After several flat years, merger and acquisition activity in Wisconsin finally appears to be picking up steam, with several new transactions announced recently.
Stanley Johnson, president of Anderson/Roethle, Inc., which specializes in mergers and acquisitions, said activity has picked up this year after three consecutive slow years.
"We began to notice a slowdown in 2001, and 2002 and 2003 were very depressed," Johnson said. "In 2004, we have had more opportunities at Anderson/Roethle than the previous 18 months. We have a number of transactions we’re working on now that are new to this year."
Johnson said the company has recently helped companies that were waiting for business to pick up and their valuation multiples to rise before making the move to sell.
"We continue to get opportunities to work with perspective clients that were waiting on the sidelines for their businesses to improve," he said. "The activity, at least from our perspective, has picked up. And from talking to others (in the industry), the activity level has picked up."
Bolstering his statements about increased activity is a recent announcement of Anderson/Roethle new joint venture with Sattell, Johnson, Appell & Co., S.C., an accounting, tax and auditing firm.
Both companies are based in downtown Milwaukee.
Johnson said the new venture, yet un-named, will result in Anderson/Roethle from its current offices at 788 N. Jefferson St. into Sattell, Johnson, Appell & Co.’s offices at 700 N. Water St.
However, the joint venture will not be a merger of the two companies.
"I have known their firm for a long time. That was part of why this was attractive to me," Johnson said. "We’ve been talking for some time now."
Johnson said the new venture will give customers a chance to draw on expertise from both firms, as accounting and other financial advice is almost always needed in M&A transactions.
"Our structure will be set up in a fashion that will give us a high probability of success," he said. "We kept looking for aspects of such a relationship that would not be beneficial or negative, and we couldn’t find any."
As first reported in BizTimes Daily, the daily e-mail news bulletin of Small Business Times, several other mergers and acquisitions involving Wisconsin firms have recently been announced:
* Site Locators, a petroleum-based business brokerage firm in Waukesha, has been acquired by Cornerstone Business Services, a Green Bay-based mergers and acquisitions firm. Cornerstone purchased the business from John Theisen of Mukwonago. The financial terms of the acquisition were not disclosed. "Site Locators has been one of this state’s premier petroleum business brokers, so it should solidify our position as Wisconsin’s leading firm to sell petroleum-based businesses," said Scott Bushkie, president of Cornerstone Business Services. Site Locators will become a wholly-owned subsidiary of Cornerstone Business Services. Theisen said he has stepped down from his role in Site Locators to spend time on other business ventures. He owns Great Lakes Lube in Mukwonago. "Cornerstone will be able to take a solid company, with great ties to the petroleum and food industry, and expand its reach and sales," Theisen said. Site Locators brokers, who acquire and sell convenience stores, are currently working out of offices in Mukwonago and Madison. The firm and three to five employees will be relocated to Milwaukee offices in the next six months, although a new site hasn’t been selected yet, a spokeswoman said.
* Anderson Pump & Process, an A.A. Anderson Co. of Waukesha, announced it has purchased UMISCO, a New Berlin-based custom hose manufacturer. The acquisition will enable Anderson Pump & Process to aggressively pursue contractor markets while widening its current industrial customer base, according to company officials.
The UMISCO operations have been moved to the Anderson Pump & Process plant in Waukesha. UMISCO employees have moved with the company to join the 42 employees at Anderson Pump & Process, the company said.
Anderson Pump & Process, which manufactures pumps, filters and heat exchangers, also operates offices in Waupaca and in Carol Stream, Ill.
* Nassco Inc., a New Berlin-based marketer of maintenance, paper and packaging supplies and equipment to commercial and industrial businesses, has acquired Dillon Co. Inc. of Green Bay.
Dillon supplies janitorial, paper, packaging and shipping supplies and equipment. With the acquisition, Nassco now has a work force of 80 employees.
"We are excited to welcome the Dillon Co. to our Nassco team. Both of our family-owned firms share a common culture of providing quality products and superior service," said Gene Melzer, president of Nassco. "The product lines and customer bases offered by Nassco In. and the Dillon Co. are complementary. The merger of our two companies creates one of the largest distributors of these products in Wisconsin, making it possible to offer unequalled value through economies of scale."
Financial terms of the acquisition were not disclosed.
* Media Dynamics of West Allis has acquired 3D Impact, a Milwaukee-based company that specializes in three-dimensional visualization and animation. 3D Impact will operate as a division of Media Dynamics and will be overseen by Tod Cruikshank and Joe McCarthy.
"Adding 3D visualization and animation technology to our production capabilities enables us to help our customers develop 3-D prototypes, demonstrate concepts, showcase new products, tour 3-D environments and add entertainment value to their programs," said Ron Trilling, a partner at Media Dynamics. "Whether it’s a mechanical cut-away of a machine part or an exploded view, a point-of-purchase display, character model, packaging concept, illustration or virtual tour of a facility, we now have the knowledge and experience to create it."
Financial terms of the acquisition were not disclosed.
* The Russ Darrow Automotive Group has acquired its first Ford dealership with the purchase of Best Ford of Wauwatosa. The new Russ Darrow Ford recently opened at the Best Ford location, 1901 N. Mayfair Road.
The Darrow Group previously acquired its first Chevrolet dealership with the purchase Lancaster Chevrolet in Madison. The Darrow Group had added Cadillac and KIA dealerships last fall.
"Our goal is to make Russ Darrow Ford the No. 1 Ford dealership in volume and satisfaction in the entire state of Wisconsin in 2005," said Russ Darrow III, president and chief operating officer of the Menomonee Falls-based company. The firm named John Sutterfield general manager for the new Ford dealership.
* Milwaukee-based Actuant Corp. announced it has completed its purchase of all of the outstanding shares of Yvel S.A., a Paris, France-based provider of hydraulic latches to the European cab-over-engine truck market.
The value of the cash transaction is estimated at $9 million. Yvel reported annual sales of about $15 million in 2003. Funding for the transaction was provided by borrowings under Actuant’s $250 million revolving credit facility.
"Yvel’s market leadership, geographic proximity and manufacturing competency complements our Power-Packer truck business," said Robert Arzbaecher, president and chief executive officer of Actuant, which is a diversified industrial company with operations in more than 20 nations.
* Modine Manufacturing Co. announced it has completed its acquisition of the Shanghai, China, assets of Automotive Climate Control Division(ACC) of WiniaMando Inc.
Financial terms of the acquisition were not disclosed. Racine-based Modine, a thermal management technology manufacturer, had acquired ACCùs South Korean assets in July.
Modine also intends to acquire ACCùs interest in a joint venture in Hefei, China, in the near future.
ùWith these significant investments in Asia, we look forward to serving our customers from a global platform,ù said David Rayburn, president and CEO of Modine.
Modine also announced it has begun producing engine cooling modules for the new BMW 1 Series, which was recently launched worldwide. BMW expects to sell about 100,000 models of the 1 series in 2005, the first full year of production of the automobile.
The cooling module will be assembled at Modine’s newest plant in Wackersdorf, Germany.
"We have been a BMW partner for nearly 25 years. Our companies continue to work well together, which is shown by the other BMW platforms for which we provide cooling systems," said Klaus Feldmann, group vice president and managing director of Modine Europe.
* The targeted completion of BancWest Corp.’s acquisition of Community First Bankshares Inc. has been bumped back until the fourth quarter. The companies had expected to complete the transaction in the third quarter.
