Construction Outlook June 2013

A publication of the Utility Contractors’ Association of New England, Inc.

JUNE, 2013

UCANE’s 39th Annual Scholarship Awards Night…

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Years of Excellence 1954-2013

OFFICERS President AL MORTEO FED. CORP. President Elect TONY BORRELLI Celco Construction Corp.

Treasurer JOHN OUR Robert B. Our Co., Inc. Secretary PAUL SCENNA Albanese D&S, Inc.

BOARD OF DIRECTORS MARCELLA ALBANESE Albanese Bros., Inc. JEFF BARDELL Daniel O’Connell’s Sons, Inc. VINCENT BARLETTA Barletta Heavy Division MICHAEL BISZKO, III Biszko Contracting Corp.

STEVEN COMOLETTI P. Caliacco Corp.

MAUREEN DAGLE Dagle Electrical Const., Corp.

ADAM DeSANCTIS DeSanctis Ins. Agency, Inc. THOMAS DESCOTEAUX R. H. White Const. Co., Inc. JERRY GAGLIARDUCCI Gagliarducci Construction, Inc. MARCO GIOIOSO P. Gioioso & Sons, Inc. BILL IRWIN C.J.P. & Sons Const. Co., Inc. PHIL JASSET Honorary Board Member BILL KEAVENEY A. R. Belli, Inc. ROBERT LEE J. F. White Contracting Co. RYAN McCOURT McCourt Construction Co. RICHARD PACELLA, JR. R. M. Pacella, Inc. LOUIS SCHOOLCRAFT Ti-SALES, Inc. ANNE KLAYMAN Executive Director

JUNE, 2013

IN THIS ISSUE

3 President’s Message:

Cape Cod...A Vacationer’s Dream

5 Legislative Update:

• State Passes Fiscal Year 2014 Budget Proposal • UCANE Secures Amendment to Provide Cost Adjustment Clauses Through Senate FY’14 Budget Amendment • Governor Patrick Signs Expanded Chapter 90 Funding $300 Million to Municipalities • Dorcena-Forry Wins 1st Suffolk State Senate Seat; Livingston Takes 8th Suffolk State Representative Primary • Legislature’s Joint Committee on Labor and Workforce Development Hears Unemployment Insurance Bills; Potential Changes Discussed • Belmont, Newton, and Malden Among Municipalities Implementing Water and Sewer Rate Increases

17 Providing an Incentive to Encourage Participation in the Water Infrastructure Partnership: The Role of a Secondary Trust Fund 19 Cape Cod Commission Starts New Wastewater Discussions 21 The Importance of Business Succession Planning: Golden Handcuffs Program

25 EPA Survey Shows $384 Billion Needed for Drinking Water Infrastructure by 2030 27 Environmental Viewpoint:

EPA’s Next Generation Compliance Program

28 UCANE’s 39th Annual Scholarship Awards Night 43 Save the Date...UCANE’s 59th Gala Banquet 44 Save the Date...Mass. Highway Association to Honor Bob Benard at Annual Charity Golf Tournament 45 Navigating the 16 Mandatory Steps of Federal Affirmative Action Compliance 51 Massachusetts Municipal Association: • State to Release $21 Million for Dam, Seawall Repair or Removal • Greater New Bedford Refuse District Pursues Waste-to-Energy Project

53 Financial Management:

• Diversify 529 Accounts • Maximizing Medical Deductions • Getting Started on a Succession Plan

Editor: Anne Klayman, Associate Editor: Suzanne Savage, Graphic Designer: Sherri Klayman Construction Outlook Chairman: Al Morteo Editorial Board: Al Morteo, Tony Borrelli, John Our and Paul Scenna CONSTRUCTION OUTLOOK published monthly by the Utility Contractors’ Association of New England, Inc., 300 Congress Street, Suite 101, Quincy, MA 02169; Tel: 617.471.9955; Fax: 617.471.8939; E-mail: aklayman@ucane.com; Website: www.ucane.com. Statements of fact and opinion are those of the authors alone and not necessarily those of UCANE and the Construction Outlook editorial board and staff.

Subscriptions are included in dues payments for UCANE members. Presorted Standard postage paid at Abington, MA. POSTMASTER, please send form #3579 to Construction Outlook, Crown Colony Office Park, 300 Congress Street, Suite 101, Quincy, MA 02169.

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Yes Cape Cod is a vacationer’s dream, a magnet for tourists and a leading engine for the Massachusetts economy. It is a simple fact with which most everyone agrees. Yet, while everyone agrees the Cape is a vital part of the Commonwealth, it is much harder to get consensus on the best way to protect its rivers, bays, coastline, and marshes from nitrogen runoff, which is slowly destroying one of the Commonwealth’s greatest treasures. he Cape Cod Commission (CCC), founded in 1989, has been given the difficult task of trying to provide a water restoration plan, which will reverse the effects of nitrogen runoff. It has proven to be no small feat. In the past, no one plan has been found acceptable to all residents of the Cape—whether centralized wastewater pollution control system, partial “green” solution, or a combination thereof.

What many fail to realize is that while everyone speaks of the Cape as a single entity, it is in fact comprised of highly individualized towns whose residents are sometimes fiercely independent.

Regional planning, which may include co-ownership and sharing of resources, must often overcome decades of the accepted “going-it-alone” attitude. To make matters more complex, the Cape has significantly different natural resources with nearly 20 different watershed groups covering 46 separate watershed areas. Overcoming this problem, which may require multiple solutions, will be both complex and expensive.

Simply stated, no one solution is going to fix all of the problems.

With that in mind, I can only hope that the CCC’s new twelve-month “public participation” initiative will involve all Cape residents in planning and coming up with

JUNE, 2013

a draft regional plan. To those who live on the Cape full-time or part-time, I encourage you to get involved in the CCC’s efforts. This will be a huge undertaking with an uncertain result. While the “NIMBY” principle may rear its ugly head, protecting the Cape is greater than any one community. For such an important issue, the final solution may require that all Massachusetts residents throughout the Commonwealth contribute to preserve what we all know is one of Massachusetts’ and this country’s most fabulous natural resources. A recent article published on this subject can be found on page 19.

On a final note and in speaking about the future of the Commonwealth, I want to congratulate all the young men and women who received a UCANE College Scholarship at our 39th Annual Scholarship Awards Night. UCANE awarded $2,000 scholarships to 12 promising high school graduates. We are very proud that once again this year, UCANE was able to help each of these talented students continue their education to help them reach their career goals. n

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Mark Molloy, Esq., Lynch Associates, Inc.

Senate Passes Fiscal Year 2014 Budget Proposal

T

he Senate passed its version of the FY’14 budget towards the end of May. With the Senate Ways and Means Committee releasing a $33.92 billion FY’14 proposal, the Senate’s budget, which trimmed close to $1 billion from Governor Patrick’s budget, calls for a 4.2% increase in state spending. The Senate budget proposal considered the primary drivers of the spending increase to be non-discretionary obligations such as debt service and employee benefits, Affordable Care Act implementation and MassHealth, and the need to continue to meet commitments to the foundation budget for Chapter 70 (i.e. local aid for education). In addition, the Senate’s FY’14 budget also includes new investments in transportation, elder affairs, housing, and local education aid.

