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Warning Signs

John Regan

John Regan says Associated Industries of Massachusetts (AIM) recently surveyed a cross-section of its members regarding the economy, the direction they believe it will take, and the steps they are themselves taking as a result.

Roughly 75% of those surveyed anticipate an economic contraction before the end of 2020, and a sampling of the gathered remarks hints strongly at an undercurrent of caution, if not outright concern:

• “Scaling back on hiring plans; slowing down certain capital expense/equipment purchases until we get a clearer picture of what the next six months will bring.”

• “Concentrating on expense reduction … evaluating closely the need to replace positions.”

• “Diversifying our service options.”

• “We have temporarily eliminated overtime, which was formerly unlimited.”

Slicing through all that, Regan said AIM’s members are looking at the conditions, gauging how they will effect things short-term and long-term, and, by and large, deciding not to take on too much until the picture becomes much clearer.

And, as the organization’s new president and CEO — he took the helm in May — he is essentially advising the state to do the same.

“A possible takeaway from the survey for state policymakers as they begin considering billions of dollars in new spending is this could be a difficult time ahead for the state economy,” Regan told BusinessWest. “Businesses are assuming a defensive posture, and significant tax increases — beyond the $1 billion for the new paid family and medical leave system — even for worthwhile causes, could harm the overall economy, most especially the manufacturing sector.

“This might not be the time to really go all in on lots of different tax proposals,” he went on, listing everything from new spending initiatives to the so-called ‘millionaires’ tax,’ a step he believes will pose dire consequences for the Commonwealth. “Legislators should do what our members who answered the questions are doing — delaying their ambitious agenda and letting the things they’ve already done take their course and put some away for a rainy day.”

Passing on members’ concerns about the economy and urging caution when it comes to business-related legislation are two of the many lines on the job description for AIM’s president, said Regan, who moved to the corner office after a dozen years as AIM’s executive vice president of Government Affairs and almost two decades with the agency in that realm.

Another line on that job description involves presiding over annual ceremonies such as the one staged earlier this month at Wistariahurst in Holyoke, at which three area companies — MGM Springfield, American Saw, and Peerless Precision — were presented with Next Century and Sustainability awards for their efforts in creating the next era of economic opportunity for state residents.

A few hours before that ceremony, Regan sat down to talk with BusinessWest about a variety of topics, including his appointment, the state of AIM and its 3,500 members, and even his thoughts on how to achieve more balance between east and west in the Commonwealth.

But the condition of the economy and the results of that aforementioned survey soon dominated the conversation.

Regan noted that, overall, the state’s economy continues to expand, albeit at a slower pace than earlier in the year. Meanwhile, AIM’s Business Confidence Index, generally a reliable barometer of economic conditions, remains in optimistic territory (58.9), although it has lost nearly four points over the past 12 months. Unemployment remains low (2.9%), and private employers created nearly 7,000 jobs between August 2018 and August 2019.

Still, there are some ominous warning signs of a recession, and a number of businesses are already starting to feel the effects of tariffs and other federal and state measures, said Regan, adding that these businesses are starting to play defense — and the state should do the same.

Background — Check

If Regan seems to know his way around the State House — in every sense of that phrase — it’s because he does.

Indeed, before coming to AIM, before serving as vice president of Operations for MassDevelopment and leading its efforts to repurpose Fort Devens, before directing the Massachusetts Office of Business Development (MOBD) for five years, and even before serving as chief of staff to the mayor of Marlboro, he worked in the State House, first as a researcher on the Joint Committee on Banks and Banking, and then as a special assistant to the House Ways and Means Committee.

“I started out on the constituent side, and quickly moved to the policy side,” he said of his work with the Legislature. And, on many respects, he has remained on the policy side ever since.

When asked how he went from working for the state to becoming an advocate for its business community, Regan said there’s a story there. It involves the former Lunt Silversmith (an AIM member) in Greenfield, he recalled, adding that, as director of MOBD, he was asked to help convince the state Highway Department to put up signs that would direct motorists to the company’s new showroom facility. Long story short, he played a big role in getting the signs up.

“AIM was so impressed that state government actually got something done that they asked if I would consider joining the agency and its Government Affairs Department,” he recalled. “At the time, I wasn’t really looking, but I knew AIM from my days at the State House — it was a well-respected group and well-regarded in the building — and I thought this was a good opportunity for me.

“I never wanted to be a lobbyist in that sense that you’re out chasing clients to represent individually,” he went on. “The opportunity to come to AIM represented a chance to use my relationships in the building, but not lobbying for individual clients; at a 3,500-member organization, you’re working on policy, not just individual company issues.”

And over the years, he has advocated for members on issues ranging from unemployment-insurance reform to non-compete agreements; from pay-equity law changes to paid family and medical leave.

