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KERN BUSINESS

Vol. 8, No. 2

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Agriculture: Milk wars — cows vs. almonds

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Community Business: Local startup thrives after downturn 8 Finance: Proposal to extend 29 expired tax provisions

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Legal and Human Resources:

Court decision changes significantly California’s reporting time pay rules

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Cover story

Former USC player tackles Kern County agribusiness By Maureen Buscher-Dang

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eith Baughman is competitive, anxious to learn, willing to try something new and committed to working hard to

PHOTO BY JOHN HARTE

Heith Baughman, from left, and his mother Marlene Baughman walk through their family’s almond orchard just northwest of Bakersfield. Heith Baughman is president of HB Ag Inc., which does farming and custom harvesting.

Kern Business Journal 3700 Pegasus Bakersfield, CA 93308

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succeed. The Kern County agribusiness man, who grew up in Arvin, where his family has lived since the Dust Bowl days, was featured last month in Western Farm Press for his use of cutting-edge systems to irrigate his block of almond trees, northwest of Bakersfield. He also has been recognized for his creation of a successful custom harvesting business. In the mid-1990s, Baughman was an offensive tackle for USC, playing on a full scholarship, when he blew out both of his knees. “I was trying to figure out what to do,” Baughman recalled during a recent interview. “When the dairies started coming to Kern County I realized I had an opportunity.” Turn to BAUGHMAN on Page 26

CIF Wrestling, March Meets date changes mean a boom for local hotels Page 12


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Spring 2019

e’re so happy to be building in Bakersfield - and so grateful for the warm, local welcome we got from Valley Republic Bank.”

J EFF E ITTREIM Woodbridge Pacific Group When one of the Woodbridge Pacific Group’s founding partners, Todd Cunningham, an East High School and Bakersfield College graduate, heard that future residential development opportunities were available in Seven Oaks, he jumped on the opportunity to be involved. Three years later, Woodbridge Pacific Group is sharing in the success of the Seven Oaks Master Plan, developed by Bolthouse Properties. Belcourt at Seven Oaks has a gorgeous new community center with a fitness center and pool, modern parks, and is connected to restaurants and neighborhood cultural spots. “Valley Republic Bank was big enough to handle our volume. Hometown enough to really care.” — Jeff Eittreim

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Editor’s Note

The season of hope and promise

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pring is the season of hope and promise. This is true, not only in the spiritual world, but also in business. Water from a stellar snow pack is filling the rivers and reservoirs, trees are blossoming, houses are selling, vacations are being planned and tax season is behind us. Hope and promise was certainly on the minds of a group of local nonprofit leadGlenn Hammett ers who gathered in March to hear Charlie Mulligan, cofounder and CEO of the hugely successful nonprofit giving platform GiveGab, share his advice on how to maximize their efforts during the Kern Community Foundation’s upcoming Give Big Kern giving day. Read Louis Medina’s Q&A with Mulligan to learn the role “customer love” has played in GiveGab’s success, what makes Kern County’s non-

KERN Journal Business

Kern County’s premier business publication Spring 2019 Vol. 8, No. 2 Kern Business Journal is a publication of TBC Media. Copies are available from The Bakersfield Californian, Kern Economic Development Corp., Greater Bakersfield Chamber of Commerce and by subscription. Associate Publisher Virginia Cowenhoven Editor Jim Lawitz Art Director Glenn Hammett Art & Marketing Manager Holly Bikakis To advertise Cliff Chandler cchandler@bakersfield.com 661-395-7521 To subscribe 661-392-5777 Contact us 3700 Pegasus Drive Bakersfield, CA 93308 661-395-7500 kbj@bakersfield.com

profit community unique and six fun ways you can be a part of Give Big Kern. Hope and promise is also at the center of Beatris Espericueta Sanders’ contribution on the history and mission of Adventist Health Bakersfield’s AIS Cancer center, which combines state-of-the-art medical technology and care for the spirit to offer local cancer patients world-class treatment right here at home. Also in this issue is Kelly Bearden’s piece on United Pipe and Steel Fabrication, a growing local business that nearly fell victim to the oil downturn in 2014, before finding success in diversifying its customer base, and is now thriving. Contributing writer Dianne Hardisty takes a fascinating look at the twists and turns in the unlikely legal battle between the dairy industry and almond growers over the use of the word “milk” on the labels of plant-based beverages. The local stakes are high, as both industries are big business in Kern County.

PHOTO COURTESY OF UNITED PIPE & STEEL FABRICATION

Things are looking up for United Pipe and Steel Fabrication, which diversified its customer base in order to survive the oil downturn.

And, Visit Bakersfield manager David Lyman writes how a fortuitous change in scheduling led to a boom for local hotels. With spring comes optimism and our cover story is a testament to the power of positive thinking. Former USC football

player Heith Baughman has used his cando attitude, refusal to accept failure and strong support system to open and develop a successful ag business. Spring has sprung in the pages of Kern Business Journal.

Business announcements Walmart’s 2019 open call for American products

If you’ve ever dreamed of potentially reaching thousands of customers with your American products, now is the time to act. Walmart is accepting applications for its sixth annual open call, scheduled for June 18 and 19 at the company’s campus in Bentonville, Ark. Apply today by visiting Walmart-jump.com for the opportunity to secure a face-to-face pitch meeting with a Walmart buyer. The application deadline is April 30. This year’s open call attendees could secure deals ranging from a handful of stores in local markets, to supplying hundreds, even thousands of stores, Sam’s Clubs and Walmart. com. The two-day event informs, empowers and encourages attendees, while providing effective networking opportunities for local entrepreneurs. “Our customers tell us that products made, sourced or grown in the U.S. are important to them and we work year-round to identify local suppliers and source products that our customers are proud to buy,” said Cindi Marsiglio, Walmart’s vice president of Merchandise Services and U.S. Manufacturing.

“Walmart’s Annual Open Call gives us a unique opportunity to meet entrepreneurs from across the country and discover new,

Bakersfield College’s Fire Technology Program earned a five-year reaccreditation niche and innovative products that fill a need for our customers and support jobs right here in America.” During the 2018 Walmart open call, nearly 600 meetings were held with product pitches including toys, apparel, natural health and beauty aids, and food. Prospective suppliers traveled from 46 states, the District of Columbia and Puerto Rico. More than half of the attending businesses self-identified as diverse, including nearly 25 percent identifying as womenowned.

Bakersfield College, in conjunction with the Bakersfield and Kern County Fire Departments, are proud to announce the firefighter training program, facilities, and curriculum have earned a recommendation for 5-year re-accreditation by the California State Fire Marshal, Department of Forestry and Fire Protection. This accreditation recognizes Bakersfield College’s commitment and dedication to the highest levels of professional fire service training. Caryn Petty, deputy state fire marshal, stated in the accreditation report that “Bakersfield College boasts flourishing

relationships with fire agencies in Bakersfield and Kern County, routinely attracting students statewide to its centrally located campus through its varied curriculum and specialty course offerings. The college has an energetic approach to program enhancement with a strong focus on diversifying student populations while maintaining an unwavering adherence to standardization.” BC’s Fire program was first developed in partnership with Bakersfield Fire Department Chief, Phil Pifer in 1956 and has since expanded tremendously. Today, BC offers five different fire degrees or certificates within the program and ten within the entire Public Safety pathway.


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Agriculture

CALIFORNIAN FIILE

California is the largest milk-producing state in the nation. Kern County’s approximately 50 dairies produce about 10 percent of the state’s output.

Cows vs. almonds

Nutty battle rages over the word ‘milk’ in labels By Dianne Hardisty Contributing Writer

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oooovvve over, Bessie. Plant-based “milk” products are gaining in popularity. But the dairy industry is fighting back. A battle is underway in the nation’s courts and at the Food and Drug Administration over the plant-based milk industry, particularly the producers of almond milk, using the word “milk” on its labels. The dairy industry contends consumers are being confused and misled when the word “milk” is associated with products not produced by cows or other lactating animals. Plant-based milk producers contend the argument is just plain nuts. And, increasingly, federal judges seem to agree. In a case brought against the California cooperative Blue Diamond Growers, the U.S. Ninth Circuit

Court of Appeals dismissed claims that the company “mislabeled its almond beverages as ‘almond milk’ when they should be labeled ‘imitation milk’ because they are a substitute for and resemble dairy milk, but are nutritionally inferior to it.” The court ruled in December that “notwithstanding any resemblance to dairy milk, almond milk is not a ‘substitute’ for dairy milk … because almond milk does not involve literally substituting inferior ingredients for those in dairy milk.” Earlier, a federal court in California blocked a similar lawsuit against the producer of Silk alternative milks by ruling that “It is simply implausible that a reasonable consumer would mistake a product like soy milk or almond milk for dairy milk from a cow. … The first words in the product’s names should be obvious enough to even the least discerning of consumers.” Interestingly, the recent skirmishes over milk label-

ing have roots in a dispute within the dairy industry itself. In 2012, a small Florida creamery was producing an all-natural skim milk, which was a byproduct of its cream production. In the skimming process, almost all of the milk’s naturally occurring vitamin A was lost. Florida law, which mirrors federal law, bans the sale of skim milk unless vitamin A is added. The creamery owner argued that to do so defeats her company’s goal of producing additive-free milk. Eleventh Circuit U.S. Court of Appeals justices sided with the creamery owner. The justices ruled that there was nothing deceptive or misleading in the allnatural skim milk, which lists the product’s ingredients on the label. In noting the need to protect the creamery’s First Amendment speech rights, justices found that the state’s effort to prohibit the use of the term “skim Turn to MILK on Page 6


Spring 2019

KERN BUSINESS JOURNAL

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Agriculture

In December, federal appeals court justices sided with Blue Diamond Growers that the labeling of their almond milk was not misleading or confusing consumers.

