BANKRUPT CITIES HAVE ONE OPTION UPDATE ON PHILLY CASINO PLANS
WHAT THE ELECTION RESULTS MEAN TO GOV. TOM CORBETT
A JOURNAL OF BUSINESS AND POLITICS
THE RAPIDLY CHANGING FACE OF THE AREA’S SUPERMARKET BUSINESS It’s a market worth billions and a mix of advanced technology and an appetite for high-end products has created a growingly competitive landscape.
WHARTON GRADS CREATE STARTUP FOR STARTUPS TACKLING THOSE UNPLEASANT TASKS WITH GUMMY BEARS A DEEPER LOOK AT ELECTION RESULTS ACROSS THE STATE RegionsBusiness.com $2.00 U.S.
8 NOVEMBER 2012
15 NOVEMBER 2012
Not Your Parents’ Supermarket
Gummy Bears Can Help Tackle Unpleasant To Do Lists
! Technology and changing tastes have created an increasingly competitive landscape across the region.
A Look Over Fiscal Cliff
As a leader, you must do things you don’t like to do. Why not reward yourself for doing them? !
! Action is needed to avoid creating another economic bubble caused by The Fed’s historically low interest rates.
One Choice For State’s Bankrupt Cities ! Across the state, politicians have put taxpayers in an impossible position, making promises that can only be kept by more and more taxes. That’s not sustainable.
1900 Arch Street 1900 Arch Street is a premier mixed use development project in the Logan Square section of Philadelphia. Scheduled for completion in Fall of 2013, the project will feature 280 luxury apartments, private parking, and 16,333 SF of ground floor retail.
A Startup For Startups
Two Wharton grads with lots of experience at investment firms and startups now support Philadelphia startups with product development assistance instead of capital. !
Gov. Corbett, State GOP Have Work To Do for 2014 Gov. Tom Corbett’s sliding approval ratings look even worse through the prism of last week’s election results. The road to a second term has become even more challenging. !
More Casino Plans
Competition is heating up for the city’s second casino. The half-dozen plans display diverse visions, opportunities and challenges. !
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Two Penn Center-Suburban Station Located just steps from City Hall, Suburban Station features some of the premier retail locations in the city. Availabilities exist from 900-2,700 SF with neighboring tenants including McDonald’s, Dunkin Donuts, Au Bon Pain, and TD Bank.
CONTENT TEAM Brandon Baker, Emily DiCicco, Victoria
Marchiony CONTRIBUTORS Chris Weeden, Timothy Holwick, Don Lee ADVERTISING DIRECTOR Larry Smallacombe DIRECTOR OF BUSINESS DEVELOPMENT Jim Bauer ACCOUNT MANAGER Rachel Sollberger
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15 NOVEMBER 2012
Lesson Delivered, Republicans Must Learn
Karl Smith is the Editorial Director for Regionâ€™s Business. You can contact him at email@example.com.
As a former sportswriter, I love presidential election nights. Itâ€™s the one time all the networks get hopped up to a Super Bowl-like frenzy and frantically overanalyze every minute detail. So last Tuesday, I settled in to watch the spectacle unfold, with the added bonus of having my son in the same room for this, the last presidential election for which he is ineligible to vote. As we were getting comfortable, organizing snacks and drinks, I discussed some of the storylines - Pennsylvania came into play late in the race, it could take two weeks to call Ohio because of the way they count provisional ballots, etc. But before I could even start a discussion about why we use the Electoral College and not a direct popular vote, the news
came across - the networks were calling Pennsylvania for President Obama. Before I could open a second bag of pretzel chips, it happened - the networks called Ohio for President Obama. I had barely sent my youngest to bed and it was over. The TV talking heads were batting around a dozen questions, but I had only one: Were the Republican operatives behind Mitt Romneyâ€™s campaign deluded, lying or just not very bright. In the weeks leading up to the election, the Republican message grew stronger: First that Mr. Romney had the momentum, that he was going to make it a real race. Then came the stance that this race was a dead heat, both in the popular vote and in the only one that really mattered - the electoral vote.
Mr. Romney visited my backyard in Bucks County and the Republican pundits took their rhetoric to a new level - Landslide. Dick Morris, Karl Rove, George Will and Michael Barone said Romney would win in a romp. So what happened? Which of my three choices - deluded, lying or just not very bright - led to such a public display of looking like a complete fool? Itâ€™s quite possible that the operatives arenâ€™t very bright, but these folks didnâ€™t get to the national stage by accident. And maybe they were lying. After all, politics are built on lies, misstatements and half-truths, so in the â€œby any means necessaryâ€? approach to elections, telling a whopper of a lie to help maintain or build momentum wouldnâ€™t be totally out of the question.
However, all signs point to the top of the Romney campaign and pretty much all of the leading GOP pundits and talking heads simply being deluded. They had flawed models that led them to believe that Mr. Romney would not only win, but win big. In the wake of what turned out to be an Obama landslide, the pundits have been squawking about how the media rigged the election and other nonsense, but Mr. Morris struck right to the heart of the matter: In a nutshell, the GOP is out of touch with the realities of the demographics of 21st century America. I always tell my kids, thereâ€™s nothing wrong with making a mistake, as long as you learn from it and improve. Weâ€™ll see if the GOP learned that lesson.
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15 NOVEMBER 2012
Sandy Delivers A Blow to Jersey Shore Casinos
Moody’s Downgrades Upper Darby District Upper Darby School District’s $4.3 million General Obligation Bonds rating was downgraded to an Aa3 underlying rating and an A1 enhanced rating by Moody’s Investors Service. The previously Aa3-rated district was cited as being downgraded because of the district’s $38 million of parity debt. The assessment also took into account the sizable suburban residential tax base bordering Philadelphia.
WHO TO FOLLOW
@StartUpPro Martin Zwilling Veteran startup mentor, executive, blogger, author, tech professional, and angel investor. “The best entrepreneurs ask ‘the dumbest questions.’” — November 2, 2012
Vedge The “vegan authority,” VegNews Magazine, has dubbed Washington Square West-located Vedge the Restaurant of the Year, previously being titled “one of” the best restaurants in the country by Philadelphia magazine.
Atlantic City’s 12 casinos reported revenue of $209.4 million in October, a 20 percent decline from October 2011, according to New Jersey’s Division of Gaming Enforcement. The drop is attributed to the four-day closure of the casinos following the impact of Hurricane Sandy. The largest decline was felt by the Trump Taj Mahal, which felt a revenue drop of 38 percent. Broken down by category, slot-machine revenue fell 21.8 percent to $149.1 million, with table games decreasing 14.6 percent to $60.2 million.
Brauhaus Schmitz Chef Michael Solomonov will pair with Brauhaus Schmitz Executive Chef Jeremy Nolen for a “Beer vs. Wine Pairing Dinner” November 20 at Brauhaus Schmitz on 718 South St., with attendees voting on winning combinations for the fivecourse dinner.
PHILADELPHIA SCHOOL DISTRICT
Schools Sales ‘Imminent’ With 12 vacant properties currently listed on the market by the Philadelphia School District, district officials are cited as being encouraged by “robust” interest in the lots. The former 250,000-square-foot home of West Philadelphia High School, located at 4700 Walnut St., has recently been eyed by developers for a sale of $6 million, according to a NewsWorks report. The unit would be purchased for a mix of retail and residential use. The School Reform Commission will vote to approve the sale of certain district buildings during a scheduled meeting on November 15. ENERGY
PECO Penalized for Explosion PECO will pay a $75,000 civil penalty stemming from a procedural mishandling of a 2009 gas explosion in Upper Merion Township, following a November 8 vote from the Pennsylvania Public Utility Commission. The gas leak occurred from an overlooked four-inch crack in a cast iron main, which spread to a nearby home on Summit Street in Swedeland.
Turnpike Plans To Eliminate Toll Plazas, More Than 850 Jobs
The Pennsylvania Turnpike will within five years eliminate all toll plazas and use only electronic tolls, acting Chief Executive Officer Craig Shuey told a joint House and Senate Transportation Committee hearing. Toll plazas currently cost
the Turnpike Commission about $67 million annually to staff, according to a PatriotNews report. The electronic conversion would eliminate the need for 755 unionized toll collectors and about 100 associated non-unionized employees.
September Job Openings Dipped, Still Below Pre-Recession Figures
Jobs Saved, Added at Navy Yard Site
The number of job openings dropped to its lowest point in five months — 3.56 million nationwide — in September, according to the U.S. Labor Department. The decrease in job openings is about 100,000 lower than where it was in August, which had its job openings during the time period revised by the Labor Department to 3.66 million. Still, job openings have spiked since July 2009, up roughly 63 percent, but slightly below the 4 million jobs available when the recession started in December 2007.
Rhoads Industries Inc., located at the Navy Yard, announced November 9 that it will increase its workforce to 300 in 2015. The news comes as a result of a 20-year loan through M&T Bank and the Obama administration’s Small Business Jobs Act, which allows for refinancing of long-term, low-interest loans. The new loan is estimated to have saved 180 jobs.
Twenty guests can experience a “La Panarda” feast December 16 at Le Virtu. The event will consist of an eight-hour, 40-course meal, which costs $200.
Bainbridge Barrel House Bainbridge Barrel House opened its doors at 627 Bainbridge St., focusing on house-crafted foods using seasonal ingredients.
DelRossi’s Cheesesteaks Co. Owners Michael and David Frank opened DelRossi’s Cheesesteaks Co. in Northern Liberties at 4th and Spring Garden streets with weekday hours of 9 a.m. to midnight, and weekend hours of 9 a.m. to 2 a.m.
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15 NOVEMBER 2012
Blue Bell’s UniTek Plans Sale of Wireline Business
KOP District Grant Allows for Commuter Shuttle
Blue Bell, Pa.-based UniTek Global Services, Inc. announced November 8 that it will close a deal to sell its wireline business in its fourth financial quarter. The announcement came alongside distribution of its third-quarter results, which have the outsourced infrastructure services company down to $1.39 per diluted share, for a total loss of $26.1 million. Total revenue came in at $132.1 million, an increase from $101.9 million during the same period in 2011.
In an effort to reduce congested traffic, the King of Prussia District has received a $500,000 grant from the Delaware Valley Regional Planning Commission to operate a commuter transit shuttle, which connects regional rail service with the King of Prussia Business Park. The shuttle will run between the
Norristown Transportation Center and the Wayne train station, with fare yet to be announced. The service will run Monday through Friday starting in Spring 2013.
Going Green For Green Toss aside everything you think you know about your consumer: Green marketing expert Jacquelyn A. Ottman has arrived on the scene to dissect the growing trends of consumerism in the age of “green” with her book, The New Rules of Green Marketing. Ms. Ottman enlists the new-age rules of emphasizing performance and health quality in marketing in order to capitalize on a changing audience, rules she has already personally put to the test with clients like Starbucks, Wal-Mart, Nike and other bigbusiness corporations. Her offering demonstrates a unique perspective on how to turn consumer- and ecofriendly green advertising into the other, more profit-friendly kind of green: money. “Hurrah for this book showing how going green pays off in delivering a triple bottom line — profits, people, and planet.” — Philip Kotler, S.C. Johnson Distinguished Professor of International Marketing, Northwestern University THEFT
Survey: Philly Worst City For Theft of Cellphones Philadelphia is No. 1 on a list by security firm Lookout as the city where owners are most likely to lose their phone, whether it is lost or stolen. The study also found that two-thirds of phone loss occurs between 9 p.m. and 2 a.m., and that people lose a smartphone about once per year.
