Southern Oregon Business Journal - December 2019

Proudly Serving Benton, Coos, Curry, Deschutes, Douglas, Jackson, Josephine, Klamath, Lane, Lincoln & Linn Counties Since 2015

December 2019

Economic Development

Economic Outlook: It’s Complicated Page 4

The Myth of Bend’s Timber-toTourism Transition Page 26

The Journal for Business in Southern Oregon

SouthernOregonBusiness.com

A Few Words from Greg September has hardly ended and the New Year has us in its sites. That’s the nature of hyperactivity; time seems to be exceeding the speed limit.

There was a time, as far as I can remember, when life headed in the direction of retirement, defined as a sort of relaxing tranquility. I believe someone has changed the script.

These Baby Boomers, of which I’m one, are living with their hair on fire. Entrepreneurialism and start-up businesses are just as likely to include a person of retirement age – if there is such a thing – as a 20 something brainchild with the world in her grasp. Generational competition is no longer a battle for control between two generations whose bell curves overlap, but may include four, even five, generations. How did that happen?

Technology.

In the last thirty minutes I communicated with five different people in five different cities, sent three written reports as attachments to an office 150 miles away, shared text messages with my son in Portland who just returned from New York and is going back again on Sunday after going to the Civil War football game on Saturday and having Thanksgiving dinner with about forty family members. Tomorrow morning I’m running five miles to relax. Whew On Tuesday my daughter is having back surgery.

We’ll be going to Idaho to be with her.

Family is first.

I hope your family is your first, as well.

Be safe, Greg Greg@SouthernOregonBusiness.com

The Southern Oregon Business Journal extends sincere thanks to the following companies for their continued presence as important cogs in the wheels of industry in southern Oregon.

A Few Words from Jim

It has been an an amazing year for us here at the Southern Oregon Business Journal. Greg and I decided to come together and partner up to grow upon the amazing work he did in getting the journal off the ground. We upgraded the look and feel of the print version of the journal and greatly enhanced the web version. We have grown our subscriber base significantly and we have the backing of fantastic sponsors and advertisers, many of which have been with Greg since he started the journal.

I like working with Greg. He brings his passion for business news across all of southern Oregon and I bring my 30 years of being an entrepreneur, community leader and technology to the table. It’s a great partnership.

It's been a lot of work to make the transition, but it has been fun and rewarding. We are always improving and trying new things. This month we added a column we hope will be a regular that showcases what books we are reading.

As always thank you for your support and encouragement as well as critical feedback.

2019 was a great year and we couldn't of done it without your support. 2020 looks to be a crazy year and we look forward to continuing to provide the business community of southern Oregon a voice.

Merry Christmas and Happy New Year!

Jim Jim@ProjectA.com

2 | Southern Oregon Business Journal December 2019

A JOURNAL FOR THE ECONOMICALLY CURIOUS, PROFESSIONALLY INSPIRED AND ACUTELY MOTIVATED

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December 2019 - Table of Contents Inside This Issue

FEATURED

6 Agriculture - Down on the Farm – 2017 Census of Agriculture for Oregon

Economic Development Economic Outlook: It’s Complicated

13 Management - What are we reading?

Page 4

14 Housing - Want more housing? Build a landlord.

The Myth of Bend’s Timber-to-Tourism Transition

16 Entrepreneurship - 50 Reasons Why Some Businesses Fail While Others Succeed

Page 26 Cover Photo

20 Economy - Graphs 22 Retail - Unwrapping Holiday Hiring 30 Agriculture - Oregon Agriculture Facts & Figures 32 Entrepreneur to Entrepreneur - AirScape 34 Science - A Feeling for Molecules 38 Taxation - Oregon’s Gross Receipts Tax Update

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ECONOMY

Jackson, Josephine

BY JIM TEECE

Grant D. Forsyth, Ph.D., Chief Economist for Avista gave a riveting talk at the November, Medford Chamber of Commerce Forum to over 200 business people. The title of his talk was “Economic Outlook: It’s Complicated”.

He presented several slides to prove his title to be true. Our Economy in Southern Oregon is complicated.

He started with one slide that showed two indexes overlapped. One index was our partisan conflict, news-based, from January 1981 to today.

4 | Southern Oregon Business Journal December 2019

Economic Outlook: It’s Complicated

The second index is the Economic Policy Uncertainty Index, news-based covering the same time period. Our partisan conflict was half what it is today on 9/11/2001 and our Economic Uncertainty Index was at the same high that it is today. He said that the only thing he can tell from this data is that “We don’t like each other and we can’t figure out what’s going on” In his job as Chief Economist at Avista, he looks at GDP Growth and Inflation and then the Employment Growth and then he looks at Population Growth and Demographics and finally

Permitting and Housing to create his load and customer forecasts for each cycle.

He showed us that the U.S. GDP growth from 2016 to 2021 (projected) was falling from a high of 2.9% to an estimated 1.9% based on Weak Global Growth, Weak Industrial Production, Trade Uncertainty, and Political Uncertainty.

He also showed us that Rogue Valley Non-Farm Employment Growth from 2015-2019 was dropping from a high of 3.3% in 2015 to 1.2% in 2019, while the Jackson County MSA Real

Wage Growth, 4Q moving average was higher than the US average by almost 1%.

He then explained how the Rogue Valley Employment Contribution changed from 2009 to 2019 with Private Service Providing businesses growing from 78% to 82% while Government Employment dropped 6%.

Healthcare Jobs grew 18% in the last 10 years in the Rogue Valley.

He stated that “Economic Health of a community depends on what’s happening in health care” At the end of his somewhat somber talk, he received a couple of great questions from the audience which he answered quickly and succinctly.

He then shared that he was concerned about rolling power outages in Northern California and what will happen with Utilities and Government as they struggle to figure out what to do. He was also concerned about the data he was seeing from the transportation industry. Trucking was down across the country.

Trying to end on a good note he also stated that “The recruitment of jobs to a community is based on how good your schools are.”

and that we have some great schools in Southern Oregon.

I had the pleasure of sitting down with him after his talk for about an hour and I found him to be very nice, intelligent and unsure about our future. He liked seeing that we have residential units permitted for workforce housing and that our home price growth was ⅓ of the San Fransisco MSA Median Sales Price but our population growth in 2018 was only 102% compared to 136% in Josephine County.

I left the meeting and interview feeling like 2020 will be a heck of a year. It will be filled with fear, uncertainty and doubt and a lot of opportunities and if we all work together, we will come out stronger, better and ready for even more growth in the years ahead.

You can reach Grant at Grant.Forsyth@avistacorp.com for more info on his presentation.

Jim Teece

Co-Publisher

Southern Oregon Business Journal

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Send your ad copy to: Greg@SouthernOregonBusiness.com Greg Henderson, Co-Publisher

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Southern Oregon Business Journal December 2019 | 5

AGRICULTURE

Down on the Farm – 2017 Census of Agriculture for Oregon

BY DALLAS FRIDLEY

Oregon’s farm acreage totaled about 16 million in 2017, with 37,616 farms and 67,595 producers, of which 44 percent were female producers. These results and more are available from the U.S. Department of Agriculture’s report, 2017 Census of Agriculture. The Census of Agriculture is intended as “a complete count of U.S. farms and ranches and

the people who operate them.”

Even small plots, where “$1,000 or more of such products were raised and sold, or normally would have been sold, during the Census year” are counted. Oregon agricultural product sales totaled $5.0 billion in 2017 and ranged from a high of $701.6 million in Marion County to $5.2 million in Lincoln County.

6 | Southern Oregon Business Journal December 2019

Agricultural Product Sales Crop sales in 2017 raised $3.3 billion or about 66 percent of Oregon’s $5.0 billion agricultural product sales total.

Livestock sales, at $1.7 billion, represented 34 percent of Oregon’s 2017 total. Oregon agricultural product sales ranked 28th out of 50 states in 2017, with crop sales in 19th

position and livestock, poultry and their products placing 31st.

