Business Pulse Magazine: Winter 2014 by Business Pulse magazine

WBA Health Care Breakfast, Feb. 26

Lewis Family 100 Years at The Tribune

MAGAZINE Winter 2014

Big Industry at

Barry Hullett, plant manager Alcoa Intalco Works

Cherry Point

Fuels jobs, charity and tax base $15 minimum A Good 2014 Economic wage

Forecast:

Business Confidence Rises

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Obamacare... The train is officially off the track

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Table of Contents

12 Cover Photo Barry Hullett, plant manager, stands between two pot lines at Alcoa Intalco Works, an aluminum smelter between two oil refineries at Cherry Point. We examined the region’s only area zoned for heavy industry for perspective on an economic force like no other in Whatcom County.

Cover Story: Cherry Point

With three mammoth corporate brands—Alcoa, BP, Phillips 66—out there generating gazillions in commodities daily, the invaluable deep-water port and land mass at Cherry Point totally rocks Whatcom County’s world. For perspective on this foundation of the region’s economy, we interviewed lead management at each facility and revealed all the many ways that heavy-industry area represents a heavyweight champion of life in its community, and beyond. (Aerial view courtesy of Phillips 66 Ferndale Refinery)

(Photo by Mike McKenzie)

Business Expansion

NW SKY FERRY

“The Multiplier Effect” is a popular phrase in economics, and Mills Electric—an iconic Bellingham business for 100-plus years— provides a shining example. For every job at the oil refineries in Washington, it leads to 13 other related jobs. This year, with three new contracts with BP, Phillips 66, and Tosoro, Mills will add around 70 six-figure jobs.

What if you could catch a plane on your schedule, and not on the airlines’? Hmmm. Good idea, thought Katie and Skip Jansen, and they purchased a commuter airline thriving on quick $49 island-hop fares, and take-offs tailored to fit the customers’ circumstances. And how about ‘pool’ fares, too?

ECONOMIC FORECAST 2014: ‘Four!’

“Welcome to the new normal.” That’s a mantra from national analyst/financial advisor Jim Paulsen from Wells Financial, explaining how 2014 looks a lot like 2013 that looked a lot like 2012—about 3 percent growth, rather than the old normal of 8 percent in recovery from recession. We sampled a cross-section of Whatcom leaders to chart their optimism index for the economy in ’14 (on a 1-to5 scale), and pulled out several for you to hear what they said. Sounds like a golfer’s warning shout.

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Barlean’s Organic Oils in Ferndale celebrates its 25th anniversary in flaxseed and fish oil Omega 3 (and other) health supplements this year, built upon a framework of 14 family members. Mom and Dad helped Bruce Barlean start it, Karen Barlean earned Business Woman of the Year recognition in 2013, and the international market is about to explode for more growth.

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Table of Contents

FROM OUT OF THE BLUE

A three-year sailing trip from California to the Far East provided inspiration for Scott Renne to start a business creating highestquality, lifetime-guarantee electrical parts for boats. With Blue Sea Systems, 22 years and 74 employees and $25M in annual sales later, Renne is flying high –figuratively and literally (air acrobatics).

THAT CRASH YOU HEAR

It’s the sound of the runaway train known commonly as Obamacare, derailing as predicted by a U.S. senator a long while back. We’ve examined the fallout, much of it dire in nature, through case examples presented by businesses and individuals alike who are wincing over what just hit them, and what still lies ahead.

COLUMNISTS: THE $15 QUESTION…

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And much more. Each edition we enjoy keeping you abreast of government goingson through contributors from the Washington Policy Center. Erin Shannon, who specializes in small business, shows the dark side of a $15/hr minimum wage that could hammer Whatcom County. Dr. Roger Stark weighs in on Obamacare, and Todd Myers on Puget Partners. Life in the Tech Lane is back, plus a look at Bellingham Airport by Port Commissioner Mike McAuley.

Managing Editor: Mike McKenzie

Cover Photo: Mike McKenzie

Graphic Designer: Michelle Manson

Photography: Steve Hortegas Sherri Huleatt Lydia Love Michelle Manson Mike McKenzie Tara Nelson

Feature Writers: Pamela Bauthues Steve Hortegas Sherri Huleatt Lydia Love Tara Nelson Cheryl Stritzel McCarthy Special Contributors: Big Fresh Don Brunell Tony Larson Michael McAuley Todd Myers Erin Shannon

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Living United

The United Way of Whatcom County uses a workplace donations model to distribute funding for solutions-based programs such as pre-Kindergarten literacy, in addition to supplementing budgets for a large list of other nonprofits.

PERSONALLY SPEAKING

Michael Lewis takes his family’s community newspaper legacy to its 100th-year anniversary in 2014 with perhaps the two oldest businesses in Whatcom County—The flagship Lynden Tribune (1884), and the Ferndale Record (1885). Lewis speaks out on the future of Lynden and the newspaper and printing business.

M A G A Z I N E The Publication of The Whatcom Business Alliance

Courtesy Photos: Alcoa Intalco Works Blue Sea Systems BP at Cherry Point Phillips 66 Ferndale Refinery David Wing

Ad Sales: Coni Pugh Catherine Sheard Randall Sheriff Subscriptions: Janel Ernster Administration: Danielle Larson

For editorial comments and suggestions, please write editor@businesspulse.com Business Pulse Magazine is the publication of the Whatcom Business Alliance. The magazine is published at 2423 E. Bakerview Rd., Bellingham, WA 98226. (360) 671-3933. Fax (360) 671-3934. The yearly subscription rate is $20 in the USA, $48 in Canada. For a free digital subscription, go to businesspulse.com or whatcombusinessalliance.com. Entire contents copyrighted © 2014 – Business Pulse Magazine. All rights reserved. POSTMASTER: Send address changes to Business Pulse Magazine, 2423 E Bakerview Rd., Bellingham, WA 98226.

WHATCOMBUSINESSALLIANCE.COM | 7

Troy Muljat Owner, NVNTD Inc. Managing Broker, Muljat Group

Jane Carten President/Director Saturna Capital Corp.

Board Chair Jeff Kochman President/CEO Barkley Company

Doug Thomas President / CEO Bellingham Cold Storage

Marv Tjoelker Partner/CEO Larson Gross PLLC

Dave Adams, President Emergency Reporting

Randi Axelsson, Sales Manager Silver Reef Hotel, Casino & Spa

Pam Brady Director, NW Govt. & Public Affairs, BP Cherry Point

Janelle Bruland President / CEO Management Services NW

Bruce Clawson Senior VP, Commercial Banking Wells Fargo

Scott Corzine Major Accounts Executive, Puget Sound Energy

Kevin DeVries CEO Exxel Pacific, Inc.

Greg Ebe President/CEO Ebe Farms

Andy Enfield Vice President Enfield Farms

John Huntley President / CEO Mills Electric, Inc.

Sandy Keathley Previous Owner K & K Industries

Paul Kenner Executive VP SSK Insurance

Bob Pritchett President & CEO Logos Bible Software

Brad Rader Vice President/General Manager Rader Farms, Inc.

Not Pictured: Guy Jansen, Director Lynden Transport, Inc.

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Becky Raney Owner/COO Print & Copy Factory

Jon Sitkin Partner Chmelik Sitkin & Davis P.S.

WBA, 2423 E. Bakerview Rd, Bellingham, WA 98226 â&#x20AC;˘ 360.671.3933

WHATCOMBUSINESSALLIANCE.COM | 9

LEADING OFF Tony Larson | President, Whatcom Business Alliance The Whatcom Business Alliance is a member organization made up of businesses of every size and shape, from every industry. The WBA enhances the quality of life throughout Whatcom County by promoting a healthy business climate that preserves and creates good jobs.

Welcome to 2014:‘The New Normal’

ow optimistic are you about 2014? The Whatcom Business Alliance followed up its Economic Forecast Breakfast in November with a survey to a large number of Whatcom County leaders to find out how they felt about the future. Business and consumer confidence about the future is a key economic indicator.

Interestingly, while many responders to the survey were generally not optimistic about the overall economy, the majority were optimistic about the growth of their own organizations. The average response on a scale of 1 lowest-to-5 highest on our Optimism Index was 3.325— guarded optimism. Many responders had the same mindset that I had printed on the back of 250 T-shirts for aspiring Bellingham Bells in a youth baseball camp a number of years ago: “If it is to be, it’s up to me.” I think my son still has that shirt. What local leaders seem to be thinking is that it’s time to kick tail, regardless of any uncertainty they may be concerned about. In this issue, we highlighted 14 leaders from a mix of industries, organizations, and the public sector and provided their rating and their reasoning for you to read. We call it 14 in ’14—and we interspersed a few other random comments with them.

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Obamacare Uncertainty tends to be a consistent obstacle for businesses. Success in business usually doesn’t happen by accident. Planning is necessary. If you don’t know your future costs, it’s very difficult to plan. In addition to a shaky economy over the past several years, nothing has created more uncertainty for business people than the Affordable Care Act (ACA). In this edition, we provide an update regarding what we know about the ACA and its impact on businesses. In edition to our feature, Dr. Roger Stark from the Washington Policy Center provides his perspective. What we know for

sure is that the law and its fallout are evolving daily. Because this law is complex and fluid, the Whatcom Business Alliance will host two separate Affordable Care Act Breakfast Symposiums in 2014. One takes place on Feb. 26, the other on Sept. 24. Save the dates, and we’ll let you know in plenty of time about the time and place. Many WBA board members are wrestling with these issues in their organizations, and they wanted to create an opportunity for all WBA members to get the most up-to-date and comprehensive information available about the policy itself, the legal issues, specific options for businesses of all

About 350 persons attended the WBA’s Economic Forecast breakfast as we headed into the new year and heard, among many things, about the “New Normal” in recovery from recession. The WBA has scheduled this event for Nov. 19. (Staff photo)

sizes, and an opportunity to hear creative strategies and approaches that other businesses have taken. For example, one of our board members implemented self-insurance with a stop-loss policy, created his own medical clinic, and saved $100,000 in the first year of implementation. These will be outstanding events if you are a business owner, manager, president, CEO, or human resource director. I think you’ll find it a valuable use of your time. We’ll see you there.

Bright Spots As Dr. James Paulsen put it at our Economic Forecast Breakfast, “Welcome to the New Normal.” This is how he described our recovery from recession. We might not see growth rates of 5-8 percent. Instead, get used to 3 percent. While that might be the case, many bright spots appear in our local economy. The heavy industry at Cherry Point continues to provide thousands of jobs directly and indirectly that pay $100,000-plus, not to mention the companies that are growing to meet the demand there. We detail some of that in this issue, including a profile of one—Mills Electric—that has worked on the Cherry Point scene every since it was developed in the ‘50s. Also, technology and agriculture are thriving, retail is strong, we have a framework for waterfront redevelopment, Bellingham airport is bulging and has become an extraordinary asset for commerce (Port Commissioner Michael McAuley wrote a column for us about that). Like me, many are looking forward to an exciting year in Whatcom County.

network, and to inform and engage on issues of importance. We’ve added new talent to our board of directors, restructured our committees for more efficiency, and have opened up our monthly board meetings to all members to provide networking opportunities and as an opportunity to educate ourselves on issues and encourage dialogue from business leaders. The topics we’ve addressed that impact business are the new marijuana law, and the FOUR JOIN WBA BOARD; EXEC COMMITTEE ELECTED Four new members joined the board of directors of the Whatcom Business Alliance (WBA) going into the 2nd fiscal year of the organization: Pam Brady, director of NW Government and Public Affairs for BP Cherry Point Refinery; Bruce Clawson, senior vice-president for Commercial Banking at Wells Fargo; Scott Corzine, a major accounts

plight of the homeless. If you are a business owner, manager, company president, or CEO, and you are not aware of the WBA, or would like to learn more about who we are and what we are doing, I want to meet with you personally. Give me a call or drop me an email anytime. My direct line is 360.746.0411, or tony@ whatcombusinessalliance.com. Wishing all of you a healthy and prosperous 2014. executive for Puget Sound Energy, and Marv Tjoelker, CEO and a partner in Larson Gross PLLC. The board also elected its executive committee for 2014. Jeff Kochman, president and CEO of Barkley Company, became chairman. The others: Jane Carten, president and director at Saturna Capital; past chairman Troy Muljat, owner NVNID Inc. and a managing broker at the Muljat Group; Doug Thomas, president and CEO of Bellingham Cold Storage, and Tjoelker.

The WBA The Whatcom Business Alliance just completed its first full fiscal year on Dec. 31. I can’t thank you enough for your support and participation as we continue to build our leadership

WHATCOMBUSINESSALLIANCE.COM | 11

TITLE

Cherry Point ste fortune and vita in Whatcom Cou Heavy industry giants Phillips 66, Alcoa, BP provide high-pay work, high environmental standards and practices, and huge financial and participation support to community service

By Mike Mckenzie, managing editor

herry Point on the northwest coastline of the county, for all its multitude of positive points, finds itself in the news often at the center of a heated controversy. Many special-interest groups, some government Jeff Pitzer, a top executive with officials including tribal, BP Cherry Point Refinery and individuals, want no more heavy industry or commercial development of any kind out there.

“The whole industrial corridor reach here at Cherry Point is part of the fabric of Whatcom County. I can’t really imagine what Whatcom County would be like without that industrial base.”

Photo courtesy of BP Cherry Point Refinery 12 | BUSINESSPULSE.COM

None of any kind. Ever. The irony of that is rich. Without the Big Three at Cherry Point—two oil refineries and the largest aluminum smelter in the U.S.—Ferndale (pop. 12,000) undoubtedly would exist as the little town it was halfway through the 20th Century (less than 1,000) rather than having gridlock for Main Street traffic, several flourishing industrial parks, and a “Contender” rating on Money magazine’s 2007 list of best cities to live in with a 100 percent score in air quality. Whatcom County would have

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Business Box Score On pages 20-25 read highlights of cherry point’s “Big 3” from top managers

WHATCOMBUSINESSALLIANCE.COM | 13

thousands upon thousands fewer jobs. Over $200 million less business tax income. Huge financial and participation holes in the spate of nonprofits. Plus more— yes, more—pollution and negative environmental impact. And that’s not blowing smoke any more than the smokestacks rising on the Cherry Point horizon. (Actually it’s steam you see in the plumes billowing across the western skyline.) A round of interviews with top

executives at Phillips 66 Ferndale Refinery, Alcoa Intalco Works, and BP Cherry Point Refinery revealed dozens of reasons why Cherry Point, unquestionably, is the largest economic driver of prosperity and community well-being throughout this region. At the fore: a slew of $100,000-plus jobs. And for every one of those, an estimated 12-13 more local jobs are created through what economists call the multiplier effect.

That’s the main draw of Cherry Point. It’s a stimulus for strong wage earning to support a familybased community; for local commerce, and for attracting other businesses and industries to the area. The first pier appeared at Cherry Point under General Petroleum in 1954 (now owned by Phillips 66). Alcoa arrived 14 years later. The third and last pier built was in 1971, then Atlantic Richfield’s (ARCO), now BP’s. No new tenants have moved in since the area received official zoning as heavy industrial in 1979. But somebody’s knocking on the door: SSA Marine in Seattle. A Whatcom County farm family started that company in Bellingham and grew it to Seattle where today it operates as one of the largest stevedore companies in the world. SSA Marine proposed 22 years ago to build the Gateway Pacific Terminal (GPT) at Cherry Point. SSA brought forth the formal proposal in 2008, and started a public relations campaign in 2010. As quickly as you can say coal train, protests arose.

“Industry and environment aren’t incompatible. It all has to do with responsible stewardship…be as light on the land as you can.” Marjorie Hatter, Refinery Manager, Phillips 66 Ferndale Refinery

The area beckons for several reasons. It has rare depth, 200 feet. It goes almost straight down, too. Ships love that. Seattle and other ports have shallower channels, more draft. Plus, it’s a straight shot to the open sea from Cherry Point. Larger cargo carriers love that, too. Infrastructure abounds with rail and pipelines, and more rail is under construction at the refineries. 14 | BUSINESSPULSE.COM

The SSA/GPT scenario will play out over the next two to three years through the results of impact studies and governance.

“What if the area was designated as residential? What would the environment look like if this area was full of houses?” Barry Hullett, Plant Manager, Alcoa Intalco Works

The Democratic Party of Whatcom County entered the fray last fall by adopting a resolution to halt all future development at Cherry Point. Most of the contention centers on environmental concerns. Meanwhile, a healthy beat goes on at Cherry Point. All three tenants make significant investments in good neighbor policies with environment, safety, and community service.

One of the most prevailing misconceptions regarding corporate heavy industry is that it automatically is contaminating the air, water, and/or land around it. “Industry and environment aren’t incompatible,” said Marjorie Hatter, a chemical engineer who is plant manager for Phillips 66 Ferndale Refinery. “It all has to do with responsible stewardship…be as This most recent pier at Cherry Point was built in 1971 for ARCO, now owned by BP. (Photo courtesy of BP light on the land as you can. We work really hard Cherry Point Refinery) at that.” Her refinery earned recognition waste-water treatment facility, and last year from the Environmental recently installed a sulfur treating Protection Agency (EPA) as an plant. It takes sulfur gasses and conEnergy Star site. “We’ve reduced verts them to molten sulfur so they our energy usage 10 percent over don’t go into the air, instead makthe last 10 years,” Hatter said. ing a product for use in agriculture “That’s hard to carve out.” chemicals. Now the company is crePhillips 66 also upgraded its ating new wetlands on its property.