Milk Continued from Page 4

milk” was “clearly more extensive than necessary to serve its interest in preventing deception and ensuring adequate nutritional standards.” But last summer, as the competition between dairy and plant-based milks heated up, the FDA jumped into the crossfire. The federal regulatory agency surveyed consumers regarding their perception of plant-based milk and found most people considered it to be as nutritionally beneficial as dairy milk. FDA Commissioner Scott Gottlieb concluded labeling of plant-based beverages as milk may confuse consumers. He also contended products, such as soy milk and almond milk, were just not “milk” because they lacked some of the ingredients found in dairy milk and “an almond doesn’t lactate.” Nut and soybean growers lashed back. With an easy reach for just about any dictionary, they cited definitions of plants “lactating,” or giving off milky substances. They also noted a whole slew of products with “milk” in their labels – Milk of Magnesia being one. The labeling distinction does not seem to matter to consumers, either. Recent industry surveys found that between 2012 and 2017, sales of non-dairy milks grew more than 60 percent, with almond milk accounting for 64 percent of the sales, while dairy milk sales dropped. In California and Kern County, both dairy and nuts are big business. “California is the nation’s largest farming state, producing more than 400 commercial food and fiber commodities, and dairy farming is the largest of these commodity groups,” noted the California Milk Advisory Board’s Jennifer Giambroni in an email. “California has

“Instead of improving their product or marketing, the dairy industry has sought out the government’s help to quash their new competition, and the FDA seems willing to comply. However, despite all the bluster suggesting deception, less than 10 percent of people actually believe these nondairy alternatives actually contain cow’s milk. — Ken Cuccinelli, former Virginia Attorney General been the nation’s largest milk producer since 1993 and is also the country’s leading producer of butter, ice cream and nonfat dry milk. It is the second largest cheese and yogurt producer. More than 1,300 dairy families stand at the center of the state’s vast and growing dairy industry. The state’s dairies house 1.73 million milk cows.” Giambroni noted that the dairy industry makes a big economic contribution to the state and cited California Department of Food and Agriculture statistics placing dairy farming as California’s leading agricultural commodity. The industry generated $6.07 billion in cash receipts from milk production in 2016. “The milk that leaves the dairy farm flows into society to become value-added products that create jobs and revenues in local communities,” she said. “According to the most recent Economic Impact Report for California Dairy, the industry contributed about $21 billion to the

gross state product in 2014 and about 189,000 jobs in California were dependent on the state’s milk production and processing.” Dr. S. Aaron Hegde, chairman of the Economics Department at Cal State Bakersfield, notes that Kern County’s approximately 50 dairies produce about 10 percent of the state’s output. While there has been little change in output, Hegde said dairy prices have declined because of decreased global demand, particularly in China. He attributed the decline to the ongoing trade war with China, as well as some U.S. consumer preferences shifting to “alternatives” to dairy milk. Almond production in Kern County has been trending upwards, Hegde reported. But similar economic trade constraints also have impacted almond exports to China, which has been an increasing importer of almonds over the last few years. To make up the loss, the almond industry has turned to new markets, including the production of almond milk, said Hegde. In January, Blue Diamond announced plans to expand its processing plant in Turlock to accommodate increased production of almond milk. The expansion, which is scheduled for completion in 2020, will make a butterlike base for the Almond Breeze brand. The base will be shipped to locations around the world, where water is added to create almond milk. If consumers consider dairy and nut milk to be “indifferent” products, or substitutes in economic terms, then the decrease in demand for cow milk would be represented by an increase in almond milk or soy milk consumption, Hegde said. However, limiting the use of the term “milk” on the labels of plant-based products may lead to fewer new consumers making the switch to soy milk or almond milk. Despite recent court rulings that support a “qualified” use of the term “milk” on the labels of plant-based beverages, the FDA is moving forward with its proposed rule to require such products as almond milk and soy milk to be called fake, imitation or alternative beverages. No date has been announced for the new rule to be adopted. But after kicking over a beehive of controversy, FDA Commissioner Gottlieb announced in March that he would be quitting in April to spend more time with his family. After only about two years in the office, Gottlieb has managed to unite liberal-leaning opponents of meat-product consumption, including dairy products, and political conservatives, who decry regulations and view the milk labeling squabble as a government overreach. In a recent nationwide opinion article, the former Republican Attorney General of Virginia, Ken Cuccinelli, called the FDA’s effort to ban the word “milk” on the labels of plant-based beverages a marketing sham. “Instead of improving their product or marketing, the dairy industry has sought out the government’s help to quash their new competition, and the FDA seems willing to comply,” Cuccinelli wrote. “However, despite all the bluster suggesting deception, less than 10 percent of people actually believe these non-dairy alternatives actually contain cow’s milk. “There is no widespread deception. The dairy industry just wants protection. It’s a shame the FDA is participating in this assault on freedom of choice and marketing competition,” Cuccinelli wrote, adding that the maneuver “looks an awful lot like the swamp that President Trump so frequently, and rightly, rails against.” With Gottlieb’s departure, the fate of the proposed rule banning the word “milk” from almond milk labels is uncertain.


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Agriculture

New considerations for depreciating farm equipment By Ann Braun & Steve Powers

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he tax law known as the Tax Cuts and Jobs Act (TCJA) made significant changes in tax depreciation benefits for farming equipment. These include opportunities available under Section 179 and bonus depreciation, which can bring cost saving opportunities to farmers and ranchers who purchase machinery and equipment. Other changes, particularly the new limit on business interest expense deductions and the new 20 percent deduction against qualified business income (QBI), may affect acquisition and depreciation planning. Bonus depreciation Under the TCJA, farmers can take a 100-percent bonus depreciation deduction for capitalized purchases of equipment placed in service after Sept. 27, 2017 and before Jan. 1, 2023 that have a depreciable life of 20 years or less. Prior to the TCJA, the bonus depreciation rate was set to be 40 percent for 2018 and Ann Braun 30 percent for 2019. A majority of farming property (whether new or used) qualifies for 100 percent bonus depreciation, including agricultural and horticultural strucSteve Powers tures, farm buildings and trucks. Thanks to another change in the TCJA, farming equipment can now be depreciated over five years, revised from seven years, for tax years beginning after Dec. 31, 2017. The five-year depreciation life excludes grain bins, fences or any land improvement structures. To qualify, the use of the equipment must initiate with the taxpayer. Section 179 expensing A farmer can choose to expense the cost of any qualifying tangible property under Section 179 in order to deduct it in the year the property is placed in service. The TCJA increased the maximum deduction from $500,000 to $1 million, and the phase-out threshold was raised from $2 million to $2.5 million. For taxable years beginning after 2018, these amounts will be adjusted for inflation. The TCJA also expanded the list of eligible tangible property to include roofs,

CALIFORNIAN FILE PHOTO

Farm equipment lined up on a sunny afternoon on South Union Avenue.

HVACs, fire protection and alarm systems and security systems. Farms that have significant purchases of property ineligible for bonus depreciation, such as building improvement property, should consider Section 179 expensing as an alternative. Interest deduction limitation The TCJA imposed a new limit on the amount of business interest expense a business can deduct under Section 163(j). Deductions are limited to interest income plus 30 percent of a business’s adjusted taxable income (ATI). Until 2022, ATI is calculated with addbacks for depreciation and amortization, roughly equating a familiar {span}earnings before interest, tax, depreciation and amortization (EBITDA) calculation. This new limitation, however, is set to become more onerous after 2021, when the ATI number loses the depreciation and amortization addback. Unused business interest expense can be carried forward indefinitely. There are certain exceptions to the business interest limitation. Farms with average annual gross receipts not exceeding $25 million for the prior three taxable years that are not “tax shelters” are exempt from the limit. Farmers and ranchers can also choose to elect out of the limitation on business interest, and make their business interest expense fully deductible. There is a trade-off for this election: the electing farming business must depreciate all assets with a recovery period of 10 years or more—including trees, wells, farm buildings, and below ground irriga-

tion—using the slower ADS rules. More importantly, bonus depreciation would not be available for these assets. Qualified business income deduction The TCJA provides a 20 percent deduction against qualified business income (QBI) to owners of businesses other than C corporations. The 20 percent QBI deduction is limited to the greater of: • 50 percent of the business W-2 wages; or • 25 percent of the business W-2 wages plus 2.5 percent of the unadjusted basis of qualified property. Farming businesses that are structured as partnerships, S corporations, or sole proprietorships can maximize the QBI benefit by making purchases of tangible property to increase the qualified property basis. The unadjusted basis of qualified property is the acquisition cost of all capitalized depreciable tangible property. Such property is qualified property for the duration of the depreciable property life, or for 10 years if the depreciable life is less than 10 years. Weighing your depreciation options The increased bonus depreciation opportunity clearly benefits and incentivizes farmers to invest in new equipment or reinvest in existing property, but the business interest limitation necessitates a detailed evaluation of the benefit trade-off for assets with a recovery period of 10 years or more. The business interest limitation effectively reduces the tax benefit subsidy provided to highly leveraged businesses in the agriculture industry. Further, if equip-

