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lbbusinessjournal.com

February 18-March 3, 2014

Manufacturing Designation Could Benefit Long Beach

PART III IN SERIES

Mayoral Candidates Respond To Questions The Business Journal presents Part III in a series asking the top mayoral candidates to respond to two questions. The series concludes with the March 4 edition.

■ By TIFFANY L. RIDER Editor ong Beach has an opportuL nity to be part of an application for the Los Angeles region to

Question

Damon Dunn

Robert Garcia

Bonnie Lowenthal

Doug Otto

Gerrie Schipske

What is your understanding of the role of the Long Beach City Attorney? What experience (such as trial experience, managing other attorneys, previous work for a law firm), do you believe is necessary for that individual to do a good job?

(Please Continue To Page 12)

(Please Continue To Page 9)

Lawrence Maehara, owner of Berth 55 Fish Market and Seafood Deli, left, and Michael Redlew, general manager, Long Beach Sportfishing, give a thumbs up to the recent news that the Port of Long Beach is not forcing them to move to make way for a new fire station. See story on Page 7. (Photograph by the Business Journal’s Thomas McConville)

FOCUS ON FINANCIAL SERVICES INDUSTRY

‘Dramatic Reconfiguring’ Of Mortgage Lending Rules Impact Consumers, Lenders ■ By TIFFANY L. RIDER Editor ortgage lending got a tight squeeze from the M Consumer Financial Protection

Bureau in the form of seven new industry regulations that took effect January 10. The core rules, which have the most impact on lenders and consumers and are intended to pre-

Question

POLITICALWIRE

Several years ago, the city’s Economic Development Bureau was eliminated. Should the Bureau be reestablished? If so, why and under what format? If not, please explain why.

In A Surprise, Firefighters Union Backs Damon Dunn For Mayor

Turn To Pages 16-17 To Read Their Responses

vent another housing market crisis, may keep potential buyers out of the market. “I’ve been in the mortgage space for most of my adult life,” Pete Mills, senior vice president for residential policy with the Mortgage Bankers Association, told the Business Journal. “I haven’t seen such a dramatic reconfiguring of the mortgage space in my 30 years [in the business].” Of the seven regulations required as part of the DoddFrank Wall Street Reform and Consumer Protection Act of

become a federally designated manufacturing community, which could bring needed funding and technical assistance to the area. The designation competition, which was launched in December by the Obama Administration, would provide up to 12 selected communities preferential treatment for federal funding from a pool of $1.3 trillion and assistance from 10 different federal agencies. The deadline to apply is March 14. Leonard Mitchell, executive director of the USC Center for Economic Development, leads the regional effort to apply for this designation. He noted that for Long Beach to be involved, a partner commitment letter must be submitted by March 7. Mitchell’s team at the USC Center as well as staff from the Los Angeles Economic Development Corporation (LAEDC) are coordinating with cities, small business development centers, regional workforce investment boards, community colleges, the California State University system, research universities and

An Analysis Of The Mayoral Race Seven Weeks Out ■ By GEORGE ECONOMIDES Publisher Perspective may be the biggest – and Iing tsome say the most surpris– endorsement of the 2014

According to Rex Pritchard, president of the union, the board vote was unanimous. The significance of the endorsement is that it provides legitimacy to a candidate who many thought of as an “outsider” and who “hadn’t paid his dues” (Please Continue To Page 18)

1985-’94: ‘Family Feud’ And ‘The Streak’

Long Beach election season: The Long Beach Firefighters Local 372, one of the city’s most influential unions, is backing Damon Dunn for mayor of Long Beach.

Long Beach Business Journal 2599 E. 28th Street, Suite 212 Signal Hill, CA 90755-2139 562/988-1222 • www.lbbusinessjournal.com

PART IV IN A SIX-PART SERIES

(Publisher’s note: To mark April’s 40th Toyota Grand Prix of Long Beach, the Business Journal has teamed up with the Grand Prix Association of Long Beach to present a series of articles highlighting America’s #1 street race.)

PRSRT STD U.S. POSTAGE

PAID Long Beach, CA PERMIT NO. 254

■ By GORDON MORRIS, Staff Writer, Grand Prix Association of Long Beach What’s Up With The Vault 350? See Real Estate Quarterly Section B

ith the race on a solid W foundation under its new sanctioning body, Championship

Auto

Racing

Teams (CART), the Toyota Grand Prix of Long Beach’s next decade turned out to be racing’s version of the Hatfields and the McCoys. Specifically, the Andrettis and the Unsers. One patriarch, Mario Andretti, was a genuine Long Beach folk hero, an ex- Formula One champion and winner of the 1969 Indianapolis 500 who would go on to win four Champ Car titles. The other, Al Unser Sr., was a (Please Continue To Page 21)

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INSIDE THIS ISSUE 2 Long Beach Business Journal

February 18-March 3, 2014

3 Newswatch • Collective Bargaining Transparency Effort Fails • City Council Takes Up E-Cigarette Regulations • Civic Center Retrofit Still An Option • Port Of Long Beach Discusses Debt Payment Plans • City Hall News In Brief • Port Allows Berth 55 And Other Businesses To Remain • ACA: Delay For Mid-Size Businesses • Manufacturing Innovation: Goal Is To Change The Rules

11 Financial Services Industry • Shared Responsibility In Fraud Protection • Changes In Mortgage Lending Rules, continued from Page 1 • Bitcoin Becoming A Popular Currency Alternative • U.S. Debt Limit Analysis: Peering Through The Ceiling

16 PoliticalWire • Long Beach Mayoral Candidates Answer Questions • PoliticalWire News/Events And Upcoming Forums

20 Encore – People In The News 21 Grand Prix Highlights • Fourth In A Series, continued from Page 1

22 Perspective Realty Views Growth In Multifamily Demand Is Predicted By Terry Ross Effective Leadership Resilience: The Art Of Overcoming And Restarting By Mick Ukleja HealthWise Having Joint Replacement Surgery? Here Is What To Ask Your Surgeon By Douglas Garland, M.D. Third Sector Report The Importance Of Developing An Obsession For Nonprofit Succession By Jeffrey Wilcox Trade And Transportation Inland Connections By Tom O’Brien

Section B Real Estate Quarterly • Update On Residential, Office, Industrial, Retail, Markets • Team Effort To Open The Vault Long Beach On Pine • State Energy Reporting Mandates Complicate Transactions • Leases And Transactions

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NEWSWATCH February 18-March 3, 2014

Collective Bargaining Transparency Effort Halted By City Councilmembers ■ By TIFFANY L. RIDER Editor A presentation on how Costa Mesa’s collective bargaining transparency regulation could be mirrored in Long Beach was tabled after councilmembers opposed exploring the option further. The issue, which had been raised on multiple occasions by 5th District Councilmember Gerrie Schipske at the city’s personnel and civil service committee level, was brought to the Long Beach City Council on February 4 with support from 3rd District Councilmember Gary DeLong. The idea was to explore how to restructure collective bargaining to include an independent negotiating party – as Costa Mesa has done – and increase transparency in the process, a move that may or may not result in a cost savings for Long Beach. Several councilmembers, including Vice Mayor and 1st District Councilmember Robert Garcia and 8th District Councilmember Al Austin, disagreed with the comparison of Long Beach to Costa Mesa and with the development of an ordinance based on Costa Mesa’s “civic openness in negotiations” ordinance. The item was received and filed, with no further action taken. “There wasn’t real clear direction on what they wanted to do,” according to City Attorney Charles Parkin. He said changing the city’s collective bargaining policies would require certain procedures. “We could get the council there,” he said, “if that becomes the council’s desire.” ■

City Council Takes Up E-Cigarette Regulations ■ By TIFFANY L. RIDER Editor After a 5-1 vote on February 11 to move forward on regulating e-cigarettes, the Long Beach City Council hears a final reading on the subject tonight (February 18). Councilmembers Gary DeLong, Patrick O’Donnell and Gerrie Schipske left the council meeting prior to the vote. The regulations, as proposed by city staff, involve amending an existing ordinance regulating tobacco products to include e-cigarette devices, meaning e-cigarettes could not be used in public places like in parks, near schools, on restaurant patios or inside retail establishments. Moreover, businesses that sell e-cigarettes would be required pay a yearly operational permit and limit advertising in the same way tobacco product advertising is restricted. Alan Schroeder, partner and owner of

Long Beach Business Journal 3 Vapin USA in Downtown Long Beach, told the Business Journal that regulating e-cigarettes like tobacco products “demonizes vaping . . . Vaping shouldn’t be lumped into that category.” Vice Mayor and 1st District Councilmember Garcia, who was the sole dissenting vote on the item presented February 11, said during the meeting that while he understands the regulations would not ban e-cigarettes, the discussion on the dangers of e-cigarette use might be unfounded until science proves otherwise. “The only part that is difficult for me is that I have friends and family members, particularly one who has been smoking for 35 years, and has destroyed his lungs,” Garcia shared during the meeting. “He’s never been able to quit, has tried everything in the book and now that he’s tried the e-cigarette he’s actually been able to quit. I certainly don’t know all the science behind what’s in that cigarette, but I couldn’t imagine it being worse than what he was putting in his lungs before.” Back in December, the city council approved directing the city attorney’s office to draft an ordinance regulating ecigarette use. At the same time, council directed the city attorney to prepare options for the regulation of e-cigarette business locations using the city’s zoning laws. According to City Attorney Charles Parkin, city staff is still working on those options. ■

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NEWSWATCH 4 Long Beach Business Journal

February 18-March 3, 2014

Student-Volunteers Offer Free Income Tax Return Assistance The Accountancy Department is home to 750 students, approximately 25 percent of all CBA majors. They study a variety of topics, such as Cost Accounting, International Accounting, Auditing, and Accounting Systems, and are sought after by national and regional accounting firms for internship opportunities as well as employment upon graduation. Through a longstanding initiative, they have the opportunity to contribute and give back to the local community by providing accounting-related services. By Jennifer Mae For over 20 years, CBA Formeloza Accountancy Accountancy majors offer Major Class of free e-filing for federal and 2015, CSULB state income tax returns to students and members of the community through the Volunteer Income Tax Assistance (VITA) program. The program is coordinated by Dr. Sudha Krishnan, Accountancy professor, and is a cooperative effort with the Internal Revenue Service (IRS) to provide free income tax assistance to low- and moderate-income individuals (less than $51,000 in 2013), the handicapped, the elderly and students. This year’s program has 60 student-volunteers who have been trained and certified by the IRS to prepare and e-file basic income tax and foreign student tax returns. “The program is a valuable civic undertaking that also sharpens the students interpersonal skills and allows them to apply classroom concepts in a real-world situation,” Professor Krishnan says. Those interested in having their 2013 tax returns prepared through the CSULB VITA program should bring proof of identification; Social Security cards, including spouse’s and dependents’ (or a Social Security number verification letter issued by the Social Security Administration); birth dates, including spouse’s and dependents’; current year’s tax package; wage and earnings statements (W-2, W-2G, 1099-R, from all employers); and interest and dividend statements from banks (1099 forms). When filing taxes electronically on a married filing jointly status, both spouses must be present to sign the required forms. The VITA program operates out of Room 237 in the CBA Building, from 8 a.m. to 5 p.m. Mondays through Thursdays, and 9 a.m. to 3 p.m. on Fridays, and runs through Friday, March 28. Appointments can be made via email at vita.csulb@gmail.com. Walk-ins are welcome. (The College of Business Administration at Cal State Long Beach is an AACSB accredited business school that provides undergraduates and MBAs with the knowledge and skills necessary to be successful in their careers and to propel the economic development of our region.) ■

The Long Beach City Hall in the center of the Long Beach Civic Center has been deemed seismically unsafe and would likely collapse in an earthquake similar in magnitude to the Northridge Quake of 1994, according to a memorandum from city management staff. A request for proposals to build a new civic center funded through a public-private partnership is scheduled for release February 28. (Photograph by the Business Journal’s Thomas McConville)

Civic Center Retrofit Still An Option City Council Requested Information Alternative To A Total Rebuild ■ By SAMANTHA MEHLINGER Staff Writer Concerns over city staff’s safety, fiscal prudency and entering the uncharted territory of a municipal public-private partnership for a new civic center in Long Beach led to a request from city council last week for further details on the option of retrofitting the seismically unsound city hall building. The Long Beach City Council voted unanimously on February 11 to direct the city manager to report back with more

information clarifying the option to retrofit city hall, how much it would cost and how it could be financed. The vote was a substitute motion to an item proposed by 5th District Councilmember Gerrie Schipske which would have suspended the contract with consulting firm Arup North American Limited to develop a request for proposals (RFP) for a new civic center until the new city council and mayor take office in July. Schipske criticized the city for not issuing a request for qualifications (RFQ) for retrofitting the building. However, according to city staff reports, a seismic study of the civic center found that even if retrofitted, the building would become uninhabitable in the event of an earthquake equivalent to the 1994 Northridge Earthquake, which measured about 6.7 on the Richter scale. The seismic study commissioned by the city council in 2006 and updated in 2013 suggested a significant magnitude earthquake with the building in its current state would likely cause “collapse of the entire structure, resulting in significant loss of life.”