The estimated $1.2 billion acquisition is still pending regulatory approval. When completed, Fargo, N.D.-based Community First will merge into Bank of the West of San Francisco. Commmunity First Bankshares is the parent company of Community First National Bank, which operates 156 branches in 12 states, including Wisconsin. Community First also operates Community First Insurance Inc. offices in 56 communities.
"We remain as enthusiastic about this merger as we were when the definitive agreement was signed earlier this year. We anticipate a fourth-quarter completion of the transaction so that our clients can begin to fully benefit from the strength and responsiveness that the combined organization will offer," said Mark Anderson, Community First president and CEO.
* PacifiCare Health Systems Inc. of Cypress, Calif., has signed a definitive agreement to acquire all of the outstanding shares of common stock of Green Bay-based American Medical Security Group Inc. (AMS) Under terms of the agreement, PacifiCare will pay $32.75 in cash for each share of AMS stock, for a totally equity purchase price of about $502 million. PacifiCare also will assume about $30.2 million of AMS debt. AMS, which has about 1,400 employees, provides individual and small group health insurance products to members in 33 states and Washington, D.C. AMS generated $712 million in total premium revenue in 2003. Samuel Miller, AMS president and CEO, and members of his management team will continue to lead AMS after the acquisition. "The underlying mission of AMS has been to create value for our shareholders. This merger accomplishes that objective while also being beneficial for our employees, policyholders and agents," Miller said. The acquisition is subject to regulatory approval and is expected to close in early 2005.
October 1, 2004, Small Business Times, Milwaukee, WI
Merger & acquisition activity picking up
Opportunities Inc. opens another plant in Oconomowoc
Opportunities Inc., a nonprofit corporation that specializes in helping people find employment, recently added a 15,000-square-foot plant in Oconomowoc to its operations.
The corporation, based in Fort Atkinson, helps about 2,000 people find work every year.
Barb LeDuc, president of the organization, said Opportunities Inc. helps people with physical or mental disabilities, the economically disadvantaged, at-risk youth, displaced workers and people with other barriers to find jobs or job skills.
The nonprofit corporation helps people through its two companies, Ol Packaging and Diversified Personnel Services.
Ol Packaging, which now has about 50 people working in the Oconomowoc site at 662 Armour Road, specializes in company outsourcing. The company subcontracts with about 80 different companies, working on specialty packaging that is not automated, promotional packaging and mailers and multi-packaging for club stores like Sam’s Club.
Ol Packaging is keeping its 80,000-square-foot facility in Fort Atkinson open as well, where it has about 350 workers. LeDuc said adding the second location helped to not only attract new workers, but also serve clients better.
"In outsourcing, we’re getting some short turn-arounds," she said. "We have to give the customer what they want in terms of turn-around, and this gives us the opportunity to do that with two locations."
Most of the 50 workers at Ol Packaging in Oconomowoc are new employees, LeDuc said.
Opportunities Inc., also will house Diversified Services in its Oconomowoc building. The firm was formerly located in an office on South Main Street in Oconomowoc before Opportunities Inc. bought the new facility.
Diversified specializes in helping people find temporary or permanent job placement in the industrial, clerical and technical fields.
"Diversified was already in Oconomowoc and was already working with companies for temporary or permanent services," she said. "Many of our customers are in that area for the subcontracting and training, so it was good to bring the two services together under one roof."
October 1, 2004, Small Business Times, Milwaukee, WI
Nominations sought for MANDI Awards
The Local Initiatives Support Corp. (LISC), Milwaukee, is calling for nominations for the sixth annual Milwaukee Awards for Neighborhood Development Initiative (MANDI).
The annual MANDI Awards, which has one winner in each of five categories, provides grants for nonprofit agencies and public recognition for innovations in community development.
MANDI nominations will be accepted by LISC from private, public and nonprofit organizations at the LISC office, 161 W. Wisconsin Ave., Suite 3008, Milwaukee, through November 1. The awards ceremony will be held March 10, 2005.
Leo Ries, program director for LISC, said MANDI Awards honor organizations and individuals that are bringing life and hope back to some of the city’s distressed neighborhoods.
"A lot of the efforts for community development, at initial glance, seem small on the scale, but collectively they are making the inner city neighborhoods more attractive," Ries said.
The five award categories are the Navigator Award, Vision Award, State Farm Insurance Building Blocks Award, Cornerstone Award and Trailblazer Award.
The Navigator Award recognizes leadership in neighborhood development by an individual associated with a community development organization. The Vision Award recognizes a foundation or nonprofit organization that has shown commitment to transform a community through financial contributions or development efforts.
The State Farm Insurance Building Blocks Award recognizes real estate projects contributing to the redevelopment of Milwaukee’s neighborhoods. One award is given to a small project and one award is given to a large project for the Building Blocks Award.
The Cornerstone Award recognizes a neighborhood development organization for innovation and perseverance. The Trailblazer Award recognizes an innovative program or project.
The winners receive a statuette and a grant to be donated to a nonprofit organization, Ries said. A total of $5,000 in grants will be awarded. The lone exception is the Vision Award, which does not come with a grant.
In addition, three finalists will be named for each category and will receive a plaque.
Maria Monreal-Cameron, president and chief executive officer of the Hispanic Chamber of Commerce of Wisconsin, was the 2004 Navigator Award winner.
The MANDI award is an aid to communities and is becoming a more sought-after prize, she said.
"The MANDI award is certainly prestigious, and the cash award makes winning the award very impressive for the non-profit sector," Monreal-Cameron said. "It is very demanding for non-profits to meet their goals while keeping one eye on their budget."
Recognizing community development is more than just acknowledging organizations that erect structures. It also is an opportunity to thank them for changing people’s lives and neighborhoods, Ries said.
One example is the Milwaukee Fresh Start Initiative, which was the 2004 winner of the Trailblazer Award. The initiative is a collaboration of the Milwaukee Private Industry Council, the State Division of Housing, the City of Milwaukee, the Harambee Ombudsman Project, the Howard Fuller Educational Foundation and Northcott Neighborhood House.
"The Milwaukee Fresh Start Initiative teaches young adults job skills by having them build a house, and the initiative accomplished a number of things," Ries said. "Someone in need ends up with a house, but the young adults that may have had problems with the law in the past learn construction skills, business skills and communication skills. It puts them on a path to productive citizenship."
Other supporters of the MANDI Awards include the Donors Forum of Wisconsin, the Greater Milwaukee Committee (GMC), the Metropolitan Milwaukee Association of Commerce (MMAC), the African American Chamber of Commerce, the Hispanic Chamber of Commerce of Wisconsin, the Urban Economic Development Association of Wisconsin, Inc. (UEDA), University of Wisconsin-Milwaukee, the U.S. Department of Housing and Urban Development (HUD), the Wisconsin Women’s Business Initiative Corporation (WWBIC), Milwaukee County Executive Scott Walker and Mayor Tom Barrett.
"It is truly a wonderful reward to receive," Monreal-Cameron said. "I think through word-of-mouth, the award is helping immensely, and I think we should embrace the award and nominate individuals and organizations. We all know someone who would qualify under one or more of the categories."
October 1, 2004, Small Business Times, Milwaukee, WI
Barriers to change
Question:
The majority of my negotiations focus on trying to convince a prospect to change a system that has been in place a long time. Some prospects see the value within a short period of time, while others are flat-out resistant to the idea of change. Do you have any helpful hints to help me get prospects to more readily accept change?