Since taking over as president and CEO, Regan said he spent much of the first several weeks focusing largely on internal matters, including membership, marketing, finances, technology, and hiring his successor in Government Affairs — Brooke Thomson, formerly with AT&T.

“I wanted to make sure I understood the parts of AIM I never really had to worry about as head of Government Affairs,” he noted. “And part of what the board charged me with was coming up with an operational plan for the balance of 2019 through 2021.

“It’s not a strategic plan,” he went on, “but just making we’re able to explain what we thought we could do and should do, and get that on paper and in front of the board.”

Reading the Tea Leaves

These days, though, he’s more focused on the Commonwealth’s businesses, the uncertain state of the economy, and policy matters, such as helping to secure a three-month delay in the start of payroll deductions to fund the program.

Returning to that recent survey of members, Regan said it is quite revealing and clearly depicts both the concern felt by business owners and their commitment to act responsibly, and defensively, in such a climate.

“They’re doing the things you might expect,” he noted. “They’re saving money versus investing it, and they’re only doing capital projects that have a very swift return on investment. They’re looking for additional, profitable product lines that might allow them to weather the storm. But mostly, they’re thinking ahead and being ready.”

And this is the mindset Regan believes both the federal and state governments should embrace given both the current conditions and the possibility, if not likelihood, of a recession in 2020.

With the former, Regan noted that tariffs and the trade war are already taking a steep toll — on manufacturing but also other sectors of the economy, including agriculture — and the threat of more such actions loom large over the state and the region.

“Uncertainty around trade, in particular, grows by the day,” he said. “It seems like every day you wake up and there’s another round of tariffs. One of our longest members is Ocean Spray cranberries, and they’re getting killed by tariffs.”

As for the State House, Regan said lawmakers there should consider the current economic conditions and the threat of recession as they ponder additional mandates and taxes, including what is known officially as the Fair Share Amendment, but has been dubbed the millionaires’ tax.

That name conjures up thoughts of rich people sitting on a beach, he told BusinessWest, but the reality is that most of those who would be impacted by this measure, which would impose a 4% income-tax surcharge on annual income beyond $1 million, are business owners, as in the small to medium-sized business owners who dominate the state’s economy and especially the Western Mass. economy.

And recent research, including an in-depth report by Bloomberg News, shows that individuals hit with such taxes often leave for safer havens, taking their income with them, he noted.

“Bloomberg found that Connecticut, New York, and New Jersey face the largest financial drains from the 5 million Americans who move from one state to another each year,” AIM wrote in a recent blog post, citing other states that had passed taxes on high earners. “Connecticut lost the equivalent of 1.6% of its adjusted gross income, according to Bloomberg, because the people who moved out of the Nutmeg State had incomes that were 26% more, on average, than those people who moved in.”

Regan agreed, and said these numbers paint a grim picture and present a competitive disadvantage for the Commonwealth, one the Legislature should consider as it moves closer to joining other states in enacting such measures.

“I love it when elected officials roll out statistics that show ‘30 states do this’ or ‘20 states do that,’” he said. “We can tell them we have a whole list of states that have tried the wealth-tax approach, and it’s bombed, and they say, ‘well, that’s different.’

“How is it different?” he went on. “How are we not going to experience the same things that they’ve experienced?”

Bottom Line

Returning to that survey of AIM members, a few of the business owners polled expressed confidence about riding out what appears to be a storm on the horizon.

“We think we’ll be immune from the contraction,” wrote one, while another said, “our industry is counter-cyclical; when the economy contracts, our industry usually receives a boost.”

Those sentiments don’t apply to most businesses, certainly, and Regan knows that. And that’s why AIM’s new president and CEO is working hard to convince lawmakers to do what his members are doing — what’s best for business and what’s best for long-term economic health.

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

Community Spotlight

Community Spotlight

Diana Schindler

Diana Schindler says it’s key for Deerfield to balance the town’s rural character with needed economic growth.

Deerfield boasts numerous draws for businesses looking to relocate, Diana Schindler says, from its reasonable property-tax rate to its proximity to Interstate 91, Route 116, and Routes 5 and 10.

But there’s also been some pushback against some of those businesses, which reared its head when residents recently spoke out against a proposed Dollar General store in town. The Planning Board listened and turned down the project, said Schindler, Deerfield’s interim town administrator.

“There’s been a feeling in the community that they want that at arm’s length — that big-box retail development, drive-thrus, things they don’t feel are part of the culture of old Deerfield. It’s meaningful to them,” Schindler told BusinessWest.

“On the flip side, it creates more of a burden on the residential tax base,” she went on, noting that more than 80% of the town’s tax base is residential. “There’s a cost to the citizens in their tax rate and the sustainability of that tax rate. Deerfield has always readily paid for the level of service its citizenry wants and expects, but at the expense of not doing some major projects.”

