Region's Business, January 16 -- Philadelphia Land Bank

WILL CITY COUNCIL STAND-UP TO UNIONS? ECHO THERAPEUTICS GLUCOSE MONITOR STATELY WISSAHICKON HOME WITH MODERN FLARE CITY LAUNCHES ACCELERATOR PROGRAM

REGION’S BUSINESS

PHILADELPHIA EDITION

A JOURNAL OF BUSINESS AND POLITICS

WILL PHILLY’S LAND BANK REALLY TRANSFORM THE CITY’S LANDSCAPE? After seemingly endless debate, City Council has finally passed Land Bank legislation, but what impact will it have?

GOVERNER CORBETT TO PRESENT 2014-15 BUDGET TO HOUSE NETPLUS MAKES SUCCESSFUL MOVE TO CENTER CITY Q&A: HARVEY ROVINSKY, BERNIE ROBBINS JEWELERS

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CONTENTS

“In every community there is work to be done.” - Marianne Williamson

19

Philly Land Bank Legislation

3

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18 Diary of a Start-Up: Explore

Partnership Opportunities

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Weekly Briefing

26

Q&A: HARVEY ROVINSKY, BERNIE ROBBINS JEWELERS

28

Political Commentary Real Estate News

PRESIDENT AND PUBLISHER James D. McDonald BUSINESS EDITOR Michelle Boyles CONTRIBUTORS Eric Boehm, Charlie Gerow, Don Lee, Scott Staruch, Tim Holwick, Sandy Smith, Judy Weightman, Juliana Reyes, Brandon Baker, Christopher Wink PROOFREADER Denise Gerstenfield ADVERTISING DIRECTOR Larry Smallacombe

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Region’s Business is published weekly on Thursdays and online at www.regionsbusiness.com.

The publisher makes no representations or warranties regarding the advertising appearing in its pages or its websites.

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16 JANUARY 2014

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DEALBOOK

ENERGY

STP Awards D&Z Nuclear Contract Texas-based STP Nuclear Operating Company announced it has signed a five-year maintenance and modifications contract with Day & Zimmermann, a local provider of construction, engineering, staffing and defense solutions. The company has extensive experience in maintenance and modification solutions for the nuclear and fossil power markets.

Engineering News-Record has ranked the company as the number one O&M contractor in the US power market for six consecutive years.

The STP plant supplies close to eight percent of the state’s electricity, with the twin reactors producing 2,7000 megawatts of energy, enough to power two million homes.

Corbett Administration Invests in PA Business The state Department of Community and Economic Development announced a $750,000 grant award dubbed, Discovered in PA – Developed in PA, or D2PA. The award was made to The Ben Franklin Technology Partners of Southeastern Pennsylvania and Montgomery County Economic Development Corporation to help launch the PA Life Sciences Connect program geared towards retention of talent and innovation in the state, with a focus on the life sciences industry. The public/private partnership will create the first, collective regional approach to connect displaced life sciences workers with companies hiring new employees.

Governor Tom Corbett established D2PA in 2011 in an effort to support Pennsylvania businesses and spur creativity and innovation. Funds are used to promote entrepreneurship, encourage technology transfer, build

capacity for regional economic development, and proactively reach out to businesses.

HOSPITALITY

Host Hotels Sells Marriott Stake SP- and Fortune-500 real estate investment trust, Host Hotels & Resorts, has sold eighty-nine percent of its stake in the Philadelphia Marriott Downtown, retaining only an 11% interest in a joint venture with Clearview.

The hotel’s gross entity value is reported to be nearly three and a half million dollars.

Host currently owns 99 properties in the U.S., 15 international properties as well as a non-controlling interest in several European, Asian and Australian hotels. The brand partners with premium brands like Marriott, Four Seasons, Le Meridien, Ritz-Carlton and more.

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Moody’s Warns Philly Schools’ Fiscal Instability

By Maura Pennington The School District of Philadelphia is facing a credit downgrade and more financial problems unless changes come soon.

The credit report released this week from the rating agency Moody’s Investors Service said the school district must reach an agreement with its various labor unions, stem the decline in student enrollment, improve its budgetary management and get more aid from the city and state.

Having started the year with a $304-million budget deficit, the district won’t be ending it in better shape.

“Finances are likely to remain strained, with operating fund balance projected to be close to zero for fiscal yearend 2014,” the report said.

The report highlights the district’s “historically weak budget management” and short-sightedness in relying on federal stimulus aid that couldn’t last. It says the district’s fiscal problems “have recently intensified” despite three straight years spending cuts.

Moody’s said two of the main factors for credit moving forward are the outcome of labor negotiations and a containment of “the accelerated student movement from district schools to charter schools or other alternatives.”

Contracts with the district’s labor unions expired at the end of the summer. Seeking a savings of $133 mil-

lion from salary and benefit cuts, the district has yet to receive concessions from the unions, including the Philadelphia Federation of Teachers.

As The Notebook reports, with the school year half over, Bill Gross, the director of the Pennsylvania Bureau of Mediation, was brought into talks at the beginning of this week.

At that time, district spokesman Fernando Gallard said they were looking to settle the issue quickly.

The PFT is not commenting on ongoing mediation, but the labor union previously has offered icy reception to suggestions that they make reductions.

With the adults at a standoff, the next target is the kids.

While Moody’s is correct in noting that the rise in charter school enrollment has had an effect on the district’s finances, this sector of education is less of a drain and more of an opportunity for thousands of families.

The moratorium on charter authorization and recent move by the School Reform Commission to cap charter school enrollment are weak measures to relieve the district of years of fiscal distress, especially when the public schools offer students a chance at academic achievement.

The district has a long-term debt of $3.4 billion. Paying that down eats up close to 10 percent of the budget for the district’s population of about 131,000 students and takes a toll on taxpayers across Pennsylvania. State aid provides 56 percent of the district’s revenue, with

local tax dollars providing the rest.

Unless the district can turn things around, Moody’s may have to reduce the already-low credit rating of Ba2, the report warned.

Even at the current level, the district has had a hard time finding willing lenders. In September, the city government borrowed $50 million on its own credit card for the district to ensure the schools would open on time.

This article originally appeared in Pennsylvania Independent at http://paindependent.com.

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WEEKLY BRIEFING

City Contractor Has Expired License

By Isaiah Thompson A company whose insurance license was revoked for alleged misappropriation of nearly $1 million continues to hold a lucrative, and recently expanded, contract with the city to do work around sheriff sales, AxisPhilly has found.

The company, Aracor Search & Abstract Services, Inc., was founded in 1994 by Anthony R. Angelo, the current president, according to its website. In the realm of city contracts, where successful bids do not infrequently correlate with political connections Angelo doesn’t stand out as a political player: He did donate $1,500 to Brady’s catch-all political campaign fund—but only once, in 2007. He also donated $500 to then-candidate for sheriff Jewell Williams in 2011.

Aracor has also been around a while. Its Revenue Department contract to perform title searches for properties the city plans to take to sheriff sale is over a decade old. City spokesman Mark McDonald says that city officials haven’t been aware of any problems or complaints regarding the company’s performance.

But outside of its city work, Aracor’s reputation has been less impeccable.

Last June, AxisPhilly found, the state insurance commission stripped Aracor and its president and founder Anthony Angelo of its insurance licensing in a consent order, signed by Angelo individually and on behalf of his company. The order required the company to pay restitution for what the document describes as the “misappropriation” of nearly $1 million.

The revocation of Aracor’s license, the document and state officials have made clear, bars the company and its president from engaging in any insurance business in Pennsylvania.

Asked about the revocation of Aracor’s license and the apparent allegation of misappropriation surrounding it, city spokesman McDonald said that city officials had not been aware of the consent order prior to AxisPhilly’s bringing it to his attention and that city officials plan to have a “conversation” with Aracor about the matter.

He also added that the company’s work for the city, which consists of title and lien searches, does not appear to involve actually providing insurance, and that city officials with whom he had spoken did not believe that Aracor needs a valid insurance license to do that work. A source familiar with Aracor’s proposal for that contract says that while the request for proposals did not mention requiring a valid insurance license, Aracor did submit its insurance license as part of its bid.

What Aracor is alleged to have done wrong is not entirely clear.

The state insurance commission consent order does not give details about the alleged “misappro-

priation,” nor does it contain an explicit accusation or admission of guilt or responsibility.

It merely states that another company canceled contracts with Angelo and his company “for misappropriation of funds of approximately $997,221,” and that state law “prohibits a licensee or applicant from demonstrating a lack of general fitness, competence, or reliability,” and Angelo and his company had “violated” that rule.

State officials declined to elaborate or offer supporting documentation.

But a civil lawsuit in which Aracor is a named defendant does offer some clues.

In a complaint filed in federal court in Philadelphia, a Bucks county couple claim that they began to receive notices of a default on payment for a mortgage, which Aracor was allegedly supposed to have paid off in closing a refinancing deal on their behalf.

According to their complaint, it was only after repeated threats of foreclosure that the couple was notified by another company, Stewart Title Insurance Company, which apparently insured Aracor’s transactions, that Aracor “had improperly failed to pay the funds to satisfy [the plaintiff couple’s] mortgage … [and] misappropriated those funds for its own use” and that Stewart Title would be responsible for the payment. It is to Stewart Title that Aracor has agreed to pay restitution of roughly $997,000; Stewart Title did not respond to a request for comment.

