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ENTERPRISE AWARDS FINALISTS NAMED THE PENSION BOMB IS ABOUT TO HIT

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REGION’S BUSINESS

PHILADELPHIA EDITION

A JOURNAL OF BUSINESS AND POLITICS

THE MOVE TO LIMIT CORRUPTION IN THE E

COURTS

A proposal to eliminate elections for the state’s top courts gains momentum in Harrisburg.

YOU CAN’T OUTSOURCE YOUR LIABILITY ON BACKGROUND CHECKS PENSION REFORM LIKELY TO TARGET CURRENT EMPLOYEES APARTMENT BUILDING NOW A MANSION RegionsBusiness.com $2.00 U.S.

JANUARY 31, 2013

31 JANUARY 2013

REGIONSBUSINESS.COM

CONTENTS

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22

Taking Money Off the Judicial Scales A proposed bill would eliminate elections for the judges on Pennsylvania’s top three courts.

!

25

Complex Picture for Top Court

To equitably reduce the deficit in a way that maintains good faith with the American people requires tax increases. And matching the European financial transaction tax is a good place to start. Yes, new taxes are necessary. Especially those focused on the speculators who caused the crash.”

With one justice facing prison time and another seeking retention, despite the fact that he would face mandatory retirement in a matter of months, the makeup of Pennsylvania’s Supreme Court will soon change. !

2013: YEAR OF THE INNOVATOR

17

Innovation Not Limited to New Businesses ! Sure, startups are all about innovation, but entrepreneurs are finding success in established industries. One local business offers a new dimension to television. Another puts a twist on the relatively new business of charging electric cars. And the ‘original entrepreneur’ (Ben Franklin) inspires a co-working space.

Looming Pension Bomb Nears

28

! Promises made by politicians, but never paid for, will have a direct impact on our wallets.

18

You Can’t Outsource Legal Liability Check the impact of a court ruling regarding outsourcing of background checks. !

REGION’S BUSINESS Independence Media Corp. 600 West Germantown Pike, Suite 400 Plymouth Meeting, PA 19462 610.940.1656 | feedback@regionsbusiness.com Online: RegionsBusiness.com To subscribe: 877.700.6245 or 215.627.6397 Circulation and Distribution managed by CCN - www.ccndelivery.com

LEO W. GERARD, UNITED STEELWORKERS HUFFINGTONPOST.COM

2040 Market Street Precision Realty Group is pleased to announce that the Pennsylvania Liquor Control Board (PLCB) has signed a long term lease for a flagship location at 2040 Market Street. Fine Wine and Good Spirits will join National Penn Bank to complete the retail portion of the former AAA Building on the corner of 21st and Market Streets. Shaun M. Lyons, President of Precision Realty Group handled the transaction on behalf of PMC Property Group. The PLCB will occupy 10,000 SF with the premium state store set to open in late Spring of 2013.

15

Tax Reform Aimed at Family Businesses ! A proposal in Harrisburg would make it easier to hand down the family business.

PRESIDENT AND PUBLISHER James D. McDonald EDITORIAL DIRECTOR Karl M. Smith ASSOCIATE EDITOR Terrence Casey CONTENT TEAM Brandon Baker CONTRIBUTORS Elissa Vallano, Don Lee ADVERTISING DIRECTOR Larry Smallacombe

2022-24 Chancellor Street Available For Sale Premier Mixed Use Building 2 blocks off of Rittenhouse Square First Floor Commercial Second Floor Residential Perfect for Owner/Occupier $1,975,000

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© Copyright 2012 Independence Media Corp. All rights reserved. Use of material within without express permission of publisher is prohibited. Region’s Business is published weekly on Thursdays and online at www.RegionsBusiness.com. The publisher makes no representations or warranties regarding the advertising appearing in its pages or its websites.

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31 JANUARY 2013

REGIONSBUSINESS.COM

EDITOR’S DESK

Lesson From Subway: Measure Up Or Else

Karl Smith is the Editorial Director for Region’s Business. You can contact him at ksmith@regionsbusiness.com.

How many times have I looked at something and said, “I never would have thought of that”? Plenty, of course. So when I saw a story about lawsuits being filed against Subway because their footlong sandwiches weren’t, well, a foot long, the first thing that came to mind was, “I would have never thought to measure my sandwich.” It started when an Australian teen took a picture of a Subway sandwich alongside a tape measure that clearly indicated that the sandwich was not a foot long. Posted to Facebook, it went viral - more than 117,000 likes, more than 2,700 shares and more than 5,100 comments. If you’re Subway, or even a Subway franchise owner, this would all be bad enough in terms of PR,

but that wasn’t the end of it. Lawsuits were filed. That’s lawsuits as in plural. Then came word a lawyer was crafting a class action lawsuit. It took a while (more than a week, in fact), but Subway eventually stepped up and said it would make sure all of the footlong sandwiches were, in fact, 12 full inches of sandwich. The curmudgeons roll their eyes and wonder why this teen made such a big deal out of it. After all, a little math shows that a footlong Subway sandwich coming up an inch short costs you about 42 cents, not exactly a king’s ransom. But if you’re a regular, that can add up, especially over the course of a few years. If you had a teen who ate at Subway once a

month through high school, the kid would end up spending about $20 too much. And multiply that across a graduating class of, say, 500 kids and you’ve got $10,000. Now just consider there are 501 public school districts in Pennsylvania and suddenly you’re talking about real money. Other companies should take heed, because there’s plenty to be learned out of this one. The first lesson for Subway is simple - give people what they pay for. If you advertise a “footlong” sub and people pay for a “footlong” sub, they should get a sub that is a foot long. There will be times when you can’t agree with your customer on how things are measured. Was it good customer service? Did the job get done in a timely man-

ner? Was the person serving you friendly enough? But when things are black and white - size, weight, deadlines, price - it’s a simple yes or no. The second lesson is clear you cannot ignore social media. That’s evident to most people now, but this should hammer it home for any doubters. The Australian teen did not set out to bring a major corporation to its knees. He merely expressed himself on Facebook. The results were unintended consequences. In the end, customers usually aren’t asking for much, they merely want what they pay for - a simple, honest exchange. Coming up short - even a little bit, an inch in this case - should never happen.

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MEDIA

Union Approves Deal With Papers An estimated 98 percent of Teamsters members voted in favor of a two-year labor contract with The Inquirer and Philadelphia Daily News, union head John Laigale told the Inquirer early this week. Under the deal, fulltime jobs are protected and buyouts were offered to union members, the Inquirer reported. Local 628 is comprised of about 300 members who drive trucks and patrol company buildings. PENNSYLVANIA LOTTERY

McCord Could Refuse Payment to Camelot Pennsylvania Treasurer Rob McCord said he is considering withholding payments to Camelot Global Services even if the attorney general’s office approves the privatization of the daily operations of the Pennsylvania Lottery.

RIGHT NOW I CERTAINLY AM TAKING A LOOK AT THIS WITH INCREASING CONCERN.’ —PENNSYLVANIA TREASURER ROB MCCORD

ENERGY

UGI Fined $500,000 for 2011 Explosion The Pennsylvania Public Utility Commission fined UGI Utilities $500,000 last week for a 2011 natural gas explosion that killed five people and destroyed half of a block, the Allentown Morning Call reported UGI, the state’s largest gas utility, was originally fined less than $400,000. The utility was given five days to accept or reject the fine. If UGI does nothing, the order will be made final, according to the Morning Call report.

WEEKLY BRIEFING

Budget Chief: Pension Reform Likely To Target Future Benefits BY ERIC BOEHM HARRISBURG — Facing nearly $1 billion in new pension costs in the next two years, Pennsylvania appears to be inching toward reforming retirement benefits for state employees and public school teachers. Monday, Budget Secretary Charles Zogby offered a preview of how the Corbett administration plans to deal with Pennsylvania’s $40 billion unfunded pension debt and rising annual costs. Part of the plan would target future benefits of current employees while keeping previously earned benefits and benefits for retirees in place, Mr. Zogby said during an appearance at the Pennsylvania Press Club luncheon. “We’re not looking to take back what anyone has already earned,” Mr. Zogby said. “But for teachers and school employees, there may well be proposed changes to your pension benefits going forward.” It will be another week before we know how the numbers add up, and the possible savings. Gov. Tom Corbett is scheduled to give his annual budget address February 5. Mr. Zogby said Corbett “very likely” will lay out a plan to achieve savings by reducing how future benefits are calculated. Failing to reform the state’s pensions is essential to avoiding “deep, immediate and painful cuts” in the state budget both this year and in the future, Mr. Zogby said. Pension costs will skyrocket from $1.1 billion this year to $2.9 billion by the fiscal year beginning July 2016, according to projections from the state’s Independent Fiscal Office. Unions are opposed to any reduction in benefits for current employees, even those benefits that are yet to be earned. William Dando, director of the political and legislative department for AFSCME Council 13, which represents more than 65,000 state employees, said pension benefits should be locked in from the time an employee is hired

until they stop receiving benefits at death. If the state does go after future benefits for current employees, the union would see grounds for a lawsuit, he said. “It’s going to all depend on what the governor lays out on Tuesday,” Mr. Dando said. But Dave Patti, president and CEO of the Pennsylvania Business Council, said arrangements between employees and employers is always subject to change — at least they should be. In the early 2000s the state increased benefits for public sector workers — part of the cause of the current pension crisis — so it should also be able to ratchet back future benefits for new hires and existing employees, Mr. Patti said. “I don’t think it only goes in one direction,” he said. Since the bulk of pension cost increases this year — about 70 percent of the $511 million increase due in the new fiscal year that begins July 1 — are in the public school teacher’s pension system, Mr. Zogby said it makes sense to tie savings in those pension costs to higher funding for school districts.. — PaIndependent