WHATCOMBUSINESSALLIANCE.COM | 15

Barry Hullett, the plant manager at Alcoa Intalco Works, similarly pointed to his company’s high bar for environmental consciousness. Ferndale citizens voted them the Most Civic-Minded Business last year, and in 2011 they were named Green Business of the Year for the aluminum industry. “That’s my most coveted, the one that means the most to me,” Hullett said. In concrete roadways on its factory property Alcoa has undertaken a green foliage initiative, and greened up its courtyard. An example of detailed attention: Operations follow strict guidelines for handling the bauxite powder, from which aluminum is made, as it gets off-loaded from a ship that arrives each month from Australia. If the wind gauge reaches a certain strength, everything shuts down, the ship backs out and waits, and the Alcoa crews manage covers and traps to keep the powder from blowing into the air. The developed factory site takes

16 | BUSINESSPULSE.COM

up just 320 acres of Alcoa’s 1,635 total. They lease 800 acres for $1 a year to the Fish & Wildlife Department to manage for public recreational use, including hunting and fishing and an archery range. A farmer leases 244 acres.

BP also has donated another $660,000 in recent years to major projects at PeaceHealth St. Joseph Medical Center, the burned-down Boys & Girls Club in Ferndale, the BP Heron Center at Birch Bay State Park, and others. “What if the area was designated as residential?” Hullett asked, referring to the original plan for use of the land by Trillium Corporation. “What would the environment look like if this area

was full of houses?” Hullett said that Intalco benefits the region by providing power service during interruptions. “When BPA (Bonneville Power Administration) needs to quickly supplement their power we respond within minutes to curtail up to 69 Megawatts of our load so it can be delivered to other customers,” Hullett said. “We act like a back-up battery on the grid. Very few industries have that ability.” BP Cherry Point, the largest refinery on the West Coast, adheres to the highest standards in safety and environmental integrity. Jeff Pitzer was the refinery manager from 2007-2011. He since has moved up to president of BP West Coast Products Company, a role in which he leads strategic performance for the refinery and all of its products and distribution, and he’s been in Whatcom County for much of the last 33 years. “We are acutely aware,” he said, “of the privilege we have to hold an

operating license in this part of the world, in this pristine environment.” The company demonstrates that awareness broadly. Two stand out. BP has dedicated 3,000 acres to enhance wildlife habitat. And, that includes a 220-acre wetland mitigation area where a Citizen Science program is underway, observing amphibian populations. The program began with a thirdgrade class field trip, with children holding frogs and salamanders.

“These are high-paying jobs. Our people make $25-$35/hour, and they don’t require a college degree. The manufacturing jobs are huge in terms of the local economy.”

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The wetland mitigation area incorporates a unique proactive methodology, restoring wetland functions in advance of any impacts. It provides water quality, floodwater storage, and biological productivity. BP also works closely with NSEA—Nooksack Salmon Enhancement Association— especially by using employee work parties in restoration of degraded areas of Terrell Creek on BP property. Pitzer described in detail how BP leads the industry in producing clean diesel, heightened by a major clean diesel project over the last few years. “The level to which we treat the diesel to take sulfur and other impurities out of it is significant compared to most other refineries,” he said. “The main thing about it is that it was a huge capital injection for this site, a big signal about the long-term plans we have to stay in business up here. We’re here to stay.” A prominent contractor in the clean diesel project was Mills

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BP takes pride in having provided nearly a half-million dollars for Whatcom United Way. (Photo courtesy of BP Cherry Point Refinery)

Alcoa Intalco Works produces about 620 metric tons a day of primary aluminum metal. (Photo courtesy of Alcoa Intalco Works)

Electric, a 103-year-old company you can read about elsewhere in this edition. Mills stands among some local companies that have worked with all three Cherry Point tenants, including the Ferndale Refinery since it was built in the ‘50s. Mills Electric recently landed a second major contract with BP for general maintenance and construction—a prime example of the long arm of the multiplier effect within the heavy industry giants. Its work force grew from 18 | BUSINESSPULSE.COM

60 to 200 abruptly with contracts at Cherry Point. For another example, Alcoa pays a local company more than $500,000 a year for air. As in, air to breathe. Hydrogen, nitrogen, argon—like SCUBA divers need, and firefighters. Independent studies estimate that Alcoa creates 2.9 other jobs for every one of its own; at about 640, it would provide around 1,900 others. The most recent figures on oil refineries in Washington State put their multiplier effect at 13. Between them, then, Phillips 66 Ferndale Refinery (about 400) and BP Cherry Point Refinery (about 1,130) create a residual of nearly 20,000 other jobs—approximately 75 percent of them at work in the immediate area. As Marjorie Hatter at Phillips 66 Ferndale Refinery observed: “These are high-paying jobs. Our people make between 25-35 bucks an hour, and they don’t require a college degree. The manufacturing jobs are huge in terms of the local economy.” The job market resonates more than any other aspect of Cherry Point’s influencers. All three companies invest hundreds of millions in technology

that promotes two high priorities to the extreme: safety and environmental protection. The other piece of those large corporations’ culture lies in their participation in community. Involvement in charities abounds at every level at all three sites. BP has for many years been the largest contributor to the United Way (also featured in this edition). In 2012 the amount was about $220,000 in matching funds donated by employees for a $440,000 total contribution. BP also has donated another $660,000 in recent years to major projects at PeaceHealth St. Joseph Medical Center, the rebuilding of the burned-down Boys & Girls Club in Ferndale, the BP Heron Center at Birch Bay State Park, and others. Many employees of the Big Three, especially management, serve on boards of various organizations. Some get involved in local government. At BP, Scott Walker—formerly the director of public affairs (when the refinery was operated by ARCO—recently retired from 22 years as an elected commissioner with the Port of Bellingham, and a current foreman at BP, Ben Elenbaas, ran for county council office last fall. What would Whatcom County be like without Cherry Point? “Family wage jobs have a very significant impact on the community,” BP executive Pitzer said. “But the other piece that would be a huge loss if we weren’t here is the incredibly involved employee population…just to make the community we live in more vibrant. “We add to the economic vitality of the area, add to the culture of the area by moving people in who come from different parts of the country, and add to the total tapestry of our area. I can’t really imagine Whatcom County without us, and I can’t imagine us without Whatcom County.”

Mills Electric salutes the industries at Cherry Point for their positive impact on our local community. Since 1911 Mills Electric has been a trusted name for providing complete electrical solutions for a diverse group of industries including reﬁnery, manufacturing, waste water, pipeline/pump station, education, healthcare/bio facilities, government and mixed use/specialty.

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1st Person: Barry Hullett at Alcoa Intalco Works If they hadn’t designated this heavy industrial area, and hadn’t invited these industries in to take advantage of this nice deep-water port—200 feet of salt water, which is why they’re here—eventually they would have been worse off, environmentally…the overall bottom-line impact has helped keep this area environmentally sustained.

Sustainability of aluminum One of the reasons I love being part of Alcoa is we have a great sustainable product that the world needs in the future. The metal we make today will be used by my kids, their kids, and their kids, and their kids after that because of its recyclability. It only takes 5 percent of the original energy to recycle it.

Barry Hullett followed his father’s career of working in aluminum smelters in Montana. In 30 years since he’s worked in Africa and Texas, but yearned for the return to the Northwest. He came to Alcoa Intalco Works in 2004 as plant manager.

The value of manufacturing

e’re a good family wage provider, with a good multiplier in the community (2.9) with an accumulative impact. I really want to be involved in whatever I can to sustain manufacturing jobs—a much-needed base in the U.S. We’re losing that, and if we don’t sustain a manufacturing base of jobs and all the things that go with it, it’s hard to fund the rest of the economy. We continue to look at opportunities to partner, find new jobs, or something else in the community. To help the community in general. We want to hire. 20 | BUSINESSPULSE.COM

Cherry Point We partner well with our neighbors. We’re the anchor in Ferndale and in the western part of Whatcom County.

factory factoids

“One of the reasons I love being part of Alcoa is we have a great sustainable product that the world needs in the future.” Aluminum continues to be used over and over again—the one great attribute over other resources. Gold, for example, doesn’t last. Ever since our process began, of all the aluminum that’s been man-

remelt, and more for U.S. markets, incl. 25% in Washington, Oregon, and Idaho. ALCOA INTALCO WORKS: • Green Business of the Year in Industry. Opened in 1966. • Most Civic Minded Business in Ferndale. Smelter manager: Barry Hulett • 2.5 direct other jobs created in • 640 employees. Whatcom County for each one at • $65 million payroll. Intalco, 2.9 statewise. Uses more than 25 • $108,000 avg. salary with benefits. subcontractors locally. • $4.3 million paid, 2012 ($3.1M local) • Alcoa Foundation Grants for 2013: • 1,634.64 acres (plant site 320). $35,000 Puget Sound Restoration Fund/ >> World’s largest producer of primary Drayton Harbor Garden of the Salish aluminum and fabricated aluminum, and world’s largest miner of bauxite (source of Sea Program, plus $75,000 for six other programs covering recycling, housing, aluminum) and aluminum refiner. >>Manufactures for use in wheels, ladders, library and literacy, and food education. • Parent corporation employs about 61,000 window frames, exercise equipment, in more than 30 countries.

ufactured in the last 125 years, 75 percent is still used, and then re-used. In construction, it’s 95 percent. And it’s not downgraded, either—it holds the same quality. Even if you try to throw away aluminum, somebody’s going to try to capture it.

SAFETY AND OTHER PRIORITIES Alcoa ranks as one of the world leaders in safety in our industry, and in overall industry. Here we strive for no-lost-time accidents. We earned the most civicminded business award voted on by Ferndale citizens, and in 2011 we were Green Business of the Year for all of industry—probably my most coveted award. Alcoa is committed to community service. It’s incredible how much our people contribute. (He provided one monthly chart that showed Alcoa employees participating in 13 different service events.) We had an outstanding year last year.

In working with red-hot molten aluminum to produce giant bars Alcoa prides itself in no-lost-time accidents as one of the world leaders in industrial safety. (Photo courtesy of Alcoa Intalco Works)

Clean environment No one wants a smokestack I understand that. Clean energy provides much better lower impact. We’re energy efficiency. If it was designated as residential out here, what would the environment look like if the area was full of houses? We’ve never dredged out there, after all these years. We’re trying to minimize our waste by recycling our industrial materials, such as a lot of coiling wire used for our compressor systems. We’ve partnered with neigh-

bors. We’ve been partnering with NSEA (Nooksack Salmon Enhancement Association) for years. It’s a great agency. How can we help improve that? Our storm water run-off has been improved. We’re planting all around our concrete areas and drainage ditches. Making our courtyard green. These are lowcost solutions. We need to, at a minimum, sustain these businesses we’ve got, because they really do fuel the rest of the economy.

WHATCOMBUSINESSALLIANCE.COM | 21

1st Person: Jeff Pitzer at BP Cherry Point He oversees both for this region for BP.] When BP made the strategic decision to sell off the southwest part of our business, everything south of San Francisco….(we) colocated it here, built a wing onto this building, and expanded the footprint by running it all right out of the refinery here. That’s unique. Most have the upstream located in a business park someplace. For example, east of the Rockies we have two refineries, all that upstream activity runs out of downtown Chicago, because that’s where the traders tend to be located.

“I’m an oil boiler at the core. Oversee about 1,100 people from here; around 300 work in other BP locations.” Jeff Pitzer.

Safety at a Premium

’ve always had the feeling that safety is not only the right thing to do, it’s also very good business. You just have to look at a couple of things that have happened to BP in the last few years to recognize the truth in that statement.

Being part of a small community helps reinforce that, because everybody who works here also lives here, plays here, and has their kids raised here. Everything we do can be scrutinized very readily, so everybody here is dedicated to doing what we do—the right way, every single day. As the refinery has aged—it’s approaching its 50th birthday—it is unique in the U.S. in terms of the care we’ve taken with the facility. 22 | BUSINESSPULSE.COM

We have very mature maintenance processes. We will replace things before they’re at the end of their service life so nothing becomes out-dated in terms of safety. We’re pretty efficient in how we use energy. A lot of refineries have a lot of heat rejection, which ends up as steam going into the atmosphere. We don’t reject a lot of heat. We have cooling towers, and a steam plume of the water vapor comes off the top of the cooling towers. But we don’t have very many stack emissions.

Expanded through consolidating the Fuels Value Chain: [Pitzer explained how the industry typically splits business into Downstream (getting oil from the ground) and Upstream (refining crude oil and selling products).

“Being part of a small community helps reinforce that, because everybody who works here also lives here, plays here, and has their kids raised here.” We expanded locally by 75 employees, which is 75 families in Whatcom County, working spouses, and everything else that goes with it.

What would it be like if Cherry Point industry was not here? If you go with the published facts and figures that say that we create about a 13 multiplier of direct jobs. So we’re responsible for about 10,000 jobs or so within the local area, just with this facility. Including the refinery industry across the whole state, probably closer to 50,000 jobs. The other big loss to the community would be that we have an incredibly involved employee population. School boards. Charitable boards. Elected officials. All part and parcel of Whatcom County. We’re the largest contributor by far to the United Way, and take pride in the fact we have

factory factoids

construction of BP Heron Center in Birch Bay State Park, $216K in 2012 to various BP CHERRY POINT REFINERY: other charity organizations (plus matching • Opened in 1971. funds up to $5K for employees). Benefits • Refinery manager: Stacey McDaniel, more than 160 organizations. chemical engineer (North Carolina State, plus MBA courses as University of Chicago) • Supplies 20% of gas at the pump in Washington and Oregon, and most of the • 773 employees, plus between 600-1,500 jet fuel for SeaTac, Portland, and Vancouver, contractors at any given time (another 357 report to HQ here from other locations in BP B.C., airports. • Each day, produces enough gasoline to fill West Coast operations). up 162 vehicles a minute, enough jet fuel • $120,270 avg. base salary (source: Washington Research Council, citing refinery for 1,000 round trips from Bellingham to New York City, enough diesel to drive a semi worker in the state). around the world 40 times, enough propane • $88.5M taxes paid, 2012 ($8.5M local), to keeping 140 BBQ grills burning 40 years, est. $109M, 2013 ($9M local) and enough butane to supply over 7 million • 3,300 acres. Largest in the state, 3rd lighters. largest on the West Coast. • Spent $750 million upgrading facility since • World’s largest supplier of calcined coke to aluminum industry, used in 1-of-every-6 2001 to produce ultra-low sulfur diesel, aluminum cans. gasoline, and jet fuel. • Clean Diesel Project reduced sulfur from • In 2012, spent $290M at more than 400 diesel fuel by 15 long tons a day, and Washington businesses. reduced sulfur dioxide emissions from • In 2012, employees donated $220,000 vehicles up to 12,200 tons a year. Largest to Whatcom County United Way, matched construction project in the plant’s history. by BP Foundation for total $440,000 • Crude by Rail Project of 1.7 mi. of donations. track created 20 new jobs, built by 300 • Other major contributions: $100K to employees. trauma center expansion PeaceHealth • Two new projects in 2013 provided jobs St. Joseph Med Center, $250K to rebuild for more than 1,200 contractors. Ferndale Boys & Girls Club, $100K

been for a number of years. We actively encourage our people to get involved locally in efforts by United Way just to make the community we live in more vibrant. Our plant manager, Stacy McDaniel, is on the board.

“So we’re responsible for about 10,000 jobs or so within the local area, just with this facility.” All of this (Cherry Point), power stations, heavy industrial zoned, it’s our intention that it should remain zoned as such. We’re not opposed to having a new industrial neighbor, because it’s the last deep-water access point available up here.

Clean Diesel Project I was refinery manager when we kicked that project off. Most of the rest of the world has moved that direction. Nonetheless, something unique about this refinery is how we make a lot of diesel. Many refineries are configured to turn most of the barrel of oil into gasoline. We turn a lot of the barrel into diesel, and a lot of the diesel we produce is extremely clean; the volume of clean diesel we produce is significant, comparatively. It’s in big process blocks. After we boil the crude oil into a diesel fraction, we then further process it —pass it over catalyst beds, inject hydrogen into it, removed sulfur and other impurities that’s naturally occurring in crude oil. That lets it burn cleaner.

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1st Person: Marjorie Hatter at Phillips 66 Ferndale

A chemical engineer from Idaho, Phillips 66 plant manager Marjorie Hatter wanted to become an inventor and thereby started her career in the oil industry in research.