The couple in question declined to comment for this story, citing the ongoing litigation, but claim in their lawsuit that that they have suffered damaged credit ratings resulting from “failing” to make payments on the loan Aracor was supposed to have paid off.

Pennsylvania Insurance officials would not comment on the details of the case but confirmed that Angelo’s and Aracor’s insurance licenses remain revoked and that neither is permitted to engage in insurance business.

Angelo did not return a call requesting comment, but an attorney from the Philadelphia law firm Meyerson & O’Neill, replying on behalf of Aracor,

Image credit: Flickr/ Christiana Care

acknowledged its contract with the city and stated that the work “is essentially a search and abstract product”—not, in other words, insurance, and that “Aracor has the necessary license and… coverage for all of its products.”

When a reporter pointed out that the company’s website still offers, under its “services” tab both “Title Search” and “Title Insurance,” a company employee replied that Aracor “[does] not sell insurance policies” and that the company has been “in touch with an IT professional to revamp the website.”

There are other signs that all is still not well at the company: The Internal Revenue Service filed four tax liens against Aracor in 2013, totaling nearly $457,000. Last year a New Jersey company secured a judgment against the company for another nearly $32,000.

One place Aracor’s business seems to be doing well, however, is the City of Philadelphia.

Over the years, the value of Aracor’s contracts has increased: from $60,000 in 2006 to $250,000 in 2012—and grew significantly larger in just the last year. Last March, just a few months before the company was stripped of its insurance license, Aracor’s contract with the city was increased from $250,000 to $495,000. Put another way, it doubled.

This article originally appeared in Axis Philly at http://axisphilly.org.

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WEEKLY BRIEFING

SMALL BUSINESS

Fed Funds PA Small Business Community banks in Pennsylvania that participate in the Small Business Lending Fund program increased small business lending by $536.1 million, according to a new report. Nationwide, SBLF participants increased lending $11.2 billion to support an estimated 51,700 loans to small businesses. In the third quarter of 2013, small business lending in Pennsylvania increased by $38.0 million. In 2010, President Obama signed the Small Business Jobs Act, which established the SBLF. The SBLF provides capital to qualified community banks and community development loan funds, encouraging collaboration between Main Street and small businesses in an effort to spur job creation and economic growth across the country. Through the SBLF, the U.S. Department of Treasury has invested more than $4 billion in 332 institutions.

Visit Philadelphia Asks: What’s Your ‘Phillyosophy’? Local Firm On PRIVACY

Stop for a minute and think about Philadelphia. How do you feel about your city? What are you thinking and talking about with your neighbors? How do you talk about the city to outsiders? Your answers point to your “Phillyosophy.”

On January 20, Visit Philadelphia will launch an extension of its beloved With Love, Philadelphia XOXO campaign that combines the campaign’s familiar voice and spirit with strong copy and bold photography that captures the way people think, feel and talk about Philadelphia.

Through March 9, the Phillyosophy ads will take over Philadelphia’s Suburban Station, New York City’s Penn Station, and a New Jersey Transit double-decker train that will transport hundreds of thousands of people, including those headed to the Super Bowl. The ads will also appear on mobile and tablet technol-

ACA Impact

ogy, online, on billboards and in print, with special sections in Arrive and US The Affordable Care Act prohibits Airways magazines. Want to share your insurance carriers from denying coverPhillyosophy? Send it to: phillosophy@ age to people with preexisting conditions, visitphilly.com. which is good news for injured workers, according to Geoffrey W. Dlin, Esq., a partner at Krasno, Krasno & Onwudinjo and a former PA workers’ compensation judge for more than 15 years. Now, injured workers can experience the “comfort and security” of medical coverage while they wait for evaluation of their claim or after their workers’ compensation ends, Dlin said in a press release.

The ACA could precipitate a rise in workers’ compensation claims when workers are injured in company-sponsored wellness programs. “The impact of the ACA will certainly be complex and will take some time to fully understand and apply to workers’ compensation,” Dlin said in the release.

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Accelerator Pairs Startups with Entrepreneurs In two years, Ted Mann grew his mobile couponing app SnipSnap to two million users. The cofounders of CollectedIt!, a new online marketplace for collectibles, hope Mann can show them the ropes.

For the next three months, Mann will act as a mentor to the team behind CollectedIt! as part of the inaugural class of the Philly Startup Leaders Accelerator. Run by entrepreneurs Kert Heinecke and Adam Kearney, the accelerator pairs 11 very early-stage startups with more established founders and will hold regular programming on different topics.

It’ll also emphasize meeting as a group, as the participants did last night at the kickoff, because “our peers will always be our greatest mentors,” Kearney said, quoting DuckDuckGo founder Gabe Weinberg.

Rick Nucci, recently-appointed president of Philly Startup Leaders and also a mentor in the program, has said that mentorship is one of his priorities for his twoyear term.

Kearney and Heinecke started the program because it was something they wish existed when they first arrived in Philly, said Kearney, who’s working on a startup called Saunter that he describes as “Yelp for the arts.”

There was lots of interest from the startup community,

with 40 startups applying to be part of the inaugural class and about 15 entrepreneurs who signed up to be mentors, Kearney said.

The founders, who each pitched to the group during the program kickoff at SEER Interactive‘s Northern Liberties “Search Church” headquarters Thursday evening, are a diverse group when it comes to age and experience: there’s at least one Drexel undergraduate, others with little startup experience looking to leave their day jobs in the financial industry and one tech scene veteran (James Bright of CollectedIt!) who cut his teeth at early local tech companies like VerticalNet andReality Online.

When it comes to gender or race, the group of nearly 20 founders is not diverse, at least on the face of things, with only one woman cofounder present at the event.

During the kickoff event, both mentors and mentees asked questions and offered feedback on each pitch.

It felt a little bit like a startup demo night but with a smaller, more curated crowd that cared about helping each presenting startup.

Find a list of the 12 mentors below.

Rick Nucci, Philly Startup Leaders president and formerly of Dell Boomi Jake Stein, RJMetrics

Bob Moore, RJMetrics Chris Cera, Arcweb Mel Baiada, BaseCamp Ventures Mark Loschiavo, Drexel’s Baiada Institute Ted Mann, SnipSnap Brendan McCorkle, CloudMine Gabe Weinberg, DuckDuckGo Scott Wasserman, Artisan Tim Raybould, Ticketleap Wil Reynolds, SEER Interactive This article originally appeared on Technical.ly/Philly.

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WEEKLY BRIEFING EXECUTIVE BOOKSHELF

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The Mortgage Wars

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Basic Idea: Equal parts history lesson, defense of Fannie Mae and manifesto for avoiding another mortgage crisis, The Mortgage Wars covers the birth and rise of Fannie Mae, how the government-sponsored enterprise survived the recession and the growth of the subprime mortgage.

Highlighter Worthy: “A financial system cannot function without the confidence of its participants, and in just two days confidence in almost every major U.S. financial institution had evaporated.”

Author’s CV: Timothy Howard is the former vice chairman and CFO of Fannie Mae until 2004.

Before that, he served as senior financial economist at Wells Fargo Bank in San Francisco.

Bottom Line: It’s worth slogging through all the data Mortgage Wars is jam packed with to understand the greater takeaways. Unless you work in mortgage lending, the lessons might not be directly applicable to your daily work, but we’ve all seen how the greed of too-big-to-fail banks affects even the little guys.

- Rosella LaFevre

It sounds a little Jetsons-like, but what if your phone helped you locate your parked car and helped save its own (battery) life? If you’ve got an Android, your phone can do these things and more through the Agent app. It includes features like a mode that lets you sleep by filtering out everything but the most important calls and texts, the capability to silence itself as you walk into a meeting and responds to incoming texts to let the sender know you’re behind the wheel. Created by Y Combinator graduate, Kulveer Taggar, the app is currently free for Android users.

Philly Beer Week To Return for Seventh Year in Summer 2014 The seventh annual Philly Beer Week™ is planned for Friday, May 30th-June 8.

This will mark the first year for PBW’s official slogan, “America’s Best Beer Drinking City.”™ PBW features hundreds of festivals, dinners, tours, pub crawls, tastings and meetthe-brewer nights throughout greater Philadelphia.

Philly Beer Week Inc., a nonprofit 501(c)(6) organization overseen by a board comprised of brewery owners, distributors, restaurant owners and others, to promote the beer and hospitality industries, established the 10-day series of events in 2008.

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WEEKLY BRIEFING

REGIONSBUSINESS.COM

CityCoHo: Green Co-working Space Hosts Environmentally Friendly Companies Philly now has its own“green”-focused co-working space.

Currently in soft launch mode, CityCoHo is a twofloor, 13,000 square foot space that aims to create a community of sustainability professionals, said cofounder Drew Foulkes. Its first anchor tenant is the Delaware Valley Green Building Council, the local chapter of the U.S. Green Building Council.

The space is inside 2401 Walnut Street, an eightstory building whose $10.5 million makeover in 2011 included installing a green roof and a 17,500 gallon rainwater cistern.