BY THE NUMBERS

NHL Lockout Hurts NBC Sports Network

58,000

Average number of homes that tuned into the NBC Sports Network during prime time in December, according to Nielsen

158,000

Average number of homes that tuned into the NBC Sports Network during prime time in December 2011

80M

Homes with access to the NBC Sports Network PHILLY.COM

Lottery Tops $1B in Revenue

$1.06B

Pennsylvania Lottery net revenue in FY 2012, according to the Department of Revenue

$955M

Pennsylvania Lottery net revenue in FY 2011

$3.48B

Total game sales in FY 2012

$2.36B

Total cost of sales in FY 2012

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REGIONSBUSINESS.COM

WEEKLY BRIEFING

TRANSPORTATION

PennDOT Orders Comprehensive Bridge Assessment County and municipal planning departments across the state have been ordered by the Pennsylvania Department of Transportation to rate the condition of small bridges. PennDOT keeps an inventory of about 12,000 bridges that are longer than 20 feet. Bridges smaller than that are currently undocumented. Needed improvements to smaller bridges must be identified and funded by counties and municipalities, according to PennDOT.

SEPTA Moving Forward With Silverliner VI Cars

SEPTA met last week with 12 manufacturing companies to begin replacing 231 Silverliner IV cars, even though it is still waiting for some Silverliner V cars, the Philadelphia Inquirer reported. The newest train cars, expected to cost $3 million each, will replace cars that are almost 40 years old.

Midtown Village Residential Tower Clears Legal Hurdle BY ISAAC RIDDLE

Pennsylvania Liquor Control Board CEO Joe Conti announced last week that he would be retiring from his role this week. But then Governor Tom Corbett, who has publicly stated that he opposes the position entirely, signed off on the rehiring of Mr. Conti as a temporary employee. Mr. Conti will make more than $80 per hour and will collect his pension on top of that rate. He will retain the job for up to 95 days.

Increase in house prices from a year ago

3,164

TEN ARQUITECTOS

at 1213 that had housed the Jewish Federation of Greater Philadelphia’s thrift shop was demolished in 2011. The project received a zoning variance that eliminated parking requirements for the building. The developers noted that the neighborhood has plenty of nearby parking structures for residences. “Fergie’s Tower” is one of many projects in the neighborhood that have experienced strong opposition from some neighbors. A proposed upscale pool hall called 1200 Bank, at the former Beneficial Bank building at 12th and Chestnut streets, received strong opposition from neighbors of the adjacent White Building condominiums. This post originally appeared on the Philadelphia Real Estate Blog (philadelphiarealestate.com)

DEVELOPMENT

Historic Homes’ Futures Uncertain The Licenses and Inspections Review Board voted Tuesday to defer a final decision on two historic brownstones at 3723-25 Chestnut Street in University City until next month. These homes serve as the parish house for the Philadelphia Episcopal Cathedral. A proposal calls for the demolition of the homes in favor of a 25-story apartment tower. PHILADELPHIAREALESTATE.COM

4.2% 0.4%

LIQUOR CONTROL BOARD

PLCB CEO Conti Rehired Temporarily

Region’s House Prices Drop

Average decrease of house prices in Philadelphia since last quarter, according to an Econsult Solutions report

P

lans to build a 26-story mixed-use residential tower with hotel and ground-floor retail on the 1200 block of Walnut Street in the Midtown Village-Gayborhood section of Washington Square West have cleared a major legal hurdle. An appeal of the zoning/use permit issued to the developers last August has been denied, meaning that the project can now move forward. The project is being developed by U3 Ventures and is designed by New Yorkand Mexico City-based architectural firm TEN Arquitectos. The original proposal for the site called for a 30-story structure that combined 299 residential units and 152 hotel rooms with ground floor retail. The project has been informally called “Fergie’s Tower” due to the presence of the popular Fergie’s Pub on the Sansom Street side of the lot. U3 Ventures first received approval for the project in 2009. After concerns about the height restrictions were resolved, by 2011 it appeared the project was back on track. The current proposal calls for 26 floors instead of the original 30 but will still be a mix of residential and hotel units with ground floor retail. According to the developer, site work has already been completed. The lot that stretched from 1213 to 1219 Walnut has been consolidated after a vacant building

REAL ESTATE

Arms-length sales of singlefamily homes this quarter

3.7%

Decrease in sales of singlefamily homes from last quarter

13.4%

Increase in sales of singlefamily homes from last year

$88

Median price per square foot

307

Sales in the most expensive category (more than $200 per square foot)

33

Homes valued at more than $1 million sold

The parish house for the Philadelphia Episcopal Cathedral PHILADELPHIAREALESTATE.COM

13

Homes valued at more than $1 million sold a year ago

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WEEKLY BRIEFING

MANUFACTURING

Maryland Defense Contractor Moving Staff To Lansdale

Corbett Unveils PLCB Plan, GOP Leaders Mull Alternatives

RETAIL

Philadelphia’s Top Luxury Retailers Per Lei 2 E. State St., Media Sophy Curson 122 S 19th St, Philadelphia Nicole Miller Philadelphia 200 S. Broad St., Philadelphia

Cobham plc’s Lansdale facility

Frank Agostino 840 W. Lancaster Ave., Bryn Mawr

SUBMITTED

British defense contractor Cobham plc will lay off 138 employees and close two Maryland locations and move operations to Lansdale, Pa., The Baltimore Sun reported this week. About 70 of the cut positions will be relocated to the Lansdale site, the company announced. “It is with genuine disappointment that Cobham must take these actions due to the contraction of the US defense market for our products,” the company said in a statement. ENERGY

DEP Receives $7.25M, Revives Solar Program The Department of Environmental Protection announced it received $7.25 million from the Commonwealth Financing Authority to complete the agency’s Sunshine Solar Program. The program had been in a waitinglist phase since August 2011 because the demand exceeded available funds. “This additional funding will go a long way to help fund solar projects for homeowners and small businesses across Pennsylvania,” DEP Secretary Mike Krancer said. “The funding is enough to provide rebates for all projects currently on the waiting list and...400 additional installations.”

Burberry 1705 Walnut Street, Philadelphia

Governor Tom Corbett laid out his plan for privatization of sales of liquor and wine in Pennsylvania during a press conference Wednesday afternoon. The move will give consumers in the Commonwealth a choice “virtually every other American has today,” the governor said in his opening remarks. Over a four-year transition to privatization, 1,200 retail licenses for wine and spirits will be auctioned off by counties. Businesses eligible for application include grocery stores, convenience stores, pharmacies, large retailers and beer distributors. As in other states, Pennsylvanians would be able to purchase beer, liquor and wine in one store, the governor said. Selling the necessary licenses will allow the state to make a $1 billion investment in public education, focusing on safety, early learning, science and technology programs and individualized learning. Senate President Pro Tempore Joe Scarnati, R-Jefferson, said before the announcement that he would be willing to hear privatization proposals to sell off the state liquor system, but he supports legislation that would change how the Pennsylvania Liquor Control Board does business, ultimately allowing it to make more money. For several years Senate Republicans have pushed for “modernization” plans making the state system more convenient to consumers — and profitable for the state.

IT’S TIME TO GIVE THE PEOPLE OF PENNSYLVANIA WHAT THEY WANT: CHOICE AND CONVENIENCE.’ —GOVERNOR TOM CORBETT

“I think we can put a couple trains on the track and continue to work through this,” Sen. Scarnati said. Modernization reforms, involving changes to pricing, hiring and retail operation, could make the state $75 million to $100 million annually, according to Sen. Scarnati, who said that money could flow to the state budget. The LCB brought in more than $1.5 billion in sales in fiscal 2010-11, $105 million of which went to the state’s general fund. But the state would still control the system. Speaker of the House Sam Smith, R-Jefferson, said he envisions Pennsylvania considering a hybrid plan that allows some private sales, such as beer in grocery stores, or allowing beer distributors to buy licenses to sell wine while keeping spirits under state control. “It seems to me, logically, that here what we might end up with is a hybrid where you’re succeeding in providing private opportunities but not exactly abolishing the system as we know it,” he said. Pennsylvania Independent contributed to this report.