Response:
Inescapably, in everyday business life, we find ourselves dealing with people whose position we want to change. Using rationale and common sense can be futile when someone’s decision is deeply rooted in emotions.
Samuel Goldwyn once said, "don’t bother me with facts when my mind is made up." In other words, logic and reason fail when emotion prevails.
As a species, we are all afflicted with "neophobia" – an initial aversion to change – to some extent. Depending upon the degree of a perceived threat, some people will put a stake in the ground, while others will at least keep an open mind.
When negotiating with someone who is change-adverse, you must be gentle and move slowly. Begin by asking questions to uncover what is most important to
them and why, before presenting your story. People do things for their own
reasons, not yours. Once you have gathered sufficient information from the prospect, review the details and determine how to strategically position your recommendation so it aligns with the prospect’s vision of the solution.
One indication the other party is moving from resistance to acceptance is when he or she moves from sitting back in their chair and leaning away from you, to leaning forward and asking you questions.
Top selling professionals are not naturally patient. They want things to happen now. But the prospect drives the buying process. Learning how to identify the barriers to change may help you understand what is happening, why and how you can influence the outcome.
Here are the four most common barriers to change:
1) Comfort with the known: Familiarity with what is (as bad as it is from your perspective) creates a tolerance for the situation. The idea of change is too overwhelming.
2) Fear of risk: For some people, the risk associated with progress is frightening. Choosing to stay put rather than face a volatile situation where potential risks may throw a monkey wrench into the situation is too frightening.
3) Vested interest in "The way we’ve always done it."
When employees hear repeatedly, "this is the way we’ve always done it, and this is the way we will continue to do it," a powerful message is sent: tradition is more important than progress. Creativity is stifled, and progress moves at the speed of comfort, not potential.
4) Need to be accepted: Deep within most humans is the need to be accepted. For some people, that means going along with the herd, despite latent desires.
With a large percentage of business professionals concerned about their job security, the idea of making a change that might fall out of line politically is intimidating – even when it’s in the company’s best interest.
Your best chance of success with this prospect is to make contact with someone higher on the executive ladder; a person who has the power and authority to say "yes" or "no." Otherwise, move on to another prospect altogether.
When you encounter a situation where the payoff is potentially large and you need to find a way to work with the other party, follow these simple tips and be amazed at the change that does take place:
1) Never be confrontational: Abstain from any urge to express your frustration with the other party. In other words, bite your tongue. While you may be steaming on the inside, you must be calm, relaxed and gracious on the outside. Being too aggressive, assertive or abrasive risks igniting a defiant response and this is certain to close the door on any potential opportunity.
Earning the other party’s trust is key. And one way to do that is to be predictable. Make commitments and follow through – every time.
You also must be humble. Find opportunities where they can help you out. For example, if you are completing some computations and need numbers calculated, ask them if they can assist you. Show your humanness. Be vulnerable. Use self-depreciating humor. All of these subtle strategies work to help you make a personal connection.
2) Leverage areas of agreement: It’s always advantageous to learn as much as possible about the other party and what is most important to him or her prior to presenting your offerings. When positioning your ideas, integrate the information you received from the other party to emotionally close the gap between where you are and where they are. Remember, the tone of your voice has to match the words you choose. It’s best to come across relaxed and friendly, like their next-door neighbor, as opposed to the intense, driving sales person.
Maintain trust: When negotiating with someone who resists change, building trust is critical. Demonstrate flexibility, acknowledge concessions, never spring new ideas without notice and when the prospect says "no" to an idea, attempt to understand their thinking and validate their feelings. Immediately readjust your original position and incorporate these newfound concerns and expectations into your message.
As your experience proves, it is not easy to get people to change, even when it’s in their best interest to do so. Continue to take your prospect’s pulse and demonstrate flexibility when it makes sense to do so to create a bridge between your positions.
Persistence, patience and ongoing repositioning are the keys to inspiring those who are resistant to change to embrace even baby steps toward acceptance.
Christine McMahon is the owner of Christine McMahon & Associates, a training and coaching firm in Milwaukee. She can be reached at 414-290-3344, via fax at 414-290-3330, or e-mail her at: ccm@christinemcmahon.com.
June 11, 2004 Small Business Times, Milwaukee, WI
Planning for change
Bob Greenstreet is wearing several important hats. The dean of the School of Architecture and Urban Planning at the University of Wisconsin-Milwaukee for 13 years, Greenstreet was recently appointed by Milwaukee Mayor Tom Barrett to also be the city planner/architect.
Greenstreet will resign from the city Plan Commission, which he chairs, and will then work for both the university and the city. He also has served as the interim chancellor of UWM for about a year and will continue to do so until July 15 when new chancellor Carlos Santiago takes over.
Now, developers who want to build in Milwaukee will have to satisfy Greenstreet if they want the mayor to support their projects. Small Business Times managing editor Andrew Weiland met with Greenstreet recently to learn more about his vision for the city. The following are excerpts of that interview.
SBT: Your plate is obviously already full here at the university. Why do you want to be the city planner/architect too?
Greenstreet: "A school like ours, to be most affective, has to be integrated with the city. We have done that through a number of initiatives. I’ve always had this vision of making it much more structurally significant to work in a partnership. I outlined that in a paper to Tom Barrett, and he was very much taken with the idea. There was an article about what does Tom know about development? Tom was very open. He said, ‘I don’t know about planning and architecture, but I know it’s very important.’ So he asked me, ‘I would like you to advise me on that.’ It fitted in with my plans for how the school could serve the city.
SBT: How do you see yourself balancing the two jobs?
GREENSTREET: "I’m still being paid by the university and the city is going to buy out a chunk of my time. We’ve tried to tailor the positions, reducing the city position to shed some of the bureaucratic stuff, and I will have some of my duties as dean taken over by some of my colleagues. I’m not worried I’m going to get totally swamped, but you never know. This is an exploratory, think-out-of-the-box exercise. We’re going to give it a try for a year. I am providing detailed reports to the campus to demonstrate how my time is being used. If either role suffers, then we’ll call it quits. But we think it’s a noble experiment that’s worth a shot, because if we can make it work, I think both could really benefit."
SBT: You’re replacing previous city planner Peter Park. He had a reputation for being a tough guy for developers to please. On the other hand, many credited him for raising the bar for the quality of development in the city. What will your approach be? Will it be similar or different than Park’s? What can developers expect when they bring projects to you?
GREENSTREET: "Peter and I share a similar philosophy about good design and city development, which is not surprising considering he was one of our students. I think a lot of credit goes to him for establishing some standards for design in the city. He and I worked together on the zoning task force to update the zoning code. My sort of whole purpose for going into that, which has become the slogan I think of for city development, is doing better development faster.
"What that means is you try and get as much good development going in the city that you can. We really need to encourage developers to work here as much as possible. There are plenty of opportunities. Expanding the tax base is absolutely critical, expanding the quality and range of housing, of commerce, of industry. We do everything that we can to try to encourage developers to come here. Having said that, we want to make sure that the quality of what they do adds to the value of the city as much as possible."
SBT: Under the Norquist administration, the mayor pushed his new urbanist vision of a dense, pedestrian-friendly city. Do you share that philosophy? Are you a new urbanist?