When asked by Schipske why city hall is currently occupied considering the danger inherent in the event of an earthquake, Assistant City Manager Suzanne Frick responded, “We are taking a risk, but it is a calculated risk. We don’t believe it is such a risk that it necessitates the immediate evacuation of this building.” Due to similar dangers, the Port of Long Beach Headquarters is currently being relocated to a temporary building on Airport Plaza Drive until a new structure is built. A memo from the city manager’s office released last week pointed out that the city would lose all the money spent on a retrofit in the event of a large earthquake – a cost estimated at about $200 million. According to Frick, the city does not have these funds to spend on a retrofitting project. At the February 11 city council meeting, she commented, “The retrofitting option requires us to go to voters for a bond measure because there is no funding for a retrofit.” Thus, city staff looked for a way to fund the building of a new civic center at

Improvements To Pine Avenue Downtown Downtown Long Beach Associates President and CEO Kraig Kojian, left, 2nd District Councilmember Suja Lowenthal and Vice Mayor and 1st District Councilmember Robert Garcia celebrate the start of a major rehabilitation project on Pine Avenue in the downtown area. Improvements to Pine Avenue between Seaside Way and Anaheim Street will consist of street resurfacing, replacing damaged sidewalks and curbs, installing a traffic signal and “scramble” pedestrian crossings, and planting new trees and shrubs. The project should take about a year, according to a statement from the city. (Photograph by the Business Journal’s Thomas McConville)

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NEWSWATCH February 18-March 3, 2014

no additional cost to the city, meaning that the city would not pay more than what it currently does to maintain city hall. Staff determined that a private-public partnership, in which there would be no tax burden to Long Beach residents, could be cost-effective, according to a memo from City Manager Patrick West. The RFP, which is to be released on February 28 to three teams selected among the proposed project’s RFQ respondents, is for the design, construction, financing, operations and maintenance of a new civic center funded by an annual payment of $12.6 million, which is currently how much the city pays to maintain city hall. The idea is to have the city lease the civic center at $12.6 million annually from the builder for a period of 40 years, according to West’s memo. The memo acknowledges, however, that city staff does not currently know if this is actually feasible. At the February 11 meeting, Schipske pointed out that if the private-public partnership is not feasible, the city would bear the burden of paying the $500,000 stipend for each RFP respondent approved by the council last year. Eighth District Councilmember Al Austin asked city staff at the council meeting if a public-private partnership had been considered to fund a retrofit of the civic center. “I just don’t think we’ve looked at all of the options and variables,” he stated. This led the council to make a substitute motion to have staff report back with more details on the cost to retrofit the civic center and to also report on financing options, including a public-private partnership. ■

Long Beach Business Journal 5

Port Of Long Beach Plans To Pay Off Its Debt By 2051 ■ By SAMANTHA MEHLINGER Staff Writer With about $602 million in current outstanding debt and another $1.6 billion to be borrowed for capital improvement projects in the next 10 years, the Port of Long Beach’s finance team projects it will be able to pay off this debt by 2051. Every year, twice a year, the port makes payments to reduce its debt, Sam Joumblat, chief financial officer for the port told the Business Journal. “This works just like your mortgage,” he said. “Every month that you pay your mortgage payment you are paying interest and principal. So in our case, we make two payments a year. One payment is interest only, and the other payment is principal and interest,” he explained. By doing this, the port reduces its debt every year. The payments the port makes to reduce its debt come from port revenues, which are sourced from the port’s operating income, according to Joumblat. Because the port is not a taxing authority, the bulk of this income comes from port operations, although some grant money also contributes. “By port operations, what we are referring to is the revenue received by leasing out our terminals under long-term leases to private companies,” Steven Rubin, managing director of finance and administration, explained in a conference call with Joumblat. These

leases provide a base for revenues that the port may expect every year, Joumblat said. Additionally, Rubin said, the more cargo volume coming through the port, the more revenue the port makes. While cargo volume may fluctuate, the port makes annual projections for how much cargo volume it may expect every year based on recent activity. The port’s finance department also annually produces a 10-year cash flow forecast to ensure that the port has enough revenue to comply with its debt management policy, Rubin said. This policy requires that the port always maintain enough cash on hand

to operate for 600 days and that it maintain a debt service coverage ratio of two-to-one, Joumblat explained. “In essence, if you divide our operating revenue minus our operating expenses by the debt services, it cannot fall below two,” Joumblat said. When the port makes its debt payments, it wires the money to the trustee who in turn wires the money to all of the port’s bond holders, Joumblat explained. “Those are the investors that invested in our bonds and expect to be paid twice a year,” he said. The port’s credit rating on these bonds is (Please Continue To Page 6)

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NEWSWATCH 6 Long Beach Business Journal

February 18-March 3, 2014 other port authorities having the ability to do what we’re doing here.� He added that the plan to pay off the debt helps the port remain competitive. “I, too, worry to some degree as we’re spending all of this money at this time to remain competitive. It is still frightening a bit,� Long Beach Harbor Commission President Doug Drummond commented at the meeting, but added that the report from Rubin, Joumblat and the financial team was “excellent.� ■

Long Beach City Hall News In Brief ■ By SAMANTHA MEHLINGER Staff Writer Port of Long Beach CFO Sam Joumblat, left, and the port’s managing director of finance and administration, Steven Rubin, look over documents related to the port’s debt profile. On February 10, Joumblat gave the Long Beach Board of Harbor Commissioners a rundown of the port’s debt and how it will be paid off by 2051. (Photograph by the Business Journal’s Thomas McConville)

Port Debt (Continued From Page 5)

AA from Fitch Ratings, Aa2 from Moody’s Investor Service and AA from Standard & Poor’s. The Port of Los Angeles holds the same ratings. Joumblat said these are “the strongest seaport ratings in the United States.� While all these agencies list the port’s revenue stream stability and increasing cargo traffic as strengths, in comparison to other U.S. ports, concerns cited in the

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port’s debt profile include past labor and traffic congestion issues, competition from other ports due to the Panama Canal expansion and potential weakened trade from Asia due to “sustained economic downturns in that region.� Rich Dines, vice president of the Long Beach Board of Harbor Commissioners, remarked during a debt presentation at the harbor commission last week that the port’s debt keeps him up at night. Still, he told Joumblat, “I really feel that you put us in a great position, and I don’t see

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Online City Expenditures – Tonight (February 18) the Long Beach City Council votes on an item from 5th District Councilmember Gerrie Schipske requesting that the city manager provide information on the cost and feasibility of using a website called OpenGov to post the city’s expenditures online. The platform allows public access to revenue and expenditure data by fund, department or type of account. So far, 62 cities in the U.S. use the online platform, according to Schipske’s memo. Gas Rate Increases – The council votes tonight on allowing gas utility rate increases of about 86 cents per month to fund costs associated with federal regulation compliance. These regulations mostly involve replacing aging gas delivery infrastructure and ensuring the safety of that infrastructure. $900,000 In Grants For Trail Projects – The city council votes tonight to accept $900,000 from the Los Angeles County Regional Park and Open Space District for three park trail projects and to execute any documents necessary to administer these projects. The grants fund the Drake/Chavez Greenbelt trail, Pacific Electric Right-ofWay trail and the Wrigley Greenbelt trail. $5 Million For Concrete Repairs – The city council approved a $5 million increase to a contract with CJ Concrete Construction, Inc. on February 11, bringing the total contract amount to $13 million. The company provides concrete repairs and related improvements for the city. Medical Bill And Ballot Opposition – On February 4, the council voted 5-3 to oppose bills and measures that would

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weaken the Medical Injury Compensation Reform Act of 1975. The act is meant to ensure that injured patients are fairly compensated, that medical liability rates are kept in check and that frivolous lawsuits are limited, according to a resolution drafted by the city attorney. Schipske, 7th District Councilmember James Johnson and 8th District Councilmember Al Austin dissented. Ninth District Councilmember Steven Neal was absent. Medical Marijuana Ballot Label Approved – As part of its consent calendar, the city council approved a ballot label for Measure A, a marijuana tax initiative, to be included on the April 8 primary nominating election ballot. The label asks if the city should impose a general tax on marijuana businesses set at $15 to $50 per square foot annually. $10 Million In Project Management Contracts – With four councilmembers absent, remaining city councilmembers approved $10 million in contracts for project management services related to city capital improvement projects on February 4. The contracts are with five firms and each lasts two years. Contract To Replace City Systems – A $457,620 contract with Plante & Moran, PLLC for professional consulting services related to replacing systems for the city’s finance and human resources departments was approved by the city council on February 4. The city council approved a plan to replace these departments’ management systems as part of the 2014 fiscal year budget. More Than $1 Million For Computers – On February 4, the city council approved a $1,157,552 contract with Paradigm System Solutions for the purchase of Toughpad mobile computers. The computers are for use in fire, harbor and police department vehicles. The contract is funded by the Urban Area Security Initiative Grant. Redondo Avenue Improvements – A project to improve Redondo Avenue begins this week, according to a press release from the City of Long Beach. Work includes replacing damaged curbs, gutters, driveways, alley entrances and sidewalks, shaving tree roots, reconstructing deteriorated pavement, resurfacing pavement, and installing pavement markings, striping and signage. “We continue to move forward with infrastructure improvements, and this important project will improve another major thoroughfare in our city,� Mayor Bob Foster said in the statement. ■

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NEWSWATCH February 18-March 3, 2014

Long Beach Business Journal 7

Port Gives Berth 55 And Other Businesses The Okay To Stay ■ By SAMANTHA MEHLINGER Staff Writer After a nearly two-year battle to keep their businesses from being razed and turned into a new fire station for port security purposes, the operators of Berth 55 Fish Market and Seafood Deli and Long Beach Sport Fishing are relieved that, at least for now, they have prevailed. In 2012, the City of Long Beach Harbor Department decided to use Berth C55, the location of several small businesses, to relocate Fire Station 20, which had to be torn down to make way for the Gerald Desmond Bridge replacement project. The Long Beach Business Journal reported the news first in May of 2012, an article that Lawrence Maehara, owner of Berth 55 Fish Market and Seafood Deli, said made a huge impact. In a follow-up article in June 2012, port spokesperson Art Wong told the Business Journal, “If there were other places we could move, we could be looking at them . . . But there aren’t.” A press release dated February 5 of this year, however, said that a harbor department study “has found suitable alternative locations for development of new fire and security facilities in the port.” Michael Redlew, general manager of Long Beach Sportfishing, told the Business Journal, “It sounds to me like there weren’t enough locations offered to the harbor commission to debate.” Maehara said he has known since Christmas that the harbor department was not going to shut down his business, but the port only officially announced the decision two weeks ago. “It felt like a Christmas present to me,” he said of receiving the news. Redlew has also known for a while, but wasn’t ready to react to the news until it was official. “I was relieved initially,” he said of his response to the port’s official announcement. “My second reaction was, okay, where do we go from here,” he said, explaining, “There is still a lot of work to do to get a long term lease on that property, because it doesn’t really help us just to say its not going to be torn down. We need to establish that it is going to have a future so there can be some investment.” The businesses have met with the port’s real estate department to discuss the possi-

bility of a 15- to 20-year lease, Redlew said, “And they did not say no to that, although nobody is making any promises.” Maehara said that his father, who previously operated the business before passing away five years ago, continually worked to get lease extensions. “Frustrating” is the word Redlew used to describe his experience trying to get the harbor department to consider other locations for the fire station. “I think in reality they thought when they terminated the lease we would go away quietly. But we didn’t,” he mused. Ultimately, he believed “public pressure” caused the port to reassess its position. Wong confirmed that community support played a role. “After the public support for Berth 55, we went back and reexamined possible sites . . . and we found feasible options,” he told the Business Journal. Port staff has always been receptive to his inquiries, Maehara said, noting that the harbor commission and Mayor Bob Foster were always supportive of the businesses. Now that the businesses are allowed to stay – although for how long is still in the air – Maehara is considering investing in the property. After he fixes the place up with paint and patio work, he intends to reach out to the public to see what changes the local community would like to see made at the location. Port staff should select a new location for the fire station by this spring or summer, Wong estimated. When the final decision is presented to the harbor commission for approval depends upon whether or not an environmental impact report is required, which Wong called a “many months-long process.” ■

Crimson Pipeline Begins School Outreach Program Long Beach-based Crimson Pipeline is launching a program with area schools to raise awareness about pipeline safety. The program targets elementary and middle schools students. A company spokesperson said in a statement that “pipelines can be located anywhere . . . it is vital that students, parents and all members of the community know the steps that need to be taken before beginning any digging project.” ■

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NEWSWATCH 8 Long Beach Business Journal

February 18-March 3, 2014

Final Employer Responsibility Rules Under The Affordable Care Act Includes Delay Of Mid-Size Business Mandate Companies With 50-99 Employees Have Until 2016 To Comply ■ By TIFFANY L. RIDER Editor The federal government has given employers more leeway to prepare for the transition to the new health care insurance regulatory environment dictated by the Affordable Care Act (ACA) by delaying the compliance requirements of mid-sized businesses until 2016.

In a joint announcement February 10, the U.S. Treasury and Internal Revenue Service issued final regulations that implement the employer mandates of the Affordable Care Act (ACA) in 2015. The two federal entities announced mid-sized businesses – those with between 50 and 99 employees – must report on health care insurance coverage for employees in 2015, but are not required to pay the federally mandated fine for not providing insurance until 2016. Large employers – those with 100 or more full-time workers – would be phased in under the new requirements. These

employers would need to provide coverage to 70 percent of their workers in 2015 and 95 percent of their workers in 2016. Small businesses – those with fewer than 50 full-time workers, making up about 96 percent of the nation’s employers – are not required to provide coverage. “While about 96 percent of employers are not subject to the employer responsibility provision, for those employers that are, we will continue to make the compliance process simpler and easier to navigate,” U.S. Assistant Secretary for Tax Policy Mark J. Mazur said in a statement.