Contained within the Senate budget were the following items of interest: • Rate Relief. While the House included the rate relief line item (1231-1000) with a $600,000 appropriation, the Senate followed the Governor’s lead and did not include the line item at all. The Senate also rejected an amendment to fund the same.

• WPAT Contract Assistance. The Senate matched the House appropriation at $62.8 million to the Water Pollution Abatement Trust line item (1599-0093). This is in line with the Governor’s recommendation ($63 million) and if adopted in the final budget, would represent an increase of just over $1 million from FY’13.

• DEP Administration. The Senate mirrored the Governor’s recommended funding for line item 2200-0100 with a $28,122,469 appropriation. If adopted in the final budget,

JUNE, 2013

this would represent a $2 million increase to DEP administration.

• Administration and Implementation of Federal Clean Air Act. The Senate appropriated $845,168 to DEP through line item 2220-2220 for the state administration and implementation of the Clean Air Act, including the operating permit program, the emissions banking program, the auto-related state implementation program, and the low emission vehicle program among other items. This is a slight increase over the House appropriation.

The Senate appropriated another $1.5 million to DEP through line item 2220-2221 for the administration and implementation of the operating permit and compliance program required under the Clean Air Act. This also represents a slight increase over the House appropriation for the same item.

• Safe Drinking Water Act. The Senate suggested an increase over the House for line item 2250-2000 with an appropriation of $1,485,185.

• Cape Cod Study. The Senate, like the Governor and the House, eliminated the Cape Cod Study line item (2260-8875). Last year the final funding to the line item was $350,000. (Note: the line item was probably eliminated because of the recent $3.5 million WPAT grant).

• Watershed Management Program. The Senate essentially level funded line item 28000101 at $1,010,223.

• Stormwater Management. The Senate, like the House, also adopted the Governor’s continued on page 7

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Legislative Update continued from page 5 recommended appropriation to line item 2800-0401 for stormwater management, funding it at $405,042. If adopted, this is a slight increase over FY’13 funding.

• Underground Storage Tank Cleanup.

Several line items appropriate funds for the following: • For underground storage tank reimbursements to parties that have remediated spills of petroleum products $12 million (1232-0100) • For the Underground Storage Tank Petroleum Cleanup Fund Administrative Review Board $1,444,826 (1232-0200) • For the expenses of the hazardous waste cleanup and underground storage tank programs $13,511,481 (2260-8870)

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The Senate and House will appoint three members each (two majority party, one minority party) to negotiate a final FY’14 budget proposal. The Governor will then have 10 days to adopt, reject, or amend various provisions of the budget proposal. continued on page 9

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Legislative Update continued from page 7

UCANE Secures Amendment to Provide Cost Adjustment Clauses Through Senate FY’14 Budget Amendment

A

s part of the Senate’s FY’14 budget debate, Senator James Timilty (D-Bristol & Norfolk District) filed an amendment to include cost adjustment language in contracts for road, bridge, water, and sewer projects. As is well known, certain state agencies in the Commonwealth and around the nation, generally, already include mandatory contract cost adjustment language (i.e. economic adjustment clauses) within their contracts with contractors. In the Commonwealth, the Massachusetts Department of Transportation (MassDOT) historically includes language advising contractors of the availability of price adjustment in the event of an increase or decrease in the price of fuel, steel, concrete, or asphalt. The filed language, which is similar to language that was included in use for projects funded under the 2008, 2011, and 2012 Transportation Bond Bills (and the 2013 ch.90 piece), will require cost adjustment clauses for road, bridge, water, and sewer projects when there has been a greater than 5% increase or decrease in the product cost.

Through the work of Senator Timilty, Senate Ways and Means Chairman Stephen Brewer, and Senate President Therese Murray, the Senate adopted the amendment as part of the FY’14 budget. In adopting this amendment, Senators recognized that cost adjustment clauses: (a) lead to lower bid prices; (b) provide greater contractor stability; (c) promote greater competition from contractors; (d) lead to fewer bid retractions; and (e) can benefit the awarding authority in the event of a cost decrease.

Simply put, cost adjustment clauses create a “winwin” scenario for contractors and awarding authorities alike–meaning residents and businesses benefit as well.

As mentioned previously, the Senate and House will now attempt to reconcile their respective budget proposals. On behalf of all UCANE members, we thank Senator Timilty and his staff for their tireless efforts on this matter as well as Senator Brewer and Senate President Murray and their respective staffs for their work on this matter. continued on page 11

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Legislative Update continued from page 9

Governor Patrick Signs Expanded Chapter 90 Funding $300 Million to Municipalities

A

s the onslaught of transportation related funding matters continues on Beacon Hill, Governor Patrick finally received and signed legislation authorizing $300 million in local aid through Chapter 90 funding for local road and bridge projects. Contingent with the signing of the legislation, the Governor filed a “terms bill” officially setting the terms of a bond offering to allow for such funding to reach municipalities. Even with the passage of the “terms” bill, it is unclear whether the Patrick Administration will release the full $300 million.

Against this backdrop, the House and Senate Conference Committee continues to meet for the purposes of reconciling the House and Senate’s differing revenue raising proposals. The House, which proposes raising close to $600 million in new reve-

nue, and the Senate, which proposes approximately $800 million, are both below the $1.9 billion amount the Governor hoped to raise through his “income tax increase/sales tax decrease” plan. According to the State House News Service, transportation financing talks in the State House have been rocky at times, with Patrick threatening to veto a House tax plan.

Also in the mix is the Governor’s Transportation Bond Bill, a Patrick proposal for ten years of road funding at about $300 million annually with a total commitment of $3.4 billion. Legislators generally favor three year bond bill packages with earmarks for local projects. As per all bond bills, they represent authorizations and not mandates. The final decision as to which projects get funded relies in part on the existing Transportation Infrastructure Plans (TIPs) and agency discretion.

Dorcena-Forry Wins 1st Suffolk State Senate Seat; Livingstone Takes 8th Suffolk State Representative Primary

V

oters within the 1st Suffolk State Senate District chose to fill the seat vacated by former State Senator Jack Hart with Representative Linda Dorcena Forry (D-Dorchester). Representative Forry, who won a hotly contested primary against Representative Nick Collins (D-South Boston), easily bested her Republican opponent and took approximately 80% of the vote. The election was closely watched as it represented the first time in years that the seat, traditionally held by someone from South Boston, was won by a resident from outside of South

Boston. On the House side of the ledger, the Democratic primary to replace former Representative Marty Walz, who left the seat to assume the top leadership post at Planned Parenthood of Massachusetts, resulted in two well-known Democrats tangling for the honor. Jay Livingstone of Beacon Hill ultimately defeated Josh Dawson, a Back Bay resident and former political director for Treasurer Steve Grossman.

As there is currently no Republican candidate on the ballot, the June 25 election should be a formality to continued on page 13 elect Mr. Livingstone.

