as equitable as we can and fair to everyone.”
These days, that’s just part of what it means to be a community bank.

Joseph Bednar can be reached at [email protected]

Departments People on the Move

People on the Move

van Schouwen Associates, LLC, of Longmeadow announced the following:

Shannon Filipelli

Shannon Filipelli

• Shannon Filippelli has been promoted to Director of Strategic Communications; and
Staasi Heropoulos

Staasi Heropoulos

• Staasi Heropoulos has been hired as Manager of Strategic Communications.
The expanded staffing and organizational changes come as the firm inks several contracts for new business with a regional bank, national retailer, international component R&D test firm, health care services organization, and other companies.
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Dr. Michael Coppola has been elected President of the Washington, D.C.-based American Sleep Apnea Assoc. for 2011. Coppola, who specializes in pulmonary and sleep medicine, has served on the association’s Board of Directors since 2004. He is President and CEO of Springfield Medical Associates. He also serves as an Associate Clinical Professor of Medicine at Tufts University School of Medicine.
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Jeffrey Corrigan has been named Vice President of Human Resources at the Brattleboro Retreat, Brattleboro, Vt. Corrigan has close to 30 years of experience in leading human resources in health care settings.
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Marta Nichols has been appointed CitiStat Director for the City of Springfield. Nichols will be responsible for managing the development and implementation of CitiStat, Performance Management and ACE/LEAN, including the development of all policies, processes, and communication programs. Nichols will also serve as a member of the steering committees that drive Continuous Improvement Springfield, as well as identify, analyze, prioritize, and make recommendations to the committee. Additionally, she will advise Mayor Domenic J. Sarno and Chief Administrative and Financial Officer Lee C. Erdmann on department activities, problems, and performance.
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Christina M. Sousa

Christina M. Sousa

TD Bank has named Christina M. Sousa the Store Manager of the Ludlow Center store at 549 Center St. An Assistant Vice President, she is responsible for new-business development, consumer and business lending, and managing personnel and day-to-day operations at the store.
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Attorney Rosemary J. Nevins has been named Senior Counsel at Royal LLP, 270 Pleasant St., Northampton. Nevins has more than 25 years of experience in labor and employment law.
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John Kennedy has been named Vice Chancellor for University Relations at UMass Amherst. He will direct the campus’ marketing, branding, and communication efforts. He will also oversee units responsible for communications and marketing, news and media relations, and external relations and university events.
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The Central Massachusetts South Chamber of Commerce in Sturbridge announced the following:
• Michael Detarando, of Incom, has been named to the Board of Directors;
• Jonathan Kelley, of Savers Bank, has been named to the Board of Directors;
• James Leaming, of Yogi Bear’s Jellystone Park, has been named to the Board of Directors; and
• Thea Marcoux, of SCHOTT North America, has been named to the Board of Directors.
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Denise McCarthy

Denise McCarthy

Denise McCarthy has joined Marcotte Ford in Holyoke as Business Development Manager. She is responsible for generating new business for the dealership by cultivating Internet inquiries as well as communicating with existing prospects and customers. She also promotes the dealership through participation in the Holyoke and Chicopee Chambers of Commerce and off-site marketing and community events.
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Alfredo Batista has joined Keller Williams Realty in its Longmeadow office.
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David Barclay has been appointed as Director of Development at Historic Deerfield.
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Psychologist L. Saxon Elliott has joined James Levine Associates in Westfield and South Hadley.
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Jeremy M. Leblond, a Certified Public Accountant, has joined the firm of Aaron Smith, Certified Public Accountants and Business Consultants, of East Longmeadow, as a Manager.
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Attorney Carol Cioe Klyman, of the firm Shatz, Schwartz and Fentin, of Springfield and Northampton, has been elected as a Fellow of the Board of Regents of the American College of Trust and Estate Counsel.
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Bradley Newell has joined Consolidated Health Plans in Springfield as Chief Financial Officer.
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Northampton Planning Director Wayne Feiden has been nominated as an honorary member of the American Institute for Architects. His nomination states that Northampton has received the highest score in Massachusetts for sustainability in five of the past six years.
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Tom O’Regan has been hired at UMass Amherst as the Manager who oversees emergency preparedness planning and response activities for the campus.
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Frank DeCaro was recently honored as one of PepsiCo’s top performers worldwide with induction into the inaugural group of Chairman’s Circle of Champion winners. He was among 216 Associates from PepsiCo’s more than 250,000-person global operations team to win the honor.
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Henry J. Drapalski Jr. has been named the Center for Human Development’s Vice President of Business Planning & Analysis. He will be responsible for analyzing business operations and fiscal performance and planning future growth for the $58 million, nonprofit agency.