Thanks to Apple’s now infamous, Google Maps-crippling iOS 6 update, one of the most simple smartphone applications has now become one of the most demanded. In addition to serving as a browser and aggregate source of personal data, Microsoft’s search app features a fairly reliable maps service that, if nothing else, trounces Apple’s largely-failed efforts at GPS service. (Free, iOS 6 and Android)
Homes Planned for Former Church Site After demolishing what was formerly St. Boniface Church at Diamond and Hancock streets, Norris Square Civic Association has announced that seven single-family homes will be constructed in the now empty space. The association had previously called into question a project for the
space that would have included 15 multi-family units, which will be spread across the area with 10 being built on West Susquehanna Avenue and five being scattered across the Norris Square neighborhood. Thirty units in total are now expected to be built.
Developers Sought for Fishtown Project
Office Tower Proposed
Philadelphia Industrial Development Corp. is currently on the market for development proposals, as it plans to sell off Fishtown properties at 104969 N. Front St. and 1101-19 N. Front St. The group has outlined the type of pitches it is seeking, a mixture of residential and neighborhood retail. The city will take proposals until February 8.
Liberty Property Trust has proposed to the Planning Commission, Logan Square Neighborhood Association and the Kennedy House a plan to construct a 22-story office tower at 19th and Arch streets. According to the Philadelphia Business Journal, Liberty purchased the parking lot where the tower would protrude during the summer. Liberty Trust has previously been responsible for the construction of the Comcast Center.
Vishay Precision — The Malvern, Pa.located precision systems maker earned $1.9 million in its third quarter, which ended September 29. Echo Therapeutics — The developer of the Symphony system, a transdermal continuous glucose monitoring system, the Philadelphia-based company announced it experienced a net loss of $4.3 million for the quarter ending September 30, with the company citing research and development expenses as the reason for the loss. Discovery Labs — Based in Warrington, Pa., the biotechnology company announced an operating loss of $10 million and net cash outflows of $9.9 million. The company’s quarter ended September 30. Inovio Pharmaceuticals — The Blue Bell, Pa.-located pharmaceutical company reported revenue of $855,000 for the threemonth period ending September 30. The company had a net loss of $2.1 million, attributed to a change in the fair value of common stock. UGI — The Valley Forge, Pa.-based gas company reported fourth-quarter results of a $14.7 million loss, translating to $0.13 per share. The company lost $22.4 million during the same period last year. InterDigital — Located in Wilmington, Del., the wireless technologies company reported an anticipated fourthquarter result of $62 million in revenue, based on royalty reports received to date. This would be a 6 percent increase over its third-quarter results.
15 NOVEMBER 2012
Students Put Entrepreneurial Spirit to Work With VenturePact Startup At 21 years old, two Wharton students have transcended the classroom to create their own “startup for startups.” Randy Rayess and Pratham Mittal are the founders of VenturePact, a University City-based venture that provides product development in place of capital. After working for SUBMITTED several startups and investment firms in places like San Francisco and New York, the two draw in new investors, the two frequent came together and agreed upon a com- Philly Tech Meetup events on weekends mon, problematic thread they’d observed and are constantly traveling to garner new engineers, new clients and new in their travels. “So we both had this startup back- ideas. Mr. Mittal, who is natively from ground, and we both realized a lot of India, has recruited from his home counproblems entrepreneurs face, and one of try for some of their engineering talent, the biggest problems is getting technol- but insists Philadelphia’s growing stature ogy built,” Mr. Mittal said. “We realized in the tech community is what keeps him it’s an inherent problem in the system, on his toes. “We grew organically from Philly’s and that’s really where our basic idea community,” Mr. Mittal said. “At one came from.” of our talks, [First Round Capital’s] Since the company’s inception Josh Kopelman was very clear that in the winter, the students have we need to accumulated 40 post-grad engikeep people neers to work on the development THERE’S LOTS OF in Philadelof customers’ product ideas. They TALENT COMING OUT are given project manager roles OF PENN, DREXEL phia, and that that give them the responsibilities AND TEMPLE. THEY it’s not true of giving a client a timeline for his that innovaJUST DON’T ALWAYS product, building relationships tion isn’ t STAY HERE.’ and setting goals. happening “We believe we have an edge —VENTURE PACT CO-FOUNDER here…There’s on [CTOs] in that we work on an PRATHAM MITTAL lots of talent equity basis instead of a cash basis,” coming out of Mr. Rayess said. “So what that does is it Penn, Drexel and Temple. They just don’t makes us invested in a client’s success. always stay here.” “What happens in an outsourcing Added Mr. Rayess, “I remember just model is they’ll say, ‘I’m going to charge a year and a half ago when we did these you on a certain basis where I have no tech meetups, there were 15 or 30 people incentive to work for you.’ But since we [at a meeting], and now you go to these work based on their success, we believe events and there’s nowhere to sit. It’s just we do it with a better quality — some- a completely different environment.” Though the VenturePact founders conthing not guaranteed with an outsourcing agreement.” sider their business model to be a multiVenturePact received an influx of about hub venture, they see more than enough 45 customer applications over the sum- reasons to keep Philadelphia as the home mer from the Philadelphia area and from for both themselves and their business. “With New York and San Francisco, Harvard-based entrepreneurs, which the they’ve already grown their talent, they’ve two whittled down to three. “We try to scale intelligently, instead of hit a wall,” Mr. Rayess said. “The fact that just saying, ‘We love all of these people, Philadelphia is growing makes it that let’s take them all,’ and then not be able to much more interesting — and compelprovide for them,” Mr. Rayess said. ling — to grow ourselves here.” To keep up with the talent pool and — Brandon Baker
15 NOVEMBER 2012
TEVA Announces New CEO
Reading Terminal Market Launches Photo Campaign
Advisors to Push in 2013 for Alternative Investing
Montgomery County-based Teva Pharmaceutical Industries Ltd. announced that unit leader Bill Marth will retire at the end of 2013, being replaced by Allan Oberman as the new president and CEO. Mr. Oberman is expected to play a slightly different role as leader of Teva’s western-hemisphere efforts, reporting directly to the recently-appointed chief executive officer, Jeremy Levin.
About 83 percent of advisors are using tactical and alternative investments, with 84 percent described as being “likely to recommend them” going into 2013, according to investment advisor CMG. The survey also indicated that 87 percent of advisors believe a portfolio that includes both tactical and strategic allocations stands to offer a greater value than one deprived of any one of them.
New Leadership, Surname Chosen Philadelphia Insurance Co., based in Bala Cynwyd, Pa., announced November 12 that it will soon be led by Chief Operating Officer Sean S. Sweeney — the first time a Maguire will not be at the head of the insurance company, effective January 1. Mr. Sweeney will replace James Maguire Jr., who was preceded by company founder James J. Maguire Sr. In addition to Mr. Sweeney’s forthcoming takeover, the company will create an “Office of the CEO” consisting of the company’s top executives in an effort to ease the transition.
Survey: Businesses Missing Talent Management Programs In an effort to promote its delectable prominence during the Thanksgiving holiday, Reading Terminal Market has launched a photo contest that encourages market shoppers to share Instagram, Facebook
and Twitter photos with the hashtag #MyMarket. The contest ends on November 17, and the first and second-place winners will receive gift cards that can be used anywhere in the market.
A survey by talent and career management group Right Management indicated that 12 percent of major organizations have what the expert group describes as a “fully-implemented talent management strategy.” The survey discovered that 44 percent of those surveyed have a series of separate, unintegrated HR processes that are not completely implemented, with 12 percent admitting to not have any strategy in place.
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15 NOVEMBER 2012
Drexel University Creates Health Outreach Office
Hospital Sold, Leased Back
Credit Unions Merge
Drexel University College urban-based health advoof Medicine has created cates and citizens with the Office of Urban Health expert health-care providEquity, Education ers, joining educaand Research as tors and researchpart of an ongoing ers with local effort to improve health advocates access to quality to bring disease health-care servicprevention infores for underserved mation to urban populations. communities, The office will be convening conNunez lead by Dr. Ana E. versations with Nunez, a professor of medi- citizens and health-care cine and the director of the providers to seek solutions college’s women’s health to complex health-care issues, and promoting an education program. Plans to address inequi- urban culture that values ties include; connecting health and wellness. HEALTH CARE
Keystone, CCP Announce Deal Philadelphia-based Keystone Mercy Health Plan, a member of the AmeriHealth Mercy Family of Cos., and Cardiology Consultants of Philadelphia announced November 8 that they have entered into a “pay for performance” agreement as part of AmeriHealth Mercy’s PerformPlus program, which offers primary-care physicians, specialists, hospitals and accountable care organi-
zations contracts that aim to reward providers who improve outcomes and efficiency. Cardiology Consultants employs 95 physicians in offices in all five counties in southeastern Pennsylvania and has served Keystone Mercy members for more than 20 years. This agreement is the first that Keystone Mercy has made with a cardiology specialty-care provider.
Exton Square Mall Adds Sports Stores Exton Square Mall has added Pottstown, Pa.-based sporting goods retailer Schuylkill Valley Sports and sports novelty seller Sports Vault to it growing roster of sports related retailers. Related stores in the 120-store Exton Square Mall include Champs Sports, Finish Line, Foot Locker, Journeys and
Zumiez. Exton Square Mall is owned by Philadelphiabased Pennsylvania Real Estate Investment Trust and is anchored by Boscov’s, JCPenney, Macy’s and Sears.
Birmingham, Ala.-based real estate investment trust Medical Properties Trust Inc. has purchased the 140bed facility used by Roxborough Memorial Hospital in Philadelphia from Ontario, Calif.-based Prime Healthcare Services for $30 million as part of a $210 million transaction with Prime that included acute-care hospitals in Reno, Nev. and Inglewood, Calif. Locally, Medical Properties Trust also owns 24-bed Roth-
man Specialty Hospital in Bensalem, Pa. Prime, which bought Roxborough Memorial in February from Solis Healthcare, will now lease the property from its new owner.
Medical Media Organizations Announce Distribution Plan On November 7, Warmin- industry. ster, Pa.-based PhysiciansNews. UBM delivers integrated and com, a website that prostrategic communication solutions to a comprehenvides medical news and practice management sive audience of medical advice to an audience of professionals and healthhealthcare professionals care consumers through announced a online, print, live, and new marketing custom proand distribugrams. PhysiciansNews.com content tion partnership with UBM Medica US, one of the largest will now be delivered to more media companies in the United professionals via the UBM States serving the healthcare Medica Partner Network.