It’s currently applying for LEED certification. 2401 Walnut Street is also home to startups like Curalate, TicketLeap and LifeVest Health, as well as Wharton’s summer startup incubator.

The space, which can fit about 100 people, was founded by Foulkes and Max Zahniser. Charles Block, who owns 2401 Walnut, is the CEO of the space, Foulkes said.

Foulkes, a Passyunk Square resident, previously ran business development for a Delaware County-based electronics recycling company called Green Technology Recycling.

Zahniser, a Graduate Hospital resident and Penn’s former director of sustainability, helped develop the LEED rating systems for green building at the U.S. Green Building Council. He now runs a nonprofit called Sustainability Nexus, which has partnered with CityCoHo. CityCoHo is holding an open house happy hour every Monday at 6:30.

This article was originally published in Technical.ly Philly at Technical.ly/Philly.

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POLITICAL COMMENTARY

REGIONSBUSINESS.COM

Will 2014 Be The Year That Harrisburg Stands Up To Public-Sector Unions?

By Eric Boehm | PA Independent

close to the bone.”

There’s no real consensus on how to fix the pension The pitched battles between fiscally prudent Repub- mess – perhaps Gov. Tom Corbett will provide the licans and the powerful public-sector unions that have General Assembly with some guidance in his upcomtaken place in several Midwestern states during the ing budget address, but that hardly means they would past few years might finally be making their way east heed it – aside from a growing sense that something to Pennsylvania. must be done.

It’s early in the legislative session, but Republican But the only way to make a significant hole in the lawmakers have their eyes on two major changes in state’s $47-billion pension debt is to reduce benefits for public policy that likely would set off waves of protests existing and future employees. Retirees’ benefits are at the state Capitol. sacrosanct.

First, there’s the ongoing public-pension crisis in the Unions would not support any cuts to existing state. Taxpayers will be on the hook for more than $2 employees benefits, and that’s putting it lightly. billion in payments to the state’s two pension funds this The second issue is less well-known to the public, but year, with higher payments coming in subsequent years. is equally important to the public-sector unions.

Those payments to retired public-sector workers Under state law, members of those public-sector seriously threaten to crowd out some other parts of the unions – which includes everyone from local public state budget, and that might be enough to get lawmak- school teachers to the bureaucrats at the DMV, and ers to address the situation. everyone from the lowest-paid janitor at the state Capi“The largest cost and growth in next year’s budget tol to the union bosses who earn more than six figures will be pension costs,” said state Senate President Joe – have to pay dues to support the union.

Scarnati, R-Jefferson, last week. “To pay the bill will Those dues are deducted automatically from workmean that we are forced to flat-fund or reduce fund ers’ paychecks by the state and deposited in the unions’ many areas of the budget that have already been cut bank accounts where they fund activities like lobbying.

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Some Republicans are pushing for “paycheck protection” that would prevent the state from collecting deductions on behalf of the unions. This would mean that the unions’ members would have to pay dues voluntarily.

It’s not hard to see why this is appealing to Republicans. They assume that scores of union members either will forget to send in their dues or will decide that they’d rather have that extra cash in their own pocket.

Either way, a major revenue stream for the unions’ political muscle would dry up.

Paycheck protection was part of the vast array of reforms passed in Wisconsin under Gov. Scott Walker, and the evidence from the Badger State indicates how effective it can be. One prominent public sector union lost 88 percent of its dues-paying members in two years after the Act 10 reforms became law.

Two major labor unions already have issued warnings to their members about the potential consequences of paycheck protection, even though the bill hasn’t even received a committee vote.

After watching the fights in Madison, Wis., Lansing, Mich., and Columbus, Ohio, labor unions in Pennsylvania might be getting ready for a showdown of their own.

16 JANUARY 2014

POLITICAL COMMENTARY

REGIONSBUSINESS.COM

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In State of Pennsylvania, Taxpayers Are on The Hook for Stashed-Away Debt

By Andrew Staub Pennsylvania has about $12 billion in outstanding debt, good enough for a No. 15 overall ranking in State Budget Solution’s Fourth Annual State Debt Report.

That accounts for primary government debt, but there’s even more debt lurking elsewhere.

Taxpayers eventually will be responsible for more than $36 billion in “off-budget” debt that’s stashed away on the books of agencies and authorities such as the Pennsylvania Turnpike Commission, Pennsylvania Higher Education Assistance Agency and the Commonwealth Financing Authority, among several others.

“The situation may be even worse, and I think this reflects the troubling difficulty of accessing and interpreting state financial information,” said Cory Eucalitto, an editor and author at State Budget Solutions, a Virginia-based nonpartisan policy organization that studied debt loads across all 50 states.

The PA Higher Educational Facilities Authority owes about $6.8 billion, the Pennsylvania Higher Education Assistance Agency about $6.6 billion and the Pennsylvania Economic Development Financing Authority about $4.2 billion, according to state figures.

Back on the state’s books, Pennsylvania places its outstanding debt at about $11.7 billion, slightly lower than the study’s numbers. The state has a debt limit of $62.4 billion this budget year.

Pennsylvania, which anticipates paying about $1.2 billion this fiscal year for general obligation bond debt, hardly is alone when it comes to owing money.

This year’s State Budget Solutions study found the country’s state governments combined are a staggering $5.1 trillion in debt — $16,178 for every person residing in the United States. Pennsylvania finished in the middle of the pack in categories such as state debt as a percentage of its gross state product (tied at 24th) and state debt as a percentage of total fiscal year 2012 expenditures (22nd).

The Keystone State finished 24th when considering state debt per capita — each Pennsylvanian’s share is $14,487, according to State Budget Solutions. Sparsely populated Alaska has the highest debt per capita at $40,714 while Arizona had the least at $9,321.

Jay Pagni, a spokesman for Gov. Tom Corbett, said the state has been fiscally prudent when it comes to debt. In one example, Pennsylvania saved millions of dollars by refinancing $3 billion in unemployment debt it owed to

the federal government in 2012.

The debt details can bet murky when considering PA’s unfunded public-pension liability because the study and state use different formulas to measure the obligations.

It’s likely be a hot topic in the state Legislature this year.

Pennsylvania places the obligation at about $47 billion, while the study sets the figure at $156.6 billion.

The differences lie partly in the anticipated rate of return, with Pennsylvania using a higher, 7.5 percent rate on its Public School and State Employees plan.

The study used a lower, less risky rate that Eucalitto contended is more accurate, given the state’s “heavily protected” pension obligations.

While settling on a different figure, the state didn’t challenge the study’s measurement of the pension liabilities.

In reality, the figure probably falls somewhere in between the two statistics, said Nathan Benefield, director of policy analysis for the Commonwealth Foundation, a Harrisburg-based free-market think tank.

This article was originally published in PA Independent at http://paindependent.com/.

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16 JANUARY 2014

LEGISLATIVE UPDATE

REGIONSBUSINESS.COM

Governer Corbett Will Present 2014-15 Budget to House

By Scott Staruch, quantum communications

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tee passed over House Bill 993, “The Public Welfare creation of new companies and the expansion of existRedesignation Act” that changes the name of Depart- ing companies. ment of Public Welfare to the Department of Human This week the General Assembly had voting session Services. The decision to skip over the vote is attributed TRANSPORTATION days Monday, Tuesday and Wednesday. Both the state to a Democratic proposal to include an amendment to Last November’s comprehensive transportation fundSenate and House return to Harrisburg for voting ses- force a Medicaid expansion. ing investment this week received national recognition sion days later this month on January 27, 28 and 29.

by Alison Premo Black, chief economist of the AmeriWORKFORCE can Road & Transportation Builders Association. In a 2014-15 BUDGET House Bill 1878 advanced from the House Appro- Post-Gazette editorial, Black described the transportaOn Tuesday, Feb. 4, Gov. Tom Corbett will present his priations Committee on Monday. Known as the Penn- tion funding plan as “the latest example of what can be 2014-15 budget proposal to the General Assembly. The sylvania Workforce Investment Strategy Act, HB 1878 done when elected leaders come together in the spirit of budget hearing schedule for the House Appropriations establishes the Pennsylvania Workforce Investment compromise to work in the best interests of the public.”

Committee begins on Feb. 10 and runs through Feb. 27. Strategy Program to incentivize businesses to organize Black notes that the state receives about $1.6 billion The schedule for the Senate Appropriations Commit- and collaborate with each other to address common annually from the federal Highway Trust Fund. That tee also begins Feb. 10 and runs through Feb. 26. The personnel needs and training shortfalls. Participating funding is in jeopardy if Congress and the president Corbett administration is anticipating the state will be businesses will be eligible for a tax credit to subsidize don’t act by October 1st. facing a deficit of as much as $1.4 billion for the next some of their incurred expenses for participation in the fiscal year. program.