GREENSTREET: "I don’t like labels, but I share the philosophy, yeah. I think Milwaukee prospers by the addition of more people living in the city, and I think the quality of their existence grows as more people join them and the city benefits accordingly. More people living downtown means downtown becomes safer than it already is, more people walking around. It means more services that those people need, grocery stores, clothes stores, whatever. "They need entertainment. More entertainment means that more people will come to the downtown because there are places to go. So it’s a snowball effect. And it’s going in the right way. It’s going slowly. Things don’t move quickly in Milwaukee, but the growth in population is coming back, so I don’t have too many fears about the downtown.
"I’d like to see a little more attention on the neighborhoods. We have a community design service that we offer through the school that’s worked with over 40 neighborhoods in the last three years. We provide design services to help neighborhoods, that really have no access to traditional architectural services because of cost, to visualize what their future might be and help them look for financing to provide some input to improve their neighborhoods one fa?ade at a time, one building block at a time."
SBT: How does the university currently work with the city and how do you want to expand on that?
GREENSTREET: "The city to us is a great place to teach students. Many of the classes we teach use sites and projects in the city as exploratory tools. It’s our laboratory, if you like. Some of those projects are plugged into what the city is actually interested in doing. Some of them actually have an impact. O’Donnell Park, for example, started in the school. East Pointe Commons, the tearing down of the Park East Freeway, the Third Ward market that’s going to begin (construction) this year – these were all projects that began as ideas in the school. These are ideas that, well they’re free, which is good. They are the results of thinking by lots of very talented young minds, so you’re thinking in a very broad range of ideas.
"This particular opportunity is a great way of coordinating the incredible output of work in the school into the incredible needs of the city in a more coordinated way. Being plugged into the decision-making structure of the city, I think we can be more affective in serving the city, and the city can be better served by the incredible generator of ideas that we have in the school."
SBT: You touched on the removal of the Park East freeway spur. As city planner, what do you envision being developed there?
GREENSTREET: "It’s a very important opportunity for the city that we want to move, but I don’t think we want to rush, because once the land is filled, we’ll never get an opportunity to rework it. The most important thing to do with it is to reweave the urban fabric in that part of town that ties back the neighborhoods into the city. It’s a great place to do that.
"When the freeway was blasted through there, it just took a scar through the city and just separated areas. Freeways just kill life around it for blocks. We’ve got an opportunity to reweave that. Ultimately and at the end of the day, development by private developers will play a critical part in the success of that area. It’s a great opportunity to bring tax base into the city. It’s a great opportunity to bring more people into the city, both residential and tourists. So I would envision in a perfect world we would see a rich balance of residential, commercial and entertainment (uses)."
SBT: What are your thoughts on the proposed community benefits ordinance that would mandate some affordable housing and living wage benefits for development in the Park East corridor? Some developers say those requirements would discourage them from building there.
GREENSTREET: "There are two areas (being debated). There’s the community benefits (ordinance) and there’s also the open space group (that wants more parkland in the Park East corridor) as well. I think they can both be discussed in a way that meets people’s needs.
"Affordable housing is important. I think we need to assess what affordable housing availability there is in the neighborhood now before we start allotting areas of land to it. I know there were some issues also with labor wages, and I know the city has taken a position in the development community in terms of costs. It’s important not to put down too many criteria at the beginning that would deter development. On the other hand, having some criteria to make sure it doesn’t end up as a total kind of gold rush town is important too. There’s some negotiations still to be done."
SBT: What’s your take on the Harley Davidson museum planned for the Menomonee Valley? Some people have criticized its design, particularly the surface parking lots, and say it’s not dense enough.
GREENSTREET: "I know it has upset some people who believe that the Menomonee Valley plan would be violated by this. You balance practical need with visionary ideals. You have to balance the two together. This to me looks like it’s going to take place. I think our job has to be to make sure it is done in the best possible way that mitigates against some of the factors that have been discussed. It’s a huge benefit to the city and will draw other activities to that area."
SBT: What’s your vision for the Menomonee Valley?
GREENSTREET: " The Menomonee Valley has incredible potential for any number of things. It’s so close to the downtown. As yet, we are not entirely sure what that full potential is. There has not been a massive rush to build on the industrial land that we put aside. Heavy industry doesn’t appear to be a major focus for the future of Milwaukee. So, you’ve got to think creatively on how to best use the resources that you have to balance between the needs of creating jobs, which is critical because that improves the tax base of the city, which is absolutely vital for a city like ours.
"The more you can expand that tax base, the more you can do within the city to make sure it’s a really livable place. The potential of the Menomonee Valley is enormous. I thought the plans that were developed for the long parks between Miller Park and the lake were terrific. I doubt that will be exactly what will happen, because there are other forces. You’ve got to be flexible."
SBT: Several groups have proposed different projects for the lakefront. Most of the projects have generated some controversy and parks advocates say the lakefront should remain as open space. How do you think the lakefront should be developed?
GREENSTREET: "I think it needs to be done carefully. I think selective, non-intrusive development is a good idea. The (Lake Park Bistro) restaurant and Alterra (Coffee Roasters) is a good example. They have brought more people into the parks, which makes them safer."
SBT: So much of land use and urban planning is tied together with transportation. Do you think there should be a light rail system built in Milwaukee?
GREENSTREET: "I think the (downtown) connector system (should be built). I don’t think light rail is entirely feasible, because the infrastructure it requires is very expensive and quite frankly we don’t have the population base, nor the parking problems.
"There are traffic problems heading out to the west, but we’re quite blessed here by comparison to some cities like Los Angeles or London or Chicago in the (traffic) issues that we have. You only really get a very effective public transportation system when you have a dense population that has to use it. We don’t have it here. "The kind of infrastructure and the cost necessary for a full light rail system doesn’t strike me as practical. But the connector system you have heard about seems to be to be eminently sensible. It’s a relatively little infrastructure cost that can be heavily subsidized by the federal government. It’s a system that doesn’t require massive infrastructure relocation in the streets. You just need a narrow channel. These European trolleys can clip out and drive around (obstructions) on a diesel motor and get back in (the track) again. It’s a very good system. I think the notion of having very specific routes, instead of trying to cover everything, exploring it just for a run from Miller Park right up to UWM coming through the east side, which is the densest populated area in the state, makes a lot of sense.
"What I would like to see happen is the connector system coming straight up through the upper east side, through the downtown. I know UWM is very excited about the idea of it being connected to the downtown for our students, faculty and staff. I’d love to see it go right out to Miller Park to link together many of the attractions and then of course a loop into the neighborhood up through Walnut (Street) that will also help to bring a heavy population of the city and give them some services as well. It’s a nicely thought-out plan. I have high hopes for that."
SBT: How do you define good, quality architecture? Can you define it? Or is it like, "I know it when I see it."
GREENSTREET: "Yeah, we know the Calatrava building is great. We know the City Hall is a great building, and we look at the (UWM) union, and we know that it’s not great. We just know that. I think you’ve got to be careful about being too precious and thinking that every building has to be a new land-breaking piece of architecture. Buildings can be good neighbors to other buildings in a very modest way and still play a very valuable part.
"We still have a rich stock of historic buildings in the city. I think that heritage is carefully guarded by the people in the city and that’s good, we must continue to do that. I don’t see anything wrong with having a rich array of historic buildings and a lot of very new buildings along with them. That’s just a natural continuum to me. I’m not in favor of freezing cities in time, as has been done in some cities. I’d like to see a good juxtaposition as long as the new buildings are good."
