December 2009 Business Magazine

BUSINESSM A G A Z I N E

Manufacturer & Business Association VOLUME XXII, NUMBER 12 DECEMBER 2009

Slow Recovery pg.16

Have we seen the worst, and what does the outlook really mean for area businesses?

2010 Economic Forecast

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22DEPARTMENTS >5 / Business Buzz22 / HR Connection

25 / On the Hill 26 / Legal Q&A40 / People Buzz

25

16FEATURES > 3 / Economic SpotlightEconomists Todd Nesbit, Ph.D. and James Kurre, Ph.D. address the outlook for 2010.

12 / PNC Financial Services Group Regional President Marlene Mosco discusses the positioning of PNC and its commitment to building strong com-munities and financial opportunities for individuals, families and businesses in Northwest Pennsylvania.

16 / 2010 Economic ForecastHave we seen the worst, and what does the outlook really mean for area businesses?

25 / Opposing I-80 TollingAnna McCauslin of the Manufacturer & Business Association’s Government Affairs Department explains five good reasons why Interstate 80 should not be tolled.

December 2009

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12Blue Ocean Strategy Center

UPCOMING EVENT > Economic Outlook Briefing Don’t miss the Association’s Economic Outlook briefing on Tuesday, December 15, with guest presenter James Kurre, Ph.D. of Penn State Erie and the Economic Research Institute of Erie.

BUSINESSM A G A Z I N E

Manufacturer & Business Association VOLUME XXII, NUMBER 12 DECEMBER 2009

Slow Recovery pg.16

Have we seen the worst, and what

does the outlook really mean for area businesses?

2010EconomicForecast

EDITORIAL > 7 / Health MattersWorkplace interventions for low back pain.DAVID M. WEIR

11 / Financial AdviserHow lifting the limits on Roth IRA conversions can benefit you.MICHAEL S. NEUBAUER

15 / Legal BriefStrategies that can help eliminate and/or minimize the tax consequences associated with future appreciation.S. CRAIG SHAMBURG

29 / Blue Ocean StrategyWhat questions to consider for a better understanding of Blue Ocean Strategy and its benefits.ANGIE ANGUS

35 / Energy UpdateHow companies in the PPL territory, where rate caps are coming off soon, can attain significant cost savings from the Employers’ Energy Alliance of Pennsylvania, Inc. J. DAVID BELL

December 2009 > www.mbausa.org > 1

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ECONOMIC SPOTLIGHT > by Karen Torres

VOL. XXIII, NO. 12 DECEMBER 2009

© Copyright 2009 by the Manufacturer & Business Association. All rights reserved. Reproduction or use of editorial, pictorial or advertisements created for use in the Business Magazine, in any manner, without written permission from the publisher, is prohibited. Unsolicited manuscripts cannot be returned unless accompanied by a properly addressed envelope bearing sufficient postage. The maga-zine accepts no responsibility for unsolicited manuscripts or artwork. The Business Magazine and Manufacturer & Business Association do not specifically endorse any of the products or practices described in the magazine. The Business Magazine is published monthly by the Manufacturer & Business Association, 2171 West 38th Street, Erie, Pa. 16508. Phone: 814/833-3200 or 800/815-2660.

Mission StatementThe Manufacturer & Business Association is dedicated to providing information and services to its members that will assist them in the pursuit of their business and community interests. – Board of Governors

Manufacturer & Business Association 2171 West 38th Street Erie, Pa. 16508 814/833-3200 or 800/815-2660 www.mbausa.org

Manufacturer John Cline & Business Dale Deist Association Board Timothy Hunter of Governors Dan Ignasiak Richard Knight Mark C. Kulyk John B. Pellegrino Sr., P.E. Dennis Prischak Robert S. Pursell Timothy G. Shuttleworth Lorenzo Simonelli Sue Sutto Philip Tredway

Editor in Chief Ralph Pontillo [email protected]

Executive Editor John Krahe [email protected]

Managing Editor & Karen Torres Senior Writer [email protected]

Contributing Angie Angus Writers J. David Bell Jessica Crocker Michael S. Neubauer S. Craig Shamburg David M. Weir

Advertising Sales Lori Maus Joint 814/833-3200 or 800/815-2660 [email protected]

Design, Production Printing Concepts Inc. & Printing [email protected]

Last year, our economic forecast was characterized as the “perfect storm.” How would you describe the economic climate for 2010? The 2010 economic climate might best be described as “tamed recovery.” Consumer spending will rise moderately as household savings are replenished. Much uncertainty exists in capital-intensive markets, leading to restrained investment. Unemployment will continue to rise moderately through the first half of 2010 as firms attempt to increase operating efficiency.Are you beginning to see signs of a turnaround? We certainly have seen signs of a turnaround. The decline in inventories has not been as severe as many feared; consumer spending was up in quarter three; and single-family housing starts has observed positive gains for five consecutive months. With this said, the economy still faces numerous hurdles ahead.What are the prospects for a return to growth in the near term? National forecasts already point to substantial positive growth (roughly 3 percent) in the third quarter of 2009. Growth should slow moderately in the upcoming quarters but will likely remain at or above 2 percent for 2010.Our members have indicated that their expectation for the next three months has gone from picking up (40.4 percent, as reported in the first quarter) to no change (42.8 percent, in the second quarter). However, looking ahead six months, the majority of business owners expect business to either stay the same or pick up. Would you consider this being cautiously optimistic? Yes, the respondents could be described as being a bit cautious in their expectations of the future. Nearly all national forecasts suggest that the economy will experience positive growth starting in the third quarter of 2009 and throughout 2010. However, such caution is to be expected with the large degree of uncertainty regarding the growing federal deficit, the proposed health-care overhaul, and the resulting fear of higher future taxation.Over the past three quarters, our members have consistently held firm with hiring freezes, overtime decreases and reduced hours to control costs. Layoffs also have dropped from 35.7 percent to 22 percent in the second quarter and 27.5 percent in the third quarter. How does this compare with the observed data for the Erie MSA (Metropolitan Statistical Area)? Observed employment data indicates only a slight reduction (-0.09 percent) in Erie employment in quarter two, which is consistent with the survey results. What is ERIE’s outlook for employment locally and nationally? Our forecast calls for an increase in the local rate of job loss in quarters three and four (-0.18 percent and -0.24 percent, respectively) before we return to positive gains in the first quarter of 2010. Overall, we expect a modest 0.34-percent rise in Erie employment in 2010. The majority of national forecasts suggest that unemployment will linger around the 10-percent level for 2010.What sectors will continue to struggle the most? Manufacturing and, in general, capital-intensive production will likely lag behind other sectors in the recovery. Manufacturing employment in Erie is projected to fall by about 6.8 percent in 2010.Which sectors do you anticipate will improve sooner than others? The service sector as a whole is projected to grow at just above 2 percent in 2010 with education and the health industry (2.2 percent) and other services, which includes government employment, (3.1 percent) being the primary drivers. The capital-intensive sector will continue to lag behind largely because the errors made during the preceding boom in these industries simply take longer to correct. It is much more difficult to liquidate heavy machinery than it is to adjust the inputs used in most service-based industries.

Todd Nesbit, Ph.D. is an assistant professor of economics at Penn State Erie, the Behrend College and a research associate for the Economic Research Institute of Erie (ERIE). James Kurre, Ph.D. is an associate professor of economics at Penn State Erie and the director of ERIE, which collects, analyzes, interprets and disseminates data, information, and forecasts for the area economy.


Business Buzz DEPARTMENTS > Contact: Jessica Crocker

LYCOMING ENGINES WINS MANUFACTURING ‘NOBEL’Lycoming Engines, a Textron Inc. company, recently was honored for its operational excellence at the 21st annual Shingo Prize Conference in Nashville, Tennessee. The Shingo Prize – known as the “Nobel Prize for manufacturing” – is recognized as the global, premier award process for excellence in operations. Named in honor of Dr. Shigeo Shingo, the famous engineer who helped create the Toyota production system and other Lean manufacturing processes, the award is given to businesses who have shown measurable, statistical and sustained levels of operational excellence and exhibit a Lean culture across all functions.Headquartered in Williamsport, Pennsylvania, Lycoming Engines specializes in the engineering, manufacture, service and support of piston aircraft engines. For more information, visit www.lycoming.com.

