Focusing on a 10-year time frame is a good thing when it comes to investing your money, according to Jim Westphal, senior vice president and partner of the Cobey-Westphal Investment Consulting Group of Wachovia Securities in downtown Milwaukee.
"If you can do that, don’t worry about what’s going to happen next week or next month or even the next year," says the 20-year investment industry veteran, who with his partner John Cobey formed their company almost three years ago.
The key, Westphal says, is to determine your income needs, properly allocate stock market investments for 10-year periods and "stay the course."
"The market goes through cycles that might not be predictable but which are familiar to those of us who have experienced it over the years," he says. "Not that we saw this last cycle coming and knew that things were going to be as dramatic as they are, but history tells us that, over time, these things are going to happen. It also tells us that over the last half of the 20th century, common stocks have grown about 12% each year."
So Cobey-Westphal and its clients discuss the risk side of the investment equation and determine a proper allocation of their investments designed to reduce risk. It’s a long process, but worth it, Westphal believes. "We need to balance one asset class against another to decrease volatility and increase the probability of a positive return," he says.
The firm’s money managers allocate their clients’ investments on large cap stocks, small caps, mid caps, international and global.
"These are basic to any good long-term asset allocation process, and putting those together in the right mix and sticking with the balance strategy is very important," according to Westphal. "Mathematically, if one class does better than the others, then your mix gets a little out of whack and you have to rebalance it. Our money managers run the investments for us and we manage them," Westphal says.
Then his firm builds bond ladders for its clients to assure income or cash flow, whatever a person is looking for, over rolling 10-year periods of time. Once that’s done, it’s easy to put everything else into the market for long periods of time, according to Westphal.
Building a bond ladder, he explains, involves buying zero-coupon government bonds that come due in one year, two years, three years, all the way up to 10 years.
"Because these are zero coupons, you pay less dollar amounts for 10-year bonds than you do for the one-year bond," Westphal said. "A good example today would be a three-year bond, which might cost you 94 or 95 cents on the dollar. A 10-year bond might cost you 65 cents on the dollar. When they mature you get back the dollar. You don’t get the interest on the way; you’re simply getting the money back at maturity. By buying a new bond every year out, in the 10th year you basically dollar cost average into a 10-year rate. It comes down to simple math," he says.
According to Westphal, if you look at volatility and the effects of time, you will mitigate much of that risk by making a good allocation decision, staying the course, and monitoring that course. "I believe that for most people over a long period of time, all your investments should be in the stock market, because that’s where better returns are over that long period of time."
Westphal also believes that the stock market is still good for retirement age investors. The key again is asset allocation, he says. "The old axiom that you should have a percentage of your money in the bond market equivalent to your age doesn’t work with the amount of money people have accumulated in this day and age. Those who are 70 years old and have saved $2 million don’t need to have 70% in the bond market. If we’ve come up with the proper asset allocation and covered their income needs, the balance of their money should be in the stock market."

April 4, 2003 Small Business Times, Milwaukee

Community benefit agreements (CBAs) could hamper or even prevent the redevelopment of the 60 acres cleared by the removal of the Park East Freeway, developers and land owners in the freeway corridor say.
"We need to be very cautious when we consider placing demands on projects like the Park East redevelopment," said John Periard, spokesman for the Commercial Association of Realtors Wisconsin. "We shouldn’t jeopardize the project because we’ve placed demands that are so unreasonable, that developers throw up their hands in frustration."
Jim Barry III, president of James T. Barry Co., believes the intentions of the Milwaukee Innercity Congregations Allied for Hope (MICHAH) coalition leaders are good, but he may be close to reaching the point of frustration described by Periard.
"I think they may be laudable goals," Barry said. "I just don’t like the apparatus of trying to impose this on other developers and therefore add to the already formidable obstacles to development in the downtown."
Barry threatened to move his business, which is headquartered on North Edison Street near the former freeway, out of the Park East corridor and perhaps out of the city if CBAs are imposed.
"If we allow a third party group to dictate the way (the land) is going to be developed, you are going to sit here with fallow land for a long time," Barry said.
"If someone wants to relocate, they have a lot of options,’ Barry added. "But if something akin to what is in their proposal would occur, I would have to seriously consider moving my business out of this area and perhaps out of the city of Milwaukee – and we have been here for 80 years."
Barry stressed that, while development in the corridor will benefit from a tax incremental finance (TIF) district, developers aren’t looking for subsidies on the project but, rather, are looking for a development opportunity that makes economic sense. CBAs, he said, would make buildings more difficult to lease and land harder to sell.
"I feel it would have a devastating effect on the potential development of the Park East corridor," Barry said.
While the idea of being required to pay into a parks fund is a concern to Barry, he said he was particularly upset about restrictions on hiring.
"To say that a community group is going to handle all the hiring for any new commercial development, in my view, contradicts the whole notion of a free market system," Barry said.
Even without CBAs, bringing companies downtown is difficult, Barry said.
"The suburbs have lower taxes and free parking," Barry said. "But because of the attitude the city took during the ’90s, downtown became more attractive. A key reason for that is the ability of developers to get transactions done free of excessive regulation and excessive additional fees. Their proposal is that they want to go back to this old highly regulatory method and place fees on people. That does not make sense," Barry said. "Development under this system will not occur. Developers are economic actors, and they will go where it makes economic sense to develop."
If developers are allowed to meet the needs of the market, many of MICAH’s goals would be achieved, Barry said.
Milwaukee County economic development director Bill Hatcher agreed, adding that allowing the Park East corridor to be developed to its highest value use would increase county revenues, making funds available for programs MICAH supports.
The county would not only benefit from increased property taxes on land in the Park East corridor but also from higher sales prices, because the county is the largest landowner in the corridor.
"The more restrictions you put on the deed or on a company development agreement, the more depressed the value is," Hatcher said. "You are in fact restricting the developer or restricting his creativity. The county hasn’t made any decisions on what it is going to do, relative to the land we own on the Park East site. That will be a matter dealt with by the county board to determine if any or what restrictions might go on the deed or related development agreement."
Like Barry, Hatcher believes much of what MICAH wants to achieve through CBAs could be better achieved by allowing development to take place within the current guidelines outlined in the city’s redevelopment plan.
"You can’t assume from the start that no progress will be made towards any of those goals under a free market situation," Hatcher said. "Any straightforward free market is going to have positive outcomes – perhaps not always as direct as they would like to see. It is going to create jobs. In the past, it has provided housing opportunities. You really can’t start with the idea that if you don’t put these requirements on the deed that none of these things are going to happen."