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Legislative Update continued from page 11

Legislature’s Joint Committee on Labor and Workforce Development Hears Unemployment Insurance Bills; Potential Changes Discussed

W

ith repeated efforts freezing the Unemployment Insurance (UI) rates for employers, legislators have begun to entertain proposals to reform the UI system. The Joint Committee on Labor and Workforce Development, co-chaired by Senator Daniel Wolf and Representative Thomas Conroy, heard a slate of proposals designed to reduce benefits, tighten eligibility, and create greater contributions from employers who utilize the system more than others.

While both chairmen agreed the system needs “fixing”, there is a difference of opinion as to how best to accomplish that reform. Senate Chairman Wolf noted that penalizing employers who frequently use the unemployment insurance system will harm a segment of the economy that may be seasonal by nature. Likewise, he has expressed concern about the impact of decreasing the maximum number of weeks a recipient can collect benefits as potentially punitive to individu-

als given the Commonwealth’s tight economy.

Among the groups testifying for change to the UI system were Associated Industries of Massachusetts, the Retailers Association of Massachusetts, and the National Federation of Independent Businesses.

The AFL-CIO, while acknowledging the UI system needs reform cautioned that penalizing workers by reducing benefits or making it less likely that employers will hire them is counterproductive.

It is anticipated that the Legislature will likely undertake some form of UI reform this session. Governor Patrick and Senate President Therese Murray have listed it as an item of shared concern. House Speaker DeLeo has acknowledged that annual rate freezes should not become the norm and pledged that the House will keep an open mind during the legislative process. continued on page 15

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Legislative Update continued from page 13

Belmont, Newton, and Malden Among Municipalities Implementing Water and Sewer Rate Increases

I

t is the time of year for annual spring meetings where municipalities establish and vote on their budgets for the upcoming year. According to the Belmont Patch, water rates would increase by 3.9% and sewer usage by 4.9% for a hike of 4.6% to most residents and businesses. The Selectmen voted unanimously to approve the rate hike. The current water rate is $5.46 per 100 cubic feet (cf) of water up to 3,000cf. Any amount more than 3,000cf the rate is $6.28 per 100cf and there is a minimum $17.27 service charge per quarter for a 5/8 meter (there is a price increase for larger meters). This year's water rate will increase by about 21 cents per 100cf.

Sanitary sewer fees are based on 100% of metered water consumption. The current sewer rate is $10.72 per 100cf of water and there is a minimum $15.16 service charge for a 5/8 meter per quarter.

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higher water bills for Malden residents. As a result, the proposed water and sewer portion of Malden’s FY’14 operating budget is slated to rise roughly 4%, approximately $25 million. It is estimated the rate hike would be less than $2 more per month for the average user. Currently, users pay a flat rate of $10 for 200cf of water and then pay per cubic foot after that. The plan will lower that initial rate to $6 for 150cf, then $0.0947 per cubic foot after that. The city will also assess fees based on actual usage, not rounded down to the nearest 100cf.

Finally, the City of Newton saw its Board of Aldermen approve new water and sewer rates that will see the average homeowner’s bill rise by $63. According to the Newton Tab, rates will increase by 3.9% and result in the average combined sewer and water bill rising to $1,675. The city estimates the water and sewer rates will generate $19.6 million and $26.7 million in 2014, respectively. While city officials have said they hope to keep rate increases below 4% in the coming years, they noted that it is still a far cry from the rate increases of old which saw as much as a 12% for one year. n

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Providing an Incentive to Encourage Participation in the Water Infrastructure Partnership: The Role of a Secondary Trust Fund

By Mark Molloy, Esq., Lynch Associates, Inc.

It has been an often discussed point that, despite the existence of the Commonwealth Drinking Water and Clean Water Statewide Revolving Funds (SRF), municipalities are often hesitant to invest in their water infrastructure needs. As last year’s report from the Massachusetts Water Finance Infrastructure Commission (“MWIFC”) found, however, the Commonwealth’s water infrastructure needs exceed $20 billion notwithstanding the funding necessary to address storm water management. The question is no longer whether there is a problem, but how to address the problem. That said, a key element to any solution addressing our water infrastructure needs will undoubtedly rely on both the “buy in” of municipalities and regional water authorities in addition to the federal and state grants.

W

ith that in mind, municipalities and regional water authorities already face a series of immediate concerns ranging from negative feedback surrounding increased water and sewer rates and debt service payments to an inability to implement fair cost pricing. There remains a reluctance to invest in water infrastructure as a result. Yet as the Commonwealth addresses its growing water infrastructure needs, there must be some way to incentivize municipalities and regional water authorities to invest in, maintain, or upgrade their water infrastructure while still recognizing the need for a meaningful partnership that includes federal and state participation.

One such mechanism may be a secondary trust fund of $200 million annually that complements existing programs, yet provides necessary funding to enable the honoring of a true partnership for water infrastructure needs. Access to these new funds should be structured to incent municipalities, authorities, and districts that adopt best management practices in full cost pricing, financial management, asset management and environmental sustainability, and use watershed-based solutions and regional approaches.

In particular, a secondary trust fund must complement and not compete against the existing successful SRF program. The SRF program remains one of the Commonwealth’s best mechanisms for addressing drinking water and clean water projects. Without it, we lose the ability to leverage essential federal funds. Still, how does a secondary trust complement the existing

JUNE, 2013

SRF programs, without competing against it? In one scenario, the secondary trust could provide principal forgiveness of approximately 20% for municipalities who utilize the SRF program – therefore, availing the municipality of the beneficial 2% loan structure at a substantially reduced amount of principal and interest payments. In another, the secondary trust could provide grants to municipalities and regional water authorities to prepare for an eventual SRF application (i.e. grants for design work, environmental studies, etc.). In all, the Commonwealth can use a secondary trust fund as a flexible application to incentivize municipalities and regional water authorities to commit to water infrastructure improvements by substantially reducing its costs.

With the use of a secondary trust fund as a flexible tool for assisting municipalities and regional water authorities, there must still be accountability measures.

As the MWIFC correctly identified, new funding should continued on page 18

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Providing and Incentive continued from page 17 be structured to incent municipalities, authorities, and districts that adopt best management practices in full cost pricing, financial management, asset management and environmental sustainability, and use watershed-based solutions and regional approaches. Put simply, these initiatives, which will not only produce direct savings and efficiencies for each municipality and regional water authority, should be in sum, or part, a pre-requisite to funding from a secondary trust.

There is no easy solution to the Commonwealth’s

water infrastructure gap. As identified by the MWIFC, it is a puzzle that will require many interested parties working together in a partnership. As with any partnership, however, there is give and take. In this way, a secondary trust fund can be part of the equation that allows for giving interested parties a means in which to address their water infrastructure needs by taking certain proactive strategies which promote best management practices and long term solutions.

Without this fund, it may be difficult to entice municipalities and regional water authorities to fully engage in the partnership necessary to address the Commonwealth’s water infrastructure needs. n

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Cape Cod Commission Starts New Wastewater Discussions

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sing an expected $3.3 million state grant, the Cape Cod Commission is going in a new direction with a plan that will involve the public in developing wastewater management solutions that will focus on the Cape’s 46 nitrogen sensitive watersheds that comprise nearly 80 percent of the Cape’s land area.