Tiffany & Co. 1414 Walnut Street, Philadelphia Joan Shepp 1616 Walnut St., Philadelphia Adresse 1706 Locust St., Philadelphia Boyds 1818 Chestnut St., Philadelphia Barneys New York Co-Op Philadelphia 1811 Walnut St., Philadelphia Lagos Fine Jewelry 1735 Walnut St., Philadelphia Saks Fifth Avenue 2 Bala Plaza, Bala Cynwyd Barbour 1517 Walnut St., Philadelphia Knit Wit 1718 Walnut St., Philadelphia Commonwealth Proper 1732 Spruce St., Philadelphia RACKED.COM

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REGIONSBUSINESS.COM

WEEKLY BRIEFING

Proposed City Casino Receives 9 Pct. Investment

EDUCATION

Faculty Union: Strike Threat Serious

GAMING

Steve Hicks, president of the Association of Pennsylvania State College and University Faculties, told The PatriotNews of Harrisburg that his union and the 5,000 members who comprise it are approaching a “point of weariness.” “If we’re not going to get a deal done, we need to start talking about what day are we going to play the other card,” he said. Though a strike would be the union’s last resort, he said, a strong majority of its members have already given it the go-ahead to call a strike if necessary. Union members have been working without a contract since June 30, 2011.

PHL Local Gaming, LLC, one of six bidders for the available casino management license in Philadelphia, announced business leader Dr. Walter Lomax Jr., together with his family, has committed to make a significant investment in the South Philadelphia-based gaming company at a level that, as presently constituted, would equal about 9 percent of the total equity in the venture. It was also disclosed that the Lomax family will, along with other investors, have the opportunity to make additional equity investments in PHL Local Gaming LLC, up to a total of $40 million, over time. As part of the Lomax investment, Dr. Lomax will become a member

IN ADDITION TO CAPITAL, THEY BRING PROVEN BUSINESS ACUMEN.’ —JOSEPH PROCACCI, CEO OF PHL LOCAL GAMING

of PHL Local Gaming’s Board of Managers. While other investors may, eventually, be invited to participate as stakeholders, it has been determined that Joseph G. Procacci, who conceived the PHL concept, and who serves as the company’s CEO, will always retain 60 percent of the gaming entity’s equity. Commenting on the Lomax investment, Mr. Procacci said:

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Joseph Procacci (second from left), CEO, PHL Local Gaming, LLC., poses with Bennett Lomax (far left), CEO, Lomax Companies, Walter Lomax Jr., M.D. (center), and Joseph Canfora (far right), president, PHL Local Gaming, LLC. SUBMITTED

“We are very excited to have the Lomax family with us as we move forward to the next level of what’s expected to be a very competitive bidding process. They are another businessfocused family with strong

South Philadelphia roots, and they will play an important role. In addition to capital, they bring proven business acumen, and an exceptional, local and national network of potential supporters.”

31 JANUARY 2013

REGIONSBUSINESS.COM

RESTAURANT ROUNDUP

WEEKLY BRIEFING EXECUTIVE BOOKSHELF

Venturing Into Capital Investing

15ANDWALNUT.COM

Cheesecake Factory: Plans for a Cheesecake Factory site at the corner of 15th and Walnut in Philadelphia were presented at a recent Center City Residents Association meeting. A sixlevel project on that corner would offer two floors and an outdoor terrace to the restaurant chain. FOOBOOZ.COM

In his classic bestseller Venture Capital Handbook, leading venture capitalist David Gladstone showed companies how to get funding and work with early stage investors. In his revision of the classic, Venture Capital Investing, he looks at venture capital through the eyes of the investor. Mr. Gladstone shows VC investors and angels exactly how to weed through scores of business proposals and find the gem that will deliver outstanding returns, especially in soft economic times.

11

MUST-HAVE APP

Thumb Need immediate feedback on an idea? Post a question to Thumb, and you can expect more than 30 votes or opinions in less than five minutes, according to user Ben Lang. Random users can also vote on posted photos, if business owners want a new design critiqued. The free app is available on Android and iOS. GOTTA-HAVE-IT GADGET

Seagate 4 TB Hard Drive The Seagate FreeAgent 4 TB external hard drive ($304) works on both Macs and PCs and has the storage space to hold about 2,000 HD movies. This hard drive requires a GoFlex USB 3.0 or FireWire 800/USB 2.0 adapter.

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31 JANUARY 2013

REGIONSBUSINESS.COM

DEALBOOK PHARMACEUTICAL

PolyMedix Considers Sale

Radnor, Pa.-based biotechnology company PolyMedix, Inc. is working with financial advisor Canaccord Genuity Inc. to discuss a potential sale of the company or its assets, the company announced last week. Canaccord will review the company’s strategic and financial alternatives, including a licensing transaction for its lead antibiotic compound, brilacidin, according to the company statement. The company’s cash balance does not allow it currently to fund any new clinical trials.

SOFTWARE

HEALTH CARE

InvestorForce Sold For $23M

Endoscopy Center Acquired

Investment index manager MSCI Inc., announced it has entered into a definitive WE ARE VERY EXCITED ABOUT agreement to acquire Wayne, Pa.-based investment software THE BENEFITS THIS company InvestorForce Holdings, TRANSACTION WILL BRING TO Inc., from ICG Group, Inc., of RadOUR CLIENTS AND EMPLOYEES.’ nor, Pa., for a total of $23.5 million. —JIM MORRISSEY, INVESTORFORCE CEO The transaction is expected to close in the first quarter of 2013, subject to customary closing condecision support tools to institutional ditions. investors across all client segments and “We believe the combination of MSCI asset classes.” and InvestorForce presents a unique Jim Morrissey, CEO of Investoropportunity to strengthen the network Force, said, “InvestorForce’s goal has between asset owners, investment long been to drive efficiencies for consultants and managers around the and expand the influence of the world,” said Henry Fernandez, Chair- investment consultant. We believe that becoming part of man and CEO, MSCI Inc. “This acquisition enhances MSCI’s MSCI, with its global footprint position as a leader in performance and resources, will significantly analysis and risk transparency and fur- enhance our ability to do just thers our goal of providing investment that.

Physicians Endoscopy acquired a majority share of the Endoscopy Center of Bucks County in Newtown, Pa., the group announced last week. The deal, which took place December 31, 2012, was PE’s sixth acquisition of the year. Eight physicians currently work at the three-procedure center, which first opened in 2006. Its staff is expected to perform more than 7,000 procedures each year. YOUTH SPORTS

Nike Signs Equipment Deal With Regional Soccer Group Nike and Eastern Pennsylvania Youth Soccer signed a four-year deal making Nike the group’s sole provider of apparel and equipment. Financial terms were undisclosed. Nike will also provide the official game ball for Eastern Pennsylvania State Cups.

31 JANUARY 2013

POLITICAL COMMENTARY

REGIONSBUSINESS.COM

13

Councilman: Overturned Veto Will Slow Development

Timothy Holwick is a freelance writer covering Philadelphia government. Find more coverage at citycouncilmatters.com.

CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.

Philadelphia City Council members voted last week to overturn Mayor Michael Nutter’s veto of a bill that would change the five-month old zoning code. The bill, introduced and championed by Councilwoman Jannie Blackwell, expands requirements for developers to notify neighbors of the nature of their project. Mayor Nutter ostensibly vetoed the bill because he felt the new zoning code should be fully implemented before bills are passed altering it. Some council members felt the requirements placed too much of a burden on developers and would result in the unnecessary slowing of progress on certain projects. The bill chiefly concerns the role of Registered Community Organizations (RCOs) in the process of development that involves zoning variances or special applications with the City

SUSAN SERMONETA

Planning Commission. RCOs are community groups based upon geographic borders that represent property owners and other stakeholders in a given neighborhood or defined area. Prior to the bill, developers were required to provide written notice and information to RCOs on any planned projects that would bring them before the zoning board, which is often the case for projects of any particular significance. After a required period of time, there would then be a single

meeting for the RCO and developer to discuss any concerns. The bill expands this process greatly by requiring developers also to notify every property owner, in writing, within a oneblock radius of the proposed project as well as the council member for that area. Additionally, the developer must provide written notice of the meeting to the public and allow for their participation. Under the bill, the council member or other interested RCOs may request additional

meetings through the Zoning Board. The overturning of a mayoral veto requires a two-thirds majority in council, and here council voted 13-3 in favor of the reversal. Councilman Dennis O’Brien was not present to vote. Councilman Bill Green was the most vocal in his opposition to the bill, stating that council would “rue the day this veto was overturned” because the changes would slow down development and job creation. Councilman Green felt that some developers would simply have too much trouble complying with the heavy notification requirements. Councilwoman Blackwell responded to Councilman Green’s statements by stating they were “simply not true.” Apparently the majority of City Council agreed and her colleagues gave her the two-thirds majority to force her bill into law.

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31 JANUARY 2013

POLITICAL COMMENTARY

REGIONSBUSINESS.COM

Obama Appointments Set Dangerous Precedent

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

CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.

A federal appeals court recently dealt President Obama a humiliating defeat and political setback. A panel of the D.C. Court of Appeals unanimously struck down several so-called “recess appointments” to the National Labor Relations Board. The court ruled Obama had abused his powers and acted when the Senate was not actually in recess. It was a major blow to Obama and those encouraging him to rule by fiat and a “unitary executive model” that sidesteps the duly elected Congress. Their scheme is pretty simple: If Congress won’t pass Obama’s environmental legislation because lawmakers think it’s bad policy, get the EPA to use rulemaking to accomplish the same thing. If they can’t ram more gun control laws through Congress, just issue executive orders. If the

Senate hasn’t yet exercised the power to confirm vetted nominees, just wait until the senators aren’t here and make “recess appointments” that don’t require confirmation. It’s disdain and contempt for our constitutional system of checks and balances. The court’s opinion — “Allowing the president to define the scope of his own appointments power would eviscerate the Constitution’s separation of powers” — was a pretty strong rebuke. It’s confirmation that the separation of powers created by our founders is a check and balance, and a guard against an imperial presidency. But the Obama Administration did what has become one of its hallmarks: It doubled down. The NLRB chairman said it would keep doing business as usual.