Malvern’s Auxilium Pharmaceuticals, Pfizer Amend Deal Over Xiapex Drug Pfizer Inc. is ending a collaboration agreement with Malvern, Pa.-based specialty biopharmaceutical company, Auxilium Pharmaceuticals, Inc. regarding the development, commercialization and supply of Xiapex in the European Union (EU) and certain other European and Eurasian countries. As a result of this mutual decision to conclude the collaboration no later than April 24, 2013,
The Collegeville, Pa. branch of UTI Employees Credit Union has merged with American Heritage Federal Credit Union, which serves customers in Philadelphia, Bucks and Montgomery counties. American Heritage is the 144th largest credit union in the U.S., with $1.15 billion in assets and 121,000 members. UTI’s Collegeville branch had 500 members and just over $2.8 million in total assets as of September 30 and is now American Heritage’s 27th branch in the Philadelphia area.
Auxilium will recognize $94 million of deferred revenue and $9 million of deferred costs in the fourth quarter of 2012. Prior to the termination date, the parties will continue to perform all obligations as described in the agreement. After the termination date, rights to commercialize Xiapex and responsibility for regulatory activities for Xiapex in these countries will revert to Auxilium.
Towers Watson Buys DaVinci Consulting New York-based human resources consulting firm Towers Watson announced it has completed its acquisition of Yardley, Pa.-based DaVinci Consulting Group, a boutique actuarial consulting firm that specializes in the long-term-care insurance market. Towers Watson announced its intent to acquire DaVinci on October 15, citing a desire to “increase its competencies and experience in the long-term care insurance market.” The principals and 10-member consulting staff of DaVinci are expected to join the Life practice of Towers Watson’s 1,000-employee operation in the Philadelphia region. Towers Watson has approximately 14,000 employees total. REAL ESTATE
Commercial Buildings Sold The Center for Neurological and Neurodevelopmental Health bought the two-story, 21,199-square-foot office/flex building at 651 Park Ave. in King of Prussia, Pa., for $2.3 million from Dick Ritter, whose advertising and marketing firm, the Ritter Co., had vacated the space following Ritter’s retirement. MVD Entertainment Group has purchased 203 Windsor Road in the Limerick Airport Business Center in Limerick, Pa. for $1.3 million. MVD Entertainment plans to move to the new warehouse and office space in early 2013.
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15 NOVEMBER 2012
GOP Must Consider Latino Votes For Continued Survival
Charlie Gerow is CEO of Quantum Communications, a Harrisburg-based public relations and issue advocacy firm.
CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.
“If Republicans don’t do better in the Hispanic community, in a few short years the Republicans will no longer be the majority party in our state...if that happens, no Republican will ever again win the White House.” Those aren’t the musing of a left-leaning college professor or the hectoring jabs of a RINO. Those are the sobering thoughts of a conservative, Tea Party favorite: Senator-elect Ted Cruz of Texas. Given the results of recent elections, who can argue his point? Just eight years ago George W. Bush took roughly 40 percent of the Latino vote. In 2008 the percentage that John McCain was able to garner was down to 35 percent. This year Mitt Romney captured only 27 percent. The dramatically decreasing percentages are especially troubling when viewed in light of the fact that the Latino population is the fastest growing in the country. The Latino vote is the most talked-about segment of the population in terms of potentially fertile ground for Republicans. After all, less than a decade ago, a sizeable portion of the Latino community was voting Republican.
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Those not casting their votes for the top of the GOP ticket still identified themselves as sympathetic to Republican philosophies of economic growth and personal freedom. They tended to be culturally and socially more conservative than other minority populations. Yet the Republican Party continued to lose their affection, allegiance and votes. The African American community was not likely to be swayed to a Romney candidacy. It was fantasy to think that large numbers of blacks were going to vote in 2012 to remove from office the first African-American president. But what about the future? There are still those within the leadership ranks of the GOP who argue for a “base” election strategy. Their argument is that if the Republicans get out their base vote in national elections, they win. They correctly point out that the country is still a center-right nation. They remind us that Mitt Romney somehow managed to get more than a million votes less than John McCain did four years ago. And they stare at electoral maps awash in red with blue on the periphery. Arguably turning out the base might have
worked in 2012. But it didn’t happen. Among other factors, the Republicans were beaten on tactics. The Obama ground game never slowed down after 2008. They merely shifted gears, focused on essential territory and ramped up for 2012. Obama poured more than 25 percent of his spending into field operations. The Republicans put most of their money into television. What can’t be argued is that as the population changes, the party seen as the domain of old white men is not going to be vibrant or even existent for very long. Conservatives don’t need to sacrifice their principles or the allies of their current coalition in order to reach into the growing minority populations. They do need to listen to and hear from those whose votes they seek. They need a commitment to old-fashioned, people-to-people campaigns; not just among their “base,” but with those who are not currently with them. Turning out the base isn’t enough. Expanding the base is the key to being a majority party in the future.
15 NOVEMBER 2012
City Voters Support Charter Changes With ‘Yes’ Votes on Ballot Questions CITY COUNCIL MATTERS
Timothy Holwick is a freelance writer covering Philadelphia government. Find more coverage at citycouncilmatters.com and follow him on Twitter @CityCouncilBlog.
CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.
VINCENT J. BROWN
While the candidates were the main focus on Election Day in Philadelphia, Philadelphians also voted “yes” on four questions included on the ballot. Three of the four questions asked voters for permission to amend the Philadelphia Home Rule Charter. In order to amend the Charter, City Council must approve the amendment with a two-thirds majority, but first they must present it to the voters for approval. This approval request takes the form of a ballot question, which can either appear on the spring primaries ballot or the November election. The first question asked for approval to create an independent body for the purpose of setting water and sewer rates. Currently, the Water Commissioner, who is appointed by the Mayor of Philadelphia, performs this duty. The proposed change will create a body independent from the Mayor’s Administration and appointed by City Council. While that just trades one elected appointer for another, the real change will be the ability of council to set procedures for this body, that are required to be open and transparent. The second question authorizes City Council, via ordinance, to require the Philadelphia Finance Department to provide additional information beyond the current annual budget proposal. Such information, includes, but is not limited to, cost/benefit analysis of certain expenditures. Back in June 2012, the Philadelphia Finance Department testified that its office, and the mayor, could not support this change at the current time due to technological limitations. However, with this voter approval, and a likely finalization by council, the Finance Department will likely have to be ready to provide the requested additional information at the budget hearings for next spring.
The third question concerns a civil service preference for the children of police officers or firefighters who died while on active duty. The proposed change would expand the preference to grandchildren as well. It is no surprise voters approved such a measure as the deaths of police officers and firefighters have been at the forefront of local media coverage recently. Finally, the fourth question on the ballot did not concern the Philadelphia Home Rule Charter but simply asked voters if it was permissible that the city borrow approximately $123 million. The stated purpose of the money is for it to be spent toward capital projects for Transit, Streets and Sanitation, Municipal Buildings, Parks, Museum, and Economic Development. City Council would have the authority to determine how these dollars are allocated to the proposed or approved uses. The Philadelphia Home Rule Charter acts as its Constitution, so amending it is no small matter when compared to the typical bills and resolutions passed by City Council. It is an important exercise in democracy that Philadelphians are asked for their approval before council can continue on with the amendments. That mechanism checks council as it essentially seeks to expand its influence with these sorts of changes, particularly on the water and sewer rates and what kind of information they can require from the Mayor’s Office when the annual budget process comes around. In a time when government is constantly pressured to be more transparent and accountable, the residents of Philadelphia apparently felt these measures were a step in the right direction.
OFFICE OF THE CONTROLLER
Commissioner’s Office, Commerce Department Targeted In City Audits City Controller Alan But- and a failure of certain kovitz, who has aggressively key employees to submit targeted fraud and waste financial disclosure forms in Philadelphia since being required by Pennsylvania elected in 2005, law. released results An audit of of two recent the Cultural and audits . Commercial An audit of the Corridors Procity’s Commisgram showed that the Comsioner’s Office found excessive merce Departovertime costs ment provided totaled around inadequate Butkovitz 27 percent of supervision over the agency’s $5 million the $135.5 million taxpaypayroll. Just one employee er-funded program. made almost $390,000 in Included among the overtime alone since 2000. findings: The Merchants This employee worked all Fund, a one-employee non14 days in a biweekly pay profit group, distributed period, 12 of those during $1 million in grants to 18 overtime hours. However, retail locations for renovanone of the overtime was tions. One recipient, was no reviewed and approved by longer in business and has a superior. sold the property where The audit also found renovations were to take inadequate payroll proce- place. More information is dures, a lack of enforce- available at www.philadelment of city sick leave rules, phiacontroller.org. COMMISSIONER’S OFFICE
Commissioners’ Chair Ousted Following months of Singer approved after protension, City Commis- moting him to chief deputy. sioner Stephanie Singer She was increasing his salwas ousted November 7 ary to the amount made by in a motion by his predecessor, Republican City Noel Kugelmass, Commissioner an amount Al Schmidt, with with which Mr. support from Schmidt had Democratic City agreed. Commissioner Mr. Schmidt Anthony Clark. told City Paper Ms. Singer that while Mr. said the issue Kugelmass Singer is regarding served as “Chief Deputy Commissioner of Staff of the Commission,” Dennis Lee’s salary. She Mr. Lee is simply “Chief said Mr. Schmidt and Mr. Deputy Commissioner.” Clarke opposed Mr. Lee’s Ms. Singer said Mr. Lee $12,000 pay raise that Ms. does “exactly the same job.”
15 NOVEMBER 2012
GOP Maintains House Leadership, Control of Leadership Positions
Governor Considering Privatization of Lottery
Casey: Congressional Plan Will Steer Clear of ‘Cliff’
Since Republicans maintained control of the state House of Representatives, much of the chamber’s leadership will remain the same. Speaker of the House: Sam Smith (R-66th Dist.) Caucus Leader: Mike Turzai (R-28th Dist.) Minority Leader: (D-33rd Dist.) Democratic Caucus Leadership Caucus Secretary: Ron Waters (191st Dist.) Caucus Administrator: Neal Goodman (123rd Dist.) Appropriations Committee Ranking Member: Joe Markosek (25th Dist.) Whip: Mike Hanna (76th Dist.) Caucus Chairman: Dan Frankel (23rd Dist.) Policy Committee Chairman: Mike Sturla (96th Dist.) Republican Caucus Leadership Appropriations Chairman: Bill Adolph (165th Dist.) Whip: Stan Saylor (94th Dist.) Caucus Chairwoman: Sandra Major (111th Dist.) Caucus Secretary: Mike Vereb (150th Dist.) Caucus Administrator: Richard Stevenson (8th Dist.) Policy Committee Chairman: Dave Reed (62nd Dist.)
An agreement to privatize the Pennsylvania Lottery system in under discussion and could be in place before February, according to The Patriot-News of Harrisburg. Under the plan originally proposed more than a year ago, daily operations of the lottery would be controlled by a private company, but Pennsylvania would maintain control. The private company would be able to take no more than 5 percent of the lottery’s profit, according to federal guidelines. “We’ve said from day one we’re looking to see what all
we can privatize,” Gov. Tom Corbett said Friday, according to a Patriot-News report. “If we can ensure increased funding and protecting our seniors ... then we have an obligation to take a look at privatization.”