Paul Niedzwiecki, Commission executive director, described the state-backed plan for the Yarmouth selectmen last week. He said Yarmouth’s previous efforts to develop a sewer system and then failing to get residents’ backing got the Commission “thinking how could we help the towns.”

The new effort that will focus on “robust public participation” rather than elected and appointed officials is on a fast-track timeframe of 12 months. The process, which started two weeks ago, will “take good local planning and channel it into a regional draft plan addressing the biggest problem we have,” Niedzwiecki said.

The Commission is working with the Consensus Building Institute to develop the process, which will start with the institute convening focus groups representing a broad range of residents across the Cape.

“It’s not going to be one plan. It’s a watershed plan that will be driven by nitrogen,” Niedzwiecki said.

The Cape Cod Water collaborative of 15 to 18 watershed groups also will meet to discuss the technical review. He described some new tools that can be used to show various nitrogen treatment options.

“I think bringing more people in will help,” Niedzwiecki said. There is a lot of information the average citizen doesn’t know or understand, he said.

When Selectman Chairman Erik Tolley asked if the new plan is moving away from a central sewer system, Niedzwiecki said, “It’s hard to say. The goal is to keep as many Title V systems as possible.”

However, he said the watershed approach should encourage more sharing of sewage facilities, such as Chatham and Harwich are already doing and could be done with other shared watersheds like Lewis Bay between Yarmouth and Barnstable. “The goal of the regional plans is to do it at the lowest possible cost,” Niedzwiecki said.

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“This plan may get us to an agreement with Dennis or Barnstable. It will keep costs down,” added Suzanne McAuliffe, Yarmouth’s representative on the county’s Assembly of Delegates, who sat with Niedzwiecki in presenting the plan.

Selectman James Quirk said his concern is if the regional approach will be beneficial for economic development. “We have to be less parochial about solving this problem,” he said. “We’ve got to get along better with each other.”

Niedzwiecki agreed, saying, “We need elected officials who don’t have the old school mentality. We need to push this as a priority in the state budget. The most expensive thing we can do is to do nothing.”

Selectwoman Tracy Post said she hopes the Cape’s representatives at the Statehouse hear their constituents before it’s too late. “When people stop coming to vacation here, we’ll no longer be the cash cow for the state,” she said.

Niedzwiecki agreed that when property values on the water start to fall, the town budgets will go down and taxes will shift inland. If the Cape does nothing about its wastewater problems, he said, “The state and federal government will step up and will take care of it.”

However, with affordability being one of the biggest concerns, he said the federal and state government will have to be part of the solution.

Niedzwiecki said the new plan is a new approach of outreach. “For the first time, we’re going to have an honest and open conversation.”

Reprinted from The Register with permission.

Written by Susan Vaughn. n

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The Importance of Business Succession Planning

Kevin Ellman, CFP

Paul D. Miller

Wealth Preservation Solutions, LLC

Golden Handcuffs Program Joe Smith had built a successful business over a 40-year working career and was now ready to cash out and enjoy his Golden Years. He envisioned himself playing golf, fishing, and watching the grass grow in Florida. He hired a business broker to help him find a suitable buyer, and after several months of meetings and negotiations he had a firm offer and a letter of intent to sell his business.

As soon as the buyer had finalized his finances, the deal would close and Joe would be on his way to his dream retirement. One of the elements that made his company so attractive to the buyer was that Joe had been very effective at finding, training, and developing key executives. His two key executives Sam and Mike would be working closely with the new owner to maintain the business and ultimately bring it to a higher level. Unfortunately, Joe had failed to make sure that Sam and Mike were committed to stay with the business through the transition and work closely with the new owners.

While Joe was marketing his business, Sam and Mike became aware of the negotiations. But they were also aware they had no ownership in the business or a written agreement that would guarantee their future financial security. This created a climate of anxiety for them, and they decided to explore other opportunities.

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s they thought about their situation they realized they had been instrumental in building and operating Joe’s company. They realized that many of the major clients had a strong relationship with them. Ultimately they decided to leave Joe’s firm, move down the street, and open a new company taking several of Joe’s major accounts with them. When this happened the buyer realized that he wouldn’t have a strong management team in place. He had planned on relying heavily on Sam and Mike to ensure all major clients stayed with the firm and that they would work closely as a team to grow the business. When he learned that Sam and Mike were leaving and taking a significant amount of the business with them, it dampened his enthusiasm for buying the company.

In the end he decided to withdraw his offer. Instead of looking forward to golf and fishing in Florida, now Joe had to fight extra hard to maintain the business he had without his two key lieutenants. On top of that he had to continued on page 23

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Succession Planning continued from page 21 fend off strong competition from them. Instead of cashing out he now had to look forward to many more years of hard work to get himself in a position to profit from selling his business. All of this could have been avoided with a little advance planning and the use of a program to recruit, retain, and reward key executives.

The heart of a “Golden Handcuffs” program is an agreement between the company and the executive that specifies that a certain dollar amount will be contributed to a long term savings plan. Most plans specify that the executive would receive these funds after retirement or any other length of time that makes sense for the company.

A well designed Golden Handcuffs Plan has four basic elements: contribution, vesting schedule, benefit payout, and funding vehicle.

should see or know that the company is actually putting money away for him. In order to comply with the relevant laws it is critical that the funding be “informal”.

The company can use bonds, stocks, mutual funds, annuities, or life insurance in order to build up a fund that can be used to ultimately pay the executive his benefit.

If you have a key executive and it is imperative you keep him, you may want to consider a Golden Handcuffs Plan.

Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), member FINRA/SIPC. Wealth Preservations Solutions, LLC is a member of PartnersFinancial, an affiliate of NFPSI. Wealth Preservation Solutions, LLC and NFPSI are not affiliated. The example provided is hypothetical and for illustrative purposes only. It includes fictitious names and does not represent any particular person or entity. n

Contribution Most plans call for a contribution of 10-30% of the executive’s salary each year, as long as the plan is in effect.

Vesting Schedule Almost every plan uses a vesting schedule. This schedule specifies how long the executive has to stay with the company in order to get his benefits. In most cases this schedule can be for 10, 15, and 20 years or until retirement and can be customized differently for each executive as appropriate.

Benefit Payout The secret to a successful Golden Handcuffs Program is to have a very large benefit. With a large annual contribution and with a long career, there can often be a retirement benefit payout of $1 million to $2 million dollars. Before an executive accepts an offer from a competitor or decides to leave to start their own business, they will have to think long and hard before walking away from a $2 million dollar retirement benefit.

Funding Vehicle The heart of the Golden Handcuffs Program is the agreement between the executive and the company. However, in order for the plan to be credible to the employee he

JUNE, 2013

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EPA Survey Shows $384 Billion Needed for Drinking Water Infrastructure by 2030

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n June 4 the U.S. Environmental Protection Agency (EPA) released results of a survey showing that $384 billion in improvements are needed for the nation’s drinking water infrastructure through 2030 for systems to continue providing safe drinking water to 297 million Americans.

EPA’s fifth Drinking Water Infrastructure Needs Survey and Assessment identifies investments needed over the next 20 years for thousands of miles of pipes and thousands of treatment plants, storage tanks, and water distribution systems, which are all vital to public health and the economy. The national total of $384 billion includes the needs of 73,400 water systems across the country, as well as American Indian and Alaska Native Village water systems.