Community work is good business Community and corporate involvement Community work is important and I do some of that. We have

factory factoids

a person on staff, Jeff Callender, who is front man for that. We as a company, and I in particular, feel like we should be heavily involved. All my senior leaders have board

PHILLIPS 66 FERNDALE REFINERY • Opened in 1954 (as General Petroleum Co., precursor to Mobil Oil) • Refinery manager: Marjorie Hatter, chemical engineer (University of Idaho) • 400 employees (approx.) • $65M payroll (pay varies $25-$35/hr for avg plant worker). • $50M-plus taxes paid 2012—doubled during the last four years. • 830 acres. • 2013 Corporation of the Year for Philanthropy in Washington state, awarded by the Assn of Fundraising Professionals. • $100,000 funded an education center at the Ferndale Boys & Girls Club, and $25,000 supported building the new Ferndale Library. • Funded school math tournaments for 30 years – one Whatcom County, and two state. • Provides financial support, both from Ferndale Refinery and Phillips 66 corporate, to more than 50 local nonprofit and charity organizations, including high on the donor list to United Way annually. 24 | BUSINESSPULSE.COM

membership…we’ve got 15 people on boards. It’s part of being a good business leader. For our employees, it’s a lot about what they’re interested in, we match them up with their enthusiasm. Day to day I’m responsible for the plant, and it’s a big deal making sure everything runs well. We meet a lot, and I read everything I sign in detail. There’s a little demon in me about writing well, and thoughtfully. I do a lot of work in government affairs. I frequently engage with our government affairs people about legislative issues, things that have potential impact on our business. And, I work with our people in Houston where my boss is. Phillips 66 has been good about including line leadership in discussions about where the company is going. I log a few miles between here and Houston or other locations for three days of discussion of some initiatives—sometimes it’s about developing people, financial issues, etc. That occupies a part of my time, to be part of the bigger corporation.

‘Smokestack industry’ perceptions If you look at our horizon all

• 2013 Recognition by the Environmental Protection Agency as an Energy Star site, citing reduction of energy use by 10% during the last 10 years. • Recent investments in the Ferndale/Whatcom County area: 6-week shutdown for complete maintenance overhaul; installation of a vacuum pre-flash steam generator to recover high heat from vacuum tower vapor and to produce steam; replacement of the top half of a tower in the alkylation unit; multi-year, multi-million-dollar initiative on the refinery dock and associated pipelines to maintain structure, and to repair roadways on the pier and to recoat pipelines. • Booms ships at the dock before loading and unloading certain petroleum products, for added safety. • Uses ammonia and hydrogen to convert nitrogen oxide into nitrogen and water, for added environmental integrity. • Another environmental control is use of new flare gas recovery system that saves energy (recovers gases and returns them to the fuel gas system).

you see is a steam plume, which is a scrubber. The notion of smokestack isn’t even valid anymore. Only in the movies. Many people’s notions are really behind the times. We have steam (rising) in the center. Processing uses fine powder, and you don’t want to release fine particles into the atmosphere, so it goes through a water scrubber to knock it all out. That creates water vapor. You don’t see any smoke anymore. When people come into our

“It’s part of being a good business leader. For our employees, it’s a lot about what they’re interested in, we match them up with their enthusiasm.” refinery, they’re surprised. They don’t smell anything, it’s clean, they don’t see a lot of people. One of the better things over the last 20 years is that the computerization of the industry has been huge. Today, computers run a huge amount of the process. Operations have gotten much more precise, controlled better. That has an auxiliary effect on the environment in a good way—less mess-ups, less problems, eliminates risk.

Expansion of rail shipping We’re building a rail project here, and as part of that we’re creating a whole bunch of new wetlands in the southwest corner of our property. The rail will provide an unloading facility (for) some of the new crude that’s being discovered in places in the U.S. like the Dakotas to come in. Because there’s no pipeline between North and South Dakota and here, the crude comes in via rail, which is already in place, so we needed a rail unloading facility where we can off-load railroad cars.

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What if Cherry Point industry wasn’t here? All of the industries here pump a lot of money into this economy. Our taxes alone approach $50 million bucks a year. We hire close to 400 full-time…those are mostly jobs that don’t require college degrees. These manufacturing jobs are huge in terms of the economy. Because manufacturing is capi-

tal intensive and we have to hire lots of service people in the area, a lot of businesses in Ferndale rely heavily on us. Quiznos. Haircut people. The list keeps going on and on. What would it be like up here? Depends on what you can dream up about that.

WHATCOMBUSINESSALLIANCE.COM | 25

Profile: Mills Electric

Mills Electric: One of many heavy industry beneficiaries Recent new contracts with Phillips 66 and BP send John Huntley’s company soaring into 2014, raising work force to above 200

Owner John Huntley of Mills Electric stands on Phillips 66’s pier, south of Alcoa’s unloading tanks

Article and photos by Mike McKenzie

wo large photographs on both a wall in his office and a wall in an inner lobby speak volumes about John Huntley, the CEO of Mills Electric on the I-5 frontage Pacific Highway north of Bellingham. The wall outside of his office displays very large blow-ups of panoramic views at each of the oil refineries at Cherry Point—Phillips 66 and BP. Inside his office Huntley looks across his desk at two large images of vintage bi-planes. One taken in 1914 shows his grandmother, Kate Ashe, seated behind her host 26 | BUSINESSPULSE.COM

pilot, the founder of Boeing, when she was “Everett Harbor Blossom Queen.” Next to it another photo shows Huntley’s wife’s grandfather piloting a seaplane at March Point in 1929, and his vintage goggles and leather-flapped pilot’s cap hang on the upper corners. About 12 years ago Huntley got the bug. He took flying lessons. “I’m kind of a control guy, and that’s why I wanted to learn,” he said. Now he pilots his own Cessna twin-engine. Unintentionally, the aerial display serves as an analogy of how Huntley’s company is flying high. The pictorial of the local refineries represent business at the fore of Mills Electric’s latest arc in growth. Recently, the company

renewed another contract with Phillips 66, keeping intact the continuous string of general contracting for five different companies at that refinery since it opened 60 years ago. Both that deal and a new two-year agreement signed with BP Cherry Point—plus a third new refinery contract, Tosoro in Anacortes—comprise electrical maintenance and construction work. During 2013 Mills completed an 18-month Clean Energy project with BP.

His company, one of Whatcom County’s oldest (103 years) that he bought almost seven years ago, is one of many that fall into the metrics known as the multiplier effect of the Cherry Point industries. The company also has done business with the third Cherry Point tenant, Alcoa Intalco Works. “Without Cherry Point,” Huntley said, seated in his office, “we wouldn’t have survived.” Huntley resides on Chuckanut Drive in southern Whatcom County, and from his deck he said he can see all three refineries that Mills Electric signed contracts with in a flurry of last-quarter activity that will push his work force to and maybe above 200 this year. His company, one of Whatcom County’s oldest (103 years) that he bought almost seven years ago, is one of many that fall into the metrics known as the multiplier effect of the Cherry Point industries. “Our work with them literally puts hundreds of workers in highpaying jobs,” Huntley said. He defined high-paying as $100,000 annually and higher. For the most part those consist

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year. “Basically, these deals are Top executive: John Huntley, owner since 2007 based on time and Start-up: 1911 material, so they Annual sales revenue: About $25 million vary in value,” he Growth indicators: Sales up in 2013 on strength of three explained. new, large contracts, including extension with Phillips 66 They began a Ferndale Refinery and two-year deal with BP Cherry Point push, along with a Refinery, which will lead to about 80 new jobs in 2014. third large multiEmployees: 120-130 year contract that Employees in Whatcom County: More than 100 helped close 2013 in a huge flurry of business, that will of local electrical union members, up the ante on Mills though the scope of the work perElectric’s standing in Business formed—“anything and everything, Pulse’s annual Top 75 Private maintenance and new projects,” Companies listings. They stood he said—creates a second layer of No. 39 last year, up from No. 47 trickle-down job creation through over the previous year, and most Mills Electric. Those would range likely will climb even more as they from civil engineers to the conpushed through the range of up to crete industry, among many. $25 million. Any given phase of a project can All this has not gone unnoinvolve anywhere from 20-120 ticed within the industry. The workers. “No doubt about it, it Washington state Association of definitely adds to the local econoGeneral Contractors named Mills my, big-time.” the Sub-Contractor of the Year While he can’t place a dollar statewide. That rare air seldom gets amount on the two most recent breathed by a company north of the contracts with the oil refineries, Seattle-Tacoma metropolitan area. Huntley estimated that his work “That’s something that came out force will swell to more than 200 of the blue,” Huntley said. “Quite this year because of them—up a surprise.” The honor recognizes from a peak of about 130 last industry leaders for both their

Business Box Score

John Huntley with his son Josh, the operations manager at Mills Electric. 28 | BUSINESSPULSE.COM

strong presence in support of their client base, but also their proactive participation in community service. Among numerous involvements, Huntley serves on the board of the PeaceHealth St. Joseph Medical Center foundation, and on the board of the Whatcom Business Alliance, and he’s very active with the Boys & Girls Clubs of Whatcom County. Mills Electric under new ownership has continued a long track record of civic pride and participation in Whatcom County charitable outreach.

The Washington state Association of General Contractors named Mills the Sub-Contractor of the Year statewide. That rare air seldom gets breathed by a company north of the Seattle-Tacoma metropolitan area. “We took over a great team at an outstanding established family business,” Huntley said, “and we’re fortunate and pleased to have grown that team even larger.” The business boomed so much that two years ago he sold his partnership stake to his brother Richard for the Skagit County-based general contracting business built by the Huntley family, PM Construction in Mount Vernon. That company has done extensive business with many oil refineries over the years, also, including the two at Cherry Point, Shell Oil, Tosoro, and others. The move brought Huntley home. He grew up in Bellingham and attended Western Washington University from 1975-’79 as a student in business and a football player. (You can see smoke come out his ears if you broach the subject

of Western dropping its football program suddenly a few years ago. “It was the way they did it,” he says, meaning that they didn’t notify former players and other alumni about the decision, just dropped it on them. “Well, at least my record will never be broken.” He holds the school record for a punt return, 92 yards.) After a year of football first at Everett Community College, Huntley started working part-time at his family’s business. “I’d never had a desire to get into the business,” he said. “Once I started and got involved, I enjoyed the work.” He continues to build with family at Mills Electric. His son, Josh, is the company’s operations manager. Josh Huntley also became a Western graduate in 2008 with a degree in finance, and, like his father he started working in the family business during his student years. “I didn’t know what I was going to do,” he said, stepping into the interview session between beeper calls.

“While we can’t place a dollar amount on the two most recent contracts with the oil refineries, we estimate our workforce will swell to more than 200 this year because of them —up from a peak of about 130 last year.” John Huntley, Mills Electric President/CEO

Starting and/or buying a business “intrigued me,” he said, because he’d grown up in that environment. His grandparents on both sides owned businesses—PM Construction, and on his maternal side, two well-known Bellingham clothing stores, House of Provias and Pro’s. “It was never on my radar to

WHATCOMBUSINESSALLIANCE.COM | 29

control, I-T…” “And taking care of me,” his father said, engaging in repartee. In talking shop, their conversation turned quickly to the No. 1 priority of Mills Electric, and of the clients they serve—safety. “As the top priority in refineries,

“The true value of the heavy industry at Cherry Point: “Our work with them literally puts hundreds of workers in highpaying ($100,000) jobs.” John Huntley, Mills Electric President/CEO

On the pier at Phillips 66 Ferndale Refinery, with Alcoa’s pier in the background: (l. to r.) President/CEO John Huntley, BP Project Supervisor Rob Kilbourne, and Phillips 66 Project Supervisor Jim Sasken. (Photo by Mike McKenzie)

get into the construction industry, let alone electrical,” Josh Huntley said. “But there was a position here as the assistant warehouse manager when I finished school and I took it, and enjoyed it. When Pat Foley moved into retirement as CEO, I started growing my

role here at the company—kind of just a natural succession.” His duties vary widely. “Help things run as smoothly as possible,” Josh Huntley said. “I’m involved in a little bit of everything, from safety, to accounting, to project management, project

John Huntley at his Mills Electric wall display of the Cherry Point oil refineries. 30 | BUSINESSPULSE.COM

safety practices there are amazing,” John Huntley said. “Any other kind of industry doesn’t compare. Refineries are the leaders in industrial safety. This is not a drivethrough we work in; we don’t get second chances sometimes.” Josh Huntley, who administers Mills’s safety initiatives, said that the company’s emphasis specifically works from-the-top method. John Huntley frequently visits work sites and emphasizes safety best practices. “It’s not just preached,” Josh said, “and it’s not just something the supervisor says. It starts from the top.” John Huntley praised the Cherry Point industries on one other point. “People have a misconception about these heavy industrial companies,” he said. “They’re probably the best also when it comes to protecting the environment….always looking for better, cleaner air, and in their investments they spend millions and millions in clean energy through better and better technology. “One thing is certain,” he concluded. “Whatcom County wouldn’t be what Whatcom County is, without them.”

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2014 TITLE Economy

Whatcom County

ECONOMIC OUTLOOK

2014

Welcome to the New Normal The Port of Bellingham Waterfront spreads along the bay as a centerpiece (and sometimes lightning rod) for the most pressing matters that will determine how the economy fares locally during 2014. Love it or not, a planâ&#x20AC;&#x2122;s in place as the Port raises its bar on economic development.

32 | BUSINESSPULSE.COM

On pages 38-41: 14 local business leaders weigh in on their Business Confidence

By Business Pulse Staff and Hortegas Research & Communications

any years ago a whimsical paperback was written called The Profit by Kehlog Albran (Price/Stern/Sloan Publishers, 1974), spoofing the best-seller The Prophet by Kahlil Gibran. One of the pearls of wisdom from The Profit went like this: “I have seen the future and it is just like the present, only longer.” The “future…present” was discussed at the first annual Economic Forecast event recently staged by the Whatcom Business Alliance (WBA). The event attracted over 350 local leaders to breakfast, drawn by presenters with strong credibility: uberbanker/analyst Dr. James Paulsen from Wells Capital Management and master researcher/analyst Dr. Hart Hodges from Western Washington University Center for Economic and Business Research.

A fair share of optimism and some strains of laughter floated about the large event ballroom. And nothing morose set in, which was a good thing because the topic was heavy, the economy —world and U.S. view, and Whatcom County view. The theme that could be most drawn from Dr. Paulsen’s commentary about the U.S. economy was, “Welcome to the new normal.” He suggested that gone are the days of the 5-8 percent recovery growth rates, and welcome to the new era of 3 percent growth, which he predicted for 2014. Eight went away in ’08, a year that had much of the business world seeing red, and feeling black and blue. Hodges echoed a similar status quo theme for Whatcom County in 2014, foreseeing businessas-usual, with “usual” meaning since the recovery began in 2009. Unemployment, for example, WHATCOMBUSINESSALLIANCE.COM | 33

Dr. Hart Hodges addresses the WBA Economic Forecast Breakfast, which will be held again this year on Nov. 19.

probably no better, but no worse however there was no mention of the substantial decrease in labor

participation rates. In some areas, his research showed, Whatcom has slippage, such as slow-to-no

growth in professional and technical services, which is not good because their pay is good. He slipped some droplets of optimism in, as well, such as predicting an uptick in retail. So, in the experts’ informed views, no “Oh, wow!” on what lies ahead, but also no “Oh, no!” That piqued our curiosity. What do people in our Whatcom County cache of economic influencers think? Business Pulse Magazine commissioned Hortegas Research & Communications to query a number of Whatcom County leaders and conduct a survey among WBA members that received numerous responses. The only thing scientific about it was that the owner of Exact Scientific was among those surveyed. Nonetheless, rather than learned theory and research, this is street talk, in real time, by the real folks who have endured the drain and the pain, and now resurrect the hope.

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Here’s how it worked. Business Pulse created an index on a scale of 1-to-5—call it an Optimism Index—and asked participants to rate their expectations of the economy in 2014, with 5 as Optimistic and 1 as Pessimistic. Participants were offered an opportunity to add comments as well. All the surveys were used to calculate the index, but each participant was allowed to choose whether their comments and name could be used for this article. Some complied and some did not. (Read several comments on pages 38-41.) Wouldn’t you know it—the results came back in the vein of tomorrow looking like today looking like yesterday (3.3 average). Gerry Millman, president at Great Western Lumber Company, for example said: “We see a lot of impediments to growth in our economy and for housing, in particular….(we) feel that 2014 will probably be very similar to 2013.”

“The economy doesn’t care what politicians are doing, which right now is nothing.” Dr. Jim Paulsen Wells Capital Management

Millman, also referenced: “High unemployment, rising interest rates, and overall anxiety about the future will all work to put the brakes on growth. But, we don’t see a collapse either.” Some themes stuck out, varying from concerned to afraid-of, the newly-restructured County Council resulting from the November election, with seemingly more progressive tendencies on land use and other issues. Several others in the survey talked about uncertainties arising over health-care benefits (another huge story on pages 42-53 in this edition).

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Many mentioned government goings-on as detrimental, which is an interesting perception in light of one of Dr. Paulsen’s emphatic points during his event presentation. He said to never pay any attention to what’s happening on Capitol Hill or the White House in relationship to whatever is happening with the economy. “The economy doesn’t care what politicians are doing,” he said, “which right now is nothing.”