Sections Supplements
Filing Is One Option, But There Are Many Paths to Recovery

If your business is in financial trouble, it may be tempting to consider filing a Chapter 11 bankruptcy petition. There may be many potential benefits: it puts at least a temporary stop to creditor collection efforts, it provides a venue in which to reduce a company’s debts, and it may create the vehicle from which to emerge from bankruptcy as a leaner, stronger company.

Steven Weiss

Steven Weiss

However, Chapter 11 is no automatic panacea for an ailing business.
Chapter 11 proceedings are expensive and a considerable distraction to the regular conduct of business. There will be supervision and reporting requirements with an unsecured-creditors committee and the U.S. trustee. The fees for the company’s bankruptcy attorneys and other professionals are considerable. Also, there will almost certainly be reductions in revenue immediately after customers learn of a Chapter 11 filing. And while it is relatively easy to get into Chapter 11, successfully emerging from bankruptcy is by no means assured. Fortunately, there are simpler, less costly alternatives; indeed, the best reorganizations are usually the ones that never see the inside of the bankruptcy court.
Perhaps the most important part of the reorganization analysis is to take a cold, dispassionate look at a business to see if there is really a core business that can be successful. This can be particularly difficult for owners of small businesses, who may have spent their adult lives developing the operation, or for owners who have taken over operations from the family founders of the business. However, there is little point to incurring the financial — and emotional — efforts of reorganization if there is little chance of success. So business owners need to ask some tough questions.
Are the financial troubles attributable to a one-time event, such as the loss of a major customer? Or are they due to a steady decline in revenue? Are certain parts of the business dragging down the other, more profitable lines? Are there weaknesses with current management that can be resolved? Is the amount of debt that won’t go away easily, e.g., bank debt and tax obligations, too high to be addressed even in a reorganization?
Because it is obviously difficult for a business owner to give these questions a truly unbiased analysis, it is useful, and probably imperative, to involve legal and financial advisors in the process.
If there is a viable business plan, the next step is to determine whether the plan can be accomplished without a Chapter 11 reorganization, and the first part of this process is to determine the primary sources of the financial pressure. For instance, if a secured lender is threatening collection action, then management’s efforts should be focused on reaching some accommodation with the lender. Secured lenders obviously have to be concerned with customers’ performance; however, except in rare instances, lenders would rather have a client continue to operate and make payments than have to liquidate their collateral.
Thus, banks may be willing to enter into forbearance agreements. Typically, these agreements provide for reduced payments and time to restructure a business or seek alternate financing. Lenders may also be willing to allow borrowers to liquidate unnecessary assets or business lines on a going-concern basis, which will usually generate better results than an auction sale.
If, on the other hand, the primary business is suffering pressure from trade creditors, there are other tactics. Fortunately for small businesses, unsecured creditors have limited legal remedies and little leverage in collection efforts, especially if the bank lender has a blanket lien on all of the business assets. And most sophisticated creditors know this. So trade creditors are often willing to take a significant discount on their claims simply because getting something is better than nothing. These discounts can be affected in a number of ways, depending on the circumstances of each business.
In some instances, arrangements can be made with individual creditors. If the creditor pressure is broadly based, making individual settlements may not be practical. Surprisingly, a carefully worded letter from counsel, explaining the circumstances and proposing either a moratorium on debt payments or discounted settlements to all trade creditors, may be accepted by the overwhelming majority. In some circumstances, particularly in larger businesses in which there are concentrated creditor bodies, groups of creditors may combine to form an informal committee to negotiate a settlement with creditors.
Many — indeed, maybe most — Chapter 11s being filed in recent years are not true reorganizations; instead, they result in sales of the company’s business as a going concern. Again, while there may be reasons to sell a business through the bankruptcy process, there are non-bankruptcy alternatives to a court-supervised sale.
Chief among these are assignments for the benefit of creditors. These are non-judicial business liquidations conducted under Massachusetts law. Management can choose the assignee, usually an attorney with bankruptcy and collection expertise. The assignee conducts his or her due diligence to ensure that the sale transaction is a fair disposition of the assets, and that there will be at least some meaningful dividend to unsecured creditors.
The assignee has wide latitude in how the sale will take place; while it can be by auction, he or she can also sell the assets as a going concern, which may contain terms favorable to management, such as employment agreements.
Once the assets are sold, the assignee notifies all creditors and provides them with a form for submitting their claims. If sufficient numbers of creditors accept the assignment, the assignee then makes a distribution to creditors. Again, the benefit to trade creditors is that they receive partial payment on their claims far more quickly than would be the case in liquidation proceedings in bankruptcy court.
Ultimately, Chapter 11 is like any other legal strategy; it may be useful, but only in the right circumstances, and only after other, less costly alternatives are considered.