ment is highly leveraged, the looming change for depreciation addbacks after 2021 will worsen this result. The ripple effects of disallowed interest may affect mandatory tax distributions for partnerships and loan coverage ratios negotiated under prior law. Farmers must now evaluate the present value of bonus depreciation deductions and the potential benefits of the QBI deduction against any potential disallowed interest deduction. Conversely, they must calculate the value of deducting all interest paid against using slower depreciation lives and no bonus depreciation for longer lived assets. Now more than ever, the agriculture industry must rely on comprehensive financial modeling to accurately assess these tax trade-offs. Strategies to mitigate or resolve these issues exist and require experienced analysis. Your tax advisor can help to assess the unique effect of these tax law changes on your farming business so that you can make the most effective purchasing decisions. Ann Braun is a Managing Director in the Bakersfield office of CBIZ and MHM, one of the nation’s top ten accounting providers. She is experienced with tax consulting and tax return preparation, as well as succession planning and estate planning in the agriculture industry. She can be reached at abraun@cbiz.com Steve Powers is a Manager in the Bakersfield office. He specializes in tax planning and consulting for the agriculture industry. He can be reached at steven.powers@cbiz.com.


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Community Business Local startup thrives after economic downturn By Kelly Bearden

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very small business owner has experienced the highs and lows of an economic cycle. Ivan Ayala and his wife, Gabriela, are no exception. The Ayalas’ Bakersfield company, Thermal Energy Solutions, which does business as United Pipe & Steel Fabrication, began offering engineering and construction services in 2006. The “mom and pop” operation is a general contracting business that services primarily heavy industry facilities. With the help of Small Business Development Center consultants at California State University, Bakersfield, the startup company initially found its footing and took off. But the 2014 downturn in Kern County’s oil patch, where the company drew many of its clients, took a heavy toll. “In the beginning, they had some success and a few setbacks, but nothing they couldn’t handle or work through,” explained Jay Kelly Bearden Thompson, the Ayalas’ SBDC consultant. “In 2014, they were able to buy their first building in downtown Bakersfield,” with guidance from the SBDC and the “good people at Mid-State Development, the local SBA lender.” “This was to house their ever-expanding business and manufacturing equipment and materials,” Thompson recalled. “Everything was going great and then disaster hit. The bottom fell out of the U.S. oil industry and that greatly affected Ivan’s business.” The Ayalas again turned to the SBDC for advice and help in developing a strategy that would deal with immediate financial problems and return their company to a sound footing. In addition, Ayala enrolled in the U.S. Small Business Development Administration’s Emerging Leaders Initiative program, which provides entrepreneurship education and training for executives of small, poised-for-growth companies that are potential job creators. The intensive, nearly 100-hour course provides opportunities for small business owners to work with experienced coaches and mentors, attend workshops and develop connections with their peers, local leaders and the financial community. Started in 2008, the program has trained more than 5,000 small business

PHOTO COURTESY OF UNITED PIPE & STEEL FABRICATION

United Pipe & Steel Fabrication in Bakersfield offers a wide range of certified services including automated orbital welding and water jet cutting.

owners, created more than 6,500 jobs, generated more than $300 million in new financing and secured more than $3.16 billion in government contracts. Ayala combined the counseling and support he received from the SBDC at California State University Bakersfield with the training received from the SBA Emergency Leaders Initiative to diversify his business beyond the economically sensitive oil industry. His clients now also include waste treatment plants, wineries, farms and companies engaged in food, dairy and beverage production. United Pipe & Steel Fabrication specializes in critical welding applications and mechanical services, including industrial construction. Its services range from concept engineering, design and fabrication to installation. In 2017, Ayala was one of five Kern County business owners presented exemplary service awards by the SBDC at CSUB for their achievements. Even after the downturn in the oil industry, Ayala fought through it and eventually expanded and grew, said SBDC consultant Thompson, who noted the company now employs more than 25, including engineers and project managers. “Jay Thompson and the SBDC have been a tremendous well of information and a very strong resource,” said Ayala. “Jay has also been a great mentor and has contributed a tremendous amount by mak-

PHOTO COURTESY OF UNITED PIPE & STEEL FABRICATION

Installation of industrial piping is one of United Pipe & Steel Fabrication’s specialties.

ing himself available at any time.” Innovation also is fueling the company’s success. Ayala recently developed and patented a device for one of his food service clients that will protect machine operators, along the production line, from serious injuries in the event of equipment failure. “Ivan has separated himself from his competition by continually doing 100 percent right 100 percent of the time for his clients,” Thompson said. “Ivan says this strategy has paid off big time!” The Small Business Development Center at CSUB is one of five service

centers within the University of California, Central California SBDC Regional Network, which is a partnership between the university and the U.S. Small Business Administration. The center at CSUB assists small business owners in Kern, Inyo and Mono counties by providing free consulting, small business training and research. For more information, go to csub.edu/sbdc Kelly Bearden is the director of the Small Business Development Center at California State University Bakersfield.


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Community Business

New incentive program helps commercial underfired charbroilers reduce emissions By Nzong Xiong

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ith the San Joaquin Valley’s unique geography, meteorology and topography, meeting national ambient air quality standards has always been a challenge. As the region grows in population, reducing emissions and protecting the health of residents continue to be top priorities of the San Joaquin Valley Air Pollution Control District. Late last year, the district successfully adopted a new plan for improving the valley’s air quality and meeting the Nzong Xiong newest federal air quality standards for fine particles (PM2.5). Known as the 2018 PM2.5 Plan, this detailed roadmap includes a suite of measures, both regulatory and incentive-based, that will help reduce emissions from both mobile and stationary sources in the Valley. One of the plan strategies includes an incentive effort to assist owners of commercial underfired charbroilers in lowering their emissions. Unlike chain-driven

DEPOSITPHOTOS

charbroilers that are common in fast-food restaurants, underfired charbroilers are typically found in steakhouses and have heavy-duty grills or large metal grids that have a heating element or flame under the grill that is used to cook the food. They

cook much like an outdoor barbecue grill where food is placed on a cast iron grate above the heat source. As the food cooks, fats or marinades drip onto the coals or ceramics producing smoke. The smoke produces the characteristic charred flavor,

while the hot grates create the strip marks that are typical on charbroiled foods. While customers frequent those businesses with the expressed purpose of enjoying that charred flavor, new equipment is necessary to capture the significant emissions that accompany it so the Valley can continue working toward PM2.5 attainment. While there are ongoing improvements in the technologies available to reduce commercial cooking emissions, the costs of installing controls for commercial underfired charbroilers remain high. The District’s new incentive-based measure aims to help fund the installation of those controls. Interested business owners are encouraged to contact the District right away to take advantage of available incentive funding. For more information about the incentive program, please visit www.valleyair. org/grants/rctp.htm or contact the District’s Technology Advancement Program staff at (559) 230-5800 or technology@ valleyair.org. Nzong Xiong is an Outreach and Communications Representative with the San Joaquin Valley Air Pollution Control District.

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Spring 2019

Community Business

Give Big Kern gab session CEO of nonprofit giving platform GiveGab visits Kern, leaves pearls of wisdom By Louis Medina

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harlie Mulligan is a busy guy. In early 2018, just seven years after cofounding the online nonprofit giving platform GiveGab, this CEO went on to acquire fellow fundraising leader Kimbia, which had been around longer than GiveGab. With this addition, Mulligan continued to grow GiveGab, based in Ithaca, New York, into the largest nonprofit giving platform in the world, having processed more than $1.5 billion in donations for more than 35,000 nonprofit organizations across the country. These days, Mulligan flies frequently across the U.S. to meet customers from GiveGab’s now close to 200 Giving Days that have a presence in all 50 states. An avid mountain biker, Mulligan takes his trustworthy Trek Stache bike with him wherever he goes — including Kern, which he visited in rain-soaked early March. Despite the rains, he still was able to do some great riding that afforded him views of our surrounding mountains. But his real reason for stretching his legs this far was to meet with Kern Community Foundation, which has been hosting Give Big Kern, our county’s official online Louis Medina Day of Giving, since 2016 — and with GiveGab’s help since 2017. Mulligan received a warm Kern welcome, including dinner at Wool Growers Restaurant and the opportunity to speak at a training event to representatives from about 50 of the more than 130 nonprofits that have signed up to participate in Give Big Kern 2019. Mulligan and his colleagues get invited to speak to many Giving Day groups, he said, but having the Mayor present (our very own Honorable—and ubiquitous—Karen Goh of Bakersfield), and Bakersfield City Ballet performing a motivational number to go with this year’s Give Big Kern theme, “Dream B-i-ii-g!” was definitely a first for him. We asked the Cornell MBA graduate to share some thoughts about Give Big Kern, Giving Days in general, and GiveGab’s corporate culture. Q: What do you think about Give Big Kern? What makes it different from GiveGab Giving Days in other communities? A: I was really excited to see how enthusiastic your participating nonprofits are about Give Big Kern specifically, and also about improving their online fundraising in general. I think what is unique about Bakersfield and Kern is the fact that much of the nonprofit community is relatively new because the city and county have grown so fast over the past few decades. This makes for unique challenges and opportunities and it is really exciting to think about how much more we can all accomplish together.