April 4, 2003 Small Business Times, Milwaukee

Wallner is new Waukesha Chamber president

Patti Wallner will become president of the Waukesha Area Chamber of Commerce in February 2003, moving to that position from her current job as executive director of the Greater Brookfield Chamber of Commerce.

Wallner succeeds Ann Nischke, who resigned the position of chamber executive director last year after winning election as state representative to the 97th Assembly District.

The title of the position has been changed from executive director to president, following a trend of chambers of commerce around the nation, noted Ty Taylor, of Waukesha State Bank, chairman of the chamber’s board.

"We are thrilled to bring Patti on board as president of the Waukesha Area Chamber of Commerce," said Taylor. "Her enthusiasm and high level of expertise will further enhance the professional services the chamber offers to its membership."

Taylor said Wallner stood "head and shoulders" above the rest of the 120 applicants for the chamber presidency.

During her three years in Brookfield, Wallner’s accomplishments included increasing membership and the retention rate of members, improving participation and commitment from the board and members at large, and creating an identity for the Brookfield Chamber, Taylor said.

Taylor expects Wallner’s efforts will boost activity in the Waukesha Chamber. "We’re going to see some good growth of membership in the chamber. And we’ll be more active in issue advocacy," he said.

"The staff is excited to have our future president in place, as we position the chamber to become an even greater resource for Waukesha County," said Bobbie Peters, acting president of the Waukesha Area Chamber of Commerce.

Peters, who is expecting her second child in May, will assume the role of vice president at the chamber; she had been associate executive director before that position’s name was changed to vice president.

Wallner is a graduate of the University of Wisconsin-Milwaukee. She resides in Hartland.

Nischke has been named vice chair of the Assembly’s Economic Development Committee and a member of the Small Business Committee.

Jan. 24, 2003 Small Business Times, Milwaukee

Delavan biotech firm lands Polish potato pact

By Charles Rathmann, of SBT

A Delavan firm will license its potato crop-acceleration technology to a Polish firm as part of Lockheed Martin Corp.’s sale of F-16 fighter jets to the Polish government.

Quantum Tubers Corp. should be able to grow from a staff of 15 to a staff of 40 and construct additional facilities in Wisconsin as a result of the defense offset deal, according to Quantum Tubers president Robert Britt.

"This started out with NATO, which is requiring Poland to upgrade their military," Britt said. "Poland had put out a request for competition on fighter jets. It went to France, Sweden and the US. Along with the cost of the fighter jets, Poland said the winner would also have to contribute at least 100 percent of the cost of the fighter jets in the form of economic offsets."

The value of the offsets would be measured in terms of an increase in the gross domestic product.

"We did an economic impact study," Britt said. "By putting our project into place, we increase Poland’s GDP by $400 million a year. That’s just not one year. That’s forever."

The projected impact went a long way to balancing off the $3.5 billion cost of the 48 fighter jets.

Quantum Tubers has, since June of 2002, been planning to build the largest bio-manufacturing facility for production of zero-generation, pathogen-free seed potatoes known as minitubers.

The 50,000-square-foot plant, with a capacity of 20 million minitubers per year, would use technology developed with cooperation from the University of Wisconsin and NASA.

Currently in the design phase, the plant would only be the start of the biotech firm’s presence in the state, as dollars from the defense trade-off deal comes home.

The capital provided by Lockheed Martin to fund the Agreko Quantum Tubers, SA of Domaszowice, Poland, license for the potato acceleration technology should allow the Walworth County company to take a leadership role in what promises to be a $100 million agricultural market.

Britt and his Polish counterparts had been trying to find capitalization for the licensing deal even before Lockheed Martin came into the picture.

"Lockheed was almost an accident for us," Britt said. "We were in the process of developing some local funding in Poland for capitalization of the process. Our first reaction was, ‘What do potatoes have to do with fighter jets?’ I sat on that for two days before I wrote a letter to the chairman of Lockheed asking if this fit with what they were doing. I thought, ‘What are we going to do – create fuel for you guys, or spud guns?’"