Grains, oilseeds, dry beans, and dry peas brought in $344 million in 2017, or about 10 percent of Oregon’s crop sales – ranking in 30th position nationally. The group’s sales were about 40 higher in 2012, at about $570 million. A drought in 2012 hit the Midwest especially hard, resulting in some record commodity prices. Umatilla County dominated this group, with $104 million in 2017 sales, around 30 percent of Oregon’s total. The top three counties, including Morrow County’s $66.3 million (19%) and Malheur County’s $40 million (12%), represented about 61 percent of Oregon’s grains, oilseeds, dry beans, and dry pea sales.

Oregon’s vegetables, melons, potatoes, and sweet potatoes ranked ninth nationally with

$539 million in sales or about 16 percent of total crop sales.

Umatilla County, with $96.3 million in sales, and Morrow County, at $97.3 million, represented about 39 percent of Oregon’s total. Umatilla and

nationally. Hood River County led Oregon with $123.2 million in 2017 sales, about 20 percent of the statewide total, and placing in the top 1 percent of counties, at 38th nationally.

Marion County ranked second in Oregon, with $92.2 million or 15 percent of Oregon’s sales, good enough to rank in the top 2 percent of counties nationally, in 45th position.

Wasco County’s $60.5 million in sales (10%), Yamhill County’s $58.6 million (10%), and Washington County’s $47 million (8%) rounded out Oregon’s top five fruits, tree nuts, and berries producers.

Morrow counties ranked in the top 1 percent nationally, in 26th and 33rd position, respectfully. Malheur County’s $75.7 million in sales (14% of Oregon’s total) ranked 44th nationally and Marion County’s $50 million (10%) ranked 48th, each in the top 2 percent of counties.

Fruits, tree nuts, and berries brought in $612 million in 2017 sales, about 19 percent of Oregon’s crop total, while ranking in fourth position

Oregon ag sales in nursery, greenhouse, floriculture, and sod totaled $887 million in 2012, about 27 percent of Oregon’s crop total, while ranking fourth nationally.

Marion County’s $278 million represented 31 percent of Oregon’s sales, while ranking

Southern Oregon Business Journal December 2019 | 7

fourth nationally out of 2,678 counties. Clackamas County’s $184 million in sales ranked ninth nationally, while representing about 21 percent of Oregon’s total. Yamhill County’s $134 million (15%) and Washington County’s $112 million (13%) were also impressive, ranking at the national level in19th and 26th positions, respectively.

Other crops and hay, which in addition to hay includes the likes of grass seed, hay and grass silage, haylage, greenchop, hops, mint for oil, and sugarbeets, found a place to grow in Oregon, bringing in $780 million or nearly one out of four crop sales dollars statewide. Marion County’s $138 million led Oregon with 18 percent of other crops and hay sales, while ranking sixth nationally. Linn County’s $107 million ranked 10th nationally and claimed 14 percent of

Oregon’s total. Around 59 percent of Linn County’s crop sales in 2017 came from the other crops and hay group.

Malheur County’s sales reached nearly $53 million, representing around 7 percent

of Oregon’s total. Yamhill County’s 2017 other crops and hay sales grew by about 25 percent between 2012 and 2017 to rank fourth in Oregon at about $46 million. Nearly all of Lake County’s crop sales, $44 million, came from the other crops and hay group.

Based on 2017 sales, other crops and hay were the primary crops produced in Crook County (94%), Grant County (88%), Wheeler County

8 | Southern Oregon Business Journal December 2019

(72%), Union County (68%), and Deschutes County (61%).

The market value of cattle and calves totaled $977 million in 2012, representing 57 percent of Oregon livestock sales while ranking 17th nationally.

Morrow County led cattle and calve sales in 2017, bringing in $234 million or 24 percent of Oregon’s total while ranking in the top 2 percent of counties nationally, in 50th position.

Malheur County’s sales totaled $169 million, representing about 17 percent of Oregon’s total.

Malheur County’s 77th position nationally placed it in the top 3 percent of counties. Umatilla County, with $73 million in sales, represented about 7 percent of Oregon’s 2017 sales, followed by Klamath County, at $53 million and Harney County, with $52 million; each

represented about 6 percent of Oregon’s cattle and calves total.

The market value of milk from cows totaled $507 million in 2017 or about 29 percent of Oregon’s livestock sales and ranked 17th nationally.

Morrow County brought in about onethird of Oregon’s total, selling $169 million in milk from cows.

Morrow County ranked 42nd nationally, in the top 2 percent of milk producing counties. Tillamook County’s sales totaled $96 million, representing 19 percent of Oregon’s total while ranking 89th nationally in the top 5 percent of counties. Marion County sold $48 million or 12 percent of Oregon’s milk from cows and Yamhill County pumped out $39 million or 8 percent.

Poultry and eggs totaled $126 million in 2017, representing about 7 percent of Oregon’s livestock sales and ranking 33rd nationally. Clackamas County led Oregon with $48 million in sales or about 38

percent of the statewide total.

Clackamas County ranked in 261st position nationally in the top 8 percent of counties. Marion County’s poultry and egg sales totaled $30 million in 2017 to represent 23 percent of Oregon’s total. Linn County’s $23 million in sales represent 16 percent of the state’s total, while Yamhill County’s $13 million ranked fifth in Oregon, laying 10 percent.

Farm Production and Value Farms with agricultural product sales of $500,000 or more represented just 5 percent (1,720) of Oregon’s farms in 2017. But with $4 billion in sales, these farms commanded 81 percent of all agricultural product sales. At the other end of the spectrum, farms selling less than $1,000 in agricultural products represented 31 percent (11,662) of Oregon‘s farms with $2.9 million in 2017 sales or just 0.1 percent.

Operations with sales in the $100,000 but less than $500,000 range represented 8 percent of Oregon’s farms (2,844) and 13 percent of its 2017 sales, at $666 million.

The estimated market value of farm land and buildings reached $38.8 billion in 2017.

That’s an increase of 26 percent over 2012’s $30.7 Southern Oregon Business Journal December 2019 | 9

billion. Around 37 percent of Oregon’s farms were valued from $200,000 to $499,000 in 2017, followed by farms valued from $500,000 to $999,999, which represented 28 percent.

Nearly one out of five farms (19%) were valued at $1 million or more in 2017, commanding 69 percent of Oregon’s farm land and buildings value.

Government Payments Government payments were received by about 11 percent of Oregon’s farms in 2017.

Payments totaled $92.4 million or an average of $22,918 per farm. More than $3 out of $4 in government payments (77%) were received by farms with $100,000 or more in 2017 farm sales. Of the 4,564 farms with $100,000 or more in farm sales, 44 percent received a government payment in 2017, which averaged $35,792.

In Gilliam County, 84 percent of farms received government payments in 2017, leading the state with a $60,000 average per farm. In neighboring

at 1,778 acres. Wheat for grain covered 90 percent of the cropland harvested in Gilliam County and around 96 percent of Sherman’s, while together they represented one out of four of Oregon’s harvested wheat acres in 2017.

Farm Producer Characteristics & Hired Farm Labor

Sherman County, 87 percent of farms received government payments, while its $59,533 average per farm ranked second. Together the two counties brought in 19 percent of Oregon’s government payments in 2017 or $17.5 million. An average farm in Gilliam County covered nearly 4,000 acres compared with 2,762 acres in Sherman County. The median size farm is still large, with Gilliam’s median sized farm covering 2,197 acres and Sherman County’s median a little lower

10 | Southern Oregon Business Journal December 2019

According to the 2017 Agricultural Census, the term producer designates a person who is involved in making decisions for the farm operation.

Decisions may include planning about such things as planting, harvesting, livestock management, and marketing.

The producer may be the owner, a member of the owner’s household, a hired manager, a tenant, a renter, or a sharecropper.

In 2017, Oregon’s farm producers numbered 67,595.

Clackamas County’s 7,681 farm producers represented 11

percent of Oregon’s total, followed by Marion County’s 5,066 or 7 percent. Female operators totaled 29,868 in 2017, representing about 44 percent of Oregon’s farm operators.