BETTER BAKED FOODS ACHIEVES LEVEL 2 SQF CERTIFICATION Better Baked Foods Inc. and Better Baked Foods of Erie, LLC, recently achieved Level 2 SQF Certification. SQF (Safe Quality Food) certification is a globally recog-nized food safety and quality certification program. It requires independent and external validation that the company’s products, processes, and services meet specific standards, enabling a supplier to assure that a food has been produced, prepared and handled according to the highest possible quality standards. “We are very proud to be one of the first SQF certified frozen food manufacturers in the country as this reinforces our dedication to product quality and food safety,” said Joe Pacinelli, president and COO. “Our team of over 400 associates works hard everyday to ensure safe food practices and this certification serves as a validation of our efforts.” With 40 years of baking experience and facilities in North East, Pennsylvania and Westfield, New York, the company has established itself as an expert

manufacturer of high-quality frozen hand-held snack food products. For information, visit www.betterbaked.com.

ISM AWARDED ISO 9001:2008 CERTIFICATIONIndustrial Sales & Manufacturing, Inc. (ISM) recently announced that it has been awarded ISO 9001:2008 certification.ISO 9001:2008 applies to industries involved in the manufacturing, installation, and servicing of products. Its quality assurance standards require the implementation of procedural changes, training, increased documentation, and adjustments to operating systems on every level of the manufacturing process. The certification process ensures ongoing compliance to standards of performance as companies, once certified, are externally audited every year for continuous execution of the standards. An industry leader for more than 42 years, ISM, headquartered in Millcreek Township in Greater Erie, is dedicated to providing quality machined, fabricated and assembled components. For information, visit www.ismerie.com.


When the subject is low back pain and the workplace, people often assume that this is an issue primarily for persons who have jobs that require some sort of heavy lifting. But, the truth is, back pain is not just for iron workers. It’s an equal opportunity health issue.

Historically, prevention of back pain at work has been viewed as a “body mechanics” and/or lifting device problem. The thinking has always been that if employees are taught the correct way to bend, stretch and lift, they can learn how to avoid back injuries. In many cases, low-back pain is not just caused by bad mechanics but a combination of bad mechanics and deteriorating fitness/core muscle strength. In reviewing occupational and non-occupational data for several large employers, we have seen that once you reach 35, it’s not a question of if you’ll get back pain, so much as when you’ll get it.

Yes, there are some occupations that put an excess physical demand on backs – nursing, construction, factory work, et cetera. But even routine office work can cause back problems if you fall into risky habits. In many cases, poor posture, age, and overall degeneration of the body due to physical activity and fitness lead to an increase risk of back injury. Most of us can recall a time when we attempt to do things that we used to do and our bodies tell us with pain and soreness that we overdid it. In many cases, back injuries, even those that occur on the worksite, are manifested over time. It’s a general degeneration of the body that leads to the problem.

Studies have shown that back pain can make it difficult to concentrate

Workplace Interventions for Low Back Painon the job. According to research by Duke University, up to 80 percent of people will deal with backaches at some time in their lives.

For employers, the impact of back-related strains and sprains on occupational and non-occupational injuries is significant both in cost and in days away from work and lost productivity. According to a recent study, the second-leading reason that people see their doctor is back- related pain. Only the common cold ranks higher.

It’s a Fitness Issue Many times, back pain is the result of a lack of overall fitness. Having poor core muscle strength and being physically inactive increases the risk of experiencing back problems.

Muscles, joints and bones all benefit greatly from regular physical fitness exercises. People who lack good physical fitness are more likely to get back pain than someone who participates to some extent in regular exercise. Persons with chronic lower back pain are most likely less fit than those who do not have it.

One of the best ways to manage lower back pain is to improve general physical fitness with cardiovascular exercise, because that helps increase the supply of blood to all the tissues in your body. Regular stretching and movement are some of the best things you can do to prevent back injuries.

Being fit helps you to maintain a healthy weight and being overweight increases the risk of having lower back pain. Exercise also can have a positive effect on mood, and having a positive

mood is an important part of managing a chronic condition such as low back pain.

Things That Can be Done at Work Understanding what causes back pain and knowing preventive measures can help you to avoid back pain and injuries.

Below are a few helpful hints to avoid the potential of back problems for you:

1. Plan your moves. 2. Listen to your body.3. Minimize hazards. 4. Work on coordination and balance.5. Examine your workstation for potential causes of imbalances.6. Regularly schedule time for fitness and exercise.

For more information on workplace interventions for low back pain, visit www.upmchealthplan.com.

Health MattersEDITORIAL > by David M. Weir

David M. Weir is president of UPMC Work Partners, which is part of the integrated partner companies of the UPMC Insurance Services Division – which also includes UPMC Health Plan, LifeSolutions, UPMC for You (Medical Assistance), and E-Benefits – and which offer a full range of insurance programs and products.


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Finding comprehensive personal and business insurance at affordable rates is a challenge in today’s uneasy marketplace, no matter what business you’re in. And while all employers’ coverage needs may vary, their bottom-line objectives — value and affordability — remain the same.

Finding Solutions Beyond the Obvious.At Davevic Benefit Consultants, we look for ideas, not excuses. And as one of the region’s leading providers of group health-care coverage, employee benefits, employee benefit statements, and personal and business insurance, including Section 125 administration, we know how and where to find solutions that lie beyond the obvious. Put Davevic Benefit Consultants on your short list of who to call for great coverage, great rates and great service.

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Finding SolutionsBeyond the Obvious.

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Finding comprehensive personal and business insurance at affordable rates is a challenge in today’s uneasy marketplace, no matter what business you’re in. And while all employers’ coverage needs may vary, their bottom-line objectives — value and affordability — remain the same.

Consider it done. At Davevic Benefit Consultants, we look for ideas, not excuses. And as one of the region’s leading providers of group health care coverage, employee benefits, employee benefit statements, and personal and business insurance, including Section 125, HRA & HSA Administration, we know how and where to find solutions that lie beyond the obvious.

Put Davevic Benefit Consultants on your short list of who to call for great coverage, great rates and great service.

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Consider It Done.Great Coverage Great Rates Great Service

Michael S. Neubauer, CPA, CVA, MBA, is a supervisor in the Erie office of the certified public accounting firm of McGill, Power, Bell & Associates, LLP. His area of specialization is the manufacturing niche. Neubauer serves as president-elect for the Erie Chapter of the Pennsylvania Institute of Certified Public Ac-countants (PICPA), the treasurer of the Presque Isle Partnership, and was recently named one of the PICPA’s 40 under 40 members to watch.

Under current regulations, taxpayers can convert traditional IRAs and qualified retirement accounts to a Roth IRA, so long as their modified adjusted gross income is $100,000 or less and their filing status is not married filing separate. Beginning January 1, 2010, under the Tax Increase Prevention and Reconciliation Act of 2005, there will no longer be an income limitation, or any restrictions on filing status. In short, all taxpayers will have the ability to convert retirement assets into Roth IRAs.

These changes in conversion requirements present a unique opportunity for taxpayers. The income limits with regard to deductible contributions to traditional IRAs or contributions to Roth IRAs have prevented many taxpayers from the tax benefits of a traditional or Roth IRA. Higher income taxpayers could always make nondeductible contributions to traditional IRAs, but there are several drawbacks that limited the benefit of doing so. Under the new regulations with no income limits, these same taxpayers can make nondeductible contributions to traditional IRAs and then convert into a Roth IRA in 2010. Essentially, the elimination of the income limit for converting to a Roth IRA eliminates the income limit for contributing to a Roth IRA. For conversions made in 2010, a taxpayer can recognize the conversion amount ratably in 2011 and 2012, or they can elect to recognize the income in 2010.

What’s the Difference?Traditional and Roth IRAs both allow income held in the account to grow tax free, but there are many differences separating the two. Contributions to a traditional IRA can be deductible, but contributions to a Roth IRA are never deductible.

Further, distributions from traditional IRAs are taxable (unless no deduction was taken for the contributions that comprise the account); qualified distributions from a Roth IRA are not taxable. Traditional IRAs have required minimum distribution (RMD) rules, but Roth IRAs do not. These rules were put in place to make sure that the traditional IRA account is distributed and taxed during the taxpayer’s life rather than saved for the next generation. Another difference is that individuals cannot contribute to a traditional IRA after age 70. Roth IRAs, on the other hand, can be contributed to as long as the taxpayer has earned income.

Factors to ConsiderCareful planning should be performed to determine if a taxpayer should take advantage of this new development. The first thing to consider is whether the individual has the resources to pay the tax on the conversion. If the taxpayer has to use a distribution from the converted IRA to pay the tax, that amount also will be taxed. Additionally, if the distribution is an early withdrawal, it will be subject to an additional 10-percent penalty.