COURTESY OF KERN COMMUNITY FOUNDATION

GiveGab co-founder and CEO Charlie Mulligan addresses a group of local nonprofit leaders.

Q: Putting on Giving Days across the country and throughout the year is a lot of work. What motivates you and your team? What is the most enjoyable part about putting on Giving Days?

A: We constantly listen to and adjust to our customers and users. Every single Giving Day we do helps us learn a little more and get better, and we’re making slight iterations and improvements throughout the year.

A: Giving Days are extremely rewarding and exhilarating. It is incredibly satisfying to help local nonprofits do great things — especially when so many nonprofits we work with are just beginning to tap into the power of online fundraising.

Q: What’s coming for Giving Days in the U.S.? What are some trends you see emerging?

Q: GiveGab’s mission is “More Happy Nonprofits.” Your company refers to customer service as “Customer Love.” Why are you such a stickler for superior customer service? A: Nothing matters if your customers don’t love you. We believe the entire reason we exist is to help our Giving Day partners, participating nonprofits, and donors be happier and more effective. Customer Love is everything. It determines every single action we take — because at the end of the day, it is the only result that really shows we are accomplishing our mission: More Happy Nonprofits. Q: Can you talk a little bit about how GiveGab implements customer feedback into product development/product enhancements for your Giving Day platform?

A: People across the country are yearning to be more meaningful donors for nonprofits that are local to them. Giving Days have an enormous capacity to help donors and nonprofits start and build relationships, and I feel like we’re just beginning to tap into the amazing potential of technology to help facilitate these relationships. Give Big Kern, “One Day to Celebrate the Giving Spirit of Kern County,” happens on the first Tuesday in May, which this year falls on May 7. The website givebigkern.org went live on April 7 and will remain open through May 8. We encourage the entire community to engage with our hard-working nonprofits by giving or volunteering through Give Big Kern. Questions? Visit givebigkern.org > Menu > FAQ or write to Louis@kernfoundation.org. Louis Medina is the Director of Community Impact for Kern Community Foundation.


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KERN BUSINESS JOURNAL

Community Business

Give Big Kern is Tuesday, May 7 Here are some ways to have fun while giving back to Kern’s hard-working nonprofits on Give Big Kern Day.

nonprofits as they receive a proclamation declaring May 7, 2019, Kern County’s Official Day of Giving.

All day long: Donate money or pledge volunteer hours to hard-working nonprofits on givebigkern.org. Search for an agency/agencies to support, find your passion, and Give Big. Listen for special matching and challenge gift announcements on local broadcast media, and monitor Give Big Kern’s social media pages (Facebook, Twitter, Instagram @GIVEBIGKERN) to multiply the amount of your donation.

10 a.m. to 4 p.m. at the Idea Hive, a co-share space at 1910 19th Street in Downtown Bakersfield: Come and meet a dozen nonprofits making a difference in education, social services, the arts and the environment, that will be using the Idea Hive to host an open house for the public. Learn about these agencies’ work, ask questions, and donate or pledge volunteer hours to them through Give Big Kern.

6 a.m. at Bakersfield’s Liberty Bell, corner of Chester and Truxtun Avenues Downtown: Join scores of nonprofits as they “Ring in Give Big Kern Day.” Bakersfield Mayor Karen Goh will deliver a Give Big Kern Day proclamation from the city.

5:30 to 7:30 p.m. at Temblor Brewing Company, 3200 Buck Owens Blvd, in Bakersfield: Celebrate the fundraising accomplishments of Give Big Kern nonprofits at the Give Big Kern After Party.

9 a.m. at the Kern County Board of Supervisors Chambers, 1115 Truxtun Ave., in Downtown Bakersfield: Join Kern Community Foundation and participating

COLD OR DRY STORAGE PRICE REDUCED $850,000 1.83± acres, 37,090± square feet storage, Earlimart. SHOP, LAND & POLE BARNS SALE PENDING 19.55± acres, Grade1 soils, within Semi-Tropic WSD boundries and adjoining water bank. Wasco area. LAND $1,500±/AC 76.36± acres, Lokern Rd, boundaries Belridge WSD, west of Buttonwillow. ALMONDS & PERSIMMONS SOLD 80± acres, young plantings, Kings Co WD, 2 wells, good sandy loam soils, Hanford PISTACHIOS SALE PENDING 99.66± acres, planted 2006, Semi-Tropic WSD boundary, 2 wells, grade 1 & 3 soils, Shafter. LAND OPPORTUNITY $16,635±/AC 150.29± acres, close to PGE sub-station, natural gas main line, high transmission power lines traverse the site. Buttonwillow, Ca FARMLAND SALE PENDING 155.85± acres, Lemoore canel Co. district and well water, mostly grade 1 soils and adjoining City of Lemoore.

Check out givebigkern.org/ info/events to learn about promotions from Cornerstone Bakery, Papa Murphy’s Pizza, Camelot Park, and other local businesses that will donate a portion of proceeds from your purchases to Give Big Kern.

DRYLAND $2,500±/AC 160± acres, mostly grade 1 soils, previously farmed to cotton, Near Valley Acres/SW Bakersfield PISTACHIOS SALE PENDING 223.31± acres planted 2015 & 16, Semi-Tropic WSD boundary & well water, and grade 3 soils, Wasco, CA. FARMLAND $8,500±/AC 318.09± acres, non contract meter Wheeler Ridge Maricopa WSD, 1 well, grade 2 & 3 soils, center pivots, NW Bakersfield PISTACHIOS SOLD 798.75± acres, district water and well water, Corcoran PISTACHIOS & FARMLAND $80,539,000 5,014.93± acres, planted to 420.8± acres Pistachios, with balance being row & field crops, district & well water, Corcoran CATTLE RANCH $1,300±/AC 5,828.03± acres, perimeter fenced with 7 pastures, 4 wells, 3 springs, 2 Terra Bella WD outlets, S Porterville

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Spring 2019

Community Business

COURTESY OF AUTO CLUB FAMOSO RACEWAY

The Good Vibrations Motorsports March Meet helps fill Bakersfield hotel rooms every year.

CIF Wrestling, March Meet usher in spring Calendar changes mean boom for local hotels By David Lyman

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ust as the blossoms on almond trees signal spring time in Bakersfield, so does the arrival of thousands of high school wrestlers, their coaches, families and friends from throughout California. Each spring since 2004, the CIF State High School Boys Wrestling Championships have convened at Bakersfield’s Rabobank Arena. Wrestlers who once competed at the high school level are now coaches who return with the next generation of wrestlers. Families who cheered on their sons years ago come back every year to root for today’s competitors. The CIF Boys Wrestling Championships have been held in Bakersfield for so long, Rabobank Arena refers to itself as “the home of high school wrestling.” Every year, Bakersfield has enthusiastically cheered the arrival of this event. But there has been an asterisk,

David Lyman

of sorts, associated with CIF boys’ wrestling because, in most years in the past, CIF wrestling landed on the same weekend as the legendary Good Vibrations Motorsports March Meet at Auto Club Famoso Raceway. The result: two big events overlapping on one weekend. That made for a shortage of hotel rooms and a near overload of the city’s

hospitality grid. But then came 2019. CIF not only returned to Bakersfield with the boy’s wrestling championships, it added the girls championships that had previously been held in Visalia. That move expanded a previous two-day event into a three-day boys and girls wrestling extravaganza. Even better, CIF moved the championships ahead one week on the calendar, meaning no more competing

COURTESY OF VISIT BAKERSFIELD

More than 16,000 people passed through the doors of Rabobank Arena for the CIF Boys’ and Girls’ Wrestling Championships in February.