Attorney Steven Weiss is a partner with Springfield-based Shatz, Schwartz and Fentin. He concentrates his practice in the areas of commercial and consumer bankruptcy, reorganization, and litigation. Weiss supervises the firm’s bankruptcy, reorganization, and workout practice; represents creditors, debtors, and others in both commercial and consumer bankruptcy cases throughout Massachusetts; and has been a member of the private panel of Chapter 7 Trustees for the District of Massachusetts since 1987, and also serves as a Chapter 11 trustee; (413) 737-1131.

Opinion
America’s Revival Begins in Its Cities

During economic downturns, we begin to fear that we are entering a permanent period of decline. But we can avoid that depressing prospect if we recognize that a revival will not come from federal spending or another building boom. Reinvention requires a new wave of innovation and entrepreneurship, which can emerge from our dense metropolitan areas and their skilled residents. America must stop treating its cities as ugly stepchildren, and should instead cherish them as the engines that power our economy.
America’s 12 largest metropolitan areas collectively produced 37% of the country’s output in 2008, the last year with available data. Per-capita productivity was particularly high in large, skilled areas such as Boston, where output per person was 39% higher than the nation’s metropolitan average. Boston also seems to be moving past the current recession, with an unemployment rate well below the national average of 9.8%.
Since 1948, the national unemployment rate has exceeded 9% only one other time: the grave 1982 recession. During the 1980s, we looked at Japan and saw an economy that seemed to be surpassing our own. Today, we watch with unease as China surges.
Yet American decline is not inevitable. During the 25 years after 1982, our real gross domestic product increased by 3.3% per year, which was also the rate of growth during the quarter-century before 1982. Our post-1982 growth involved massive economic restructuring. Manufacturing employment fell by 39% from its peak of 19.4 million jobs in 1979. The 1979-2009 manufacturing decline was more than offset by the 126% employment jump in professional and business services and the 184% increase in education and health jobs.
Boston offers a model of how cities can foster such transformations. In the 1970s, Boston seemed headed for the trash-heap of history. Manufacturing jobs had vanished, and social chaos ensued. But Greater Boston experienced three great decades, as a former industrial hub became a capital of the information age.
To succeed in the future, the country needs to produce a stream of new ideas, like personal computers, Facebook, and steerable catheters. We must produce goods and services innovative enough to command the high prices needed to cover high labor costs.
Such breakthroughs rarely come from solitary geniuses. The movie The Social Network hints at the messy, interactive process that created Facebook, which now has over 500 million users and is valued at about $40 billion. Mark Zuckerberg benefited from being surrounded by smart peers, whose ideas about social networking helped his company get started.
The roots of Boston Scientific reveal a similarly collaborative process that started in the basement of a Belmont church. The brilliant inventor (and spiritualist) Itzhak Bentov created a steerable catheter, catering to the demands of Boston’s medical community. Boston connected Bentov with John Abele, who brought his business vision and later connected Abele with other partners, who helped him create a medical-innovation behemoth.
Cities have long enabled economic creativity. Detroit in 1900 looked a lot like Silicon Valley in the 1960s, with an entrepreneur on every street corner. In that urban hotbed, innovators like Ford, Buick, and the Fisher Brothers supplied and financed each other — and borrowed ideas freely. The urban edge in engendering innovation explains why globalization and technology have made cities more, not less, important. While all workers in the Boston area benefit from the region’s human capital, the flow of knowledge seems strongest in the dense clusters of Boston and Cambridge.
For decades, the American dream has meant white picket fences and endless suburbs. But the ideas created in dense metropolitan areas power American productivity. We should reduce the pro-home-ownership bias of housing policies, such as the home-mortgage-interest deduction, which subsidize suburban sprawl and penalize cities. We should rethink infrastructure policies that encourage Americans to move to lower-density environments. Most importantly, we should invest and innovate more in education, because human capital is the ultimate source of both urban and national strength.
As we grope toward a brighter future, we must embrace our cities, and invest in the skills that are central to their success.