Days after his re-elec- federal tax rates and tion, Senator Bob Casey finances. Tax reform, higher talked about the “grand bargain,” a fiscal plan in taxes on the wealthy, and discussion in Congress deeper spending cuts are some of the key which would cut components of deficits by $4 such a plan. trillion to $5 trilHe added that lion over the next Congressmen decade, with the can more easTimes-Tribune. ily work together Sen. Casey, post-election. chairman of Con“I don’t care gress’ Joint EcoCasey who you are, nomic Committee, said that the “grand Democrat or Republican, bargain” agreement could House or Senate, you produce enough revenue heard from people on the to decrease future deficits street about how much because it would give they want people workinvestors and businesses ing together,” he told the confidence in stabilized newspaper.
15 NOVEMBER 2012
Governor Signs Legislation Benefitting Veterans
Governor Tom Corbett is joined by Maj. Gen. Wesley Craig as he signs a bill into law at the Keystone Conference Center November 12. PENNSYLVANIA NATIONAL GUARD
Governor Tom Corbett signed seven pieces of legislation Monday that will benefit Pennsylvania’s military veterans and Pennsylvania National Guard. “Today is about honoring a debt; a debt earned in blood and sacrifice,” said. Gov. Corbett. Legislation included: — The Veterans Trust Fund, sponsored by Sen. Lisa Baker (R-Luzerne), will provide for veterans’ programs. — “V” Designation on Driver License, sponsored by Rep. Jeff Pyle (R-Armstrong), requires PennDOT to issue a driver’s license or ID card with a “V” for Veteran identifier at no additional cost, for persons who have served in the U.S. Armed Forces. — Pennsylvania Code of Military Justice, sponsored by Sen. Mary Jo White (R-Butler), substantially
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REGION’S BUSINESS A JOURNAL OF BUSINESS & POLITICS
TODAY IS ABOUT HONORING A DEBT; A DEBT EARNED IN BLOOD AND SACRIFICE.’ — GOVERNOR TOM CORBETT
revises the code, enforcing order and discipline for members of the Pennsylvania National Guard who are not in active federal service. — Uniformed Military Overseas Voting Act, sponsored by Sen. Bob Robbins (R-Butler), simplifies the registration and absentee ballot process for uniformed service voters and overseas civilian voters for all elections within the state. — Veteran-Owned Business Procurement Program, sponsored by Sen. Tommy Tomlinson (R-Bucks), encourages state agencies to contract with veteran-owned and service-disabled veteran-owned small businesses. — Establishes license plates
for World War II veterans of the U.S. Merchant Marine and for all veterans of U.S. Military Airborne Units, sponsored by Rep. John Bear (R-Lancaster). Prior to this legislation, special plates were available to Word War II veterans of all other military services except the Merchant Marine. — Municipal Police Officers’ Education and Training Commission, sponsored by Rep. Marcia Hahn (R-Northampton), which provides training for police officers in the state on recognizing and interacting with veterans and other individuals suffering from Post Traumatic Stress Disorder and Traumatic Brain Injury.
15 NOVEMBER 2012
GOP, Corbett Have Work To Do Before 2014
Eric Boehm is bureau chief for PA Independent, an online political news organization.
CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.
HARRISBURG — Republicans seem to have their work cut out for them to get Gov. Tom Corbett re-elected in 2014. Gov. Corbett and his GOP counterparts were soundly beaten in all five statewide races on Election Day, but two of last week’s results are bigger red flags than the others. The list begins with Kathleen Kane, a former assistant district attorney for Lackawanna County who scored more than 3 million votes (about 140,000 more votes than President Obama received in the Keystone State) as she became the first Democrat and the first woman ever elected as Pennsylvania’s attorney general. The election was viewed by some as a referendum on Gov. Corbett — Ms. Kane made a particular issue of the handling of the Jerry Sandusky investigation, which began while Gov. Corbett was the state’s attorney general — and Republican candidate Dave Freed was personally and politically backed by Gov. Corbett during the campaign. The second concerning loss for the GOP on Tuesday was not really a loss, but more of a slip. Democrats were able to reduce a 30-20 GOP majority in the state Senate to a much more narrow 27-23 edge by winning seats vacated by retiring Republicans in Erie, Harrisburg and the Pittsburgh suburbs. Already more moderate than the state House and the governor, the state Senate figures to move further to the center (or even slightly to the left) when the new session begins in January. That will make it harder for the governor to get some of his more conservative agenda items across the finish line. Gov. Corbett’s popularity has been hovering around 40 percent in most recent polls, but inside the administration there is only limited concern about that because the governor has two years until he faces the voters — a long time in politics. After all, former Gov. Tom Ridge was nicknamed “One-Term Tom” by some in the media two years before he coasted to re-election in
GOVERNOR TOM CORBETT
1998. So where should Gov. Corbett begin? First and foremost, by sticking to his “no tax increases” message. It will be harder than it sounds with increasing pension payments coming down the pike and no dramatic increase in state revenue expected. The no-tax promise is a winning message — even if it is going to come with some lumps from those who want to see more funding for education and other special interests. It’s been written ad infinitum for the last two years, but Gov. Corbett also needs to become more of a salesman for his initiatives and needs to be more willing to take praise and do victory laps. Case in point: Last year, Gov. Corbett wanted to cut higher education by 10 percent in the budget he proposed in February. But when the final package received his signature on June 30, he had agreed to flat-line funding for the state’s colleges and universities. The governor took a lot of heat for proposing the cuts, but seemed unwilling to take credit when he agreed to put more money in the pot without breaking his tax pledge.
Corbett: Kane Investigation Should Be Short Throughout her campaign, Attorney General-elect Kathleen Kane vowed to thoroughly investigate Governor Tom Corbett’s role in the Jerry Sandusky investigation. The governor said he welcomes the investigation but added it should take no more than a few weeks or a few months. “There is nothing out there,” he said in a recent Radio Pennsylvania interview.
Observers question how to define the “Corbett agenda” after two years. While he has not made the policy splashes of Gov. Chris Christie in New Jersey or Gov. Scott Walker in Wisconsin, Gov. Corbett is committed to ensuring the state does not spend more money than it takes in. Now he should stick to that promise — and take every opportunity to remind taxpayers why that is good for them.
September 29, 2011
32% 50% Disapproval
June 12, 2012
47% 36% Disapproval
October 16, 2012
42% 38% Disapproval
15 NOVEMBER 2012
THE CHANGING FACE OF THE SUPERMARKET BUSINESS Players in an increasingly crowded field try to carve out niches as they learn it’s not always about price.
he powers of the grocery stores are changing, and they’re doing so with a dramatically different approach: Value over price. Earlier this year, the purchase of Genuardi’s by Giant represented a significant consolidation of a regional brand by a formidable power. Fifteen of 24 stores were rebranded over the summer. Four additional sales and five closings dwindled the staple to a mere two locations. The inability of Genuardi’s to survive in the current marketplace is the result of several conditions. Large players are entering the market, and they could not adapt to transforming palettes. The emergence of Wegmans, Whole Foods Markets, Giant and Trader Joe’s bring reputations for quality products with reputable customer service at affordable prices. They do not want the average customer, instead catering to the higher-income individuals who grew to resent the inadequacies of industry predecessors. Wegmans is opening a store in Montgomeryville next year and Whole Foods opened one in Glen Mills in March. On November 7, Whole Foods Markets slowly began announcing a $100 million project in conjunction with a move from Callowhill to Center City. As these give rise, Pathmark, ACME and Superfresh flounder left to respond to the
dwindling market share that they once revered, proving it’s not just how many you reach but who. “When we move into an area, we understand that we have competition,” Wegmans spokeswoman Jeanne Colleluori said. “But we keep our heads down and focus on what our strengths are: Customer service and we make sure that our employees are armed with all the knowledge that they need.” Ventures such as farmers markets, community-shared agriculture (CSA) and buyers club programs can be credited with the shifting consumer preferences. It began as a grass-roots movement desiring food that was of a higher quality and less industrial than what was available on most grocery-store shelves.
Stories by Chris We Illustration by Don Lee
15 NOVEMBER 2012
BY THE NUMBERS
Grocery Stores Grapple With Online Demand In an Amazon.com world where people can shop for anything and have it arrive on their doorstep within days, grocery shopping is fashioning itself in the same mold. One of Giant’s sister companies, Peapod, allows registered users to shop a catalog of items and have these items shipped to their doorstep. This is convenient for a number of reasons. For many people, it avoids the headaches of grocery shopping including traffic jams and checkout lines and everything in between. According to a 2003 report by the Population Reference Bureau, traditional families represented only seven percent of the population, while two-income families more than doubled it at 16 percent. In an era when both parents are working, often full-time, they simply don’t have the time to juggle such chores, and this service fits that niche. Giant did not have the statistics for volume of people utilizing these services, but in 2008, the Internet Retailer Top 500 Guide reported that the Chicago-based firm grossed $378 million. Just last month, it announced that it was launching 100 new virtual grocery stores along commuter rail stations in Philadelphia, Boston, C o nnecticut, New York, Washington, D.C., and Chicago. According to a June 14 report by Internet Retailer, Peapod launched
a trial of this service in Philadelphia along 15 commuter lines, allowing commuters to utilize their smart phones to scan items, creating shopping lists. Although it sounds foreign, 90 percent of those who tried it returned for a second use during the 12-week span. A mobile app will further make it easier to shop for groceries from the comfort of wherever you are. Giant’s role in the marketplace may not generate the same fervor as its competitors from out of state upon entry, but it is poised to remain a player indefinitely due to its own strategies. The third-largest chain regionally offers shopping solutions kiosks to expedite the in-store experience. They perform a number of functions including allowing customers to place deli orders as they walk into the store and pick them up prior to checkout. Technologically inclined customers can avoid them altogether. Hand-held scanners available at entrances make it possible to avoid lines during an entire visit. “Supermarket technology is something we approach from a sense of
innovation for something to enhance the customer experience,” Mr. Brand said. “There are some customers that prefer self-checkout because they like having control over the transaction. Some prefer interaction. It offers more options.” When converting the 15 Genuardi’s stores, Giant needed to ensure that it could make the enhancements both aesthetically and technologically that were required to maintain brand continuity. More than a facelift, it required an overhaul. As the older regional chains declined, such tools were not implemented. An evident dichotomy emerges when perusing the websites of Wegman’s, ShopRite, Trader Joe’s or Giant versus those owned by A&P (Pathmark, Superfresh) or SUPERVALU’s ACME. The latter’s designs are archaically unappealing and difficult to navigate. Looks aside, most are adding tools online. At Wegmans.com, once you select a store, you can find the aisle location of a particular item. Virtually all of them allow users to generate shopping lists with several empowering customers to load coupons directly onto bonus cards. Giant, Wegman’s, ShopRite, ACME and Whole Foods Markets all have applications available on the Apple Store with various levels of functionality.
Biggest seller in Philadelphia Keasbey, N.J.-based Shoprite is the region’s top chain in terms of sales.