A principal producer is a producer who indicated they were a principal operator. A farm can have multiple principal producers. Each farm has at least one principal producer. There were 54,450 principal producers in 2017 with a 60/40 split between males, numbering 32,903 and females, at 21,547. Principal producers were also asked whether their primary occupation was farming. The majority of principal producers, 57 percent, worked off the farm, spending less than 50 percent of his/her work time during 2017 farming or ranching. The remaining 43 percent of principal producers spent 50 percent or more of his/her work time during 2017 farming or ranching, making their primary occupation farming.

The vast majority of principal producers, 47,595 or 87 percent, lived on the farm.

Principal producers spend an average of 20.2 years at the same operation and an

average of 22.5 years operating any farm. Principal producers in Gilliam County spent an average 24.1 years at the same farm, followed closely

by Sherman County’s 23.3 years. Principal producers in Deschutes County, with an average tenure of 15.5 years, represented the new comers.

The age of an Oregon principal farm producer averaged 58.9 years in 2017. Wheeler County’s farm producers led the state, averaging 63.7 years of age, while Harney County’s represented the youngest, at 55.6 on average. By age group, producers ages 55 to 64 led Oregon in 2017, representing about 29 percent of all principal farm producers. The 65 to 74 age group followed closely, representing more than one out of four producers or 26 percent. Producers in the 75 years and over group totaled 6,511 to represent 12 percent of Oregon’s total. Together, farmers age 55 and older represented 66 percent of Oregon’s principal farm producers.

workers employed about 72 percent of Oregon’s hired farm laborers. Around 68 percent of Oregon farms employed hired farm laborers for fewer than 150 days during the year.

Where to Look for 2017 Census of Agriculture Publications The 2017 Census of Agriculture provides far more information about farms and farm operators than can be presented in one article.

County profiles are available for each of Oregon’s 36 counties, along with a statewide summary, at the USDA’s Census of Agriculture website at https:// www.nass.usda.gov/ Publications/AgCensus/2017/ Full_Report/Census_by_State/ Oregon/index.php.

Details by county include the number of farms, land in farms, market value of products sold, and government payments, along with economic and producer characteristics.

Oregon farms and ranches hired 86,240 farm laborers during 2017, paying out just over $1 billion in wages.

Operations with 10 or more Southern Oregon Business Journal December 2019 | 11

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MANAGEMENT

BY GREG HENDERSON AND JIM TEECE

According to Time and Forbes magazines Dalio is one of the 100 most influential and wealthiest people in the world.

I wanted to read his best seller. His book is reassuring and inspirational for its practicality and familiar thoughts on decision making.

(Think first, then decide) His reflections on his own life leading to his rank among the world’s most successful investors, convinced me to take up his book. Thanks to my daughter, Kara, who gave his book to me. I now count it in my favorite readings column. https://www.principles.com/ --Greg

What are we reading?

Socrates had some disappointing comments about the younger generation.

It seems generational differences have always been a topic of conversation.

Strauss and Howe in 1997 presented their book, The Fourth Turning to show us that things haven’t changed that much since ancient times. But the passing of time isn’t linear, its cyclical, like a spiral – not a circle. Their supporting evidence is intriguing as they explain how each generation of 20 to 25 years moves through phases reaching end of life in 80 to 100 years. The four turnings have happened for so long that forecasting in a broad sense may not be impossible.

Read “The Fourth Turning” it’s worth it.

http://www.fourthturning.com/ --Greg

My friend, Trever recommended this book.

It's fascinating to read a book about how chefs work and relate it to creating work spaces for other professions.

It's really about organization skills for life, work, and mind.

Chefs tend to be meticulous and have an obsession for order.

After I read this the first time, I found myself rethinking about the insane way I work and how I can apply many of these mise-en-place ideas to make me a better leader, manager and person.

A great book and very well worth the investment in time to read it. Twice.

"Work Clean" by Dan Charnas.

--Jim

Southern Oregon Business Journal December 2019 | 13

HOUSING

Want more housing? Build a landlord.

BY JOE CORTRIGHT

A fourplex in Northeast Portland.

If we’re going to have a lot more missing middle housing; we’re also going to have a lot more landlords Accessory dwellings, duplexes, triplexes and fourplexes are suited to “mom-and-pop” landlords, but tough tenants rights requirements may discourage many homeowners from creating more housing.

By Ethan Seltzer

City Observatory is pleased to feature this guest commentary by Ethan Seltzer. Ethan Seltzer is an Emeritus Professor in the Toulan School of Urban Studies and Planning at Portland State University. He previously served as the President of the City of Portland Planning Commission and as the Land Use Supervisor for Metro, the regional government. He has lived and

worked in Oregon and the Portland region since 1980 and is a contributor to City Observatory. For the past 8 years he has been the coowner of one rental unit in the City of Portland that has been in the family for 11 years.

Portland, like a few other states and localities in the US, is rethinking it residential zoning. Single household zoning occupies about 40% of the land in Portland, and the lion’s share of land zoned for residential use.

Today, Portland is growing rapidly, but the new housing to accommodate that growth is largely being built outside of the single household zones.

Sure, Portland has had zoning to allow Accessory Dwelling Units

14 | Southern Oregon Business Journal December 2019

(ADUs) on the books since 1980, and has long allowed, by right, duplexes on corner lots in single household districts. However, those housing types have amounted to a mere trickle of new housing capacity in the last 40 years, particularly when compared with the rate of population growth and its associated growth in the demand for new housing.

In recognition of the role that every residential zoning district and every neighborhood has to play in meeting the needs of Portland residents for suitable, affordable housing, the City embarked on its “Residential Infill Project.” The Residential Infill Project, or “RIP,” was created to devise new rules for adding missing “middle”

housing types to existing neighborhoods: By updating the rules that govern the types of housing allowed in our neighborhoods, we have an opportunity to accomplish two main goals: 1) Expand housing choices in residential neighborhoods to help ensure a more inclusive and diverse community. 2) Limit the size of new buildings to bring them more in line with existing homes. (https:// www.portlandoregon.gov/bps/ article/738843, page two) Far from a wholesale demolition order for existing neighborhoods, the Residential Infill Project envisions an orderly and incremental addition of new housing types to existing neighborhoods, including the retention and modification of existing structures to contain more than a single dwelling unit.

However, missing completely from the RIP is the fact that the creation of new “middle” housing units brings with it the creation of a vast number of new landlords. Phrased another way, the success of Portland’s Residential Infill Project rests entirely on the emergence of a large number of individual land and homeowners willing to become landlords. Build an ADU, and you are now both a homeowner and landlord. Convert a single household dwelling into a duplex or triplex, and you’ve become a landlord.

Because of the incremental nature of the changes, and the relatively small scale of the infill, economies of scale are hard to come by. Certainly someone will figure out a business plan to take advantage of this new development capacity at scale. For the most part though, it is dependent on individuals willing to assume the risk of being a landlord. In short, meeting the goals of the Residential Infill Project to expand housing

choices in all neighborhoods and for all households, and to keep new development small in scale, requires a new cadre of committed landlords.

Interestingly, just as the City and the State of Oregon are taking steps to require “middle” housing development opportunities in all single household zones, they are also taking steps to enact new tenants’ rights laws at the behest of the same coalitions advocating for the zoning changes. In Oregon a desire to sell a unit is no longer a legal reason to ask a tenant to leave. In fact, tenants now have a right to stay until the owner has a signed sale agreement with a new buyer. In Portland, no-cause evictions are, for the most part, illegal.

If you are a large landlord, this is simply adding to the cost of doing business. Leases will change, lawyers will be involved, and rents will rise to incorporate and cover these new costs of being a landlord.

However, for small landlords, owners of single rental units, or those contemplating using their existing properties more intensively, these new controls on the real excesses of corporate housing rental companies will also apply, for the most part, to them. This means that the uncertainty associated with owning rental property has just shot up for those considering becoming a part of the “middle” housing movement in Portland and Oregon.