In the research and survey, only two persons gave ratings of 5…and only one chose pessimism (1). The lone ‘1’ stated, “Our supposed ‘leaders’ have backed us all up into a wicked-debt corner. There is now no way out of this debt-mess that is not going to hurt.” He cited rising taxes, government spending, federal debt, and the threat of default as the demise of the economy this year. Among those standing on mid-

dle ground was Marty Maberry. He heads Maberry Packing, an integrated farming, processing, and marketing organization specializing in berries that sell both locally and worldwide. He, like Millman, rated himself at 3, showing his cautious side with this comment: “The economy will not be bad, but not robust, and the environment for growth is struggling. For me the key word is uncertainty.” Specifically, Maberry identified factors common to his farm’s future, which he believes typify business in general: “Locally, things can change due to land and water availability,” he wrote. “And what we do is impacted by a world market and economy that is transitional with lots of uncertainty regarding government regulations, including tax policies, income tax, and health care. All of this affects businesses’ ability to manage profits, and so there is less money for growth, job expansion, and so on. “In general, these are strong factors in our company, and for some, these will be game changers. One strain prevailed. While cautious and even borderline negative about the national economic scene, our index indicated a shared degree of optimism regarding the local economic outlook, and more specifically, in the immediate future of their own organizations. And if they are right on, that would be positive for Whatcom County’s future.

Please socialize with us on Facebook at both the Business Pulse Magazine page and the Whatcom Business Alliance page.

The Matrix Service northwest regional office is located in Bellingham, WA. Locally, our company employs between 500 and 1,500 employees supporting our Whatcom and Skagit County business partners. Matrix Service is very appreciative of our first class business partners and the positive influence they have on our local community. We take great pride in the many organizations we support: • • • • • •

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WHATCOMBUSINESSALLIANCE.COM | 37

Economic Forecast: Optimism Index

14in‘14 The average from all who responded to our business confidence survey was 3.325—moderately optimistic. Here, we selected 14 leaders, who averaged 4.0, to tell why in a requested 100-150 words, with a few random comments sprinkled in.

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Survey shows local business leaders confident about their own organizations, but less so about the economy Average Rating

1 Pessimistic

Keith Cox, Owner, Keith Cox Autobahn Optimism Index: 4

We are seeing some of our client friends who have put off a new car purchase in the past few years deciding to go ahead and acquire one. This is a sign of their optimism. We are developing a comprehensive strategy to build stronger relationships with our existing client base and to continually look for new clients. This is not an economy where you can afford to sit around to see what happens. You will get left in the dust by the innovators and run over by the second wave of agile adapters.

Chris Foss, Co-Owner, Greenhouse Optimism Index: 4

My bellwether for the upcoming year is the con38 | BUSINESSPULSE.COM

3.325

5 optimistic

optimism index participants were asked to rate their expectations of the economy in 2014, with 5 as Optimistic and 1 as Pessimistic.

tinuing improvement in the housing market—both in refinancing and new home purchases. Our furniture business is directly impacted by these factors, and we have seen a substantial increase in home furnishing sales for 2013, which I expect to continue in the new year.

Jeff Kochman, President/CEO, Barkley Company Optimism Index: 3

Business activity has been stalled for quite a while due to recession, lack of confidence with the economy, and political concerns regarding business support. So somewhat out of pent up energy, things will start to move forward, better than in past years. I believe it will still be slow, but steadier than before.

“We have seen a steady flow of work in 2012 and 2013, however it seems it could change at any time. It seems more business owners are becoming optimistic, but there is always a degree of hesitation.” Jim Sutterfield, Signs Plus Inc.

Kelli Linville, Mayor, City of Bellingham Optimism Index: 5

We have good reason to be optimistic. In partnership with the Port of Bellingham, Whatcom County, other public agencies, and local businesses, we’re advancing an economic development agenda that first focuses on retaining and expanding existing businesses. We’re partnering with our higher education institutions to ensure we have the work force we need to power our recovery. We’re taking steps to maintain and build a positive, business-friendly climate, including beginning a “lean” review of our permitting process. We’re making strategic investments in infrastructure, such as building regional storm water treatment facilities and making transportation improvements. We are poised to implement our city center plan, and the master plan for Waterfront District redevelopment. Much more needs to be done, but we’re optimistic about these opportunities and confident about Bellingham’s economic future.

Derek Long, Executive Director, Sustainable Connections

Jack Louws, Chief Executive, Whatcom County Optimism Index: 4

I believe our local economy is poised for positive growth in the coming months and years. Most every county revenue source is showing positive trend lines, indicating an economy that is relatively well-balanced and vibrant. Retail, manufacturing, housing, and agriculture are all major components of our economy, and I sense a renewed optimism that wasn’t evident two years ago from business owners and community leaders representing these industries. The most challenging longterm, local concern I foresee for Whatcom County relates to the availability of water for our agricultural needs. This developing challenge could have severe adverse consequences in future years, reducing our productivity on resource lands.

Dennis Meade, Co-owner, Scratch and Peck Feeds Optimism Index: 4

Optimism Index: 4

I believe our local economy will outperform Washington state and the nation in 2014, largely due to the quality of our natural environment and creative people we are fortunate to attract and retain. Sustainable Connections recently finished a survey of business members and they are at least as optimistic as any year in the past. Our local banks are healthy and we hear loan demand is up as businesses look to invest and grow. Consumers and businesses are thinking local for purchases…keeping dollars circulating in our local economy. Growing interest in living and doing business in existing downtowns will also drive the economy. Downtown Bellingham is building up and should continue becoming more vibrant with the addition of the Waterfront District. The same will be true for Ferndale and Lynden (with)…significant investment in historic buildings.

We believe 2014 will be another record sales year for us. We have doubled output and our work force this past year, and we forecast more substantial growth and profit….sustained by several powerful trends rather than the general economy: a unique product valued for simplicity and goodness in a market that has lost a great deal of credibility; a niche in that market, free from compromises that industrial production promotes, and our brand name widelyrecognized as a leader in a movement away from complacency and compromise in animal feeds. We will continue to professionally, efficiently, and passionately establish ourselves even more as a first choice source in natural nutrition to the animals which we depend on to feed us.

WHATCOMBUSINESSALLIANCE.COM | 39

Economic Forcast: 14 in ‘14 Kent Oostra, CEO and Laboratory Director, Exact Scientific Services

Jennifer Shelton, Director, WWU Small Business Development Center Optimism Index: 4

Optimism Index: 4

I believe 2014 is a year that will see businesses make decisions. For the past five or so years, companies have struggled, and those who had a good foundation or plan survived. I see more of our clients looking to expand and grow their companies in the next year and I believe the county is a great location for businesses to enter the U.S. market. We have proximity to Canada, and, through the Port, the Asian and Russian markets. We have continually upgraded infrastructure—the Bellingham Airport, the I-5 corridor, railways, and the room to add businesses without lessening the quality of our natural landscapes. We are in an era where all we have are the opportunities ahead of us with the lessons we have learned.

Teri Treat, Partner/ Manager, Sage Management, developers of the Inn at Lynden

During the past year, more businesses have come to the SBDC with the specific purpose of expanding. In 2012, 42 percent of clients came seeking help related to issues such as declining sales and cash flow challenges. In 2013, that number has decreased to 30 percent. Currently, most are seeking help to expand, and more start-up businesses have sought SBDC’s services this year than in the past few years since the recession (32 percent, compared to 17 percent in 2012). Most of all, local business clients overall have a positive attitude toward taking risk in their businesses. At the federal level, there is a movement toward small business support in areas such as health care and incentives for energy efficiency; we see businesses capitalizing on both.

Marty VanDriel, General Manager, TriVan Truck Body Optimism Index: 4

Optimism Index: 5 We are bullish on the economy and feel strongly that real estate will continue to be a very good investment for us. That said, buying the right location at the right price is a very important factor. This region will continue to draw small business investment, and agriculture will continue to grow. Food, wine and agriculture are influencing choices made by the leisure traveler, and Whatcom County is ripe to become one of the exciting choices for travelers from all over the world.

“When going to restaurants it seems there are more people out...(and) a lot of cars and trucks with new temp licenses, as in people buying new vehicles. I am also receiving more requests for work. I feel like people in general are starting to spend money again.” Scott Harksell, Compass Point Survey 40 | BUSINESSPULSE.COM

We are seeing lots of interest from prospects and customers for exciting projects in 2014. Why are we optimistic? We have tried to instill a “we can do that” spirit throughout our organization, and it seems to be working fantastically well! TriVan has also explored many different markets, so we do not remain overly reliant on any one sector. Oil and gas exploration has been a big contributor for us, but tends to be very cyclical. So, we have invested time and resources into these other areas with the goal of finding markets that are winners for us, and this has paid off.

Kathy Varner, CEO, VSH Certified Public Accountants Optimism Index: 3

The uncertainty and reality of Obamacare and the political games of the 2014 election will keep our economy in a sluggish position. Our gigantic national debt and concern over the value of the U.S. dollar will take its toll on our ability to be again truly prosperous for several more years. My solution is to create a system that ensures our elected Congressional members represent what is best for our country and not for their own re-election. A very effective and relatively inexpensive way to do that: …have 8-year term limits for all congress members, with no re-election during the 8-year period, and pay them each $1 million a year for their service. That brings in the brightest with the best ideas and a real focus on the future of the United States of America.

“As a provider of services for global commerce, we’re optimistic. However, as workers within the U.S. when most work is off-shored, we are pessimistic!” Jaye Stover, The Language Exchange Inc.

Rick Wilson, Dealer Principal, Wilson Motors Optimism Index: 4

The trend in auto sales has been up since the severe recession beginning in 2008 (a time when we opened up our new store!). We have seen the demand for new and used vehicles continue to grow from that time to now. We still think there is a lot of pent-up demand for new cars. Five years ago the average used car was 7 years old; today the average used car is a little over 11 years old. We are lucky to represent three popular vehicle makes: Nissan, Mercedes-Benz, and Toyota. Because of these brands, I am very optimistic for future sales.

“I think 2014 will be neutral; another year like (2013) with uncertain optimism. Next year will be a difficult year as the Affordable Care Act takes hold (and become) inflationary to the economy. Locally the last election radically changed the neutrality of our county government. The new county government will regulate and stifle business growth. Yet they will demand higher budgets as they seek “to do more.” With higher budgets and less $ coming in because there won’t be growth, it will fall back on the existing tax base to fund government programs.” Richard Johnson, Bellair Charters/Airporter Shuttle

Dale Zender, CFO, PeaceHealth Northwest Network Optimism Index: 4

The Affordable Care Act (ACA) will continue to reshape our industry and impact our economy for years to come. In 2014, PeaceHealth will continue as a strong driver of our local economy, adding services and capacity. As more people become insured and have access to health care, demand is destined to increase. We must continue to recruit physicians and build the support systems around them. Also, PeaceHealth will sustain services that may not be financially profitable, but are essential to the community, that align with priorities identified in our Community Health Needs Assessment, and that are consistent with our Mission and Core Values.

Steve Hortegas, principal of Hortegas Research & Communications, is a regular contributing reporter for Business Pulse. He has served a variety of local business, medical, health, and government leaders as a specialist in market research, communications, promotions, and events. WHATCOMBUSINESSALLIANCE.COM | 41

Affordable Care Act

Affordable Care Act not so affordable Employers, employees fear sticker shock By Cheryl Stritzel McCarthy

he Affordable Care Act (ACA), commonly called Obamacare, became law on March 23, 2010. Employers have until Jan. 1, 2015 to comply with regulations. (For individuals buying health insurance, the ACA took effect Jan. 1 of this year.) It is the biggest overhaul of health insurance since Medicare and Medicaid became available in 1965. It is as comprehensive as the Social Security Act, which passed in 1935. The condensed version of the ACA is 1,000 pages. The law passed on a partisan vote, without a single Republican in either house of Congress supporting it. It passed using a special process rule called reconciliation, which limits debate. This occurred at a time when, according to poll42 | BUSINESSPULSE.COM

ing, the majority of Americans did not support the ACA. The stated aim of the mandates for this national health insurance policy is to increase the quality and affordability of insurance, lower the number of uninsured, and reduce costs within what constitutes about one-sixth of the U.S. economy. “It’s called the Affordable Care Act, but it’s not very affordable,” said Josh Wright of the Ferndale office of Bell-Anderson Agency, Inc., an independent broker that offers health insurance plans to clients across a range of industries. To illuminate the ACA’s impact in Whatcom County, Wright and Matt Heikkala of Bell-Anderson explained its effect on a manufacturer, a restaurant chain, and an individual purchasing insurance outside of an employer. Business Pulse sought out additional sources for specific impacts. Some

of the companies and individuals divulging information for this report requested that their names not appear, but they are documented case studies. “How plans operate will change. How the employer offers coverage, that also will change,” Heikkala said he has discovered in studying the ACA thoroughly.

The manufacturer This manufacturer in Ferndale with 100 full-time employees will see a 36 percent increase in the cost of premiums to the company under the ACA, Heikkala said. The manufacturer is putting a new, ACA-compliant plan in place for 2014 to stand ready for the 2015 deadline. This industry typically has healthy individuals and a record of low claims. “These are core changes to the plans themselves,” Heikkala said.

“It’s better coverage, but those changes will cost more. I’m seeing a 36 percent increase, which is close to average.” That increase is due to several factors, e.g., the continuous upward trend in medical costs; plan changes that dictate richer coverage; claims, and taxes and fees imposed on insurance companies by the ACA. Also, for 2014, new full-time employees, defined by the ACA as working 30 or more hours a week, must be covered within 90 days of their start date, Heikkala said. “In 2015, if (employer-sponsored health insurance) is deemed unaffordable to an employee, the employer could get a penalty.” The ACA’s penalty to employers for not providing health insurance is $2,000 for each employee annually. The average cost of a health insurance policy in Washington state is $4,500 for an individual, and $14,000 for a family, according to a report published

Another Exemption In late December, the Obama administration announced that people who’ve had their health insurance plans canceled after the ACA implementation would be eligible for a “hardship exemption” from the individual mandate that was set to take effect Jan. 1, 2014. Those qualifying will be allowed to

on line by retired cardiothoracic surgeon Roger Stark (washingtonpolicy.org). Stark, an analyst with the Washington Policy Center in Olympia, said ACA’s taxes are causing tremendous uncertainty for employers. Some companies, especially in low-profit businesses like grocery stores, may drop health benefits and pay the fine. Then workers will have to choose their insurance from the state health insurance exchanges, where subsidies assist those who qualify. Stark wrote,

sign up for “catastrophic” plans that do not meet government standards under the law. This was the 14th unilateral change to the ACA made since the law was enacted. Like other exemptions, this ‘fix’ will last only a year, raising the prospect that coverage under these plans will be canceled again, sometime after the 2014 election.

“These subsidies, coupled with the low employer penalty, will shift workers from employer-sponsored health insurance to taxpayer-supported health benefits.” For the 100-employee Ferndale manufacturer, solutions start with canvassing every option available in the marketplace. “Maybe we look at higher deductibles, or different ways to structure the cost,” Heikkala said of this Bell-Anderson client. Self-insurance might be an option, where the manufacturer acts as its own insurance com-

WHATCOMBUSINESSALLIANCE.COM | 43

pany, paying claims up to a certain point, with an outside insurer covering claims over that. “We understand the ACA. People want help navigating this process,” Heikkala said. He said six of his prospective clients, all employers with group plans for 20-to-90 employees, face 32 percent increases in premiums, on average. The stress on employers caused by the ACA is huge, Wright said. Employers need to understand the new law so they can educate employees about ACA’s exchanges.

“The ACA is a significant distraction to working families, and an increase in monitoring and administrative costs to the company.” Janelle Bruland, president/CEO Management Service NW

“Administrative costs will definitely be much more,” Wright said.

The restaurant chain This Whatcom County restaurant chain has 20 locations in the county and 300 employees, with 180 of them part-time. The government’s decision in October 2013 to shift the ACA deadline for business compliance to 2015 relieved a lot of stress. Before, this business was contem-

plating closing stores, and changing some full-time employees to part time. “If 30 hours is the norm now for full-time, you’d have them working 29,” Heikkala said. Another option for this business was to drop coverage and pay the fine of $2,000 for each fulltime employee, after the first 30 employees. “In a lot of cases for a lot of employers, it’d be less to pay the fine than to provide coverage,” Heikkala said. But with the ACA deadline pushed to 2015, this business now has time to consider the situation. Employees who shift to parttime will earn less, and go to government exchanges to buy a plan, where they might qualify for a taxpayer-supported subsidy. “But anything they’d pay for themselves would be more than what they’d pay through their employer,” Heikkala said. Owners of three separate fastfood chains in Whatcom County, contacted for this article, all declined to be interviewed. One, asking to remain anonymous, said he felt for his employees, many of whom are young people striving for financial independence, working their first job, and in some cases living with parents. “The ACA is really forcing those folks to work under 30 hours,” he said. “The restaurant business in any state is huge. It affects a lot of people.” Carl Schramm wrote in The Wall Street Journal that the ACA can’t survive financially unless

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young, healthy people, or their parents, “pay through the nose

“Now many employers are cutting hours to less than 30 per week, limiting employment to 49 workers, or dropping union contracts when they expire.” Dr. Roger Stark Washington Policy Center

for coverage under parental plans or individual mandate. The 18-26 age group is the lowest user of care, the least costly to cover, and the most profitable of all healthinsurance coverage. Yet the group faces extraordinarily high Obamacare rates.” A Manhattan Institute analysis of Health and Human Services noted that a 27-year-old male will pay 99 percent higher premiums under Obamacare than he would under previously prevailing market rates. Local restaurant owners, like other employers, are grateful at least that ACA won’t take effect until 2015. “Things keep changing,” said Wright at BellAnderson. “What we know today may change tomorrow.” As the government changes the rules, businesses must adjust, Heikkala said. “We give clients a daily feed that show changes, broken into bite-size pieces.” Wright compared the ACA to an airplane that was built after it was in the air. “There was so much ‘fill-in-the-blank,’ and ‘to-bedetermined,’” he said. Referring to his colleague Heikkala, Wright said, “Matt’s the only person I know who’s read the legislation, and everything since, which is more than you can say for the people who passed the legislation.”