Number of ShopRite stores in Philadelphia area.
ShopRite sales for the first half of 2012 nationwide.
ShopRite’s market share in the Philadelphia market.
Sales per store average for ShopRite nationwide. Carlisle, Pa-based Giant Food is second in the region.
Number of Giant stores in the Philadelphia area.
Sales for first half of year.
Giant’s market share in the Philadelphia region.
Genuardi’s stores acquired by Giant this year.
15 NOVEMBER 2012
BY THE NUMBERS
As food and health education progress to the front of public consciousness, these small-scale operations continue to thrive.
Demise of the local mainstays
At the high end Although they have fewer stores in the region, Whole Foods Markets and Wegmans generate huge sales in the region.
Wegmans ranking in the region in terms of sales.
Number of Wegmans stores in the region, the fewest stores among chains in the region’s top 10 in terms of sales.
Wegmans sales for the first half of 2012 nationwide.
Wegmans market share in the Philadelphia market.
Sales per store average for Wegmans nationwide.
Square feet in an average Wegmans store.
The family-owned Genuardi’s chain was sold to Safeway in 2000. Facing debt and dissatisfied investors, it sold 16 stores to Giant January 5 but the Federal Trade Commission intervened citing lack of competition, so Giant agreed to sell the Newton store to McCaffrey’s. Throughout June and July, the 15 Genuardi’s stores that Giant added were closed and rebranded, but the future of the remaining eight stores remained less certain as Safeway attempted to secure an owner in an attempt to leave the Philadelphia market. Unable to find an investor, the Egg Harbor and Barnegat township stores will close by the year’s end resulting in the loss of 150 jobs, according to an October 17 Press of Atlantic City article. They join stores in Exton, Jeffersonville and Cherry Hill in shutting their doors. Weis obtained locations in Conshohocken, Doylestown and East Norriton. Only two Genuardi’s remain, in Audobon and Marlton, N.J. ACME, according to last year’s figures, was the No. 2 grocer generating $1.57 billion in sales for a market share of 10.56 percent among its 69 regional stores, but its future is decisively bleak. Owned by Eden-Prairie, Minn.-based SUPERVALU, a September announcement revealed that stores in Sharon Hill, Glassboro and Morrisville will close. This announcement followed a similarly dire declaration in January closing two Pennsylvania stores and three in New Jersey. Seven facilities ceased operations in 2011. In 2010, A&P filed for Chapter 11 bankruptcy, and the NJ-based company closed seven-area stores last year. Super Fresh had purchased a struggling Pathmark in 2007, and by the time it filed for bankruptcy, the debt total neared $1 million. According to its brands’ websites, there are a combined 42 locations of the stores within 30 miles of Philadelphia: 25 Pathmark and 17 Super Fresh. Just one opened last year, with a Super Fresh debuting in the city neighborhood of Northern Liberties. It is not all gloom, however. ShopRite grossed the largest revenue in the region in 2011 at $1.7 billion between its 43 stores. Privately held by Wakefern in Keasbey, N.J., individual stores are independently owned, which allows them to be adaptive
in the market place. The chain surpassed will open in the Allentown store in sumACME for the first time last year. mer 2013. Giant Food Stores was No. 3 in 2011 and Wal-Mart, the country’s largest grocer, certainly passed ACME because of ACME’s focuses on sales to attract its buyers. Wegstore closing and the acquisition of Genumans strives for always being affordable but does offer adjustments on common ardi’s. ShopRite and Giant represent the items as their demand fluctuates throughlongest-tenured, thriving food stores in the region. out the year. The emphasis is valThe corollary between the fall of aforeue, according to Ms. Colleluori. “We focus on our consistent, mentioned grocers and the rise of those low pricing,” she said. It was coming to the area reveals itself in this a phrase she would utilize year’s Consumer Reports rating 52 of the frequently during a phone country’s most popular chains. Rankings interview. “Each season for the were obtained by feedback last few seasons, we have been provided from more than identifying products people are 24,000 customers and buying most often on their visit 42,000 visits with an to the store. They can buy it when evaluative formula they need it because they know utilizing frustrations the price is going to caused by parking, be consistent from customer service, week to week. checkout speed and “It varies from food quality, among season to season, others, as a gauge of dependcustomer satisfaction. Philadelphia-area ing on chains exposed themselves for their own vulnerability. Pathmark, while recouping from bankruptcy under A&P ownership, rated an industry worst as Wegmans logged first for the third straight year. Between them, local companies varied, but they were mostly disappointing. ShopRite came in 24th. Privately-held Wegmans operates five of its supermarkets in the Philadelphia area. The opening of the King of Prussia store in May and a EACH SEASON FOR THE Montgomeryville location in LAST FEW SEASONS, the imminent future promises WE HAVE BEEN greater sales figures. In 2011, with King of Prussia still under IDENTIFYING construction, the mega-superPRODUCTS PEOPLE market held a 2.54 percent ARE BUYING MOST market share and ranked 13th OFTEN ON THEIR VISIT in revenue. TO THE STORE.’ Wegmans, with its massive, diverse selection, offers qual—JEANNE COLLELUORI, WEGMANS ity ingredients to suit different tastes, from the price-conscious customers to the “foodies” who yearn for high-quality ingredients necessary to make the next big dish. In the Malvern, Collegeville and King of Prussia stores, customers can visit fully serviced Irish-themed pubs. Another one
15 NOVEMBER 2012
what people feel customers are going to be looking for. [At this time of year], cold and flu medications are going to be on the list. In the summer, you’re going to see produce items and we are going to try to have certain meat items on there to help families get those meals on the table.” The pitfall of many within the industry has been unsuccessful mergers and acquisitions, as when Pathmark was purchased by A&P and SUPERVALU’s stewardship of ACME. Giant, meanwhile must cope with such a transition with the purchase of Genuardi’s, and in doing so, it is relying heavily on its experience locally having formed in Carlisle in 1923. “Giant is going to be celebrating its 90th anniversary next year,” said Chris Brand, manager of public relations. “Our customers are very responsive to our value equation, which many customers might recognize as quality selection and savings every day. We believe in that approach. We are very fortunate to have a good associate base.” Thirty-one thousand workers includes 1,700 former Genuardi’s employees that remained with the company. While Giant needed to rebrand 15 stores and update facilities, Wegmans growth requires a different approach often because of the scale of the operation. The square footage cannot be merely reconfigured when the stores are often twice the size of most supermarkets. Balancing such a large, diverse operation forces management to undertake special measures protecting the integrity of the brand. It does so by having employees of other stores train the new ones in opening markets. “We focus on our employees,” Ms. Colleluori said. “Our best investment is our employees, whether it’s training or providing support. It will make the customer experience better.” Another Wegmans store is opening in Montgomeryville off of Rt. 309 in the site of a closed Boscov’s at North Wales Road with opening slated for next year. Trader Joe’s rates nearly as high in the latest Consumer Reports as Wegmans, but the scale of its operations pales in comparison by design. While Wegmans can feel large and overwhelming for the uninitiated or the impatient, Trader Joe’s is small, dynamic and adaptive. At checkout, the carts are handed to the cashier instead of unloaded down a conveyor belt, prompting person-to-person interaction with the intention of resembling a farmer’s market. The high-end supermarket carousel only gets more complicated. Whole Food Markets just opened a Glen Mills location in
March, an area with a real dearth of a quality large-scale grocery stores compared to neighboring communities. It joined nine other area locations with two in Philadelphia (South Street and Callowhill), five in the Pennsylvania suburbs (North Whales, Devon, Plymouth Meeting, Jenkintown and Wynnewood) and two in New Jersey (Marlton and Princeton). On November 7, the Austin-based company announced it will leave Callowhill by 2017 and all indications, despite the hushhush, are that it will relocate to Center City and become the second-largest store in the area, housing 15,000 square feet of additional retail space and four or five stories of at least 250 apartment buildings above it.
Combating Globalism with Hyper Localism The advent of the counter-consumerism compounded with greater food education awareness is revolutionizing how consumers obtain their food. Frustrated by the one-stop, impersonal model offered by Wal-Mart and others, many shoppers have opted for farmers markets, communityshared agriculture groups (CSAs) or buyers clubs, avoiding retailers all together. The popularity of these emerging entities represents a national trend. Many are opting to make the efforts to make sure it stays within their community. They are also combing for new buying experiences that differentiate themselves from the hordes in supermarket lines. Tracking data is difficult because of fragmentation, but one of the major outfits in the region is Farm to City, which brings 17 different farmers markets together and generates revenue through three different means. First, it charges farmers space at these markets and then there is a small mark-up on food sold to its winter harvest buying club. It also earns a commission for the customers it refers to different farmers’ CSAs and buyers clubs through FarmToCity.org. CSAs are agreements between the farmers and the consumers prior to a season for how much food they are going to purchase. At certain times in the week or month, that consumer picks up the food at a designated location. Often if a certain threshold is reached, it will be delivered, otherwise it must be picked up. Deliveries are often option for offices where co-workers sign up and split the food packages among themselves. Quantities and items are not determined by the purchaser but by the farmer’s available crop.
In buying clubs customers pay as they purchase. In this arrangement, customers are more in control of the quantities and types of produce, meat, cheeses, etc., that they receive. Through these different ventures, Harvest to City estimates that it will generate $3 million this year with $2 million from the farmers markets. The additional $1 million comes from its commissions from CSAs and buyers clubs as well as its own winter harvest buyers club, which is in its 13th year. Bob Pierson, the company’s founder and co-director, was first motivated by a trip to Italy in the 1960s where he saw the pride people had in the hand-picked ingredients they picked. In the early 1990s, he set up two markets in Philadelphia, which led to a job with the Food Trust in 1996 before separating and forming Farm to City in 2000. The scope of expansion has been breathtaking. In his first year at Food Trust with seven markets, the farmers made $40,000. When he started Farm to City over a 12 years ago, its inaugural take was $160,000. While he expects to surpass his 17 farmers markets to generate $2 million in 2012, he said Food Trust with 30-plus markets is still the larger entity and estimates its earnings to be between $2-3 million annually. Pooled together, the two farmers markets account for 125 times more business than in 1996. “Fifty-eighty percent of people find out about it by seeing it or hearing about it,” Mr. Pierson said. “It has its own momentum.” Often, he said, farmers are empowered to sell directly to restaurants, enabling them to develop long-term partnerships that guarantee business throughout the year and regardless of seasonal production capabilities. But they are not reaching everyone. Farmers markets don’t work in lowincome communities, Mr. Pierson said. Farmers are not available to fetch the highest price for their goods. By appealing to the wealthy, middle-aged demographic at the height of their careers and cutting out the middlemen, entrepreneurial producers hand-pick who they sell to in order to guarantee profitability. Mr. Pierson cites one large-scale orchards in favor of a smaller farm because he was able to make just as much money. “They’ve totally changed their cropping systems and what they grow,” Mr. Pierson said. “Orchards don’t have to grow as many acres if they’re selling it at retail. They don’t have to raise the same amount of apples to
BY THE NUMBERS
At the high end Although they have fewer stores in the region, Whole Foods Markets and Wegmans generate huge sales in the region.