“A safe and adequate supply of drinking water in our homes, schools, and businesses is essential to the health and prosperity of every American,” said

EPA Acting Administrator Bob Perciasepe. “The survey EPA released today shows that the nation’s water systems have entered a rehabilitation and replacement era in which much of the existing infrastructure has reached or is approaching the end of its useful life. This is a major issue that must be addressed so that American families continue to have the access they need to clean and healthy water sources.”

The survey, required under the Safe Drinking Water Act to be submitted to Congress every four years by EPA, was developed in consultation with all continued on page 26

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EPA Survey continued from page 25 50 states and the Navajo Nation. The survey looked at the funding and operational needs of more than 3,000 public drinking water systems across the United States, including those in Tribal communities, through an extensive questionnaire. In many cases, drinking water infrastructure was reported to be 50100 years old.

The assessment shows that improvements are primarily needed in: • Distribution and transmission: $247.5 billion to replace or refurbish aging or deteriorating lines • Treatment: $72.5 billion to construct, expand, or rehabilitate infrastructure to reduce contamination • Storage: $39.5 billion to construct, rehabilitate, or cover finished water storage reservoirs • Source: $20.5 billion to construct or rehabilitate intake structures, wells, and spring collectors The EPA allocates Drinking Water State Revolving Fund grants to states based on the finding of the assessment. These funds help states to provide low-

cost financing to public water systems for infrastructure improvements necessary to protect public health and comply with drinking water regulations.

Since its inception in 1997, the Drinking Water State Revolving Fund has provided close to $15 billion in grants to all 50 states and Puerto Rico to improve drinking water treatment, transmission, and distribution. The Drinking Water State Revolving Fund program has also provided more than $5.5 billion to protect drinking water in disadvantaged communities.

The EPA is committed to utilizing the tools provided under the Safe Drinking Water Act to assist states and to better target resources and technical assistance toward managing the nation’s drinking water infrastructure. In addition to Drinking Water State Revolving Fund grants, EPA awarded nearly $15 million in funding in 2012 to provide training and technical assistance to small drinking and wastewater systems – those serving fewer than 10,000 people – and to private well owners to improve small system operations and management practices and to promote sustainability. EPA also works with states, municipalities, and water utilities to strengthen the resiliency of drinking water systems against the potential impacts of severe weather events and climate change. n

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Environmental Viewpoint Robin L. Main, Esq.

Hinckley Allen, LLP

Rhiannon Campbell, Esq.

EPA’s Next Generation Compliance Program Note: Robin L. Main is a Partner in Hinckley, Allen & Snyder LLP’s litigation group and co-chair of the firm’s environmental practice group. Rhiannon A. Campbell is an Associate in Hinckley, Allen & Snyder LLP’s litigation and environmental practice groups.

In July of 2012 the Environmental Protection Agency (“EPA”) introduced its Next Generation Compliance initiative in an attempt to address noncompliance with environmental regulations.

recent draft national program manager guidance for FY’14 the EPA’s Office of Enforcement and Compliance Assurance detailed the initiative and stated that it will develop a strategic plan for the Next Generation Compliance Program by the end of FY’13 (Sept. 2013). n

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he Next Generation Compliance initiative involves the use of advanced emission detection technology and advanced monitoring technology that will assist industry users in preventing releases and help the public and government entities target noncompliance. Under the initiative, the EPA will require electronic reporting of releases, pollution, sources, and compliance measures. The EPA has suggested that these requirements will be built in through existing enforcement procedures: settlements and enforcement investigations may require advance monitoring and electronic reporting.

The EPA also intends to increase transparency and public accountability by making the compliance information it currently has publicly available. It also plans to make the new information that it gains through advanced emissions monitoring and electronic reporting publicly available.

Since this introduction, the EPA has taken some preliminary steps to increase transparency and accountability in enforcement and compliance by developing work groups and task forces to provide guidance on implementing electronic reporting and to identify advanced monitoring technology.

The EPA has also sought comments on including the Next Generation Compliance initiative among its enforcement priorities for FY’14 through FY’16. In its

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UCANE’s 39th Annual Scholarship Awards Night…A Night to Remember Some see things the way they are and ask, why?

I dream things that never were, and ask why not? ~ George Bernard Shaw In paraphrasing George Bernard Shaw’s famous quote, John, Robert, and Ted Kennedy all used these profound words to capture the emotion and exhilaration of those who seek knowledge and truth…those who are not satisfied with the present, but who look to the future with hopes of being a part of new discoveries and the expansion of human knowledge. These words are appropriate to describe today’s college bound young men and women who are uninhibited by knowledge already gained and discoveries already made, and who are ready, willing, and eager to face the future and make it better for all.

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his is one of UCANE’s favorite nights of the year. It is a night filled with excitement, pride, and hope for the future. Thanks to the extreme generosity of our members, for the second year in a row UCANE increased the number of scholarships awarded from ten to twelve.

Eligible students are the sons and daughters of our members and their employees. Some of our members believe so deeply in this program, that even when tragedy strikes their families, they turn to our scholarship program to memorialize their loved ones. Nine of our scholarships were memorial scholarships; two were honorary scholarships, and this year UCANE presented one scholarship in memory of the Boston Marathon Victims.

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On Wednesday, May 22, 2013 at the Four Points by Sheraton Hotel in Norwood, MA, UCANE Executive Director Anne Klayman opened the program by stating how proud our Association was to be awarding these scholarships. For the twelve scholarship recipients setting out to live their own dreams, being awarded one of UCANE’s scholarships is a testament to how hard they have worked for the past four years. They were chosen among 44 very talented applicants.

To make this evening especially memorable, thanks to the generosity of Todd McDonald and Broadstone Advisors, LLC we were fortunate to have as our guest speaker New England Patriots Center, Ryan Wendell. As

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she has done for many years, Anne asked Joe Andruzzi to assist her in finding a celebrity sports figure to speak at our scholarship awards night. Without hesitation he said, “I know exactly who I want your recipients to hear from.

Ryan Wendell is an up and coming young athlete and you’re going to hear a lot of great things about this young man…he’s one of the nicest guys I’ve met in a long time.”

Joe was absolutely right!

In 2008 the Patriots signed Ryan as an undrafted free agent. He was later waived, but then was signed to the Patriots Practice Squad, where he spent the remainder of the 2008-2009 season. Ryan was promoted to the active roster on December 31, 2009. He played in 15 games in the 2010-2011 season and started in the final 2 games. During training camp for the 2012 season Ryan beat out longtime Patriot Dan Koppen for the Starting Center position.

Ryan said he wondered why UCANE would want him to be a guest speaker, so he researched our website in an effort to find out more about us. Then he “got it”… underground utility contractors work down and dirty in the trenches, and as an offensive lineman that is what he does. He said, “We are similar, but with one major exception…I’m protecting Brady’s backside.” Ryan spoke about being part of a team and what it meant. He plays on the offensive side of the ball, but when the defense is on the field he is “chomping at the bit” to get back out there. But being part of a team means you have to rely on your teammates. You rely on them to do their job to the best of their ability. He then went on to address the recipients, “you are now part of a team, the UCANE team.