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Without the illegal appointments the NLRB lacked a quorum. That throws into question several hundred of its rulings. The board wants to play “chicken” by continuing to make rulings. Presumably it believes it can do this pending Supreme Court review. The proper response would be to constitute the NLRB by the proper means — getting nominees confirmed by the Senate. All this has special significance for the business community, most of which objected to the appointments. They are now faced with uncertainty and serious questions about NLRB rulings made by the illegal appointees. Additionally, the business community is faced with a potential scramble in other sectors. One specific example is the “recess” appointment of Richard Cordry

to head the Consumer Financial Protection Bureau. The CFPB holds sway on rules clarifying how lenders can satisfy new mortgage standards where clarity and certainty is vital. The confusion and chaos caused by these appointments are only symptoms of a disease that must be cured. No president is above the law. Surely there will be other court challenges to unconstitutional power grabs by the administration. Congress isn’t without a few swords in this fight. They could de-fund the NLRB as early as March when the continuing resolution expires, for one small example. The beginning of the second Obama term looks like a rough ride. It doesn’t need to be that way. Abiding by the rule of law is the best way to smooth the path.

31 JANUARY 2013

PENNSYLVANIA POLITICS

REGIONSBUSINESS.COM

‘Death Tax’ Reforms Aim To Save Family Businesses Melissa Daniels is a reporter for PA Independent, a part of the Franklin Center for Government and Public Integrity

CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.

HARRISBURG — The family business — an epitome of the American dream, where the entrepreneurial spirit is alive and well. Of course, reality tests these dreams. Businesses may not make it past their first year, let alone their first generation. Their business plan may have failed. Maybe they didn’t find an audience. Or maybe overhead costs may have gone up unexpectedly. But, some of these businesses actually do OK. Some are corner bakeries where families buy cookies every holiday. Some are privately held retail, selling diamonds or suits or carpeting. Some might even find themselves on the Fortune 500 list, one day. But here in the Keystone State, there is another concern that owners of family businesses have to deal with — passing down one of these businesses from one generation to the next comes with a tax bill from the Commonwealth of Pennsylvania. Should the main owner pass away and will the business assets onto a family member, those assets are taxed 4.5 to 15 percent. Lawmakers in Harrisburg are looking to end this practice this session. Efforts to exempt business assets from the inheritance tax are led by Rep. Steve Bloom, R-Cumberland, and Senate Majority Leader Dominic Pileggi, R-Delaware. Those same lawmakers successfully passed a similar exemption for family farms last year. Rep. Bloom said it’s a way to make Pennsylvania more

Beiler’s Bakery at Reading Terminal Market.

business-friendly, and he’s received bipartisan support from lawmakers representing urban and rural districts, who seem to agree that the tax is unfair. (It is, in a way, rather medieval, like paying taxes to the king to continue to live on the estate where you were born). As Pennsylvania lawmakers enter this debate, they are rightly considering the effects the exemption would have on the state’s revenues. Department of Revenue calculations estimate a loss of $9.9 million in fiscal 2013-14, though that would increase by several million over the next few years. But the figures are a drop in the bucket considering the total revenues the inheritance tax collects on an annual basis: estimates for total inheritance tax collection in 2013-2014 are more than $886 million. But taking out this revenue stream plays into a larger conversation about what Pennsylvania lawmakers are doing about the business tax

STEPHEN BUGNO

environment in the first place. The capital stock and franchise tax phase-out continues, and eliminating the corporate loan tax is also up for discussion. Officials from the Corbett administration have said the governor is even eying lowering the corporate net income tax from 9.99 percent, the highest in the nation. While that’s probably more of a pipe dream than anything else, considering revenues, the administration has made no small effort at its push to appear business friendly. So, maybe removing the inheritance tax on business assets ends up being a discussion about how lawmakers can reshape the business tax environment. Maybe the system should be based on fairness and equity, as opposed to collecting on what’s available and on the books as taxable. Maybe then, Pennsylvania’s family owned businesses would have a little bit more of a shot at staying in it for the long haul.

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2014 ELECTION

Wolf Likely in Governor’s Race Businessman and former Pa. Revenue Secretary Tom Wolf says he’s likely to jump into the Democratic primary for governor. “I will likely be running to seek the Democratic nomination for governor. I really want to run,” he told the Pittsburgh Tribune-Review. “We could do so much better, and I think I bring a unique inside-outside perspective of having run a business, created jobs and also worked in government,” he said. But he won‘t run if “something convinces me that that is a fool’s errand.” Mr. Wolf, 63, presently owns and operates Wolf Industries, a building supplies wholesaler in York, Pa. He served as Revenue Secretary from 2006 to 2008 under Gov. Ed Rendell. —PoliticsPa.com

Murphy On Race: ‘Not Happening’ Patrick Murphy is a veteran and former Congressman, but he won’t be a candidate for Governor in 2014. The Bucks County Democrat dismissed rumors that have circulated recently in some Pa. Democratic circles. It’s “absolutely not happening,” he said. Mr. Murphy represented the 8th district in Congress from 2007 to 2011 and ran for Pa. Attorney General last year. He served in Iraq from 2003-2004 as a JAG Corps attorney with the U.S. 82nd Airborne Division. He’s presently a partner at the firm Fox Rothschild. Only two Democrats — former Department Of Environmental Protection Scretary John Hanger and Cumberland County pastor Max Meyers — have officially announced a bid. —PoliticsPA.com

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31 JANUARY 2013

2013: YEAR OF THE INNOVATOR

REGIONSBUSINESS.COM

INNOVATION

PACT Names Enterprise Awards Finalists The Greater Philadelphia Alliance for Capital & Technologies named its finalists for the Enterprise Awards. Winning businesses will be named at the Enterprise Awards 20th Anniversary Black-Tie Gala, to be held May 9 at Valley Forge Casino Resort. Technology Company of the Year Health Advocate Lockheed Martin IS & GS – Defense Quintiq Momentum Dynamics CEO Andrew Daga beside his invention, which wirelessly powers electric vehicles like the Chevy Volt. SUBMITTED PHOTO

CAPITAL SEEKERS

Momentum Dynamics Electric cars are chic, green and frustrating for drivers who don’t have eight hours to wait for the car to charge. That’s the cue for Andrew Daga. Steadily, but almost quietly, Philadelphia has become a hotspot for entrepreneurs. The combination of great ideas, available capital and a welcoming environment have set the stage to make 2013 a breakout year for innovation and new businesses. To Learn More ... For more information on sponsorship opportunities or to suggest story ideas, call our main office at 610-940-1656. The web: RegionsBusiness.com Facebook: Facebook.com/regionsbusiness Twitter: @RegionsBusiness Sponsored by

Business: Momentum Dynamics Founder: Andrew Daga Contact: andrew.daga@ momentumdynamics.com

BY BRANDON BAKER

A

ndrew Daga experienced his light-bulb moment — perhaps in a more literal sense than most — while working with both NASA employees and Lockheed Martin contractors on developing solar power technology for the Department of Defense. In the process realizing that gas prices, circa 2008, had elevated to $4 per gallon, he decided to capitalize on the inevitable demand for electric-powered cars. Today, he and his 15-person team at Momentum Dynamics boast what is debatably the most viable wireless charging technology for electric cars. “It occurred to me that the average consumer would not be willing to plug in their car for eight hours a day,

on the road, waiting in the snow,” Mr. Daga said. “So, I found the technology, I found the team, and we started to develop it.” Mr. Daga’s technological gamble originally started with the intention of licensing through a Boston startup, until his chief scientist advised him that, after seeing an initial prototype, the Momentum Dynamics team “could do better.” A short four weeks later, they did. “You put together a mix of talent, inspiration from another company, and great ideas, and you get results,” Mr. Daga said. “There’s a misconception that projects need to take a long time to develop, and they don’t.” Since launching Momentum Dynamics in 2009 and crafting the original, more skeletal version of the charger, the company has been perfecting it in the form of a 30,000-watt, 10,000-volts wireless device akin to most wireless phone chargers, but producing enough energy to charge an electric car three times faster than the standard.