Another principal concern is whether the taxpayer believes he or she will be in a lower or higher tax bracket after retirement. If an individual believes they are going to fall into a lower tax bracket during retirement, it may be more beneficial to take advantage of the tax deferment quality of a traditional IRA. Similarly, it is important for the taxpayer to consider whether they believe that income tax rates will increase or decrease in the future. When looking at historical statistics, our current income tax rates are considerably low. However, with recent economic decline and budget

deficits, many feel that a tax increase is on its way sooner than later. If this scenario plays out, it may be beneficial to pay the tax on the Roth conversion now while rates are low.

These are just a couple of the factors that should be taken into consideration when planning whether to convert retirement assets into a Roth IRA. The elimination of the $100,000 income limitation was designed by the government to be a revenue-producing tax measure. However, for many high-income taxpayers, this may be an opportunity for significant tax savings.

Converting retirement assets into a Roth IRA should only be done after careful consideration of circumstances and tax planning. For assistance in determining if a Roth conversion is right for you, contact Michael Neubauer at McGill, Power, Bell & Associates, LLP at 814/453-6594 or [email protected].

Financial AdviserEDITORIAL > by Michael S. Neubauer, CPA, CVA, MBA

Roth IRA Conversions: Income Limit to be Removed January 1


Area pre-schoolers learn science concepts from Marlene Mosco, regional president of PNC, during an educational workshop at the Tom Ridge Environmental Center in Erie. Thanks to a two-year $100,000 grant to the Friends of Tom Ridge Center from the PNC Foundation, the funds will help train pre-school teachers and introduce families of pre-school children to Science. Through visits to the center’s interactive exhibits and the Presque Isle educators’ “Outside the Window” environmental science program, the activities will reach over 150 children in 2009 and 2010.

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Company PROFILE PNC Financial Services Group

901 State Street Erie, PA 16501

Contact:

Marlene D. Mosco PNC Regional President Northwest Pennsylvania

Web Site:

www.pnc.com

Date Founded:

1852

Employees:

Approximately 58,000 in the United States and abroad

Company Description:

Pittsburgh National Corporation was established as the Pittsburgh Trust and Savings Company in 1852, making it the oldest bank in Pittsburgh. Today, The PNC Financial Services Group (NYSE:PNC) is one of the nation’s largest financial services companies with assets of $286 billion. PNC is a diversified financial institution, which includes a regional banking franchise operating primarily in 14 states and the District of Columbia, specialized financial businesses serving companies and government entities, and leading asset management and fund-processing businesses.With 2,600 branches and more than 6,400 ATM machines, PNC provides deposit, lending, cash management and investment services to more than 6 million consumer and small-business customers across 14 states and the District of Columbia. The bank operates in 49 locations in Northwest Pennsylvania.Products/Services

• Retail Banking - Consumer and

small business banking PNC is the nation’s fifth largest bank based on deposits and branches and is ranked among the top small business lenders. PNC also was the first major U.S. bank to design and build bank branches based on U.S. Green Building Council standards.

• Asset Management Group

- Individual wealth and

institutional investment

management PNC is one of the nation’s largest wealth management firms and one of the top 10 bank wealth managers, according to Barron’s Corporate & Institutional Banking.

• Financial services for companies

and government agencies – PNC is a top 10 Treasury Management business and is the No.1 lead arranger of traditional middle market loan syndications.

• Originator of first lien residential

mortgage loans nationwide – PNC is among the nation’s top 10 retail lenders and servicers.

• PNC Global Investment Servicing

- Global fund processing services PNC is the No. 1 subaccounting provider and No. 2 full-service mutual fund transfer agent in the United States. The bank also is the leading provider of information and analytics products through Albridge Solutions and Coates Analytics.

• BlackRock - Publicly traded asset

management firm.

PNC is one of the world’s largest publicly traded asset management firms.

Community Involvement PNC is committed to helping build strong communities and create financial opportunities for individuals, families and businesses through:• Community Development:

PNC boosts the quality of life in neighborhoods through affordable housing, economic revitalization and customized financial solutions. PNC earned an “outstanding” rating in 2007 for exceeding Community Reinvestment Act standards.

• Charitable Giving: More than $50 million is expected to be invested in communities in 2009. The PNC Foundation forms partnerships with nonprofit organizations to advance mutual objectives driven by two priorities: 1) early childhood education, supported by the 10-year $100 million Grow Up Great Program; and 2) community and economic development.

• Environmental Responsibility: PNC’s commitment to innovation and environmentally friendly business practices during the past decade has enabled the company to lower costs, increase efficiency and improve communities. PNC has more newly constructed, LEED-certified green buildings than any company on Earth.

PNC Financial Services operates at 49 locations in Northwest Pennsylvania, including this “green” retail branch at the Millcreek Marketplace and another on West Ridge Road.

PNC Grow Up Great Programs Help Area Pre-Schoolers

PNC has remained largely stable throughout the banking crisis. What do you credit this stability to?PNC operates with a moderate risk philosophy. During the real estate market of this decade, PNC simply did not offer the types of risky mortgage products that contributed to the current crisis. Subsequently, PNC was in a position to benefit from changes to the industry landscape.

Please explain the importance of the National City acquisition for PNC? PNC’s strategy focuses on acquiring and growing customer checking relationships. To a large extent, these relationships begin at the branch. National City’s branch network more than doubles PNC’s retail network providing us with additional opportunities to reach out to customers.

Describe PNC’s expectations for this acquisition in the short term and long term?In the short term, our goal is to integrate National City customers with minimal disruption. Over the long term, we want to grow our relationships with innovative products and services that our greater scale and scope allow us to offer.

PNC recently posted its Economic Outlook Survey – Fall 2009. Please explain some of the key findings.The survey says that, generally speaking, business owners are less pessimistic than they were in the Spring when we last conducted this survey. After pessimism of small and mid-sized business owners rose last Spring to an all-time high in the history of the PNC Economic Outlook survey, Pennsylvania owners are now more cautiously optimistic, though still waiting for a boost from the federal stimulus program. The new Fall findings support PNC’s forecast that the U.S. economy has started a moderate U-shaped recovery in the latter half of this year that will continue throughout at least 2010. Last Spring showed a record high concern with more than one-third pessimistic about their own company’s prospects during the next six months. In the Fall survey, less than one-quarter (22 percent) are pessimistic, which is comparable to the 24 percent last Fall.

With many business owners cautiously optimistic about the year ahead, they are more likely to reduce capital spending and squeeze expenses. How is this impacting banking today? The Fall survey results for Pennsylvania show that about half (53 percent) have no plans for capital spending over the next six months, compared to the same 53 percent last Spring, and the 38 percent who reported no capital spending plans one year ago. I can tell you, though, PNC remains committed to lending to qualified borrowers. We have been a strong bank through the recession and are especially well poised for the recovery.

Is there anything else you would like to add?We believe that the National City acquisition positions PNC very well in Erie and Northwest Pennsylvania. Our branch and ATM network has grown greatly and provides customers with much more ease and convenience in which to do their banking. It is an exciting time in our area and we are pleased to be a part of it.

Marlene Mosco is the regional president for PNC Financial Services Group in Northwest Pennsylvania. She recently spoke with the Business Magazine about the positioning of PNC and the financial outlook for the year ahead.

PNC Community Impact

EARLY EDUCATION: SUCCESS IN SCHOOL AND LIFEPNC Grow Up Great is a $100 million, 10-year investment to improve school readiness among children from birth to age five through public/private collaboration grants, advocacy and education. More than 100,000 volunteer hours are contributed by PNC employees.

Today, PNC Grow Up Great and PNC Crezca con Éxito form one of the nation’s most comprehensive bilingual, corporate-based, school-readiness programs. With a focus on underserved children, Grow Up Great is dedicated to creating opportunities for children and building stronger communities and a skilled workforce.

BUILDING STRONG COMMUNITIESOther notable PNC achievements in education and community development include:

• PNC Northwest Pennsylvania collaborates with the Saint Benedict Child Development Center in Erie, offering the company’s only Grow Up Great program for migrant pre-school children.

• Since 2004, PNC has funded more than $17 million in early learning efforts and has provided $2.1 million in support of pre-k scholarships.

• National Award: Excellence in Workplace Volunteering, Points of Light Foundation Award (2006)

• PNC honored along with First Lady Laura Bush, Sesame Workshop (2007)

• National Corporate Friends of Children Award, Child Welfare League of America (2007)

• Top 100 Companies for Working Mothers, Working Mother (2001, 2003-2009)

• 2007 “outstanding” rating for exceeding Community Reinvestment Act standards reflects PNC’s long history of serving the credit needs of communities in which it operates.