However, the key to success had more to do with butter than guns. Poland is the world’s third-largest producer of potatoes. Access to Britt’s patented technology could move Poland’s economic needle substantially.

"We have mapped the trigger-point of a potato so we can force it to go through each one of the primary growth cycles that it needs to go through, and do it on our own life cycle arrangement," Britt said. "We do that in a closed, atmosphere-controlled facility. We trick the potato into thinking it as gone through spring, summer and fall in just a few days, so we can get about nine turnovers a year out of our building."

Britt said that while the sale of Lockheed Martin jets closed Dec. 28 of last year, the Polish government committee was still reviewing the offset agreement, which should be finalized within weeks.

A representative of Lockheed Martin did not return a phone call regarding the transaction.

Jan. 24, 2003 Small Business Times, Milwaukee

Irgens moving into Illinois market

Irgens Development Partner, the largest office developer in the Milwaukee market, is expanding into the northern Illinois market.
Irgens, which is based in Wauwatosa, will open a branch office in Northbrook, Ill.
The new office reflects the company’s intention of becoming a regional developer, according to Mark Irgens, president and chief executive officer of the firm.
"We are excited about the opportunity to enter the Illinois market," Irgens said. "We see a lot of opportunity and are ready to jump into it. If we are going to grow beyond Wisconsin’s borders, the Chicago market is the place to be."
The company says recent market analysis indicates a steady demand for new health care properties in the north and northwestern edges of the Chicago market.
"Due to an increase in northern Illinois’ population, we think the northern Chicago market is prime for our entry," Irgens said. "We believe our success in Milwaukee can permeate into larger markets such as the Chicago area."
Irgens has hired Michael McCall as senior vice president. McCall, who spent the previous 18 years with the Bovis Lend Lease firm in Chicago, will oversee Irgens’ new office in Northbrook.
"The decision to move into Illinois just makes good business sense," McCall said. "As the area’s population expands, the demand for health care facilities increases. Since medical buildings are clearly an area of unmatched expertise for Irgens Development, we couldn’t ask for a better time to make our mark in Illinois."
Irgens currently has an estimated $250 million invested in ongoing projects.

Jan. 24, 2003 Small Business Times, Milwaukee

Insurance purchasing pool proponents try again

By Charles Rathmann, of SBT

While a partial veto by former Gov. Scott McCallum prevented budget provisions for a health insurance purchasing pool for small businesses from coming to fruition last year, lawmakers and the administration of Gov. Jim Doyle are trying to hammer out an agreement to create the pool in the first few months of 2003.

According to lawmakers involved with the Assembly’s Small Business and Insurance Committees, gears are turning to implement the Private Employer Health Care Purchasing Alliance (PEHCPA) through the administrative rule-making process.

An administrative rule would not likely have to be voted on by the entire Assembly, but would need approval by committees in the Assembly and Senate involved with health, insurance or small business.

If a committee in either chamber had an objection to the bill, it would be sent to the Joint Committee for Review of Administrative Rules (JCRAR), which is chaired by the purchasing pool’s strongest advocate, Rep. Lorraine Seratti, a Republican from Florence County.

The pool is designed to moderate health insurance cost increases by making insured employees part of a larger pool. Insurers participating in the pool would offer packages that employers — or even individual employees — could choose from.

Premiums would be based on geography, age and sex of participants, but health status would not be a consideration. To prevent the pool from attracting only older, sicker groups, a variety of measures may be included in new legislation or an administrative rule, including a subsidy from Badger Care, the state’s program for working poor with children, and an exemption from state health insurance coverage mandates.

A group of consultants from Washington think-tanks and California’s successful insurance pool were in Madison Jan. 15 to advise state legislators on health care-related issues, including the purchasing pool.

The seminar, held by the University of Wisconsin-Madison’s Wisconsin Family Impact Seminar group and Wisconsin Health Policy Forums, was closed to the media and industry advocates.

Small Business Times spoke with legislators who attended the seminar and consultants who spoke at the event.

About 80 legislators attended the event, according to organizers.

According to Seratti’s office, no ad

ditional legislation should be needed to implement the pool as proposed.

A Seratti aide said the Office of the Commissioner of Insurance has been asked by Doyle to draft an administrative rule that would close the gap left by McCallum’s veto of rate band and funding provisions in the PEHCPA legislation.

The PEHCPA proposal originated as part of Wisconsin Act 9, the previous biennial budget bill.

While PEHCPA would be a self-funded private industry initiative, the biennial budget proposal included an $850,000 loan from the State Life Insurance Fund. In his veto message, McCallum characterized that funding source as unconstitutional, but PEHCPA sponsors pointed out that it was suggested to them by a fellow Republican – then-Senate Majority Leader Scott Jensen.

The team of consultants was adamant that rate-band provisions would be necessary for the success of the pool, despite the objections of the insurance industry.

The rate bands would restrict the degree above or below a midpoint premium for any group that could be increased in a single year.

A 15% rate band for health status-related increases currently exists in the state, but the budget proposal called for a 10% band that would apply to all small businesses in the state.