June 11, 2004 Small Business Times, Milwaukee, WI
In search of cool
Thousands of students at public and private colleges and universities in Wisconsin have just received their diplomas, and they are now plotting their first career move.
Will they stay in Wisconsin or will they take jobs in other states?
Today’s young professionals make quality of life a top priority in choosing where they want to live and start their career.
The quality of a city’s nightlife and other entertainment options often determines where many young professionals choose to live.
Attractive, vibrant places to live are gaining young minds, and stagnant places are losing them.
"(Today’s graduates) are making choices on where they want to live, and then they find a job," said Dean Amhaus, president of the Spirit of Milwaukee. "All too often, the individuals talking about brain drain and brain gain don’t understand what’s in the head of a 21-year-old today. It’s not all about taxes. For a 21-year-old, (taxes are) probably not even on their radar screen because they don’t own property."
Those talented young workers are the business leaders of tomorrow and will fill the workforce void soon to be created as baby boomers retire.
"The largest demographic is retiring and is being replaced by the smallest demographic," said Shelley Jurewicz, executive director of Young Professionals of Milwaukee.
"At the very least, we’ll see (a labor shortage) two to three years from now," said Terry Ludeman, chief of the office of economic advisors for the Wisconsin Department of Workforce Development.
Therefore, the economic futures of states and metro areas depend largely on their abilities to attract highly skilled young professionals who today are looking for someplace cool to live.
For that reason, many cities have formed young professionals organizations to attract and retain skilled young workers and provide them with networking opportunities.
Young Professionals of Milwaukee, formed in 2001, has grown to 3,000 members. The organization helped start young professional organizations in Green Bay, Appleton, Madison and Racine.
Wisconsin is one of several states trying to reverse a brain drain, which means more skilled young people move out of the state each year than move in. The annual net loss of young minds saps the ability of the state’s economy to grow, state leaders say.
According to the U.S. Census Bureau the state had a net loss of 11,224 single, young, college-educated people from 1995 to 2000.
Many single young professionals move to what they believe are exciting cities with prosperous economies and fun social scenes. Milwaukee, by far the biggest city in Wisconsin with just under 600,000 residents, did better than most areas of the state with a slight brain gain of 579 during the late 1990s, according to the Census Bureau.
However, Milwaukee still ranks behind many other U.S. cities, such as Chicago and the Twin Cities, in attracting young professionals. Milwaukee, in the minds of some young professionals, is still stuck with an image of a blue-collar town that is not growing.
Job growth in the metro Milwaukee area is slower than in other parts of the state, Ludeman said. Madison, the Fox Valley and portions of northwestern Wisconsin near the Twin Cities are seeing faster job growth than Milwaukee, he said.
The reason, Ludeman said, is Milwaukee’s traditional reliance on manufacturing. Virtually every other industry in the state is experiencing job growth, except for manufacturing, he said.
Jobs in technology, business management, health care, wholesale trade and construction are all on the rise in the state, he said.
"The Milwaukee County job market has been sluggish for three to four years," Ludeman said. "The job market in Milwaukee is growing more in the suburban areas than in Milwaukee County. That doesn’t mean there aren’t any jobs in Milwaukee. It’s still an important part of the state’s economy."
In fact, metro Milwaukee still has far more job opportunities than any other area of the state. The Milwaukee area had a monthly average of 831,000 jobs available in 2003, according to the Wisconsin Department of Workforce Development. Combined, Appleton, Green Bay and Madison had fewer jobs in 2003 than the Milwaukee area. The Appleton area had 203,500 jobs, Green Bay had 147,800 jobs and Madison had 297,300 jobs.
Today’s college graduates are more than qualified to fill many of those jobs, said Rolf Wegenke, president of the Wisconsin Association of Independent Colleges and Universities.
"Whatever a business might need, I think you will find them among our grads," Wegenke said. "We have a really high-quality graduate. Our test scores are high, and our job placement rates are high."
Private school students receive a well-rounded education that makes them an asset to small businesses in need of employees to perform a variety of duties, Wegenke said.
"Small businesses need people to be able to do everything," he said.
Over 11,000 students are receiving degrees this spring at Wisconsin technical colleges.
"Technical college graduates have never been more valuable to employers in Wisconsin," said Kyle Schwarm, marketing director of the Wisconsin Technical College system. "Twenty of the 30 fastest growing occupations over the next decade will require a technical college education. Our graduates have hands on experience with ready to work knowledge that employers require."
About 29,000 students are graduating this spring from the University of Wisconsin System.
"These well-educated graduates are central to efforts to grow the state’s economy," U.W. System president Katharine C. Lyall said. "The UW System is a perfect partner as Wisconsin works to develop a high-end economy by investing in its citizens and attracting new businesses."
UW System survey data indicates more than 80 percent of Wisconsin residents who earn UW degrees remain in the state after graduation.
Wegenke said about 70 percent of students from Wisconsin’s private schools remain in the state after graduation.
However, the U.S. Census Bureau’s brain drain statistics indicate Wisconsin is attracting few young professionals from out of state to move here.
Only about 20 percent of UW System students from out of state remain in Wisconsin after they graduate.
Businesses in the state must be more aggressive if they want to hire the best and brightest of Wisconsin’s college graduates. Some businesses from outside the state begin recruiting top students at the Milwaukee School of Engineering when they are only sophomores, Wegenke said.
"When you want really good employees, you have to be aggressive," he said. "For whatever reason, we have a culture (in Wisconsin) that’s sort of complacent. We assume people will stay here."
If the state hopes to retain talented young people, wages must increase, Wegenke said. The state’s average wage trails wages paid in many nearby states, including Minnesota and Illinois.
"Money talks," Wegenke said.
The state also must overcome its aversion to risk, which permeates the business community. The state ranks low in venture capital investment and in start-up businesses.
"If you’re a young entrepreneur, you want to go to a place that opens its arms to new ideas," Amhaus said.
Milwaukee leaders say their community is the key to reversing the state’s brain drain, because young professionals are drawn to big cities. Milwaukee must continue to evolve into an inclusive and hip city, or young professionals will continue to leave the city and the state, they said.
Milwaukee should take advantage of its 2001 ranking in Girlfriends magazine as the best place for lesbians to live and work to eliminate the racial segregation that has plagued the city, Jurewicz said.
"Young talent is looking for a city that can demonstrate it’s very diverse and very inclusive," she said. "Anything we can do to demonstrate we are a friendly place for women and minorities and people of a different lifestyle is a huge selling point."
Wisconsin and Milwaukee must try to attract talented young minds from not only other states, but also from other countries if the region is to thrive in a global economy, Amhaus said.
"Is Milwaukee ready to welcome people who look different than us, speak differently and have a different religion?" he said. "We absolutely have to have all of that."
Milwaukee also should work to expand its shopping opportunities, improve city schools and add modern mass transportation systems for getting around the region and traveling to Chicago, city boosters said. Such amenities appeal to young professionals, they said.
In addition, affordable housing is needed in Milwaukee’s downtown area, where young professionals want to live, Jurewicz said.
"We don’t’ want the city to be full of empty nesters (living in expensive condos)," she said.
Ludeman said Milwaukee’s economy struggles because, unlike Madison and major cities such as Boston and San Francisco, it lacks a large research institution. Ludeman said he made a recommendation to the U.W. Board of Regents about five or six months ago that they build up the University of Wisconsin-Milwaukee into a major research institution to boost the region’s economy.