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Community Business

Traits and habits of driven entrepreneurs By Tim McNeely

A COURTESY OF VISIT BAKERSFIELD

CIF Wrestling expanded to include both boys’ and girls’ championships at Rabobank Arena in 2019.

with March Meet for local hotel rooms. This expanded CIF wrestling championships brought a significant number of visitors to Bakersfield. According to AEG, the operators of Rabobank Arena, 16,024 people came through the Arena doors for the combined CIF wrestling championships over three days. That number was a mix of locals and out-of-town visitors, with the percentage of out-of-towners exceeding the locals by at least two to one. Accounting for people who attended more than one day of the event, AEG estimated that the number of unique out-of-town attendees was around 3,500, plus 750 outof-town wrestlers and 1,000 out-of-town coaches, for an estimated total of 5,250 out-of-town individuals attending the three-day event. Near the end of the championships, on its last day, CIF Executive Director Roger Blake commented to the crowd, “This has been a great weekend. So proud and appreciative of the great hospitality and kindness of the Bakersfield community. Lifetime of memories for a thousand girls and boys wrestlers.” In addition to CIF moving ahead a week on the calendar compared to last year, March Meet moved back one week. These two changes to this year’s calendar provided an ideal opportunity to measure the effects of each large event by isolating their impacts on local hotels and comparing those impacts to the same respective weekend the year before. For CIF wrestling, Bakersfield-area hotel room sales for Wednesday through Saturday of CIF week were up an average of seven percent compared with the same non-CIF period the year before, according to STR, Inc. The average daily rate that hotels charged was up about 23 precent and hotel revenue was up about 33 percent

over the previous year. For March Meet, data from STR, Inc., showed hotel rooms sales increased about 17 percent compared with the same nonMarch Meet weekend the year before. The average daily rate charged by hotels was up about 20 percent and hotel revenue was up about 41 percent. But what about the first weekend of March that fell between CIF Wrestling and March Meet? As expected, Bakersfield-area hotels saw significant declines across the board for that non-event weekend, compared with the same CIF and March Meet-filled weekend in 2018. According to STR, Inc., hotel room sales declined about 29% and the average daily rate charged by hotels was down about 26%. Revenue also was down about 47%. As these figures show, separating CIF Wrestling and March Meet gave Bakersfield hotels two big weekends, rather than trying to accommodate both events on overlapping dates. More hotel revenue means more hotel tax revenue flowing to local governments. These calendar changes also will allow CIF Wrestling and March Meet to continue to grow. As they grow, Bakersfield hotels will be able to keep up with the demand. As of April 2019, three hotels were under construction in the City of Bakersfield and plans for an additional three hotels have been submitted to City Planning. When all six of those hotels are completed, an additional 658 rooms will be added to Bakersfield’s hotel inventory. David Lyman, PhD is manager of Visit Bakersfield. He and other members of Team More to Explore help visitors from throughout the world spend their money in California’s ninth largest city. They are available toll-free (866) 425-7353 or at Info@VisitBakersfield.com.

s an entrepreneur, you have a mission to provide the best services or products possible to your clients. You also want to build a very successful business and are committed to doing your personal best in all areas of your life. That makes you a driven entrepreneur — a person who is highly motivated to make a difference in this world. According to a recent survey by AES Nation*, about three-fifths of entrepreneurs fall into this category. Driven entrepreneurs tend to have three personality traits in common and they tend to have them to a much higher degree than their peers, who may also possess these traits. Excellence Driven entrepreneurs tend to be extremely focused on excelling at all they do. They can be highly competitive and often thrive in challenging situations. This drive toward accomplishment and achievement is the first hallmark of a driven entrepreneur—93 percent of driven entrepreneurs and 61 percent of other entrepreneurs report this personality trait. Learning Driven entrepreneurs are curious, habitually seeking to deepen their understanding and broaden their knowledge. They know that this openmindedness allows their business to be nimble and responsive, leading to greater success. It is also a quality that improves their overall well-being. This trait is present in 80 percent of driven entrepreneurs and only 33 percent of other entrepreneurs. Larger purpose Driven entrepreneurs are looking to create social value, perhaps even to change the world. Their view ranges far beyond their business and their loved ones; they wish to have a meaningful impact on the world and leave a legacy of good. This trait is present in 55 percent of driven entrepreneurs and 18 percent of other entrepreneurs. Steps to improve your business All entrepreneurs want to improve their business, regardless of whether or not they consider themselves driven. Surveyed entrepreneurs report taking the following steps to increasing their

success and competency. • Self-directed learning — Whether keeping up with trade journals, reading business books or even researching specific questions, all entrepreneurs report some kind of self-directed acquisition of knowledge. • Educational platforms — This refers to enrolling in management, business education or professional development. • Peer support — This refers to reaching out to others in a similar line of business to network and learn how to handle any issues that arise. This kind of activity ranges from informally keeping up with your classmates from your undergrad program or business school, to creating a board of advisors, to joining a trade association or a mastermind group. 100 percent of driven entrepreneurs and 95 percent of other entrepreneurs report peer support activity. Involvement in a formal group that is designed to help its members excel can be far more effective than informal peer support. Mastermind and CEO groups provide the best places for entrepreneurs to truly accelerate their success. They have an executive director to run the group, as well as membership fees, which range anywhere from $100 to over $100,000 per year. This buy-in helps to guarantee the commitment of members to each other and their common purpose. All of these approaches to improve your business and your own leadership skills can help your business and your employees improve outcomes. Reported results include an increase in employees’ self-awareness and motivation, development of employees’ self-confidence and improvement in their overall well-being. *Survey of 759 North American entrepreneurs who are senior management (all C-level executives) who have at least 25% stake in their privately held businesses. The revenues at the companies had to be at least $5 million annually in each of the past three years. Timothy J. McNeely is an Investment Advisor Representative with Dynamic Wealth Advisors dba Lifestone Family Office. For more on how you can adopt the habits of a driven entrepreneur and make your business even better, contact Tim McNeely of LifeStone Family Office by visiting LifeStoneCO.com, by phone at (661) 368-0947 or on twitter at @ timmcneely.


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Spring 2019

Finance

Proposed tax extender act

Bill would extend 29 previously expired tax provisions By Joel Bock

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n Feb. 28, Senate Finance Committee Chairman Chuck Grassley and Senator Ron Wyden introduced the Tax Extender and Disaster Relief Act of 2019. The legislation includes 29 previously expired tax provisions (26 expiring at the end of 2017 and 3 expiring at the end of 2018). The approach of extending tax provisions after the expiration of such provisions has recently become a common practice. The Bipartisan Budget Act of 2018, which included 33 tax provisions that expired at the end of 2016, was signed into law on Feb. 9, 2018. The Tax Extender and Disaster Relief Act of 2019 would attempt to somewhat remedy this recent trend of retroactively extending previously expired legislation by extending these provisions through the end of 2019. Senator Grassley stated, “Congress needs to get out of this bad habit of regular retroactive Joel Bock extensions of these tax provisions. The whole point of these federal tax incentives is to encourage certain behaviors, especially investments in alternative energies, energy efficiency and transportation. The best way to do that is ahead of time, not retroactively. But it’s also the case that many of these industries made business decisions last year based on that reasonable expectation that they would be extended, since it’s what Congress has consistently done in the past. I hope the House of Representatives acts soon, since taxpayers affected by these expired provisions have to file their tax returns in the coming weeks. Thousands of jobs across the country depend on it.” Senator Wyden added, “It’s past time to kick the addiction to short-term tax policies, but until Congress is able to break this cycle for good, taxpayers deserve certainty about what they’ll owe. It’s important this is a two-year bill covering 2019, and it includes key renewable energy incentives I’m proud to fight for. Filing season for 2018 is already underway, so the Congress should act on this quickly.” The proposed tax extender provisions

include: • Credit for nonbusiness energy property (IRC §25C). • Credit for new qualified fuel cell motor vehicles [IRC §30B(b)]. • Credit for alternative fuel vehicle refueling property (IRC §30C). • Credit for two-wheeled plug-in electric vehicles (IRC §30D). • Second generation biofuel producer credit [IRC §40(b)(6)]. • Biodiesel and renewable diesel incentives [IRC §§ 40A, 6426©, and 6427(e)]. • Credits with respect to facilities producing energy from certain renewable resources [IRC §§45 and 48(a)(5)]. • Production credit for Indian coal facilities [IRC §45(e)(10)]. • Railroad track maintenance credit (IRC §45G). • Credit for energy-efficient new homes (IRC §45L). • Three-year depreciation for race horses two years old or younger [IRC §168(e) (3)(A)(i)].

• Special allowance for second generation biofuel plant property [IRC §168(I)]. • Energy-efficient commercial buildings deduction (IRC §179D). • Election to expense mine safety equipment (IRC §179E). • Special rule for sales or dispositions to implement FERC or State electric restructuring policy for qualified electric utilities [IRC §451(k)]. • Excise tax credits relating to alternative fuels [IRC §§ 6426(d), 6426(e), and 6427(e)]. • Seven-year recovery period for motorsports entertainment complexes [IRC §§ 168(i)(15) and 168(e)(3)(C)(ii)]. • Accelerated depreciation for business property on an Indian reservation [IRC §168(j)]. • Special expensing rules for certain film, television, and live theatrical productions (IRC §181). • Indian employment tax credit [IRC §45A(f)]. • Mine rescue team training credit (IRC §45N).

• Exclusion from gross income of discharge of qualified principal residence indebtedness [IRC §108(a)(1)(E)]. • Mortgage insurance premiums treated as qualified residence interest [IRC §163(h)(3)]. • Above-the-line deduction for qualified tuition and related expenses (IRC §222). • Empowerment zone tax incentives [IRC §§ 1391(d)(1)(A)(i), 1391(h)(2), 1394, 1396, 1397A, and 1397B]. • American Samoa economic development credit (IRC §119). • Temporary reduction in medical expense deduction floor [IRC §213(f)]. • Extension of oil spill liability trust fund rate [IRC §4611(f)(2)]. • Black lung liability trust fund excise tax [IRC §4121(e)(2)(A)].

Please consult your tax advisor to determine how these tax extenders impact your specific situation. Joel A. Bock, CPA, MST is a partner in Daniells Phillips Vaughan & Bock, a Bakersfield accounting firm.