Neil Trautwein, vice president and employee benefits policy counsel for the National Retail Federation, compared the announcement to an Olympic feat. “The Administration should receive a gold medal for recognizing the enormous complexities of the Affordable Care Act, and its agility and flexibility in working with retailers and others in crafting these much-needed and commonsense reforms and revisions,” he said in a statement. “Continued simplicity, streamlining and clarification of the Affordable Care Act, are in the best interests of employers and employees and the Administration and Congress.” According to the U.S. Bureau of Labor Statistics’ Quarterly Census of Employment and Wages, there were a total of 1,273,556 private sector businesses nationwide with 50 to 99 employees as of the first quarter of 2013. Of those, 26,127 businesses are located in California. “While this is a necessary step, it’s the next step that is the most important,” Rob Lapsley, president of the California Business Roundtable, told the Business Journal in an e-mail. “All of the major problems must be fixed by the Administration in order to help remove some of the regulatory and cost uncertainty that is hurting investment and job creation decisions by businesses of all sizes.” Many of those businesses are represented in the retail sector, which includes restaurants. Jot Condie, president and CEO of the California Restaurant Association, said in an e-mail that he appreciates the response from the federal government to the concerns about the employer requirements of the ACA. “It’s been difficult for thousands of restaurants to determine what their costs are actually going to look like and how those increases will affect their ability to keep their doors open,” Condie said. “Though there are still some questions and concerns to be determined, the extra time and tweaks to the requirements’ details will assist restaurant operators on the road to compliance.” ■

Court Dismisses Lawsuit Over Santa Monica Airport In a landmark decision February 13, a U.S. District Court judge sided with the Federal Aviation Administration in a motion to dismiss a federal lawsuit brought by the City of Santa Monica over the future of Santa Monica Municipal Airport, according to a statement released by the Aircraft Owners and Pilots Administration, which, along with the National Business Aviation Association (AOPA), filed a friend of the court brief in support of the FAA’s motion. Santa Monica officials were seeking permission to use the airport property as they wished. The lawsuit challenged the FAA’s claim that the city was obligated to operate the property as an airport or, if they do not, then the right of possession to the property could – at the option of the U.S. government – revert to the U.S. AOPA expects the city to make another effort. ■

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NEWSWATCH February 18-March 3, 2014

Manufacturing Designation (Continued From Page 1)

other academic institutions to craft an application that would designate the region as what many consider it to be already – a hub for aerospace and defense manufacturing. “If you look historically, many industries have been seeded by aerospace and defense research,” Mitchell told the Business Journal. JoAnne Golden-Stewart, director of public policy for the LAEDC, told the Business Journal that this designation is critical. “The Los Angeles region is the manufacturing capital of America,” she said. “We are working with Long Beach to make sure the city is being competitive as part of this proposal.” The application requires proof that the region is adequately equipped to hold the designation – quantified in time and money spent – and has strategies for investing in the following areas: workforce and training, infrastructure and site development, trade and international investment, operational improvement and capital access, advanced research and supply chain support. “Long Beach has quite a bit to offer in each of those categories,” Golden-Stewart said. “It’s a very critical player.” Mitchell agreed. The Long Beach College Promise program, which provides a path for high school students to get into college, would be a valuable addition to the application, according to Mitchell. “The region has invested a lot in STEM

Long Beach Business Journal 9 (science, technology, engineering and mathematics) education,” he explained. “We’re trying to build the next steps for those kids to show them the future of manufacturing. We have strengths we will not lose because we have invested so heavily in our education infrastructure. What we are doing now is to prepare for the future.” As the university redevelops curricula for manufacturing, students can start looking at manufacturing as being creative as developing a computer game, Mitchell said. “For those people who want to make something, there are so many opportunities,” he said. Fifth District Councilmember Gerrie Schipske, who serves as a member of the Los Angeles Jobs Council, learned about the opportunity and placed an item on the February 18 city council agenda to encourage the city’s participation. “We have one of the highest unemployment rates in the county, so anything that brings jobs will be a benefit to the city,” Schipske told the Business Journal. “We’ve got to get involved in this process so the city can explore what actual benefits there would be.” The goal is to ensure that investments are industry driven, according to Mitchell. “What we’re trying to do is to support this industry and its supply chain in moving into its future through advanced manufacturing technologies,” he said. LAEDC has been conducting conversations with businesses in aerospace and defense manufacturing, and further discussion will occur as the application is developed. ■

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NEWSWATCH 10 Long Beach Business Journal

February 18-March 3, 2014 the investment in Technology Readiness Level (TRL) 4-7 research,” Molnar says. (TRL is a measure of the development of a new idea or technology; levels 4-7 span the process from laboratory validation to operational prototype demonstration). “This is even more difficult for small and medium sized companies – not to mention start-ups – to have the access to the best minds and equipment to develop new innovative ideas. These institutes create that space, to “de-risk” new technologies and get them into production here in the U.S.” It is not a plan without its critics. Some argue that by funding such institutes, the federal government will engage in determining “winning” and “losing” technologies, a function that is best performed by competitive market forces. But others argue that the success of other nations in creating and operating such riskalleviating public-private institutes has proven so successful that the U.S. cannot afford to ignore manufacturing innovation investment. It is not just the next generation of products, but the infrastructure of manufacturing those products, its tendency to perpetuate itself, and the economic benefits that are generated by that ecosystem, now and in the future, that are so incredibly significant, Molnar says. “In addition to not benefiting from the economic and jobs impact that manufacturing delivers, the next generation of technology advances frequently are linked to where manufacturing occurs,” Molnar says. “The mission is to create new hubs here in the U.S. and to greatly reinforce the existing hubs.” ■

Institutes For Manufacturing Innovation: ‘The Goal Is To Change The Rules . . .’ ■ By MICHAEL GOUGIS Contributing Writer The threat to any region’s economic health posed by a loss of manufacturing isn’t short-term. The real damage is longterm, and insidiously difficult to undo. Simply put, once something is manufactured on a large scale in one geographic location, it is immensely difficult for other regions to compete with that concentration of knowledge, facilities and networks. That means most of the people who have knowledge in manufacturing and innovating on that topic tend to converge in the area where most of the activity is taking place. And that means new developments, the technological and manufacturing breakthroughs, tend to come from that region and reinforce its position of prominence in that sector. For example, you may have heard of a place called Silicon Valley; by one estimate, those few square miles account for one-third of all venture capital investments in the United States. Innovation draws investment; the investment nurtures development and manufacturing; the cycle perpetuates the region’s dominance in the industry. To create, preserve and grow a healthy manufacturing sector, you have to cultivate an ecosystem conducive to manufacturing. To that end, federal officials are pushing forward with a National Network for Manufacturing Innovation program. Anchored by a national network of Institutes for Manufacturing Innovation, the program is designed to make sure that the nation remains competitive in not only developing new ideas, but retains and expands its ability to manufacture the products based on those technological refinements and breakthroughs. “Manufacturing is strategic,” says Michael Molnar, director of the Advanced Manufacturing National Program Office and the National Institute of Standards and Technology’s Advanced Manufacturing Program Office, part of the U.S. Department of Commerce. “The goal is to change the rules.” Molnar, who is the 2014 president of SME (formerly the Society of Manufacturing Engineers), is scheduled to be the featured speaker on the final day of the upcoming AeroDef Manufacturing Summit & Exposition, scheduled for February 25-27 at the Long Beach Convention & Entertainment Center. Molnar’s task, as head of the Advanced Manufacturing National Program Office, is to help establish the network of Institutes for Manufacturing Innovation. The first institute was created in 2012 by a consortium of companies, universities, colleges and nonprofit institutions that formed the National Additive Manufacturing Innovation

The National Additive Manufacturing Innovation Institute is the first such institute supported by the U.S. government. It has since been renamed America Makes. (Image courtesy of SME)

Institute. It was funded by President Obama reprogramming $30 million in money earmarked for four federal agencies, as well as $40 million from the consortium, the national program office says. Several other institutes are scheduled to be created via executive action, Molnar says, with Congress studying proposals to fund a network of up to 45 such institutes over the next 10 years. The function of the institutes differs from investments in basic research. It’s not enough simply to come up with a new idea. The challenge is in bringing it to competitiveness. Some innovation and manufacturing analysts use phrases like the “mountain of death” to describe the market forces that generate innovation-suffocating environments. One solution that has worked in other nations has been the formation of innovation institutes. The model system is centered in Germany and is known as the Fraunhofer Society. Funded by contract work and federal and local government funding, the public-private society operates 67 institutes – including seven in the U.S. – that focus on basic and applied research and contract work. Several other countries have established public-private institutes to help individual companies spread the work and the risk of innovation, thus helping ensure such changes make it into the economic chain. “Underpinning this wealth-creating transformation to commercialization are new production processes that often are

needed by entire industries, but usually are too risky for an individual company to develop alone. Other countries have focused on this “scale-up” opportunity, so while the U.S. remains the world leader in invention, the products are increasingly being manufactured elsewhere,” the national program office says. “Currently, Germany, Korea and Japan each have more R&D-intensive manufacturing sectors than the United States, have positive balances in trade of goods, and have made substantial investments in manufacturing, similar to the funding proposed for the NNMI.” The idea behind the institutes in the U.S. is to “de-risk” new technology, Molnar says. “Scaling-up” new technologies to the level where they provide the maximum return on investment can take longer than the threshold of returns for individual companies, or can exceed an individual company’s risk threshold. “The goal of manufacturing innovation institutes is to strengthen the innovation performance, competitiveness, and job-creating power of U.S. manufacturing, by addressing the “scale-up” issues of accelerating new materials and new technologies into U.S. production,” Molnar says. “NNMI is about expanding existing manufacturing hubs and creating new hubs around these future technologies. “The complexity, high risk and oftentimes long time horizons means individual companies cannot undertake by themselves

News Briefs • The Boeing Company delivered Kuwait’s first C-17 Globemaster III airlifter on February 13. It marked the 260th C-17 delivery, of which 223 have been to the U.S. Air Force. • The Boeing Company announced on February 9, during the Singapore Airshow, that it forecasts a $1.9 trillion, 20-year market for new airplanes in Asia Pacific. That region represents 36 percent of the world’s new airplane deliveries. • TechAmerica Foundation based in Washington, D.C., reported that technology merchandise exports from California to the world totaled $45 billion in 2012. However, the state fell from the top spot, giving way to Texas. Leading U.S. tech export destinations in 2012 were Mexico ($37.8 billion), Canada ($28 billion), China ($13.9 billion), Japan ($9.2 billion) and Hong Kong ($9.2 billion). • The Port of Los Angeles experienced a 2.5 percent increase in cargo volumes during January 2014 as compared to a year earlier. • The U.S. Census Bureau reported January 30 that Chinese small business owners make up the highest percentage of Asian small business owners in the U.S. The bureau completes a “Survey of Business Owners” every five years. • The National Retail Federation released its 2014 economic forecast on February 6, projecting retail industry sales (which exclude automobiles, gas stations and restaurants) will increase 4.1 percent. It expects online sales in 2014 to grow between 9 and 12 percent. ■

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FINANCIAL SERVICES INDUSTRY February 18-March 3, 2014

Long Beach Business Journal 11

ANALYSIS

Consumers, Financial Services Providers, Retailers Share Responsibility In Fraud Protection Community Bankers of America (ICBA), told the Business Journal that, “no matter where the breach happens, community Recent data breaches at big-box retailers banks are the stewards of their customers’ Target, Neiman Marcus and Michaels have information. The back and forth you’re caused thousands of consumers to franti- hearing about is where Target and these cally figure out how to best secure their other retailers have held onto private, perpersonal and financial data. The effort, sonal information.” In an effort to prevent fraud, banks like however, is only one link in the payment system chain that must support anti-theft Wells Fargo use high tech systems to continually monitor accounts for suspicious protections. According to the American Bankers activity. “If we believe the security of a Association (ABA), that system remains debit or credit card is at risk, Wells Fargo strong in its support of the $3 trillion that is will take action to safeguard our cusspent each year by credit and debit card tomers’ accounts,” Alvarado said. He users. While banks take responsibility for could not provide further explanation in replenishing consumer accounts in the just how that data is secured because event of a retail breach, the ABA has “sharing any information about our fraud asserted that all participants in the payment prevention measures would jeopardize system chain are responsible for keeping their effectiveness.” Banks receive pennies on the dollar for data secure. fraud losses and incur other costs in providing fraud protection for their customers, according to Reuter, who noted in his testimony that banks accounted for less than 8 percent of reported breaches since 2005 while, at the same time, bearing more than 60 percent of fraud losses. “More needs to be done to stop this kind of fraud in its tracks,” Reuter said. One such effort, being led by major payment procesEach link along the payment system chain has a responsibility to sors, would require EMV provide security to protect against fraud, including the consumer. (chip) technology. Used glob(Image courtesy of sxc.hu) ally in place of credit card magnetic stripes, the chips James Reuter, executive vice president of help reduce fraud when making purchases FirstBank in Lakewood, Colorado, testified in-person. Visa, MasterCard, Discover and on this matter in front of the U.S. Senate American Express have all indicated plans Subcommittee on National Security and to migrate to an EMV-based payment infraInternational Trade and Finance on structure in the near future. February 3 on behalf of the ABA. “Today, very few domestic merchant “When a retailer like Target speaks of its terminals support EMV technology, so customers having ‘zero liability’ from any EMV cards issued have limited merfraudulent transactions, it is because our chant acceptance in the United States,” nation’s banks are making customers according to Alvarado. “As merchant chip whole, not the retailer that suffered the card acceptance gains popularity in the breach,” Reuter said. “Banks swiftly U.S., we will continue to evaluate the best research and reimburse customers for way to support our customers’ credit card unauthorized transactions, and normally and debit card needs.” exceed legal requirements by making cusThough the shift to EMV would help tomers whole within days of the customer reduce fraud in face-to-face transactions, alerting them.” Thomas said it would not protect personal This is a pertinent fact in the data data associated with that card when breach incidents, according to Ben stored by a retailer. Alvarado, senior vice president and By swiping an EMV card, a chip inside regional president for Wells Fargo Orange communicates with the EMV payment-proCounty. “It’s important to note that the cessing device and prompts the cardholder systems involved in recent breaches of to enter a pin to validate their identity. credit and debit card information belong “The chip would prevent hackers from to the retailers who announced those creating a counterfeit card,” Thomas said. breaches – not to Wells Fargo,” he told the “But you still need to protect consumers’ Business Journal. “However, Wells Fargo information. Anyone in that payment chain is doing everything possible to protect who has access to that data should be a our cardholders and to be helpful to this guardian of that information. It doesn’t do investigation.” us any good if we are the only ones protectLilly Thomas, vice president and regula- ing that information. You are only as strong tory counsel for the Independent as your weakest link.” ■ By TIFFANY L. RIDER Editor

What must not get lost is that personal responsibility is integral to the strength of that chain. Travis Barr, first vice president and wealth management advisor for Merrill Lynch, told the Business Journal that, in addition to setting up security and fraud protection for financial accounts, Bank of America Merrill Lynch recommends that all clients regularly change passwords, sign up for a third-party serv-

ice to track credit and potential fraud, monitor account statements regularly and shred everything. “Just like an annual checkup for your body, people should be doing an annual credit check,” Barr said. “I am fascinated on how often things are found prior to it becoming a problem, meaning our systems must be absolutely amazing for them to notice something when millions of transactions are happening. I believe our bank is doing a good job in terms of putting a lot of safeguards in. But there should be some self-ownership on this. Calling your local bank and calling your financial advisor is a great first step.” ■

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FINANCIAL SERVICES INDUSTRY 12 Long Beach Business Journal