2014 ELECTIONS On Tuesday, The Ben Franklin Technology Partners State Rep. Todd Rock (R-Franklin) announced TuesENERGY & ENVIRONMENT of Southeastern Pennsylvania (BFTP –SEPA) and day that he’s decided to not seek re-election in NovemOn Tuesday, House Bill 1699 was reported out of the Montgomery County Economic Development Corpora- ber 2014. Rep. Rock is serving his fourth term. On House Environmental Resources and Energy Commit- tion (MCEDC) were awarded a $750,000 Discovered Monday, Lt. Governor Jim Cawley set Tuesday, March tee. HB 1699 provides for the regulation of standby in PA – Developed in PA (D2PA) grant to support the 18, as the date for a special election to fill the vacancy emergency generators that are compensated for their PA Life Sciences Connect program. of the 28th Senatorial District in York County. The seat participation in P JM demand response programs.

The initiative is a new public/private partnership was left vacant by the Jan. 12 resignation of Senator designed to ensure Pennsylvania’s prominence in the Mike Waugh, who represented the district from 1998 HEALTHCARE life sciences industry by retaining and redeploying to 2014.

On Monday, the Senate Appropriations Commit- highly qualified employees in order to accelerate the

48 Days to the Work You Love

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16 JANUARY 2014

POLITICAL COMMENTARY

REGIONSBUSINESS.COM

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Republicans And Democrats Square Off In Elections

Charlie Gerow is CEO of Quantum Communications, a Harrisburg-based public relations and issue advocacy firm.

CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com.

Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.

A half century is a pretty good opportunity to see how things are going. So it’s no surprise that fifty years after LBJ launched the “War on Poverty” there is a plethora of commentary on where we stand.

Since Lyndon Johnson used his State of the Union message 50 years ago this week to declare an “unconditional war on poverty in America” we have poured $21 trillion inflation-adjusted dollars into anti-poverty programs. In 2012 alone the federal government spent nearly $700 billion dollars on more than 125 different anti-poverty programs. State and local governments added another $285 billion. That’s almost one trillion dollars in a single year. With federal spending increased last year the numbers are bound to be even higher.

And what is the net result of this incredible outlay of taxpayer dollars? At best the successes are de minimis. Roughly 15% of our people live in poverty today, a marginal decrease from when Johnson spoke 50 years ago. Nearly 22% of children live in poverty.

In 1964 it was 23%.

How could we have spent so much to achieve so little? After all, we could have given 21 million families a million dollars each with the amount we spent. In 2012 a family of four could have received more than $80,000. Merely spending more tax dollars hasn’t appreciably reduced poverty and has failed to give those living below the poverty line the opportunity to do better for

themselves.

Fleischer pointed out in The Wall Street More welfare spending is the constant Journal earlier this week, the collapse of mantra of the Left. If we spend even more, marriage in lower income communities has they argue, we can eradicate poverty and had a negative effect on capacity for self supclose the “income inequality” gap they plan port. He pointed to data that shows children to focus on during this election year. in single parent households four times more likely to be in poverty than those in intact families.

Additionally, the drop in labor force participation by men stands as collateral damage in the war against poverty. There’s an old bumper sticker slogan that says “The best weapon in fighting poverty is a job.”

Academics may assail that as trite but they cannot escape the basic truth. Less than 3% of full-time workers are below the poverty line whereas roughly one quarter of those without a job are.

Election year politics will yield all kinds of demagogic platitudes about “income But even Lyndon Johnson didn’t believe inequality,” but nothing will do more than that. His goal, he told us 50 years ago, was the ability to get a good education and a “to give our fellow citizens a fair chance to decent job. develop their own capacities.” He sought to A successful war on poverty will promote give Americans “opportunity not doles,” he real opportunity and policies that promote said. His War on Poverty would transform economic growth. If Republicans can pro“taxeaters into taxpayers” and give poor mote an “Opportunity Society” model and Americans more opportunities to support develop serious programs to help less fortuthemselves. nate Americans -- through more competiSadly, most of the programs that have tion and choice in our education, a simple rolled into battle in the war on poverty have and fair tax system that allows people to failed to accomplish their mission. The root keep more of what they earn, and incentives causes of poverty haven’t been eliminated for employment -- they will win the 2014 and many have been exacerbated. As Ari mid-term elections and a war on poverty.

A SUCCESSFUL WAR ON POVERTY WILL PROMOTE REAL OPPORTUNITY.”

“The Intellingent Choice” Business and Policy Intersect Every Week in Print Go to RegionsBusiness.com To Subscribe

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INNOVATION

EVENTS

LFHM - Effective Presentations: A Perspective from Cognitive Psychology Date: January 21, 2014 Location University City Science Center, 3711 Market St., Suite 800 Slideshow presentations are an omnipresent necessary component of meetings in academia and industry, as well as the interface between the two. Learn the associated principles of human perception, attention, learning, and memory.

Locally Developed App Helps Companies Stay On Top of Possible Security Risks

Philadelphia Entrepreneur Monthly Meetup Date: January 23, 2014 Location: Syscom Technologies, 490 Norristown Road, Blue Bell Meet other local Business People and all those who are interested in advancing their business through Collaboration, Brain Storming, Idea Think Tank, green light thinking.

Benjamin’s Desk Grand Opening Date: January 31, 2014 Location: 1701 Walnut St., 8th floor Innovators, disrupters and influencers are invited to the 8th floor opening of Philadelphia’s premier shared office and coworking space in the heart of Rittenhouse Square.

Coffee & Capital Date: January 31, 2014 Location: University City Science Center, 3711 Market St., Suite 800 Coffee & Capital brings an investor to Quorum to meet with a small group of entrepreneurs over coffee and a light breakfast for an informal Q&A session about funding and pitching.

Denise Zimmerman, Netplus Cofounder.

Facing the breach of even just one customer’s private financial data is a scary prospect for a business owner. What if the private accounts of hundreds of thousands or even millions of customers were breached? It happened recently to Target, Neiman Marcus and Snapchat. Such data breaches can wreak havoc on a business’ reputation and bottom line.

Fox Rothschild LLP, a Philadelphia law firm practicing commercial law nationwide, released a new, free app called Data Breach 411 that helps companies affected by a breach navigate various state rules and regulations. Scott Vernick, a partner at Fox Rothschild LLP and head of the firm’s privacy and data security practice, spearheaded the creation of Data Breach 411.

The only data breach app of its kind, Data Breach 411 focuses on what businesses need to know in preparation for and response to a data breach. The app includes a list of the 46 states that have data breach laws, links to relevant notification statutes, HIPAA/HITECH statutes with breach notification rules, a section on the Children’s Online Privacy Protection Act and links to credit agencies and the Federal Trade Commission website.

Any website designed for or that collects data on children under the age of 13 must comply with COPPA, which stipulates that parental consent must be given for the collection of data from youth under 13. Companies “need to know how to proceed if they unknowingly, inadvertently or otherwise find themselves having improperly collected information,” Vernick said.

Echo Therapeutics Expands Glucose Monitor Sometimes two are better when they become one. Three separapte and distinct companies merged to become what is now Echo Therapeutics, an innovative healthcare technology company headquartered in Philadelphia’s 8 Penn Center.

The company developed technology that allows for needle-free continuous glucose monitoring in patients with diabetes or in critical care. The Symphony CGM System is a noninvasive, wireless alternative to the current paradigm of glucose monitoring currently being tested in critical care units and other hospital units. In November 2013, the company announced significantly positive results from clinical trials at four sites; 97 percent of readings were clinically accurate at sites such as Cooper Medical Center.

Late last year, Echo Therapeutics announced a successful $10 million cash investment from Medical Technologies Innovation

Asia and the investment firm, Platinum Partners. Hong Kongbased Medical Technologies Innovation Asia paid $5 million for a ten-year exclusive on the rights to develop, manufacture, market and distribute the Symphony CGM System within the Chinese Market. The additional $5 million was Platinum Partners’ equity investment in Echo Therapeutics.

On Tuesday, Echo Therapeutics announced that it submitted its Conformité Européenne Mark Technical File, an application to obtain European market approval for its Symphony CGM System in the hospital critical care environment. The company is listed in the Nasdaq (“ECTE”).

Echo Therapeutics employs roughly 30 people, and most recently hired a new vice president of product development to execute its product roadmap strategy.

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INNOVATION

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Viddler Transitions From School Project To Start-Up

By Brandon Baker Here’s the straight dope: What really sets Viddler apart from its competitors is that it knows how – and when – to react to a bullet-pace marketplace.

Donna DeMarco and her then-classmate and - business partner Rob Sandie began Viddler as a class project at Lehigh University in Bethlehem, Pa., circa 2005.

The assignment was to come up with something new using technology; Ms. DeMarco immediately flung to fresh technology that allowed for in-video interaction.

Her first pseudo-client: “Blue’s Clues.”

“Our first use was with the TV show, so Periwinkle would say, ‘Thank you!’ And Joe would say, ‘What did you have for breakfast today?’ And we’d pause the video, bring in an overlay and what’s called ‘the assessment’ in teachers’ terms, and a kid could drag and drop what they had for breakfast – so, bacon and milk -- and a little child’s voice would say what it was,” Ms. DeMarco says.

“Everybody loved it, and by the end of the class, we had this technology that was just too cool to let go.”

The duo soon after found funding through a combination of a local business competition, interest from Benjamin Franklin Technology Partners and an angel network they tapped through the Union League, allowing Bethlehem-based Viddler to grow quickly to a team of 10 – and today, 20 -- after hiring a development team to transform the technology into a full-fledged, adrevenue-focused, user-generated, interactive-video site.