The reaction on the part of small, prospective “middle” housing landlords could take several forms.

They may decide to skip it entirely.

Or, they might make affordable rents much less affordable to cover the risk.

Or they might not put the units they create on the market, renting instead through AirBNB or simply through word of mouth to friends and family.

In all cases, the lack of attention to the needs of small landlords in both the tenants’ rights acts and the Residential Infill Project does not bode well for encouraging a large new group to become the landlords that Portland needs. In short, we’re on a path to become a city of impersonal, large, corporate landlords when what we’ve been working towards, apparently, is just the opposite.

Of course, it doesn’t need to end up this way. Portland could take steps to encourage and incentivize small landlords. It could recognize that there is a world of difference in capacity between those owning 4 or fewer units and those building 50 units at a crack. It could do more to bridge the gap between small landlords and tenants, creating programs to help them find each other and to negotiate mutually fair and supportive leasing agreements. It could even be so bold as to create nonprofit, neighborhood-based housing management associations to make it easier, simpler, and more transparent for investors and tenants to find and hold places in our City.

Unfortunately, the City is pursuing none of these, or to my knowledge, any others. To date, the City is seeking “middle” housing at the same time that it’s villainizing the landlords it’ll need to be successful.

Tenants’ rights are important and needed. But more landlords are needed now. Landlords and tenants need each other, and simply changing the zoning is, at best, less than half a step in the right direction. http://cityobservatory.org Joe Cortright is President and principal economist of Impresa, a consulting firm specializing in regional economic analysis, innovation and industry clusters. Over the past two decades he has specialized in urban economies developing the City Vitals framework with CEOs for Cities, and developing the city dividends concept.

Southern Oregon Business Journal December 2019 | 15

ENTREPRENEURSHIP

50 REASONS WHY SOME BUSINESSES FAIL WHILE OTHERS SUCCEED

BY GEORGE MESZAROS COFOUNDER - SUCCESS HARBOR SUCCESSHARBOR.COM

Photo by Benjamin Davies on Unsplash

THREE PART SERIES: PART TWO

Why is it that so many businesses fail while so few succeed?

One of the great mysteries of entrepreneurship is why businesses fail. Some people start one successful business after another while others fail to succeed.

Why some businesses fail while others succeed?

The worst part about a failing business is that the entrepreneur is unaware of it

happening until it is often too late. It makes sense because if the entrepreneur really knew what he was doing wrong, he might have been able to save the business. Some entrepreneurs live in a land of denial while others are unaware of their mistakes.

One thing for sure, a business almost always fails because of the entrepreneur.

“It’s not the plan that is important, it’s the planning.”

Dr. Graeme Edwards

16 | Southern Oregon Business Journal December 2019

There are over 28 million small businesses in the United States, according to the SBA. It’s an impressive number. The sad reality is that only about 50% of them survive. What’s worse is that only about onethird survive 10 years or more.

The life of an entrepreneur is unforgiving. It is a constant challenge. There are many moving parts. Any one of them could put you out of business.

Businesses fail for many reasons. The following list

Photo by Austin Distel on Unsplash

includes some of the most common reasons: If you are serious about making it as entrepreneurs, focus on the following: 19 – Make a plan – It all begins with planning. The biggest mistake many entrepreneurs make as they start their ventures is that they don’t sit down and write a business plan. The goal is to keep it concise. Don’t treat it like a business school project. Leave writing a 50,000-word business plan to academics. Let them

waste their time. You can do a great business plan in one or two pages. There are some great books on business plans such as “The Secrets to Writing a Successful Business Plan” and “Successful Business Plan“.

values should remain the same.

Core values can also serve as a moral compass. Some of the more common core values are integrity, trust, excellence, respect, responsibility, and teamwork.

Your business plan should include the following:

Don’t allow your core values to become empty words, make them part of your culture.

20 – Core values – Your core values are the fundamental beliefs that drive your business.

They are your guiding principles that should remain constant. Even as your company grows your core

21 – Mission statement – A brief statement that defines why your company exists. Your corporate reason for being. It describes your target market and the services/products you

Southern Oregon Business Journal December 2019 | 17

50 Reasons Why… (Continued)

offer. If you have done it right, your mission statement, in just a few sentences, will communicate the essence of your business to your business and to the world.

22 – Who are your customers – If you are going to succeed in business you will have a clear definition of your customer. It is not an abstract idea. It is something that can be expressed in numbers. For example, if your target customers are family law attorneys, you have to be able to put a number on it. For example, there are 175,000 (fictional number) family law attorneys in the USA and they are our customers.

23 – What is your product/ service – It’s key to have a clear definition of the services you offer. Without a clear definition, you will be unable to effectively develop, market, and sell your services.

24 – Involve your customers in product development – Most businesses that fail create products/services without involving their customers. If you are serious about success, you will build your products with your customers.

Businesses that fail build

products based on assumptions.

25 – How will you sell and market your product/service – Marketing and selling your service could be one of your biggest business challenges. A sales and marketing plan is a must. Set measurable goals.

Create systems to manage the process.

Proper preparation doesn’t require a 100-page formal business plan. The keyword is “proper,” not “planning.” If you do everything in your power to properly plan your business, you increase your chances for success. Don’t confuse planning with avoiding action or paralysis analysis. No amount of planning is a substitute for action.

“No matter what one does, regardless of failure or success, the experience is a form of success in itself.”

Jack Ma, billionaire founder of Alibaba Your first action item is to write your business plan.

Completing your business plan will give you an opportunity to process your idea in detail.

One of the best things you can do is to collect your thoughts before you make a real commitment to starting your

18 | Southern Oregon Business Journal December 2019

business. If you aren’t passionate about writing your business plan, it’s unlikely that you’ll get passionate about your business either.

One day you might think of a product that could revolutionize life on earth as we know it. You might dream up something so great that no one ever thought of before. The reality is that most successful businesses are without revolutionary ideas. Instead, they modify or improve wellestablished products or services.

Must Have Business Plan Components Mission Statement Company Description Product Description Market Analysis Marketing Strategy SWOT Revenue Projections

If you don’t prepare a business plan, your initial enthusiasm will fade and you will fail.

26 – In the end, enthusiasm is not enough to succeed. It takes much more than that. You

need to research your market, your competition, the financial feasibility of your concept, and more. As you fight through the battles of making your dream come true, you need to be able to go back to read and re-read your business plan. The concepts laid down in your business plan will help you to convince your bank to give you the loan you need, or to determine the best marketing strategy for your business.

Don’t be emotional when you prepare your business plan.

Treat it as a business process with goals and deliverables.

Once you complete it, ask yourself, “Would I invest in this company?” Remember, you are going to have to convince others to support your idea.

Bankers, corporate buyers, investors, partners, and the like will look at your business based on facts. Their decision is not going to be based on emotion. When creating a written business plan you give yourself a chance to think about your idea thoroughly. As you put your ideas in writing, you tend to give them more thought. You might think writing a business plan is boring, or a waste of time.

Truly, it should be one of the most exciting projects you

could ask for. You are writing your future.

27 – You are accountable – Many businesses fail because people treat them like hobbies.

From day one treat your business as a business. Treat yourself as an employee. Set measurable goals and hold yourself accountable. If you only plan to work in your business a couple of hours a week, you can’t expect great results. Owning your own business requires focus and commitment. Educate yourself about the wide range of options and technologies. You can’t expect to get an ounce more out of your business than what you’ve put into it. If you are only willing to put in a few hours a week, expect to get a few hours a week of income.

There are no shortcuts.

Entrepreneurs can stay accountable several ways: 28 – Write down your goals.

Keep your goals in front of you and keep coming back to them, at least once a month.

29 – Build an advisory board.

30 – Join a peer advisory group. You will get feedback from fellow entrepreneurs. The best kind of peer advisory group is where your business is the smallest business. You

definitely don’t want to be the largest or most successful business of your group. When you are the smallest you will be pushed harder to catch up to the others in your group.

31 – Find a coach. Try to work with a coach who has already built a successful business.

32 – Find an investor, an angel or venture capitalist.