February 18-March 3, 2014

Lee Vieira, branch manager at Cherry Creek Mortgage Company in Long Beach, reviews the requirements for a qualified mortgage loan with a potential borrower. Vieira referred to the new rules as “closing the door after the horses are gone.” (Photograph by the Business Journal’s Thomas McConville)

Mortgage Lending Rules (Continued From Page 1)

2010, three are having the most impact, according to Mills: the qualified mortgage rule, the loan originator compensation rule and the mortgage servicing standards rule. Under the qualified mortgage rule, lenders are required to make “a reasonable, good-faith determination” that borrowers have the ability to repay. Though the rule does not ban any mortgage products, Mills said it has increased risk exposure for lenders who do not offer qualified mortgages. For example, if a borrower is able to

take out a mortgage loan that is considered a qualified mortgage, and he or she has problems repaying the loan, that individual may seek litigation against the lender for not making the “reasonable, good-faith determination” of the borrower’s ability to repay. Some aspects of the qualified mortgage rule are product specific in that adjusted rate loans must be underwritten to avoid payment shock to the borrowers and that negative amortization loans do not qualify. Others are price specific, such as the 3 percent cap on points and fees charged by the lender. Others still are borrower specific, including the debt-to-income ratio. “If

your housing payment and other debt exceed 43 percent of your income, then you are outside of a qualified mortgage,” Mills said. While lenders are still able to offer home loans outside of the qualified mortgage space, those products will have significantly higher interest rates and higher risk premiums. The loan originator compensation rule is tied to the 3 percent cap rule for qualified mortgages. Anyone who negotiates, assists or modifies a loan can only make a 3 percent profit off a loan of $100,000 or more. That amount includes origination costs, administrative charges, processing and underwriting fees – all finance charges except real estate or “We are continuing to work on skillfully building our mortgage business,” Robert Renteria, vice president and area manager for First Bank, told the Business Journal. Under the new mortgage lending rules, Renteria said, “borrowers who qualify will still be able to obtain financing.” (Photograph by the Business Journal’s Thomas McConville)

third-party fees. Mortgage loans for between $60,000 and $100,000 have a cap of $3,000. Those between $20,000 and $60,000 have a 5 percent cap. Under the new mortgage servicing rule, regulations set standards for how lenders interact with borrowers in terms of delinquencies and how they work with borrowers on loan modifications. The rule also discusses how soon a lender can move forward with foreclosure. Ben Alvarado, senior vice president and regional president for Wells Fargo Orange County, told the Business Journal in an e-mail that these new regulations impact the way all mortgage lenders do business in the future. “We believe that overall the new regulations strike an appropriate balance between providing consumer protection and ensuring continued access to credit,” he said. California Bank & Trust had to revise its lending guidelines to meet the qualified mortgage standards, according to Private Mortgage Banking Business Development Manager and First Vice President Michael Smith. “At California Bank & Trust we have always upheld the highest quality lending standards so we have had to make some adjustments but no radical changes in our underwriting philosophy,” he said in an e-mail. Potential borrowers may find fewer mortgage products to choose from as a result of the rules, Smith said. At the same time, he said, those customers should expect to provide more documentation supporting their ability to repay than they may have in the past. Robert Renteria, vice president and area manager for First Banks’ branch in Bixby Knolls, told the Business Journal that these rules should have very little impact on the company’s mortgage customer base. “Borrowers who qualify to buy a home will still be able to make that purchase,” he said. “Banks are making loans outside of the qualified mortgage rules for those exceptional clients that do not meet the more stringent criteria.” “These rules are supposed to make us cognizant of making loans to people who could qualify,” Lee Vieira, branch manager at Cherry Creek Mortgage Company in Long Beach, told the Business Journal. “It’s kind of silly. In my opinion, if we can’t convince our underwriters that a mortgage can’t be sold in the secondary market, we’re not going to make the loan anyway.” According to Vieira, these rules are “closing the door after the horses are gone,” meaning that they take effect after the poor products and lack of responsibility in lending that caused the most recent housing bubble have been mostly eradicated. “The rules have had probably more of a fear factor because, in the past, only 10 to 20 percent of loans were audited,” Vieira said. “This offers the ability to drill down on loans. There will probably be a lot less fraud.” Even so, lenders must weigh staying in the business under these rules against the heightened litigation risk, Mills said. “There are costs that are going to be greater for a small lender,” he said. “And there is a smaller base to spread those costs.” ■

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FINANCIAL SERVICES INDUSTRY 14 Long Beach Business Journal

February 18-March 3, 2014

The Future Of Money: Bitcoin Becoming A Popular Currency Alternative ■ By TIFFANY L. RIDER Editor Large and small, a growing number of businesses are accepting the virtual currency Bitcoin as the debate over how it fits into existing regulation and the economy continues. Major online retailer Overstock.com partnered with Bitcoin wallet service Coinbase in January to begin accepting Bitcoin as a form of payment. Overstock.com touts itself as the first major retailer to accept the digital currency. Web-based travel agency CheapAir got its start with Bitcoin payments back in November and promotes itself as the first such agency to accept Bitcoin. TigerDirect, an online retailer of electronics with some brick-and-mortar locations, just a few weeks ago added itself to a growing list of major companies accepting Bitcoin. Bitcoin isn’t just catching on with major retailers. Signal Hill-based restaurant parts supplier Centerlen Services, co-owned and managed by Darryl Webb, began using

Efforts to improve security, as a result of the recent hacking that resulted in the theft of $2.7 million worth of Bitcoin from the underground marketplace Silk Road 2, are part of the challenges in making Bitcoin a viable currency. (Image courtesy of Bitcoin.org)

Bitcoin late last year. The company accepts Bitcoin as payment from customers and plans to use Bitcoin to pay its suppliers as well. Centerlen continues to accept more traditional forms of payment, including cash, major credit cards and PayPal. As a person-to-person, decentralized currency, Bitcoin allows its users to make instant payments. “I’ve been doing some reading on it and I think it’s a neat idea,” Webb told the Business Journal. “The way we have it set up is we can accept it, but we have it converted into U.S. dollars right away.” The transaction fee for Bitcoin payments is less than half the price for credit card processing, Webb explained. “We’re a small business here and, by year end, if you added up our credit card transaction fees, we could

easily hire another employee,” he said. “When this concept came up, we thought we should try it. It’s going to take a while to get going. But I think once people start dabbling into it, it will be the way of the future.” Another upside to using Bitcoin, Webb said, is the ease with which to conduct international orders. “The paperwork, the delay of time to transfer the currency to our bank account from their bank account is significant,” he said. “With Bitcoin, we wouldn’t have that dilemma. It would just be a person-to-person transaction.” Bitcoin was the first cryptocurrency, or digital medium of exchange. There are about 60 different cryptocurrencies on the market today, most of which are modeled after Bitcoin. The market value of Bitcoin hit above $1,200 last year and hovered around $680 mid-February. This time last year Bitcoin was trading for a mere $30. Meetup groups, nonprofit organizations and conferences on Bitcoin have been popping up as the currency gains momentum. The North American Bitcoin Conference, held in Miami Beach last month, generated interest from speculators, enthusiasts, business users and politicians. The event included workshops for merchants and exhibited Bitcoin startups, whose founders shared innovations in payment, deposit and trading transactions. With the Bitcoin hype, there has been pushback. Some domestic and international regulators have put up a front against Bitcoin. Indonesia has banned the use of the digital currency. Finland’s central bank

does not recognize Bitcoin as a currency and neither does the central bank in Norway. China’s central bank has banned lenders from accepting any cryptocurrency. Many corporations have also taken a stance against Bitcoin. Apple eliminated all digital wallets for Bitcoin from its application store. More corporate efforts against Bitcoin could pop up if it does not meet the three distinguishing features of currency. According to global investment management firm Payden & Rygel, currency is distinguished as a liquid medium of exchange that must maintain a store of value and qualify as a unit of account. Even at this early point in Bitcoin’s potential lifespan, the currency meets the first distinguishing feature standard. In terms of holding value over time, Bitcoin is designed to be finite. However, each unit of Bitcoin is designed with eight decimal places to allow its holders to trade at fractions of a Bitcoin. This, according to Payden & Rygel, helps fend off concerns that Bitcoin is a deflationary currency. The final feat for the digital currency would be making it commonplace to quote commodities in units of Bitcoin, as opposed to pricing in U.S dollars. Though Bitcoin attaining that level of popularity may seem out of reach, regulators acknowledge its potential by working now to address its use. New York’s top bank regulator plans to develop financial services licenses that tailor specifically to virtual currencies – a “BitLicense” – to help avoid money laundering. California may see similar regulation of Bitcoin as well. If passed, Assembly Bill 129, amended in the California State Assembly last month, would redefine lawful money to include alternative currency such as Bitcoin. It would not require individuals or businesses to accept alternative currency. However many stumbles it may have along the way, Bitcoin is exemplifying the future of currency. How soon its use becomes more commonplace in the Long Beach area remains uncertain. “So far we’ve had a few inquiries about using Bitcoin,” Webb said. “For the most part, it’s the competition asking us about it. It’s quite the topic of conversation.” ■

U.S. Debt Limit Analysis: Peering Through The Ceiling ■ By TIFFANY L. RIDER Editor In a stop-and-go fashion for nearly 100 years, funding for approved federal government programs is temporarily stalled because of a cap known as the debt limit. According to the U.S. Treasury, the debt limit is the total amount of money that the federal government is authorized to borrow to meet its legal obligations – Social Security, Medicare benefits, military salaries, tax refunds, interest on the national debt and other approved programs. Raising the debt limit allows the federal government to continue to fund programs it

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FINANCIAL SERVICES INDUSTRY February 18-March 3, 2014 does not have revenue to pay for. It is commonly mischaracterized as acting like a credit card; however, it does not allow the government to create new spending programs. The U.S. Congress has temporarily extended, revised the definition of or raised the debt limit a total of 78 times since 1960, according to the Treasury. Debt ceiling drama in 2013 included suspending the debt ceiling in February, reinstating it in May and, just a day before hitting the ceiling in October, once again suspending the debt limit through February 7, 2014. Treasury Secretary Jack Lew announced in early February that the federal government’s borrowing authority must be extended by the end of the month, or else risk defaulting on payments due in March. As part of its “special accounting maneuvers” to postpone default, the Treasury suspended the sale of state and local government nonmarketable securities effective February 7 until further notice. The suspension helped the Treasury manage the debt, subject to the limit, until Congress could come together on a vote to raise the limit. Congressman Alan Lowenthal, who represents Long Beach as part of California’s 47th Congressional District, was part of the 221 U.S. House of Representatives votes cast on February 11 in favor of raising the debt limit. “The full faith and credit of the United States would have been in jeopardy after February 27 if both the House and Senate did not agree to raise the debt ceiling,” Lowenthal said in a newsletter statement to his constituents. The U.S. Senate approved an increase to the debt limit the following day to meet the federal government’s financial obligations through March 2015 without conditions, providing a year free of debt limit drama.

Long Beach Business Journal 15 Research Service. Though it had been brought down to about 45 percent of GDP in 1941, the federal debt spiked above 120 percent of GDP by 1946. The years 1946 through 1950 are the top five years with the highest national debt to GDP ratio on record, according to data from the Council on Foreign Relations. Over the next 35 years the government brought down the debt, and then President Ronald Reagan brought it back up to more than 50 percent of GDP in the 1980s due to Cold War spending. Gross debt was on the decline in the late 1990s, but began to rise again in the early 2000s to more than 60 percent of GDP. Today, through spending to fight the war on terror and to fund a massive bailout for

financial institutions after what is now known as the Great Recession, the federal debt is at about 75 percent of GDP, or approximately $17.2 trillion.

A Political Theater Prop? The U.S. is one of the only developed economies that has a debt ceiling. Another is Denmark, though their government sets the limit so high that it is rarely – if ever – reached. According to Eduardo Martinez, economist with Moody’s Investors Service, “There really isn’t a good argument to have a debt ceiling. It’s an unneeded exercise that we force ourselves to go through, as long as we’re going to have a 50-50 government.” Most mainstream economists, those slightly to the right or to the left, agree that the debt ceiling really has no purpose with an

economy this size, Martinez affirmed. Just as a business doesn’t have 100 percent cash on hand to pay accounts, he explained that the federal government has to borrow to pay. “It’s not going to be nice and even, in terms of revenues and expenditures,” he said. In those terms, the debate over raising the debt limit becomes sort of old hat. “Democrats voiced concerns over [President] Bush going over the debt limit,” Martinez said. “Now Republicans voice concerns over the Democrats going over the limit. Most politicians realize that we can’t afford to start missing payments. . . . A lot of people would argue that, in the world financial system, U.S. bonds and the dollar are good assets. It’s bad we repeat ourselves, but the market really shrugs it off. We’re not close to a point yet where

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1_LBBJ_Feb18_SectionA_LBBJ MASTER LAYOUT 2/17/14 9:28 AM Page 16

POLITICALWIRE – LONG BEACH MAYORAL RACE 16 Long Beach Business Journal

February 18-March 3, 2014

Question: What is your understanding of the role of the Long Beach City Attorney? What experience (such as trial experience, managing other attorneys, previous work for a law firm), do you believe is necessary for that individual to do a good job? DAMON DUNN

T

he City Charter lays out the duties: (1) legal advisor to the City and its bodies, (2) draft all ordinances and legal documents, (3) attend all legal proceedings (4) defend all lawsuits, (5) approve all bonds and contracts, and (6) investigate and enforce the Charter, ordinances, and applicable laws. Further, the decisions made by the City Attorney can have a broad impact on job creation. The City Attorney helps determine the legal environment in a community by which lawsuits they seek to pursue, which cases are settled, and how they conduct their duties. This in turn plays a major role in how small businesses and other employers view Long Beach. Are we a City that spends legal resources on paperwork violations and nuisance lawsuits or a City that ensures government is working efficiently and fairly and that residents and businesses have a safe place to live and work? This answer adds greatly to our ability to grow the jobs we so sorely need. This office needs to function in a dual role, as a public sector legal advisor to the City and its agencies and as a private sector corporate counsel to our many enterprise funds—the Port, oil, airport, gas utility, SERFF, and others. The enterprise funds need to operate efficiently as businesses that generate jobs directly, and indirectly through the competitive edge these resources give our community. Finally, lawyers tend to be of two types—lawyers who tend to find the reasons not to do something and lawyers who are able to find legal avenues to allow a community to reach its goals. In my workings with cities, my unfortunate experience is that government lawyers are too often of the first type. It’s too easy for the typical government lawyer to fold under the sheer weight of the massive rules, regulations, and restrictions imposed on cities by both the state and federal governments. As a Charter City, our community has constantly found creative paths to resolve its problems and reinvent its economic future. The City Attorney needs to be an individual who can continue the same innovative spirit. ■