-----------------------------Technology CEO of the Year EvolveIP, Thomas Gravina iPipeline, Tim Wallace The Neat Company, James Foster -----------------------------IT Innovator Award of Excellence Mobiquity Rajant Corporation Relay Networks -----------------------------Emerging Technology Company InstaMed Matcor SkillSurvey -----------------------------Technology Startup Company CloudMine ThingWorx Zonoff Please see Page 20 for the rest of the list

31 JANUARY 2013

2013: YEAR OF THE INNOVATOR

REGIONSBUSINESS.COM

BY BRANDON BAKER

F

THE NEW

DIMENSION OF TELEVISION

Forget 3D; the newest dimensions in television are those of your tablet

@OneTwoSeeTV

OneTwoSee

info@OneTwoSee.com

aster than you can say “one, two, three,” second-screen TV development company OneTwoSee has more than tripled its employee count. Starting with co-founders Jason Angelides and Chris Reynolds in early 2012 as part of the Seed Philly incubator, the company entered 2013 boasting nine employees and a lineup of major-player clients that include Comcast, DirecTV and NBC. “This market, it’s moving so fast,” Mr. Angelides said. “I’ve seen the Internet growth phase and the mobile phase, but this phase we’re seeing now — interactive television — it’s just mind-blowingly fast-moving.” The company, based in Center City at 1650 Arch Street, began testing for its social TV platform with reality television shows like “The Bachelor.” However, the bulk of OneTwoSee’s ongoing business involves application development for NBA, NHL and MLB sports programming. “Second-screen viewing is a fundamental paradigm shift in television viewing, and 80 percent of people watching television are said to have a second-screen device in their hand — whether it be a tablet, a PC, or a phone,” Mr. Angelides said. “So, the question is, ‘What do you put in front of them to bridge the digital and linear gap?’ And with sports, we’ve done a pretty good job of it.” Second-screen features for sports broadcasts include player coverage through Facebook and Twitter integration, fan photos, ingame statistical analysis and breaking news. When planted on the couch in his off-time, Mr. Angelides said he personally uses the platform. “I may not be the Facebook generation — I’m 45 years old —but [our team uses these applications] on a regular basis,” he said. “Sometimes, when I watch TV, even if I have high-def, I can’t see who’s on the ice, or the camera angle’s not right. This way, I get the play-by-play on what’s happening.” Despite the alarming rate at which interactive television technology is developing, Mr. Angelides isn’t intimidated by the path ahead. “You can look out five years and say, ‘Well, a lot of this stuff is going to move into the smart television,” and that’s probably true,” he said. “But if you come back to the basic premise, the paradigm shift is happening where people want to complement the broadcast, and we understand what our mission is.”

OneTwoSee.com

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2013: YEAR OF THE INNOVATOR

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No Outsourcing Liability For Background Checks

Mark A. DiAntonio, Esq. focuses his practice on civil litigation and employment law matters. He can be reached at mark@diantoniolaw.com or (215) 609-1563.

CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.

Employers outsourcing their employee background checks should heed the warning of a local federal court judge: You can’t outsource legal liability. Being involved to some extent in the process should help employers avoid legal liability. However, paying a “gatekeeper” to perform searches and send you “qualified” employees only may be hazardous to your bottom line. In a recent case in the U.S. District Court in Philadelphia, the Court faced a situation where employers contracted with LexisNexis to perform background checks on employees and job applicants, to identify any negative history. LexisNexis assigned a “competitive” or “noncompetitive” score based on the background check. Two individuals applied for jobs at Family Dollar Stores and Rite Aid, and the searches revealed reports of alleged thefts at their prior employers. LexisNexis allegedly assigned both individuals “noncompetitive” scores and sent letters indicating that a search revealed a report

Timely updates

of an alleged theft at a prior employer. The individuals could contact LexisNexis — not Family Dollar Stores or Rite Aid — if they wished to dispute the information. Both alleged they asked LexisNexis for additional information, but neither received the information before an “adverse action” occurred, meaning they did not get the jobs. The employers did not participate in this process. The individuals brought claims under the Fair Credit Reporting Act (“FCRA”), which contains provisions regarding employee background checks. Potential exposure under FCRA is not trifling. It includes actual damages, which consist of alleged harm to reputation and missed opportunities, as well as emotional distress; statutory penalties up to $1,000 per incident; punitive damages; and attorney’s fees. The Court denied the request to dismiss the lawsuit, explaining that before an adverse action can be taken against a job applicant or employee

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based on a background check, FCRA requires the applicant or employee to receive a copy of the background report and have a chance to respond. Significantly, the Court noted that the employers may be liable under FCRA for the actions taken by LexisNexis on their behalf. In other words, employers cannot escape liability by hiding behind an outside vendor when an adverse employment action occurs. To protect against such a claim, or at least reduce the potential damage, employers can adopt these proactive measures: Double-Check the Checker — Employers should assure outside vendors don’t make decisions without the employer’s input. Employers should assure they receive the background reports, and that they have some degree of participation in any employment decision based on that report. Employers permitting an outside vendor to perform background checks to “weed

out” unsuitable candidates, without any involvement, run the risk of exposure under FCRA. Timing is Everything — Employers should assure the applicant or employee has the opportunity to respond to a background check that may be used to disqualify, discipline or terminate the applicant or employee before adverse action occurs. In this recent case, the Court’s primary concern was the timing of events, where LexisNexis allegedly made an adverse employment decision without giving the individuals a chance to respond. Indeed, the “noncompetitive” score could have been used to support an adverse employment action, so long as the individual had a chance to respond before adverse action occurred. While there are measurable benefits to conducting employee background checks, it’s important to assure they’re performed correctly so employers don’t expose themselves to potential liability under FCRA.

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31 JANUARY 2013

2013: YEAR OF THE INNOVATOR

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Education Conference Brings Hundreds to City

Patti Grayson, a fourth-grade teacher at Hampton Roads Academy in Newport News, Va., uses Legos to build a better school at EduCon. The annual three-day conference, held last weekend, brings together hundreds of educators from across the country to discuss the future of education. This year’s keynote speaker was William Hite, superintendent of the School District of Philadelphia. TWITTER.COM/BALDY7

Philadelphia a Mayors Challenge Finalist Philadelphia is one of 20 American cities in the running for a $5 million grand prize in the Bloomberg Philanthropies Mayors Challenge. The challenge seeks “innovative ideas that solve major challenges and improve city life — and that ultimately can be shared with cities across the nation,” according to its website, mayorschallenge. bloomberg.org. Four runners-up in the challenge will receive a $1 million prize. According to the challenge, Philadelphia will “develop a project that will revolutionize how Philadelphia tackles major urban challenges and achieves meaningful change. “Called the Philadelphia Social Enterprise Partnership (PSEP), PSEP changes how

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city government interacts with the private sector by engaging entrepreneurs in framing social challenges and seeking solutions. “With city government as an active partner, providing data and feedback throughout the process, the concept provides a new model for urban prob-

lem solving. “This project will be run in collaboration with Good Company Ventures, a leading social enterprise incubator in Philadelphia.” The Bloomberg Philanthropies Mayors Challenge will reveal the winners in the second quarter.

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31 JANUARY 2013

2013: YEAR OF THE INNOVATOR

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‘Original Entrepreneur’ Ben Franklin Inspires Coworking Office Space Plan

INNOVATION Continued from Page 18 -----------------------------CleanTech Company of the Year Holganix OxiCool Renmatix -----------------------------Investment Deal of the Year

BY BRANDON BAKER

1701 Walnut Street in 2011. Walking into the space today, Michael and Jennifer Maher members see a chic, substantialare the proud new parents of ly-renovated space with three two: their three-month-old son private offices, a shared kitchen, and four-month-old business, two phone rooms, a spacious Benjamin’s Desk. shared conference room and Officially launched in October a large, open area that houses as what they describe as a “pre- eight large-sized tables and mier” coworking space, Benja- desks. The launch, Mr. Maher said, min’s Desk first manifested as a loaded cloud bubble of ideas has been a resounding success when Mr. Maher read about so far. The space currently has 50 the growth of the shared-space members, representing 22 difindustry in an article. After mulling it over and doing ferent companies. That list, he his homework, exploring other said, continues to grow at a spaces in New York and Boston lightning-speed pace. with Mrs. Maher, the two waged “We think [coworking spaces] their bets by leasing a space at represent a trend that’s here to

stay,” Mr. Maher said. “For us, we want our members to be able to say, ‘I grew my revenues X amount in this space because of where I worked and who I met.’ So the collaboration part of our business isn’t just a buzz word, and neither is the creativity part. We live and breathe it.” The two are fans of Benjamin Franklin’s jack-of-all-trades image, and Mr. Maher cited him as the “original entrepreneur.” He and his wife often wonder, he said, what was on his desk at any given time, and thought it to be an appropriate title for the shared space’s melting pot community. Keeping up with their momen-

DIARY OF A STARTUP

-----------------------------Emerging Life Sciences Company CD Diagnostics Halfpenny Technologies Monitorforhire.com

tum, the Mahers will soon be announcing what Mr. Maher called a “big partnership” with a firm that will be moving into their space. More insight into what the space has in the works, he said, is soon to come.

Wharton Course Helps Entrepreneurs Worldwide BY TSIVI RAVI

Christian Terwiesch

THE WHARTON SCHOOL

A farmer from Africa with only one tractor. A worker at a loading dock. A manager of an assembly line making electronic components. These small business workers want to make their business more productive but may not have the resources to go to the Wharton School. With Wharton professor Christian Terwiesch’s course on Coursera, people all around the world can take his class, “Introduction to Operations Management,” and learn how to use the operations management tools to enhance their businesses, lower costs and better serve their customers. “I was curious to see if we could use the technology to increase the productivity of one faculty [member]

Kenexa Liquent SevOne

and dramatically reach more people,” Mr. Terwiesch said. He began teaching his course in September. Approximately 90,000 users registered, and around 5,000 completed the course. According to Mr. Terwiesch, 80 percent of the registered students were also working. Many of the students noted in the class’ discussion forum that they took the course to enhance their businesses. Mr. Terweisch will teach his online class again this April, hoping to make the course better suited to his student base by emphasizing how to implement the lessons learned in class as opposed to how to study for exams. This article was originally published January 29 in The Daily Pennsylvanian.