33 – Forget the idea, take action – You should never start a business based on a great idea. An idea is just that: an idea. It’s worthless. It is not going to help you succeed in business. Ideas won’t do; you need action to succeed.

Wantrepreneurs are full of ideas that never result in action. Entrepreneurs are action takers.

THREE PART SERIES: PART THREE OF “50 REASONS…” WILL APPEAR IN THE NEXT ISSUE OF THE SOUTHERN OREGON BUSINESS JOURNAL

By George Meszaros george@successharbor.com

www.successharbor.com

Southern Oregon Business Journal December 2019 | 19

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Southern Oregon Business Journal December 2019 | 21

RETAIL

BY ANNA JOHNSON

Unwrapping Holiday Hiring

Photo by Heidi Sandstrom. on Unsplash

Retailers and package delivery companies rely on the holiday season to provide an end-ofyear boost in sales that makes operating during the rest of the year worthwhile. Some businesses hire extra workers, often on a temporary basis, to get them through this busy time of year. In 2018, the number of jobs added by “holiday hiring” industries with strong holiday employment patterns was lower than average. The season’s traditional holiday buildup was smaller than usual among retailers. The new leaders in holiday hiring are couriers and messengers (UPS, FedEx, etc.),

postal services, and health and personal care stores.

The 2018 Holiday Buildup Oregon’s job buildup in industries with strong holiday employment patterns was 8,929 (or 7%) in 2018, which was lower than the average buildup of more than 11,200 (9%) since 2001. The “holiday buildup” is one way to measure holiday hiring activity. The holiday buildup table shows the net job gain in industries where employment grows during the holiday season and is cut soon after the New Year.

Holiday buildups since 2001 ranged from a high of about

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15,000 (13%) in 2005 to a financial crisis-induced low of less than half that in 2008. The October through December jobs buildup in the holiday hiring industries that year fell to 7,077, just 6 percent more than September’s level and far below the historical average buildup of 9 percent. Holiday hiring in 2018 was close to the lows seen in 2008 and 2009.

Couriers and Messengers Deliver Largest Holiday Buildup Couriers and messengers had the largest buildup, adding 3,013 jobs in the closing months of 2018. Other

industries with a large buildup included clothing and accessory stores (1,891), general merchandise stores (1,882 jobs), and health and personal care stores (523).

Increased online shopping means more jobs are being added in transportation industries during the holidays than in the past. It also means traditional retailers are increasing the number of temporary workers in their distribution and fulfillment centers that serve online customers. Instore workers will also be fulfilling online purchases using merchandise from stores, so the line between serving online customers and in-store customers is blurring.

Postal services and couriers and messengers deliver many of the packages purchased during the holiday season.

Their holiday workers account

for about 34 percent of the total holiday jobs buildup.

in 2018, faster than the average of 338 jobs.

The U.S. Postal Service used to add more than 500 jobs in Oregon each holiday season. That number fell drastically starting in 2007, but has since recovered and returned to adding more than 400 jobs during the holiday season.

The private-sector couriers and messengers industry had the fastest buildup rate of these seasonal industries. The industry had almost twice the buildup in 2018’s holiday season (3,013 jobs) than the average buildup between 2001 and 2018 (1,681). Other industries with the fastest buildup rates were clothing and clothing accessory stores and private-sector and federal postal services. Clothing and clothing accessory stores added 1,891 jobs in 2018.

Private-sector and federal postal services added 458 jobs

Bricks to Clicks The data above can seem a little scary. Are we heading towards the next recession?

Are employers having so much trouble finding workers during a time of low unemployment that hiring has slowed? It is possible, and these two factors could both be happening and impacting holiday hiring together. However, slow holiday hiring could also be attributed to the changing nature of retail. The holiday hiring retail industries included

Southern Oregon Business Journal December 2019 | 23

in this article are based on the March 2009 Bureau of Labor Statistics article Holiday Season Hiring in Retail Trade, with jobs at postal services (both private and federal) and couriers and messengers added to give a more complete picture of industries with strong holiday hiring patterns.

In the past 10 years, technology has advanced quickly and online shopping has expanded, impacting the economy

greatly. Everything from groceries to holiday presents can be ordered online and delivered within days, if not hours. It is highly possible that

because more people are doing their shopping online, traditional “brick and mortar”

retailers do not need to hire as much as they did in previous holiday seasons and industries more closely related with “e-

commerce” are hiring more workers.

To analyze this, the traditional holiday hiring industries can be

24 | Southern Oregon Business Journal December 2019

divided between brick and mortar industries and ecommerce industries, and a sector that has been booming in Oregon recently, warehousing and storage, can be added to the ecommerce mix.

Industries in the warehousing and storage subsector are primarily engaged in operating warehousing and storage facilities for general merchandise, refrigerated goods, and other warehouse products. These establishments provide facilities to store goods.

When the warehousing and storage sector is added, the picture of holiday hiring looks completely different. In total, holiday hiring (the buildup of employment between September and December) looks steady from 2010 (post Great Recession) on, with holiday hires ranging from 10,298 in 2013 to 12,180

in 2014. What is really changing is the percentage of holiday hiring that falls in the brick and mortar areas as compared with the ecommerce areas. In 2001, 74.7 percent of holiday hiring took place in the sectors found in the brick and mortar category and by 2010, it

represented 68.9 percent. However, in 2018 traditional brick and mortar holiday hiring represented only 43.8 percent, while ecommerce hiring had grown to 56.2 percent of all holiday hiring. Holiday hiring is still happening at similar levels as before, it just appears to be happening in different sectors.

2019’s Wish List Holiday buildups inevitably lead to corresponding postholiday declines in the number of workers needed as businesses adjust back to the usual sales pace. As a group, the holiday hiring industries

are growing slower than the overall economy. This suggests that not all of the jobs added in the 2019 holiday season will stick around in 2020.

It’s difficult to know what future seasonal hiring patterns of retailers will be as consumers make more of their purchases online. Parcel deliverers will no doubt continue hiring holiday workers to deliver those extra packages to all the good kids, but local stores may not need to hire as many holiday workers as in past years if their customers are doing less shopping in person. However, traditional brick and mortar retailers may be offering more online shopping options in the future and may still require more workers during the

holidays, just in different occupations. As more online shopping takes place, warehousing and storage will continue to be important in holiday hiring.

We won’t know how this season’s holiday hiring compares with prior years until sometime in the New Year, but a peek at the employment forecast provides a hint about what the future will bring. The September 2019 employment forecast from the Oregon Office of Economic Analysis (OEA) expects Oregon’s retail trade employment to grow in the fourth quarter of 2019 by just 400 jobs. OEA expects the transportation, warehousing, and utilities industry to remain unchanged in the fourth quarter of 2019. These forecasts are for the entire retail trade sector and much more than warehousing and storage in the transportation, warehousing, and utilities industry, not just the industries with a lot of holiday hiring, but the implication is that the holiday buildup will be below average this year in these areas.

Southern Oregon Business Journal December 2019 | 25

ECONOMY

The Myth of Bend’s Timber-to-Tourism Transition

BY DAMON RUNBERG

Photo by Aleksandar Radovanovic

You may have heard this story before. Bend was a timber town, but after the demise of the timber industry, the regional economy shifted to tourism to replace those timber jobs. The vast ponderosa forests outside of town attracted mills that sustained the town for much of its history.

The present location of the Old Mill District shopping center was once the home of two large competing mills, BrooksScanlon Lumber Company and Shevlin-Hixon Lumber Company. Later, the ShevlinHixon mill was acquired by Brooks-Scanlon. By 1994, the last mill down at the “Old Mill”

site closed. This site was eventually redeveloped into the shopping center that most of us are familiar with today. It is a retail and entertainment hub that attracts both tourists and locals alike. The story of the Old Mill site is representative of this broader story about Bend and Central Oregon’s economy shifting to a tourism-based economy after the decline of the timber industry.

competition, and industry consolidation. Increased regulation on federal forest lands began in the early 1990s and dealt a major blow to the once dominant industry. In 1994, the Northwest Forest Plan became enacted by the Clinton Administration, which sought to take into account the needs of endangered species when harvesting on public lands across the Pacific Northwest.