ROBERT GARCIA

I

've worked closely over the last five years with the City Attorney’s Office. I have also had the opportunity to work with the talented team of Deputy City Attorneys and legal professionals we have working for the City of Long Beach. The City Charter specifies that the City Attorney is “the sole and exclusive legal advisor of the City, the City Council and all City commissions, committees, officers and employees.” To put it simply, it is the role of the City Attorney to uphold the City Charter and advise City officials and employees on policy, laws and ordinances. The City Attorney also defends the City in court when legal matters arise. The City Attorney is critical to the policy making process. As Vice Mayor and a Councilmember, I have relied on the City Attorney to assist and give advice in crafting local ordinances and policy. It is essential that the City Attorney also provide the Mayor and Council with sound and well researched legal advice on cases before the city and on numerous issues related to the port, real estate, public safety, and development. I believe that a qualified candidate for City Attorney will have experience in municipal law, understand the charter, and have litigation and management experience. It is also critical that the City Attorney be a person of strong moral character. The City Attorney must also show a commitment to Long Beach and to working with the City Council, Commissions, and City Staff. ■

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BONNIE LOWENTHAL

T

he role of the City Attorney in Long Beach is to represent the City and all of its departments, commissions and officers in all municipally-related matters. Providing advice and counsel to city officers and defending the city in litigation are the City Attorney’s primary responsibilities. But he/she is also responsible for hiring and overseeing any outside legal firms brought in to handle highly specialized litigation; drafting ordinances, resolutions, charter and municipal code amendments; promulgating ethical standards and training for all city officers and employees; and writing and administering contracts relating to public improvement projects and ordinances related to the collection of revenues. Long Beach is unique; we have a major port generating billions of dollars, a commercial airport, a municipal oil production company, and gas, health, and water departments. Our City Attorney must be well-versed in issues spanning all of these complex functions. He/she must be familiar with the power and limitations of the “regular” city services that the city provides its residents. For instance, regulations must be drafted and administered with regard to street use, parks, public health, and zoning matters. The person who is responsible for leading our City Attorney’s Office should be of unquestioned ethical character. On occasion, it is incumbent on the City Attorney to offer unsolicited legal and ethical advice if he or she observes actions or activities that are likely to cause harm to the city or individuals who represent the city. Of course, our City Attorney must have an extensive litigation background and experience practicing municipal law. But even being the best litigator or most experienced litigator is not enough. Litigation is often a zerosum game: even when the city wins a lawsuit it often has to expend significant sums in litigation preparation; it is generally very time-consuming and distracts city employees, who are required to participate, from dedicating their attention to their regular city responsibilities. Our City Attorney must take a proactive approach to their advisory function by sensitizing city management on how to avoid litigation. The City Attorney should bring people together and engender confidence in his/her legal analysis and opinion. ■

DOUG OTTO

T

he job of the Long Beach City Attorney is one of the most complex jobs any attorney could undertake. This is because the breadth of responsibilities that the Long Beach City Attorney’s Office has exceeds similar jobs in almost all other cities. To be truly successful, the elected City Attorney should have a diverse background in many of the areas for which the City Attorney’s Office is responsible. Those areas include the following: a) The City Attorney investigates and handles all liability, contract, and workers comp claims. b) The City administers and maintains the State’s coastal tidelands in Long Beach, including beaches, piers, marinas, the Convention Center, and an aquatic complex, all in conformity with the “tidelands trust” doctrine. c) The City operates the nation’s second busiest port. d) The City Attorney drafts and approves all city contracts, and all city contracts must be awarded by a formal bid process. e) The City operates a robust program for the exploration and production of hydrocarbon products and a large natural gas field. f) The City Attorney has regulatory responsibilities in the areas of land use, zoning, building codes, public safety, traffic, public nuisance, waste management, and environment matters. g) The City Attorney administers a Civil Service System and is responsible for labor relations with all city employee unions. h) The City operates the Southeast Resource Recovery Facility (SERRF) with statemandated solid waste reduction requirements. i) The City Attorney oversees elections, including fundraising, and adopts rules and regulations that establish electoral districts. j) Finally, the City Attorney serves as the sole and exclusive legal advisor and representative for the City, the City Council, and all city commissions and boards. It is difficult to say what requirements there should be for an individual to run for the office of City Attorney. A minimum of five years’ experience in municipal law, not just the practice of law, should be required, given the breadth of responsibilities of the City Attorney. The job of the City Attorney requires so much legal and political acumen that, perhaps, the position should be appointed, not elected. ■

GERRIE SCHIPSKE

T

he City Charter is quite clear about the role of the Long Beach City Attorney: To be the sole and exclusive legal advisor of the City, the City Council and all City commissions, committees, officers and employees with reference to all of their functions, powers and duties under this Charter, State and Federal law; To draft all ordinances, contracts, and other legal documents; To attend to all suits, matters and proceedings in which the City may be legally interested; To defend all suits for damages instituted against officers and employees and former officers and employees for acts performed by them in furtherance of their duty while in the employ of the City; To approve in writing the form of all bonds required by the City and all contracts before the same are entered into on behalf of the City; To investigate and enforce on behalf of the City all provisions of this Charter, of the general law applicable to municipal corporations, and of the ordinances of the City, in all courts in the State of California, except criminal cases. Because of the multiplicity of City services and departments (i.e. Gas, oil, water, airport, port, general City), the Long Beach City Attorney must be experienced in these areas, which in reality requires more than the minimum five years of practice that is required by the City Charter. Long Beach has been fortunate to have stability in the Office of City Attorney. More importantly, the voters have elected those attorneys who have worked their way up through the office, bringing with them a wealth of experience and knowledge that has served the City well. ■

See PoliticalWire News on Page 18

1_LBBJ_Feb18_SectionA_LBBJ MASTER LAYOUT 2/17/14 9:28 AM Page 17

POLITICALWIRE – LONG BEACH MAYORAL RACE February 18-March 3, 2014

Long Beach Business Journal 17

Question: Several years ago, the city’s Economic Development Bureau was eliminated. Should the Bureau be reestablished? If so, why and under what format? If not, please explain why. DAMON DUNN

C

reating jobs and building longterm economic growth in Long Beach is such an important goal that it needs to be the responsibility of the Mayor to advance it. As mayor, I will become the city’s number one champion for job growth – dedicating staff to economic development, meeting with employers, advancing reforms, and calling on city departments to make creating jobs easier in Long Beach. By vesting this responsibility in the mayor’s office, voters will know who to hold responsible for success or failure. In my private career, I worked with cities to create jobs and grow revenue – property tax, sales tax and business tax revenue. We can do some amazing things in Long Beach if we think creatively, act decisively and prioritize job creation. Leadership must start at the top to break down institutional barriers that stop the city’s management from being entrepreneurial. The fact is, we have departments and agencies that work with businesses every day. We have our enterprise funds which give our community unique competitive advantages that when broadly promoted, become phenomenal engines of job growth. We have underutilized properties and assets throughout the City that if properly marketed and developed, can generate the needed jobs to benefit all our neighborhoods. The City agencies need to recognize that they are the Long Beach economic development agency. How they deal with businesses, how efficiently and costeffectively they provide their services determines how businesses large and small view our community as a place to invest and a safe and welcoming place to grow jobs. How the enterprise funds operate determines whether we are gaining the greatest economic boost possible from these assets. And the Mayor’s Office needs to be the point where this economic development perspective is maintained and applied. In previous editions, I’ve written how I believe a Mayor needs to be a catalyst. In this case, that catalyst role needs to function as the point that brings together the resources and advantages Long Beach has to offer with the employers who can grow the jobs we need. ■

ROBERT GARCIA

R

estoring t h e Economic Development Department will be one of my top priorities as Mayor. In 2012, I successfully led efforts to hire an Economic Development Officer to begin rebuilding the department. The new department head should report to the city manager and maintain strong relationships with the business community, port officials, and members of the community. The New Economic Development Bureau should focus on key sectors including trade and transportation, technology, green development, healthcare, aerospace, and the creative economy. As our national economy rebounds, it is essential our port remain the competitive global force it is today. We must remain aggressive to recruit new port partners and attract the best companies. We need to grow in new markets beyond China and begin to make a serious effort in South America. If we get serious about expanding our import portfolio, we could see incredible results. Long Beach can become the Silicon Valley of the South with the right leadership and an aggressive approach to business recruitment. We have a Downtown by the water, transit into downtown Los Angeles, and great schools and weather. We need a strong plan to recruit high tech companies and venture capital. We must also lead Long Beach into a new Blue & Green Economy, focused on green development, sustainable buildings, solar projects, and opportunities along the coast for aquatic recreation and tourism. New developments should be green and community-oriented. We need to encourage green tech zones and support efforts on expanding solar initiatives. We also have incredible opportunities to grow and foster the creative economy. We need to encourage more jobs in the arts, design, and entertainment. If Long Beach is going to continue to thrive and grow, new economic activity, including the development of real estate, is essential. To support this critical part of our economic health, we must speed and streamline the development process. While progress has been made, we have much more work to do to make this process more business friendly. I am looking forward to our new Economic Development Department leading the way and bringing business to Long Beach. ■

BONNIE LOWENTHAL

A

bsolutely. L o n g Beach is ideally located to serve as a regional hub and innovator in economic development. It’s time to make the most of our assets and bring businesses and good jobs back to Long Beach and keep them here. Reestablishing the Economic Development Bureau (EDB) is a good way to start. The focus of the EDB must be retention. We cannot grow if we are losing our current businesses. The bureau, which should consist of at least three individuals, has to first assess our current business climate to understand those industries at risk, where we can grow, and where we are thriving. If we want to see sustainable growth in our local economy, we have to be proactive. With a robust EDB, we can reestablish a Red Team for Long Beach, similar to our Red Team for the C-17, to aggressively pursue industries. We can liaison with the Los Angeles County Economic Development Corporation. We can work with the state to leverage incentives through GO-BIZ, including new tools that go beyond the old restrictions of enterprise zones. We now have sales tax exemptions for manufacturing and biotechnology equipment and hiring credits for middle class jobs, as well as some promising proposals on the horizon to expand the use of infrastructure financing districts which would give Long Beach the tools to finance projects for affordable housing, transit, and other projects. We can build the EDB as a hub to assist with business loans, create and maintain existing business improvement districts, and help new businesses establish in our city. Of course, economic development and community development go hand-in-hand. With a strong business community our ability to provide better neighborhood services grows. We can’t forget the role that our community plays in luring and retaining businesses. It’s not just the economic incentives, it’s our quality of life and it’s uniquely Long Beach. Our arts and culture, neighborhoods, schools, and parks can be magnets for businesses looking to build a future in our city. We need to brand Long Beach as a destination for innovation, the arts, and world-class industries. ■

DOUG OTTO

T

o be a successful city, Long Beach must be a prosperous city, and that means making business and job growth our top priority. In these difficult economic times, it was an enormous mistake to eliminate the Economic Development Bureau. We are the only major city in America without an EDB. The reasons the bureau should be reestablished include the following: a) We have fewer jobs in Long Beach than in 2000. b) Our December 2013 unemployment rate was 9.7% – which is 16.9% greater than California’s, and a whopping 44.8% greater than the nation’s. c) Our poverty rate is 19.9% greater than that of L.A. County, and almost 33% of our children are living below the poverty line. This has a corrosive effect that we must correct by focusing on job and business growth. Goal 5 of my Jobs Plan (found at: www.dougottoforlongbeach.com/j obs_plan) calls for restructuring the City’s economic development efforts in two primary ways. If elected Mayor, I will quickly request the City Council and City Manager to do the following: 1) Create an Economic Development Bureau with core functions currently dispersed throughout city departments which will also unify and coordinate economic development efforts – from Workforce Development to Business Improvement Districts. 2) Create a city-sponsored, nonprofit entity with private sector drive and ideas, coupled with public sector responsibilities that can take the lead to promote economic prosperity. While some current city functions could be transferred to this new entity, accountability should remain at the public level. The functions transferred to this new entity would include Business Improvement Districts, Filming and Special Events (the income from which could pay for the entity), Business Loan Programs, Marketing, Economic Data and Economic Impact Analysis, Property Disposition, Cultural Affairs and Special Projects designed to further make our city prosperous. I am the only candidate with a detailed action plan for jobs and business creation. To me, that’s revealing. It’s my priority and should be the priority of the City. City Hall should invest in what matters to Long Beach residents – jobs and business creation, not ribbon-cutting monuments to elected officials. ■

GERRIE SCHIPSKE

W

e need a C i t y Manager who is a warrior for bringing economic development and a Mayor and City Council that will support the efforts with appropriate budgeting. I am the only member of the City Council that sits on the Los Angeles Economic Development Corporation’s L.A. Jobs Defense Council which is working on a series of initiatives to bring and keep good paying jobs in our area. I am stunned by the lack of participation by any other representative or staff from the City of Long Beach. LAEDC offers a variety of resources to assist in economic development and it is unbelievable that Long Beach does not fully participate. A year ago, I proposed that the City of Long Beach contract with the LB Chamber of Commerce to assist on economic development. However, the item was withdrawn because the Chamber felt that the animosity between the Chamber and the current Mayor would make such a partnership difficult. In looking forward, we might take our cue as to what a City can do about economic development by looking at the City of San Jose which takes a five pronged approach of coordinating: an Office of Cultural Affairs to promote the arts; Assistance to Business which provides services and information for small businesses and entrepreneurial growth; a Real Estate and Asset Management office that manages the acquisition and valuation of City owned property; and Workforce Development to provide workforce development services to businesses and job seekers. Additionally, we need to establish a citizen/expert advisory committee to the Mayor on economic development. This should be comprised of local business leaders, investors, and entrepreneurs who can help guide the City in doing what is necessary to spur economic development. Finally, the City pays into the California Public Employees Retirement System (CALPERS) $94 million each year and has $3.1 billion in assets in CALPERS, which invests these assets throughout the US and globally but not in Long Beach. The City of Long Beach needs to encourage economic investment back into our City and work with local businesses to apply to become the recipient of CALPERS investments. ■

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POLITICALWIRE NEWS 18 Long Beach Business Journal

February 18-March 3, 2014

(Continued From Page 1)

before running for the city’s highest office. Dunn moved to Long Beach in 2011 and in late 2012 was the first to announce a run for mayor. Soon after, he began walking the city and, according to him, knocking on thousands of doors – long before any other mayoral candidate began campaigning. Many well-connected members of the community dismissed him because he went from a Democrat to a Republican to an Independent and, despite failing to vote over the years, ran unsuccessfully for secretary of state (which oversees statewide elections). Some people claimed he relocated to Long Beach at the behest of “Long Beach Chamber-types” to specifically run for mayor – a charge both Dunn and the chamber deny. The chamber, however, endorsed him last June, long before the field for mayor had been finalized. Despite all the knocks on him, Dunn is young (born in 1976), well educated (Stanford University grad), athletic (four years on the football team, lettered in track and a short stint in the National Football League) and an articulate speaker with a good story to share (from poverty in Texas to becoming wealthy through real estate). He joined the top ranks of the mayoral candidates because of money. By June 30, 2013, he had accumulated more than $240,000 in campaign contributions, including $125,000 of his own money. By the end of 2013, Dunn, according to city records, had spent

nearly $245,000 on his campaign – more than double that of any other mayoral candidate. An independent expenditure (IE) group formed through the chamber political action committee spent another nearly $40,000 on mailings pushing Dunn. Historically, the firefighters work hard for candidates they endorse. It’s not just writing a check or sending out mailers. They walk the neighborhoods, talk to voters and make the phone calls. The firefighters, along with the Long Beach Police Officers Association (POA), are considered the two most influential organizations in the city come election time, and thus the two most sought-after endorsements. Voters tend to trust an endorsement from “their” police officers and firefighters more than one from a business group, outof-city union or even an elected official. Thus, the backing by Local 372 could prove pivotal. The POA is not, according to its president, Steve James, going to endorse in the April 8 primary.