Edward L. Glaeser, a professor of economics at Harvard, is the author of the forthcoming book The Triumph of the City.

Company Notebook Departments

Law Firm Named to ‘Top Tier’ List
SPRINGFIELD — Sullivan Hayes & Quinn was recently named a Top Tier Employment Management Firm by Best Lawyers and U.S. News and World Report. Managing partner Meghan Sullivan noted that the law firm was among 8,782 firms from across the country to be recognized. The local law firm specializes in employment-management issues, including labor relations, risk avoidance, workplace regulation, and employment litigation.

Appledore Engineering Joins Tighe & Bond
WESTFIELD — A New Hampshire civil-engineering firm has joined forces with Tighe & Bond, a engineering and environmental consulting service in the city. The move will enable Appledore Engineering to expand its service offerings and will also provide Tighe & Bond more opportunities for expansion into the New Hampshire and Maine markets. Appledore Engineering will remain at its Portsmouth location and do business as Appledore Engineering, a division of Tighe & Bond.

CHD, Cancer House of Hope Announce Merger
SPRINGFIELD — The Center for Human Development (CHD) and Cancer House of Hope recently announced a merger between the two nonprofit agencies. The CHD Board of Directors and Cancer House of Hope Board of Trustees both approved the merger late last year. It became effective Jan. 1. Cancer House of Hope operates two houses, one in Westfield and one in Springfield, that offer free support groups, workshops, and classes to adults with cancer and their family members and friends. Cancer House of Hope is now a program of CHD in its Community Resources division. Cancer House of Hope’s events, activities, and services will continue without interruption, and the agency’s two full-time and one part-time employee are now employees of CHD. Cheryl Gorski, executive director of Cancer House of Hope, noted in a statement that, “given the economy, it was getting more and more difficult to keep things running.” Gorski will continue to manage the program as its director. Gorski added that “merging with CHD will give us access to more resources for development, marketing, and support.” Founded in 1997, Cancer House of Hope has an annual operating budget of about $235,000, all of it coming from donations, grants, and fund-raising events, such as its upcoming, third annual Cheeseburger in Paradise Bar-B-Que at the Cedars in Springfield Feb. 19. Cancer House of Hope serves approximately 260 people a month at its two locations: 86 Court St., Westfield, and 946 Plumtree Road, Springfield. In addition to its three staff, Cancer House of Hope also contracts for services with 12 per-diem counselors and depends on about 50 volunteers, who help run the homes and activities. Gorski said she reached out to CHD President and CEO Jim Goodwin last August about the possibility of a merger. Gorski noted, “It made sense to help us get to the next level of what we can offer our members. I’m very enthusiastic about it. I think it’s a great thing for us.” Goodwin said that merging with a high-quality agency like Cancer House of Hope furthers CHD’s mission of offering community-oriented services in a way that helps protect people’s dignity. Goodwin noted that everyone knows someone who has been touched by cancer. He added that the programs and services Cancer House of Hope offers “are just too important to risk losing.” Those programs and services include yoga, Reiki, wig fittings, and bereavement-support groups, among many others. While the two homes are open to anyone regardless of residency and need, they mostly serve people who live in Hampden County and Northern Conn. For a list of Cancer House of Hope programs and services, visit www.cancerhouseofhope.org. Founded in 1972, CHD is a family of more than 40 programs that deliver a wide range of social services in communities throughout Western Mass. and Northwestern Conn. in areas such as mental health, youth mentoring, family stabilization, foster care, early intervention, elder care, occupational therapy, intellectual and physical disabilities, homelessness prevention, substance abuse, and juvenile justice. CHD’s main office is located at 332 Birnie Ave., Springfield. For a list and description of programs and services, visit www.chd.org.