The Wisconsin insurance industry, led by Humana Wisconsin market president Larry Rambo and the Wisconsin Association of Health Plans (WAHP), claimed that most small businesses would see an increase in costs if the pool is put into place. That, in turn, would drive some employers and employees out of the market, they said.

One of the visiting experts, Rick Curtis of the Institute for Health Policy Solutions, Washington, D.C., presented legislators with the results of the study commissioned by the Wisconsin Private Employer Health Care Coverage Board (PEHCCP). The study results indicated that premiums would increase slightly for most small employers if the pool is created, because the drastically higher premiums paid by a small minority of very high-risk groups would be spread out over the pool market as a whole.

Curtis stressed that a remedy for that would have to be found, or the pool would suffer from adverse selection.

One solution Curtis proposed, reflected in a Jan. 14 advisory minute to Department of Employee Trust Funds from the PEHCCP board, would be to drop certain state-mandated coverages from policies written to pool participants.

"It might do a little to prevent adverse selection," Curtis said.

Another suggestion from Curtis was to leverage Badger Care dollars by offering subsidies to employers with low-wage employees who cannot afford health insurance.

"On a budget neutral basis or on a budget savings basis, it could do a lot of good," Curtis said.

Even critics of the purchasing pool concept were intrigued by the proposals.

"We have long been advocating for increased flexibility for small employers in choosing benefits plans," WAHP deputy director Joe Kachelski said. "If it’s a good idea for the whole market, it’s a good idea for the pool "

Rep. Gregg Underheim, an Oshkosh Republican who chairs the Assembly Health Committee, called the mandate exemption concept "interesting."

The insurance industry, which was instrumental in the demise of the pool last year, also cited increased costs as a prime concern.

However, according to Curtis and John Grgurina, the director of PacAdvantage, California’s insurance pool, insurers currently in the Wisconsin market have another reason to fear the pool.

"Before we put the pool and rate reforms in place, there were a lot of insurers sitting on the sidelines in California," Grgurina said. "Other established insurers were skimming off the good risk, selectively marketing to good risk. When someone proved to be a bad risk, you just jack up their premium 200%, which is the equivalent of telling them you don’t want to do business with them. So it all has to do with who has the best risk managers. By taking underwriting out of the picture, it is easier for new companies to come into the market without fear of being stuck with nothing but bad risk."

"It certainly makes for a better opportunity," Curtis said. "It is no longer a matter of who has the best actuaries. But if you are an insurer and you think you are good at risk management, you probably don’t want your competition to be able to come in and compete on a level playing field."

"They all think that they win if they play this underwriting game," said Tom Korpady, administrator of the Department of Employee Trust Funds. "The fact is there are winners and losers in that underwriting game. Underwriting really rewards young, healthy groups and punishes people who need the insurance."

Kachelski disagreed with the argument that the pool would attract insurers not already in the market.

"I would be shocked if the implementation of this pool introduced new insurers into the Wisconsin market," Kachelski said. "I am not aware of that scenario playing out in other states. We have an awfully competitive market right now."

Jan. 24, 2003 Small Business Times, Milwaukee

Members of Responsible Energy for Southeastern Wisconsin’s Tomorrow (RESET), the coalition opposing Wisconsin Energy Corp.’s plan to expand its coal plants in Oak Creek:

All Saints Healthcare
Allergy & Asthma Network Mothers of Asthmatics
American Lung Association – Wisconsin Chapter
Citizens for a Better Environment
Citizens for Responsible Power
Clean Air Task Force
Doublas Business Center
Franciscans International – North American Region Office
General Converters & Assemblers Inc.
LakeAir International
Michna Farm
Quick Cable Corp.
Racine Earth Service Corps Youth United
Random Lake Association
Rapids Business Center
S.C. Johnson & Son Inc.
Town of Caledonia
Wisconsin’s Environmental Decade
Wisconsin Interfaith Climate Change Campaign
Wisconsin Interfaith IMPACT

Matter is new Equitable Bank president

The Equitable Bank board of directors has promoted John P. Matter to the presidency of the Wauwatosa-based bank. Matter, who succeeds Charles R. Pittelkow, is the first non-family member to run the bank.

Pittelkow will remain as chairman of the board and chief executive officer.

Matter started his banking career as a teller with City Federal Savings and Loan in 1976. He joined The Equitable Bank in 1980, starting as a branch manager of the Brookfield office. In the years to follow, he assumed higher positions, starting with promotion to regional branch manager in 1981.

In 1983, he was named assistant vice president of sales and marketing. Subsequently, he assumed responsibilities for sale of annuity and investment products, consumer lending, mortgage loan origination and retail banking. Matter was promoted to senior VP in 2000, followed by chief operating officer later that same year, and executive vice president in 2001.

Pittelkow’s grandfather founded The Equitable Bank, then known as Equitable Savings Building and Loan Association, in 1927.

Prior to Matter’s promotion, the bank has been led by four generations of the Pittelkow family. According to Pittelkow, "I am proud to have John following me in the leadership of the bank. His leadership has been instrumental for the bank’s substantial growth in deposits, mortgage loan origination, and continued financial strength."

Matter is a graduate of UW-Milwaukee and received a master of business administration degree from the UW-Whitewater in 1993. He is a member of the American Marketing Association, Wisconsin Bankers Association, Wisconsin Mortgage Bankers Association, and the Exchange Club of Milwaukee.