• More than $1 billion in annual financing provided to lower-income individuals, small businesses and nonprofit organizations.

• Approximately 23,000 people benefited from PNC’s financial education curriculum in 2008.

While the economy appears ready to rebound, many assets remain valued at depressed levels and interest rates remain low. It may be worth considering certain strategies that eliminate or minimize the tax consequences associated with the future appreciation that is bound (we all hope) to occur. Roth IRA Conversions One way to take advantage of depressed asset values involves converting retirement accounts into Roth IRAs. For tax years 2010 and beyond, the income limits on Roth IRA conversions will no longer exist. At the time of conversion, the retirement account owner will pay tax on the current low value of the account. This tax can be spread over two years if the conversion occurs in 2010. Any amount converted to a Roth IRA will then continue to grow tax-free.Gifting Now also might be a great time to gift property that has the potential to increase in value. The annual gift tax exclusion allows you to gift $13,000 ($26,000 if your spouse joins in the gift) to as many people as you desire without any tax consequences. Gifts in excess of the annual exclusion are applied against your lifetime gift tax exemption of $1 million. Once this exemption is exhausted, additional gifts are subject to gift tax. Gifting allows you to transfer all future appreciation in the gifted property outside of your estate. While gifting is relatively straightforward, the transferee currently receives a carryover basis in the gifted property. Thus, you may be gifting assets that carry with them a hefty tax burden. Accordingly, it is necessary to analyze any potential income tax consequences and your family’s ultimate plans for the asset prior to making any gift.

Grantor Retained Annuity TrustGrantor Retained Annuity Trusts (“GRATs”) allow taxpayers to transfer the future appreciation of certain assets out of their taxable estate. As with outright gifts, the taxpayer makes an irrevocable transfer into the GRAT. However, the taxpayer retains the right to receive an income stream for a term of years or for his or her lifetime. The remainder interest typically passes to the taxpayer’s family upon the termination of the GRAT, and is considered a completed gift at the time of the transfer. GRATs are currently attractive because the remainder is valued based on the reduced asset values and the low discount (interest) rate prescribed by the Internal Revenue Service (IRS). Upon termination, any appreciation in the value of the remainder interest in excess of the rate prescribed by the IRS is passed free of estate and gift tax to the taxpayer’s family. Charitable Lead Annuity Trust For those with charitable intentions, a Charitable Lead Annuity Trust (“CLAT”) may be the perfect choice for you. It works in much the same way as a GRAT. The main difference between a CLAT and a GRAT is that instead of the income stream being retained by you, it is directed to a charity of your choosing. At the termination of the trust, your family members can still be the beneficiaries and receive all of the CLAT assets tax-free. The CLAT can be structured so that either: 1) you get a large upfront charitable deduction, but remain responsible for income tax on any income earned by the Trust, or 2) so that the CLAT receives the charitable deduction each year.Intra-Family Loans Low interest rates make now a great time to consider a loan to one of your children or other family

members. Intra-family loans allow your assets to appreciate outside of your estate, while allowing a family member to invest, buy a home or start a business. The IRS requires a certain minimum interest rate be charged in order to avoid tax consequences. As of November 2009, this rate ranges from less than 1 percent to just over 4 percent, depending on the term of the loan. If the loan proceeds receive a return on investment that is greater than the IRS interest rate, the difference passes to your children tax-free. This strategy can then be leveraged by using annual exclusion gifts to forgive the monthly or annual payments on the loan up to $13,000 a year gift tax-free. However, as with any loan, you may be responsible for reporting interest income or expense depending on the purpose of the loan. As always, the effectiveness and desirability of any of these strategies depends on your individual circumstances. For more information about these strategies, contact S. Craig Shamburg at MacDonald, Illig, Jones & Britton LLP at 814/870-7716 or [email protected].

Legal Brief

S. Craig Shamburg is an associate at the law firm of MacDonald, Illig, Jones & Britton LLP. A graduate of the Pennsylvania State University and the University of Dayton School of Law, he practices in the areas of estate planning, estate and trust administration, tax and business law.

Take Advantage of Market Conditions

EDITORIAL > by S. Craig Shamburg


After being beaten and battered in 2009, the U.S. economy is finally limping its way back to recovery.

A recent survey by the National Association for Business Economics (NABE) reported that more than 80 percent of top economists surveyed believe that the worst is over. But these same economists also expect the recovery to be rather slow and painful, with massive increases in federal debt and unemployment rates that are expected to remain very high through next year.

The economic recovery also is likely to be more moderate than those typically experienced following steep declines. As local economist Dr. Todd Nesbit of Penn State Erie and the Economic Research Institute of Erie (ERIE) explains, the 2010 economic climate could be described as a “tamed recovery” at best. (See Economic Spotlight on p. 3)

More specifically, “consumer spending will rise moderately as household savings are replenished,” says Dr. Nesbit. But “much uncertainty exists in capital intensive markets, leading to restrained investment. Unemploy-ment will continue to rise moderately through the first half of 2010 as firms attempt to increase operating efficiency.”

Employers who had braced for the worst during 2009’s “perfect storm,” however, are slightly less pessimistic about 2010. In a recent Economic Forecast Survey, conducted by the Manufacturer & Business Association, the majority of employers reported being cautiously optimistic about the economic conditions for their businesses as they look ahead. Currently, nearly 89 percent of MBA survey respondents claim conditions will either stay the same or pick up in the next six months. In fact, of these businesses, many already have instituted cost-cutting measures – such as overtime reductions, reduced hours and hiring freezes – but anti-cipate smaller reductions in the near term.

It’s a small but noticeable shift that’s in line with slight increases in CEO confidence. According to The Conference Board, the CEO confidence index rose to 63 in the third quarter and about 58 percent of CEOs expect economic conditions to improve in the next six months, up from about 55 percent last quarter. Expectations for their own industries also were more optimistic, with 51 percent of CEOs anticipating an improvement, up from 45 percent in the previous quarter.

“CEOs have grown considerably more optimistic in their short-term outlook,” states Lynn Franco, director of The Conference Board Consumer Research Center. “Although nearly 60 percent

say they’ve scaled back capital spending plans since January, growing optimism over the past several quarters should translate into increased spending in 2010.”

MANUFACTURINGManufacturing, which has progressively been doing more with less for decades, recently posted one of its largest increases in productivity among 17 countries amid one of the biggest spikes in U.S. unemployment, which hit 10.2 percent in October. And, according to a recent Federal Economic survey, a majority of manufacturing contacts thought production would stay at current levels or show a gradual improvement going into 2010.

NAME: Michael Chesley TITLE: General Manager COMPANY: Composiflex, Inc. LOCATION: 8100 Hawthorne Drive, Erie, PA 16509 TOTAL EMPLOYEES: 60

“Next year certainly looks promising for us,” explains Michael Chesley, general manager of Composiflex, Inc. “We broke ground this month on a building addition that will increase our facility size by 60 percent. We just could not wait any longer in light of the active projects, which we expect to transition into full production in 2010.”

Slow Recovery

Have we seen the worst, and what does the outlook really

mean for area businesses?

16 < www.mbausa.org < December 2009

Composiflex, headquartered in Erie, designs and manufactures advanced composite products for a number of markets including: medical, military, aerospace, and industrial. The company also designs and manufactures advanced composite armor, which is used for ballistic protection of aircraft, ground vehicles, and personnel.

Although “our total revenue is off by approximately 15 percent from last year,” states Chesley, “our product, market, and geographic diversity have certainly helped us to weather the economic downturn. However, our overall backlog has been weakened a bit due to the economic uncertainty. We are seeing our customers consciously avoid risk by simply holding their purchase orders until the threshold of our quoted lead-time, minimizing our advance visibility of years past.”

In an effort to control costs, Composiflex, as with many companies, found it was necessary to reduce its work force early in the year but has not had any additional reductions since. Instead, the company has a number of ongoing projects to improve operational efficiency and minimize waste, and also completed a major thermal fluid consolidation project this year, converting a large portion of its processing equipment from electric energy to natural gas — generating immediate and substantial operational cost savings from this conversion project.

The outlook for the composites industry also looks positive. “Before this economic downturn,” notes Chesley, “the composites industry had experienced year-on-year growth for a number of years. We expect that the growth pattern will resume in 2010.”

NAME: Jerry Wertz TITLE: President & CEO COMPANY: Data Papers, Inc. LOCATION: 468 Industrial Park Road, Muncy, PA 17756 TOTAL EMPLOYEES: 88

Even before the current economic downturn, the printing industry has declined by about 5 percent per year for the past decade. 2009 has seen that rate of decline double.