UCANE has invested in you and your future. You will always be part of UCANE, and UCANE will be a part of you. Be proud of what you have accomplished. It’s just the beginning of your adult life…but realize it’s a great start. Don’t ever give up on your goals no matter what.

If you believe in your goals you will do what is necessary to reach them. Nothing will stand in your way.” Ryan also spoke about his college career and how at only 6’ 2” he was probably considered by many to be too small to play pro ball. But he dreamt big and asked “why not?” He is a living example of “why not” in his career. continued on page 31

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Grant Simpson and New England Patriots Center Ryan Wendell

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Scholarship Awards Night continued from page 29 Following Ryan’s talk Anne began the formal Scholarship Awards presentation by explaining that our applicants are judged in a number of areas, not just their academics. They include class standing, scholastic honors, SAT and achievement test scores, their extracurricular activities both in and out of school, community and volunteer service, the maturity and presentation of their essay, and their career objective.

Each applicant is reviewed and graded by a committee of educators who are not affiliated with UCANE. The evening continued with the introduction of each recipient and their impressive resumes. Enthusiastic applause could be heard as each student stepped up to

the podium to meet Ryan, and accept their Scholarship Award. After the final scholarship was presented, Anne recognized a truly gifted student who was not eligible to receive a UCANE scholarship. The reason he was not eligible is that the rules of our scholarship program state, “If a winner receives a full scholarship to the college of their choice, the scholarship will be awarded to another student. This is the first time this has happened since our program’s inception, 39 years ago.” Anne stated, “We at UCANE want to recognize Grant Simpson’s accomplishments and to also thank him. Through his academic excellence, he is helping another student reach their goal.” She then invited Grant to the podium and presented him with the latest iPad Mini, as a token of UCANE’s appreciation.

Anne closed the program by congratulating our twelve outstanding scholarship recipients. She again thanked Todd McDonald and Broadstone Advisors, LLC for sponsoring Ryan Wendell, and she also thanked Ryan for taking time out of his busy and hectic schedule to join us and for making this such a memorable evening for our students, their families, and our members. n

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Tori E. Bodozian

Scholarship in Honor of Phil Bonnano (Established by J. F. White Contracting Co.)

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ori Bodozian is the daughter of Victoria and Michael Bodozian. Victoria works for A. H. Harris & Sons, Inc. of Plainville, MA. Tori attended Medfield High School where academically she maintained honor roll status. Her SAT scores were 630 in Math and 720 in English. She was a National Merit Scholar in her senior year, a Gold Key Writing Portfolio Winner in the scholastic art and writing competition, and she is a member of the National Honor Society, and the Spanish National Honor Society.

Tori was also a member of the Art and Ballroom Dancing Clubs, and she is co-president of the Book Club. In her freshman and sophomore years she played soccer and basketball, and in her junior and senior years she was varsity soccer manager. Her passion is reading and writing fiction.

In her recommendation, Tori’s advanced writing teacher wrote, “Writing recommendations can be an overwhelming amount of work, but writing a recommendation for this candidate is a delight. When I first met her, she was a junior in an advanced writing honors class where students work on their own essays and serve as tutors for peers who struggle with their writing. This class was full of strong personalities, and some of her classmates were hesitant to speak out because of the social dynamic in the room. Despite this challenging environment, this student was a standout. To be clear, she did not have the loudest voice in the room. However, when Tori speaks, others listen because her words have an impact on people. I work with many talented students, but because of her character and academic gifts, this student stands out from them all.”

Tori will attend Roger Williams University where she will double major in Creative Writing and Visual Arts Studies.

Bob Lee of J. F. White Construction Co. presented the scholarship to Tori in honor of Phil Bonnano.

Christian P. Cardinal

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Arnold Belli Memorial Scholarship

hristian Cardinal is the son of Steve and Leanne Cardinal. Steve works for HD Supply Waterworks of Dedham, MA. Christian attended West Bridgewater Middle/ Senior High School where he excelled in mostly honors and advanced placement courses. His SAT scores were 610 in Math, 550 in English, and 600 in Biology.

In addition to taking a demanding course load, Chris was captain of his varsity basketball, golf, and track teams. He was also a member of the Math Club, Student Council, was President of the National Honor Society, and served as Class Treasurer.

His guidance counselor wrote, “In the classroom Chris is an outstanding student who excels in all subject areas. Driven, focused, and motivated, it comes as no surprise that Chris was already thinking about college when he was only in the 9th grade. Early on, he charted a course for success by enrolling in a challenging curriculum of AP and honors level courses, and producing high quality work. Teachers describe Chris as one of their top students with respect to motivation, self-discipline, and academic promise.”

The head of the science department wrote, “In my ten years of teaching, I have had the pleasure of working with many talented students. In his junior year, Chris took on the challenging course work in honor’s level Anatomy and Physiology, and AP Biology, these courses have intense content curriculum and Chris has shown great skill and interest in each of them.

This well-rounded student is truly a gift to our school.”

Chris will attend Stonehill College where he will major in Biology on a Pre-Med track. His goal is to become an Orthopedic Surgeon.

Cindy Sementelli presented Christian with the Arnold Belli Memorial Scholarship in memory of her father.

Stephen J. DiGiusto Les Marino Memorial Scholarship

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tephen DiGiusto, is the son of David and Regina Digiusto. David works for McGladrey of Boston, MA. Stephen attended Braintree High School where he maintained honor roll status while taking mostly honors and advanced placement classes. His SAT scores were 680 in Math and 670 in English. In addition, he was vice-president of the National Honor Society, and was a member of the Spanish National Honor Society.

His extracurricular activities at school included being captain of the varsity track team, senior producer and principal of the Braintree High School Theatre Guild, as well as a soloist in the Concert Band and Jazz Band.

Outside of school, Stephen was captain of his “Relay for Life” team where he received the Youth Leadership Award. He also was the founding member and soloist performer of “Entertaining For A Cure” which helped raise $35,000 for the American Cancer Society.

Stephen’s guidance counselor wrote, “This young man has done more in the past few years than many do in their lifetime. He is an amazing person who inspires and leads others to do their best. He has always carried a full course load with the most challenging schedule we have at Braintree High. Stephen will leave a huge void at Braintree High as he transitions into college.”

Stephen will attend UMass Amherst’s Isenberg School of Management where he will major in Accounting and Finance and minor in History and Music.

Max Marino and Ken Anderson presented the Les Marino Memorial Scholarship to Stephen.

Stephanie G. Gioioso

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Tony & Anthony Umbro Memorial Scholarship

tephanie Gioioso is the daughter of Ann and Joe Gioioso. Joe works for his family’s business, P. Gioioso & Sons, Inc. of Hyde Park, MA. Stephanie attended Ursuline Academy in Dedham, MA where she maintained high honor roll status throughout high school in all honors and advanced placement classes. Her SAT scores were 710 in Math, 630 in English, 690 in U.S. History, and 630 in Chemistry. She is also a member of the National Honor Society. Stephanie received the Salve Regina University Book Award and the Daughters of the American Revolution Good Citizen Award.