Equitable originated more than $400,000,000 in residential mortgages last year. The Equitable Bank (www.equitablebank.net) operates an 11-branch network in the metropolitan Milwaukee area.

Jan. 24, 2003 Small Business Times, Milwaukee

Brew City plans Third Ward store

Brew City Beer Gear Inc. is extending its brand of Milwaukee- and Wisconsin-related products to the Historic Third Ward. Brew City’s first non-mall location, at 407 E. Buffalo St., will sell local apparel, posters, books and glassware.

Brew City has also teamed up with Stone Creek Coffee to sell its locally made coffee, and will release a custom Third Ward blend.

Another attraction will be a Class A beer license, so that Brew City can retail Wisconsin-made micro-brews from its Third Ward location.

The new retail location is just below Brew City’s corporate headquarters and production facility, where it designs and prints its products for wholesale and retail markets. Its Third Ward location will feature several warehouse sales each season, with special pricing.

In the past two years, Brew City Beer Gear has opened three locations, grown its wholesale business through in-house production facilities, and developed an integrated retail Web site with e-commerce engines, at www.brewcityonline.com

Brew City currently has retail locations at The Shops of Grand Avenue, Mayfair and Brookfield Square. Brew City Beer Gear Inc. has been in business since June, 1986.

Wisconsin’s new governor focuses on small business

By Steve Jagler, of SBT

As the state’s new governor, Jim Doyle is making two promises to Wisconsin’s businesses: 1) He’s not going to raise your taxes and; 2) He’s going to do what he can to limit your costs for employee health insurance.
If Doyle is successful, those objectives would provide welcome relief to business owners, who repeatedly identify their tax burdens and employee health insurance costs as two of the largest impediments to economic growth in Wisconsin.
Doyle, who was inaugurated as the state’s governor Jan. 6, acknowledges his task won’t be easy. As a Democrat, he has always subscribed to the notion that government can help people. Yet, with the reality of inheriting a projected state deficit now estimated at $4.3 billion, his options for social programs are limited, at best.
In a recent interview with Small Business Times executive editor Steve Jagler in Madison, Doyle insisted he will keep his campaign pledge to hold the line on taxes and will find a way to create a pool for Wisconsin’s small businesses to join with the state and negotiate for lower employee health care insurance premiums.
Doyle, who actually lived for a time on an Indian reservation, also intends to enlist the help of Wisconsin’s Native American tribes to help build some of the state’s infrastructure. The tribes told Small Business Times in 2002 they would like to spend $600 million in economic development in Wisconsin, but they need longer gaming compacts and a handful of other concessions from the state to make that happen.
Doyle’s cabinet has more of a Milwaukee flavor than the cabinets of recent administrations: Marc Marotta, a partner at the Foley & Lardner law firm in Milwaukee, is Doyle’s nominee for secretary of the Department of Administration; David Riemer, a former City of Milwaukee employee, is Doyle’s nominee for budget director; Michael Morgan, a former City of Milwaukee employee and officer of Milwaukee’s Helen Bader Foundation, is Doyle’s nominee for secretary of revenue; Frank Busalacchi, a Teamster and a member of the Miller Park and Summerfest boards, is Doyle’s transportation secretary nominee; Antonio Riley, a Democratic Assemblyman from Milwaukee, is Doyle’s nominee to oversee the Wisconsin Housing and Economic Development Authority; and Cory Nettles, an attorney at Quarles & Brady, Milwaukee, is Doyle’s commerce secretary nominee.
The following are excerpts from the SBT interview with Wisconsin’s new governor:

SBT: Marc Marotta, David Reimer, Michael Morgan, Frank Busalacchi, Antonio Riley and Cory Nettles — these are people with credibility in Milwaukee. You’ve got to be thrilled with the level of competence you’ve been able to bring on board here.
Doyle: Well, I am. We’re still in the process of putting together a very strong team. It certainly is a team that is tuned in well to business. I understand that it’s not going to be in the state government that we’re going to be creating jobs in the state. It’s going to be in the private sector. In fact, I want to reduce the number of state jobs, so I want to really be working with businesses to expand the job base and (the base) of good-paying jobs in the state, and I also understand that small businesses really are the lifeblood of that.

SBT: I’m sure you’re aware there are many business people who don’t like the notion that ANY Democrat is in the governor’s office. What do you think your administration can do to bridge that gap, that perception that people might have in the business community?
Doyle: (Laughs) Well, I would assume and I would hope the appointments I made would send a pretty clear signal of how I regard our need to grow and develop our business base here. And there are some people who have voted Republican and are never going to vote for a Democrat, but I think people in Wisconsin realize this is a time we really have to pull together.
I’ve inherited a $4.3 billion deficit. So, business fighting labor, and Democrats fighting Republicans, big cities fighting rural interests. … Maybe in flush times you can have all those fights, but in the times we’re in, you can’t have them. We really all have to pull together.
I have a very strong belief that there is no social program that is better than a job, and that’s what we should really be focused on — getting this economy growing and growing in a way that’s producing good jobs. The only real long-term answer to this is economic growth, and I’m going to be very focused on that.