But according to Jerry Wertz, president and CEO of Data Papers, Inc. in Muncy, Pennsylvania, the employee-owned company, which specializes in commercial and digital printings primarily in the eastern third of the United States, has been fortunate to experience a modest reduction in sales of 3 percent this year.

To deal with the current economic downturn, Data Papers has, at times, gone to a modified work schedule. Management has taken a 10-percent reduction in salary as well.

“Recently, we looked at our company and saw a tenuous future in light of computer technology and Internet commerce,” says Wertz. “We decided that we could either stay the course and slowly fade away, or evolve and prosper. We chose the latter.”

The evolution is the transition from printing traditional business forms, such as multiple-part carbon paper sets, to modern commercial and digital printing, and advertising specialties. In the past year, Data Papers has invested in a high-speed eight-color commercial press and a seven-color digital press to meet new customer demands. The new digital technology gives Data Papers the ability to print personalized products.

“Our outlook for 2010 is growth of 2 to 3 percent, based on the slight recovery of financial institutions, and our increase in personalized target-marketing campaigns,” says Wertz. “Our industry in general is expecting a 7- to 8-percent reduction.”

BANKING & FINANCEFor the banking and financial industry, a return to profitability doesn’t necessarily portend a quick recovery from the severe downturn that began two years ago. However, bank leaders are trying to find the best model for their own institutions, while managing the fallout from the financial crisis.

NAME: James E. Martin TITLE: Region President COMPANY: Northwest Savings Bank LOCATION: Erie, PA Corporate headquarters in Warren, PA TOTAL EMPLOYEES: 275 in Erie County and 2,014 bankwide

According to James E. Martin, region president of Northwest Savings Bank, the bulk of their business, which is in Pennsylvania, was not nearly as hard-hit by the crisis as many other states. Likewise, Northwest, which was founded in 1896 and is a full-service financial institution, never indulged in the risky subprime loans that got many banks in trouble.

“We’ve always kept our loan standards high,” says Martin. “We avoided the government’s TARP program as well. We were considered ‘well capitalized’ at the start of the crisis and we’re still considered ‘well capitalized’ by the FDIC… Our ‘possible bad loans’ and ‘bad loans’ are lower as a percentage than most of the industry’s or our peers’ yet we’ve still increased our loan loss reserves just in case. (Times are tough. Some of our customers are bound to get into trouble. We’ll be ready.) And, the final test of a tough bank is, can it make money in tough times? Northwest can and we have. We remain profitable.”

Northwest also has been controlling costs since Martin became a banker in 1985. “It’s the same song today that it was then, maybe a bit louder,” explains Martin. “Some banks, especially the big ones, are closing banks and laying off workers. Northwest certainly is not about to do that, but we do keep our eyes open. If no one is in the building, the lights are off and the heat is turned down.”

However, Martin says that the business outlook for Northwest, at least, is good. “The industry is in turmoil; things are changing constantly, with regulations, mergers and acquisitions, and legislation.”

“I can say that we have been profitable and it’s safe to forecast that Northwest Savings Bank will continue to be profitable…,” notes Martin, “Generally, the fewer risks you take in banking, the better things are. We keep our standards high to cut risks.”

REAL ESTATEThe banking business is getting better but still faces major threats because of bad commercial real estate loans. A recent Federal Reserve survey in the tri-state region shows that in housing the lower end of the market is doing particularly well, while the high-end market is sluggish. Commercial real estate, however, continues to struggle.

NAME: Thomas Kennedy TITLE: President COMPANY: Professional Development Associates, Inc. LOCATION: 1001 State Street, Erie, PA 16501 TOTAL EMPLOYEES: 30

Tom Kennedy, president of Professional Development Associates, Inc., a business and real estate development firm, has seen a softening demand for commercial real estate, with time on the market increasing and prices remaining flat, and few new projects being initiated with tightened financial markets.

“Our tenant base has been affected by the recent downturn, with several businesses closing and/or cutting back on office space,” says Kennedy. “We recently consolidated two of our downtown business centers into one, and acquired a site in Niagara Village for a future suburban centre when things improve.”

The company, which specializes in startup and turn around projects, with business interests such as Alliance Builders, Palace Business Centres and Altair Holdings, and real estate interests such as Renaissance Centre, Parkside Commons and others located regionally, also has clients on both coasts, including institutional investors such as Boston Capital in Massachusetts and PNC Capital in Oregon. >

Slow Recovery

Have we seen the worst, and what does the outlook really

mean for area businesses?


The good news is that, “We are starting to see a slight increase in inquiries,” says Kennedy, “and although we do not see 2010 being a strong year, we are optimistic that the slide has leveled out and that real estate demand will gradually increase.”

EDUCATIONIn education, the weak economy has helped to boost college and university enrollment as many adults return to school to find new careers. Likewise, a record high of about 11.5 million Americans age 18 to 24, or nearly 40 percent, attended college in October 2008, according to a recent study of Census data released by the Pew Research Center.

NAME: Antoine M. Garibaldi, Ph.D. TITLE: President COMPANY: Gannon University LOCATION: 109 University Sq., Erie, PA 16541 TOTAL EMPLOYEES: 1,445 people, including 626 student employees

Gannon University, a private faith-based university in Erie focused on Catholic values, that offers nearly 100 academic programs in the health professions, engineering, business, education, social sciences and the humanities, is seeing a significant enrollment shift.

“Gannon’s enrollment has increased by more than 790 students since 2001 and, over the past four years, the diversity of its freshman classes has increased by 40 percent,” says President Antoine Garibaldi, Ph.D. “Fall 2009 total enrollment was 4,238 students, which is the largest total enrollment since 1992.”

Like many universities across the country, Gannon’s endowment experienced a loss, but the 18.6-percent shortfall was not as high as many other institutions. As a direct response to the impact the economy was having on students and their families, Gannon initiated the Gannon Stimulus Initiative to assist current and prospective students by increasing the pool of institutional financial aid to a total of $26.6 million – a $2.6-million increase over the previous fiscal year. Additionally, the University

increased tuition by only 4 percent, which was much lower than in previous years.

Gannon also reviewed all of its contracts and service agreements and renegotiated for possible cost savings and efficiencies. Because of the enrollment increases in fall 2009, Gannon was able to increase salaries by 2.9 percent. The University also expanded its travel card program to a purchase card program that has increased procurement efficiency and enhanced department flexibility by allowing small purchases to be charged. This program reduces the number of purchase orders and check requests.

Likewise, the Marketing Department has reduced the cost of creating promotional materials by increasing Gannon’s in-house capability and productivity. The University also is conducting an on-campus energy study that will identify projects to improve the building environments and reduce operating costs. All summer classes were moved into one academic building in order to save operating costs.

“We are not out of the ‘storm’ yet,” adds Dr. Garibaldi. “Some of the same external economic conditions that led us to set prudent tuition and salary increases this fiscal year also will apply in next fiscal year’s budgeting process.”

HEALTH CAREIn addition to being the largest industry, health care remains among the fastest growing. According to the U.S. Department of Labor’s Bureau for Labor Statistics projections, eight of the top 20 fastest-growing occupations are in health care, and the industry also is expected to lead in new wage and salary job creation – generating some 3.6 million jobs between 2004 and 2014.

NAME: John Papalia Title: CEO COMPANY: Warren General Hospital LOCATION: 2 Crescent Park West, Warren, PA 16365 EMPLOYEES: 560

Warren General Hospital (WGH), a regional health-care facility nestled in northwest

Pennsylvania’s Allegheny National Forest, which draws its patients predominantly from Warren County as well as Eastern Erie County, McKean County and Southwestern New York with specialty services, has reported growth amidst the economic downturn.

“WGH was fortunate to have entered the downturn in very strong financial position,” explains Warren General Hospital CEO John Papalia. “Our revenue growth, which was achieved with the development of new services and expansion of current services, has resulted in a doubling of our revenues over the past 8 years. We have seen some increase in those patients who are underinsured and uninsured and we are watching that trend closely.”

As such, WGH continually strives to be more efficient in its delivery of high quality care. “We have implemented cost efficiencies in supply chain, productivity and service costs each year,” says Papalia. “We also are very careful about capital allocation these days. In other words, how will our patients be helped, from an access to care and quality perspective, by what we invest in?”