But then, YouTube came along.

“We couldn’t support ourselves on [user-generated content], so we made a pivot in 2008 to business-to-

business,” Ms. DeMarco said. The problem, she clarified, was the competing companies had dedicated ad sales teams that they lacked. “At that point, we became a business provider – we were then in control of our revenue stream and business model,” she added.

That single decision has allowed the company to both grow and differentiate itself from other videohosting companies. The team has since accrued clients like Gawker, McGraw-Hill T-Mobile, Amazon and Engadget, hitting home their timedtagging technology – which allows for in-video commenting – as a sales pitch, in addition to their campaignoriented business solutions.

Moving forward, Viddler hopes to return to its roots – with a broadened focus.

“We’re going back to the interactivity component – it’s not just video that people want anymore,” Ms. DeMarco said. “It’s about creating a singleuser experience. So, our next version coming out is more of a media player than a video player. We’re creating that whole user experience in one component.”

Netplus’ Center City Relocation Helps Sustain Success

By Brandon Baker

Denise Zimmerman, Netplus Cofounder.

Countering the urban-exodus narrative of the past few decades, digital-marketing agency Netplus shirked its longtime status as a suburban business in June in favor of a Center City Philadelphia network that, cofounder Denise Zimmerman emphasized, has made her a “Philly girl.”

“Our old space was too big. We were growing, we were – it was just craziness, how fast we were growing, and then it’s literally like we hit a wall. And the space was just too damn big, and not for a creative, collaborative environment,” Ms. Zimmerman said.

The move, then, is largely a combo-product of an adapting business and a changing workforce that makes working from popular suburban hubs, like Conshohocken, Pa., more inconvenient than in years past.

“We have national and global brands that we solve problems for, and the brands we work with, they’re attractive. So we’d have young, creative, ambitious, passionate folks come out to Conshohocken from Center City, and they’d have no car, so they’d take an hour and a half to get there, and it was like, ‘OK, we’re glad you’re so excited,’ but we really wanted to open up the pool and be able to build,” Ms. Zimmerman said. “We’re getting better responses.”

Now located at Seventh and Arch streets, the move is equally a sign of Netplus’ own new journey in its lifecycle, which began way back in 1996 alongside cofounder Robin Neifield as a home-launched marketing agency with an online twist during an era when, Zimmerman giggled, “no one knew what we were talking about.”

But now, after peaking in the mid-‘00s with 45 employees – it now has 26, and is hiring -- and surviving not just the recession but a shift that had some pharmaceutical and retail clients bringing digital marketing in-house, the company has found comfort in extending its wellestablished services to businesses throughout Greater Philadelphia.

“We have a national platform, and one of our goals is now to raise our visibility and work more with local, regional folks,” Ms. Zimmerman said. “It’s not that we don’t want to work with the global brands of the world and all that, because that’s great, but one of our goals is to be … and this is so corny … but we want Philly to be proud that we’re here. And we really want to help Philly business, and apply what we’ve learned since starting in 1996 and working with all of these big brands, to help support and grow the regional businesses.”

She mused that a surprising and refreshing twist to being in the city has been the tight-knit connectivity of the city’s network.

“One of our newest clients, after being here a month, is Steven Singer. And he’s just down that street,” she said. “That’s awesome.”

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INNOVATION

Diary of A Start-Up: Evaluate Partners AboutOne founder Joanne Lang shovels through her brain to scoop out the people who helped bring her -- and her company -- such great success in the past year. Here, she breaks down her go-to contacts, the types of folks entrepreneurs should surround themselves with and why writing down New Year’s goals isn’t as cheesy as everyone says it is.

In her words: A friend once told me that if I threw my problems into a circle with everyone else’s, after looking I would be happy to walk away with my own. I really had to remind myself of that over the last few weeks while working through challenges with a partner who, upon first meeting, I thought would be a long-term strategic partner.

Much has been written about partnering between organizations, but little emphasis has been given to equitable partnerships between startups and their service providers. Going through my recent partner challenges exhausted me as a CEO. I don’t often feel this way, so I spent some time thinking about which partners a startup really needs to be successful -- which ones have filled me with energy, and why.

These are my lessons learned from practical experiences of working together to form equitable partnerships (none of these companies know I am writing about them).

Legal Counsel I met my attorney, Paul Jaskot (Reed Smith) through Wendi Platt (whom I met on a train -- you never know who will help you!). Paul was one of the very first people who believed in me, but what I admire and appreciate most about him is the fact that he always keeps his word. He sets the right expectations and makes sure his partners understand his process to meet those expectations. When he sets a price, he sticks to it; never once did he change his mind, back out of a contract, or fail to deliver. When you’re a startup and your partners do not honor their promises, it can shut your company down -even if one project results in a loss. Paul recognizes that, and he makes this up over time from other projects; he recognizes the value of a long-term relationship. What long-term relationships are you nurturing? Do you set the right expectations for your teams and for your partners?

Connectors Every company, big or small, needs a connector. I didn’t know what a connector was until I met David Sorin. He’s one of the most well-connected and philanthropic people I’ve ever known. He knows everyone and he makes introductions with no thought to personal gain. He does it to be helpful. Have you made a connection this week to help someone else?

Region’s Business Is Seeking New “Diary Of A Startup” Entrants

Business Services Mary Fuchs works for the Chester Country Economic Council. If you haven’t heard of them and you are a startup, you need to contact her. Mary will help you start and grow your business. Her quality is finding the right resource to help you. She has amazing grant writers, intern programs and education sessions. Are you in a Keystone Innovation Zone? If so, Mary can work with you on your $100,000 tax credits. If not, ask Mary what this is!

Mentors I also want to mention my mentors: Tim, Jay and Amy. Everyone needs a mentor. I always feel like mine believe in me and are there to help me through any situation, good or bad. They are a support mechanism and they always tell me the truth. My goal is to take their mentoring skills and be able pass them on to other mentees, and also my children.

What are your goals for 2014? Do you have mentors or people who believe in you for each of your goals? Have you written down your goals? Statistics show that people who write down their goals have an 80 percent higher success rate of achieving them. Write down your 2014 goals and assign a mentor for each -- and then call that person!

Happy New Year and good luck achieving your goals!

City To Launch New Accelerator Program

The City of Philadelphia’s Office of New Urban Mechanics, GoodCompany Group, and the Wharton Social Impact Initiative have joined forces to innovate in the public safety arena. This spring, they’ll kick off an accelerator designed to spur the growth of early stage, market-based ventures with Here, we allow these ambitious founders and CEOs to express the day-by-day goings-on innovative approaches to issues such as recidivism, network of their startup experience without filter, providing them an outlet to vent and, for readers, analytics, neighborhood surveillance, and vacant land, among others. a colorful insight into the curious 21st-century world of startup life.

The top 10 applicants will receive a $10,000 stipend, an But with a new year, comes a new batch of startups: we’ll embark on a six-month journey opportunity to refine their business models with subject matter experts and strategy and finance consultants from with our third round of “Diary of a Startup” entrants.

Wharton, inclusion in a synergistic cohort of world-class entrepreneurs, and access to pilot projects directly with the We welcome submissions from startups of all sizes launched (or about to launch) in the past two years; submissions are printed once a month. Currently seeking: three startups. City of Philadelphia.

For the past year, Region’s Business has been proud to lend a portion of its margins to four up-and-comers in Philadelphia’s burgeoning startup space — including companies like AboutOne and SpeSo Health, and newcomers like AutoAlpha that, as “Diary” entrant VenturePact might say, learned to “fail fast.”

To inquire about this opportunity, please contact Michelle Boyles at mboyles@ regionsbusiness.com.

Applications will be open until January 22nd. Apply now: www.fast-fwd.org

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WILL PHILLY’S LAND BANK REALLY TRANSFORM THE CITY’S LANDSCAPE? After seemingly endless debate, City Council has finally passed Land Bank legistlation, but what impact will it have?

Story By rosella lafevre Illustration By Don Lee

January 13 was a day was years in the making for politicians, community advocacy groups and citizens tired of vacant, taxdelinquent properties dragging down market values in their neighborhoods. Mayor Michael Nutter called for the creation of a land bank during his first campaign and established the Vacant Property Working Group, chaired by City Finance Director Rob Dubow and Managing Director & Deputy Mayor for Administration and Coordination Rich Negrin, in fall 2010 to develop a strategy for putting vacant land to better use. On January 13, he signed Bill No. 130156-A into law. The legislation established a land bank that could be used to empower the city to reclaim its vacant and abandoned properties, returning them to productive use. “Welcome to the most exciting moment in the city’s history,” said Mayor Nutter, who stood at the podium in room 202 of City Hall.

He hadn’t yet signed the legislation. City Council and representatives from local organizations stood behind him, while others – City Hall staff, reporters and their camera crews, citizens and yellow t-shirted members of the Campaign to Take Back Vacant Land – filled the seats and stood on the fringe.

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20 The day truly was historic; with the signing of Bill No. 130156-A, Philadelphia became the largest American city to establish a municipal land bank.