SBT: Can this budget be balanced without raising taxes?
Doyle: Well, sure. I believe it has to be done without raising taxes. I just read that we are the fourth-highest taxed state in the country, so I don’t think we have any more room to go. So, it has to be done.
Now the question is can it be done painlessly. The answer to that is no. There are going to have to be some very difficult decisions made. This is not going to be business as usual. We are going to have to reverse the trend where the government spends more year after year, even if the revenues aren’t there.
I’ve been elected governor. Those are the circumstances we’re in. My job is to be the leader of this state as we get our spending back in line and budget back in balance.
SBT: Internally, will it be somebody such as Marc Marotta who will be really focused on maximizing efficiency and making cuts where there need to be cuts?
Doyle: He’ll play a very key role. As the head of the Department of Administration, he’s in charge of putting together the state budget. He is the person I selected for one of the most important jobs in the administration.

SBT: Some people are skeptical, that although you might not raise taxes, you’ll instead raise fees. There already are many government fees imposed on Wisconsin businesses. Many people simply consider them taxes. Will fees be increased?
Doyle: Well, I have no intention of trying to figure out how to "trick" people into paying higher fees to help balance this budget. I don’t think that’s appropriate.
If there would be any fees raised, it would only be because over the years, the costs of running a program perhaps have grown significantly and the fees have not.
But I think you have to adhere very closely to the purpose of the fee. It should not be a disguised tax. It shouldn’t be a way of, "Oh, we need more money, can’t we up that fee?"

SBT: What about the notion of repealing the personal property tax? Is that on the table?
Doyle: Well, not right now. I’ve got to balance this budget. So I don’t think this is the time to go through major changes of our tax policy. I’m always open to new ideas (about shifting tax burdens), but frankly, between now and this budget I have to put together by June, I think what we basically should do is keep our tax structure as it is and say, "OK, this is the income we have. Now, we have to figure out how to get our spending in line with that income."

SBT: The two issues that business people talk to me about every week are: 1) taxes and, 2) employee health care costs. We’ve already talked about taxes. Is the notion of establishing a pool for small businesses to link with the state government to get more bargaining power for lower premiums a priority for your administration?
Doyle: Yes, it’s a very high priority. What you’ve just described, I’ve heard it constantly for the last two years. I hear it all across the board. I hear it from small business. I hear it from farm families, which really are small businesses. I hear it from labor, where they’re going to the bargaining table, and they’re finding the employer saying, "Look, you’re going to have to give back on wages to cover your health insurance," and they know the employer isn’t lying to them. It’s not the employer who’s making the money here.
I would like to help, and I think the place to start is with small businesses and farm families to be able to get the benefit of the state’s bargaining power. I hope what we’re going to be able put together by the time the budget is finally passed is a pool in which small businesses and farm families can sign up, and when the state bargains for health insurance coverage for the state workers, it can bargain for better prices. It wouldn’t be the state paying for the insurance.
SBT: Right.
Doyle: It would be the state using its leverage to try to bring those insurance costs down for people.
You know, it really pains me, and I’m sure you do hear it too, when a small business (owner) will say to me, "You know, we’ve prided ourselves in providing health coverage for our workers, and we’re not able to do it anymore. With 15, 20, 25 percent increases in health premiums, the choice is between going out of business or cutting the health insurance."
I know that these employers just feel terrible about it, because it’s something they’ve prided themselves in taking care of their employees, and it’s just getting tougher and tougher to do.
So I hope we can use the state’s leverage to try to bring some of those costs down for small businesses and farm families.

SBT: Is there anything else that comes to mind that can be done to help control health care costs?
Doyle: Part of it is, I hope the market really goes to work. Some insurance companies are now developing different-tiered systems. I think you’re going to find that more and more people are going to choose those second and third tiers, and it’s going to make the high-end providers have to come down.
In prescription drugs, if small businesses and others are able to purchase through buying pools that the state has established, we can bring down prescription drug costs. And maybe it’s true with hospitalization costs as well.
I don’t know if we can get all of that done in the first six months here. … But over my four years as governor, believe me, I’m going to be very much focused on how we try to make health insurance more affordable for ordinary men and women, whether they’re employers or employees. They’re all facing the same crunch right now.

SBT: Switching to Indian gaming — I know your life experiences when it comes to Native American issues, tribes and compacts. The tribes recently told Small Business Times they can "rebuild" this state. At a time when the state is essentially broke, is the notion of longer compacts and some of the concessions they are pushing for in return for that investment in the state an appealing idea?
Doyle: Yes. I hope we can go into these negotiations with a win/win kind of attitude here. I have no problem negotiating longer compacts with the tribes. These enterprises are here to stay. Potawatomi isn’t going to shut down in Milwaukee.
So I think the tribes make a good argument that they are able to finance their operations better and make better long-term investments in their businesses and in surrounding businesses if they have longer-term compacts.
I’ve also indicated that I’m more than willing to talk about increasing the kinds of games. I’ve never quite understood the logic that said, "You can go play Black Jack, but there’s something wrong with roulette."
So I think there are things the state can do for the tribes and things the tribes can do for the state. Our interests in many ways are very much aligned, if we can strike the right deal.