Employment declines in the wood products sector began before the 1990s due to fewer large diameter trees, new technology, international

It is true that natural resources and wood products have been declining over the past several decades, both in total employment and as a share of

26 | Southern Oregon Business Journal December 2019

total private employment.

Back in 1990, prior to the impact of new federal regulations on public forests, wood products and natural resources accounted for 12.3 percent of total private employment in Deschutes County. That share dropped to 1.3 percent as of 2018. A major shift. However, is it true that

stable share of Deschutes County’s total private employment going back to 1990. In fact, the leisure sector accounted for a larger share of total private employment back in 1990 than in 2018. The share of our private-sector economy in leisure and hospitality has not fluctuated much. It reached a low of

was declining? Construction.

Beginning in the mid-1990s through the mid-2000s construction experienced rapid growth, leading to a peak of nearly 13 percent of the county’s total private employment by 2006. This construction growth was the result of population gains, but it is also a housing bubble. We

tourism replaced wood products? It doesn’t seem that way.

about 15 percent in 2006 and a high of about 18 percent in 1992.

know how that ended.

Leisure and hospitality, a good proxy for tourism-related jobs, has maintained a relatively

What was becoming a larger share of our economy as timber and wood products

Interestingly, the industry that has really begun to gain a notable share of total private employment in this economic cycle is professional and Southern Oregon Business Journal December 2019 | 27

The Myth of Bend… (Continued)

business services. The broad professional sector only accounted for 6.5 percent of all private sector jobs in 1990 and 9.9 percent by 2000. However, that share rose to nearly 14 percent by 2018, rapidly approaching leisure and hospitality’s share of 17 percent.

The common narrative that tourism replaced or supplanted the timber and

wood products sector is wrong. Going back to 1990, leisure and hospitality has maintained a relatively constant share of the region’s private-sector jobs. In reality, there have been several structural transitions to Bend’s economy over the past 30 years. Construction largely supplanted wood products in the late 1990s and early 2000s.

In this current expansion, professional and business

28 | Southern Oregon Business Journal December 2019

services has experienced significant growth, becoming one of the areas dominant industries.

Damon Runberg Regional Economist Crook, Deschutes, Jefferson, Klamath, and Lake counties damon.m.runberg@oregon.gov 404 SW Columbia St., Suite 200 Bend, OR 97702

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Southern Oregon Business Journal December 2019 | 31

ENTREPRENEUR TO ENTREPRENEUR

Jackson

Airscape

CYNTHIA SCHERR

November 29, 2019 E2E Meeting

One of the most delightful aspects of a Southern Oregon summer is the 35° temperature difference from day to night.

Perhaps you’re like me, running around every evening opening windows to let in the cool evening air, then another lap around the house in the morning, closing them before the day heats up. Good exercise, but tiresome after a while.

But what if you could pump out all the hot air at night and replace it with cool, fresh air automatically? That idea occurred to Neil Smith— engineer, inveterate tinkerer, and founder of AirScape Fans, who developed an unmanned

ventilation system that efficiently provides better air quality at 1/10th the cost of running air conditioning.

Recently Neil gave Southern Oregon E2E a tour of the company’s manufacturing plant and warehouse. Here’s what we learned: Neil used his expertise in heating, ventilating and air conditioning (HVAC) equipment to start two companies out of a container in San Jose, California, later moving the company to Medford. Hvacquick.com solved one problem—finding HVAC equipment you can’t get anywhere else. AirScape Fans solves many others—taking

32 | Southern Oregon Business Journal December 2019

advantage of natural cooling, using fresh air, eliminating the dehumidifying effect of AC, and saving electricity costs.

Hvacquick.com carries a vast inventory of supplies all available through their website. Customers find him through searching the web for heating, cooling, ventilation, filtration, hot water systems and recirculation pumps, among other supplies.

Inventory is carefully curated and they have the in-house expertise to help customers order the right supplies for the job. With an inventory of over 40,000 products, Neil quips, “you can’t get this stuff at Home Depot.”

AirScape Fans does 100% of its manufacturing and quality control in-house and has an impressive Air Lab to ensure that its products meet all calibration standards. The company has expanded into commercial cooling solutions that can slash a company’s electricity bill and create a more comfortable work environment. Want a custom grille or register for your system? The company can do custom designs that are function-specific or decorative.

During the tour, members of E2E asked several questions.

Q: How much less electricity does a whole-house fan use compared to AC?

A: 90% less Q: How many days would I still need AC if I have a wholehouse fan?

A: After a retrofit, you would likely go from 12 weeks of needing AC to just 8-10 days during the summer.

packing material. To eliminate the cost and waste of bubble wrap, they turn recycled cardboard into cushioning packing material. The company sees opportunity in what is already there, using it with greater purpose and efficiency.

Q: Can the fan clear out the smell of burned toast?

The Southern Oregon

A: You bet. It eliminates evidence of kitchen disasters fast.

Network is a non-formal group

Neil Smith and his team embrace so many elements of cool. From cooling residential and commercial spaces, to custom metal cutting and pressing, to creating environmentally friendly

Entrepreneur to Entrepreneur of Entrepreneurs that gather once a month to meet and learn about each others businesses in Southern Oregon.

Find out more at soe2e.com.

Cynthia Scherr has over 20 years of experience working with businesses, nonprofits, and government organizations. She also co-founded the Southern Oregon E2E network.

ScherrConsults.com

Southern Oregon Business Journal December 2019 | 33

SCIENCE

A Feeling for Molecules

BY STEVE LUNDEBERG

Nyman advises graduate student Mehran Amiri in a Department of Energy project on ion association. (Photo: Hannah O’Leary)

If chemistry professor May Nyman and her lab group worked in home construction, they’d be the ones building the foundation — and then moving on to the next house, leaving the floors, walls and roof to subsequent carpenters.

“We focus on the fundamentals,” Nyman says.

“My group and I are molecule makers. It feels genuine and pure, and we let other people figure out how to apply our molecules. Some people do applied research very well, some start companies with their discoveries. We make inorganic molecules and want

to understand how these molecules are made.”

The Nyman group’s quest is understanding the structure of important elements of the periodic table like aluminum, zinc and chromium — elements that have a range of uses in electronic circuits, nuclear energy, environmental science and catalysis.

“Usually we make our molecules in water. Water is a sustainable solvent, it’s an inexpensive solvent, and it’s nontoxic,” Nyman says. “It’s a good solvent to work in if you want to make molecules that can have a useful application

34 | Southern Oregon Business Journal December 2019

and be stable in an aqueous environment, like the environment we live in. Solidstate characterization is important, but understanding what is happening in solution is much more challenging and exciting.”

This year, in recognition of her achievements, Nyman received the F.A. Gilfillan Award, established in honor of the dean of the School of Science from 1939 to 1962. See Nyman’s presentation online.

Ironically, to find out what is happening in solution, a key to success for a student in Nyman’s lab is to crystallize

something out of solutions formed by chemical reactions.

A crystalline solid is one whose constituents — atoms, molecules and ions — are arranged in a highly ordered microscopic structure, forming a lattice that extends in every direction. They can be common like salt or beautiful like diamonds.

“Crystals hold many answers and also give rise to many questions,” Nyman says. “If you can crystallize a solid, you can analyze it and know its exact atomic arrangement and learn how the atomic arrangement leads to useful behavior. When one of my students shows me a new crystal structure, a brandnew way to link together molecules or atoms, that makes my day.”

Heavy Metal Of particular interest to Nyman are so-called metal-oxo clusters, collections of oxygen and metal atoms larger than a molecule but smaller than a bulk solid.

Metal oxides, compounds produced when metals combine with oxygen, serve a variety of important purposes.

For example, titanium dioxide is a catalyst that degrades pollutants, and aluminum oxides and iron oxides are coagulants, used as the first step in purifying drinking water.