Her extracurricular activities at school include playing junior varsity soccer in grades 9 and 10, varsity soccer in grades 11 and 12, and she was captain of the varsity ski team. Stephanie was also class president in grades 11 and 12, a Student Ambassador in grades 9-12, and was Tour Guide Manager in her senior year.

Outside of school she was a volunteer at Beth Israel Deaconess Medical Center, a volunteer at the Dedham Food Pantry for four years, and she participated in the Making Strides Against Breast Cancer walk for four years.

The principal of Ursuline Academy wrote, “Stephanie has embraced every challenge with enthusiasm, and she has demonstrated outstanding scholarship, leadership, athleticism, and commitment to service. Inside the classroom, she is a scholar and a stand out. She has carefully prepared for her desired profession by working at the front desk and emergency room at Beth Israel Deaconnes Hospital in Milton during the past two years. Stephanie is the “go to person” whom I can call on when I need something accomplished.”

Stephanie will attend Villanova University where she will major in Nursing and minor in Spanish.

Joe and Paul Umbro presented the Tony and Anthony Umbro Memorial Scholarship to Stephanie and P. Gioioso & Sons, Inc. matched the UCANE scholarship.

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Meghan M. Grela Joseph D’Amico Memorial Scholarship

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eghan Grela is the daughter of Linda and Peter Grela. Peter works for Dagle Electrical Construction Corp. of Melrose, MA. Meghan attended Ursuline Academy in Dedham where she graduated with a 4.0 GPA in all honors and advanced placement courses. Her SAT scores were 770 in Math and 700 in English. She received academic first honors in grades 9-12 and received the Harvard Book Award in her junior year. She also was a National Merit Commended Student, a member of the National Honor Society, an AP Scholar in her senior year, and a National Youth Leadership nominee.

In addition to being an excellent student, Meghan was captain and varsity member of the cross-country team, the indoor track and field team, and the outdoor track and field team. She was a National Honor Society tutor, president of the Spanish Club, a member of the Student Ambassador Club, the Green Team, the Math League, and the Big Sister Club.

She has been a group leader at Vacation Bible School at the Grace Chapel for the past seven years. She also volunteered at the Bristol Lodge and St. Joseph’s Food Pantry, and was a volunteer coach for the Wellesley Track and Field Club.

The head of the math department at Ursuline wrote, “Meghan is that rare student who embodies intelligence, passion, diligence, and kindness. She takes the initiative to come in after school and ask for clarification of a problem, which demonstrates the thoroughness and conscientiousness she applies to everything she does. Academically, Meghan is superior, however she is also humble and gracious.”

Meghan will attend Dartmouth College where she will major in Economics. She hopes to enter the world of business and finance and address current social issues that people are facing today.

Mike Lenihan and Nick Biello of J. D’Amico, Inc. presented the Joseph D’Amico Memorial Scholarship, to Meghan.

Adam J. Huber

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Scholarship in Memory of the Boston Marathon Victims

dam Huber is the son of Sharon and Joseph Huber. Joe works for Schmidt Equipment, Inc. of North Oxford, MA. Adam attended Nauset Regional High School in North Eastham, MA where he was ranked 10th out of a class of 191 students. He maintained high honor roll status throughout high school in mostly honors and advanced placement classes. His SAT scores were 700 in Math, 710 in English, and 720 in English Writing.

He was a member of the National Honor Society, the Student Council, and the Student Senate. Adam was captain of his soccer, and hockey teams.

Outside of school he played soccer for Crusaders United, and he admits that soccer is his passion. He plans on playing soccer at college as well. He was chosen to represent Nauset at Boys State and he received the Atlantic Coast League Sportsmanship Award for soccer, as well as being named ACI All-Star and receiving the MVP Award for both soccer and hockey.

His guidance counselor wrote, “Academically, Adam has mastered our substantial curriculum and excelled, as much from hard work as from natural ability, at all subjects. He is polite, eminently considerate, and thoughtful. Though his passion is engineering, he is also very much drawn to languages and psychology. There is no doubt that he will find success. He was captain of his sports teams, a student leader, and is comfortable in any environment. Adam is a natural in all walks of life.”

Adam will attend Worcester Polytechnic Institute where he will major in Civil Engineering.

UCANE Executive Director Anne Klayman presented this scholarship to Adam in memory of the Boston Marathon Victims.

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JUNE, 2013

Victoria A. Hughes Robert DeSanctis Memorial Scholarship

V

ictoria Hughes is the daughter of Anne and Stephen Hughes. Steve works for Barletta Heavy Division of Canton, MA. Victoria attended Pembroke High School where she has maintained honor roll status in mostly advanced placement and honors classes. Her SAT scores totaled 1240, and she was a member of the National Honor Society.

Victoria was co-founder and president of the Environmental Club, publicity coordinator of the Student Council, art editor of her school newspaper, and a member of the Key Club.

Outside of school, she was captain of the club volleyball team, and a member of Students for Service, a student organized group for community service.

Her guidance counselor wrote, “Victoria is a young lady who, I have no doubt, will have a future in scientific research. Her methodology in the lab reflects outstanding scientific thinking. She motivates group members and politely suggests new ways to experiment, scrutinize data, and evaluate results. She has demonstrated immense talent, unrelenting drive, and limitless abilities.”

Victoria will attend UMass Amherst where she will major in Natural Resources Conservation and Environmental Sciences.

Adam DeSanctis presented the Robert DeSanctis Memorial Scholarship to Victoria, in memory of his father.

Michael C. Livingstone Scholarship in Honor of Rick Middleton

M

(Established by J. F. White Contracting Co.)

ichael Livingstone is the son of William and Jean Livingstone. Jean works for The Driscoll Insurance Agency of Norwell, MA. Michael attended Cohasset Middle/High School where he earned a 3.83 GPA. He maintained honor roll status in all honors and advanced placement classes. His SAT scores were 760 in Math, 760 in English, 690 in Literature, and 780 in World History. He was also a member of the National Honor Society.

Michael’s extracurricular activities at school included playing football for four years, and being a member of the Cohasset wrestling team for four years, serving as captain in 2012 and 2013.

His outside activities include taking part in St. Anthony’s parish religious program for ten years, working for the Cohasset Food Pantry, he was a Cohasset Day volunteer for three years, volunteered at the Golden Living Senior Center, and took part in the American Cancer Society’s “Relay for Life”. In addition, Michael and a 100 of his friends traveled to Mingo County, West Virginia to spend nine days re-roofing homes for the Appalachia Service Project.

One of the volunteers who worked with Michael on the Appalachia service project wrote, “I worked side by side with Michael when we assisted a family who lived in a home with many roof leaks, which made living uncomfortable and unhealthy from the perspective of mold and mildew. Together we removed old roofing material, repaired rotted rafters, plywood sheeting, laid a waterproof subsurface material and began the installation of an attractive leak-proof metal roof. Michael was a tireless worker who was ready to contribute and always set a good example. He is a leader among his peers and I know he will continue to contribute to those less fortunate, perhaps all his life.”

Michael will attend Providence College where he will major in History and English.