“This has to be a game changer for the city of Philadelphia if we’re going to create the jobs and the opportunities for small businesses, and redevelop neighborhood after neighborhood, not for just those who want to come here but those who live here,” said Councilmember Maria Quinones-Sanchez. She sponsored Bill No. 130156-A, which Philadelphia magazine called her “legislative magnum opus.” City Council voted unanimously on December 12 to pass the bill.

A land bank is a governmental or nonprofit entity that acquires, holds and manages foreclosed or abandoned properties. A board of directors usually governs the land bank, and ensures that the organization adheres to bylaws and articles of incorporation specifically tailored to meet the community’s needs. The local government may fund the land bank or revenue from operations may provide the necessary funding. “Land banks have clear streamlined procedures to clear title, transfer properties to responsible owners, and acquire tax delinquent properties without risking their sale to speculators,” according to PhillyLandBank.org.

Currently, the City owns between 9,000 and 10,000 vacant properties, most of which are held by three City agencies: Philadelphia Redevelopment Authority, Department of Public Property and the Philadelphia Housing Development Corporation. An additional 30,000 vacant, derelict or underused units are privately owned. These blighted properties drag down the value of neighboring properties and hamper economic growth in Philadelphia’s neighborhoods.

The legislation signed by Mayor Nutter draws upon the City’s power to create a Land Bank, as laid out in chapter 21 of Pennsylvania’s Title 68. Through the provisions of Bill No. 130156-A, the Land Bank will design and oversee a single process by which the City can sell or dispose of its property and will be able to take ownership of private properties that lie adjacent to City-owned properties. This latter power will enable developers to avoid “gap-toothed development” (picture a block with four new townhouses, a weeded dirt lot and then three more new townhouses).

“Our land bank will be a powerful tool for the renewal of Philadelphia’s neighborhoods. This land bank will, in fact, facilitate moving properties from blight to usefulness,” Mayor Nutter said.

Mission The mission of the Land Bank is outlined in the legislation. It reads, “The mission of the Land Bank is to return vacant and underutilized property to productive use through a unified, predictable, and transparent process, thereby to assist in revitalizing neighborhoods, creating socially and economically diverse communities, and strengthening the City’s tax base.”

Board The Mayor will appoint five members of the Philadelphia Land Bank Board of Directors, and City Council will appoint another five. Those 10 board members will elect an 11th. Each board member will serve a term

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concurrent with the authority that appointed him or her. The Mayor and City Council must each appoint two board members who are employees, members or board members of civic associations or of nonprofit or advocacy experience in housing or community development.

These members will bring to the Land Bank specific knowledge of conditions and needs in neighborhoods with significant numbers of vacant and/or abandoned properties.

Board members are subject to termination. They’ll serve until their successors are appointed. Members of the board shall have expertise in relevant areas, including planning, real estate development, open space and architecture, and live or have a primary office in Philadelphia. They must not be elected officials.

Land Bank staff will likely move laterally from the agencies that currently handle vacant land disposition into the office of the Land Bank. “There won’t be a lot of new jobs,” said Rick Sauer, executive director of the Philadelphia Association of Community Development Corporations, a part of the diverse coalition known as Philly Land Bank Alliance.

legislation’s adoption is able to pass from the Philadelphia Redevelopment Authority into the Land Bank.

“The Land Bank itself is prohibited from holding the power of eminent domain,” Mr. Sauer said.

The Land Bank will work with the Philadelphia Redevelopment Authority on disposition of eminent domain properties if bundled with Land Bank-owned properties.

Land Disposition Using whichever legal measure necessary, the Land Bank may transfer the ownership of property it owns.

This includes conveyance, exchange, sale, transfer, lease, grant or mortgaging of that property. Applicants who wish to take ownership of a Land Bank property must be certified by the Department of Revenue as having no tax or water delinquencies, and by the Department of Licenses and Inspections as keeping any other properties in compliance with the Philadelphia Code.

(If the applicant’s other properties are not in compliance, an agreement may be made regarding bringing those properties into compliance.) Significant history of either behavior should be noted in those certifications. An applicant may not be denied if he or she owns a property with delinquencies that originated before he or she took ownership.

The Land Bank must consider the Philadelphia Comprehensive Plan and any relevant community plans when considering how to dispose of a property or group of properties. Final action requires a resolution from City Council, and may require the approval of the Land Bank Board.

Land Acquisition The Land Bank will acquire City-owned properties, unifying them under a single entity with a single disposition process. Citizens can gift or donate property, and the Land Bank is authorized to acquire buildings and land through purchase or other legal means. The Land Bank may assume a lien or pre-judgment claim on property not occupied by an owner.

The Land Bank may request that the City of Philadelphia approve its purchase of a privately owned, taxdelinquent property. The board shall give preference to Public Notice & Comment keeping owner-occupants in any properties held by the The Land Bank must provide public notice in no less Land Bank. When the City of Philadelphia is to put a than 10 days of plans for selling or transferring property, property with two-year-old tax debts up for sale (“upset and must notify any registered community organizasale”) or to attempt selling a property that earned no tions operating in the geographical area where a sale bids in upset sale (“judicial sale”), it must notify the is to take place. Anyone may provide comment about a Land Bank, which can seek to purchase those proper- proposed sale to the Land Bank, which will make those ties.

If there are any liens, municipal claims, charges or fines against a property owned by the Land Bank, Through the next three months, until the Mayor and City Council the Land Bank’s Finance Director appoints the first full board, the following people will sit on the may clear them. Additionally, the interim Land Bank board: Land Bank may exempt any of its properties from all real estate taxes, Michael Koonce, Philadelphia Housing Development water and sewer charges.

Corporation The Philadelphia Redevelopment Brian Abernathy, Philadelphia Redevelopment Authority Authority alone holds the power to Herb Wetzel, Council President Clarke’s Office seize property in Philadelphia by Jennifer Kates, Councilwoman Quinones Sanchez’s Office reason of eminent domain. Eminent Courtney Voss, Councilman Henon’s Office domain is a legal process by which Rick Sauer, Philadelphia Association of Community the City can claim private property Development Corporations for public use, so long as they offer Bill Salas, HACE the owner just compensation.

Majeedah Rasheed, Nicetown CDC and City Wide NAC Alliance Any property purchased under Ken Scott, Beech Companies eminent domain after the passage Don McGrogan,United Food and Commercial Workers local of chapter 21 of Pennsylvania’s Title 1776 and Campaign to Take 68 is ineligible for ownership by the Back Vacant Land Land Bank. Property purchased Paul Badger, Greater Philadelphia Association of Realtors under eminent domain before that

The Interim Land Bank Board

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comments available to the Vacant Property Review Committee, a 14-member committee established by City Council in 1977.

Could Tax Leins Gum Up The Works?

Pricing The Land Bank will use the most current data available to set prices. It may accept less than fair market value if the redevelopment plans would create beneficial community impact. This includes affordable or mixed-income housing, projects that lead to job creation, community facilities, side or rear yards and urban agriculture.

Profits will go toward Land Bank operating costs, ongoing inventory maintenance and further property acquisition.

In the interest of some fast cash for the city’s coffers, City Council passed Bill No. 130531-A, a measure amending chapter 19-1300 of the Philadelphia Code, entitled “Real Estate Taxes.” The amended chapter, which Mayor Nutter signed into law on November 13, specifies the terms and conditions under which the sale or transfer of real estate tax claims to third parties may be executed. Councilmembers Bill Green, David Oh, Brian O’Neill, Bobby Henon, Jim Kenney and Mark Squilla co-sponsored the legislation, which doesn’t give the Administration new powers but provides some citizen-oriented protections in the event of Mayor Nutter’s administration flexing its power to sell tax liens.

The bill protects citizens with a handful of provisions. It prohibits the sale of tax liens valued at less than $1,000. It caps attorney fees at $200 per hour (and $2,500 total), interest rates at 10 percent and penalty rates at 5 percent. The bill requires a two-year waiting period from purchase of a lien before the lien holder can foreclose on Homestead Properties.

“Using tax lien sales, we can bring in an additional $50-60 million in revenue for the City and School District,” Councilmember Green said in an undated release published to PhiladelphiaCityCouncil.net. While some would breathe a sigh of relief, others aren’t so sure this was the right move.

Beth McConnell, the policy director of the Philadelphia Association of Community Development Corporations, wrote a letter dated October 16 urging Councilmember Green to hold off on passing legislation regarding tax lien sales. Ms. McConnell referred Councilmember Green to a tax delinquency reform ordinance he sponsored with Councilmember Quinones-Sanchez and nine other members of City Council. That legislation, which City Council approved in June 2013, had not yet taken full effect. She also argued that the sale of tax liens might hinder the Land Bank, which hadn’t been enacted.

In June 2013, The Pew Charitable Trusts published a report on the City’s tax delinquency situation and indicated that approximately 30 percent of the estimated $515.4 million in delinquent real estate taxes could be collected in the next few years, provided the City takes full advantage of the tools at its disposal. That means 70 percent of delinquent real estate taxes would likely go uncollected by the third-party buyers, who would tie up land that might otherwise be sold with clear title under the Land Bank’s authority.

“Philadelphia’s system for getting vacant, blighted and abandoned properties into the hands of responsible owners is already broken and in desperate need of reform,” Ms. McConnell wrote. “Complicating the current system by selling tax liens to private investors will add more uncertainty and inefficiencies.”