How They Stand Seven Weeks Out Following is how the Business Journal sees the mayoral race as of mid February. This is based on conversations with dozens of people throughout the city representing a cross section of the community. Up until the firefighters’ endorsement, most political observers seemed to agree that the two candidates with the best chance of making it to a June runoff were Bonnie Lowenthal and Robert Garcia, with Gerrie Schipske an outside shot of passing

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Garcia. Dunn and the other top contender, Doug Otto, were pretty much relegated to finishing no better than third. Why? The Lowenthal name is golden in Long Beach. Many voters who don’t know all the candidates will side with a Lowenthal. Bonnie Lowenthal also has the backing of the California Democratic Party and L.A. County Democratic Party, which is significant in a city heavy with registered Democrats. Garcia gets a runoff nod because he holds the title of vice mayor, is young and energetic, and to many represents the growing creative, tech-savvy, young entrepreneurial sector in Long Beach. While Lowenthal often comes across as drab and boring (watch some of the debates), Garcia is upbeat and enthusiastic. Both have received strong financial support, have plenty of cash on hand and can count on heavy IE spending. One big question that opens the door for the other three is, how well known is Garcia outside of the downtown area? He’s never run for a citywide seat and has been tested only in the 1st Council District, where the most votes he received in two races was 1,168. That fact alone is what gives Schipske a chance, who received four times that many votes winning her district in 2010. Over the years, she’s run in at least a dozen races in the city, has strong name identification, and is well liked in her 5th City Council District – which historically turns out more voters than three other districts combined – although new registration in Long Beach is primarily downtown and the Westside, which helps Garcia. Another edge for her is that her name appears first on the ballot. The problem for Schipske is a lack of money. As of the end of 2013, she had raised less than $60,000 in cash contributions, with about $30,000 cash on hand. While the odds are against her, don’t be too surprised if she beats Garcia in votes. The more money she raises, the better her chances are of passing Garcia. A criticism heard of both Lowenthal and Garcia is that neither has a strong enough personality or take-charge attitude to run the city, and that they could be controlled by other people. Schipske, on the other hand, as she has shown repeatedly during city council meetings, doesn’t back down from a good fight. This assessment of the three, whether accurate or not, is out there in the community – which benefits Otto, a defense attorney by profession, the most. The roadblock for Otto is Dunn. Those who support Dunn would most likely support Otto if Dunn were not in the race. PoliticalWire has spoken with many individuals who back Dunn who admit Otto would otherwise be their clear choice. They cite Otto’s several decades of work in supporting a variety of city issues and needs – from the arts to education to planning to the nonprofit sector and much more. Otto has proven his resourcefulness to residents and elected officials time and again (he’s been the go-to guy for numerous task forces and committees), a fact no one can dispute. The hesitation? His health. Several years ago, Otto beat back cancer. He says he’s in great shape and that his doctors back him up. Still, there are doubters. Otto has probably logged more volunteer hours to help the city than all of the other mayoral candidates combined. That’s why

Upcoming Candidate Forums Mayoral Race • February 19 – 5-6:30 p.m., The Grand, 4101 E. Willow St. Hosts: Junior League of Long Beach and the League of Women Voters. • February 23 – 2-4 p.m., L.B. Museum of Art, 2300 E. Ocean Blvd. Hosts: League of Women Voters and Museum of Art. • February 24 – 6-9 p.m., Bogart & Co. at Pacific Gallery, L.B. Arena. Hosts: Ocean Residents Community Association and Downtown Residential Council. RSVP by email: RSVP@ORCALB.org or call 435-7155 by February 21. • February 25 – 7 p.m., Art Theatre, 2025 E. 4th St. Host: Longbeachize and numerous others, including bicycle groups. • February 27 – 6:30 p.m., The Petroleum Club, 3636 Linden Ave. Host: Los Cerritos Neighborhood Association.

City Council 7th District • March 3 – 7 p.m., Veteran’s Park Social Hall, 101 E. 28th St. Host: The Wrigley Association. LBWrigley@yahoo.com.

City Council 9th District • February 24 – 6-8:30 p.m., American Legion Hall, 1215 Orange Ave. Host: North Long Beach Neighborhood Association. he has raised quadruple the money Schipske has (the other home-town product) and, from a review of contribution statements, appears to have the most “local, homebased” support (money donated by Long Beach residents) of all the candidates. There seems to be agreement that if Lowenthal finishes on top in the primary, Otto would be her toughest opponent in a runoff. The same scenario would not play out for Dunn if Otto were out of the race. Otto supporters are much more diverse (due to Otto’s decades of involvement) and their support would spread equally among the other candidates if Otto were not running. In backing Dunn, Pritchard said, “Damon Dunn is committed to making Long Beach an even safer place to live and work, and understands that restoring staffing levels for police and fire are vital in helping us improve response times. . . . When you listen to Damon Dunn, you learn quickly he fully understands the city’s fiscal situation and has a clear transparent path to move Long Beach forward, while maintaining a balanced budget.” Like many in the community, the firefighters are looking for a new direction. One advantage for Dunn is that he is a fresh face who has not served in a local elected office as have the other four: Garcia and Schipske are current councilmembers; Lowenthal is a member of the state assembly who previously served as a councilmember and school district boardmember; and Otto is on the city college board of trustees, which distances him from being included in “city hall types.” This mayoral election could play out similar to the race of 20 years ago when Beverly O’Neill, the president/superintendent of Long Beach City College, was considered the “fresh face” in the election. Up

1_LBBJ_Feb18_SectionA_LBBJ MASTER LAYOUT 2/17/14 9:28 AM Page 19

POLITICALWIRE NEWS February 18-March 3, 2014 against several long-time politicians, including the incumbent mayor, voters saw her as representing a new direction. In a very close race, where only seven percentage points separated the top four finishers and the incumbent mayor finished fifth with 10.5 percent of the vote, O’Neill bested a primary field of 13 candidates. The 2014 mayoral election should prove equally close, and, despite this analysis, any of the top five candidates are capable of winning – or finishing in fifth place.

Voter Turnout Huge Factor As Registration Numbers Shift Turnout is always a factor, not only in the total numbers of people voting, but where they live in the city. For that 1994 primary mentioned earlier, 49,932 votes were cast for mayor out of a registration of 179,171 voters – a healthy 28 percent turnout. The 3rd and 5th City Council Districts accounted for nearly half (46.2 percent) of all votes cast for mayor. How times change. As of October 2013, the number of registered voters is up to 256,316 and it’s expected to grow. A similar percentage turnout to 1994 would equate to more than 72,000 votes cast. But unlike 20 years ago, the 3rd and 5th Districts may not dominate turnout. The number of registered voters in those Eastside districts is up 16 and 15 percent, respectively, but look at the increases for the other districts: 1st District, 124 percent; 2nd District, 63 percent; 4th District, 25 percent; 6th District, 78 percent; 7th District, 97 percent; 8th District, 29 percent; and 9th District, 47 percent. While numbers provide a historical perspective, the higher registration downtown, on the Westside and North Long Beach don’t necessarily translate into people actually voting – although unions are expected to play a key role in turnout in those areas. Because the city leans heavily toward registered Democrats, the higher the turnout, the better it is for Lowenthal, Garcia and Schipske. The fact that there are competitive races in the 3rd and 5th City Council Districts help Schipske (in the 5th), Dunn and Otto.

Candidate News • Damon Dunn: The mayoral candidate was endorsed by retired police commander Charles Parks. • Robert Garcia: The mayoral candidate fell just shy of receiving the endorsement of the Long Beach Democratic Club. Garcia received 58 percent of the 138 votes cast, with Bonnie Lowenthal receiving 42 percent. Garcia was endorsed by United Association Local 250, a building trade union. In a February 4 press release, Garcia claimed he: raised the most money of any candidate during the reporting period ($206,641.11 July 1-December 31); had the most cash on hand ($165,308.98); had more donors than any other campaign (669); and had more contributions of under $100 (319). • Bonnie Lowenthal: The mayoral candidate was endorsed by the Los Angeles League of Conservation Voters. • Charles Parkin: The city attorney candidate was endorsed by Los Angeles District Attorney Jackie Lacey, former governor, George Deukmejian and 3rd District Councilmember Gary DeLong. • Rex Richardson: The 9th District City Council candidate was endorsed by

Long Beach Business Journal 19 Congresswoman Janice Hahn, State Senator Ricardo Lara, the Long Beach LAMBDA Democratic Club and the Progressive Democratic Club of Long Beach. • Long Beach Democratic Club endorsements: City Prosecutor – Rosemary Chavez; City Attorney – James Johnson; City Council – Lena Gonzalez, 1st District; Suzie Price, 3rd District; Carl Kemp, 5th District; Roberto Uranga, 7th District; Rex Richardson, 9th District; Community College – Marshall Blesofsky, 1st District; Gregory Slaughter, 5th District; School District – Uduak-Joe Ntuk, 1st District; Juan Benitez, 3rd District. For more information: longbeachdemclub@gmail.com. • Long Beach Sierra Club endorsements: Lowenthal for mayor; Gonzalez in

Council District 1; Joan Greenwood in District 7; and Rex Richardson in District 9. Its website is: http://angeles2.sierraclub.org/longbch/. • Jeff Kellogg: The Long Beach Community College Board of Trustees 1st District candidate and current president of the board has been endorsed by former governor George Deukmejian; former mayor and city college president Beverly O’Neill; L.A. County Supervisor Don Knabe; Councilmembers Al Austin and Steve Neal; School Boardmember Mary Stanton; and College Trustee Roberto Uranga. • Megan Kerr: The 1st District Board of Education candidate was endorsed by the National Women’s Political Caucus of California and UNITE HERE Local 11.

• Uduak-Joe Ntuk: The 1st District Board of Education candidate was endorsed by the Service Employees International Union Locals 99, 721, 1000, ULTCW, HWW, USWW and State Council. He was also endorsed by the American Federation of State, County and Municipal Employees District Council. • Juan Benitez: The 3rd District Board of Education candidate was endorsed by Vice Mayor Robert Garcia, the California School Employees Association and State Senator Ricardo Lara. • John McGinnis: The incumbent 3rd District Board of Education candidate was endorsed by former state superintendent of public instruction Delaine Eastin, and Signal Hill City Councilmember Larry Forester. ■

1_LBBJ_Feb18_SectionA_LBBJ MASTER LAYOUT 2/17/14 9:28 AM Page 20

ENCORE – PEOPLE IN THE NEWS 20 Long Beach Business Journal

February 18-March 3, 2014

City Prosecutor’s Annual IMPACT Awards

Long Beach City Prosecutor Doug Haubert presented his annual IMPACT awards February 11 to six individuals and groups who “in working with the City Prosecutor’s Office, have made ‘a positive,’ significan impact in the City of Long Beach in the past year.” The event was held at Gladstone’s restaurant at Rainbow Harbor. Honored were: the Long Beach Police Department (LBPD) Vice Division “for the entire team’s success in investigating cases of human trafficking and assisting victims;” Gabby Guillen and Marvin Kelly for “their assistance in helping former Long Beach gang members with free tattoo removal;” Leilani Ronca, code enforcement officer for the city’s neighborhood services bureau, for her “personal efforts to eliminate blight and abate public nuisance properties;” Tiffany Brown, the school district’s director of coordinated student services, for her “efforts to work with city prosecutor staff to reduce chronic truancy in Long Beach;” LBPD police officers David Corcoran, Jeannie Villanueva, Gabriel Carrillo, Carlos Del Real and Pedro Valenzuela for their efforts, “which individually and collectively resulted in the successful arrest and prosecution of a gang-related hate crime;” and Jessica Quintana, Pastor Wayne Chaney, Jr., and Pastor Gregory Sanders for their “assistance with developing and implementing ‘Operation Opt Out,’ a city prosecutor program assisting persons formely associated with street gangs.” Pictured, left to right, are: Carrillo; Del Real; Villanueva; Valenzuela; Haubert; Lt. Dan Pratt of the LBPD Vice Division; Quintana; Guillen; Sanders; and Chaney. (Photograph by the Business Journal’s Thomas McConville)