Whole Foods Market ranking in the region in terms of sales.
Number of Whole Foods Market stores in the region, the second-fewest stores among chains in the region’s top 10 in terms of sales.
Whole Foods Market’s sales for the first half of 2012 nationwide.
Whole Foods Market’s market share in the Philadelphia market.
Whole Foods Market’s rank in the Fortune 500. It is the eighth largest food and drug chain in the country.
15 NOVEMBER 2012
BY THE NUMBERS
Local players Horsham-based Thriftway/ Shop N Bag and Readingbased Redner’s Warehouse Markets are in the region’s top 10 in sales.
Thriftway/Shop N Bag’s ranking in the region in terms of sales.
Number of Thriftway/Shop N Bag stores in the region.
$185.5M Thriftway/Shop N Bag’s sales for the first half of 2012 nationwide.
Thriftway/Shop N Bag’s market share in the Philadelphia market.
Redner’s ranking in the region in terms of sales.
Number of Redner’s stores in the region.
$263.5M Redner’s sales for the first half of 2012 nationwide.
Redner’s marke tshare in the Philadelphia market.
make the same amount of money.” Community-shared agriculture has become popular as well. Little formal studies have been commissioned researching these ventures, but according to a 2002 national report by the University Massachusetts-Amherst and the University of Wisconsin Community Supported Agriculture Entering the 21st Century: Results from the 2001 National Survey, they have proved profitable for the farms. Three hundred CSA farms from across 43 states responded to a mail survey with results yielding that the farmers are significantly younger than the national average of the rest of industry and that once they begin the program, they stick with it. Fifty-one percent of farmers were 45 years old or younger, while just 27 percent of the agricultural industry occupied that demographic. Only 12.5 percent of farmers were more than 55 while nation-wide, that represents nearly half (48.8 percent) the workforce. While CSAs comprised just part of the revenue, 94.1 percent planned to continue their involvement in the programs. They tend to be progressive and welleducated. Farming represents just part of their income with 74 percent holding at least a bachelor’s degree with 23 percent boasting completed graduate work. Ninety-six percent of the farms practiced sustainable techniques, whether organic or biodynamic production, targeting customers seeking fresh products without preservatives or pesticides. Harvest Local Foods has been a player serving as a buyers club since 2006 and plans to reach a half-million dollars annually either in 2012 or next year. Harvest Local Foods works with 60 farmers and food artisans delivering 120 packages a week. Although they did not know each other, co-founders Mary Ann Ford and Pam Nelson had a vision for a company that filled a void in the market place. Farmers markets and community-shared agriculture initiatives have reinvigorated the local farming scene, but both had their holes, Ms. Ford said. Farmers markets offer a communal space where buyers can select their quantities, but she felt that markets like those in Center City were sometimes avoided
Americans spent more than $584 billion in supermarkets in 2011. because of parking and other difficulties. Community-shared agriculture offered food delivery, but many were turned off by inconsistency and lack of selectivity in the CSAs; occasionally the packages contained great products, other times, the variety was weak or less desirable. Harvest Local Foods allows members to select quantities of 250 products ranging from pasture-raised meats, fish, produce, dairy, breads, soups and salads, all of which is organically and sustainably procured. Ms. Ford said her company experienced 10-15 percent growth its first four years. Its pace has slowed with the stagnating of the economy. Headquartered in Lansdowne, Harvest Local Food operates within a 50-mile radius, but half of its $500k revenue comes from deliveries in Philadelphia. “It’s incredibly gratifying,” she said. “We got Best of Philly for grocery delivery service. We’ve gotten other awards too where we’ve seen testimonials from customers. People are excited about being able to get this kind of food and be a part of this kind of undertaking.” As they come back from economic woes, Philadelphia’s neighborhoods are not yet ready for farmers markets because there is not enough of a presence of this demographic. This younger, post-college demographic does not purchase foods at enough of a quantity to justify it. Young, single people are more prone to go out to eat. Mr. Pierson said Farm to City’s prime demographic is females between 35-55 years old. However, for Ms. Ford, whose business lends itself to people on the go, Harvest Local Foods works perfectly, and she said
she has many customers in these areas that are coming back, noting that in several condominiums, an initial buy results in growth within that building. Such referral marketing has been the primary engine of growth. Relying very little on print advertising, her main advertising is her website. The dynamic space requires consistent updates. On HarvestLocalFoods.com, you can submit orders, read bios on several of the 60 farms and food artisans being used at the moment, sign up for the newsletter, obtain recipes and obtain that week’s specials. A blog is also maintained, although it is updated sporadically. “[Growth] is basically word of mouth,” she said. “We don’t spend a lot on advertising. It’s a pretty expensive website and we try to keep up with the social media, so we have a pretty strong web presence — not great, could be better — and very little print. We do attend events occasionally and we do participate in the Landsdowne Farmers Market.” Landsdowne Farmers Market is a part of the Food Trust network and one of its seven suburban markets. It operates 26 within Philadelphia.
Pushback from the Chains The emergent market for local, organic products forced the larger retailers to respond, and perhaps nobody has done it as well on such a scale as Giant in this area. While others have roots in nearby states such as New Jersey and New York, Giant’s Pennsylvania roots serve it well, winning multiple awards. Giant opened in 1923 as the Carlisle Meat Market and was an initial member of the PA Preferred Program developed by the Department of Agriculture. Its goal is to ensure that local product is used throughout the state rather than have it brought in from elsewhere. Agriculture is the state’s largest industry at $5.1 billion annually, according to the program’s website. This involves retailers, food service agencies and others committing to the cause. Upon the formation of the endeavor in January 2004, Giant earned immediate recognition. It claimed the 2006 PA Preferred Retailer of the Year Award, the inaugural year for the honor, and owns the 2008 Leadership Award for Excellence in Agriculture. If any chain attempts to usurp Giant’s
15 NOVEMBER 2012
role, it must cultivate relationships with farmers in the state. Sixty percent of the product must be grown, harvested or manufactured in the state. Giant currently has PA Preferred racks designated by stickers, said Mr. Brand. Currently, more than 30 farms comprise Giant’s Pennsylvania supply. Its organic section has grown as well. In 2005, it opened Nature’s Promise Marketplace, which represents more than 800 natural, organic products. It began in the Camp Hill and has extended into other locations. “It is a health food store within a store,” Mr. Brand said. “We’re also committed to products that are in need of a special diet.” He added that other sections have grown. This includes gluten-free choices and other requirements dictated either by health conditions or lifestyle choices made by consumers. Wegmans has long utilized local farming and its organic section spans many aisles, like Nature’s Promise Marketplace It also formulated its supply chain to
include fresh product, whether it’s produce, meat, dairy or other goods. “We have worked with local growers in all of our markets for decades,” Ms. Colleluori said. “They deliver directly to the stores. In the growing season, it’s not unusual to have product that was picked fresh that morning. It’s one of the great benefits that we can offer our customers.” A&P, emerging from bankruptcy, announced on August 30 that it and BrightFarms reached an agreement to use a 500,000 square-foot Yardley facility to grow produce from under the Superfresh banner as an exclusive retailer. They broke ground during the summer and plan to harvest by the end of the year. According to BrightFarms’ web site, McCaffrey’s, which purchased the Newton Genuardi’s, and Jon Vena, Inc., will also procure lettuce, herbs and tomatoes from the greenhouse. Even with the best of intentions, these relationships sometimes go awry, said Mr. Pierson. One of the great benefits offered by Whole Foods on South Street
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was to allow local farmers to come and sell outside of its store. From the perspective of the farmers, the results were mixed. Confused customers still went inside to locate items that were available in stands by the entrance. Whole Foods Markets, he says, still has to depend on items that come from outside of the region when they are unavailable locally often because they are out of growing season. While it may not be intentional, it creates inadvertent buyer practices. Larger chains create signage for what they have obtained regionally, but it may not be clear unless the customer is specifically looking for it. “Every time I check in Whole Foods, they say that they are local, but maybe 10 out of 100 items are identified as being from local farms,” he said. Still, these large chains are doing the best with what they can. They are expected to have everything because of their size. Their role as industry leaders creates parallel growth with the farmers markets because of the scales of the exposure they
are able to generate. “People that shop there are conscious of their health and taste, and they want high value from what they are getting,” Mr. Pierson said. “It’s friendly with their hours, far more than farmers markets. It’s traveling the same direction as the local food movement.” As small business such as Harvest Local Foods aspires to grow, the obstacles are part of the process. The larger chains are now creating the demand, and they both grow consumer tastes evolve. “It’s creating an awareness of the food system and what the consequences are when they’re eating industrially processed foods,” Ms. Ford said. “My children are grown, but in terms of this business, I was just realizing how it is like raising a child. It is a long-term undertaking but there’s always a new challenge and something else to learn. “Being a part of this movement and connecting with our colleagues who are doing this in Philadelphia is great. I wouldn’t do anything else.”
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Developers Betting Big on Philadelphia Developers are scrambling in a competition over Philadelphia’s second (and only available) casino license. November 15 was the deadline for developers to submit their proposals to the Pennsylvania Gaming Control Board. So far, at least six different groups have showed an interest in gaming in the city. The Goldenberg Group, of Blue Bell, Pa., proposed building on the site of a surface parking lot at 8th and Market Streets, according to the Daily News.
The most elaborately-detailed plan, and concocted by the most high-profile of Philadelphia developers, Bart Blatstein’s $700-million Provence would rest on the property of the former Daily News and Philadelphia Inquirer building, featuring French-inspired architecture, a 125-room hotel, a first floor of restaurants and shopping, a luxury swimming pool, a nightclub and jazz club, a theater, a roof village and a more subdued second-floor casino. Mr. Blatstein’s resort would join the transformation of the Divine Lorraine Hotel and construction efforts from Temple to jolt the area of North Broad Street back to life.
Steve Wynn, chief executive of Wynn Resorts Ltd., has proposed a Delaware River-front casino resort in a 60-acre Fishtown lot. It would boast a 300room hotel with a 150,000-square-foot casino that would consist of 2,500 slot machines and 100 table games.
Penn National Gaming, which runs a casino near Harrisburg, submitted an impact report with the city for a site at 7th Street and Packer Avenue in South Philly, according to the Daily News.
The Philadelphia-based Parkway Corporation has filed an impact report with the city at its main headquarters at Broad and Race Streets, according to the Daily News.
Rep. Bob Brady proposed a massive, 5,000-slot-machine casino with a nightclub and 300-room hotel that the representative believes could generate $40 to $50 million per year and, in turn, contribute to the financing of the struggling Philadelphia School District. The casino would be located in South Philadelphia at the still-city-owned, 30-acre lot of the Food Distribution Center. Rep. Brady’s proposal will not be submitted to the state by Thursday’s deadline.
Greenwood Gaming and Entertainment Inc. and The Cordish Companies — owners of Parx Casino and Maryland Live!, respectively — are looking to build a “Las Vegas quality” hotel and casino at 800 Packer Avenue, currently the Stadium Holiday Inn. The 200,000-square-foot site is expected to include 240 rooms; a casino floor with 125 table games and 2,000 slot machines and a parking garage consisting of 2,500 spaces.