Strategic Plans and Performance Reports Annually, the Land Bank will develop a strategic plan outlining its acquisition and disposition processes for the coming year. The strategic plan will also include proposed goals for the five-year period to follow.

Also an on annual basis, the Land Bank will publish a performance report that includes a list of all properties acquired, all properties sold or otherwise disposed, any properties on hold and analysis of how close the Land Bank came to its goals for that year.

How it Differs Prior to the signing of Bill No. 130156-A, developers navigated multiple processes to secure land held by different City agencies with different rules. The process took an average of 1.5 to 3.5 years, and involved the Vacant Property Review Committee, Philadelphia Redevelopment Authority, Department of Public Property, Law Department and City Council.

With the creation of the Land Bank, the Philly Land Bank Alliance predicts the process will take 1 to 1.5 years. It would involve the Vacant Property Review Committee, the board and staff of the Land Bank and City Council. The Philly Land Bank Alliance wanted to do away with the Vacant Property Review Committee, and assign to the Land Bank Board the task of reviewing proposed plans for vacant property disposition being.

Though Mr. Sauer said, “A lot of time has been cut out of the process,” two features of the Land Bank bill seem to slow down the process unnecessarily. Those features are the retention of the Vacant Property Review Committee and the requirement of a resolution from City Council to pass each dissolution plan brought by the Land Bank.

In a November release, the Philly Land Bank Alliance urged City Council to eliminate the Vacant Property Review Committee, building its greatest features into the Land Bank, “rather than slowing down the system by adding another hurdle for applicants to overcome in order to gain approval to buy a lot.”

A draft of Bill No. 130156-A proposed a revamped Vacant Property Review Committee that would give City Council input earlier in the disposition process and eliminate the need for a resolution. (This would

have saved applicants money and time, if City Council did not approve of the proposed plans.) City Council President Darrell Clarke, who initially gave the bill his support, finally sought an amendment to the legislation that would require a City Council resolution.

The Philly Land Bank Alliance warned against this, explaining that this increases the number of people involved in the approval of disposition plans to 41. To get the bill passed, Councilmember Quinones-Sanchez compromised and accepted Councilmember Clarke’s amendment.

“Overall, the legislation is very strong and we’re very supportive of it,” Mr. Sauer said. “It’s a good bill overall, [although] it didn’t have 100 percent of what we wanted.”

Mr. Sauer and members of City Council admitted that the creation of the Land Bank was a lot like making sausage and some parts may be unsavory, and there are skeptics of Bill No. 130156-A. “I’m a little confused with it and I don’t trust it,” said Donna Aument, democratic leader of the 33rd ward. (Full disclosure: I’m a committee member in her ward.)

PhillyMag.com user “Veillantif ” wants fewer agencies involved, commenting that the disposition process might involve just two agencies: the Land Bank staff and eBay.com. “Total time: 3-5 days,” Veillantif wrote.

But these skeptics couldn’t quiet the thunderous

applause of the audience in room 202 on the day of the bill signing.

“This bill marks the beginning of a new era in Philadelphia,” Mayor Nutter said.

What’s next Several people involved in the legislation’s creation and passing, including Councilmember QuinonesSanchez, said the work is far from over.

“The members of the BIA join the Philly Land Bank Alliance in urging City Council and the Nutter administration to continue to move the ball forward by fully funding the Land Bank, proactively transferring all publicly held properties into the Land Bank and establishing a permanent Land Bank Board as quickly as possible,” said Anne Fadullon, president of the Building Industry Association of Philadelphia at the bill signing.

Mr. Sauer said the Philly Land Bank Alliance met recently and committed to staying involved in the process that will play out over the next year as the Land Bank becomes fully operational. “There’s still a lot of important steps we need to take,” he said. This includes securing funding for Land Bank startup costs, necessary legal work and acceptable minimum upkeep on properties that will be held by the Land Bank. He predicts that the Land Bank will have its first strategic plan ready this spring.

22

16 JANUARY 2014

REGIONSBUSINESS.COM

FINE ESTATES

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The romantic master suite boasts a fireplace, dressing room and walk-in closet. Four additional bedrooms with tons of space and light for the whole family. There is also a walk-up attic for storage.

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16 JANUARY 2014

REGIONSBUSINESS.COM

REAL ESTATE

Eateries, Lobby Could Redeem Maligned Hotel

By Sandy Smith

stay hotels catering to people who are more than just tourists but less than Since it opened at 12th and Arch new residents. The sleek, stylish modern streets a few months ago, the Home2 lobby features several nods to local hisSuites by Hilton hotel has been wel- tory and iconography and gives a sophiscomed by a chorus of raspberries from ticated vibe to the registration desk, local architecture buffs. From Inquir- breakfast bar and lounge area. Cope er architecture critic Inga Saffron, who Linder Architects may have phoned in likened its effect on the streetscape to the outside, but they did give some care “being handed a plate of plastic play food and thought to the inside. at a fancy banquet” in her review of the The primary restaurant tenant may hotel, on down, everyone who has had go even further towards redeeming this two cents to offer on the design of this effort. Most of the street floor space will hotel has been decidedly underwhelmed be taken up by BurgerFi, one of the pioby it. neers of the “better burger” trend that And it is true that the building looks is redefining the American classic. The more at home by a freeway off-ramp chain prides itself on serving all-natural, than it does in the middle of a bustling antibiotic- and hormone-free, grass-fed downtown. But maybe its soon-to-be Angus beef burgers and hot dogs (includstreet floor occupants will offer partial ing a Wagyu beef dog) with a dazzling atonement for the design sins. array of toppings. The restaurant will In our opinion, the hotel lobby does so have a full liquor license. No opening already. It’s a notch above what is usually date has yet been announced for the found in hotels of this type – extended- restaurant, which will be the first Phil-

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adelphia-area location for the Florida-based chain with outlets up and down the East Coast, but it looks as though interior construction is close to complete.

The other street floor tenant will be the first Panera Bread outlet in Center City. As these fast-casual eateries can be found in strip malls in many a suburb, it won’t do as much to repair the hotel’s cookie-cutter reputation, but at least it offers another inexpensive dining alternative in an area lousy with them already, thanks to the presence of the Reading Terminal Market across the street and Chinatown a block to the east.

This article was originally published in Philadelphia Real Estate Blog at http://blog.philadelphiarealestate.com/.

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Q&A

16 JANUARY 2014

REGIONSBUSINESS.COM

HARVEY ROVINSKY:

SUSTAINING A CUTTING EDGE BUSINESS The CEO of Bernie Robbins Jewelers has worked at the company since it sold appliances decades ago and has seen it through many transitions. Region’s Business got his refreshing take on the lessons he’s learned and how the brand has not only survived, but thrived.

How long have you been with the company?

Since 1966. When I started, Bernie Robbins was an appliance store. Bernie was my father-in-law and that was his business. I started working for him when I was about 19 years old, delivering appliances up three flights of stairs in South Philly. The store has transitioned several times but began to focus on jewelry exclusive in the 1980s. By the 90s, we changed our focus to luxury jewelry.

What prompted such a big shift in your business model?

The business was already in a kind of a transition. It’s a family business, so we sat down as a family and talked about it. We noticed that in our area there were hundreds to low-middle end jewelers, but very few high-end jewelers. So, we made the decision because A) there’s more money is in higher end merchandise and B) competition is less so we thought we could be a more important player in a much smaller arena. It turned out to be the right move at the right time.

How was your holiday retail season and what are your expectations for Valentine’s Day? It was good compared to other years. But we toughed it out, basically ground out every single sale. We work very hard at proper price points, brands and merchandise for our target customer. We were just in New York and I must have talked to twenty people in my industry. They all said the same thing: everyone ended up ok, but we just ground it out.

Right now, we believe it’s all about market share, how we promote our prod-

ucts, target price points and focus on our customers. We’re very optimistic about what we do, not necessarily what the economy allows us to do. We control everything that we can, watching everything from overtime, to management to cost savings. We are always reevaluating.

What are your practices for profitability in today’s economy?

Start from the beginning. Bernie was a terrific mentor. His philosophy was: always treat your customer the way you want to be treated. In this environment, we have worked the hire best people we can find. We watch our expenses diligently, looking at everything. There are people in this world who have Wharton MBAs. I have a recession MBA. We’re careful about what we buy. We only carry the best products and market toward our target audience.

I still read ten magazines a month, all kinds of business publications so I’m familiar with the market.I have meetings constantly about what people want, price points, how to market to our core customer.

Of course, we’re always looking to get a little younger, even though I’m not.

Our customers don’t live in a bubble. My wife is our head buyer. She has the best fashion sense and she’s always on top of the newest and latest trends. Whenever there’s something new in the jewelry world, Bernie Robbins has it first and our customers know that.

I can’t tell [others] how to run their business. But I can tell you if you take an efficient, customer-service based approach, your chances at success will be greatly enhanced.

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VISIONS

Prioritize Spending, Create Philly Jobs

By Alan Butkovitz

Alan Butkovitz, Philadelphia City Controller

CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com.

Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.

To value something means to understand it’s the City of Philadelphia has become two cities: one that is high-skilled and highwage, the other stuck in a trap of unemployment and under-employment. For our city to realize future economic growth, we need job opportunities for the 75 percent of our citizens who lack college educations.