New Dean At Long Beach City College – Kenneth J. Starkman has been appointed dean for the School of Career Technical Education at Long Beach City College. He is responsible for overseeing the college’s 38 technical instructional programs. Starkman previously served as dean at Madison Area Technical College in Wisconsin, and as a state supervisor and educational consultant with the Wisconsin Department of Public Instruction. “My goal is to support programs that are in place, while developing new programs with greater effectiveness in areas where the market is in need of qualified individuals,” Starkman said in a statement. “There is a great team already in place at LBCC to move the CTE programs to the next level and I look forward to working with faculty members, local industry and corporate partners to advance our programs.” New Partner At Windes – Gary Curtis has been appointed a partner in the tax and accounting services practice at Windes, an audit, tax and advisory firm based in Long Beach. Curtis, who is working from the firm’s Irvine office, has more than 30 years of professional experience, including serving as a director at Deloitte and managing director at KPMG. He most recently served as a corporate tax partner at Haskell & White. Curtis earned his bachelor’s in accounting from Phillips University in Oklahoma. “I am very excited to join Windes, as the firm has a stellar reputation and I believe I can contribute to the continued success of the organization, Curtis said in a statement. New Environmental Planning Director For Port – Heather A. Tomley is the new director of environmental planning for the Port of Long Beach. She has been serving as acting director since last July. Tomley joined the port in 2005 and has been serving as assis-

tant director of the division since 2008. In her new role, she is responsible for the port’s signature environmental programs: the Green Port Policy and the San Pedro Bay Ports Clean Air Action Plan. According to a statement from the port, “The division coordinates programs to improve air, water and soil quality, preserve wildlife habitat and integrate sustainability into port practices.” Tomley earned her master’s in environmental science from the University of North Carolina and her bachelor’s in chemistry from Cal Poly San Luis Obispo. Leadership Changes For Alaska Air Group’s Legal Division – The board of directors for Alaska Air Group, a subsidiary of Alaska Airlines which serves Long Beach Airport, approved several leadership changes in the company’s legal division. Herman Wacker, Air Group's deputy general counsel and managing director of legal, has been elected vice president of legal. Shannon Alberts, managing director of corporate affairs and assistant corporate secretary, has been elected corporate secretary. Kyle Levine retains his role as deputy general counsel and managing director of legal, and replaces Alberts as assistant corporate secretary. New Senior Project Manager At SCS – Long Beach-based SCS Engineers announced the appointment of Solavann Sim as senior project manager to the company’s Southwest Solid Waste Division. Sim is responsible for planning, executing and implementing projects in waste management, landfill gas management, and landfill construction, monitoring and maintenance. He previously worked for Waste Management (WM), where he oversaw all landfill gas operations at nine WM landfills in Southern California and Hawaii. Sim earned his bachelor’s in civil engineering from California State University, Fullerton. Law Firm Adds Senior Associate – Christopher J. Cummiskey has joined the Long Beach-based law firm of Garcia, Artigliere & Schadrack. The firm, which specializes in elder abuse, has offices in

Chouras Realign Operations Ryan Choura is pictured with his father, Jim Choura, at The Grand Event Center in Long Beach. The younger Choura is now focusing his efforts full time on Choura Events, a fullservice boutique event rental and tenting agency based in Torrance. The elder Choura serves as CEO of Choura Venue Services, the catering and venue management company located at The Grand. (Photograph by the Business Journal’s Thomas McConville)

Arizona, Florida, Kentucky and Washington. According to the firm, Cummiskey is experienced in civil litigation, commercial litigation, personal injury, product liability and employment-related disputes. He most recently worked with a large defense firm representing insurance companies, corporations and government entities in federal and state matters. Cummiskey earned is Juris Doctor from Syracuse University and his bachelor’s from Ithaca College. Former Harbor Commissioner Joins Vectis Strategies – Carmen O. Perez, a former two-term member of the Long Beach Board of Harbor Commissioners, has been named a partner with Vectis Strategies, a bi-partisan national public relations and public affairs firm. Vectis has offices in Los Angeles, San Diego, Sacramento and Washington, D.C. It has clients in the utility, financial services, technology, public and private infrastructure, not for profit and real estate sectors. Perez is the former vice chair of the Democratic National Committee and was chief deputy to former L.A. County Supervisor Kenneth Hahn. New Officers For International Trade Goup – The Los Angeles Customs Brokers and Freight Forwarders Association, which was formed in 1949 and currently represents more than 250 members, elected new

officers for 2014. They are: President – Mark Hirzel, western regional director of MIQ Logistics; Vice President – Wayne Wagner, senior manager, U.S. Brokerage Services of FedEx Trade Networks; Secretary – Barbara Clarke, vice president of Williams Clarke Co.; Treasurer – Karen Quintana, director, national sales, customs brokerage, Yusen Logistics (Americas); and Chair – Vincent Iacopella, managing director of The Janel Group of Los Angeles. For more information about the association, call 818/951-2841. New Uptown Group Elects First President – The newly formed Uptown Property Business Improvement District (UPBID) in North Long Beach elected Yanki Greenspan of Westland Real Estate Group as its first president. Also, Lorena Parker was named interim program manager. The UPBID area boundary is Atlantic Avenue between Market Street on the south and Artesia Boulevard on the north, and along Artesia from Atlantic to Orange Avenue on the east. “This district represents the commitment of North Long Beach property owners to the revitalization of our business corridors and the entire community,” Greenspan said. “I look forward to being a part of this great transformation.” For more information, e-mail UptownPBID@gmail.com. ■

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GRAND PRIX HIGHLIGHTS February 18-March 3, 2014

Long Beach Business Journal 21

Celebrating 40 Years (Continued From Page 1)

four-time Indy 500 winner and would add four CART/Indy car championships to his resume before he retired. And their two sons – Michael and Al Jr., popularly know as “Little Al” – were flashing signs of future Indy car greatness. Mario won the first battle. Fighting off fuel economy issues that plagued many starters, he won the 1985 Toyota Grand Prix of Long Beach over fast-closing Danny Sullivan, whose March ran out of fuel less than 100 yards from the finish, handing second place to Emerson Fittipaldi. The following year, Michael (March) and Little Al (Lola) gave Long Beach race fans a hint of things to come, engaging in a thrilling duel over the race’s final laps, with Michael beating Little Al to the checkered flag by a scant .0380 seconds – still the record for closest margin of victory at Long Beach. And, race fans were beginning to take notice: More than 77,000 packed the grandstands to watch the race. Mario was dominant in 1987, steering his Lola from the pole position to an immense one lap plus-29 second win – almost 2.5 miles – over Little Al. Tom Sneva finished third, just ahead of Michael. The following year, “the streak” began. And Little Al even went Mario one better. Starting fourth, he went on to lead 73 of the race’s 95 laps and crossed the finish line one lap plus-33 seconds ahead of Bobby Rahal for his first Toyota Grand Prix of Long Beach victory. More than 84,000 race fans roared their approval. He won again in 1989 . . . but this win wasn’t quite so popular with the legions of Andretti fans. Dueling with Mario in the final laps, Little Al locked up his brakes and spun Mario off-course in Turn 3. Unser went on to win his second straight, beating Michael and Fittipaldi to the checkered flag, but was greeted with a hearty chorus of boos from Andretti supporters on his victory lap! Little Al made it three straight the following year, beating Fittipaldi and Sullivan to the finish, but it was Michael Andretti who got the lion’s share of the kudos. Starting 5th, Andretti spun out on the second lap and dropped to last place. He then methodically worked his way back up the field, picking off one car after another, crossing the finish line in fourth place to thunderous applause. Unser went on to become the 1990 series champion. As he sat on the starting grid for the 1991 race, Little Al found himself surrounded by Andrettis: Michael sat on the pole, with Mario starting 7th, son Jeff 12th and Mario’s nephew, John, 10th! Unfazed, Little Al led 93 of the race’s 95 laps in his Lola to score an unprecedented fourth straight Long Beach victory in front of more than 82,500 fans, part of a three-day race record attendance of 204,000. “Some tracks you just perform better at,” Unser said when asked about his dazzling winning streak. “Long Beach is one of those for me. I love racing here and it gives me a lot of confidence.” Mario Andretti noticed it, too. “You see it when Al gets behind the wheel here,”

Michael Andretti 1986

Danny Sullivan 1992

All photographs provided by the Grand Prix Association of Long Beach Then-governor George Deukmejian looks on as Michael Andretti hoists the 1986 winner’s trophy. Al Unser, Jr., is at far right.

Al Unser, Jr., 1988

Andretti said. “He knows he’s going to do well so he drives a lot smoother. To beat him, you have to run an almost-perfect race and hope he makes a mistake.” Danny Sullivan broke Little Al’s streak the following year after mechanical woes sidelined Michael Andretti and others, but it was yet another close finish: Sullivan beat Bobby Rahal to the finish line by 0.596 seconds with Little Al settling for fourth place after teammate Sullivan spun him in Turn 6 with just over two laps to go. In 1993, the face of CART/Indy car began to change. More foreign-born drivers were joining the series and the starting field at Long Beach contained no less than ten foreigners. One of them was no stranger to motor racing combat: Nigel Mansell. The reigning Formula One Champion had left F1 after a disagreement with team owner Frank Williams. Ironically, Mansell inherited the Lola cockpit vacated by Michael

Andretti, who was competing in his first year of F1 racing! Another foreign-born driver was Canadian Paul Tracy, and Tracy immediately made his mark on the streets of Long Beach, cruising to his first-ever Indy car victory by 12 seconds over Bobby Rahal, with Mansell finishing third. Little Al got back on the winning track in 1994, posting a 39-second win over Mansell and Robby Gordon, and went on to win his second CART/Indy car crown. Further back, Mario Andretti finished fifth. After 36 years of racing, it was to be his final appearance on the streets of Long Beach in a race he won four times and had

Paul Tracy, 1993

helped to survive at two critical junctures. There was another significant change in the wind, too. Two thousand miles away, in Indianapolis, a man named Tony George announced the formation of the Indy Racing League. ■

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PERSPECTIVE 22 Long Beach Business Journal

February 18-March 3, 2014

Resilience: The Art Of Overcoming And Restarting

■ EFFECTIVE LEADERSHIP By Mick Ukleja esilience is an appealing characteristic. The temptation is to make it bigger than life. It’s not bigger than life. It’s how we go through life successfully. When we think of resilient people, we tend to attribute to those personalities heroic attributes. They face the un-faceable and solve the unsolvable. But putting our energies into developing heroic qualities can cause us to chase after something that is unattainable. In that illusive chase, we can miss the real ingredients of resiliency that we need on a daily basis. Life is not an unending string of good after good. We face struggles, adversaries, and difficulties. We steer through everyday challenges. We overcome the difficulties of our past. We get thrown off course and have to get back on. New experiences challenge us and sometimes even frighten us. Overcoming them takes resilience. Like one lady said, “I’m never down. I’m either up, or getting up.” It’s the ability to get back up, go one more lap and rise to the occasion. In the world of engineering a resilient material is capable of withstanding shock, bending without breaking, and then returning to its original position. For humans it’s flexibility during life’s pressures. They come in various waves and to varying degrees. Humans, just like resilient material, some-

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times shrink to minimal needs during high pressure, and then gather their energies to restart or sustain the mission, project, or issue. Winston Churchill said, “Storms don’t last. They go away.” He also said, “When you are going through Hell . . . keep going!” Reinhold Niebuhr’s prayer (1943), is one of the keys to resilience. “Grant us • the serenity to accept the things we cannot change, • the courage to change the things we can, and • the wisdom to know the difference. It is very easy to fall into the trap of trying to fix things that are out of our control. On the other end of the spectrum we can give up too soon and miss problem solving opportunities. And this is where the quality of our thinking comes into play. Our thinking influences our emotions and our behavior. When life gets tough we have our own way of explaining it. It’s our thinking style. It’s important to know what you are feeling. But don’t stop there. Take a step back and notice what you are thinking. Do I tend to blame myself or others for the issue or hardship? Am I stuck in this problem permanently or is it temporary? Does this issue impact every area of my life or project or is it affecting only certain parts? Which parts, and how? Resilience is about breaking our “thinking trap” habits so that we can think more flexibly and accurately. Accurate thinking is useful thinking, and useful thinking will help you come up with more constructive ways to approach the issue. That in turn will strengthen your resolve. Emotions are

Inland Connections

■ TRADE AND TRANSPORTATION By Tom O’Brien he success of our ports depends upon a complex network of relationships between partners up and down the supply chain. That list of partners includes ocean carriers, truckers, rail companies and others who handle the cargo on its way from origin to destination. Since the early 2000s, there has been a renewed interest by some stakeholders in developing inland ports as a means of improving the competitiveness and efficiency of our trade hubs, including the ports. An inland port is a site located away from a traditional seaport, airport or border crossing that contributes to the efficient flow of goods through both intermodal transportation services and value added cargo handling and processing. These services are integrated with the major trade hub and help provide access to the inland market for both inbound and outbound traffic. Many inland ports act as distribution centers, depots for containers and chassis, warehouses and locations for other general logistics services. Inland ports may also play a key role in the transfer of full or empty containers to railcars or add value to the supply chain as a free-trade zone. Some inland port facilities are located

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outside of urban areas to be near manufacturing and distribution centers; others are located adjacent to large urban areas to take advantage of pre-existing networks of suppliers and customers. In almost all cases, they are located where there is available land at relatively affordable prices for warehousing, distribution and transloading; reliable and competitive rail service; good access to a highway network; and available labor. Successful inland ports help major seaports accommodate the growth in container volumes while reducing costs related to truck travel time. For planners and elected officials at the local level, inland ports are sometimes viewed as an opportunity to move cargo processing and distribution away from congested areas. The closure of military bases in the 1990s and projections of dramatic growth in containerization in the early 2000s prompted freight carriers and public agencies to explore strategies to take advantage of newly available land while at the same time reducing port congestion by adding new cost-effective inland ports to their supply chains. At about the same time, public agencies were seeking transportation strategies to lower truck emissions by reducing vehicle miles travelled. Major inland ports serve trade hubs as diverse as Houston, Chicago, Kansas City, St. Louis, Atlanta, Memphis, Columbus and Charlotte. Newer inland ports have been created in Greer, South Carolina, Front Royal, Virginia, and Alliance, Texas. Closer to home, a 2008 study of the potential for rail shuttle service to a new inland port in the Inland Empire concluded that, while the project was technically feasible