United Bank Supports United Way Campaigns
WEST SPRINGFIELD — United Bank recently announced its annual United Way employee campaign generated more than $52,000 in contributions to United Way organizations located in the bank’s service area. The bank ran campaigns at all 22 branches located throughout Western and Central Mass. The 2010-11 employee campaign surpassed last year’s level of participation and giving to the United Ways of Pioneer Valley, Hampshire County, and Central Massachusetts. In addition, the United Bank Foundation contributed $36,000 to the campaign for a combined gift of $88,118.

MassMutual Explains Roth Retirement Plan Conversions
SPRINGFIELD — As part of its commitment to educate participants, plan sponsors, and advisers, MassMutual’s Retirement Services Division has published a white paper titled “Roth Retirement Plan Conversions — Questions and Answers.” The document answers the most common questions around converting 401(k), 403(b), and, starting this year, 457(b) governmental plans into Roth accounts. Effective last fall, the Small Business Jobs Act of 2010 allows participants who are in a retirement plan that offers Roth accounts the ability to convert or roll over their non-Roth account balances into a Roth source under the same plan, provided the participant has a distributable event (i.e., termination of service or in-service withdrawal provision, excluding hardship). For more information, visit www.massmutual.com.

Agency Offers Mobile Marketing Services
AGAWAM — The Creative Strategy Agency has started offering mobile marketing services including mobile Web sites, short-message service, and tablet and mobile applications for businesses. Alfonso Santaniello, CEO and president, noted in a statement that he wanted to take the agency’s marketing services “to a new and innovative format.” Santaniello added that mobile applications have “grown significantly” in the past year, and that he expects that trend to “continue to grow in the years to come.” For more information, visit www.creativestrategyagency.com.

Big E Plans $2.2M
Equine Arena
WEST SPRINGFIELD — Wayne McCary, president and CEO of the Eastern States Exposition, recently announced that the organization will embark on a $2.2 million construction project to build a covered warm-up arena attached to its C-Barn, the main horse barn used by the ESE Horse Show conducted during the Big E as well as a number of year-round equine events. Exposition officials vowed to continue their commitment to agriculture and the horse show by further developing infrastructure to maintain ESE’s position as New England’s most-sought-after equine destination. McCary noted in a statement, “I am confident that this project will further solidify the exposition’s position as the premier horse show facility in the Northeast. Our commitment to agriculture and our horse show, which began here in 1916, is ongoing.” The Exposition is also home to 12 year-round horse shows as well as a major equine-related trade show, Equine Affaire, held each November. The new arena will match the height of the existing building, and the 66’ x 170’ clear span outdoor roof will be bordered by a four-foot brick perimeter wall with pre-cast concrete upright posts. The exterior of the structure will mirror the north wall of the existing barn, and its walls will consist of a permeable vinyl designed to protect riders and horses from the elements while providing air circulation and ventilation. Each end of the covered arena will feature 20-foot ornamental iron sliding gates. Riders will be cooled by 16’, low-speed, high-volume fans. New lighting will be installed, and the riding arena will have spray irrigation and underground drainage. An existing angled doorway will be enlarged to 12’ x 14’ so riders may enter and exit the ring on horseback, and the immediate exterior area will also be covered. The project is the result of an extensive study of ESE facilities, conducted in 2010 to assess the needs of existing tenants and look toward future year-round growth. The research included a major engineering study of the Coliseum by Populous of Knoxville, Tenn., and a marketing analysis by AECOM of Washington, D.C. The Exposition will assume financial responsibility of the project and will receive no funding from the state. In addition, its 2011 capital budget of more than $1.1 million will include the installation of a new roof and other major improvements to the Coliseum. F-Barn, an auxiliary barn with 100 horse stalls located in the southwest corner of the fairgrounds, will also receive a new, upgraded metal roof. McCary noted, “we are investing in our future to maintain our roots and stay viable in an ever-changing marketplace.” The design architects for the project are Charlie Smith and David Forkner of Populous, in Knoxville. Neffinger Architects, of West Springfield, will serve as the architect of record. This winter, contractors will be selected, and construction will begin at the end of March. The project will be completed in time for the 2011 Big E, planned for Sept. 16 through Oct. 2.