In accomplishing this intricate task, we need to connect Philadelphia’s history of making things with those large institutions that purchase things. Fortunately, part of the solution to our problem is in plain sight.

Philadelphia is blessed with a very high concentration of so-called “eds-and-meds anchor institutions” - large non-profit, place-based, and mission-driven institutions that have sufficient economic resources to make a difference in their communities. At least 18 universities or colleges and at least 16 hospitals call the city home. They employ at least 150,000 people and represent 25 percent of our city’s economy. They all have an economic stake in the health of their local communities and most have a stated commitment to using their economic power to do so.

A report recently released by my office shows that the Philadelphia anchor sector’s total operating budget is about $14 billion a year, of which roughly $5.3 billion is non-payroll spending on goods and services. Of that, approximately 52 percent of the spending, or about $2.7 billion, is currently done within the City of Philadelphia.

We estimated the current total spending produces roughly 28,000 jobs and about $89 million in tax revenue annually. This includes both indirect and induced spending.

If the anchors collectively committed to increase their local spending by even 25 percent, our models suggest that this could create more than $640 million in new direct expenditures, with multiplier effects generating 4,400 jobs and an additional $14 million in tax revenue annually.

The University of Pennsylvania and Drexel University have long been considered national leaders in community economic development. For many years, Penn and Drexel have invested large sums in real estate development, cleaning, greening and public safety, and creating employment opportunities for West Philadelphia residents. More recently, Temple has

begun to conduct similar projects. These are fantastic initiatives and they are to be commended.

In other cities, such as Cleveland, Baltimore, and Detroit, major foundations and civic leaders have pulled together to devise multi-anchor strategies for reinvesting in the community. Ironically, the institutions in these cities began by emulating Philadelphia’s eds-and-meds institutions – by redeveloping real estate, enhancing beauty and public safety in surrounding communities, and hiring local residents where possible.

Pennsylvania professor. Meaning, that it is in the self-interest of eds-and-meds anchors to spend locally because it decreases poverty and crime, enlarges the tax base, and helps the host city prosper.

To be clear, this is not a government mandate. The local government’s role would be to coordinate and build relationships so that more of the money already spent by these largely private, non-profit institutions stays local.

Penn has long prioritized local spending, and about $100 million of its roughly $1 billion procurement budget is spent in West

Image credit: Flickr/University Communications - Web

These institutions realize that collectively, they buy immense amounts of goods and services in the course of their daily operations. Additionally, they realize that if they made a decision to spend more of their procurement dollars locally rather than exporting them, in a coordinated fashion, they could spur the development of local businesses that would expand the tax base and create a virtuous cycle.

More specifically in Cleveland, the institutions that comprise the Greater University Circle Initiative pulled together and studied their procurement patterns down to the commodity level. They determined that there was critical mass in a few areas such as laundry services and food production, and they created a business incubator to develop businesses to meet demand for these goods and services. Today, there is a state-of-the-art laundry, a major urban farm, and a solar panel installation company that employ dozens of Cleveland residents. More importantly, the anchor institutions pay a competitive price for these goods and services.

My Office’s initiative is based on “enlightened self interest,” – as described by Dr. Ira Harkavy, Chair of the National Anchor Institution Task Force and University of

Philadelphia. Penn and Drexel actively helped develop a local office supply vendor. Temple University also spends about $44 million locally a year.

Although, as indicated in my Office’s report, I believe we have barely scratched the surface.

The next phase of our work, which is already underway, entails an analysis of each institution’s actual purchasing patterns – what exactly is bought, from where, in what quantities – to determine supply chain needs. I am pleased to report that several of the major institutions are already cooperating with my office in this study, and I am optimistic that several more of the large major eds-and-meds will join in our partnership.

With the information my Office is compiling, we can bring together business groups, community development financial institutions, foundations, our world-class business schools, and others, and figure out how to build local capacity and to seed the development of enterprises to meet anchor demand.

I believe we can establish the workings and agreements of this program during this year and then reap the benefits for many years to come.

16 JANUARY 2014

REGIONSBUSINESS.COM

VISION

29

Examining The True Worth of Water

By Susan Story

Susan Story, President and CFO of American Water

CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com.

Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.

How many times do you use water, directly or indirectly in a given day? Ten? Twenty?

More? You’ve probably never thought about it. Yet, you’ve come to expect the quality and reliability that our nation’s water systems provide and that make our way of life possible.

When asked, most Americans would say they care about water; they certainly depend on it. But do they value it? It’s a question not of semantics, but one that relates to the future of water in this country.

To value something means to understand its worth, its importance. Historically, Americans have undervalued water, thanks to effective systems that have brought safe, drinking water to homes and businesses, and for fire protection, but also because of a lack of awareness of the challenges facing our water infrastructure. In fact, a survey by Xylem Inc. in 2012 showed that 90 percent of Americans considered water an important service, on par with heat and electricity. Yet 69 percent said they took clean water for granted and less than 30 percent believed water infrastructure problems would affect them “a great deal.”

It’s an issue the Value of Water Coalition, a partnership involving the leading organizations responsible for ensuring the safety, reliability and sustainability of the country’s water, is aiming to resolve in its public education campaign that launched nationwide last fall. I am proud to say American Water is one of the many public and private organizations that for the first time have joined together as a single, united voice, in pursuit of a common goal: to help people throughout the U.S. understand that the nation’s water systems are in need of significant investment to maintain the safety and performance levels we rely on, and that while our efforts have been successful, continuing as we always have is no longer sustainable.

There’s even more at stake. Just as people depend on clean and safe water, so does the entire U.S. economy. In its recently released Importance of Water to the U.S. Economy report, the EPA highlights the fact that every sector of the U.S. economy is either directly or indirectly dependent on the output of industries that rely on water, especially energy and food production, and water supply, which rely nearly 100 percent on the nation’s water resources. From industries ranging from manufacturing to

Image credit: Flickr/ grungepunk2010

tourism, any drop in water supply or heightened competition for use will significantly impact economic development for the entire country. Changes in even just one sector or region can produce ripple effects across the whole economic system. Once again, awareness -- in this case, of water’s true worth to our national economic welfare – is key.

Indeed, investing in water infrastructure pays off – in good-paying jobs to repair, replace and upgrade our aging water systems, which in turn will ensure safe and reliable water to attract and retain business and qualified workers, essential to creating healthy communities and keeps the U.S. competitive.

Backed by such efforts as the Value of Water Campaign and the EPA report,we in the water industry need customers to understand what’s at stake and what they would be getting in return. These education efforts are essential to the process, so that we can start making these investments now in order to ensure a clean, safe, and reliable supply of water for our children and all of our futures.

While the challenges we face are significant, they are not insurmountable. In fact, they can be viewed as drivers of the support necessary to institute real, and muchneeded, change. The Importance of Water

to the U.S. Economy report underscores the fact that decision-makers in both the public and private sectors will need robust data and information tools to help them sustainably reduce risk and manage the nation’s precious water resources.

Another solution is attracting additional private capital for public water infrastructure projects from investor-owned companies like American Water, as well as private capital that is already in infrastructure funds and other sources eager for the long-term, reliable investments that well-run water utilities offer.

Ultimately, it comes down to gaining awareness of water’s true worth in all our daily lives. We depend on it to cook and clean. It is an essential component for a vital economy and environment, not to mention health and fire safety. We need it to exist.

What other resource delivers that much?

Susan Story is senior vice president and chief financial officer of American Water, the nation’s largest publicly traded water and wastewater utility, headquartered in Voorhees, N.J. and operating in more than 30 states and parts of Canada. In May, she will assume the position of president and CEO of American Water.

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16 JANUARY 2014

REGIONSBUSINESS.COM

BY THE NUMBERS

25%

Decrease in the number of jobs available in Philadelphia since 1970, says a recent Center City District report

43%

Philadelphia’s share of total regional jobs in 1970

23%

Philadelphia’s share of total regional jobs in 2011

36%

6,400,000,000

Number of Philadelphia residents who work in the suburbs

Calories cut from 16 of the nation’s largest food companies’ products between 2007 and 2012, according to a study conduction by researchers at the University of North Carolina at Chapel Hill and sponsored by the Robert Wood Johnson Foundation

1,000,000,000 Number of calories that companies in the Healthy Weight Commitment Foundation pledged to cut from food products by 2012

232,551

Number of private wage/salary positions lost in Philadelphia since 1970

57,000

Flickr/jisc_infonet

$92,000,000

Anticipated economic impact of January convention tourism for the city of Philadelphia, according to The Pennsylvania Convention Center

78 Average number of calories cut from the average American’s diet by food company caloric reductions

2,000

Number of daily calories recommended for the average American

$9,000,000

$42,000,000 Impact from American Economic Association held January 3-5

US Lacrosse National Convention impact, held January 10-12

$15,000,000

Expected impact of National Soccer Coaches Association of America meeting, scheduled January 15-19 Flickr/Polycart

Number of government jobs lost in Philadelphia since 1970

$26,000,000 Anticipated economic impact from the American Library Association meeting, scheduled January 24-28

Flickr/jdigit3l

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