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The individual The calamitous launch of the website Healthcare.gov last October didn’t help. Among other problems, the website forced users to register before having access to browsing options, which created a bottleneck that jammed the system. “Healthcare.gov was initially going to include an option to browse before registering,” Christopher Weaver and Louise Radnofsky reported in The Wall Street Journal. “But that tool was delayed.”

“I’ve seen 60 to 150 percent increases.” Matt Heikkala, Bell-Anderson Agency, Inc.

Why? They reported that a healthcare.org spokeswoman said the government agency wanted to ensure that users were aware of eligibility for any subsidies before they saw the price of the policies.

Locally, semi-retired information technologist Charles K. Jessup of Blaine hit sticker shock on WAHealthPlanFinder.com in October 2013. After waiting out some system malfunctions, he discovered the lowest Group Health Bronze plan would charge him and his wife $9,808 annually “for worse coverage than our already high-deductible plan,” Jessup said. (The couple’s existing premiums, after rising for two years, were $7,313 in 2013.) “I call it the Unaffordable Care Act. It’s a nightmare,” Jessup said. “People like me, with a reasonable income who don’t qualify for subsidies, are getting taken to the cleaners.” This married couple’s income is $70,000 annually. The ACA hit home for BellAnderson’s Wright and Heikkala who have personal examples of the ACA’s effect on individuals purchasing insurance outside of an employer. Both of their wives, before ACA, purchased individual

health insurance through outside providers. That was substantially less expensive than buying coverage through their husbands’ employer.

“People like me, with a reasonable income who don’t qualify for subsidies, are getting taken to the cleaners.” Charles K. Jessup, semi-retired information technologist, Blaine

But now, “Anybody with an individual plan is being discontinued and must move to a new plan,” Heikkala said. “My wife could go to the state exchange, or go to her previous provider and apply for one of their new plans. The closest match was a new Bronze Plan, offered by her previous provider. The cost increase is 86 percent. Her monthly premium will go up $361 per month.

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She likes her plan, but can’t keep it Local bookkeeper told she had to change plans at higher cost for less coverage By Mike McKenzie Janet Wing has become one-of-amillion—or, according to some news reports, as many as one-of-15 million. She’s had her health-care plan cancelled. She liked her plan; she wanted to keep her plan. Period. Instead, her old plan with Regence BlueShield in Seattle died on Dec. 31, 2013, and her newly-presented option hit her bank account hard. When the state of Washington’s insurance commissioner, Mike Kreidler, went against the recommendation of President Obama to extend current plans a year, Regence changed Janet to a “bronze” plan at a substantially higher cost and with undesirable and unwanted coverages. She conducts business as Northwest Secretarial, telecommuting from her home on Lummi Island where she lives with her retired husband. Janet contracts as administrator/office manager for a chiropractic clinic in California, responsible for her own benefits. Her monthly premium shot up 45 percent, from $390 to $564.55, and her deductible doubled from $2,500 to $5,000. Janet made several notes on her notice in November from Regence, which cited requirements for compliance with the Affordable Care Act. They invited her to the Washington health care exchange website to view other options. She then called Regence to request documentation that she wanted to keep her existing plan another year. Regence confirmed in writing that she could not. The plan coverage definitions that could have been extended a year included three areas in particular that Janet wanted to 48 | BUSINESSPULSE.COM

Janet Wing, seen here in her home office, was not happy about her healthcare plan cancellation. (photo by David Wing)

keep in place: doctors’ office visits, and emergency room visits, and radiology and laboratory out-patient care. • Instead of coverage for the “first four office visits per calendar year covered after $35 copay (deductible waived)” and “covered after In/Out-of-Network,” she now must apply all office visits to deductible. • For emergency room, facility and professional, she had “$150 copay per each emergency room visit (waived if admitted)” and “covered after copay then deductible and preferred level coinsurance.” Now, she wrote, “I must pay $5,000 deductible before anything is paid.” • In radiology/lab, she had “first $200 per calendar year, deductible waived” and “after $200 upfront limit is met, covered after deductible and coinsurance.” That changed to “covered after In/Out-ofNetwork deductible and coinsurance.” Janet marked two areas on her new plan, both required by Obamacare, “don’t need this benefit” – chemical dependency treatment, and maternity. Maternity? She is 61. And the final blow, Janet said: “My email has been hacked, and it might well be because of me going into the state’s health-care exchange website.”

“That’s average. I’ve seen 60 to 150 percent increases.” Heikkala cited plan differences that include a $2,500 deductible that’s now $4,000. “You have to pay four grand before anything, aside from preventive care, gets covered.” His spouse’s previous plan did not offer prescription drug coverage, and it required office co-pays. The ACA-compliant plan will cover both. Her previous plan had a $5,000 out-of-pocket maximum. The ACA-compliant plan has a $6,350 out-of-pocket maximum, which includes the deductible. “She’s looking at all options now. From what I’ve seen, rates are comparable among carriers,” Heikkala said. “There’s nowhere to get a lower cost per month. Cheaper? It’s just not. You’re going to have to buy a richer plan, or pay the fine.”

“Self-insurance may be an option, where the manufacturer acts as its own insurance company, paying claims up to a certain point, with an outside insurer covering claims over that.” Matt Heikkala, Bell-Anderson Agency, Inc.

His wife, a representative case, is not eligible for government subsidies since she has access to coverage through her spouse’s employer. It’s a Catch-22. The employer doesn’t pay for dependents’ coverage, but since employer-sponsored coverage is available, and ACA deems it affordable, she doesn’t qualify for a subsidy. About 14 million Americans buy their own insurance, and it’s unknown how many of those policies are being discontinued, according to Julie Appleby in “Kaiser Health News.” Some insurers report discontinuing 20 percent

of their individual business, others report 80 percent. In Washington state by mid-November last year, insurance companies had cancelled policies for 290,000 citizens. “My first half hour of every meeting is taken up with this,” Heikkala said shortly after the healthcare.org website launched last October. “Existing plans are done. They get rate shock. Then they go to the exchange and can’t get in.”

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The service provider Management Services NW in Ferndale provides office cleaning and building maintenance-related services. The company employs about 280, and another 100 or so independent subcontractors. Their insurance provider hopes that increases for MSNW won’t go up more than 6 to 15 percent. “They don’t know. We have not been provided rates yet,” company President/CEO Janelle Bruland said. “We’ve seen articles that say it will be a lot more. How can a business or employee take more than a 20 percent increase in premiums? How is that feasible for either party?” MSNW will not consider dropping coverage and paying the fine, Bruland said. “It’s part of our culture to take care of our people. We’ll continue to provide health insurance, shop for the most affordable plan, and help educate employees about options. We’d like to offer what we’ve been offering, but if that’s not affordable, we’ll investigate other options.” Administrative costs will rise. “We could hire another half-time, ongoing support person to handle requirements imposed on us by ACA,” Bruland said. Admin costs will ratchet up further due to the ACA’s definition of full-time as 30 hours. Previously, some employees worked more or less than MSNW’s defined full-time of 36 hours without it becoming an issue. “It will cost us adminis-

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tratively to watch that. Before it was no big deal for them to hover around the 30-hour mark.” Full-time vs. part-time work through her company is determined by client needs, not the ACA, Bruland said. “If there’s a need for a full-time employee, we’ll retain a full-time employee.” The ACA is increasing employees’ insecurity, she said. “Those who’ll be most impacted are already struggling financially to support their families. There’s a lot of fear regarding the unknown. The ACA is a significant distraction to working families, and an increase in monitoring and administrative costs to the company.”

The union Integrating the ACA with existing plans so members get the best possible care will be a challenge, said Joe Peters, business manager of International Brotherhood of Electrical Workers, Local Union 191, which has an office in Bellingham. “We are pro-coverage. We just don’t want union workers to be unduly affected by cost

when others may not be. “One of our primary issues is to make sure people have care. Our plans were already offering some ACA items. For example, we didn’t deny coverage based on pre-existing conditions. Our medical plans are so rich in what they cover, we could be taxed later to the level of care. We don’t want to be overtaxed because of the level of care, or have to adjust coverage later.

“We are pro-coverage. We just don’t want union workers to be unduly affected by cost when others may not be.” Joe Peters, business manager IBEW Local 191

“We really don’t know cost implications yet.” Other local unions declined to be interviewed for this article, citing contract negotiations. One of many controversial elements of the ACA that could

impact plans that provide excellent benefits is a 40 percent excise tax on the so-called “Cadillac Plans,” taking effect in 2018. “Union members enjoyed excellent health benefits for the past 65 years,” wrote Dr. Stark, the health care analyst with Washington Policy Center, and the author of “The Patient-Centered Solution: Our Health Care Crisis.” Now, he reported, many employers are cutting hours to less than 30 a week, limiting employment to 49 workers, or dropping union contracts when they expire. “Ironically, union executives were strong supporters of the ACA and lobbied for its passage,” Stark continues. “Now the law they supported may hurt their own members.” That appears to be the universal case regarding universal coverage. With health care coverage mandated by federal law, nobody across the spectrum appears immune to the sticker-shock dead ahead.

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HEALTH Guest Column: CARE INDUSTRY Health Care Roger Stark | MD, FACS Dr. Roger Stark is the author of “The Patient-Centered Solution: Our Health Care Crisis, How It Happened, and How We Can Fix It.” He is a retired heart surgeon and a health care policy analyst with Washington Policy Center, a nonpartisan think tank in Washington state. For more information, visit washingtonpolicy.org.

Tough economic decisions on benefits for most businesses Obamacare puts Washington companies in a vise

hree years ago, with narrow partisan support and substantial bipartisan opposition in Congress, President Obama signed the Affordable Care Act (ACA), known as Obamacare. Polls consistently show the ACA is increasingly unpopular with the public. At no point in U.S. history has such sweeping social legislation become law by such a slim political margin, and with the votes of only one party. The Administration has issued over 1,600 waivers to favored interests. Otherwise, the law will affect all citizens, and will have a definite negative impact on employers and business owners. The ACA will be fully implemented by 2018 and some provisions have already taken effect. For example: • All employer-sponsored group plans must now cover employees’ adult children up to age 26. • Employer plans may not exclude children up to age 19 for preexisting medical conditions and they must cover preventive care. • Small businesses with fewer than 25 employees may receive a federal subsidy if they agree to provide 52 | BUSINESSPULSE.COM

a wellness program. • A small business tax credit began in 2010, but because of burdensome paperwork and extremely restrictive rules, very few eligible employers have signed up. • In 2012, all employers who offer health benefits were required to file reports to the Secretary of Health and Human Services. Employers will be required to submit details of their health insurance coverage to guarantee they meet federally-mandated requirements. • New Medicare taxes began in 2013. The Medicare tax on income went up 0.9 percent to a total of 3.8 percent a year on wages over $200,000 for individuals and $250,000 for married couples.

None of the exchanges will function as open markets, however, because prices and benefit levels will be set by federal regulators, not by consumer demand. These same taxpayers are also required to pay a new 3.8 percent tax on “unearned” income. Unearned income includes dividends, capital gains, rental income

and, in certain cases, profits from home sales. Many business owners in Washington state are in this income bracket and are subject to the new tax. The earning threshold is not indexed for inflation, so the number of families hit by this tax will increase each year, as has happened with the federal Alternative Minimum Tax (AMT). In 2014, state-based exchanges are supposed to act as insurance brokers, connecting consumers with health coverage. Washington state has been proactive about setting up an exchange, but 35 states have opted to use the federal exchange. This federal exchange has been plagued with serious problems since it opened on Oct. 1, 2013. None of the exchanges will function as open markets, however, because prices and benefit levels will be set by federal regulators, not by consumer demand. Individuals and families earning up to 400 percent of the federal poverty level ($94,200 for a family of four) can receive federal subsidies for the purchase of health insurance in the exchanges. Employers with fewer than 100 workers will also be allowed to purchase health insurance through the exchanges starting in 2015. By 2014, all health plans must

comply with federal mandates. Federal officials have chosen 10 benefit mandates that every health insurance policy must include. These include pre-natal, maternity and pediatric dental care. Obviously not everyone needs this coverage, yet they will be forced to pay for this â&#x20AC;&#x153;basicâ&#x20AC;? insurance coverage whether they want it or not. Starting in 2015, every employer with more than 49 full-time (30 hours or more a week) employees will have to pay a fine of $3,000 for every worker who receives a government subsidy. These same employers will face a fine of $2,000 for every worker if the business owner does not offer a health insurance plan. Starting in 2018 a 40 percent excise tax will be imposed on high-value health insurance plans, $10,200 and $27,500 for individuals and families respectively. Businesses and employment in Washington state will suffer as a result of the ACA. Employers of

all sizes will experience a greater regulatory burden, more government-mandated paper work, fewer choices for their employees, and no mechanism to control costs. These provisions will have a negative impact on employment.

Starting in 2015, every employer with more than 49 full-time (30 hours or more a week) employees will have to pay a fine of $3,000 for every worker who receives a government subsidy. Employers now offer health benefits as a way to attract the best workers, or because of a moral commitment based on 65 years of employer-sponsored health care in this country.

The landscape has changed dramatically with the passage of the ACA, however. Employers faced with escalating costs and the 20,000 pages of new regulations will be forced to make tough economic decisions. In many cases paying the fine, or tax, for not offering health insurance will cost employers considerably less than paying for employee health coverage. In highly-competitive markets, business owners will likely decide to pay the tax and force their employees into the governmentmanaged insurance exchange plans. As a result, millions of workers will lose their current health coverage. As it is implemented, the ACA will dramatically change health care for all Americans. Every employer and employee will be subject to increased government regulation, higher taxes and fewer personal choices in health care.

WHATCOMBUSINESSALLIANCE.COM | 53

Profile: NW Sky Ferry

Bellingham’s only locally-owned airline tailors its services Northwest Sky Ferry offers commuter and charter flights and caters their flight times to meet their customers’ needs

Article and photos by Sherri Huleatt

an Juan Island from 3,000 feet up is a beautiful thing. But even more beautiful? Getting from Bellingham to Friday Harbor in 15 minutes flat. No driving down to Anacortes, no long lines, and no slow-moving ferry when traveling with Northwest Sky Ferry. It offers exceptional scenery, friendly customer service, and competitive fares.

Photo: Skip and Katie Jansen bought Northwest Sky Ferry in 2009, and upgraded the FAA certificate to offer both charter and commuter flights.

Northwest Sky Ferry is Bellingham’s only locally-owned airline. Their charter and commuter flights serve all the San

54 | BUSINESSPULSE.COM

Juan Islands, British Columbia, and other Northwest destinations. Flight services range from scenic flights over Mt. Baker to romantic views over Roche Harbor to $49 flights that get workers to and from the islands in a fraction of the time a ferry would take. Since taking over the airline in 2009, owners Skip and Katie Jansen have adopted a highly effective customer-first policy inspired by their own experience with the airline long before they took over. As happy residents of Crane Island—a tiny oasis tucked away in the San Juans—the Jansens relied on Bellingham Air Taxi (the previous name) to get to and from the island. Their business, JIJ

Corporation—a construction development company—was located in Bellingham. When the airline went up for sale in 2009, the Jansens decided they loved the service so much, they’d buy the company and change the business plan to be the first local airline to offer both commuter and charter flights.

“We wanted to come up with a business model that was different. Instead of just offering scheduled flights, we wanted our customers’ schedules to determine our flights.” Katie Jansen, co-owner, Northwest Sky Ferry

“When we took over we wanted to come up with a business model that was different,” Katie Jansen

said. “Instead Business Box Score of just offering Owners: Skip and Katie Jansen scheduled flights, Start-up date: 2009 we wanted our Industry revenue: The U.S. charter airline industry is worth customers’ sched$14 billion ules to determine Growth rate: 15% to 20% through 2014 our flights.” Employees: 13 (11 in Whatcom County) Even if there’s Other growth indicators: In 2010, they were issued a only one person Commuter Certificate by the FAA that allowed them to that needs to fly offer both charter and commuter flights. In June of that somewhere in same year, they opened a new hangar next to the Heritage the Northwest— Flight Museum and held a “pool party” to celebrate their whether to new “flight pooling” option, which lowers the cost of each Boeing or to ticket the more passengers ride on a flight. Point Roberts— No. of planes: Four Cessnas—a 206, a 182, and two 172s. they’ll accomPrimary client base: Whatcom and Island county residents modate that single-passenger need on the passenger’s schedule. strong through 2014. With four Despite taking over the airline Cessna airplanes and 13 employin the middle of the recession ees, the Jansens hope their steady and facing stiff competition from growth allows them to invest in other local airlines, Northwest Sky larger aircraft, more staff, and Ferry has seen 15-to-20 percent flights to Alaska and eastern growth over the last few years. Washington. They expect these numbers to stay According to the Jansens, their

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Flights include scenic tours, such as this view in the San Juans at dusk by the author/photographer. Northwest Sky Ferry also offers commuter flights, and quick trips that transport contract workers between Bellingham and the islands.

exceptional customer service is the reason for their loyal customer base and continued growth. “In a world that is so automated, we strive to take care of our customer’s scheduling and travel needs in a more up-front and personal way,” Katie said. “Each of our pilots and staff interact with our customers. They are absolutely our best assets.” During the peak summer season, in which they fly about 35-40 people a day, much of their business comes from tourists looking for scenic flights. Last summer saw a particularly strong boost in tourists after Trip Advisor listed San Juan Island the top island to visit in the U.S. The airline keeps busy yearround with islanders going to and from the mainland. Their biggest customer base, however, 56 | BUSINESSPULSE.COM

comes from local contractors shuttling construction workers

Despite taking over the airline in the middle of the recession, and facing stiff competition from other local airlines, Northwest Sky Ferry has seen 15 percent to 20 percent growth over the last few years. They expect these numbers to stay strong through 2014. around the islands. In comparison to transporting workers by ferry, Northwest Sky Ferry saves businesses both time and money.