For instance, the town is looking at a $1 million cost to replace a tank at the South Deerfield Wastewater Treatment Plant, which is only the tip of the iceberg when it comes to needed work at the facility over the next decade or two. Then there are plans to expand the Tilton Library and develop a shared senior center with surrounding communities.

“Seniors are asking for that. But all this adds up to millions of dollars, and you have the pressure of limiting development — or, rather, wanting development that will fit into the culture, which does limit it to some capacity,” Schindler said. “Less than 20% of the tax base is commercial/industrial, which is not a lot considering the viability of the property we have along 5/10 and a couple other areas. It’s going to become a question for the citizenry — is it sustainable?”

She’s one of many in Deerfield who believe economic development — in whatever form residents may want — is critical to the future of a town known for its tourist draws, including Yankee Candle’s flagship store, Mount Sugarloaf, Historic Deerfield, and Magic Wings, but needs to diversify and broaden its commercial portfolio.

“At first, they wanted to hide it, put it on the outskirts of town, but now they want it close to downtown. And that’s where it should be — take it out of the shadows, take it away from the edge of town where people can just pop in and leave. Bring them in and use it for economic development.”

“The ideal would be to get everybody together and integrate it all. We’re spread out geographically, and there’s a dichotomy between Old Deerfield and South Deerfield. We’re working toward making sure the town is the town, and everybody recognizes that if the town does well and comes together, then all of the components, all of our events, could do better.”

A veteran of the Franklin Regional Council of Governments and the Hampshire Council of Governments, Schindler has some regional government experience, and she believes there’s value in taking a regional view of economic development. But she’s more concerned with Deerfield’s residents, agencies, and organizations working together to forge a common vision for community development.

“If we could come together,” she said, “especially as we come to our 350th-anniversary celebration, we could build energy off of each other.”

Forging a Path

That celebration rolls around in 2023, which should be enough time, Schindler said, to see some real development progress in town, particularly in the Elm Street corridor, the main commercial area in South Deerfield.

Town leaders know that to attract new businesses — in hospitality and other sectors as well — they need to make the downtown area more inviting and pedestrian-friendly, and they’re eyeing a host of potential improvements in the Elm Street center, which may include work on sidewalks, lights, and storefronts.

For a year before taking on her current role last month — one she is interested in pursuing on a permanent basis — Schindler was a special projects consultant in town, and one of the big projects she embraced right away was Complete Streets, mostly geared toward the South Deerfield center.

South Deerfield center

Town leaders see plenty of potential in the South Deerfield center corridor.

“We’re in the process of putting that plan together. We want to create more walkability, more accessibility, and that includes for folks in wheelchairs, people with children, people of all abilities,” she said. “We’re also looking at ways to make South Deerfield’s center more aesthetically pleasing — light it, put in streetscapes, put in wayfinding, finish the municipal parking lot we have down there; all that is being discussed as part of the plan. We want it to stay a viable downtown.”

The area is not particularly expansive, she pointed out, spanning just a few blocks, but in some ways, that presents a more enticing opportunity, by ensuring that development and improvement efforts are tightly focused. There’s some land-use complexity as well, as the Massachusetts Department of Transportation owns a small part of the corridor, and the state owns Conway Street, home to Town Hall.

“But that’s an opportunity,” she said, “because the state is also excited about Complete Streets, and we could see a wonderful economic center down here, which I’m sure the state would support in a variety of different ways.”

The downtown has seen some business change recently, with longtime restaurant Jerry’s Place closing last year, and a café called Leo’s Table setting up shop in the location, with proprietor Jennifer Howard specializing in made-from-scratch breakfast and lunch fare. The building itself — which is also home to Ciesluk’s Market, Giving Circle Thrift Shop, the Tavern, and a Subway sandwich location, as well as 19 apartments on the second floor, has new owners, Jason Kicza and Justin Killeen, who plan to touch up the property this spring.

“I would consider that the anchor building on that side,” Schindler said, “and it’s doing great.”

Cumberland Farms’ move from South Deerfield’s center to the main road — specifically, the corner of Elm Street and Routes 5 and 10 — may not have been as great for the downtown’s prospects.

Deerfield at a Glance

Year Incorporated: 1677
Population: 5,400
Area: 33.4 square miles
County: Franklin
Residential and commercial Tax Rate: $16.34 (Deerfield), $18.14 (South Deerfield)
Median Household Income: $74,853
Median Family Income: $83,859
Type of Government: Open Town Meeting
Largest Employers: Yankee Candle Co., Pelican Products Inc.
* Latest information available

“They have a bigger business down on the corner, but it’s not necessarily a draw into the center; now people can just pop into Cumby’s for gas and keep going,” she said. “So we are looking at ways to basically create more stability in the center of South Deerfield by doing a variety of things. Obviously, part of that is keeping businesses and attracting more businesses.”