SBT: Does the right deal involve the state taking a larger percentage of the tribes’ gaming revenue?
Doyle: Yeah, if you look at what the state needs right now, it needs money. And this is a source of money that is not a one-time deal. This is an ongoing deal. But I want to make it clear. I really want to work closely with the tribes on this. I think we’re at a spot right now, where we have some very common interests in getting these compacts done and getting them done very quickly.

SBT: To switch gears again — I saw Frank Busalacchi in the hallway before I came in here, and I asked him whether we are going to build freeway lanes or railroad tracks. Would you consider the Marquette Interchange the highest priority of transportation issues in the state?
Doyle: It’s the highest, single-most visible one. Generally, making sure we have good roads that allow raw materials to be brought into the state and manufactured products to be taken out of the state, and good roads for farm products to move on and good roads for the people to move on. … It’s very, very important.
Now, the Marquette Interchange is clearly the most visible immediate need. It clearly is, not only for Milwaukee, but for the eastern part of the state and even coming out of the west from Madison. So much of the commerce in this state comes out of that Marquette Interchange, so it’s very important we take care of it.
At the same time, we can’t just say all of our road money is going into the Marquette Interchange. We have a lot of very important road needs all around the state.
We have other very important transit needs. This is a massive balancing act that we’ve got to accommodate all of these needs with shrinking dollars. It’s one of the significant challenges that’s been handed to me.
I wish in the 1990s somebody had been putting money away for the Marquette Interchange, but they didn’t. So now, we’ve got what almost everyone agrees is an outdated road system, and its life is coming to an end, and we’re going to have to do something about it.

SBT: Wisconsin Energy Corp.’s Power the Future Plan — What is your take on that? Is it the answer to the state’s energy needs?
Doyle: I think the general notion of trying to get a plan on the books that people can look at … is very important. Whether this is exactly the plan — the Public Service Commission still has to make some major decisions on it.

SBT: Wisconsin tried to jump on the dot-com bandwagon in the 1990s, and so much of that economy collapsed. How important is the state’s high-tech economy?
Doyle: I see the high-tech economy as not only being the stand-alone dot-com companies, but it’s how we’re making sure that our long-time manufacturing base has the best production technology and is using the Internet and other technology to find market for its products.
I also hope that we’re really going to work to develop the sort of higher-octane, smaller businesses that are information-based. I think that is one of the real strengths of our state — the level of education of the workforce.
We have fallen behind in this area, and it’s not right that we’ve fallen behind. When you look at what we have in this state, we should really be a high-tech, biotech center. We have one of the greatest research universities in the country.
This is Wisconsin’s great strength – our educational system.

SBT: There’s so much to do. And such a limited pool of money with which to do it, even with the best of intentions. How can we as a state and you as a governor accomplish all of these things, given the current economic reality?
Doyle: Well, it’s going to be tough, but I liken the position that I am in very much to someone who’s brought into a company that’s a good, solid company. The state of Wisconsin is a wonderful place. The basic, the most important building blocks are all here — the educational system, the environment, the work ethic of the people, the intelligence and creativity of the people. This is really a great, great place.
We are in unprecedentedly difficult economic times. So, just as someone coming in taking over a sound company that is having some real serious problems, we’ve got to get to the other side of these problems. We’ve got to address them honestly. Clearly, it’s going to call for a reduction in spending to get our budget back in line with our revenues. It’s going to call on us over four years I am governor in this term to see what we can do to get businesses growing. There’s no doubt about it, we’re going to suffer some real pain, more than Wisconsin is used to.
I believe, once I do deliver an honestly balanced budget that is going to put Wisconsin back on the track of having a sound financial picture, that we’re going to be much healthier and we’ll be much more able then to concentrate on the things we really want to do — good education, good business development, protecting the environment, helping young people get into the business world. Those are all things we want to do.

Jan. 24, 2003 Small Business Times, Milwaukee

CEO predictions for 2003

By Harry S. Dennis III, for SBT

Where do you begin? The stock market in 2002 was the third consecutive year that, as one pundit said, "clawed everyone."

On the other hand, the economy grew at a 4% clip in the third quarter. Fourth-quarter growth, many "econs" say, is anticipated to be half that.

Well, it’s been traditional each year in this column that I report what our TEC members are saying as we launch 2003. We’re only looking at viewpoints in Wisconsin and Michigan. So here are the viewpoints.

We surveyed 540 TEC members and got a 30% response. First on the list was the status of the US economy. Forty-nine percent believe a rebound will occur in the second or third quarter of 2003. Only 6% think it will happen in 2004.

Better than half surveyed see a growth rate of 1% to 2%. And because of that expectation, the outlook for capital expenditure and operating expense increases/decreases for the next two quarters is as follows. Nearly 40% see a decrease in capital expenditures, and 53% report that they intend to reduce their operating costs from figures a year ago.

No matter how you cut the mustard, our members are telling us that we are not out of the woods, at least for the next two quarters. But for the year as a whole, a more positive picture emerges:

— 54% indicate that they will increase capital expenditures by 10% or more.

— 49% plan to increase their employee base by 5% or more.

— 88% see their revenues increasing from 10% to more than 20%.

Very interesting is that only 12% of our members report that they intend to "retrench" over the next six months. Fifty percent state that they are repositioning to accelerate growth, and nearly a quarter of them intend to make capital investments to make that possible.