Katie Jansen with NW Sky Ferry greeted visitors in the company’s booth at the WBA’s 2013 Northwest Business Expo & Conference, informing them about unique air commuter and tourism opportunities. (Staff photo)

The company’s commitment to keeping costs down for customers inspired them to be the first airline in the region to offer

WHEN PIGS FLY Northwest Sky Ferry at Bellingham International Airport caters to business commuters and tourists, primarily. But they’ve even gone so far as to fly animals. They transported a mistreated pig from a Whatcom County farm to a safe home on Point Roberts. They’ve also helped rescue two stranded seal pups. All such flights they do for free. “We make room for everyone,” co-owner Katie Jansen said. — Sherri Huleatt

“flight pooling”—an option that decreases the price of each ticket as more passengers ride a flight. This gives customers the option of customizing their flight while saving money.

Their biggest customer base comes from local contractors shuttling construction workers around the islands. In comparison to transporting workers by ferry, Northwest Sky Ferry saves businesses both time and money. “We add a personal touch every time we schedule any flight,” Katie said. “We work really hard to get our clients into a schedule that works for them while keeping their costs low.”

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Profile: TITLE Barlean’s Organic Oils

CEO John Puckett (left) and the owner/ founder of Barlean’s Organic Oils, Bruce Barlean, take a break from a company training workshop at Barlean’s home in rural Ferndale.

Turning Dreams into Reality How Family Values resulted in a $65 million business that brings health to the world By Tara Nelson

t the end of a long, bucolic road outside of Ferndale to the southwest, on the corner of Slater Road and Lake Terrell Road, lies one of Whatcom County’s sleepy-appearing giants. It deals in oils. No, we’re not talking crude oil refineries. This is Barlean’s Organic Oils, and from the outside it can be easily mistaken for a series of brightly-colored storage warehouses with little activity, easily missed in otherwise drive-through land. Walking through their doors, it becomes clear quickly that this is a family-owned business. You’ll first be greeted by a woman affectionately nicknamed “Sug” (pronounced shug, as in sugar). She is owner Bruce Barlean’s aunt. The next thing you’ll notice is a hand-made bottling machine. It was crafted by Bruce’s dad, Dave Barlean, a skilled machinist and former fisherman who helped his son fund the company’s start-up 25 years ago. The machine, 58 | BUSINESSPULSE.COM

Business Box Score

Karen Barlean. Another, Cindy, Top Executives: Bruce Barlean (owner), John Puckett (CEO) and her husband Start-up: 1989 Ronan run the How start-up was funded: funding from bruce barlean’s original Barlean’s parents’ life savings Fishery market, Annual sales: $65 million also located on-site. ANNUAL Growth rate: 10-13% In all, Barlean’s Other growth indicators: Expanding international markets, Organic Oils new manufacturing facilities, new process technologies employs 12 family Employees: 160 (all but 10 in Whatcom County) members, and both of his parents are very much involved although no longer in use, could in the business, Bruce said. produce 100 bottles of oil an hour, “We call it a professional famrepresenting one of the simple, yet ily business, rather than just a effective keys to Barlean’s longprofessional business,” he said. term success. “We don’t want to lose the family “He knows how to make things aspect of it, and by that I mean for free,” Bruce Barlean said. taking care of people and all of “A lot of our processing equipour employees.” ment is still made on-site in our Barlean’s Organic Oils has machine shop.” rather quietly blossomed into one of the largest and most successful family-owned companies in Whatcom County—160 employees “I had been in corporate and $65 million in sales for 2012.

America most of my life and all (those companies) cared about was sales growth and profit numbers. Then I met with Bruce and he never once used sales or profit as an example, so it was really neat to see he really valued his employees rather than just the numbers.”

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John Puckett, CEO

The family home sits on the same 42-acre property as the business, the home where the six Barlean children were raised since 1977. Five of them are employed in the organic oils business next door, including chief financial officer and Whatcom County Professional Woman of the Year

They have operated under the radar of most local residents while capturing a large chunk of a burgeoning global market—fish and flaxseed Omega 3 oil supplements. The Barlean family empire has humble beginnings. The company website details the story: In 1989 Bruce Barlean, while working as press operator for another producer of organic oils, started reading up on the benefits of Omega 3 fatty acids in flax oils. After work he would tell his parents all about it, and the ever-resourceful Dave Barlean asked if his son could sell a barrel of oil a day. When Bruce said yes, Dave Barlean and his wife poured their life savings into their son’s startup. Soon after, Dave gave up his life-long fishing career and began helping his son develop a new method of cold pressing that would produce a fresher tasting oil with higher quality and less deterioration.

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Dave also flew to Germany to meet Dr. Johanna Budwig, an expert on the health benefits of Omega 3 oils. Although at first skeptical, Dr. Budwig soon endorsed the product and gave Barlean’s the right to reprint her books in the U.S. Progress was slow at first and the Barlean’s family took no profits out of the company and instead reinvested capital that they needed to grow the business. Then in 1992, the company hired Don Bodenbach of Progressive Health in San Diego, Calif., to market the product. Soon after, sales surged an average of 40 percent each year and the company quickly doubled in size. Two years later, another warehouse, then another storage facility, and eventually nine buildings held 125,000 square feet of manufacturing and storage space. Also, around 2000, Barlean’s added powdered greens and fish oil supplements, and in 2007 they developed a proprietary Swirl technology (natural-ingredient flavored cream) that made Barlean’s

Employees filled the living room at owner Bruce Barlean’s home before the holiday break for a workshop on personal improvement. (Staff photo)

a household name. Since then, they’ve also added chia seeds, olive leaf extract, extra virgin coconut oil, standardized lignan extract, and other unique supplements to their arsenal of internationally-recognized healthy supplements. The awards have been too many to count—mentions in magazines like Whole Foods, Better Nutrition,

Lisa Neilsen checks her email during a break in the workshop action; she is in charge of the booming international sales market at Barlean’s Organic Oils. (Staff photo) 60 | BUSINESSPULSE.COM

Prevention, and Taste For Life, to name a few. Bruce Barlean struggled to recall exactly how many honorable mentions and awards his company has received for best taste, best quality, manufacturer of the year, No. 1-rated health food company, best new product, et al. He spoke, however, particularly proudly of their designation as “One of the Top 100 Eco-Friendly Companies” by Green Patriot Magazine. “We get so many awards, it’s hard to keep up,” he said. Not all of their endeavors have been successful, however. Forty percent of their business is tied up in private-label packaging for other companies’ products. Bruce recalled that in 2012 a large client came on board and asked if Barlean’s would package a fad diet product. Bruce said they watched company sales skyrocket by almost 75 percent and then drop back down all in the same year. The product was quickly discontinued after that. Bottom-line evangelists take note: For Bruce, the objective of business is not so much about numbers as it is taking care of family, helping people, and having fun. If you’re able to catch up with Bruce, he’s less likely to talk about the success of his business and more likely to talk about

the problem of human trafficking in the United States. Or, food deserts, places where affordable, healthy food is inaccessible for the majority of residents—particularly for low-income residents without vehicles or adequate public transportation. The Barlean’s Organic Oils corporate culture that values people over profit attracted John Puckett, their current CEO who left behind 12 years with a pharmaceutical corporation in North Carolina and helped catapult the company’s sales with clients in countries all over the world.

“The most gratifying part (has been) to see that we can sustain our growth, and whether it’s 10 percent or 30 percent, can prove to customers, including Fortune 500 companies, that if their sales grow, we can grow with them.” John Puckett, CEO

“I had been in corporate America most of my life and all (those companies) cared about was sales growth and profit numbers,” Puckett said. “Then I met with Bruce and he never once used sales or profit as an example, so it was really neat to see he really valued his employees rather than just the numbers.” Puckett added that he liked how Barlean’s Organic Oils gave him the opportunity to explore lots of ideas he had developed over his career. Puckett started with the firm as a consultant hired in 2009 to help design a new manufacturing facility for a new product, a soft-gel capsule.

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The new facility cut production costs two ways: • Package more supplements inhouse, and • The proprietary encapsulation design allowed the soft gel to dry in 12-15 hours, as opposed to the industry standard of 5-7 days. “It’s a good feeling, because I always had that in my brain to do, and finally I found someone who

would listen to me,” Puckett said. “So I did it and it worked…better than I imagined.” As Barlean’s Organic Oils filed permits to build their new 15,000-square-foot facility, Puckett loaded up his family in the car and headed west. Bruce Barlean would be responsible for the vision, and Puckett would be responsible for the technical

Professional Woman of the Year:

Karen Barlean, CFO By Lydia Love Karen Barlean said it came as a shock to her when she learned she had been nominated for a prestigious award. And the shock waves continued when Whatcom Women in Business named her as the 2013 Professional Woman of the Year. She is chief financial officer of the large Ferndale family business of Barlean’s Organic Oils. Barlean became the 31st professional woman chosen by the Whatcom Women in Business. “I think I forget sometimes that I’m a real grownup now, with lots of work experiences to share with other women in the startup phase of their career,” Barlean said. “This award is a good reminder to be open to

62 | BUSINESSPULSE.COM

opportunities to assist others. While this is a great honor, the work by no means stops here.” Lynne Henifin, 2013 president of Whatcom Women in Business, said Barlean has shown outstanding leadership and business knowledge in building and helping grow Barlean’s Organic Oils. “She has dedicated countless hours to many organizations within our community and she has been a mentor to many, leading through example and supporting those who needed her help,” Henifin said. Some of the qualities the Whatcom Women in Business look for in their candidates include strong leadership, business acumen, mentoring, professionalism, and an involvement with the community. “I’ve seen too many businesses and people win awards and then tank within the year, so it’s not something you can’t take a loan against,” Barlean said. “Life still requires just as much hard work tomorrow as it did yesterday.” Barlean remembered a time recently when she looked at the parking lot at work and noticed their employee count had doubled from 70 to 140 in about a year. Her feelings of satisfaction weren’t about the sales or the profitability of the company, but came from the fact that her own family business had created so many jobs in Ferndale. And that’s what keeps her smiling.

aspects of the project. Puckett also brought his expertise in dealing with raw material providers and equipment manufacturers in one stop with no middlemen. The end result has been a 40-50 percent reduction in costs by cutting manufacturing time, number of people, materials, and equipment. “What some companies need 10,000 square feet to do, we can now do in 5,000,” Bruce said. “We can do it in half the space, twice as fast, and produce a product of better quality.” It also allowed them to increase their production capacity and to respond quickly to spikes in demand, as required by some of their larger private labeling clients. Puckett’s knowledge of pharmaceutical and dietary supplement regulations helped raise Barlean’s new manufacturing to pharmaceutical grade level that allows them to do business with Fortune 500 companies.

“When we were growing up, we didn’t have much. But God has been really good to us and we basically just want to be able to help others now, in whatever way that is.” Bruce Barlean, Owner

“We’ve plowed a lot of capital dollars back into the facility and into purchasing equipment to allow us to sustain the growth,” Puckett said. “That’s been the most gratifying part, seeing that we can sustain our growth. Whether it’s 10 percent or 30 percent we can prove to customers, including Fortune 500 companies, that if their sales grow, we can grow with them.” Barlean’s Organic Oils operates in about 120,000 square feet of production and storage

Jeff Engen leads the U.S. sales team for Barlean’s. (Staff photo)

space in Whatcom County with 150 employees, as well as 25,000 square feet of warehouse space in Lenexa, Kan., where they employ 10 people. They recently received permits from Whatcom County to build two more buildings at their Ferndale location. Flexibility might as well be their middle name. Their business fluctuates so much, Bruce Barlean and Puckett developed a system of interchangeable plexiglass walls with transferrable electrical grids that allow them to reconfigure their entire operation in a matter of days if needed. He said it would take most other companies two months to reconfigure. Colorfully referred to as “The Fishbowl,” Bruce said the technology and configuration also cuts down on construction waste, helping the company meet a green bottom line. Their biggest new prospect could be China. Bruce Barlean said the excitement among Chinese consumers at a recent trade show there was “palpable,” as lines for free samples never slowed during the three-day event. Bruce said the level of demand currently in discussion could double the company in size.

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Still, Puckett said that whatever happens he and Bruce want to maintain a fun and supportive culture for their employees. He said that he thinks Barlean’s Organic Oils’ success started with great ownership and leadership that believed in what they’re doing and in the people they employ. “We have fun running this busi-

The end result has been a 40 to 50 percent reduction in production costs by cutting down on manufacturing time, the number of people, materials and equipment necessary.

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ness. When we don’t have fun, we actually stop and take the time to figure out why it isn’t fun,” Puckett said. “Bruce challenged me to take his company from a family business to a professional company, but he didn’t want to lose sight of what family brings to a company. The fact that the owners are willing to listen and invest money back into the company affects the whole culture and the mindset of the employees, and without great employees that believe in what you’re doing as a company, you’re not going to move forward.” While much of Barlean’s

Organic Oils’ profits have been plowed back into capital projects, research, and development, an equally large portion has gone to helping people by way of local and international charities. The company is partnering with Vitamin Angels, a non-profit organization that distributes vitamin A to more than 27 million vitamindeficient pregnant women and children in 49 countries around the world. Barlean’s also donates regularly to Not For Sale, an anti-human trafficking organization, and Autism Hope Alliance. In fact, Bruce Barlean said he wants his company to move toward donating 50 percent of their profit to organizations that help people. “It’s just in our hearts,” he said of the motivation to do that. “When we were growing up, we didn’t have much,” he said. “But God has been really good to us and we basically just want to be able to help others now, in whatever way that is.” Puckett, who is charged with putting Bruce Barlean’s ideas into action, said he is inspired by Bruce’s altruistic goals. “I love the benevolent side of what (Bruce) is trying to do,” Puckett said. “When I joined, I didn’t know this. He and his family really, truly believe in this mission they’re on. I feel humbled and flattered to help them achieve the goals that he and his family desire.”

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Profile: Blue Sea Systems

15% sales growth over 21 consecutive years and no sign of slowdown Sky’s the limit for Blue Sea Systems (Left to Right) Scott Renne, Founder and President; Jodi Faix, Controller; Craig Smith, Vice President of Operations, and David Johnson, Senior Vice President

By Mike McKenzie Photos courtesy of Scott Lechner/ Blue Sea Systems

66 | BUSINESSPULSE.COM

cott Renne loves to soar in the sky, and sail on the seas. When it comes to business, he’s firmly grounded as founder, president, and CEO of Blue Sea Systems in Bellingham, a provider of all things electrical in the world of boating (among many worlds of component parts).

He’s a pilot, and not just a get-from-here-to-there pilot. He recently purchased a special airplane with which to perform acrobatics. Yes, figure-eights, loop-de-loops, spins, nose-dives —all the breath-taking maneuvers

of aerobatics, or acrobatic flying. He holds five different instrument ratings on pilot certificates and endorsements. By sailboat Renne (pronounced “ruh-NAY”) has navigated with his family on multiple-year excursions, such as the threeyear, 20,000-mile trip with an infant daughter during which he hit upon the concept for his business. “In the electrical systems of boats,” he said, “I knew that the predominant problem was the quality of components.” From that seed idea, starting in a small house, he grew not only Blue Sea Systems to its current sales track of more than $25 million a year, but another spin-off company, Terra, that he said would have made a second

have been at the core of Renne’s life since childhood in the San Top executive: Scott Renne, founder Diego area when he Start-up: 1992 was a budding sales Funded by: Personal savings and credit cards machine. Annual sales revenue: Over $25 million During an excursion Growth indicators: Sales up about 13 percent for by sailboat for three 2013, and 21 straight years of positive earnings. years with his family Moved into larger facilities ’99, expanded space since at the turn of the ‘90s, then. Market has expanded to distribution and OEM Renne’s ‘aha’ moment customers in 44 countries. arose. Using his credit Employees: 76 cards and some personEmployees in Whatcom County: 74 al savings, he started Blue Sea Systems to Business Pulse Top 75 Private make what he vowed Companies list had he not sold it would become the highest-quality in late 2012. electrical components for boats. Blue Sea Systems employs 76 “We slept on the living room from its two-building, comprefloor, and it was also our produchensive research/development, tion facility,” he said, “because we manufacturing, sales and distribuneeded one bedroom for our small tion operation tucked away on daughter, and one for an office.” the backside of the Cordata indusThat was 1992. Starting with trial spread. Two work in sales in one component and no employClearwater, Fla. ees, he took no salary for almost The company’s catalog features three years. During the third year more than 1,000 items. That’s not he hired an assembler, Mary Sluys. a typo: 1,000-plus. Anything and everything electrical you can think of for a boat, any boat, every boat, they not only make it already, they’ll custom design it if they don’t already have one. All very quickly; like, tomorrow. Their business model is strictly wholesale, including a large OEM base (original equipment manufacturer, sourcing wholesalers who then sell to retailers). And Blue Sea’s nearest competition? Somebody in New Zealand. Besides quality and service, a huge reason for such a corner on the market is the company’s ability to turn most orders around in 24 hours for rapid delivery. The original core customer is a distributor of electrical parts for boats, such as West Marine, where Renne’s career in the boating industry began. He worked for them in California 15 years, rising to vice-president. A passion for the ocean and boats, and an interest in business

Business Box Score

“She’s still with us,” he said. Now, products evolve regularly. Example: a circuit breaker block rolled out recently from the designers and engineers in research and development. During 2013, a dozen new product lines

“In the electrical systems of boats, I knew that the predominant problem was the quality of components.” Scott Renne, speaking to the premise upon which he founded Blue Sea Systems

surfaced, including the company’s first battery charger, and already 14 new ones appear on the 2014 drawing board. The business has expanded into many other areas in addition to boating.