Warren General Hospital, Papalia says, is guardedly optimistic about the “recovery.” “Our industry is unique in that we provide care year round, year in and year out, despite the general economic climate,” he adds. “This has created a long-term planning mind-set in our hospital that brings continuity and consistency to our care delivery as opposed to making radical short-term changes. We do believe that employers in our markets will carefully add to their payrolls in 2010 and beyond.”

From a national view, however, Papalia does believe some incremental health reform is likely, though the details are unknown. “What is known from our perspective is that most sectors of health care require scale to survive, our industry is very fixed cost intensive and thus we intend to achieve scale in a carefully planned way.”

To view results of the Manufacturer & Business Association’s Economic Forecast

Survey, click on the “Members Only” section on www.mbausa.org.


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Offer available to new Northwest personal checking account customers only who open a Switch Checking Account with a $100 minimum opening deposit. Northwest Savings Bank customers with an existing checking account are not eligible for this offer. To qualify, you must initiate a monthly direct deposit of $100 or more. A qualifying direct deposit is defi ned as a direct deposit of a paycheck, pension, Social Security or other regular monthly income electronically deposited into a Switch Rewards, Switch Free, or Switch Interest Checking Account. The direct deposit must be made by an employer or outside agency. Transfers from one account to another or deposits made at a branch or ATM do not qualify as direct deposits. The credit of $100 will be posted to the eligible account within 7 days of the fi rst verifi ed direct deposit. The credit will be identifi ed as “New Checking Account Credit” on your monthly statement. The $100 credit is not considered part of the minimum opening balance. Account is subject to approval. Employees and affi liates of Northwest Savings Bank are not eligible. $100 credit is subject to 1099 reporting. Any applicable taxes are the responsibility of the account holder. Offer may be extended, modifi ed or discontinued at any time and may vary by market. *Greystone checks, or half off the price of the fi rst order of higher priced checks. **Online Bill Pay is free when you pay at least one bill per month online. ***Free for six months. See bank for details. Member FDIC

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DEPARTMENTS > Contact: John OnoratoHR ConnectionMOST EMPLOYERS PLAN TO UNFREEZE SALARIES WITHIN SIX MONTHSFifty-four percent of large employers that have frozen salaries say that they will unfreeze them in the next six months, up from 33 percent who said the same in August, according to a survey by Watson Wyatt, a consulting firm.Overall, 56 percent of organizations in the survey have instituted a salary freeze and a hiring freeze since the economic crisis began.

The survey also found that 49 percent of respondents plan to reverse hiring freezes at least partially in the next six months, up from 38 percent who said the same in August.

U.S. SMALL BUSINESSES LACKING CYBERSECURITY AWARENESS, POLICIESSmall-business owners’ cybersecurity

policies and actions are not adequate enough to ensure the safety of their employees, intellectual property and customer data, according to the 2009 National Small Business Cybersecurity Study.Co-sponsored by the National Cyber Security Alliance and Symantec, the report surveyed nearly 1,500 small-business

owners across the United States about their cybersecurity awareness policies and practices. Sixty-five percent of the businesses surveyed claimed that the Internet was critical to their success yet they are doing very little to ensure that their employees and systems are not victims of a data breach.

Periodically, health insurers will conduct what is known as a small group re-underwriting initiative. This exercise is done to make sure that all participation requirements are being met and to guard against adverse selection. If and when your company receives this type of inquiry, answer to the best of your ability and involve your agent in the process. The insurer will respond back to you with any changes necessary in order for your plan to become compliant. For more information, contact Patty Smith at 814/833-3200, 800/815-2660 or [email protected].

Patty Smith is the director of Employee Benefit Services at the Manufacturer & Business Association.

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EFCU MANF Ad2 (12-09).indd 1 11/13/09 3:14:56 PM 22 < www.mbausa.org < December 2009

Saint Vincent Health Center • 232 West 25 Street • Erie, PA 16544 • 814-452-5000 • www.saintvincenthealth.com

HEALTH CARE IS A CRITICAL CHOICE. CHOOSE WELL.

STANDING STRONG FOR OUR COMMUNITY.These are the words Saint Vincent president and CEO C. Angela Bontempo chose to describe Saint Vincent at the 2009 Saint Vincent Foundation Annual Meeting on October 26. In the most challening of times, Saint Vincent preserved jobs, gave more to the community, and was able to remain profitable...all while providing patients with the highest quality of medical care. Saint Vincent highlighted the accomplishments of the past year in three categories: Your Health, Your Hospital and Your Community.

Your Health Your Hospital Your CommunitySaint Vincent continued its development of the Yorktown Commons Medical Plaza to include the new Saint Vincent Imaging and Endoscopy Centers. It addressed a re-emerging need for quickly accessible care for those with minor illnesses or injuries by opening Urgent Care-East in Harborcreek Township, with plans to open Urgent Care-West in Yorktown Commons soon.

In 2009, Saint Vincent invested $12.5 million in property, plant and equipment, bringing its total five-year investment to $78.4 million. It’s $8 million commitment to women and babies has resulted in a $2.8 million, state-of-the-art neonatal intensive care unit -- the region’s largest and busiest -- a 10-bed gynecology and antepartum unit, and 27 new, private mother/baby rooms, set for completion this spring.

Serving the needs of the community is at the very core of the Saint Vincent mission. Also in 2009, at a time when it was needed most, Saint Vincent increased the maximum income for families to qualify for its Community Care program to 350% above the national poverty level. In addition, Saint Vincent made alternative payment arrangements for families facing financial difficulties.

Saint Vincent remained profitable by being fiscally responsible with its resources, resulting in a 4.4% growth in revenues. There were also increases in operating efficiency, employee productivity and inventory management. Although the future may be uncertain in terms of the economy, you can count on one thing to remain the same:

Saint Vincent taking care of your health, remaining your hospital of choice, and standing strong to support the communities you live in and the communities we serve.

Anna L. McCauslin recently joined the Government Affairs Department as the state government relations representative, responsible for developing the state legislative priorities and agenda. You can reach her at 800/815-2660 or [email protected].

OntheHill DEPARTMENTS > Contact: Sheila Sterrett

3. Paying the Fair Share. Unfortunately, the money garnered from I-80 would not go back to the communities and businesses that use the road most. The revenues would be dispersed across Pennsylvania to fund mass transit in city centers, as well as other transportation initiatives. Truckers, commuters and other motorists traveling I-80 recently have been found to be paying approximately $50 million more than is currently spent maintaining the interstate. 4. A Penny Saved is a Penny Earned. Just as residents look for ways to get the most out of their money, the Pennsylvania Turnpike Commission should do the same. If the Commission can cut waste, there will be more funds that can be diverted to road construction, maintenance and repair. In October of this year, the PTC invited the Federal Bureau of Investigation (FBI) to investigate the report of an PTC Inspector General that found pay-to-play and other problems with a project near Valley Forge. Nearly five years ago the Pittsburgh Tribune-Review reported of excessive spending on the part of the PTC.5. Not a Priority. Transportation infrastructure is not a top priority for the state government. PennDOT saw a $700,000 decrease in appropriations from the state budget. The issue of funding the improvement of the decaying roads and bridges in Pennsylvania was the elephant in the room during this fall’s budget debates.

Just as you were starting to breathe a sigh of relief, stop. The discussion to toll Interstate 80, which runs along 311 beautiful Pennsylvania miles from Ohio to New Jersey, has started again. BackgroundIn July 2007 Governor Edward Rendell signed into law Act 44, which allows the Pennsylvania Turnpike Commission (PTC) to lease Interstate 80 from the Pennsylvania Department of Transportation (PennDOT) for 50 years. The lease allows the interstate to be tolled in order to pay for the upkeep as well as divert money to other roads, highways and public transportation across the state.Act 44 was passed by the state legislature without input from the public. Not one hearing. There also were few opportunities for the business community to discuss concerns. Passing Act 44 was the first step that enabled the PTC and PennDOT to apply to the Federal Highway Administration (FHA) to approve tolling I-80. Twice they applied. Twice they were rejected. The PTC submitted additional information to the FHA that will continue the process.Why I-80 Should Not be Tolled1. It’s the Economy, Stupid. In the throes of a recession, which Pennsylvania is historically slow to recover from, it is not the time to put what is essentially another tax on residents. Paying up to $400 for a roundtrip toll for a truck to deliver goods would be unfeasible for some small, and even large businesses. This could cause businesses to relocate out of Pennsylvania, taking jobs and other forms of revenues with them. The cost for passenger vehicles would be as high as $66 for a roundtrip. However, there is no ceiling for the amount of tolls. 2. Long and Lonely Road. If I-80 is tolled, many trucks and passenger vehicles will resort to taking secondary roads. This will lead to congestion, and wear and tear on county and municipal roads that is best carried on interstates. The counties along I-80 would then be required to repair roads and bridges. Forcing traffic onto local roads also could increase the number of traffic related fatalities in the region. If I-80 were tolled, there would not be a no-toll option for direct east-to-west traffic.