A war against Iraq looms in everyone’s thinking. Seventy-eight percent of our TEC member sample sees such a war as having no impact or a mild negative impact on their business. And if you think high-energy prices are a concern, it ranks far behind concerns about higher taxes and the lack of qualified, skilled labor.

Home security remains an issue with 40% of the respondents saying that they are more concerned than they were a year ago. On the other hand, 78% report that home security issues have no impact on their businesses.

Here is an interesting data point: nearly 90% expect to see health insurance costs increase by at least 20% this year!

For the manufacturers out there, concerns about business moving offshore, specifically to China, remain alarming. One-third of the respondents see offshore, low-cost labor as a major threat to their businesses. A similar percent intend to increase outsourcing to compete with the offshore problem.

One TEC member said it best: "They can import manufactured goods into our country duty free; we export goods to their country and pay the piper!"

Where are most TEC businesses included in our survey focusing their efforts in this new year? Three categories surfaced as major priorities:

1. Sales, marketing and customer efforts

2. Financial efforts (internal)

3. Launching new products

So where does this leave us now in 2003? Actually, this year’s survey was far more positive than last year’s survey for companies in our neck of the woods. Sure, we have our disappointments. But if you read the press, you cannot help but note that much of the news deals with big local area companies making changes that are condemning to our local Wisconsin/Michigan economy (e.g., Briggs recently moving its 9HP line back to Alabama, affecting a net 47 jobs).

The news about small and medium-size businesses is not that bad at all in the grand scheme of things. We are tough and getting tougher. I keep hearing these fundamentals over and over again:

1. Stay very close to the customer.

2. Everything is negotiable.

3. Hire smart.

4. Fire smart.

5. Keep a close eye on the cash.

6. Build for the future, not the past.

7. Use trusted advisors!

Until next month, stay warm, smile, and enjoy great business progress in our new year!

Harry S. Dennis III is the president of TEC (The Executive Committee) in Wisconsin and Michigan. TEC is a professional development group for CEOs, presidents and business owners. He can be reached at 262-821-3340.

Jan. 24, 2003 Small Business Times, Milwaukee

Partnership launches commercial real estate market report

By Steve Jagler, of SBT

Measuring the pulse of the Milwaukee area’s commercial real estate market is about to get a lot easier.

The first Southeastern Wisconsin Commercial Real Estate Report has been completed, documenting the state of the market in the third and fourth quarters of 2002.

The report for the first quarter of 2003 is forthcoming, and the report will be completed quarterly on an ongoing basis, according to Mark Eppli, Marquette University’s Robert Bernard Bell Sr. chair in real estate in the school’s Department of Finance.

The initial reports have been compiled by Marquette interns Jonathan Mulcahy and John Amman, who were assigned to the project by Eppli.

The detailed report is a product of the Wisconsin Commercial Data Exchange (WCDE), which was formed in June 2002. The WCDE research director is Brian Parrish, and its market analyst is Thomas Makarewicz.

The WCDE is partnering with the Marquette University Real Estate Program and The Business Journal’s Commercial Real Estate Quarterly for the report.

The report is being offered by the Commercial Association of Realtors Wisconsin (CARW), a nonprofit association of more than 525 members from various commercial industries.

The report condenses information from 215 commercial real estate brokers from about 50 local companies.

Each quarterly report will provide market statistics, investor survey results, market forecasts and other information about the commercial real estate markets in eight counties: Milwaukee, Waukesha, Racine, Kenosha, Walworth, Washington, Ozaukee and Sheboygan.

The report also breaks down the information by submarkets within the counties.

In addition, the report provides information on comparable sales, lease rates, sublease rates and investor surveys.

In its first edition, the report noted the following vacancy rates for the eight-county region: industrial, 5.9%; office, 10.4%; shopping center retail, 3.7%; and freestanding retail, 3.4%.

In Milwaukee County, the report indicated the following vacancy rates: industrial, 7.9%; office, 11.4%; shopping center retail, 4.9%; and freestanding retail, 4.4%.

The highest vacancy rates in southeastern Wisconsin, according to the report, are: industrial, 7.9% in Milwaukee County; office, 12.1% in Waukesha County; shopping center retail, 11.1% in Ozaukee County; and freestanding retail, 15.1% in Walworth County.

Trends noted in the survey include:

— The average industrial lease rates in Waukesha County are consistently higher than the rates in Milwaukee County.

— Class A office lease rates in Milwaukee County are consistently higher than those in the surrounding counties.

— Retail lease rates in Waukesha County are higher than those in Milwaukee County.

The decision by the CARW board of directors to create a commercial information exchange system that produced the data for the report was applauded by Christopher Ruditys, executive vice president of the organization.

"That choice hopefully will prove to be the biggest asset for the commercial real estate industry in Wisconsin since Juneau and Kilbourn first plotted the streets for what eventually became downtown Milwaukee," Ruditys stated in the first report.

Ruditys predicted the CARW will expand from southeastern Wisconsin to cover the entire state by the end of 2003.

He also predicted the organization will form its first political action committee (PAC) to amplify the voice of the state’s real estate industry.

Further information about the report is available by contacting CARW at (414) 271-2021.

Jan. 24, 2003 Small Business Times, Milwaukee