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Chief Technology Officer Wayne Kelsoe, a 10-year employee, recently worked with inhouse engineers on the company’s first battery charger. The in-house lab allows engineers to test the chargers in extreme environments to ensure the highest standards for quality, as all Blue Sea Systems products carry a lifetime guarantee.

Avery Stiles assembles a Mini Battery Switch at Blue Sea Systems Bellingham facility. Battery switches are installed on boats, emergency vehicles, RVs and other equipment worldwide. 68 | BUSINESSPULSE.COM

The company operates on a foundation of its “Always Onboard” three-point promise: • Quality Products engineered for the harsh marine environment and built to last. • Guaranteed Satisfaction with our products for as long as you own them. • Technical Support by officers, engineers, and technical staff. That last line stands out in the boating industry. Tech support comes from every corner, not just tech staff, and company officers lead the way. In his role as president, Renne spends most of his time, he said, in the ever-evolving culture of the work place. “I really love establishing and maintaining the culture,” he said. The company operates on a foundation of a four-person management team. Renne champions a collegial atmosphere in which each and all on staff has a voice at any and all times. “I take the most pleasure in nurturing our company’s positive workplace environment,” Renne

said. “We run the company with five rules, and the sixth rule is to break them all.” The rules are posted on walls. Fundamentally, he explained, they form a recipe for “here’s how you behave….it’s imbedded in our culture, and it’s the litmus test for much of what we’re doing.” In a display of the established method, the interviews for this article took place in the round, with a request that all four of the management team sit in and contribute—the manner by which they run the business. The others on that team: • Jodi Faix, controller and human resources. • David Johnson, senior vicepresident, sales and marketing. • Craig Smith, vice-president, operations. Smith, also a former West Marine employee, oversees the entire facility, the morning parts report, the IT department, all production, materials, and more. In addition to managing the billings, receivables, and all

Using his credit cards and some personal savings, he started Blue Sea Systems to make what he vowed would become the highestquality electrical components for boats. On Scott Renne, CEO, Blue Sea Systems

accounting, Faix also deals with all human resources issues. All four of them sit in with product development teams. “We’re essentially a big family,” Johnson said during one of the interview sessions, “who help one another succeed. We consult on every major component of the company, frequently walking into each other’s offices. Scott and I

probably have done that 13 times just today.” An example of how the teamwork works: each of the four officers works in Tech Support one hour a day. “That is extremely rare,” Dave said. “We engage with the end user. We hear from boating people from all around the world, and we learn from them.” Passion for boats bonds the work force. “Practically everyone here comes from some kind of boating background,” Renne said. Mostly, that’s been recreational. Several have sailed the established routes commonly called “around the world.” Renne sets the pattern. From San Diego, he went to college at the University of New Mexico and majored in philosophy before creating his career track in boating. Business, however—particularly selling –flowed through his veins. “When I was a kid, I sold vegetables from my parents’ enormous garden. I still have the old green

scale I weighed them in, and the pull-around green wagon I sold them out of.” He also sold prickly pears from cacti that grew in the hills behind the family home. “I harvested them and sold from a

“We slept on the living room floor, and it was also our production facility, because we needed one bedroom for our small daughter, and one for an office.” Scott Renne, CEO, Blue Sea Systems

stand for a nickel…(until) all the kids in the neighborhood got sick on them, and their mothers called my parents.” He described how, when he was 14 he’d ride his small motorcycle twice a day to the next town

where fireworks were legal and purchase some, ride back, and sell them. “Basic business,” he said. “I had no operating capital. I’d just buy at one price, and sell at a higher price.” During college years to pay the bills Renne bought and sold used Volkswagens. “The Bug was still in vogue as the economy car,” he said. “I’d see one with flat tires, buy it, take it to an auto shop and fix it up, then post ‘for sale’ cards on the bulletin boards around campus.” Johnson also had no basic background pointing toward his future in business at Blue Sea Systems, unless you count selling berries at age 10 out of a gallon coffee can, or having a paper route at age 12, or selling greeting cards. He grew up in Shelton, Wash., near Olympia, and obtained a degree in psychology at the University of Washington. He taught school, including English as second language in Osaka, Japan. Next he joined West Marine,

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Annual customer survey Each year, Blue Sea Systems asks its customers to rate the following, and the company uses it to measure quality and improvements: 1. Orders are received on time 2. Orders are received complete 3. Orders are well packed resulting in no shipping damage 4. Product quality exceeds expectations 5. Product innovation and design exceeds expectations 6. Product pricing is a good value 7. Technical support is accurate and available when needed 8. Customer service staff are courteous and professional 9. Independent Sales Representation is strong 10. Blue Sea Systems is our top choice of suppliers

where he met Renne. “Scott’s one of those people you keep up with….always successful at what he did,” Johnson said. “We met up at a conference in Las Vegas years later. Afterward I told Scott that if he wanted more than a sales manager I was interested.” Johnson’s been with the company 11 years and sales shot up to almost $7 million his first year. At Blue Sea Systems, he said, “I look after sales and marketing, and help keep 14-plus people working together.” Everybody not on the technical side of business gets involved in handling calls from clients. “Customer service,” Johnson said, “is the company.” That contributes to the fast turnaround, an industry benchmark that Blue Sea Systems thrives on. “Most companies in the parts industry have lots of engineers in one department and lots of sales people in another,” Johnson said. “The way we operate we can make changes quickly. We reduce the number of contacts for the customer. An email is sent to the sales manager and in a matter of minutes, an order is in line to be built and fulfilled.” Blue Sea Systems has six engineers. “I’m an electrical idiot,” 70 | BUSINESSPULSE.COM

David Johnson, Senior Vice President, has worked with the company for more than 11 years after teaching and serving as a forester. He’s accountable for sales and marketing worldwide.

Renne said. “Never knew a thing about electrical stuff. But I’d been building boats my whole life, and helping other people on their boats, so I knew what worked and what didn’t. Our business is built on relationships.” Johnson built his first boat at age 14, then built a 40-footer

that he sailed at age 21 to the South Pacific for 11 months with his twin brother and two friends, traveling 14,000 miles. About electrics: “When I started at Blue Sea Systems I didn’t know much beyond that a power post connects big wires together. The boating culture is a community. So our

Osvaldo Euceda assembles a Custom 360 Panel, which Blue Sea Systems ships to customers globally for use aboard boats, emergency vehicles, and RVs.

decision makers all have a passion for boats whether that’s in management, sales, or engineering.” That passion spread to electrical truck parts, starting with a simple fuse block that rolled five purposes requiring five different parts into one part. In addition to the boating world, Renne’s business now has branched out to RV, automotive, renewable energy, and industrial markets.

Business, however—particularly selling—flowed through his veins. “When I was a kid, I sold vegetables from my parents’ enormous garden. I still have the old green scale I weighed them in, and the pull-around green wagon I sold them out of.” A long way from that living room floor when he and his wife at the time assembled the first component while a 3-year-old slept in a nearby bedroom. “Once we got rolling,” Renne said, “it grew huge pretty fast—$125,000, then $150,000. I’m proud that we’ve sustained about 15 percent growth over 21 consecutive years, including the downturn.” Those are sunny skies. And he flies them high.

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TITLE Philanthropy: United Way

Kids are among 1000s who benefit from workplace fund-raising.

By Pam Bauthues

United Way: provides resources to sustain local nonprofits and to “Live United” Photos courtesy of United Way of Whatcom County 72 | BUSINESSPULSE.COM

hey may only have five employees, but as one of the largest fundraising nonprofits in the area United Way of Whatcom County makes a big impact. With $2 million in fundraising efforts they’re striving to support programs that enable community organizations to create long-term social change. President and CEO Peter Theisen said, “We provide a bridge between the private sector businesses and the community.” Not only does United Way provide financial support, but they

also assist with leadership training and other services that help nonprofits build and develop sustainable programs. Internationally, United Way has different levels that offer tiered support. “United Way is a worldwide organization, Tamara Tregoning said. She is director of resource development locally. “United Way of Whatcom County is exactly that—we work in Whatcom County. However, United Way of Whatcom County is also actively involved at the state level. United Ways of Washington get together to advocate in Olympia and to promote their legislative agenda. “It’s a good way to stay connected with what’s going on,” Theisen said. “We get access to materials,

resources, and data.” Participation beyond the county level offers important benefits, including information from research and development, examples of successful program templates to work from, and international relationships. Each of these allows local branches to run successful programs and learn from a wide professional network. In Whatcom County, United Way seeks to develop goals that align with the greater community. “Our goals are developed in partnership with the community—the community is what drives change. We’re attacking problems collectively,” Theisen said. To support these programs, United Way relies on top sponsors—including BP Cherry Point Refinery, PeaceHealth St. Joseph Medical Center, Banner Bank, Whatcom Educational Credit Union, and Matrix Services Inc.— and hosts a variety of fundraising campaigns. BP alone contrib-

uted $440,000 – half from Business Box Score its employees’ donations, Top executive: Peter Theisen, President/CEO and half with Start-up date for United Way of Whatcom County: 1953 matching funds How start-up was funded: Primarily with individual donated by the contributions and corporate contributions company. Current Budget: Approximately $2 million Last fall, Growth rate indicators: 25 percent growth in past 10 years. United Way Anticipates serving 150,000 residents this year in Whatcom employees: 5 County focused on a workplace giving campaign, where local businesses parWay is known for workplace ticipated in ways that worked best fundraising—we’re working toward for them. United Way tries to meet making the workplace giving cambusinesses where they are and work paign a year-round effort.” with their needs, and then tailor the Aside from business fundraiscampaign to each business. What’s ing, United Way has three main successful for one company may ways to get involved—in improvnot be for another, so businesses ing our community, they believe can host anything from a chili that anyone can give, advocate, cook-off to a trivia night. or volunteer. There’s a way for In addition to different types anyone to participate and work of fundraisers, United Way is also toward that collective impact. tailoring campaigns that aren’t just With the funds raised, seasonal. Tregoning said, “United United Way turns to their Fund

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President/CEO Peter Theisen sees the organization’s role as bridge builder.

United Way works in three main focus areas: education, income, and health. Each of these areas has its own set of unique programs and goals, but together they aim to promote stability and improve different areas of life for individuals. Rather than short-term projects, United Way focuses on long-term solutions. One current program that addresses education is promoting early childhood literacy in Ferndale schools. This pilot initiative will be tested and, if successful, adapted to other schools throughout the county. By focusing on literacy before kindergarten, the school district should see an increase in high school graduation rates. When children learn these basic skills, it impacts other areas of their life—such as sharing habits and behavior. “The goal isn’t just to reach the kids who are struggling,” Tregoning said. “It’s to

reach the whole classroom.” There are also several community partners in this literacy program. To create a collective impact, the program involves schools, libraries, and other community organizations that can all assist in their areas of expertise, which is where United Way comes in. “Our role is to bring players together that don’t normally work together,” Theisen said.

“We provide a bridge between the private sector businesses and the community.” Peter Theisen, President/CEO

Distribution Committee to determine how the money raised will be distributed. United Way researches throughout the year, and then the Nonprofits are affected by volunteer committee reviews grant government support on many applications and allocates the follevels—not just financial, but also lowing year’s budget. in the government’s policies and “We use research about curprograms. With the Affordable rent community issues and then Care Act, organizations like the we empower local volunteers to Interfaith Community Health take that research and carefully invest funds into programs that are collaboratively working to achieve our goals through collective impact,” Tregoning said. While many nonprofits rely on government funding based on annual appropriation, they can turn to United Way as a reliable means of financial support. “We provide a steady stream of revenue to nonprofits—it’s something they know they can count Literacy before kindergarten, a United Way program, benefits whole classrooms and not just children who on,” Theisen said. are “struggling.” 74 | BUSINESSPULSE.COM

Center—which works closely with United Way—will be directly impacted. In the short-term, they saw an immediate increase in activity, which calls for more support—financial and otherwise. However, United Way sees this as an opportunity that shares a mission with their health goals. If people take advantage of healthcare, then they should be healthier overall. This could be preventative and lessen the need for other programs that are indirectly based on individuals’ physical health.

The financial crisis also placed additional stress and fatigue on professionals—nonprofits saw a 50 percent loss in executive leadership, and organizations saw that they were in desperate need of that leadership to keep going. The 2008 financial crisis also had a direct impact on United Way’s work. 2008 was their most successful fundraising year to date, and it also saw the largest number of uncollectable pledges as the year played out—resulting in a significant write-off. Their five-year growth rate dropped to minus-10 percent, and the community saw a huge increase in demand for services paired with a reduction in government support. Many local nonprofits were closing because they didn’t have the financial support they needed. These examples point out the vital importance of the support of private enterprise to the sustenance of an organization as vast as United Way. It could not survive, let alone thrive without the contributions of companies and their employees.

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United Way’s Keys to Success for a Nonprofit 1. 2. 3. 4.

Strong board of directors that provides leadership specific to their skill sets. Experienced, professional staff. Financial health. Good relationships w/ local businesses, government sector, and other nonprofits.

The financial crisis also placed additional stress and fatigue on professionals—nonprofits saw a 50 percent loss in executive leadership, and organizations saw that they were in desperate need of

that leadership to keep going. Fortunately, this is one avenue that United Way was able to assist nonprofits. In order to support and keep valuable programs— especially when they’re struggling

financially—United Way provided leadership training and transitional support. By empowering employees to become leaders, the whole organization was better off. Now, United Way’s growth rate is closer to minus-1 percent— essentially, almost back where they started in 2008. However, there are less people in the workplace making contributions, so while fewer individuals are contributing, the average contribution has risen. Looking forward, United Way is launching their next grant cycle for 2014. They invited community members—typically from organizations they support, such as nonprofits and local schools— to weigh in on financial priorities and develop new goals. They continually look for things that aren’t being done in Whatcom County, especially programs that promote resilience and stability.

United Way has received the highest ratings possible from both GuideStar and Charity Navigator, which look for results and transparency in nonprofits. In addition to community recognition, United Way has received the highest ratings possible from both GuideStar and Charity Navigator, which look for results and transparency in nonprofits. While transparency is important, they also appreciate these rankings for their level of accountability. As Theisen wrote in a newspaper article, “Our mission and vision for a stronger community for all is a big one, and no one person can do it alone. But, when we choose to collectively work together we can produce amazing changes in our community.”

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Guest Column: Bellingham International Airport Michael McAuley | Commissioner, Port of Bellingham Michael McAuley is a local green builder and community-spirited elected official. He believes we stand well-positioned to become a global leader in the Clean Tech Revolution by expanding the port’s regional role in economic development. He was reelected last November for a second term of serving Port District 2. He is available at 360.676.2500, or michaelm@portofbellingham.com

What can you get for $72 million these days? W

ell, if you have one of the fastest growing airports in the country, all you get is caught up —and that is not an understatement. Anyone who has flown from Bellingham International Airport (BLI) in the last 10 years will tell you that this sleepy little airport with occasional jet service has gone through some dramatic changes. Our local airport was always intended to serve a small region. The same as most other small airports scattered across the nation. So, when our Bellingham Airport was first constructed it had a gravel strip intended to serve general aviation needs almost exclusively. World War II left us with a somewhat better airstrip, the 1950s gave us a real commercial terminal, and the ‘80s gave us a longer runway. In 2010 the Port decided that we needed to do something about a runway with a huge dip in the middle and a terminal that just didn’t cut it. Our first investment was a $24 million upgrade to the runway and taxiways. These upgrades leveled the runway, while adding much needed lighting, water management, and 78 | BUSINESSPULSE.COM

safety improvements. Before the runway was even completed plans were underway to triple the size of the old terminal.