Amhaus said residents must try to improve the image of Milwaukee and create positive word-of-mouth buzz by bragging about the city’s assets.
"I hear all the time about people who come here and are surprised about what we have," Amhaus said. "We can’t be the best kept secret anymore."
June 11, 2004 Small Business Times, Milwaukee, WI
Corporate wellness
I have just completed close to 400 individual health counseling sessions in follow-up to Health Risk Appraisals at three local companies. I am convinced that we are not doing a great job at helping people understand what it is that makes them sick.
There are those who believe that illness is just bad luck, or that germs are out there lurking, waiting to attack. Some understand that health problems occur as a result of lifestyle choices such as poor nutrition, lack of exercise and tobacco use.
To most, it never occurs that if we are experiencing stressful relationships, financial problems, dissatisfying work or a joyless life that lacks purpose and meaning we are most likely going to get sick. Add these life experiences to our genetic make up, environmental influences and poor lifestyle choices over a period of years, and we develop "chronic disease."
Despite the billions of dollars spent on insurance and health care, the United States is far from the healthiest nation. Yes, we are living longer, but we are not living healthier. The Centers for Disease Control reports that both chronic and infectious disease is on the rise. The latest statistics show that:
* One in six people will become diabetic.
* One in three will develop cancer.
* One in two will develop cardiovascular disease.
* One of six couples will experience unexplained fertility.
* One in seven women will develop breast cancer.
A growing number of local companies are responding proactively to these health care concerns with workplace wellness initiatives. This movement to employer-sponsored health promotion is showing a significant return on investment for companies who have made the commitment.
Most of these programs focus on activities related to "healthy lifestyle choices." However, we are missing the boat if we think of lifestyle choices as those related only to what we can measure in biomedical markers such as cholesterol, blood pressure and body fat percentage.
Healthy lifestyle choices are not limited to exercise, quitting smoking and eating the right foods. Choices related to quality relationships, emotional awareness and management, spirituality, social connectedness and job satisfaction are equally important in building our resistance to disease.
We are moving into a new understanding of health and medicine by giving more attention to the connection between the mind and body. In her fascinating book, Rethinking Pasteur’s Germ Theory, Nancy Appleton talks about who gets sick and who stays healthy.
She explains that for a long time, Western medicine was dominated by Louis Pasteur’s belief that if a germ invades the body, we will get sick. If we can manage to avoid germs, we will stay healthy. Why is it then that many people will die during a plague and others survive? Why doesn’t everyone who is exposed to the AIDS virus become HIV positive? Or why don’t all who become HIV positive get full-blown AIDS?"
The answer, Appleton goes on to say, is simply the efficiency of the body’s systems. Most specifically, our immune system. What we eat, think about, feel, as well as other lifestyle habits such as exercise and stress all contribute to the strength or weakness of our immune system.
When our immune system and other body systems are healthy and strong, our body is able to meet trauma, resist infection, stop and reverse degeneration and heal itself. For many, the immune system has lost its ability to heal because of poor diet, negative thinking and inability to cope with stress.
Since most adults spend the majority of their waking hours at work, job stress is a major contributor to poor health. Dr. Larry Dossey, a Texas physician and internationally influential advocate for the role of the mind in health, contends that the "joyless striving" that people experience when their job goals and objectives are not matched with their purpose and meaning in life causes more heart attacks than does high cholesterol and unhealthy diets.
What can companies do within their organizations to reduce job-related stress and help employees build strong immune systems?
* Conduct an annual job satisfaction survey.
Have the disciple to "Confront the Brutal Facts," as Jim Collins says in his best selling book Good to Great. Getting honest feedback from employees about what in the organizational culture might be changed to make work more satisfying will result in healthier employees who are more productive.
* Build a work environment of communication and support.
Workplace studies document that people who experience supportive relationships at work have lower incidence of health problems. When people are supported by their supervisors, they are higher producers and have a lower absenteeism rate.
* Provide flexibility within job descriptions.
Finding purpose and meaning in work does not necessarily require changing jobs. Allow opportunities for employees to be involved in changing aspects of their jobs that are not satisfying.
* Encourage the use of your employee assistance program.
I have said it in previous articles, and I will say it again. Company sponsored employee assistance programs are drastically underutilized. EAPs can be an inexpensive resource for employees who are experiencing financial, social, family or emotional difficulties. Encourage the use of your EAP as a component of your wellness program.
Connie Roethel, RN, MSH, is president of Complementary Health & Healing Partners (CHHP), a corporate wellness and health promotion services company with offices in Mequon. She can be reached at (262) 241-9947.
June11, 2004 Small Business Times, Milwaukee, WI
New grant will fund collegiate business ethics program
The Wisconsin Foundation for Independent Colleges (WFIC) has received a $25,000 challenge grant to create a business ethics program at 20 private colleges throughout the state.
The Milwaukee-based WFIC received the grant from the James S. Kemper Foundation. If matching donations can be raised, the WFIC intends to use the grant to launch the College Community Partnerships for Business Ethics.
The goals of the program will be:
(1) To unite the college and corporate communities to encourage a resurgence of ethical practices in business.
(2) To create a national higher education model for the promotion of good business practices.
Through the program, students and faculty from Wisconsin’s private colleges will be awarded grants to develop and implement projects that will better educate young business leaders, inspire ethical leadership, enrich ethical knowledge and promote ethical collaboration.
The program will provide a framework for cooperative work toward ethical business models and share best practices.
The WFIC plans to cap off the first year of the program with a Business Ethics Forum. The James S. Kemper Foundation and the other partners that sign up with the project will help select an expert to serve as the keynote speaker of the event.
"The forum will be open to the college and business communities. The forum is a splendid sponsorship opportunity for corporate underwriters wishing to heighten their visibility in the state or region," said David Wolfson, WFIC vice president.
"Colleges and partners can share best practices, joining the abilities and resources of all the independent colleges towards a common goal: solid business integrity. With a broad partnership, the independent colleges can play a pivotal role in improving business ethics," Wolfson said.
Wolfson said the new program arose after WFIC conducted a survey of business deans from Wisconsin’s private colleges. In the survey, the deans expressed strong desires and a willingness to develop and expand the emphasis on business ethics.
In explaining the need for the business ethics program, Wolfson cited a quote from former Enron Corp. chief executive officer Jeffrey Skilling: "When the Enron Corp. works on a project, customers have nothing to worry about. They know that it’s clean, absolutely clean, because Enron’s involved. That’s the way we do business."
Of course, that quote came before Enron filed for bankruptcy and a corporate scandal forced Skilling from his job.
Companies and other organizations interested in learning more about the program or contributing to the initiative can contact Wolfson at (414) 273-5980, ext. 15.
June 11, 2004 Small Business Times, Milwaukee, WI
New law provides opportunities for new venture capital investment in Wisconsin
On April 15, Gov. Jim Doyle signed into law Wisconsin Act 255, which provides investment incentives and assistance to new businesses. The legislation provides two types of tax credits to venture capitalists – the angel investment tax credit and the early stage seed investment tax credit.
In addition, the legislation creates a technology commercialization grant and loan program.
The angel investment tax credit generally allows individual investors to claim a non-refundable credit against Wisconsin income tax equal to 25% of the amount the individual invests in a qualified angel investment.
Half of the credit is available in the year the qualified angel investment is made and half in the following year. The maximum amount of a claimant’s investment that may be used as a basis for the angel investment tax credit is limited to $500,000 (or a maximum credit of $62,500 per year per investment).