Five Good Reasons for Opposing I-80 Tolling

We Want to Hear From You Simply go to the Keep Pennsylvania Producing Web site, www.keepproducing.org, and answer the following poll question:

Do You Believe I-80 Should be Tolled?

Yes

No

No Opinion


IS AN EMPLOYEE PROTECTED FROM UNLAWFUL DISCRIMINATION DUE TO MILITARY AFFILIATION?Yes. The Uniformed Services Employment and Reemployment Rights Act (USERRA) provides protections for initial hiring and adverse employment actions by an employer if the actions are motivated, even in part, by the employee’s military service. This protection also extends to witnesses who assist or testify in a USERRA investigation.

WHAT ARE THE BASIC ELIGIBILITY REQUIREMENTS FOR JOB PROTECTION UNDER USERRA?To be protected, a National Guard or Reserve member must have a

civilian job, must provide timely notification to the employer of military duty and must report back to work for reemployment in a timely manner. Reemployment rights are provided even if the civilian job is described as “temporary,” unless the employment was for a brief period with no reasonable expectation of continuance for a significant period of time.

IS THERE A LIMIT TO THE AMOUNT OF ACTIVE DUTY AN EMPLOYEE CAN PERFORM AND STILL HAVE REEMPLOYMENT RIGHTS?Yes, there is a five-year cumulative total of military service an employer is required to support. Not included in that total are: inactive duty training (drills); annual training;

involuntary recall to or retention on active duty; voluntary or involuntary active duty in support of a war, national emergency or certain operational missions; or additional training requirements determined and certified in writing by the Service Secretary and considered to be necessary for professional development or for completion of skill training or retraining.

DOES AN EMPLOYEE HAVE REINSTATEMENT RIGHTS FOLLOWING VOLUNTARY MILITARY SERVICE?Yes. There is no longer any differentiation between voluntary and involuntary orders under the USERRA, as long as the basic eligibility requirements are met.

Legal Q&A

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Loesel-Schaaf Insurance Agency, Inc. is an authorized broker for the MBA Eastern Alliance program.

Call Doug Loesel or Joe Parlak and find out.

814-833-5433


DEPARTMENTS > Contact: John Onorato

The Internal Revenue Service (IRS) recently announced that, beginning February 2010, it will launch a major employment tax audit initiative. The initiative involves randomly auditing 6,000 U.S. companies over the next three years to determine whether they pay all their required employment taxes to fund Social Security and Medicare benefits. The audit initiative will target a broad cross-section of businesses of varying size and legal form, including tax-exempt employers.

These examinations will provide statistical data for the IRS’s first National Research Program (NRP) study of employment tax compliance since 1984. Although the initiative is not specifically limited to these areas, the IRS has indicated that these audits will focus on three primary employment tax issues: 1) worker

classification, 2) fringe benefits, and 3) executive pay.

The Treasury Department in 2005 estimated, based on the 1984 IRS data, that companies underpay employer taxes by about $14 billion annually.

In particular, federal agencies have raised concerns about employers improperly classifying workers as independent contractors. Employee misclassification not only means that the government is not receiving the proper tax revenue, but also that the misclassified employees are possibly being denied health benefits, overtime pay and unemployment insurance.

While there is nothing that a company can do to avoid being targeted under this audit, there are certain measures that companies

can take in response to the dramatic shift in the way the IRS will be policing employment tax compliance. Companies may want to consider conducting self-audits to ensure compliance in these three areas that the IRS has identified as targets. Doing so may prevent companies from having to open their checkbooks if the IRS does pay a visit.

For more information, contact the Association’s HR & Legal Services Division at 814/833-3200, 800/815-2660 or [email protected].

IRS Tax Audit Initiative to Start in February 2010

Tammy Lamary is Labor & Employment Counsel for the Manufacturer & Business Association’s Legal Services Division.

Offer available to new Northwest personal checking account customers only who open a Switch Checking Account with a $100 minimum opening deposit. Northwest Savings Bank customers with an existing checking account are not eligible for this offer. To qualify, you must initiate a monthly direct deposit of $100 or more. A qualifying direct deposit is defi ned as a direct deposit of a paycheck, pension, Social Security or other regular monthly income electronically deposited into a Switch Rewards, Switch Free, or Switch Interest Checking Account. The direct deposit must be made by an employer or outside agency. Transfers from one account to another or deposits made at a branch or ATM do not qualify as direct deposits. The credit of $100 will be posted to the eligible account within 7 days of the fi rst verifi ed direct deposit. The credit will be identifi ed as “New Checking Account Credit” on your monthly statement. The $100 credit is not considered part of the minimum opening balance. Account is subject to approval. Employees and affi liates of Northwest Savings Bank are not eligible. $100 credit is subject to 1099 reporting. Any applicable taxes are the responsibility of the account holder. Offer may be extended, modifi ed or discontinued at any time and may vary by market. MEMBER FDIC

Get $ 100 when youbecome a personal checking customer.

Open your account online atwww.northwestsavingsbank.com or visit your

local Northwest Savings Bank o! ce.Questions? Call Northwest Direct: 1-877-672-5678.

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EDITORIAL > by Angie Angus

Angie Angus, Manager of BOS Programs and Support Services

4. Why, in the middle of an almost commodity type, highly competitive industry with price wars and low margins, is it that every time Southwest Airlines opens a new route, people who did not travel by air before account for 30 percent to 80 percent of their passengers?

5. In 1984, the circus industry was waning with limited growth and dwindling audiences and revenues. How, in a mere 20 years, despite these market realities, did Cirque du Soleil, earn a level of revenues that took Ringling Bros. and Barnum & Bailey more than 100 years to achieve?

6. Despite your organization’s ability to outcompete with total optimization, do you see industry competition on the rise, new foreign competitors growing, increasing market-share battles, price competition and declining margins? Join us next month. You are not alone.

Blue oceans ahead,

— The BOS Team, USA

For more information about BOS, go to mbausa.blueoceanstrategy.com or contact Angie Angus at [email protected] or 866/293-4194.

In June 2009, the Manufacturer & Business Association (MBA) became the first Blue Ocean Strategy Center in the United States of America. Beginning this month, the Association’s Business Magazine will publish a series of articles that will focus on the center’s incredible, groundbreaking work, which was designed to help companies achieve strategic success.

Based on a study of 150 strategic moves, spanning more than 100 years and 30 industries, Blue Ocean Strategy (BOS) is a proven and practical set of tools, methodologies and frameworks to systematically execute breakthrough growth that creates strong and enduring commercial opportunities.

The MBA Blue Ocean Strategy Center is dedicated to helping you recreate your business so that your organization can create uncontested market space and make the competition irrelevant. Whether you are a business-to-business, government, health-care or business-to-consumer company, BOS can help navigate your company from bloody red oceans of head-to-head competition into vast, deep blue oceans of opportunity.

Prior to next month’s article, here are a series of questions to consider as we work together for a better understanding of Blue Ocean Strategy:

1. How many industries that are in existence today did not exist 100 years ago?

2. How many industries not in existence today will exist 10, 20 or 30 years from now?

3. How, within two years in a crowded worldwide market, did {yellow tail} become the fastest-growing brand in both the Australian and U.S. wine markets and the Number One wine imported into the United States?

Blue Ocean Strategy BriefingsJohn Krahe is a certified member of The BOS Team, USA. The team regularly conducts briefings on the concepts, tools and frameworks of Blue Ocean Strategy. For more information or to register for an upcoming briefing, please visit the Blue Ocean Strategy Web site, mbausa.blueoceanstrategy.com.


Michael EdwardsCEO

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decisions, and local focus thatMarquette has o!ered toindividuals and families formore than 100 years,nowmean business—businesschecking, lines of credit,business loans, remote depositcapture, and more.

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Find out just how goodhometown banking can befor your business.In Erie, call Dave at(814) 455-4481;in Crawford County,call Gene at(814) 337-7929.

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The Regional Career & Technical Center is a leading provider of quality career and technical training programs for adults. We offer a wide variety of courses, affordable tuition and convenient class schedules.