15 NOVEMBER 2012
Kane Victory Did Not Come On President’s Coattails
Despite being outspent, Sen. Bob Casey outperformed President Barack Obama significantly — and not just in western Pa. where the president is weak. President Obama cleared Mitt Romney by 5.2 percent statewide; Sen. Casey beat Tom Smith by 9.1 points.
Pennsylvania Auditor General
With little money spent, the York County state representative rode the president’s coattails to a win on Tuesday over GOP colleague John Maher from Allegheny County. He won by a relatively tight 3.2 percent margin.
Rob McCord was an incumbent, and he spent hundreds of thousands on a steady TV presence, making a difference in the Pittsburgh, Johnstown and Scranton markets. Statewide, he won by 8.6 percent. He even outperformed the president in his opponent Diana Irey Vaughan’s home County of Washington.
Sometimes row office candidates rely on the top of the ticket to carry them to a win. They tend to be lesser known than, say, the presidential candidates, and count on riding their party’s coattails. Not Kathleen Kane. She made history twice on Tuesday when she became the first Democrat and first woman elected Pa. Attorney General. She achieved a fairly impressive performance across the state. The map above compares her win margin to that of President Obama. President Obama won the state by 5.2 points, 52 percent to 46.8 percent for Mitt Romney. Ms. Kane won by 14.5 points, 56.1 percent to 41.6 percent for Dave Freed. On election night she exceeded the president’s performance in eastern Pa. and showed none of his weakness in western Pennsylvania The map below shows how Kane did
compared to another AG hopeful back in 2004. Tom Corbett was running alongside President George W. Bush’s re-election effort, which turned out to be the best GOP performance since 1988. This map below shows Ms. Kane’s 2012 vote share compared to Mr. Corbett’s in 2004. Many of the differences reflect Pennsylvania’s basic red-v-blue county dynamic. But Centre County is worth a special look. Ms. Kane campaigned on criticism of Mr. Corbett’s handling of the Jerry Sandusky case and turned the AG contest into a referendum on the investigation. In the epicenter of Nittany Nation, which Mr. Corbett won by 8 points in ‘04, Ms. Kane won by 17 points this year — a 25 point swing. She also outperformed his vote share there during the 2010 gubernatorial campaign, by 2 points). — PoliticsPA.com
15 NOVEMBER 2012
How to Attack Those Unpleasant Tasks
Brian Farnham was the founding Editor-in-Chief of Patch.com, where he remains on the advisory board.
In the sixties, a psychologist named David Premack confirmed something that at first blush sounds pretty “NS, Sherlock!’: if you make pleasant things contingent upon doing unpleasant things, there's a better chance the unpleasant things will get done. Premack proved this with studies on cebus monkeys and small children (although, sadly, not together), and so the phenomenon got his name: the Premack Principle. If you're a parent, you likely put this principle to work all the time. “Yes, you can play Xbox if you finish your homework.” The promise of Assassin's Creed drives the behavior of toughing out some trigonometry. All well and good. But what do you do when you don't have any parents? I don't mean that in a literal,
Oliver Twist way. I mean it in a lonely-at-the-top way (i.e. when you're the boss). Although even the highest falutin' of us have an overseer somewhere (e.g., a board of directors) to spur us generally, the challenge of being a leader for a lot of execs is finding ways to motivate yourself day to day, especially around the unpleasant tasks — small and large — of your particular biz. This is where you can put Premack to work for you personally. The first step is to identify what a reward is to you. You should literally make a list. If my four year-old son were doing this exercise, it would be a short list: gummy bears and the iPad. With a pound of gummy bears and a fully charged iPad I'm pretty sure I could get him to do my taxes. Your gummy bears might be as
simple as checking your Fantasy Football stats or running to Starbucks. But the key is in the simplicity: make these doable, daily things that you know make you feel good. (One caveat: be careful your small rewards aren't laced. If “quickly” checking eBay for art glass to bid on can too easily turn into an hour of online shopping, that's not a gummy bear, it's a crack pipe.) Once you have your Gummy Bears List — and it could be 20 or 30 items long — keep it handy on your desk or iPhone. You'll use it as a reference source. Now make your Eff Me List (things that when you contemplate having to do, make you go, “Oh, Eff me!”). The Eff Me List can be general — weekly one-on-ones, for example. But optimally, compiling it is as easy as highlighting the things on each daily To Do list that you
find repellent. With your Eff Me List identified, shuffle in items from your Gummy Bear list after each one. At first, this may feel a tad juvenile, but you'll be amazed at how effective it is. All those small, real rewards will keep your wheels of productivity greased all day long. And it will only get easier. Because here's the interesting thing about Premack's Principle: the more you use dopamineinducing behavior to reinforce behavior that's less likely to happen on its own, the more likely that not-so-likely behavior gets over time. So while sorting your T&E receipts will never exactly give you a contact high, paired constantly with fifteen minutes of crossword puzzling, you may almost find yourself looking forward to it.
15 NOVEMBER 2012
The Executive Director of the Philadelphia Marathon is prepared to showcase the best that the city she loves has to offer when runners take their mark this weekend.
What’s the elevator pitch for the Philadelphia Marathon?
It’s one of the best marathons in the country. We like to say we treat the whole runner, and we show you our city. We have a whole expo dedicated to the City of Philadelphia that shows you not just what you can do as a runner, but also as a visitor. One thing I’ve learned is runners rarely, if ever, run alone. You’re coming with your spouse, your child, your friend, and we have something for all of them. Runners also frequently have their best times on our course. What kind of response have you gotten from New York Marathon runners?
It goes back to Philly being the best host city. When we heard what had happened to our neighbor — and New York City is our neighbor — we thought about what we could do to help. Then we had to make sure we could handle it. We also had to make sure it would not impact the other runners. [Registration for] the race has closed November 1. We opened 3,000 spots [for runners who had signed up for the New York Marathon]. We didn’t think we’d get 3,000. We got 1,460. We’re encouraging our New York runners to wear their New York Marathon shirts for the race as a sign of unity.
How did you get involved with the Marathon? I fell into it unexpectedly. In 2008 I was working for a candidate for mayor. He won, and he appointed me representative for the City of Philadelphia. Someone came to me after I started and told me that in two weeks we’d be going to California for a conference. I asked, “Why?” She said, “Did nobody tell you? You’re the executive director of the Philadelphia Marathon.” I ran track in high school, but marathons? I watch that in the Olympics. So I really had to learn from the ground up. What I did know was marketing. When I came in, we had 16,000 runners, and we’ve added 2,000 runners every year. This year we have more than 28,000 runners. What does the marathon mean for the city in terms of tourism? In 2011, about 21,000 runners came for the race and 55 percent stayed in hotels. Thirty-two percent of them said they were likely to return to the city for a vacation in the next 12 months. I love my city. My team loves this city, and I use that love and dedication to the city and this marathon to showcase it. — Photo courtesy of the City of Philadelphia
15 NOVEMBER 2012
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15 NOVEMBER 2012
Bankrupt Cities Must Save Themselves
Matthew J. Brouillette is President & CEO of The Commonwealth Foundation. Find out more at CommonwealthFoundation.org.
Harrisburg is broke. Literally. So are 26 other cities across the commonwealth that are stuck in the state's Act 47 program for financially strapped municipalities. Many enter in — like Pittsburgh — but very few ever get out. And many more cities are likely to join them in the near future. While the stories of urban fiscal decline may be unique, the underlying causes of municipal decay are generally the same: toxic combinations of underperforming schools, violent crime, relentless government unions, outmigration of middle and high income earners, inhospitable business taxes and regulations, woefully underfunded pensions and major financial blunders. But in every Act 47 case, a common destructive denominator is present: government unions insisting on higher salaries and costly benefits regardless of a city's ability to pay. Years ago, Scranton tried to renegotiate union contracts, but instead, courts ordered the city to give workers bonuses and raises. Last month, Democrat Mayor Chris Doherty took the desperate measure of cutting all city employees' pay to minimum wage to demonstrate the city's dire financial distress. The unions, of course, took him to court. In Harrisburg, government employee unions refuse to surrender any ground to help America's most indebted city. And recently, a state court ruled that the mayor and city council must double the local earned income tax in order to pay, in part,
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the salaries, pensions, and health care for the city's unionized employees. In city after city, local elected officials — mostly Democrats — are complaining that state law and court rulings have so tipped the balance of power to organized labor that just personnel costs, especially pensions, threaten to bankrupt local governments. While government employees themselves are certainly not to blame for the financial blunders of mayors and city councils, the reality is that the taxpayers cannot keep all of the promises made by politicians to union bosses at the bargaining table. What these city officials are experiencing is why President Franklin Delano Roosevelt — no enemy of organized labor — adamantly opposed giving government employees the ability to unionize and collectively bargain with politicians. He understood that once union bosses gained the power to hire and fire the very people they negotiate contracts with, the taxpayers would be victimized. And this is precisely what is happening across Pennsylvania, not only in our cities but particularly in our public schools. Of course, taxpayers can appreciate government employees and teachers without loving their unions. But unless we address the unfair and unaffordable labor policies and practices, the inevitable end will benefit neither government employees nor taxpayers. In short, cities must cut their spending.
Raising taxes and borrowing more money will only exacerbate the problem. Real solutions will require the state legislature and local officials to work together and change state laws to give municipalities the ability to control unaffordable and unsustainable personnel costs. Reforms like 401(k)-style retirement plans instead of defined-benefit (guaranteed government income for life) pensions, ending prevailing wage laws that unnecessarily inflate the cost of construction projects, and privatizing functions that should be left to the private sector will help save our cities. What won't work is increasing taxes and going further into debt. Such "solutions" will do more to aggravate a city's financial woes than ameliorate them. Most cities already have exorbitant taxes and burdensome debt, and when you add in crummy schools and shoddy public services, you can understand why higher income families fled to the suburbs years ago. Further increasing the cost to live or work in a city will only encourage another mass exodus and discourage future investment. Cities will ultimately have to save themselves from those who benefit when governments spend too much. This will happen only when city officials — and state lawmakers — are willing to confront the government union bosses and their unaffordable and unsustainable demands on the taxpayer.
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15 NOVEMBER 2012
GREATER PHILADELPHIA ALLIANCE FOR CAPITAL AND TECHNOLOGIES
VALLEY FORGE CONVENTION AND VISITORS BUREAU
President Stepping Down After 10 Years With Bureau
IMPACT 2012 Draws Hundreds of Investors, Entrepreneurs More than 800 investors and entrepreneurs gathered last week at the Center City Ritz-Carlton hotel to pitch their young businesses or consider investment opportunities as part of the East Coast’s oldest venture conference. IMPACT 2012 Venture Summit Mid-Atlantic — “the marquee networking event in the city” — has gone by different names over its 20-plus-year existence, but the mission has always been the same, and it has brought billions of dollars of venture funding to the region over the years. Between Mayor Michael Nutter and the strong university scene in
The Valley Forge Convention and Visitors Bureau’s longtime president will step down after March. Paul Decker has led CVB since 1992, through the conversion from a 12-employee government agency with a $1.5 million budget into a 21-employee IMPACT 2012 Venture Summit Mid-Atlantic attendees listen to Emily Mendell of the National Venture Capital Association November 8 at the Center City Ritz-Carlton. REGION’S BUSINESS PHOTO
this city, Philadelphia has the right ingredients to continue to improve its rank among entrepreneurfriendly cities in the United States, said Emily Mendell of the National Venture Capital Association.