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KERN BUSINESS JOURNAL

Great lawyers close to home. A top California legal team is right in your own backyard. Whether you are operating a business or need personal legal counseling, you can rely on local attorneys who have an unrivaled track record, depth of knowledge and experience unique to the San Joaquin Valley. From business litigation, transactions and counseling, to bankruptcy, intellectual property, estate planning and employment law issues, KDG works with you to meet your legal needs and achieve successful, cost-effective results.

B A K E R S F I E L D • F R E S N O • SA N D IEG O • K LEIN LAW. COM

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Finance

Sound risk management can reduce the total cost of risk By John Pryor

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nyone who follows local, state and national news these days must have the same reaction I do — news is dominated by two major topics: politics and risk management. It’s easy to identify political news; however, some risk management stories can be more nuanced while others jump out at you in unmistakable terms. Every business owner needs to be sensitive to all such John Pryor risks as each become increasingly important to the survival of their business itself. A few examples: The horrific flooding of the Missouri River in Nebraska and adjacent states

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shows business property devastated by rising waters with not only loss of buildings, equipment and inventory, but also loss of income for the duration of the flooding and beyond. All-too-frequent news stories describe diversion of cash (or other property) from a business to an employee — always a “trusted” employee. Then follow all the seemingly routine rounds of business fires, truck and auto accidents, construction injuries, burglaries and robberies, cyber-crime plus lawsuits — valid or frivolous. Do you sense that your business is vulnerable to most, if not all, of these incidents and events?

The overall goal is to lower your total cost of risk (TCOR), a calculation that includes more than mere insurance premiums. In Kern County, most (but not all) businesses are not susceptible to flood damage. Yet all here are exposed to a severe earthquake — when the “next big one” ultimately arrives, as it surely shall. According to our scientific community, we’re long overdue. The last major event wasn’t in 1952. It was in 1987 on the nearby San Andreas fault. It will be devastating to all! That’s a rather lengthy problem definition. Of more importance to us is the solution, through traditional risk management, of course. It’s a matter of working through the various risk management processes and creating a system within your business to mitigate, if not eliminate, the multitude of risks every business confronts. Here are risk management’s basic elements: • Risk identification and measurement • Risk control • Risk finance Risk identification and measurement, as the title implies, includes the following: Calculating costs you will incur to rebuild and reconstruct each of your buildings. The same for your equipment and inventory. Other direct costs of personal property also need to be identified and valued, e.g., mobile equipment, signs, property in storage at another location, cash on hand, customers’ property in your care, custody, or control, computer hardware, supply chain risks, etc. Any business also has indirect costs, such as loss of revenue, rental income, older buildings needing code upgrades, etc. Liability risks are usually considered “unlimited” with special damages supplemented by less calculable general damages for pain, suffering, etc. Risk Control includes, but is not lim-

KERN BUSINESS JOURNAL

ited to: • Safety • Security • Fire prevention • Cyber-security • Driver training Risk finance is complex and includes: • Risk assumption in which you opt to bear a particular risk (or portion of a risk through deductibles). • Risk transfer by contract through hold harmless and indemnification provisions in contracts. • Commercial insurance through your broker. This brief overview is merely the tip of the iceberg, as each element requires indepth thought and planning, not to mention key decisions for the future of your business. The overall goal is to lower your total cost of risk (TCOR), a calculation that includes more than mere insurance premiums. It is worth tracking and charting over several years. It includes these costs: • Deductibles and self-insured retentions • Safety • Security • Fire and cyber-crime prevention • Legal defense costs for liability risks not covered by insurance • Legal fees for drafting risk transfer clauses in contracts • Commercial insurance premiums Each of these complex elements of risk management can be more readily understood and implemented if you have, as a reference, my book entitled Quality Risk Management Fieldbook. It couples both risk management and quality management (Lean Six Sigma) disciplines and best practices — hence, the word “quality” in its title. Its 281 pages are full of data in great specificity, plus lots of worksheets, checklists, process maps and other graphics to help you walk through risk management processes effectively, well beyond your purchase of insurance. It’s endorsed by two California small business organizations as well as California and national insurance broker organizations. It’s available through amazon.com, Russo’s, and the publisher: International Risk Management Institute in Dallas (www.irmi.com) Print copies are available from each of these sources; however, IRMI also offers a digital copy for a very low monthly fee for the time you need this reference to work toward the two major goals of risk management: A lower total cost of risk and a quiet night’s sleep. With sound risk management, you can enjoy both! John Pryor, CPCU, ARM, AAI, AIS is a risk management consultant for CSU Bakersfield’s Small Business Development Center. For counsel without fee through the SBDC, go to www.csub.edu/sbdc and click on “Get Started” to register.

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Spring 2019

Legal & Human Resources Major change in California’s reporting time pay rules By Jerry Pearson

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recent California Court of Appeal decision has ushered in a significant change in California’s reporting time pay rules, which will now prohibit a common scheduling practice used by employers in California. In Ward v. Tilly’s Inc., the Court held that California employers who require employees to call in two hours before a shift to determine whether or not they are needed, are now required to pay that employee, at a minimum, for two hours of work, even if the employee is informed that there is no need to report to work that day. Unfortunately, the case left many questions unanswered and, as a result, employers should be careful to review their scheduling policies to make sure they avoid the same problems seen in this case. Background Under Tilly’s scheduling policy, Skylar Ward was required to call in approximately two hours before the start of her shift to see whether she needed to report to work. If Tilly’s told her to report to work, she was Jerry Pearson required to do so and would be paid for that shift as usual. However, if Tilly’s notified her that she did not need to come in, Ward would not be paid. In a precedent-setting ruling, the Court held that, under the facts of this case, merely calling in for one of these mandatory on-call shifts constituted “report[ing] to work,” which entitled Ms. Ward and her co-workers to a minimum of two hours of reporting time pay under the applicable wage order. In relevant part, the court examined the following language from the reporting time rule contained within Wage Order No. 7(A): “Each workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work, the employee shall be paid for half the usual or scheduled day’s work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee’s regular rate of pay, which shall not be less than minimum wage.” Prior to this case, courts had disagreed about what it actually meant to “report to work,” with many courts holding that this required the employee to physically report to the workplace to be eligible for reporting time pay. When

an employee physically reports to work but is furnished less than half of his or her scheduled hours, providing the employee with at least two hours of pay was justified to compensate them for the inconvenience and expense of essentially showing up for nothing. According to the Court, however, modern technology had advanced to the point where “reporting” could mean far more than just physical presence at the work site. Court’s Reasoning The Court ultimately reasoned that even having to place a telephone call as part of a mandatory on-call schedule fell within the scope of this “reporting” rule for two main reasons. First, requiring reporting time pay would “require employers to internalize some of the costs of overscheduling, thus encouraging employers to accurately project their labor needs and to schedule accordingly.” Second, it would also “compensate employees for the inconvenience and expense associated with making themselves available to work on-call shifts, including forgoing other employment, hiring caregivers for children or elders, and traveling to a work site.” In relying on these public policy considerations, the court aligned itself with prior California cases that linked the compensability of work time to the degree of employer control over an employee’s activities. Specifically, the Court cited the 2016 California Supreme Court decision in Augustus v. ABM Securities, which prohibited employers from having their employees carry radios and remain on-call during rest periods. The decision was made on the basis that “compelling employees to remain at the ready, tethered by time and policy to particular locations or communication devices” was inconsistent with the concept of having truly “relieved employees of all work duties and employer control.” Like in Tilly’s, the Court in Augustus was clear that this rule applied even if the employees were never actually called upon. What Should Employers Do Now? In light of this decision, employers should review their scheduling policies and be sure to avoid the dangers inherent in Tilly’s scheduling policy. Specifically, the court identified several issues with Tilly’s policy that were problematic: • Requiring the employees to call the employer; • Independently disciplining employees for late or missed call-ins; • Making call-in and reporting mandatory.

Though certainly not foolproof, there are steps an employer can take to lessen the chances that your scheduling policy will fail the smell test as with Tilly’s. For instance: Have the employer call the employee, not require them to call you. This is typically accomplished by having a manager call employees from a list of potential on-call employees. This practice has been approved by various courts in related “on-call” contexts. Don’t discipline employees for failing to respond to your call to check for availability. Without fear of discipline, it would be much more difficult for the employee to argue that the policy constrained the employee’s freedom and activity. Don’t make reporting when called mandatory. If an employee answers and doesn’t wish or can’t report to work, simply move on to the next person on the list. This practice has also been approved by various courts in related “oncall” contexts. Even with these guidelines, however, no policy is a sure thing, and even minor changes could affect the way a court may interpret it. We will monitor this decision to see if a subsequent appeal is filed and whether the California Supreme Court ultimately decides to address this case in the near future. It is important to note that every employment law situation is unique and this update is not a replacement for legal counsel. If you have further questions or would like additional information, contact Jerry Pearson at jpearson@ youngwooldridge.com. Jerry Pearson is a Managing Partner at Young Wooldridge, LLP and leads the firm’s Business Department. Pearson represents management in labor and employment issues and ensures his clients stay in compliance with the State and Federal labor laws.