RCTC specializes in customized training that is tailored to meet the needs of your organization. From entry-level to advanced training, let RCTC develop a program for your employees based on a time frame, location and

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EDITORIAL > by J. David Bell

J. David Bell, President Employers’ Energy Alliance of Pennsylvania, Inc.

EnergyUpdate

detailed analysis of your savings; 3) by registering for one of our informational briefings; and 4) by contacting the EEA-PA directly.

To apply for enrollment or to contact the EEA-PA directly, please e-mail Bob Hickox at [email protected] to discuss how the Employers’ Energy Alliance of Pennsylvania, Inc. (EEA-PA) can help you maximize your savings on your utility bill.

For additional questions on the Employers’ Energy Alliance of Pennsylvania, please contact David Bell at [email protected], call 814/833-3200 or fax 814/833-4844.

Employers are strongly encouraged to visit the EEA-PA Web site on www.mbausa.org to learn more about the benefits of joining the Employers’ Energy Alliance of Pennsylvania, Inc.

In central Pennsylvania, rate caps in the PPL Electric Utilities territory are being removed in January 2010 and monthly bills already are expected to increase on average about 18.4 percent for small businesses and about 36.1 percent for mid-size businesses.

Facing these double-digit rate hikes, combined with fluctuating natural gas prices, businesses of every size and type are seeking a trusted low-cost energy supplier.

As these rate caps come off, the Employers’ Energy Alliance of Pennsylvania, Inc. (EEA-PA) is in a position to help all employers significantly save on their utility bills. Serving as a wholesale, low-cost energy supplier, the EEA-PA, a subsidiary of the Manufacturer & Business Association (MBA), purchases directly from the electrical grid and gas pipeline – eliminating broker commissions and marketing costs, and passing that savings on to participating companies.

60-Second Worksheet to Determine Your SavingsCalculate an estimation of the increase in your annual bill for 2010 if you continue to purchase your electricity through PPL and want to see firsthand the significant savings you would experience as a member of the EEA-PA. Simply fill out the Electricity Savings Worksheet on www.mbausa.org, which only takes 60 seconds to complete.

All that is required to use this worksheet is a copy of your most recent PPL bill. You will be asked to identify your rate classification and input 12 months of electricity usage, which can all be found on your most recent energy bill. Your estimated savings will then be automatically generated and displayed. After the savings are calculated, the estimate may be printed.

The result of this worksheet is to be considered an estimate. However, if you want a more detailed Energy Savings Analysis, it can be obtained by e-mailing or faxing 12 months of bills to Adam Bellows at Synergy at [email protected] or 716/842-1705.

Contact EEA-PA TodayFor detailed information about the EEA-PA, simply visit the Web site, www.mbausa.org, to find the four routes that have been established for your convenience: 1) by utilizing a self-directed worksheet of your energy savings; 2) by requesting a

Electricity Purchasing Option for PPL Customers

Energy Information BriefingsAnother way to learn about the benefits of joining the EEA-PA is to attend one of our free energy briefings by registering online at www.mbausa.org and clicking on the EEA-PA button. At these briefings, employers are encouraged to bring a copy of their most recent electricity bill with them to find out what their business could be saving with the EEA-PA on the spot. Energy briefings currently are being scheduled in those areas of Pennsylvania where rate caps have been removed and those areas where they are scheduled to come off soon. Informational sessions already have been held in October and November and upcoming briefings are scheduled for December in Bloomsburg, Lewisburg and Williamsport, as follows:

Bloomsburg Holiday Inn Express 14 Mitchell Drive Monday, Dec. 7, 8:30 a.m., 10:30 a.m., 1 p.m. & 3 p.m. Wednesday, Dec. 16, 8:30 a.m., 10:30 a.m, 1 p.m. & 3 p.m. Lewisburg Hampton Inn 140 International Drive Wednesday, Dec. 9, 8:30 a.m, 10:30 a.m., 1 p.m. & 3 p.m. Friday, Dec. 18, 8:30 a.m., 10:30 a.m., 1 p.m. & 3 p.m. Williamsport Holiday Inn 100 Pine Street Tuesday, Dec. 8, 8:30 a.m., 10:30 a.m., 1 p.m. & 3 p.m. Thursday, Dec. 17, 8:30 a.m., 10:30 a.m., 1 p.m. & 3 p.m.


Natural GasFor Comfort. For the Environment. For Savings.We can warm our homes and businesses, provide hot water, cook our food, dry our clothes, generate clean power, and fuel our industries, all without destroying our air.

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ADP does not give legal advice as part of its Workforce Now offering. Workforce Now is not a substitute for legal advice or your professional judgment. You should review applicable laws in your jurisdiction and consult experienced counsel forlegal advice. ADP and the Business Behind Business are registered trademarks of ADP, Inc. ADP Workforce Now is a trademark of ADP, Inc.

– Ken Polk, District Manager, ADP

www.adp.com

KEN POLK

Is the ADP District Manager for the Erie, Pennsylvania and Jamestown,New York areas. Ken has 15 years of experience with ADP and workedwith all size companies in a variety of industries.

Ken can be reached at 814-460-4570 or [email protected]

ADPUMA09053 Profile Ad 11/12/09 3:00 PM Page 1

MBA WELCOMES NEW ADDITION TO GOVERNMENT AFFAIRS STAFFThe Manufacturer & Business Association (MBA) recently hired Anna McCauslin as the state government relations representative in the Association’s Harrisburg office.

McCauslin is responsible for developing state legislative priorities and strategies; encouraging membership grassroots activities; and lobbying on behalf of a pro-growth, pro-business agenda.

McCauslin previously worked for the Pennsylvania Business Council in Harrisburg, where she tracked legislation and developed relations in the state’s policy network. A graduate of Shippensburg University, she holds both a bachelor’s degree in political science and a master’s degree in public administration.

PULAKOS 926 ANNOUNCES OWNERSHIP CHANGEPulakos 926 Chocolates, the oldest, local chocolatier and candy maker in the Erie area, which was founded in 1903 by George P. Pulakos, has announced a change of ownership as well as the formation of a new strategic management team.

Joseph M. Hilbert is the president and new owner; John M. Zack is the manager of Business Development; and George A. Pulakos is the manager of Manufacturing and

Product Development.

Prior to becoming the new owner of Pulakos 926 Chocolates, Hilbert held the position of vice president of Purchasing with Reddog Industries, Inc. For 17 years, he was responsible for materials management, cost containment and property management.

Zack held the position of principal and part owner with A. Anthony & Sons, Inc., where he was responsible for business development, project management and corporate cash flow management.

George A. Pulakos took over the family business from his father Achilles “Herk” Pulakos in 1986. He has been actively involved in numerous trade organizations including the Pennsylvania Manufacturers Confectioners Association, the Retail Confectioners International, the American Association of Candy Technologists and the Institute of Food Technologists.

BLACK NAMED PSU BEHREND’S 2009 ALUMNI FELLOWErie native and entrepreneur Samuel P. “Pat” Black III, class of 1964, has been named Penn State Behrend’s 2009 Alumni Fellow. The Alumni Fellow award is the most prestigious honor given by the Penn State Alumni Association, and is a permanent and lifelong designation.

Black is chairman of Erie Management Group, which invests in and manages companies whose innovative products capitalize on economic opportunities within the Lake Erie region. Its portfolio includes Kold-Draft Industries, a manufacturer of commercial ice-machine systems that produce a patented long-lasting ice cube, and HERO BX, a BQ9000

accredited producer and marketer of biodiesel fuels.

Additionally, Dr. Jeffrey Pinto, professor of management at the Erie campus, has received the 2009 Research Achievement Award from the Project Management Institute. The award was presented during the PMI Global Congress held in Orlando, Florida, earlier this fall.

The Research Achievement Award recognizes and honors an individual who has significantly advanced the concepts, knowledge, and practices of project management through professionally conducted and authored project-management research.

KIDDER WACHTER ARCHITECTURE EXPANDS PROFESSIONAL STAFF

Kidder Wachter Architecture and Design has announced that Intern Architect, Christian J. Torchio, recently joined the firm.

Kidder Wachter Architecture and Design is a full service architectural firm that designs and manages a broad spectrum of building types and urban planning services within the tri-state area.

Torchio, a native of Erie and Cathedral Prep graduate, received a bachelor’s degree in business administration from Gannon University in 2005, a bachelor of science degree in architecture from Kent State University in 2008, and a master of architecture degree from Kent in 2009.

Torchio is currently participating in the Intern Development Program with the National Council of Architectural Registration Boards.

People Buzz EDITORIAL > Contact: Karen Torres


Member FDIC. Citizens Bank is RBS Citizens, N.A. and Citizens Bank of Pennsylvania. 67530

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December 2009 Business Magazine

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