Most problems, such as traffic congestion, require simple, although expensive fixes. The most challenging problem, however, is noise. While the terminal of just three years ago was comfortable it was really a series of workarounds that were failing to get the job done. The success of new air routes revealed fatal flaws in our systems when passenger volumes exploded. Terminal seating was inadequate, the Transportation Safety Administration (TSA) couldn’t move passengers through security properly because ticketing queues blocked access to the security check-in, and so on. The terminal improvements and expansion have been far more challenging than the runway fixes. When the runway needed paving work we closed it for about two weeks and worked around the clock; but we can’t close the terminal for a year, or even for a few days. Terminal expansion requires managing daily operations with as little interruption as possible while

providing all of the same needed elements of functionality. With airport growth we also face more problems: Traffic congestion at Bakerview and Bennett Roads, off-airport aircraft noise, commercial jets infringing on General Aviation (GA) space, and other operational constraints create constant work. Most problems, such as traffic congestion, require simple, although expensive fixes. The most challenging problem, however, is noise. Not many years ago the occasional jet was seen as interesting, a sign of progress and worldly access. After all, jet service had been promised for decades but never really settled in. As Alaska Air and Allegiant Air have expanded the region to include lower mainland British Columbia, we have that longpromised access—and the noise that goes with it. One problem of noise pollution is that it is measured very subjectively. In fact, there is a county ordinance requiring all property sales within one mile of the airport to have an accompanying document informing the buyer of the airport’s proximity. Yet, many people care very little about airport noise. Still others, mostly long-time property owners, become increasingly upset with the incredible uptick in jet traffic. A group called Reduce Jet Noise

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Construction has been an ongoing byword at Bellingham International (BLI), and there’s more to come in the next phase as it continues to expand in travelers and services. (Staff photo)

formed in the last year or so to address the issue with the port.

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I am forming a work group of off-airport advisors that can look at the issues of noise and airport impacts. The group will start by looking at federal regulations and what opportunities they offer, then identify those options most relevant to our local situation. Airports are challenging. One Washington port is actually closing its urban airport in favor of redeveloping the land to support in-fill expectations. Their analysis showed that redevelopment would create almost 4,000 new jobs, while continued airport operations support only a handful. Here at Bellingham International (airport code: BLI) we have taken the opposite approach by investing in our airport. Current airline use has increased private sector jobs to more than 700, and we can expect further modest increases. A further job creation tactic I hope to employ is a reconfiguration of the airport industrial park.

Ours has competed with other areas for decades but, metaphorically speaking, only by moving the fence and turning around to face the runway.

Current airline use has increased private sector jobs to more than 700, and we can expect further modest increases. I believe we can attract small aerospace firms that need work space and a runway. Given the underutilized airport industrial park is poorly positioned to take advantage of the runway, some new ideas are long overdue. Our $72 million commitment got our airport up with the times, and now we need to move forward to the next demands as air travel demands continue to increase.

Business Pulse brings you information regarding the people, companies, ideas and trends that are shaping our county. Business Pulse Magazine is the official magazine of the Whatcom Business Alliance (WBA) and is a quarterly publication. Please complete and mail to: Or, subscribe online at: businesspulse.com

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Guest Column: Free-Market Environmentalism Todd Myers | Environmental Director, Washington Policy Center The Washington Policy Center is an independent, non-partisan think tank promoting sound public policy based on free-market solutions. Todd Myers is one of the nation’s leading experts on freemarket environmental policy and is the author of the 2011 landmark book Eco-Fads: How the Rise of Trendy Environmentalism is Harming the Environment. His in-depth research on the failure of the state’s 2005 “green” building mandate receives national attention. He recently became a contributor to The Wall Street Journal.

Politics is poisoning Puget Sound P

oliticians often say there would be no environmental improvement without their leadership. Case in point is the creation of the Puget Sound Partnership state agency more than six years ago. When Gov. Christine Gregoire launched what was supposed to be her signature environmental achievement, she promised the agency would set science-based priorities to clean up the Sound. More than six years later, how is the Partnership doing? Of the 21 “vital” indicators listed by the Partnership, only five have improved. Even some of those few improvements remain questionable. Take for example, the “improvement” in the “On Site Sewage” indicator. The Partnership reports an increase in the number of septic systems “current with all required inspections,” but officials admit they have “no data to assess progress on fixing failures.” Put simply, they don’t know if they’ve really improved water quality. Other areas, like “Marine Sediment Quality,” have shown real improvement. The limited progress, however, is overshadowed by actual decline 82 | BUSINESSPULSE.COM

in the health of the Sound. Five indicators show the Sound is worse off today than when the Partnership began trying to clean it up.

Herring stocks and orca populations have declined. Both marine and freshwater quality have declined. At its core, the Puget Sound Partnership is designed to improve water quality. Herring stocks and orca populations have declined. Both marine and freshwater qualityhave declined. At its core, the Puget Sound Partnership is designed to improve water quality. Its failing at that most fundamental goal demonstrates real problems. Additionally, most categories have no data or no way of measuring results. For birds, flood plains, and other categories, no data or goals exist. The Partnership explains that the flood plains target is “pending until the…definition of what ‘to restore’ means.” After six years they don’t know what “restore” means. Successes are so rare that the recent 2013 State of the Sound report lists the top accomplishment as “The Leadership Council is

becoming more focused on implementing Near Term Actions.” [That could hardly be less meaningful. Or you could say, “Leaders feeling better about themselves is nice, but it doesn’t do much for Puget Sound.”] The reason for failure is that the Puget Partnership has always been more about politics than science. The agency head is Martha Kongsgaard, a wealthy political donor with no previous management experience. Despite a lack of progress in the Partnership’s first five years, the new governor, Jay Inslee, kept Kongsgaard on. The agency seems to be even more adrift today and farther from its goals. There is an alternative. In Alaska, U. S. officials use a market-based approach that gives each fishing boat a share of the total catch. The results have been positive, reducing waste and improving safety. Another innovation is “mitigation banking.” Where the construction of new houses or business impacts wetlands, builders can replace that habitat elsewhere, often leading to a net increase in protected habitat. Finally, people concerned about water use (supposedly one of the Puget Sound Partnership’s top goals) can use the prosperity created in a free market to purchase a Water Restoration Certificate from the Bonneville Environmental Foundation. Just as some pay

more for a hybrid vehicle to reduce carbon emissions, they can pay for projects that increase the amount of water for fish. Market-based approaches may not solve all the problems in Puget Sound. There may always be a role for government in achieving environmental goals we all cherish. What is clear, however, is that relying on a political approach is a foolâ&#x20AC;&#x2122;s errand. Unless we make some important changes, by learning from the free market, the herring, the orcas, and the water quality in Puget Sound will continue to suffer.

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Guest Column: Minimum Wage Law Erin Shannon | Director, WPC for Small Business Erin Shannon became director of the Washington Policy Center for Small Business during January 2012. She has an extensive background in small business issues and public affairs. The Center improves the state’s small business climate by working with owners and policymakers toward positives solutions.

Controversy over job-killing high minimum wage coming soon to a city near you

he debate over imposing a superhigh minimum wage is everywhere right now.

• Voters in the City of SeaTac approved a measure to increase the minimum wage to $15 an hour for some workers (unions were exempt). • Mandating a $15 an hour wage was a centerpiece of Seattle’s mayoral campaign. • And, there have been calls for the proposed Bellingham waterfront development to guarantee a so-called “living wage” for the thousands of new jobs the project will create. The issue is not new to Bellingham. In 2002, the City debated an ordinance requiring companies that do business with the city pay employees a “living wage.” Concerns over the significant cost of the mandate resulted in passage of a version that was significantly watered down, limited in scope and laden with exemptions. Proponents argue a “living wage” wage higher than the state’s 2014 legal minimum of $9.32 an hour (already the highest in the nation) should be imposed by law. The idea is to help lift low-wage workers out of poverty. But what does the wording “living wage” mean? There is no clear definition of that term. Right now 84 | BUSINESSPULSE.COM

supporters have settled on the completely arbitrary number of $15 an hour, but the phrase could equally apply to $12 an hour, or $25 an hour, and of course activists could always say “living wage” means something different next year, or the year after. Basing government-imposed mandates on vague political slogans is a bad way to make public policy.

There have been calls for the proposed Bellingham waterfront development to guarantee a so-called “living wage” for the thousands of new jobs the project will create. Besides, no amount of forced wage increase can lift people out of poverty if the law has priced them out of the labor market. Research shows that forcing a big increase in the minimum wage hurts small businesses and pushes many low wage workers out of their jobs. As Dr. Joseph Phillips, of Seattle University’s Albers School of Business explains, when costs become too high for employers, they quit hiring or let people go.

As Professor Phillips puts it, “At some point, it adds up and discourages employment. We need a minimum wage law, but set it too high and it stops helping those it is designed to help.” Study after study shows increases in the minimum wage reduce the employment opportunities of low-skilled workers. An increase in the minimum wage may help low-skilled workers who remain employed, but other workers will lose their jobs, have their hours cut back, or find it difficult to find work in the first place, all of which reduces their income and pushes their families into poverty. The overall result of a superhigh minimum wage is fewer people working and higher poverty rates. Perhaps that is why a wage survey of 336 labor economists reveals 93 percent believe a very high minimum wage law is not an efficient way to solve the income needs of poor families. Indeed, an ever-increasing minimum wage has not helped reduce poverty in Washington State. In fact, our state’s poverty rate has increased over the years, even before the Great Recession, despite the state’s automatic minimum wage increase every year. And studies examining the poverty rates of other states that increased their minimum wage between

2003 and 2007 found no evidence the higher government-imposed wages reduced poverty rates. While it sounds generous to make employers pay a super-high minimum wage, the policy is not cost-free; someone has to pay for it. The money comes immediately from employers, later from consumers, and eventually from the very workers the forced high wages are supposed to help. For example, proponents of the measure to mandate $15 an hour for 6,300 workers in SeaTac claimed it would inject $54 million into the region. They failed to mention the regulation would cost employers an average of up to $52 million each year. So the money supporters claim would be injected into the local economy is not free, it would be extracted from the estimated 72 businesses to be covered by the new law. The average cost increase for SeaTac businesses would be up to $722,500 for each

covered employer annually. It is not reasonable to believe employers can simply absorb such a huge increase without a loss of business and jobs.

When costs become too high for employers, they quit hiring or let people go. At some point, it adds up and discourages employment. We need a minimum wage law, but set it too high and it stops helping those it is designed to help.â&#x20AC;? Dr. Joseph Phillips, Seattle Universityâ&#x20AC;&#x2122;s Albers School of Business

Mandating a hyper-minimum wage is bad public policy for

many reasons, but the bottom line is whenever government imposes a higher cost of doing business, employers are forced to raise prices or take other mitigating steps. The mandate works like any price control. It distorts the markets and forces cuts someplace else. Forcing employers to pay workers $15 an hour may make some people feel good, but it would have consequences. It may force many employers out of business, or reduce the number of jobs and hours available. It may result in the loss of other employee benefits. Or it may result in young or inexperienced workers being squeezed out of the market by their more experienced counterparts. These workers will not earn $15 an hour; they will get zero. Pushing a high minimum wage law may make the activists feel good about themselves, but ultimately it harms the low-income workers they say they want to help.

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Guest Column: Ethanol Fuel Problems Don C. Brunell | Past President, AWB Don Brunell retired in January 2014 after 28 years as president of the Association of Washington Business. Formed in 1904, the AWB is Washington’s oldest and largest statewide business association. Its roster has more than 8,100 members representing 700,000 employees, serving as both the state’s chamber of commerce and the manufacturing and technology association. Membership includes major employers like Boeing and Microsoft, but 90 percent of AWB members employ fewer than 100 people. More than half of AWB’s members employ fewer than 10. For more about AWB, visit www.awb.org.

The ‘Ethanol Shuffle’ and other bad ideas H

ave you heard of the Ethanol Shuffle? One step forward, two steps back. Actually, it’s not a dance; it’s part of California’s clean energy policy—a program our governor wants to emulate.

Gov. Jay Inslee recently signed a pact with California, Oregon, and British Columbia pledging to support cap-and-trade, carbon taxes and low-carbon fuel standards as part of his climate change agenda. Why should you care? Because you will be paying the bill, and California history shows that it doesn’t work well and isn’t worth the cost. The governor’s own consultants estimate that his low-carbon fuel regulations will increase gasoline and diesel prices $.98 to $1.18 a gallon. Not surprisingly, that is complicating legislative efforts to increase our state’s 37 cent/gallon fuel tax by 11.5 cents to fund transportation improvements. If both measures pass, Washington drivers could be paying $4.50-$5 a gallon. California appears to be the model for Gov. Inslee’s climate change legislation. As it happens, that state has much to teach us— namely, that low-carbon fuel standards are costly and unworkable. California is the only state in 86 | BUSINESSPULSE.COM

the nation with a low-carbon fuel standard. Enacted in 2007, the program seeks to reduce the amount of carbon emitted by gasoline and diesel by 10 percent by 2020.

California’s rules give preference to Brazilian ethanol made from sugar cane, saying it’s better than corn-based ethanol at reducing the carbon content of gasoline. The technology to achieve that goal didn’t even exist in 2007. But because the limits took effect gradually, bureaucrats presumed the technology would be available by the time it was needed. Unfortunately, that didn’t happen, and now California’s refinery system is in turmoil—and consumers pay the price. This is what happened: For a couple of years, California refiners were able to comply with the regulations, either by blending Midwest ethanol in their fuel or by purchasing “credits” that benefit electric or hydrogen-powered vehicles. However, as California’s carbon limit became more severe, refiners could no longer comply using corn-based ethanol. That’s where the Ethanol

Shuffle comes in. California’s rules give preference to Brazilian ethanol made from sugar cane, saying it’s better than corn-based ethanol at reducing the carbon content of gasoline. The Renewable Fuels Assn. finds that ruling puzzling, considering that sugar cane farmers in Brazil burn their fields each year and thereby release tons of greenhouse gas emissions. Further, they ship most of their product to market in trucks, and Brazilian ethanol must be shipped almost 8,500 miles to the U.S. Still, to get maximum compliance credits, California refiners import Brazilian ethanol rather than use American ethanol. But there’s a problem. Brazil needs ethanol for its own use, so the U.S. sends American ethanol to Brazil, while Brazil sends it sugar cane ethanol to us. The Ethanol Shuffle. Double trouble. Aside from the additional transportation costs, the Renewable Fuels Association estimates that the transportation-related greenhouse gas emissions of the Ethanol Shuffle are more than twice the level than if each country used its own ethanol. But it gets worse. A study by the international Boston Consulting Group estimates that by next year there won’t be enough sugar cane ethanol or

electric car credits available to allow refiners to meet California’s ever-lower carbon fuel standard. At that point, California refineries can either go out of business or sell their fuel outside the state. That would create a fuel shortage in California, drive up gas prices, and reduce gas tax revenues to the state. As we consider our own environmental policies, we should remember two things: First, Washington is not California. Our problems are not as severe, so any benefits that result won’t be worth the cost. We don’t need to import California’s draconian regulations or repeat their mistakes. And second, while ideals are good, policies must be tempered by common sense and an understanding of their true cost. Is that too much to ask?

Sumas: A great place to live and do business The City of Sumas has a thriving industrial zone with rail service & heavy haul roads making it an excellent place to do business. Here are a few more reasons why you should be here: • Proximity to Canada • Foreign trade zone • Low electric rates • Fast turn around for permits • No development or impact fees

• Low land prices • Great schools and beautiful parks • Lowest utilities cost in the county • 24 hour police protection • Quiet rural setting

For more information, or to book a tour of the industrial zone, please call Rod Fadden at 360.988.5711

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Whatcom Business Person of the Year

Who will it be? Bob Pritchett, the president and CEO of Logos Bible Software, earned 2013 Business Person of the Year accolades (Staff Photo)

Business Person of the Year awards dinner March 26 By Business Pulse Staff

ontinuing a tradition of 28 years, the Whatcom Business Alliance and Business Pulse will name the annual Whatcom Business Person of the Year on March 26 in the Event Center at Silver Reef. Additionally, other recognition handed out at the annual awards dinner includes Lifetime Achievement, Small Business of the Year, and Startup Business of the Year This is the longest-standing award of its kind in Northwest Washington, begun in 1986 for recognition of excellent business achievement. Criteria for 88 | BUSINESSPULSE.COM

the nominees: • Business Person of the Year— Any leader in Whatcom County from a business or organization, either private sector or nonprofit, who represents business success and community impact. • Lifetime Achievement Award—Any person representing long-time contributions to business success and community prosperity in Whatcom County. • Small Business of the Year— Any successful business with fewer than 100 employees. • Start-Up of the Year—Must have opened for business on or after Jan. 1, 2011. Table reservations and sponsorships for the event are available at 360.746.0410, or on www. WhatcomBusinessAlliance.com.

Last year’s Award Winners Business Person of the Year—Bob Pritchett, CEO and co-founder of Logos Bible Software in 1992 (No. 21 on Top 75 Private Companies $30M-$35M annually, 330 employees, four downtown buildings, a Phoenix satellite). Lifetime Achievement—Nicholas Kaiser, Director & Chairman of the Board, Equity Portfolio Manager, and founder of Saturna Capital in 1989. Small Business —Vital Choice Wild Seafood & Organics, Ferndale (founded 2001 by Randy Hartnell, 25 employees and $20M-$25M in sales 2012). Startup Business—NextLevel Training, Ferndale (founded 2010 by Mike Hughes).