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Legal & Human Resources

Managing Gen Z By Robin Paggi

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f you’re still trying to figure out how to manage millennials, you’ll probably be disheartened to learn that another generation has entered the workforce behind them. Say hello to Generation Z. Sixty-one million people strong, Gen Z (born after 1996) already outnumber Gen X (1965 – 1980) and are almost as large as the baby boomer generation (1946 — 1964). Members of Gen Z have never known a world with privacy, security, or stability, or a world without smartphones, the Internet, or social media. While much attention was focused Robin Paggi on managing millennials (1981 — 1996), Gen Z became old enough to work. Numerous articles have been written about the difference between the two generations, often describing Gen Z in

glowing terms. In her article, How Gen Z and Millennials are Totally Different, Yerin Kim says that Gen Z is more: • Entrepreneurial • Practical with their money • Socially conscious • Diverse and accepting Kat Clowes, the owner of March Consulting (a Bakersfield business that helps high school and college students with the college admissions process), says she is reminded daily of the difference between the two generations and had to change her methods of teaching the admissions process to accommodate the shift she saw from one generation to the next. However, because she’s worked closely with them, Clowes’ take on this generation is a bit different than the journalists who write articles about them. “In general, Gen Z lacks the common sense skills that previous generations gained primarily from managing their own activities” she told me. Clowes explained that when previous generations grew up, they were told to “be home by dark” and had to figure out how to entertain themselves until then; Gen Z’s

time is generally scheduled by their parents who chauffeur them to playdates. No longer are they going to the store on their own, fixing a flat tire on their bike, or making plans to go to a friend’s house to play — all activities that create responsibility, skills that are considered “common sense,” and aid in becoming an adult. Additionally, because many households no longer have land lines, Gen Z wasn’t taught by their parents how to politely answer the phone and take a message. Because most of them don’t leave voice mails, they don’t know how to. Because texting is usually their preferred method of communicating, many don’t know how to write a thank you letter or address an envelope. I haven’t worked with hundreds of students but, as the training and development specialist at Worklogic HR (a human resources outsourcing company), I have talked with numerous employers who have told me that members of Gen Z: • View their managers as their peers • Don’t want to look vulnerable so won’t ask for help • Don’t know how to plan • Prefer electronic communication and avoid face-to-face and phone conversations • Have a very different idea of what dressing appropriately for work means • Work at their own pace Before you get soured on this new generation, there are many things they can do that are unique to them. They are connected, are great at knowing basic social media marketing skills and work in groups extremely well. They also follow instructions and are eager to do a good job. Now, how to manage them? Articles that provide tips on this topic include How to understand and manage Generation Z by Alexandre Diard, who suggests: • Think up different and more modern ways to lead • Keep them interested in what they’re doing • Be more dynamic If you’re rolling your eyes, you’re not alone. Based on our occupations and experiences, Clowes and I created some tips that we think might actually be useful:

Train them Don’t assume they know how to complete “common sense” tasks. Arriving on time, dressing appropriately and other typical work behaviors have not necessarily been taught to this generation. Processes should be documented, explained in depth and demonstrated. Bottom line: clearly communicate your expectations. Train their supervisors Supervisors are one of the key factors in whether employees stay with or leave organizations, so they need to know how to supervise in a way that inspires people to perform instead of inspiring them to complain or quit. This is applicable for supervising all generations, not just Gen Z. Give them a stake in the process Instead of simply answering emails and the phone, help them feel like they are part of the company, that they are valued and that the way they perform their job is important. Show them what they do matters in the bigger scheme of things and they’ll take a greater interest in their work. Mentor them Remember that you didn’t know everything you know now when you started working. This is your opportunity to share the knowledge you’ve gained and mentor someone like someone undoubtedly mentored you. Help them to grow, set their own goals, and achieve them. This is also a great way to ensure that knowledge gets transferred and doesn’t get lost when older people leave the organization. Yes, Gen Z is different than previous generations because of the society they are being raised in and because of who is raising them. However, all young employees need to be taught how to do their jobs, and all employees want the same things – to be heard, valued and respected, regardless of their age. If that’s not common sense, it should be. Robin Paggi is a training and development specialist with Worklogic HR.


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Legal & Human Resources

You’re Fired!

Words that can trigger violence BY Karen Bonanno

F

iring a worker, particularly a violent one, is one of the most stressful and often dangerous things an employer must do. A workplace shooting in a Chicago suburb in mid-February showed just how quickly such a situation can go fatally bad. Gary Montez Martin, a 15-year employee of the Henry Pratt Co., a valve manufacturer, had been the subject of months of “progressive discipline.” Company officials explain Martin repeatedly broke basic workplace rules. On Feb. 15, MarKaren Bonanno tin was summoned to a meeting at his job site, where company officials, including the plant manager, human resources manager and a college intern, who was on his first day on the job, were present to fire him. Family members and neighbors later told reporters that Martin expected to lose his job and he was very depressed.

After being told during the meeting that he was being fired, Martin pulled out a handgun and in the space of five minutes fatally shot five people, including two coworkers, who were not in the meeting. Martin ran into the warehouse, where he later exchanged gunfire with police officers. Martin was fatally shot and five police officers were injured. There are many questions about how Martin, a convicted felon, was able to get and keep his weapon. In 1995, Martin was convicted of aggravated assault and sent to prison in Mississippi after brutally beating his girlfriend. When released from prison, he moved to Aurora, Ill., where he was arrested for various crimes, including domestic violence. In 2014, Martin obtained an Illinois license to possess a gun, which required a background check. Inexplicably, his Mississippi conviction was not revealed in an interstate data base. But a few months later, when Martin applied for a concealedweapons permit, a fingerprint check revealed his felony conviction. He was denied a concealed-weapons permit and his state gun license was revoked. It is unclear why Illinois law enforcement officials did

not confiscate the weapon he later used to murder his coworkers. Company officials say they are reviewing both Martin’s hiring and the handling of his termination to determine if red flags were missed, or if increased precautions need to be taken. “If we have reason to believe that somebody is going to be violent, we take precautions,” a company official told reporters. “I can only assume that we did not.” Reviewing what happened in this workplace tragedy may help identify ways all workplaces can be made safer in the future. According to recent government studies, more than 2 million Americans are reported to be victims of workplace violence. Many more cases go unreported. And while only a few involve mass shootings, such as the one in Illinois, there are many situations that trigger such events. They range from bullying to everyday workplace disputes. Terminations, particularly the firing of long-time employees, can be triggers of violence. In 2017, there were 458 workplace homicides across the nation. The Bureau of Labor Statistics reported that 77 percent

involved a firearm. Clearly, no workplace is immune to such violence. And no plans or safety procedures can assure complete workplace safety. But steps can be taken to help defuse potentially violent situations. Red flags: Before you reach the point of terminating a worker, look for warning signs or chronic problems, conflicts with coworkers, mood swings, anger, paranoia, sudden deterioration of work performance or grooming or stressful personal problems, such as divorce or financial setbacks. Intervention by employee assistance resources may help resolve some of these problems. Slow up: If employee assistance intervention does not help and appropriate disciplinary steps have been exhausted, the decision may be made to fire an employee. Take the time to do the firing right. Understand the employee. Engage other managers in identifying the employee’s problems and likely reactions to a firing. Possibly hire an outside consultant to assess risks and develop plans. Location: A neutral location should be selected for the termination meeting. Post security nearby, especially if the worker has a history of violence. Place a desk between the worker and managers handling the firing. Do not allow the worker to block the exit. Do not take a break, even if the worker asks to leave to use the restroom. A distraught worker may return with a weapon. Timing: Generally, dismissing an employee in the earlier part of the week is better than at the end. If possible, conduct the meeting towards the end of the day, so the worker can be spared the embarrassment of being walked out in front of coworkers. Meeting content: Explain in a clear, brief way that the worker is being terminated. Present the worker’s final check during the meeting. This should include any accrued and unpaid vacation or PTO, as well as any applicable separation paperwork. Explain resources available to the exiting employee. Prevent the employee from immediately returning to the workplace. Deliver personal items to the fired employee, or arrange to have the escorted former worker return when other employees are gone. Practice: Develop a plan that includes time, location and other details. Anticipate the worker’s reactions and develop potential responses. Practice the plan. The more prepared managers are for the termination, the more control they will have over a potentially volatile situation. Karen Bonanno is president of the Bakersfield-based human resources consulting firm P.A.S. Associates and P.A.S. Investigations. She can be contacted through her website www.PASassociates.com and through the P.A.S. Facebook page.


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Marketing

Clever PR publicity stunts L By Maureen Buscher-Dang

ooking for some great public relations ideas for 2019? I’ve always found it useful to rummage around online for brand promotions both inside and outside the U.S. Sometimes all it takes is reaching outside the proverbial box to cook up something with a little extra pizzazz. Lovin’ it down under McDonald’s Australia recently decided to celebrate the country’s national Australia Day holiday with several phonetic outdoor posters. Affectionately referred to as Macca, McDonald’s created a campaign of their menu using Aussie slang. The clever Strayan spin on McDonald’s classic menu items included Kworda Pownda, Filadafsh, and a Bakeneg Mugmufn.