“Man never made any material as resilient as the human spirit” – Bern Williams

important, but don’t assume that your emotions are an accurate indicator of what is going on. Some people personalize, some magnify, and some catastrophize. We all have thinking traps. The key is to know what yours is so you can avoid it. That has more to do with resilience than most would imagine. Do you tend to get out of sorts when something confronts you? Or do you see things happening FOR you instead of TO you? Sometimes the things that are happening TO you, are happening FOR you, so that something can happen IN you. What happens in you builds resiliency to not only withstand issues and adversity, but also to eliminate distractions that diffuse our focus, that slow us down, and that increase our fatigue. A resilient mind has the ability to go further, faster, with less fatigue. It doesn’t eliminate the struggles and everyday tough times. And resilience is not a commodity that you either have or don’t have. It is a process. It requires practice. So start today by making use of every circumstance you face. Use those issues of life as a valuable resource to help you understand the way you think. Spot the thinking traps and make an immediate adjustment. This will impact the way you feel and act. And like any learning, the feedback, insights, and mutual support of others makes it easier and more effective. (Mick Ukleja is a consultant, author, coach, keynote speaker and president of LeadershipTraq.Check his weekly blog at www.leadershiptraq.com.) and would produce a small reduction in vehicle miles traveled, it was not justified for a variety of institutional and economic issues and could not compete with more pressing freight-related investment options. That’s because an inland port needs to be located where local officials support its development and are willing to offer strong incentives to participants. Local residents need to be convinced that there are minimal potential conflicts with other land uses and that congestion and other environmental impacts can be mitigated. And of course, service providers want to see that the costs savings in logistics operations significantly offset the cost of moving those operations further from the coastal ports. The primary planning goal in developing a new inland port is to ensure there is a strong and sustainable economic benefit from the capital investment in which the total logistics costs – including capital, fuel, labor, transit time – are lower, and flexibility and reliability are significantly higher than expanding in the vicinity of the coastal port area would be. Inland port strategies that do not take this into consideration are not likely to be successful. Another planning concern is the uncertainty of future growth in trade volumes. Investment in new capacity simply to relieve current congestion may be risky if that volume is not sustained or shifts to other locations. Success depends upon a clear demonstration of potential costs and benefits to everyone involved. (Dr. Thomas O’Brien is the interim executive director of the Center for International Trade and Transportation at CSULB and an associate director for the METRANS Transportation Center, a partnership of USC and CSULB.)

Having Joint Replacement Surgery? Here Is What To Ask Your Surgeon ou’ve just been told by your primary care physician that you need a hip or knee replacement. They referred you to their favorite orthopedic surgeon. What do you do next? Go to the Internet and research? Better yet, go meet several different surgeons, ask your questions and then go to the Internet for confirmation of the doctors and the answers. Here are some questions to ask your prospective surgeon so you can be as ■ HEALTHWISE informed as possible. By Douglas 1. Do you do minimally invasive surGarland, M.D. gery? – The term minimally invasive is a contradiction. Arthroscopy is minimally invasive. Arthroscopy is a surgical procedure by which the internal structure of a joint is examined for diagnosis and/or treatment using a tube-like viewing instrument called an arthroscope. If a procedure can be done arthroscopically instead of by traditional surgical techniques, it usually causes less tissue trauma, may result in less pain, and may promote a faster recovery. All other surgeries are determined by body build. If you are large, a larger incision will be necessary to get to the joint and vice versa. Incision size is not associated with pain, blood loss, discharge times or outcomes. 2. How many joint surgeries do you do? Are you fellowship trained? – 70 to 80 percent of joint replacements are performed by general orthopedists. A surgeon who does one replacement per week (50 per year) is a reasonable vantage number. Higher volumes are associated with better outcomes. 3. I know most knee replacements are done from the front of the body. Which approach do you use for hip replacements? – The posterior (back of body) approach is the most common but was associated with dislocations and leg length discrepancies. With better surgical techniques and larger prosthetic head sizes the incidence of dislocations and leg length equality between the two approaches are now similar. There presently are minimal if any differences between outcomes within any of the surgical approaches. 4. Do you use muscle sparing approaches? – Most orthopedic surgeries are muscle sparing (not needing to cut through muscles). 5. Should I have the latest and greatest implant? – No. There have been as many failures as breakthroughs over the last 10 years. None of the newer devices have consistently improved outcomes. 6. Should I donate blood or will I receive blood post-operatively? – Smaller incisions, attention to surgical technique, spinal anesthesia and drugs to prevent bleeding have reduced transfusion rates to fewer than 10 percent incidence. Donating blood or receiving blood is rarely necessary. 7. What type of anesthesia do you use? – Regional (such as anesthesia given through the spine) anesthesia when possible is the correct answer. It is associated with the best outcomes: early mobility, pain management and decreases in blood loss, infections, transfusions and blood clots. It potentially allows a rapid recovery, positive hospital experience and outcome. 8. How do you decrease the risk of blood clots after surgery? – As long as some type of chemical (medication) or mechanical (medical devices) and/or protocol is used, the incidence of a blood clot should be below one percent. Tell your surgeon if you have a history of a previous clot or any bleeding/clotting disorders as this may increase your risk. 9. What are the major and minor complications and the incidence? – The incidence varies between five to eight percent during the first three months. Major complications include: pulmonary embolism, sepsis, cerebrovascular accident, cardiac complications, renal failure, deep wound infection, nerve injuries, dislocations (hips). Minor complications are: urinary tract infections, blood clots, pneumonia. Diligent medical management is imperative after surgery. 10. Is there anything I can do? – All surgery has a risk/reward ratio – so tilt the scales toward the reward side, while reducing risk. Stop smoking immediately. See your primary care physician for a clean bill of health. Have your lung, cardiac, diabetes and blood pressure under control. Push your body mass index (BMI) below 40. After you have done your research and met different surgeons, keep in mind these criteria when making your decision: Select a higher volume surgeon who is affiliated with a high volume hospital where spinal anesthesia is the norm and provides diligent post-operative medical management to include some type of clot prevention after surgery. (Dr. Douglas Garland is medical director of the MemorialCare Joint Replacement Center at Long Beach Memorial.)

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PERSPECTIVE February 18-March 3, 2014

Long Beach Business Journal 23

Growth In Multifamily Demand Is Predicted

■ REALTY VIEWS By Terry Ross ecause of economic, social and generational changes in the population, the outlook for apartment investing and building appears to be on the rise through the next few years. During the recent International Builders Show (IBS) in Las Vegas, a panel discussion on the immediate outlook for apartments took an optimistic approach coming out of the down years of the housing collapse, and pointed towards some encouraging signs from various phases of the economy. “The multifamily market has rebounded significantly from its trough in 2009 at 82,000 multifamily housing starts to 340,000 in 2013,” said National Association of Home Builders Chief Economist David Crowe. “NAHB is forecasting 363,000 multifamily housing starts in 2015, which is above the previous longer term average of 340,000 as more young adults prefer renting.” The strong performance in multifamily comes from three sources, explained Crowe. “First, during the collapse, production of multifamily

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housing had significantly decreased, so part of the resurgence in 2011 was just catching up with a more normal flow. Second, the strong demand for apartments is being fed by a rising demographic of echo boomers who will continue to grow in size as we absorb people born after 1980. Third, young adults who might have otherwise chosen homeownership, and some older adults as well, are hampered by a variety of issues, such as unusually tight underwriting standards for mortgages, lower credit scores because of the slow employment market and lower entry salaries. As a result, the share of households that rent rather than own has increased steadily since 2004 and will likely continue until jobs are more secure, mortgages more accessible and careers more stable.” Many markets have regained their footing and are producing at least as many multifamily units as they did during the relatively stable period between 1996 and 2006. “The multifamily market has come a long way since the collapse,” said panelist Guy K. Hays, president of Legacy Partners Residential Inc. in Foster City, California. “Overall, supply and demand are in balance, and in most markets there is a need for the continued production of new units.” While land costs to build apartments have dropped since the beginning of the recession, the over-supply that plagued the market just a

few years ago has abated because of additional renters in the market. So, the economic forces are more aligned than they have been in a while for a healthy apartment market. There are still challenges that face the industry – such as the availability of labor and rising cost of some building materials. But demand for apartments is strong enough for developers to proceed in most markets, the conference panelists noted. In an analysis by National Real Estate Investor, it called the multifamily market the darlings of the commercial side of real estate and referred to it as the segment with the strongest fundamentals, greatest returns and the best access to financing. The site also ranked the Top 10 U.S. markets for apartments based on which ones will generate the highest rental rate growth while maintaining high levels of occupancy for this year. Half of that list is located in California and seven of the 10 are on the West Coast. Only one from the East Coast made the list – Miami. Two areas from Southern California – Orange County (8th) and San Diego (10th) – appeared on the list, with Oakland-East Bay (1st), Portland, Oregon, (2nd), San Francisco (3rd), San Jose (4th), Miami (5th), Houston (6th), Denver (7th) and Seattle (8th) rounding out the Top 10.

According to this survey, all 10 of these markets will get significant new supply this year but will not be in danger of overbuilding since they have lacked sufficient supply during the downturn in the economy. It was also noted that a common trait of these markets is their ability to attract high-paying jobs and young, well-educated residents into areas that have affordable single-family housing – especially in the Bay area, Orange County and San Diego. Orange County is within the top 50 counties nationwide in terms of the percentage of households that rent versus own residences and at the end of last year was looking at a 3.6 percent growth rate in rents and an occupancy rate of 95.9 percent. San Diego had similar numbers at 3.6 percent growth in rental rates and 96.2 percent occupancy. Compare these with the top rental market in the nation – Oakland-East Bay, with a 6.6 percent growth in rents last year and occupancy at 97.1 percent. An average household income of almost $160,000 and scant new growth in the number of apartments being built make this an investor’s dream – if you can find the right deal in this area. (Terry Ross, the broker-owner of TR Properties, will answer any questions about today’s real estate market. E-mail questions to Realty Views at terryross1@cs.com or call 949/457-4922.)

Vol. XXVII No. 3 February 18March 3, 2014 PUBLISHER George Economides VICE PRESIDENT SALES & MARKETING Martha Rangel SALES & MARKETING ASSISTANT Heather Dann GRAPHICS/PRE-PRESS Jennifer Ebunilo DISTRIBUTION Conrad Riley EDITORIAL DEPARTMENT EDITOR Tiffany Rider STAFF WRITER Samantha Mehlinger CONTRIBUTING WRITER Michael Gougis PHOTOJOURNALIST Thomas McConville COPY EDITOR Lindsay Christopher The Long Beach Business Journal is a publication of South Coast Publishing, Inc., incorporated in the State of California in July 1985. It is published every other Tuesday (except between Christmas and mid-January) – 25 copies annually. The Business Journal premiered March 1987 as the Long Beach

The Importance Of Developing An Obsession For Nonprofit Succession

■ THIRD SECTOR REPORT By Jeffrey Wilcox t’s too bad that whenever the word, “succession,” finds its way into conversations at nonprofit organizations, most view its utterance as code for someone needs to go. When an inevitable transition does occur, these same organizations soon discover that having kept succession in the closet ultimately costs their worthy causes significant amounts of time, money and angst. The Third Sector is no different than the other sectors when it comes to human resource matters and leadership. Most transitions in key positions aren’t planned. Messy exits can be a public relations challenge. And, transitions that should have happened earlier, but for personal or political reasons were avoided, creates a domino-effect of other’s choosing to vacate their positions instead. While nonprofits face other common workforce realities such as a Baby Boomer generation retiring en masse and the difficulty of attracting

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and keeping up-and-comers, the sector has a couple of quirks that make leadership continuity slightly more complicated: The first is that each of these realities can be applied not only to paid employees, but also to volunteers. The second is that without term limits and a commitment to succession, great causes can easily evolve into family-run businesses disguised as nonprofits. All of these factors sum up to a subject that is emotionally charged and filled with deeply-rooted confusion over what constitutes prudent succession planning for a nonprofit organization. Replacing key positions, managing with a leadership void, and curbing high attrition are expensive propositions for any enterprise. For organizations that depend on people’s generosity to survive, however, these are situations that demand pro-active and visible attention. The Daring to Lead study released by CompassPoint Nonprofit Services in Oakland dramatically illustrates the current state of the sector when it comes to succession: • 17 percent of 3,000 nonprofit organizations indicate having a succession plan; • 24 percent of nonprofit executives report planning to vacate their positions within two years; • 45 percent have no executive per-

formance review process to annually discuss succession. Based on these numbers, there is a significant quantity of important nonprofit organizations whose futures are at risk. Sadly, most of them have little idea how large the risk is because succession has been considered an unmentionable in their cultures. For those who have believed that investing time and money in leadership development, retention and succession will hurt a nonprofit’s overhead calculations, the Daring to Lead numbers suggest that the day in court is nigh. The costs of sloppy human resource practices, poorly managed executive exits, replacing avoidable vacancies, and a lack of competent future board leadership creates a tab that is going to be difficult to prove as circumstantial. The sum of these costs will be even more difficult to defend as responsible fiduciary oversight in the name of charity. Succession, like fundraising, is an integral piece of a successful nonprofit’s organizational culture. Both subjects are forms of resource development that are equally vital for fueling its future. Cultures that value succession have six distinct attributes. The first is operating with a common understanding that succession is about ongoing efforts to assure a continuity of good leadership is in place for the organization. It

is not about naming an heir-apparent or planning one person’s transition. The second attribute is completing a contingency operations plan every year and creating a warehouse of vital organizational information should a key position become vacant for any reason. The third attribute is a series of board-approved succession policies which mandates such things as performance reviews, term limits, human resource procedures and nominations. Demonstrated competencies in basic human resources is the critical fourth attribute. The fifth is completing and managing from a strategic plan that pays as much attention to developing human capital as it does to developing financial capital for creating its future. And, the final attribute is assigning the task of succession to key people as part of their job responsibilities and performance objectives. For me, nonprofit leadership succession has become an obsession. Perhaps I’ve stood on the curb for too many years watching people confuse or avoid the subject and declining to get on the succession planning bus. It’s painful to witness so many great executives, boards and organizations now at significant risk of being hit by it. (Jeffrey R. Wilcox, CFRE, is president and CEO of The Third Sector Company, Inc.)

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February 18 - March 3, 2014 Section A