Unused credits may be carried forward for up to 15 years. The new legislation limits the aggregate amount of angel investment tax credits claimed by all Wisconsin taxpayers for all certified businesses to $3 million per year with an overall lifetime cap of $30 million.
Angel investors may begin claiming the credits for taxable years beginning on or after Jan. 1, 2005. As currently drafted, it appears that only direct investments by individuals and trusts will qualify for the tax credit, while investments made through limited liability companies or partnerships will not be eligible.
However, it remains to be seen whether the Department of Commerce, in its rulemaking process, will interpret the definition of eligible angel investors to include single-investment partnerships or limited liability companies.
The angel investment credit may only be claimed for equity investments and other qualified expenditures in businesses that meet the following requirements as certified by the Department of Commerce:
* The business has its headquarters in Wisconsin.
* At least 51% of the business’s employees are employed in Wisconsin.
* The business is engaged in, or is committed to engage in, manufacturing, agriculture, processing or assembling products, conducting research and development, or developing a new product or business process.
* The business is not engaged in real estate development, insurance, banking, lending, lobbying, political consulting, wholesale or retail trade, leisure, hospitality, transportation, construction or professional services provided by attorneys, accountants, business consultants, physicians or health care consultants.
* The business has less than 100 employees.
* The business has not been in operation for more than seven consecutive years.
* The business has not received more than $1 million in investments that qualified for angel investment tax credits.
For indirect investments in certified businesses, the early stage seed investment tax credit allows individual, trust and corporate investors (including investments made through partnerships and limited liability companies) to claim a non-refundable credit equal to 25 percent of the claimant’s initial investment in qualifying venture capital funds.
To be eligible for the credit, a qualifying fund manager must invest the claimant’s investment in certified businesses as described above.
Overall, the bill limits the aggregate amount of early stage seed investment tax credits claimed by all Wisconsin taxpayers for all certified investments to $3 million per year with an overall lifetime cap of $35 million.
Fund investors may begin claiming the early stage seed investment tax credits for years beginning on or after January 1, 2005. Unused credits may be carried forward for 15 years.
Before investors can claim the early stage seed investment tax credit, the Wisconsin Department of Commerce must certify the investment fund manager. In determining certification, the Department of Commerce must consider a number of factors, including:
* The fund manager’s experience in managing venture capital funds.
* The past performance of investment funds managed by the fund manager.
* The expected level of investment in the fund to be managed.
* The fund manager’s commitment to placing investments in certified businesses.
The new legislation also creates a technology commercialization grant and loan program which will provide grants and loans to assist individuals and companies in obtaining federal government grants and third-party financing.
The Department of Commerce will evaluate submissions for these grants and loans based on various factors, including whether the applicant will use the grant or loan proceeds to further a business in Wisconsin.
Access to these grants and loans is expected to be made available later this year.
In combination, the new tax credits and the grant and loan program provide incentives for investment in emerging Wisconsin companies. We encourage you to keep these opportunities in mind when evaluating upcoming investments. At this point, the Department of Commerce must work out the details of implementing these programs by addressing such issues as the yearly apportionment of tax credits among qualifying investments and the certification process for fund managers.
While the new law may have limited application, in the right circumstances it could be helpful in venture capital formations or in financing new ventures.
Attorneys James Phillips and Sarah McNally are members of the Godfrey & Kahn Attorneys at Law tax team. They can be reached at (414) 273-3500.
June 11, 2004 Small Business Times, Milwaukee, WI
Early IRA withdrawals
The individual retirement account (IRA) frequently forms an important part of the retirement income strategy of a working person. In fact, because of job switches, rollovers and other developments, it is quite common for all of an employee’s tax-deferred retirement funds to be consolidated into one or more IRAs.
Because IRAs are intended for long-term retirement accumulations and not a short "in and out" tax shelter, the Internal Revenue Service imposes penalties on IRA withdrawals prior to age 59. The penalty is 10 percent of the amount withdrawn and is in addition to the regular income tax. Wisconsin follows suit and imposes an additional 3-1/3 percent penalty.
If a withdrawal from an IRA account is subject to penalties, it is possible to lose almost one-half of the premature distribution to taxes and penalties. For example, with a federal income tax of 28 percent, a Wisconsin income tax of 6 percent, a federal penalty of 10 percent and a Wisconsin penalty of 3-1/3 percent, the total taxes and penalties would be 47.3 percent.
Accordingly, accessing IRA accumulations prior to age 59 and paying both taxes and penalties would drive a stake into the heart of most retirement income strategies. Yet there are times when access to retirement funds prior to age 59 would be entirely appropriate and would not violate the government’s tax policy that such funds should be used for retirement purposes.
Say, for example, where an individual attains age 55, either retires or is laid off or downsized, is unable or chooses not to pursue other employment and needs a retirement income bridge until he or she can commence receiving Social Security at age 62, or begin receiving another company or government pension.
Fortunately, the Internal Revenue Code provides penalty-free access to IRA funds prior to age 59 if the payment or withdrawals are made in a series of substantially equal periodic payments, sometimes abbreviated as a SOSEPP, over the lifetime of the IRA owner.
One’s first reaction to such a proposal might be negative. Why would anyone at age 50 or 55 commit themselves to an inflexible monthly payment from an IRA account which if left until age 59 could be accessed with much more flexibility?
While some people might find such a fixed recurring payment comforting, most people would prefer more flexibility. The series of substantially equal periodic payments that is the legal door to penalty-free, pre-age 59 distributions is not so unforgiving.
To constitute a SOSEPP, the series of payments may commence anytime at any age, but must continue until age 59, or for at least five years, whichever is longer. Thus, if an employee needs access to funds at age 52, the substantially equal payments must continue until age 59. On the other hand, if the series of payments starts at age 57, then the payments must continue until age 62, because at age 59, the payments would not have lasted for the required minimum five-year period.
After the required period has been satisfied, then withdrawals from the IRA can be made in whatever amounts and at whatever time the individual desires. The requirement for making distributions for at least five years (or age 59 if later) helps to ensure that the IRA accounts act like a real retirement income source rather than a tax-deferred pocket of cash that can be accessed whenever the need arises.
How, then, is the amount of the substantially equal periodic payment determined? It should first be noted that the SOSEPP does not necessarily involve purchasing a commercial annuity from an insurance company, although this would also qualify as a way to make penalty-free distributions. In fact, the IRS permits the substantially equal periodic payments to be calculated in one of three ways: the amortization method; the annuity factor method; and the minimum distribution method.
Of these, the amortization method is perhaps the easiest to understand and explain. Under the amortization method, the required substantially equal periodic payment is that distribution which at a required interest rate would exhaust the IRA balance over the life expectancy of the IRA owner. This is similar to a fully amortizing mortgage, except instead of repaying the bank, the IRA owner is paying him or herself.
The IRA owner’s life expectancy is determined by an IRS life expectancy table, and the interest rate is 120% of the applicable federal mid-term rate, an interest rate which the IRS publishes monthly for various tax related financial transactions. If, for example, an individual age 55 with an IRA balance of $300,000 were to start a series of substantially equal periodic payments on May 1, 2004, the term would be 29.6 years, the interest rate would be 3.75 percent and the monthly payment would be $1,400.
The annuitization method, the second way of calculating a SOSEPP, would produce a minimum payment using a government annuity factor.
The minimum distribution method, the third method of calculating a SOSEPP, would produce a variable distribution by dividing the changing account balance by a decreasing life expectancy factor each year.