“Metal oxides influence processes everywhere,” Nyman says. “They control the spread of contaminants in the

environment. They are the touchscreen of your cellphone.

The metal-oxide cluster forms are in your body storing iron and in plants controlling photosynthesis. Most of these processes are in water. Yet scientists still know so little about how these metal oxides operate in nature, or how we can make them with the absolute control needed for high-performance materials in energy applications.”

Nyman’s group works to unravel those mysteries by making metal-oxo clusters and dissolving them, characterizing how they behave in solution with changing concentrations and conditions.

“We can use mass spectrometry and small-angle X-ray scattering to look at the atomic arrangement in solution in response to different conditions,” she says.

“Understanding all of that for metal-oxo clusters across the periodic table has many implications: protein science, biological science, geosciences, building materials, understanding how contaminants transport in the environment and understanding why things are soluble or insoluble.”

Putting Chemistry to Work Nyman joined the College of Science faculty in 2012 following nearly a decade and a half at Sandia National Laboratories in Albuquerque, New Mexico. Sandia, whose

roots trace to the Manhattan Project during World War II, is one of three National Nuclear Security Administration research and development labs, with a focus on nuclear materials and nuclear weapons systems.

During her time at Sandia, Nyman focused on designing materials able to separate radioactive cesium, strontium and plutonium from nuclear waste. She led efforts to clean up contaminants old (from the Cold War) and new (from the meltdown of the Fukushima Daichii nuclear reactor in Japan).

Nyman developed a new metal-oxide sorbent — an insoluble material used to retrieve other substances through absorption or adsorption — that resulted in a 20-fold improvement in the capture of radioactive strontium. The material was 40 times more effective than other sorbents for plutonium separation and five times more effective for neptunium capture.

At Sandia, Nyman also worked on radioactive cesium removal technologies used in treating contaminated seawater at the earthquake-ravaged Fukushima power plant. The research led her to discover a new class of a type of compound known simply as a POM, or polyoxometalate: hetero polyniobates.

Southern Oregon Business Journal December 2019 | 35

The latter, abbreviated to PONbs, are extremely active basic compounds that have a strong binding effect with positively charged molecules, including ones found in living organisms. The discovery opened the door for chemical warfare countermeasures, molecules that degrade nerve

After almost 15 years at Sandia, Nyman sought to pivot to academia. Her top choice was Oregon State and the Center for Sustainable Materials Chemistry, with its focus on making thin-film materials from metal-oxo clusters like POMs. She arrived in Corvallis in 2012, and in her first year, Nyman

row. They are advancing separation technology in the nuclear fuel cycle through the use of uranyl peroxide clusters.

According to Nyman, “despite the fact that scientists made a bomb out of plutonium, there is still little known about these elements. Their electron configurations are very complicated, and how and where they fit in the big picture of the periodic table are still not well understood. My students who do uranium chemistry — because there are few scientists worldwide studying actinides — make new discoveries all the time. It’s not a crowded field.”

A Lab for Students

OSU chemistry professor May Nyman, right, talks with graduate students Morgan Olsen, left, and Mehran Amiri, center. Olsen works in the Center for Sustainable Materials Chemistry and Amiri in Nyman’s research group. (Photo: Hannah O’Leary)

agents like sarin gas.

“There’s not much bandwidth for fundamental chemistry at a lab like Sandia, but this was a pretty important discovery that opened up very fundamental questions,” Nyman explains.

“How anions and cations interact in solution, how synthetic materials crystallize, and how they form in nature — these are important things to know and control to make new materials.”

secured funding from the Department of Energy to study PONbs. She spent her first summer at OSU poring over Xray scattering data for metaloxo cluster chemistry, work she found so exciting that she calls that time “one of the best summers of my life.”

Nyman’s group conducts metal-oxo cluster-chemistry research all across the periodic table, including the actinides — the radioactive elements that make up the table’s bottom

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Nyman seeks internship opportunities for her students in national labs, like the Pacific Northwest National Laboratory in Richland, Washington. This past summer, OSU Ph.D. student Ana Arteaga worked in nuclear forensics, figuring out the history of radioactive material: where it was mined, how it was processed, and where and how it was stored.

Arteaga’s work at PNNL centers on mysterious cubes of uranium thought to possibly be among those once used by the Nazis in a failed attempt to make their own atomic bomb during World War II. Many of the cubes went missing after the war. According to an Aug.

30, 2019, NPR story, one of the cubes ended up at PNNL. “May is crazy busy all the time but somehow still finds a way to make time for her students,” Arteaga says. “I can just walk in her door, ask questions about science or my personal life or career — even now when I’m at the PNNL, I just call her and talk to her. She always makes time, while also being a mom and an amazing scientist.”

Nyman advises graduate student Mehran Amiri in a Department of Energy project on ion association. (Photo: Hannah O’Leary)

lab also has one master’s student, one postdoctoral scholar and three undergraduates) says she and her lab mates “are very fortunate to have a boss like Dr. Nyman.”

“Beyond commending our hard work, she is also supportive in times of need,”

asking me how I was doing.

She was very supportive, even though she wasn’t even my advisor at the time. When I came back, I knew I wanted to be in her group.”

Having taught for just seven years, Nyman says her ideas on instruction are still evolving, though her mission is clear.

“My job is to turn students into wellrounded, independent scientists,” she says. “There is a great need for actinide chemists in national labs, and we’re training the next generation of them.

Danielle Hutchison, “I would like to get another Ph.D. student, more into science marvels at how her with applications boss keeps it all Nyman gestures in a 2019 presentation recognizing her receipt of the F.A. Gilfillan that the general straight. “May is Memorial Award for Distinguished Scholarship in Science. (Photo: Jodi Herrling) public can always working, understand,” she always coming up with Olsen says. “I have had some adds, “but every time we go new ideas for experiments, health issues this year, and she down that road, we get new funding opportunities.” offered support and sidetracked by fundamental And always supportive of her encouragement in multiple science and understanding students, they attest. ways. Graduate school is an how chemistry works in “I had a baby five months ago, emotionally and physically solutions, especially metal-oxo and May was wonderful,” draining process, and she clusters. It’s what we’re good Hutchison adds. “She helped strives to help her students in at, and we can’t get away from me figure out maternity leave whatever way possible.” it.” and loves my son, loves to see Arteaga, the nuclear forensics him, likes when I bring him into intern, shares a similar Steve Lundeberg covers the colleges of Engineering, Pharmacy, Science and the office. I know there are Forestry, as well as the Linus Pauling experience. “I had a family Institute. many women who don’t have Lundeberg earned a technical journalism emergency and had to leave degree from OSU in 1985 and spent nearly three decades in the newspaper business, that kind of support in grad first as a sportswriter and editor and later as school for a while. I had to take a features writer, circuit court/city government reporter and editorial page editor. He school.” returned to Oregon State in 2014 after 25 care of my uncle and my sister. years at the Albany (Ore.) Democrat-Herald. https://today.oregonstate.edu/people/steven-lundeberg Morgan Olsen, another of May knew about the situation Nyman’s 10 Ph.D. students (the and consistently emailed me,

Southern Oregon Business Journal December 2019 | 37

TAXATION

BY GREG HENDERSON, FOUNDER & CO-PUBLISHER SOUTHERN OREGON BUSINESS JOURNAL WWW.SOUTHERNOREGONBUSINESS.COM

The Oregon Department of Revenue has determined that the best method of informing tax-payers of the progress being made toward full implementation of the “Corporate Activities Tax” (CAT) is to establish a three-step process, or “tracks”, to establish Temporary Rules of implementation. The Temporary Rules will be released in tracks on January 1, 2010, February 1, 2020 and March 1, 2020.

Following is a response from the Department of Revenue explaining the three-track process.

Greg Henderson Oregon Department of Revenue

Oregon’s Gross Receipts Tax Update

Temporary Rules HB 3427 Gross Receipts Tax The Department of Revenue chose to go with temporary rules for two reasons.

We can get temporary rules in place faster.