-----------------------------Life Sciences Startup Company Kerathin Trice Orthopedics Vascular Magnetics -----------------------------MedTech Honoree: Leadership: Secant Medical -----------------------------Legend Award (lifetime achievement) Honoree: David L. Cohen, Executive Vice President, Comcast Corporation

31 JANUARY 2013

REGIONSBUSINESS.COM

CHAMBER REPORT DELAWARE COUNTY CHAMBER

EASTERN MONTGOMERY COUNTY CHAMBER

Learn Business Basics at Chamber 101 Event Eastern Montgomery County Chamber of Commerce’s Chamber 101 allows prospective members to learn of the benefits of joining a chamber of commerce. The event will be held 8:30 to 9:30 a.m. February 1 at the chamber office. Call 215-887-5122 or email debbie@emccc.org to register. LOWER BUCKS COUNTY CHAMBER OF COMMERCE

Chamber Develops App The Lower Bucks County Chamber of Commerce, with the assistance of BrickSimple LLC, has developed a free app for both the Android and iOS markets. The app “allows users to view Chamber events and share them to their calendar, Facebook and/ or Twitter. It also provides users with a directory of Chamber members and businesses,” according to the app description.

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GREATER PHILADELPHIA CHAMBER OF COMMERCE

Governor Corbett to Address Chamber The Greater Philadelphia are: Lt. Governor Jim Cawley; Chamber of Commerce’s annual Chief of Staff Steve Aichele, “Conversation with the Governor” Office of the Governor; Adjureturns 4:30 to 7 p.m. Thursday tant General Major General at The Academy of Wesley Craig; Secretary Natural Sciences. of Aging Brian Duke; Channel 6ABC’s Secretary of BankMatt O’Donnell will ing Glenn E. Moyer; moderate an interview Secretary of General of Governor Tom CorServices Sheri Phillips; Secretary of Labor bett before hundreds and Industry Julia of members of the Hearthway; Secretary Philadelphia business of Administration community. Corbett Kelly Powell Logan; Tickets to the event are $80 for members and $160 Inspector General Kenya Mann Faulkner; and Secretary of the for non-members. Also attending the discussion Commonwealth Carol Aichele.

Perspective. Delivered weekly. $40 annually. To subscribe, call 877.700.6245 or 215.627.6397

REGION’S BUSINESS A JOURNAL OF BUSINESS & POLITICS

Panel To Discuss Local Impact of ‘Fiscal Cliff’ “Jumping off the Cliff – Analyzing the Fiscal Cliff and the Impact of the American Taxpayer Relief Act on Business and the Economy” will be held 8 to 10 a.m. February 1 at the Delaware County Chamber of Commerce, 1001 Baltimore Pike, Springfield, Pa., in the Lower Level Conference Room. Tickets to the event are $40. Panelists include: Peter Barsz, CPA at Merves, Amon & Barsz; Luke Tilley, Regional Economic Advisor at Federal Reserve Bank of Philadelphia; Graham Lee, Political Science Professor at St. Joseph’s University; and Iqbal “Monte” Mansur, Economics Professor at Widener University.

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31 JANUARY 2013

REGIONSBUSINESS.COM

IS NEW PROPOSAL A CURTAIN CALL FOR

CORRUPTION IN STATE COURTS? Pennsylvania’s judicial elections have been a longstanding, problematic process fueled by corruption and special interests. While most states in the country still rely on some type of election to the high courts, legislators from both sides of the aisle are intent on making sweeping changes to restore the public’s faith in Pennsylvania’s judges.

TEXT BY ELISSA VALLANO ILLUSTRATIONS BY DON LEE

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T

here are few issues Pennsylvania’s Democrats and Republicans often agree upon, but every once in a long while, there’s a problem too obvious to ignore. It’s one that requires the attention of both parties, as well as a single-mindedness to achieve the necessary resolution for the greater good. Unfortunately in this case, it’s a crisis within the state’s court system. Senators Anthony H. Williams (D-Philadelphia) and Richard Alloway (R-Franklin) have proposed a bill to end Pennsylvania’s judicial elections and replace them with a commission of 15 members. The commission would consist of four members appointed by the governor, four by the General Assembly and the remaining seven as members of the general public. Sen. Williams is the lead sponsor of the bill with Sen. Alloway (also serving as the Vice Chairman of the Senate Law and Justice Committee) backing the proposal. “As citizens, we have to have utmost confidence in our judiciary, and right now, that’s simply not the case,” Sen. Williams told The Pennsylvania Independent. According to Pennsylvanians for Modern Courts, state elections are currently held in odd-numbered years to fill vacancies. Appellate court and common pleas court candidates run in partisan elections for 10-year terms, while minor court candidates run in partisan elections for six-year terms. The dominant political parties often endorse certain candidates to run, and for trial judges, a candidate may receive the endorsement of both parties. When a judge’s term is completed, he or she can stand for successive 10-year terms in retention elections – which are nonpartisan and uncontested

GOV. CORBETT ON COURT REFORM Region’s Business had a chance to talk one-on-one with Gov. Corbett late last year. In a wide-ranging interview, we asked him about adding judicial reform on his already hefty agenda. Region’s Business: Do you see any room on your agenda or need for judicial reform in Pennsylvania?

Delaware Judges are chosen through a merit selection process, appointed by the governor with the consent of the senate. Governors have adopted executive orders creating a judicial nominating commission to identify highly qualified candidates for judicial appointments. With the exception of justices of the peace, judges serve twelve years (one of the longest terms for state court judges in the country). Judges in Delaware do not run for retention. They must be reappointed through the same process by which they were originally appointed.

Maryland

Gov. Corbett: Do we need judicial reform? If you’re asking me does that mean merit selection for appellate courts, if I saw some willingness from the legislature to go that way, I mean true willingness, I would not be opposed to it at all.

Judges are appointed by the governor with the consent of the senate (except for circuit court judges). Governors have adopted executive orders creating judicial nominating commissions to recommend candidates for appointment.

Region’s Business: The sense we get from business leaders here is that the court system can be rather onerous as they try to get things done. Is there an appetite on anyone’s part to take a hard look at the way the courts operate? Gov. Corbett: The first way you look at it is, how do you get your judges. And I know there have been discussions in the past with people who would like to see merit selection and appointments for the appellate courts. I’ve never heard anyone really want to do that with the common pleas court. But if you’re talking about reform of the individual judges, that falls under the court system itself and outsiders are not going to be able to direct the court. Judiciary guards its own reform of its judges if they need some sort of discipline or education or something like that. The other thing you could be talking about is tort reform. And we have seen some tort reform with the Fair Share Act. We’ll see what bills go into the hopper come next year and see what we think we may or may not be able to make it to my desk. - From the Region’s Business issue of 8 December 2012.

SERGE MELKI

REGIONAL SNAPSHOT

Appellate judges keep their seats through retention elections, but circuit court judges run in contested, nonpartisan elections.

New Jersey The governor, with the approval of the senate, chooses all judges in New Jersey. Judges stand for reappointment after seven years in office, and once reappointed, they serve until they reach the age of 70.

New York The majority of New York’s trial court judges are chosen in partisan elections, with judicial candidates competing in primary elections to determine who will represent the party in the general election. Candidates for the Supreme Court are chosen through a party convention system, in which primary voters elect convention delegates who choose candidates for the judgeships.

Ohio Judicial candidates are nominated in partisan primary elections and are endorsed by political parties. Judges in Ohio are selected in nonpartisan elections. Party affiliations are not listed on the ballot. AMERICAN JUDICATURE SOCIETY (AJS)

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JUDGES ARE SUPPOSED TO MAKE DECISIONS BASED ON THE FACTS AND THE LAW, NOT BASED ON HOW THEIR CAMPAIGN SUPPORTERS WANT THEM TO RULE.’ — LYNN MARKS, EXECUTIVE DIRECTOR PENNSYLVANIANS FOR MODERN COURTS