Accessing funds prior to age 59 through substantially equal periodic payments is a way to provide penalty-free IRA retirement income for a period of time free from IRS premature distribution penalties. It works well at earlier ages as a bridge to other forms of retirement income, such as Social Security or a company pension. Yet what is taken today is not available tomorrow, and early distributions will ultimately reduce funds available for later retirement years.
John T. Bannen is a partner in the Milwaukee office of Quarles & Brady LLP. He focuses his practice on estate planning and probate, employee benefits and taxation.
April 11, 2004 Small Business Times, Milwaukee, WI
Viewpoint: Waukesha County needs another hospital
As a family practice physician, I see a wide range of patients from all walks of life. I am privileged to count among my patients a number of people who operate small businesses. As a group, they are talented, hard-working and committed. They have to be. Otherwise, they wouldn’t succeed.
One thing these small-business people all understand is competition. They understand that competition forces all participants in the marketplace to focus on continually improving the products and services they offer. They understand that competition is fundamental to our free-market economy.
I am a physician, not a business person, but I do appreciate the merits of competition. And I do understand that this needs to be an important part of the debate over a new medical center to serve western Waukesha County. The truth is this simple: When health care providers compete for your business, the result is better care and better service.
The physicians and staff of Wilkinson Medical Clinic and Aurora Health Care have proposed to build a beautiful new medical center on a site within Pabst Farms in the Town of Summit. The project will include a new and larger Wilkinson clinic to replace the old building in Oconomowoc, which we long ago outgrew. The clinic will be closely integrated into a state-of-the-art community hospital featuring the latest technology for diagnosis and treatment, along with a new patient-centered model of care that is unlike anything that now exists in Waukesha County.
Most important, the new medical center will provide an option for care where no option now exists. While eastern Waukesha County offers a number of choices in hospital care, there is only one hospital in the fast-growing communities of western Waukesha County. The new Aurora Medical Center will introduce competition – and that’s a good thing.
Some critics call it "duplication of services," an odd argument that’s never made when someone proposes to establish a bank in a community that already has a bank – or a supermarket, or restaurant or department store.
Other critics maintain that costs will rise when a second hospital begins serving the communities of western Waukesha County. They argue that the same number of patients will need to be shared among two hospitals, driving up overhead costs. This argument ignores a sad truth that my physician colleagues and I know well: Many of our patients now leave the area when they need hospital care. The latest state data shows that 57 percent of the residents of western Waukesha County travel out of the area when they need to be hospitalized. That’s just not right.
A new hospital will give people a new reason to stay in the area for care. This, coupled with the rapid population growth in our communities, to be fueled in part by the development of Pabst Farms over the next few years, will mean there is more than enough patient volume to support two community hospitals. The growing number of older residents in our communities also will increase the demand for inpatient care.
We’re in the midst of a crisis in health care costs. The insurance premium increases we’ve been seeing are unsustainable. I hear that most clearly from the small-business operators who are among my patients. As we announced plans for the new medical center, Aurora thought it was important to address cost concerns up front – by pledging to establish prices at the new hospital at levels consistent with prices at other hospitals in the county, and thereafter to hold any price increases below the medical consumer price index. In other words, patients and employers will receive a new option for care at a price that is no different from what they are paying elsewhere.
And, of course, competition acts as a check on spiraling costs. Being competitive means providing care in the most cost-effective manner.
Again, I’m a doctor, not a business person or a health care economist. But I don’t need an advanced degree in economics to understand the benefits of competition. And I know that we are seldom best-served by monopolies.
I was born and raised in the Town of Summit, and that’s where I’m raising my children. For my family, my neighbors and my patients, I want to ensure a strong and vibrant system of health care services, today and long into the future.
Competition? It’s only healthy.
Kristin Simons, M.D., is a family practitioner with Aurora Health Care’s Wilkinson Medical Clinic in Oconomowoc.
April 11, 2004 Small Business Times, Milwaukee, WI
The perfect storm
We covered a range of topics, from his assessment Milwaukee Public Schools to the propensity for Milwaukee to be risk adverse.
Not surprisingly, George and I moved to talking about the often-discussed topic of Wisconsin’s brain drain/gain. As noted hundreds of times, we are quickly approaching a time where there will be a significant decline in the number of young workers, due largely to a drop in the number of births a few years ago.
Combine this fact with the increase in the amount of communities across the country that realize they need to project an attractive image to net that young person, and we are plunging into a so-called "perfect storm."
If you haven’t noticed, there has been a major paradigm shift with respect to how today’s young talent find a job. When I graduated from college nearly 25 years ago, you scrambled to find a job. Once you found one, the job dictated where you lived.
Today, make a 180-degree-turn. It is true, young people today are first deciding where they want to live and are confident they will find a job in that place. They live and breathe the phrase "No Fear."
There are some that think the key to making a place attractive for that young person is to simply lower taxes and create great job prospects. Great idea, but if you simply rest your case on these traditional economic development formulas, then you have only added half of the ingredients in your quest to attract talent and, maybe, not even the right ingredients.
As an example, step into the shoes of the 25-year-old hot shot, and we might realize lower property taxes are the furthest thing from that person’s mind, for no other reason than the fact he or she doesn’t own any property. "Out of sight, out of mind."
Yes, someday that may be important, but right now, it is time to live for the moment and to the fullest.
So what’s the ticket? Just like the latest images that are created by MTV, movies or ads on television, communities need to develop a strong, upbeat image. An image that proclaims we are "cool" without actually having to say the word.
What is cool? A bold arts and cultural scene, a vibrant music industry that includes great radio, eclectic retail stores, farmers markets, efficient mass transit, etc.
For the young entrepreneur, the last place they are headed is to a place that is viewed as being "old" and unfriendly to new creative ideas and people. Not only are they seeking communities that are invigorating, but they also want to work in a place where their career can be on the fast track. One young accomplished person I recently spoke with gave me a sense of frustration because she wasn’t moving fast enough in her career – she was about to turn 30.
Communities that are open-minded and embrace the unique qualities and attributes of entrepreneurs and pioneers are also the same places that willingly accept and engage people of all cultures, another ticket to successfully attracting talent.
Today’s young people expect to live and work in places where the welcome mat is out for EVERYONE. This is not only critical now, but even more so, in the next few years.
That leads me back to my conversation with George Lightbourn and the "perfect storm" that is poised to occur because of a decreasing pool of talent and an increasing competition between cities and regions.
George Lightbourn thinks that one of the answers is importing twenty-something’s from Europe, Southeast Asia, Africa, etc. But remember, when you attract that worker from abroad, they will bring with them their different cultures, religions, languages and appearances.
For Milwaukee and Wisconsin, the question is whether the welcome mat will be out for them. If it is, we can come full circle and be on the leading edge of the brain gain scenario for the young talent from the United States.
The bottom line is that we must not apply the talent recruitment principals of the 1960s, 70’s or 80’s, but instead tune into the hopes, dreams and expectations of today’s young people. It is about having great opportunities, but it is also about presenting an inviting image backed up by reality.
Dean Amhaus is the president of the Spirit of Milwaukee, a nonprofit organization dedicated to enhancing Milwaukee’s image. He has served as the president of Forward Wisconsin, the state’s economic development organization, and executive director of the Wisconsin Sesquicentennial Commission.
April 11, 2004 Small Business Times Milwaukee, WI