They offer the opportunity for changes should the need become apparent.

The agency has planned all along to release temporary rules in three groups.

The most critical rules – the ones business taxpayers and tax preparers need first – will be posted on January 1, 2020.

Based on stakeholder input during our statewide tour, it became apparent that we needed to move some

38 | Southern Oregon Business Journal December 2019

subjects up into the critical group so that taxpayers would have direction sooner.

The second group of rules – those deemed to be in the next most important group – will be posted February 1, 2020.

The final group – the remaining rules which are of a less timely nature – will be posted March 1, 2020.

Temporary rules are only in effect for 180 days, at which time they must be made permanent or they will cease to exist.

The department’s Corporate Activity Tax team will begin the permanent rule process on the first group of rules April 1. That

process involves a public comment period, which, as mentioned before, will allow changes to be made to the temporary rules should the need become apparent.

The agency will continue the permanent rule process for the second and third group of temporary rules in order.

Summary of Corporate Activity Tax stakeholder input tour discussion topics : The Oregon Department of Revenue recently hosted a series of town hall meetings across the state soliciting input from stakeholders on the administrative rules for the Corporate Activity Tax (CAT).

Additionally, the agency hosted video conferences and conference calls for in-state and out-of-state stakeholders who were unable to attend any of the meetings.

Below is a sample of the questions asked and suggestions made during meetings and calls. It is a summary and does not include every question asked. The information is organized by topic for those who were unable to participate and would like to offer comments and suggestions on the administrative rules for the CAT. Staff is continuing to address many of the questions asked during the tour through a list

of frequently asked questions, forms and instructions, administrative rules, and other communications. If you have additional questions or suggestions about the Corporate Activity Tax, you can email them to the CAT team at cat.help.dor@oregon.gov.

Commercial activity • Participants asked for a clearer definition of commercial activity.

• Are taxes/fees collected by customers taxed even though they are passed onto a government agency? They offered the example of a plumbing contractor paying city inspection fees for customers.

• Are discounts removed from commercial activity?

Subtractions • Cost inputs o Are cost inputs equal to Cost of Goods Sold (COGS) for CAT purposes?

Participants said it would be easiest if they could tie to whatever is on the federal Form 1125-A for COGS. o COGS may include labor costs. Can labor costs be included in a CAT subtraction for cost inputs for the CAT? Labor costs • Who is defined as an employee for this subtraction? Can payments

•

•

•

to subcontractors be included in the cost?

Are fringe benefits and 401(k) expenses included? o How do you apportion the subtraction? Is there an easier way to calculate the costs other than a direct method? Could there be some type of percentage method, particularly for businesses with costs for commercial activity sourced outside of Oregon or exclusions from commercial activity?

What if the business being taxed doesn’t have costs to subtract? They offered the example of commercial landlords who don’t have COGS or employees. o Are product rebates a reduction of cost?

Taxpayers cannot claim expenses related to noncommercial activity. Is this limitation computed at the Oregon level or the everywhere level?

Wholesale certificate • Participants said sellers don’t always know what is going to be sold outside of Oregon.

• Sometimes a wholesaler disclosing the end location for products can involve sharing trade secrets.

• How does the wholesaler determine the amount of

Southern Oregon Business Journal December 2019 | 39

Oregon’s Gross Receipts Tax (Continued)

goods being shipped outside of Oregon?

• What if the wholesaler is unwilling to provide certification?

• Will the department have a wholesaler certificate available for taxpayers to utilize?

Supply chain • When is the tax imposed on different points of the supply chain?

• Can the department adopt the rules for IC-DISC’s? This method is already used by exporting entities and would be easy for them to follow.

• When products are delivered to a company in Oregon, but the invoice of the sale is outside of Oregon, how is it taxed under CAT? • Products purchased and then enhanced or combined prior to another sale within Oregon. Is the tax imposed on each sale?

• What happens when a producer sells a product to a broker in Oregon, who then sells the products to locations outside of Oregon?

Because the broker is in Oregon, is the producer subject to the tax?

Groceries • Dairy farmers said they can’t sell raw milk out of state and must sell to a company to have the milk pasteurized.

• Some producers may not know the final destination.

• A producer won’t know if its products are ultimately sold to a grocery store, a restaurant, or out of state.

• When do agriculture products become groceries?

What about agricultural products with multiple uses?

For example, corn can be used as cattle feed, food, or as an ingredient in motor vehicle fuel.

• Participants asked for the definition of groceries to be expanded, if possible. Can the grocery exclusion apply at each level in the supply chain?

• Can farmers tie the cost of goods sold from previous years to a crop sold in the current year?

Certification • What elements need to be present to show destination is outside of Oregon?

Sourcing • When do you consider a product or service delivered for CAT purposes?

• Does ownership begin upon delivery or destination?

• How do you treat a product picked up in Oregon but delivered out of state?

• How do trucking or freight businesses source their receipts for interstate shipments?

40 | Southern Oregon Business Journal December 2019

• How are insurance premiums taxed?

• Are they sourced based on the location of the beneficiary or owner?

• Property transferred into the state • When does this provision apply?

• Participants said tax avoidance needs to be clearly defined. Also, they said, it needs to be clarified how this section works with exclusions from commercial activity. For example, is motor vehicle fuel transferred into the state of Oregon subject to the CAT? Auto dealers • How are they supposed to calculate the amount of the CAT to pass along to each customer?

• When do auto dealers start collecting the tax?

• What if the dealers collect too much tax, who do they refund the tax to? Who pays the tax?

• Can businesses outside of the auto dealers pass the tax along as a line item? (This question was asked at every session.)

• When bidding a construction project, or preparing a lease agreement, can the tax be listed as one of the costs?

Agent • In the case of a money order purchased in a store, is the fee or the gross amount

subject to CAT? Does it make any difference if the seller of the money order is obligated to honor the money order?

• Cell phones: A retailer buys a phone from a manufacturer and sells it to a customer.

The retailer doesn’t realize a gain from the manufacturer but makes a fee off the cellphone service provided.

Is this an agent relationship • Pharmacies: Do they act as an agent of Medicare or the insurance company? A pharmacy representative said he has no control over the price, and the majority of the cost is billed to the insurance company. Is the CAT paid on the amount after insurance reimbursement or the total sales price?

• There were questions about holding a product and taking liability for it when it will be resold at a later date. Is the fee to hold the product the only taxable event, or the gross value of the purchased product?

Estimated tax payments • How do those subject to the CAT estimate their quarterly payments?

• May a taxpayer use their prior-year apportionment figure to estimate their quarterly payments?

• How does the penalty for the first year work?

• Will the department have tools available on Revenue Online or its website to help business owners determine their quarterly payments?

taxpayer’s quarterly call report for the FDIC?

Joint venture projects • Who is required to pay the tax?

Unitary groups • Do direct family members fall under common control?

• Is the CAT unitary group the same as the unitary group for corporate excise tax?

• How do you determine which members are included in a CAT unitary group?

• Are transactions between members of a unitary group subject to the CAT? • How are joint ventures or entities with less than 50% common ownership reported?

Apportionment • How is the expense subtraction supposed to be calculated? Specifically, in what order are the various limitations in the statute applied?

• Is Oregon commercial activity the same as Oregon sales for purposes of income taxes? Bad debt • When is bad debt realized?

Financial institution • Will the department follow Multistate Tax Commission guidelines?

• Will the department reference specific lines on a

Registration • Is registration required every year?

• Is the department looking at easier ways for taxpayers to reregister?

• Will there be a reminder for registration? Other questions • Will the department consider issuing declaratory rulings in connection with the CAT? • What entities are included in the term government entities? Specifically, are water districts government entities?

I want to thank the staff members of the Oregon Department of Revenue for their consideration of public inquiries in the process of implementing this large undertaking. The Corporate Activities Tax is a complicated and new law with no template for a multitude of details required. The deadlines for completion complicates the process, as well.

Greg Henderson

Founder & Co-Publisher

Southern Oregon Business Journal

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Southern Oregon Business Journal December 2019 | 41

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