– up until the mandatory retirement age of 70 years old. The primary issue with contested elections and the catalyst for Sen. Williams’ proposed bill lies in the financing of judicial candidates’ campaigns. Campaign donors will often appear before the judges they help elect, and this unavoidable conflict blurs the line of impartiality. Special interest groups are also active influencers in judicial elections, funding advertising campaigns and contributing to campaigns. This is especially problematic because there are currently no rules of conduct that require judges to recuse themselves in cases involving campaign contributors. “Judges are supposed to make decisions based on the facts and the law, not based on how their campaign supporters want them to rule,” Lynn Marks, Executive Director of Pennsylvanians for Modern Courts, told The Pennsylvania Independent this month. “They criss-cross the state raising tons of money, all while promising to be unbiased when they are elected.” This complication in the judicial process is as far-reaching as its consequences. According to the Brennan Center for Justice at New York University School of Law, a non-partisan public policy and law institute that focuses on the fundamental issues of

democracy and justice, a total of $38.4 million was spent nationally on state high court elections in 2009-10. This figure is slightly less than the last nonpresidential election cycle in 2005-06, but it managed to be the costliest for television advertising. Roughly $16.8 million was spent on television advertising campaigns, and outside forces accounted for nearly 30 percent of all money spent – a number far exceeding four years prior. Pennsylvania is already battling one instance of alleged corruption in its high courts. The trial of suspended Supreme Court Justice Joan Orie Melvin is underway in Pittsburgh where she faces seven counts related to her

alleged use of public resources during her 2009 campaign that eventually culminated in her election. Sen. Jane Orie, her sister, was convicted of 14 counts of theft of services, conflict of interest and forgery last March relating to the incident. She is now serving her sentence of up to ten years in state prison. Adding fuel to the already growing fire, Justice Orie Melvin’s attorneys asked her colleagues on the court to dismiss her charges. She filed a petition earlier this month requesting the remaining six jurists on the high court block her trial and toss out the charges leveled against her. In its 16-page filing, the defense wrote, “Immediate

action by this court is necessary to enforce the separation of powers and compel the dismissal of the constitutionally impermissible charges.” The motion was declined. Pennsylvania seems to be one of the few states willing to definitively tackle these issues of corruption, but the road ahead will be long and hard. If the bill is successful, the state constitution will have to be amended in order to implement a new merit selection process. Such sweeping changes would require approval by the House and Senate in consecutive legislative session, which can be an involved and arduous process in and of itself. If that is achieved, it will then be introduced to voters in a statewide referendum. Best case scenario, the proposal would reach voters by May 2015. It’s an unprecedented time in state’s legal system. The charges against Justice Orie Melvin have turned a spotlight on the corruption born of judicial elections, and the merit selection bill could revolutionize the Pennsylvania judiciary. The bill’s proposed Appellate Court Nominating Commission would be designed with the express purpose of thoroughly assessing judicial candidates, carefully assembling a list of the most qualified candidates, and then presenting them to the governor. The governor would then make his choices from that list of prospective candidates, and those selections would then seek Senate confirmation. After serving an abbreviated initial term, judges will then stand before voters in a nonpartisan, uncontested retention election. If successful, the bill’s outcome would ensure the judges serving on the bench would be the most qualified candidate, not simply the best campaigner. It could serve as a model to the nation, inspiring other states to follow suit and amend their own troubled judicial elections. And in its most basic form, it could offer peace of mind to anyone stepping foot into a Pennsylvania court room.

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31 JANUARY 2013

REGIONSBUSINESS.COM

Supreme Court Facing Big Changes

Supreme Court Justice Joan Orie Melvin was supsended in May of 2012 immediately following an indictment on nine criminal counts alleging she used legislative and judicial staff to perform campaign work. If convicted, Gov. Tom Corbett could nominate a replacement.

With the proposed bill of Senators Anthony H. Williams and Richard Alloway being reviewed by state lawmakers, the future of Pennsylvania’s judicial elections lies in limbo. The bill proposes a hybrid system of appointing appellate judges that stipulates judges can petition state voters for retention after an initial term. But retention is not without its own weaknesses to corruption. The small groups of powerful campaign contributors that are able to sway judicial elections with largely untraceable donations can exact that same influence over retention elections. Retention elections now account for 12 percent of all election spending, an increase of 11 percent over the previous decade. Retention was introduced in Pennsylvania in 1968, and since that time, only one Supreme Court justice (Russell M. Nigro in 2005) has failed to win an additional term. Pennsylvania Supreme Court Chief Justice Ronald D. Castille recently announced

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his plan for running for retention in November despite quickly approaching the state’s mandatory judicial retirement age of 70. If he’s successful in his retention election, and the current retirement age regulation stands, he will have no choice but to step down in 2014, thereby opening the door for Governor Corbett to nominate his replacement. Fellow justice Max Baer will be also joining him on the ballot this fall. Justice Castille was elected in 1993 and retained in 2003. The state’s mandatory retirement age is a source of contention for some Pennsylvania jurists, and its constitutionality is currently being challenged in federal court. Justice Castille has said he remains optimistic about the subsequent outcome, highlighting his 19 years of experience on the Supreme Court bench during a time when stability is so desperately needed in the state’s courts. Pennsylvania has seven justices, but only six are serving due to the trial of suspended

Supreme Court Justice Joan Orie Melvin. If Justice Castille had decided not to run for retention this year, there would have been another hotly contested, partisan election for his seat on bench. It’s a vicious cycle one would predict damned to repeat itself, but a season of change may be on the horizon. Until the outcome of the bill is determined, Pennsylvania’s high courts will be undergoing a number of potential changes, most notably regarding Justice Orie Melvin’s open seat. Her vacancy leaves the court equally divided between Republicans and Democrats – three a piece - and the state constitution indicates that the governor may fill any empty seat on the court as long as it’s within 10 months of an election (which it is). If Justice Orie Melvin is found guilty, Governor Corbett may opt to name her replacement until the seat finally returns to voters in 2015.

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31 JANUARY 2013

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Q&A

31 JANUARY 2013

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DANIEL FITZPATRICK’S

COLLABORATIVE ASSIGNMENT

The Greater Philadelphia Chamber of Commerce Chairman and Citizens Bank regional executive says natural gas and world-class education put the city in the middle of a Renaissance, but business leaders, innovators and government need to work together for improvements to come to fruition.

What’s the elevator pitch for the Greater Philadelphia Chamber of Commerce? The Greater Philadelphia Chamber of Commerce represents its more than 5,000 member companies, which is a wide variety of large, Fortune 100 companies through entrepreneurial businesses — from restaurants to startup technology companies — throughout the Greater Philadelphia region. Why are you the man for the job? That’s actually a great question. I’ve been meaning to ask that myself. I never lobbied to do the job. The role of the chairman is to work on setting strategy and goals for the Chamber for the next year or two, and the attributes that I brought was a passion and caring for Philadelphia and the Greater Philadelphia tri-state

region, and the ability to work collaboratively with leaders from various industries, companies, not-for-profit industries and government. What is the Chamber’s strategy? We believe in creating an environment that facilitates a private industry, working collaboratively with government and the non-profit sector to make the region as attractive for businesses to start their businesses here, grow their businesses here, move their businesses from some other region to this region. What makes Philadelphia attractive to businesses? One of the great stories of the Greater Philadelphia region is our educational industry as well as our life sciences industry. We need to

continue to invest in that, cultivate that, advocate for that and continue to build upon that strength. The unique opportunity we have right now is the Renaissance in manufacturing, due in part to the energy industry that is growing more rapidly, from an investment perspective, in the region due to the shale gas phenomenon. And what that’s doing, obviously, is driving energy costs down for our region, certainly being close to that supply, but it also creates opportunities for the Greater Philadelphia region as a processing site for natural gas as well as an export location. How does your job help with your chamber work? I was always very active with the chamber on its executive committee,

but I also believe it’s very synergistic with my job as the Mid-Atlantic Regional Executive for Citizens Bank, because of my knowledge of the economy from so many great business leaders throughout our region. Knowing what their needs are and how the Chamber can help them achieve their growth and create those job opportunities for businesses in the region makes it, again, that symbiotic relationship. If I can lead the chamber effectively and help grow our regional economy, that certainly helps every bank doing businesses in the Greater Philadelphia region as well as most businesses doing business in the Greater Philadelphia region. Spending weekends devoted to chamber activities, it really is part of my job as a banking industry leader in the region.

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OPINION

Pension Bomb About To Hit Philadelphia-area Families A

Nathan A. Benefield is director of policy analysis for Commonwealth Foundation, Pennsylvania’s free-market think tank. Learn more at CommonwealthFoundation. org.

CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.

re you ready to pay an additional $1,000 in state and local taxes alone? Prepared to see your child’s teacher laid off ? Thanks to bad promises politicians made to good people, a pension crisis facing Pennsylvania threatens our American way of life, homes, cities and schools. Already, more than 675 classroom teachers in Philadelphia public schools received pink slips over the past two school years. This unprecedented trend, following years in staff growth, will likely worsen due to skyrocketing pension costs with no financial safety net built in to protect good teachers. What’s more, homeowners will get socked with the pension bomb, too — for benefits that were promised by politicians but never paid for. School districts’ pension payments (which only cover half the required payments) will rise substantially over the next four years. For Philadelphia families, that cost increase comes to approximately $304 per homeowner, albeit largely born through the Philadelphia wage tax. Homeowners in suburban Philadelphia school districts will see local pension costs increase from between $244 and $626 per homeowner by 2017. As scary as that seems, it is but the tip of this woeful economic iceberg. State government’s pension costs (for state employees and half of school employees’ pensions) are expected to rise by more than $2.5 billion over the next four years — or $523 annually per household. That is, many families will pay more than $1,000 in additional taxes for pension debt we accumulated over the past decade, and get nothing more for their money. So how did we get into this mess? Very simply, it is the culmination of a series of bad politics and policy decisions. In 2001, following an economic boom, politicians thought pensions were well-funded and stock market gains would continue indefinitely, so they decided to boost pension benefits for themselves and government workers — even doing so retroactively.