Venture capital statistics are improving, albeit slowly, from recent years. “Venture capitalists are optimistic by nature, and the [NVCA] chooses to be optimistic as well,” she said.
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PHILADELPHIA-ISRAEL CHAMBER OF COMMERCE
Chamber Undergoes Name Change The America-Israel Chamber of Commerce, Central Atlantic Region is now known as the Philadelphia-Israel Chamber of Commerce (PICC). The name, followed by “PA, NJ, DE,” was adopted to make the connection between Israel and Philadelphia explicit.
15 NOVEMBER 2012
Peering At The Fiscal Cliff Through a Crystal Ball
Alan Mandeloff is a partner at Citrin Cooperman where he provides tax services, financial planning and investment advisory services for businesses and high net-worth individuals. Contact him at amandeloff@citrincooperman. com
Just when the investment world came to the conclusion that interest rates in the U.S. could not get any lower, the Federal Reserve, in reaction to lingering weak economic data, instituted a third round of quantitative easing measures that it hoped would keep rates very low for the foreseeable future. As has been the case with all of its major easing events since the financial crisis began in 2008, the medicine was effective and interest rates, at each tangent along the 30-year yield curve have remained at unprecedentedly low levels. It’s unfortunate that the artificially low interest rates have not done more to stimulate the economy. One aspect of the economic stimulus that has been positive is that the resulting low interest rates have served to prop up U.S. equity markets and kept alive a more than 30-year bull market in bonds. Absent the stimulus the world’s economic problems would be significantly more problematic. The challenges in the eurozone are far from resolved. Growth in the major emerging market economies is decelerating, global corporate earnings are under increasing pressure and President Obama and Congress have yet to address the fiscal cliff standoff. Yet there is reason for hope. Despite the fact that none of these factors would appear to be good for equities, the S&P 500 now stands just 10 percent from its all-time high. Such resiliency has to be at least in part, due to the fact that cash and investment quality bonds offer investors such painfully low rates of return. In the search for investment return, stocks, particularly those that pay dividends, have become more or less the only game in town. Without question, the Federal Reserve will alter its low interest rate policy sooner or later. The hope is that the change will be implemented as the result of an improving economy and a declining rate of unemployment. That last happened during the period from 2002-2006, when GDP grew from 1.8 percent to 2.7 percent, and the unemployment rate fell from 5.8 percent to 4.6 percent. The bond market sold off during that span due to higher interest rates, but the stock market rallied. A far less pleasant catalyst for a change in Federal Reserve policy would be the emergence of inflationary fears. The longer this era of easy money lasts the more likely a bubble will be formed that will require more aggressive action by the central bank. In this scenario, interest rates could move up suddenly and sharply and the damage done to all financial assets would be
OTHER VOICES If the Budget Control Act (BCA) goes in to effect, financial markets will feel a major impact due to uncertainty and could resemble a fall similar to 2008. KENNETH WISENEFSKI OWNER, WEBIMAX
The longer this era of easy money lasts the more likely a bubble will be formed that will require more aggressive action ... severe. It is true that globalization has dampened the threat of a 1970’s style inflation cycle, but after many years of unprecedented stimulus it is dangerous to ignore the risk, especially in the event of significant weakness in the U.S. dollar. If the Fed has to adopt inflation fighting measures like it did in the 1970’s, stocks will be punished, but likely not as badly as bonds. It is well understood that when the time comes for the Fed to allow interest rates to move higher they will attempt to do so deliberately and systematically. The performance of the financial markets will be heavily dependent on an orderly transition. If rates move up sharply as a result of detrimental economic forces, both stocks and bonds will decline sharply. If rates, on the other hand, increase moderately for what is perceived as a constructive reason, stocks and bonds could actually move in opposite directions. Imagine that. Bonds, which have been for so long the investment darling of many investors, would finally go out of style and stocks, which have been vilified by many investors since as far back as the technology crash in 2000, would take center stage. That would be a real game changer.
The deal is bigger than the fiscal cliff. The same sort of give-and-take is needed for budget control over the long haul. If they can avoid the fiscal cliff, they can get on the road to further progress. HENRY J. WATERS III THE COLUMBIA DAILY TRIBUNE 12 NOVEMBER 2012
Going over the so-called fiscal cliff may, on the face of it, “improve” U.S. public finances, reduce the deficit and slow the rise of America’s debt mountain. But the fiscal cliff will not of itself solve America’s large and deep-seated financial problems. SATYAJIT DAS MARKETWATCH 13 NOVEMBER 2012
With the U.S. economy still struggling to crawl out of the economic downturn, it’s important to avoid policies that impede growth and investment. Allowing the nation to go over the fiscal cliff is not the right choice. MATTHEW GLANS THE HEARTLAND INSTITUTE 8 NOVEMBER 2012
15 NOVEMBER 2012
Fiscal Cliff Demands Washington Change Politics As Usual So much of politics today is about posturing and positioning more about what things look like than what they really are. So in the aftermath of an election night that for Republicans can at best be described as disappointing and at worst described as a shellacking, one might have expected the GOP to emerge in a mood to compromise. In the wake of the results, both Mitt Romney and President Obama at least made the polite gesture of suggesting that the two sides needed to work together to solve the significant challenges facing the country. But as discussion turned to the the upcoming “fiscal cliff ” - the common moniker attached to the combination of expiring Bush-era tax cuts and automatically triggered federal spending cuts - both parties retreated to well-worn positions that have repeatedly led to gridlock. President Obama won the election and claims that the results meant that the American public endorsed his solution to the deficit problem and the fiscal cliff. For his part, House leader John Boehner (R-Ohio) points out that Americans left Congress in the hands of the Republicans, so there is an endorsement of the GOP tactics. It’s time to break that cycle. To President Obama falls the responsibility of leadership and leadership from the front, not from behind. While winning a second term in the midst of an economic
slide certainly earns him some political capital, it does not, by any means, give him a blank check. The president is charged with presenting a workable solution while showing the country that he understands that the country’s long-term economic health is tied directly to the ability of businesses to expand and grow. Mr. Boehner and the rest of the GOP are not off the hook. Mr. Boehner is charged with being a counterbalance to the president. However, he is not charged with being a counterweight. While not expected to lead the discussion, the GOP must be an active participant and bring to the table more than a “Just Say No” response. Instead, now is the time to press key points of the Republican agenda aimed at helping to grow businesses. Neither side needs to solve all the country’s problems during these negotiations. In fact, the most sensible approach would be to tighten tax loopholes and craft modest spending cuts in order to avert the fiscal cliff. This would be more than simply kicking the can down the road. Rather, a well-negotiated short-term solution would set the stage for a more lengthy discussion on what the country really needs, namely, a streamlined tax code and system that aggressively rewards businesses for job creation and entrepreneurial tactics. It’s time to lead, Mr. President.
COMMENTARY FROM ACROSS THE WEB
Petraeus Right To Step Down Retired Gen. David H. Petraeus made the right decision in resigning from his post as head of the CIA after admitting he had been involved in an extramarital affair. If for no other reason, Petraeus needed to step down because, as his former Army spokesman, Steve Boylan, said, “He screwed up, he knows he screwed up; now he’s got to try to get past this with his family and heal.” PHILADELPHIA INQUIRER EDITORIAL, 13 NOVEMBER 2012
Brady’s Casino Idea a Bad Bet Rep. Bob Brady is pitching
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EDITORIAL BOARD CEO and President James D. McDonald Editorial Director Karl Smith Associate Editor Terrence Casey
an idea that the city take ownership of a second casino destined for Philadelphia. ... Brady should get credit for the kind of creative thinking that many call “out of the box.” But this one should stay in the box. PHILADELPHIA DAILY NEWS EDITORIAL, 13 NOVEMBER 2012
GOP Needs to See Real Obama Nonsensical Tea Party rhetoric aside, Obama is a pragmatic centrist who would like some help fending off spendthrift nonsense from his left flank. CHRIS SATULLO, WHYY’S NEWSWORKS 11 NOVEMBER 2012
Obama Didn’t Win a Mandate Obama would be foolish to assume a mandate to continue transforming America into a bankrupt
@DavidLimbaugh This CANNOT STAND. This is NOT the America I grew up in. Romney got Zero votes in 59 Philadelphia voting divisions. 12 NOVEMBER 2012
European-style, soft-socialist welfare state. During the campaign, only Gov. Mitt Romney addressed hard economic truths, but, to avoid politically damaging errors, offered few solutions to a voting public hungry for them. JERRY SHENK, THE PATRIOT-NEWS 10 NOVEMBER 2012
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15 NOVEMBER 2012
BY THE NUMBERS
Number of smartphones that go missing every minute in the United States.
Median annual salary of top executives at charities in Northeast states.
Number of jobs open nationwide in September according to the U.S. Labor Department.
Median annual salary of top executives at charities in mid-Atlantic states, which includes Pennsylvania.
Amount Rep. Bob Brady proposes the City of Philadelphia borrow to fund the GamePoint casino resort.
Median annual salary of top executives at charities nationwide.
Median salary increase for top executives at charities nationwide in 2008.
Drop in retail sales nationwide in October. Analysts attribute most of the drop to Hurricane Sandyâ€™s impact.
Median salary increase for top executives at charities nationwide in 2009.
6,500,000 New businesses created nationwide in 2011.
Year Nancy Pelosi was elected to Congress. She announced this week that she will retain the leadership spot for congressional Democrats, a spot she has held since 2003.
Computer-related jobs created by venture-capital companies from 2008-2010.
Average annual owner investment into young firms in 2011.
Cost of a gallon of gas in 1987. According to GasBuddy.com, the average cost of a gallon of gas in Philadelphia is $3.67 and on the rise.
Percent of small business owners likely to borrow from family and/or friends.
Amount of venture capital invested nationwide in 2011, the largest amount since 2008 and a more than 25% increase over 2012.
The number of venture-capital deals struck nationwide in 2011, the largest number since 2008 and a 6.5% increase over 2012.
Percent of startups that did not use a capital injection in 2010.
Percent of total angel investments made in healthcare in the first half of 2011.
Median salary increase for top executives at charities nationwide in 2010.
Percent of total angel investments made in retail in the first half of 2011. The same amount was invested in media.
Amount pledged so far this year to the crowdfunding site Kickstarter.com. Top categories include film & video ($69 million), music ($45 million), games ($42 million) and design ($41.9 million).
Nationwide, the number of charities that paid their CEO more than $1 million in 2008.
Nationwide, the number of charities that paid their CEO more than $1 million in 2012.
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Published on Nov 15, 2012