These days, the corridor can be oddly empty at certain times of the day, she noted, but well-trafficked during morning and evening rush hours. The goal, she told BusinessWest, is to turn it into a pedestrian-friendly center at all hours, rather than a thruway.

The Complete Streets plan will be a big part of that. By the time the 350th rolls around, she’d like to see significant physical and infrastructure improvements to make the downtown more of a destination. “The sidewalks will look different, maybe more green space, and hopefully we’ll see more people down there.”

High Times

Like many area communities, Deerfield has embraced the burgeoning cannabis industry in Massachusetts, recently approving two site plans, one for a cultivation facility at Pioneer Gardens on Mill Village Road, and the other for a dispensary run by Harvest Inc. on State Road.

“The culture has changed,” Schindler said, noting that, when communities were first exploring the economic possibilities of marijuana businesses, many Deerfield residents — most of them older — were staunchly opposed. But that opposition has died down to a large degree in many towns, to the point where communities might begin to locate such businesses in more central areas.

“At first, they wanted to hide it, put it on the outskirts of town, but now they want it close to downtown. And that’s where it should be — take it out of the shadows, take it away from the edge of town where people can just pop in and leave. Bring them in and use it for economic development.”

Meanwhile, Schindler and other Deerfield leaders will continue to think outside the box — even if big boxes aren’t in the cards — by examining where pockets of land already devoted to commercial and industrial businesses might have some infill potential, and continue to take pressure off the residential tax base.

“The thing I think is so tremendous about Deerfield is the huge opportunity it offers,” she said. “It’s wide open, and it’s got resources — financial resources, natural resources, culture, art, access to main roads. I get excited about it.”

Joseph Bednar can be reached at [email protected]

Opinion

Editorial

A year ago this time, we were writing how the pieces would soon start to fall in place for Springfield and this region as a whole and how there would be the start of a snow-ball effect regarding the city and heightened interest as it as a place to live, work, and invest in.

Well, 12 months later, the snowball is starting to take on some size and move at a pretty good clip, making the outlook for 2019 considerable bright locally, even as the picture nationally is becoming increasingly clouded by question marks (see related stories beginning on page 16).

In a way, there are two stories when it comes to the economy: nationally, there is considerable apprehension regarding a slowdown — what’s happening in Wall Street is a perfect example — even though most economic indicators, everything from unemployment rates to demand loans, remain solid.

It will be up the Fed, as well as investors and other constituencies, to sort things out at an intriguing time, when there is growth and doubt — both in very large quantities.

Meanwhile, locally, the region, and especially Springfield, seem to be on the cusp of something momentous, maybe even historic.

Those quoted in the stories comprising the Economic Outlook 2019 section speak of not merely optimism (there’s been lots of that over the years), but interest and activity. Tourism officials talk of rising occupancy rates and hotel-room rates and interest in developing new hotels. Meanwhile, commercial real-estate brokers and managers talk of interest in this market that they haven’t seen in decades — if ever.

Investors are looking at sites for everything from housing developments to cannabis dispensaries and everything I between.

It’s not as simple as ‘if you build it, they will come,’ but in many ways it is.

And what we’re building is a vibrant, livable, accessible city (and region) that people and businesses want to be part of. We have a long, long way to go, but more of those aforementioned pieces are falling into place, and more should come in the next few years.

MGM Springfield was certainly a big piece. It brought jobs, foot traffic, and interest in Springfield from people who might have had to look at a map or rely on the GPS system in the car to find it.

But there are many other pieces as well: Union Station and enhanced rail service are making it easier to get to the city; renovation of Stearns Square, Riverfront Park, and other facilities will make Springfield more livable; businesses and institutions moving into the downtown and investing there are prompting others to consider following suit; and an improved police presence is contributing to less apprehension about public safety — not to mention the many colleges now populating downtown, the ongoing remaking of Tower Square (White Lion Brewery will soon be moving in), the cannabis industry, and more.

When things like this start to happen, a city becomes more saleable as a place to live, and we’re seeing considerable interest in development of market-rate housing in and around downtown.

And when more people start to make the city their home address, more businesses — more restaurants, more clubs, some cannabis dispensaries, and more service-related ventures — will follow.

And then more people will want to relocate here, and more businesses will follow. That’s the theory, and in practice — and in some cities, like Cambridge, Lowell, and others — it works.

Will it work here? Perhaps. The signs are there. The pieces are falling into place, and the snowball is starting to take on size.

If 2018 was a year to build some momentum, then 2019 will be a year to capitalize on it. Big time.