... homeowners will get socked with the pension bomb, too — for benefits that were promised by politicians but never paid for. When the stock market dropped, lawmakers erred again by voting to put off paying for those losses for years. Those bills are now coming due, and exacerbated by the big investment losses in 2008. But one can understand why lawmakers made the choices they did. There’s a big political payoff for boosting benefits as government unions lobbied heavily for those changes. And there’s little downside to delaying payments (with government unions lobbying for those changes, too). Those costs will be paid through generational theft, foisted upon our children and grandchildren, who are still too young to vote. Ultimately, the only solution is to get politics out of pensions. This can only happen by moving from traditional pensions, where taxpayers provide a guaranteed government income for life, to a retirement plan popular in the private sector, similar to a 401(k). In a 401(k), which most private companies switched to decades ago, lawmakers can’t play politics. If they promise to contribute six percent of salary, they must put that in, and can’t defer those costs to kids and grandkids. Further, 401(k)-style plans are predictable for elected officials, allowing them to plan for all costs and avoid massive property tax hikes, and they’re affordable for taxpayers. Moreover, 401(k) plans offer more convenience for workers. Younger workers especially will benefit from the ability to

take a 401(k) with them as they change jobs instead of forfeiting retirement savings to advance their career. Older adults can pass their remaining 401(k) onto their children, whereas pension payouts end when retirees die, even if they paid in more than they collected. And all workers will benefit from a sustainable retirement system that will actually be there when they retire. Legislation with bipartisan support sponsored by Sen. Pat Browne (R-Lehigh) last session would place all new state and school employees in a 401(k)-style retirement plan. As they say, “when you’re in a hole, stop digging,” and this legislation would stop digging a deeper pension hole and empower new government employees to have ownership over their retirement. However, this reform doesn’t pay off the pension shortfall we’ve already built up by overpromising pensions. These costs will continue to burden state taxpayers, schools and local governments for years. Lawmakers must recognize the impact the pension bomb will have on Pennsylvania, and show courage to defuse it before the fallout reaches our already stressed families. They must resist the urge to repeat the spending splurge of years past, create new programs, or throw money at problems. Moreover, to find funding for pensions without raising taxes on working families, lawmakers must find significant savings through prevailing wage reform, ending corporate welfare, and tackling bloated and wasteful welfare spending. Today, the pension bomb facing Pennsylvania threatens homeowners with massive tax hikes and school teachers and other government workers with layoffs. If our children and grandchildren are to have a prosperous tomorrow, they can’t afford any more missteps from their leaders. Defusing the pension bomb, for their sake, must be job number one for state lawmakers this year.

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OPINION

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Details Needed to Make Court Reform Plan a True Success

T

here’s a great deal of urgency in the state and federal legislatures these days, mostly born out of the trend of government by crisis. While Washington deals with debt ceiling limits and fiscal cliffs, Harrisburg attacks a massive pension crisis and the privatization of the lottery, turnpike and liquor stores. All of those issues demand intense scrutiny and swift action, but in a large and complex world, they cannot be the only entries on the government agenda. In Harrisburg, at least, room has been found on the agenda for at least one more important issue. Philadelphia State Senator Anthony Williams is the lead sponsor of a bill that would start the commonwealth down the road of judicial reform. While that sort of legislation is not, on the surface, the sort of headline-grabbing change that dominates media, it’s importance cannot be overstated. The integrity of Pennsylvania’s judicial system is a bedrock principle and the degradation of that integrity, even if slow and subtle, can cause a steady deterioration of the very fabric of our society. Pennsylvania is currently only one of eight states that elects judges to its highest courts. Under the proposed legislation, which is also supported by Republican Sen. Richard Alloway of Franklin County (vice chairman of the Senate Law and Justice Committee), a 15-member panel would draw up a short list of candidates for

vacancies on the state’s Supreme Court, Superior Court and Commonwealth Court. The governor would then make a selection from that list. Numerous details must be worked out, not the least of which is how members of this select committee are chosen. The goal is to eliminate the conflict created by the need to generate millions of dollars in campaign funds. That influence, however, could be shifted to members of this selection committee and shifted in a rather shadowy manner. The initial proposal has the governor appointing four members and the General Assembly appointing four members. The other seven would be members of the public, but there are no specifics on how they are selected. That’s a glaring loophole, but it might also create an opening for robust debate and discussion that will eventually lead to a strong bill that can sail through the process. Such details are critical, but it’s encouraging to see Sens. Williams and Alloway supporting an important and necessary piece of legislation that will not necessarily produce high-profile political gain, but could lead to the strengthening of a cornerstone of our state’s democracy. If they can extract campaign funds from the selection of judges at the highest level through the creation of a committee whose members are chosen in an ethical manner, it will change Pennsylvania - very much for the better - for generations.

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COMMENTARY FROM ACROSS THE WEB

Pennsylvania Charter Schools Akin to Wild West It’s one thing to observe that publics schools might work better with fewer layers of regulation. It’s a different, and less useful thing, to claim that schools thrive best with NO regulation. But that ideologues’ stance is what ruled the day when Pennsylvania’s charter initiative got started in the 1990s under Gov. Tom Ridge. As a result, oversight is weak. And, predictably, charters in Pennsylvania have become a Wild West giving free rein to quick-buck artists, politicians seeking patronage pits, fringe theorists, and wellmeaning bumblers. CHRIS SATULLO ON NEWSWORKS.ORG, 27 JANUARY 2013

No One Is In Control I personally do not believe the U.S. Government is controlled by shadowy figures lurking behind a smoke screen of faux democracy. If anything, the political and social events of the last few years are evidence that no one is ultimately “in control” and that every player, from the President to the Speaker to captains

EDITORIAL BOARD CEO and President James D. McDonald Editorial Director Karl Smith Associate Editor Terrence Casey

@CouncilwomanBRB

$528 million in property taxes off the table b/c of non-profit exemptions. Time to examine all options. #phillycouncil 24 JANUARY 2013

of industry, is each equally frustrated. If the United States were a software program, it’s clearly poorly maintained with many hasty hacks working around several buggy components. JOHN PAVLEY ON HUFFINGTONPOST.COM, 27 JANUARY, 2013

‘Liberated’ Obama Could Continue to Polarize U.S. Superintendent William Hite and his team are searching for ways to turn around the Philadelphia School District. Basic writing instruction, which the district has largely neglected for years, could help. The district desperately needs a cohesive K-12 writing program, including a healthy dose of castor oil in the form of traditional grammar. CHRISTINA LONG ON PHILLY.COM, 28 JANUARY 2013

HOW TO CONTRIBUTE To contribute, send comments, letters and essays to feedback@regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business. We reserve the right to edit all submissions for content, style and length.

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BY THE NUMBERS

9:32 p.m.

7.9

Time the last Acela train leaves Philadelphia’s 30th Street Station as part of Amtrak’s extended service that started January 28. The train will arrive in New York at 10:45 p.m. The last train to Washington leaves at 10:23 p.m.

3

Number of roundtrips Acela riders must take before March 2 to qualify for a free Acela trip this summer. Vouchers will be redeemable from July 1 to August 29.

8

Number of charter school applications for the 2013-14 school year denied by Secretary of Education Ron Tomalis, which means all applications were denied, including three in the Delaware Valley.

$48,000

Amount paid by Philadelphia councilwoman Blondell Reynolds Brown to settle with the city’s Board of Ethics. She admitted to using campaign funds for personal purposes and failing to disclose income in required statements.

$300,000

Millions of viewers who watched the Season 3 premiere of the PBS show “Downton Abbey,” which is roughly quadruple the ratings for an average PBS primetime show.

Estimated annual savings by SEPTA through reduced electricity costs at its Market Street headquarters.

9.9

$34,706

Millions of viewers who watched this year’s NFL Pro Bowl, down about 8 percent from last year.

Energy rebates received by SEPTA for energy efficiency initiatives at five facilities.

$144,969

Revenue generated by SEPTA through its waste oil recycling program, more than double the amount of money generated in 2010.

$130,385

55%

Percentage of opening weekend box office revenue from the movie “Hansel & Gretel: Witch Hunters” generated at 3-D theaters.

11%

Percentage of opening weekend box office revenue from the movie “Hansel & Gretel: Witch Hunters” generated at IMAX theaters.

$5,634 Average revenue per theater for the opening weekend of “Hansel & Gretel.”

PECO rebates for projects at seven SEPTA facilities that are in review or on a waiting list.

828

Number of tickets to pro sports events distributed last year by Mayor Nutter’s office to the Very Impressive Performers program in recognition of academic performance of city school students.

20

Chip Kelly’s age when the Philadelphia Eagles appeared in their first Super Bowl, which they lost to the Oakland Raiders on January 25, 1981.

0

Number of future Hall of Famers on the 1980 Philadelphia Eagles team that went to the franchise’s first Super Bowl. Their opponents, the Oakland Raiders, had three Hall of Famers.

2009

The year Chip Kelly accepted his first head coaching position, taking over the top spot at the University of Oregon after two years as the offensive coordinator.

1976

The year the Philadelphia Eagles hired Dick Vermeil, the last time the team hired a head coach from the college ranks (though he had experience as an assistant coach in the NFL).

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Region's Business 31 January 2013