Pizza paving Ogden, Utah is happy potholes along their city streets will be fixed this year with a grant courtesy of Dominos “Paving for Pizza” campaign. Maureen Buscher-Dang The pizza chain recently announced the city would be one of their latest recipients of the campaign that was launched in June 2018. In order to qualify, customers were asked to nominate their town for pothole repair funds via the website www.pavingforpizza.com. Since the launch, Dominos says it’s received more than 194,000 unique nominations from 17,198 different zip codes in all 50 states, according to a press release. While ingenious, it’s a little hard to swallow the campaign’s motives as pure corporate social responsibility. They claim “potholes, cracks, and bumps in the road can cause irreversible damage to your pizza during the drive home from Dominos. So we’re helping to pave in towns across the country to save your good pizza from these bad roads.” The website even has a pothole impact meter and video footage from a GoPro inserted inside a box to show the amount of damage done to the pizza during a drive. Did someone say free beer? Before the 2018 regular football season, it must have been tough being a Cleveland Browns fan. The Browns had not won a game in almost two years. Bud Light came to fans’ rescue and set up “Victory Fridges” around select areas of

Domino’s Paving for Pizza campaign at work.

Bud Light’s Victory Fridges gave Browns fans something cheer about.

McDonald’s humorous take on Staryan slang.

the Cleveland metropolitan area. Holding about 200 bottles of free beer, each fridge was secured with chains, along with the morale-boosting phrase, “When the Browns win, Cleveland wins.” The Browns finally broke their long drought in a game against the New York Jets on Sept. 21. And parched fans got to break through the chains and into the fridges to celebrate their victory with free Bud Light beer. Talk about an event designed for photographs and built-in fan engagement. Most likely the amount of news and social media coverage more than paid for the cost of this

ties to capitalize on trending topics, as well as current events. Obviously, this requires exercising good judgement and caution. Bud Light’s publicity stunt is an example of hitting just the right notes. Break away from the pack. Be willing to look for and take a fresh approach. A unique angle has the ability to cut through the clutter and make your company stand head and shoulders above the rest.

nifty promotion. When you and your company or nonprofit are considering any new promotion or event, there are some important elements to think through. Look ahead. Go beyond the advertising and consider how your message will play with the media, not to mention your key audiences — customers, clients, employees, investors, vendors and more. Be creative. It doesn’t always have to be complicated either. McDonald’s devised a fun play on menu items using Aussie slang. It garnered lots of attention and smiles. Keep an open eye. Look for opportuni-

Maureen Buscher-Dang is a Bakersfield public relations and marketing consultant. She can be contacted through her website www.buschermarketing.com


Spring 2019

KERN BUSINESS JOURNAL

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Health

Making a difference

Adventist Health Bakersfield’s AIS Cancer Center cutting-edge medical technology and care for the spirit By Beatris Espericueta Sanders

A

s the spring season brings our community’s annual cancer fundraising events – where generous Kern County residents rally in force to help – the team at Adventist Health’s AIS Cancer Center remembers when they first rallied for a new cancer facility nearly seven years ago. When the AIS Cancer Center was completed in December 2012, the vision focused on creating a patient-centered, world-class, comprehensive cancer center that would keep people in our community for treatment. At the time, one in five cancer patients in Kern County would leave the area for care. In sports terms, we wanted to give Kern County cancer patients – and their families – the “home field advantage.” “We know that people heal better and quicker when surrounded by a strong support system,” said Beatris Espericueta Sanders Jenny Lavers, AIS Cancer Center operations director. “Cancer is a diagnosis that affects not only the patient receiving that news, but their loved ones, family, friends – anyone connected who wants to help, so being nearby when going through treatment, that makes a huge difference.” Nearly seven years later, the four-story, 60,000-squarefoot facility features a team of three medical oncologists, one radiation oncologist and two board-certified, fellowship-trained breast surgeons (part of an all-female breast surgery team with a diagnostic radiologist and family nurse practioner, FNP).

PHOTO COURTESY OF ADVENTIST HEALTH

Medi-yoga is one of the many support elements and programs offered at the AIS Cancer Center.

“We know that people heal better and quicker when surrounded by a strong support system.” — Jenny Lavers, AIS Cancer Center operations director

The AIS Cancer Center offers medical and radiation oncology, along with infusion services, breast surgery and numerous other patient-centered program resources. The technology at the AIS Cancer Center is among the most advanced in Kern County. For example, the TrueBeam linear accelerator – the only one of its kind in our community – can target a tumor within one millimeter of accuracy, taking cancer cells while reducing damage to healthy tissue. This machine also makes radiation therapy as comfortable as possible with treatments taking only five to 15 minutes instead of 30-45 minutes. The AIS Cancer Center’s radiation oncology clinic is accredited by the American College of Radiology. This accreditation is given only to radiation oncology providers that can prove compliance with the ACR’s high-quality

PHOTO COURTESY OF ADVENTIST HEALTH

The Adventist Health Bakersfield AIS Cancer Center

standards. The AIS Cancer Center was the first to receive this distinction in Kern County. Some additional elements that make “The AIS Cancer Center Difference” include: • Board-certified oncologic pharmacist • Dedicated social worker for all services • Faith-based culture • Multiple languages spoken by providers • Lymphedema treatment program (to relieve excess

buildup of fluid under the skin) • Foundation-supported financial help, including costs for transportation, wigs, other support services • Young Survival Coalition (organized by AIS Cancer Center’s FNP, herself a breast cancer survivor) • Free Inspired Healing Program (medi-yoga, tai chi, meditation, nutrition classes, etc.) • Tumor board to discuss complex patient cases • Genetic counseling and research on-site • Regularly hosting free cancer screening events So as Kern County gathers over these next few months for the various community events that promote cancer awareness and raise money toward research and support of local cancer patients, the team at the AIS Cancer Center will continue to support – year-round – current and future cancer patients. “We’re in the business of helping people deal with a disease that can be devastating – and we would love for that disease to become obsolete,” Lavers reflected. “But until that day, the AIS Cancer Center believes that the best way to support a cancer diagnosis, treatment and recovery is through combining the power of technology with caring for a person’s spirit – we see the positive effects of this combination every day. It’s why our center was built.” Beatris Espericueta Sanders is the foundation president at Adventist Health Bakersfield


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www.crossroadsbusinesspark.com

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Cover Story

Baughman Continued from Page 1

Having watched his dad and grandfather work in the harvesting business, Baughman loaded up his clothes, told his apartment manager to give everything away, and

“I bought an almond ranch and literally knew nothing about almonds. I had a consultant, who I would call three or four times a day and would drive him crazy. Luckily, I had a few other growers, who would help me, too. They all helped me succeed.” — Heaith Baughman headed back home. Fortunately, with the backing of his family, plus financial support from a local dairy family, he was able to start his custom harvesting business.

“I didn’t know a whole lot about the business, but it was just a matter of learning and working my butt off,” Baughman said. “Failure is never an option. When you have to succeed, you will find a way.” When Baughman started HB Ag Inc. in 1996, he drove the harvester. As the business found its footing, both his mother and father joined the effort and they remain more than two decades later. “There are people smarter than me out there, but no one will work harder than me,” said Baughman, adding that “everything we made we put back into the business.” By 2003, Baughman’s interest also turned to growing. “I always wanted to be a farmer, but never had the resources before. A lot of farmers I know from my harvesting business were talking about almonds and how they were a pretty good investment. I was fortunate to meet a couple of guys who became my mentors in the almond deal,” he said. “I bought an almond ranch and literally knew nothing about almonds,” said Baughman. “I had a consultant, who I would call three or four times a day and would drive him crazy. Luckily, I had a few other growers, who would help me, too. They all helped me succeed.” Along the way, it has not always been smooth sailing. A few years ago, Baughman

detected his trees were becoming stressed. Advisors determined they were suffering from Alternaria leaf spot, a fungus that appears as a large, brown spot on leaves. If severe, it can lead to nearly complete defoliation by early summer. “I didn’t know what Alternaria was,” said Baughman, adding that he soon learned it could be caused by overwatering. Baughman turned a laser-focus on the problem, which led to the use of sophisticated systems that monitor irrigation. The systems have not only curbed the disease, they have reduced Baughman’s use of water and pumping costs. It’s just part of Baughman’s obsession with seeking out the best practices and best consultants to operate his agribusinesses. “I’m the kind of person who’s bought a lot of ground over the last few years. I’ll set a deal up with a grower and I ask what they want. Some want a 30 day deal. I don’t want to go back to the grower and tell him we can’t do the deal,” said Baughman. Baughman met his future wife Denise at Mission Bank and, after the two were married, moved his business accounts there. Denise no longer works at the bank. Instead, she handles the farming side of HB Ag Inc. and Baughman’s mother handles the custom harvesting side. “My focus is to thrive,” Baughman said.

PHOTO BY JOHN HARTE

Heith Baughman and his mother Marlene Baughman in their family’s blooming almond orchard just northwest of Bakersfield.

“I’m trying to be the best businessman I can; the best family man; and the best father to my two kids.” Maureen Buscher-Dang is a Bakersfield public relations consultant.


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Profile for TBC Media Specialty Publications

Kern Business Journal Spring 2019  

Kern Business Journal Spring 2019