His career objective is to become a history teacher, go to law school, and then go into politics.

Bob Lee of J. F. White Contracting Co. presented this scholarship in honor of Rick Middleton, to Michael.

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JUNE, 2013

Allison M. Mahoney Frank McCourt Memorial Scholarship

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llison Mahoney is the daughter of Tracy and Joseph Mahoney. Joe works for McGladrey of Boston, MA. Allison attended Stoneham High School where she was ranked 4th in a class of 177 students and had a GPA of 4.76. In her four years of high school, she received all “A’s” and two “B’s’” in all honors and advanced placement courses.

Her SAT scores were 640 in Math and 610 in English.

She was also a member of the National Honor Society and was a Varsity Scholar. Her extracurricular activities included being captain of her varsity field hockey team for 4 years, a member of the Student Council and Yearbook Committee, and she was a Sparc Leader, which is a mentoring group for freshmen. Outside of school, Allison is a competitive dance team member, and participated in “Relay for Life”, which raised thousands of dollars for the American Cancer Society.

Her social studies teacher wrote, “Sometimes when I’m asked to write college recommendations, I have found myself struggling to think of things to say. When asked to write a recommendation for Allison however, I knew that I would have the opposite problem—how to narrow down all of the positive things I have to say about Allison into a brief synopsis. Allison has always shined as an active participant in class discussions and projects while never dominating the discussion. Her work was consistently of superior quality, and she consistently earned some of the highest grades of all my students. She is seen as a leader and is genuinely kind and compassionate.”

Allison will attend the College of the Holy Cross where she will major in Economics and Political Science.

Matt McCourt presented the Frank McCourt Memorial Scholarship in memory of his grandfather, to Allison.

Madeleine E. O’Leary

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Robert B. Our Memorial Scholarship

adeleine O’Leary is the daughter of Tara and Walter O’Leary. Walter works for EJ of Brockton, MA. Madeleine attended Milton High School where she maintained honor roll status in all honors and advanced placement classes. Her SAT scores totaled 1230. She was also a member of the National Honor Society, the Key Club, the Irish American Club, and was president of the Latin Club. Her extracurricular activities included being captain of the indoor and outdoor track teams.

In her essay Madeleine wrote: When we are little, we are repeatedly asked the same question, ‘What do you want to be when you grow up?’ While most children in my second grade class were yelling out the words astronaut, baseball player, and ballerina, I made my tiny voice strong and I said, a ‘medicalist’. I created my own word because I wanted to be more than a doctor who would give you nasty medicine and a sticker. To me, a ‘medicalist’ referred to a person who got into you and put things back in their place.

As a child who had undergone multiple open heart surgeries before the age of five, I had experienced more than my share of doctors…my tiny dream grew with me as I went through school, and led me to enroll in every single science course my high school offered.

Through advanced placement biology, chemistry, and especially anatomy, my desire to become a surgeon continued to grow. I wanted more than hands on experience with medicine, and so I became a volunteer at Children’s Hospital in Boston.

However, I wasn’t able to interact with children on any personal level, so I became the fifth member to join the Heart2Heart Mentoring Program on the cardiac floor. As a mentor, I am able to discuss with children who have just come out, or are heading in for a cardiac procedure, the struggles I faced and the fears I held inside as I sat in the same hospital bed.”

Madeleine will attend the University of South Carolina where she will major in Biology and Pre-Med. Her career objective is to become a cardiothoracic surgeon.

John Our presented the Robert B. Our Memorial Scholarship in memory of his father, to Madeleine.

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JUNE, 2013

Jonathan Sheedy William Zoppo Memorial Scholarship

J

onathan Sheedy is the son of Francine and Christopher Sheedy. Chris works for Jay Cashman, Inc. of Quincy, MA. Jonathan attended Thayer Academy where he was an excellent student who graduated with high honors in mostly honors and advanced placement courses. His SAT scores were 800 in Math and a total of 1180 in English Reading and Writing. His achievement test scores are 690 in Math and 730 in Chemistry.

His extracurricular activities included being captain of his varsity hockey team, playing varsity baseball, and being a member of the Business Club, the Physics Club, and the Jazz Combo. Jon said that in addition to hockey and baseball, he enjoys playing chess because of the thinking and strategy that is extremely important to the game.

The head of the math department at Thayer wrote, “Jon stretched himself in his junior year pre-calculus class. He took risks in class, volunteering to explain his methods, being a part of the class discussion, and helping his classmates understand more complex ideas. Although he usually stood at the top of the class, his humility and generosity kept him grounded. Jon not only loves learning, he revels in it. Much of what he has achieved so far is through his intuition and intelligence, a skill set and recipe for success that makes him stand out among his peers.”

Jon will attend St. Anselm College where he will major in Mechanical Engineering and Physics.

David Zoppo presented the William Zoppo Memorial Scholarship in memory of his father, to Jonathan.

Ashlee B. Thomas

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Herman Snyder Memorial Scholarship

shlee Thomas is the daughter of Richard and Sonia Thomas. Sonia works for Hinckley Allen in Boston, MA. Ashlee attended the Prout school in Wakefield, RI where she was ranked 4th out of a class of 146 students. She maintained an all “A+” average throughout high school in mostly honors and advanced placement classes. She was a National Merit Scholar and an Outstanding National Achievement Program participant. Her SAT scores were 690 in Math and 710 in English, and she graduated with a 4.25 GPA. Her extracurricular activities included being a member of the indoor track team, a Student Ambassador, treasurer of the French Club, a peer tutor, a member of the Peer Ministry, and working on her school newspaper.

Outside of school, Ashlee volunteered at the Brentwood Nursing Home, The Jimmy Fund, and the Kent County YMCA. The guidance director at the Prout School wrote, “Humble, emotionally mature, insightful, inquisitive, and diligent: these are all qualities describing Ashlee. As displayed by her transcript, Ashlee is one of our top students, maintaining an A+ average in our school’s most academically rigorous curriculum. What Ashlee’s great GPA does not articulate, however, is her genuine thirst for knowledge. Her work consistently far exceeds the standard, and mirrors sophisticated analytical, critical, reflective, and creative thinking.”

Ashlee will attend Brown University where she will major in Pre-Med, Biology, and Neuroscience. Her career objective is to be a Surgeon or Medical Diagnostician.

Chuck Schaub and Richard Wayne presented the Herman Snyder Memorial Scholarship to Ashlee.

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JUNE, 2013

SAVE THE DATE Bob Benard, C. N. Wood Co., Inc. will be Honored at Mass. Highway Association’s Annual Charity Golf Tournament The Massachusetts Highway Association is honoring Bob Benard of C. N. Wood Co., Inc. at their Annual Golf Tournament for his commitment and ongoing support. The honoree selects a charity that is near and dear to him, and all of the proceeds from the tournament will be donated to that charity.

Bob has chosen “Boston Step Out: Walk to Stop Diabetes”, which is being held by the Boston Chapter of the American Diabetes Assn., as his charity. Bob’s 21 year old granddaughter, Kristen MacIver has had type 1 diabetes for over eight years and has been a tireless worker who continues to raise funds to help find a cure.

Kristen experienced issues while in middle and high school regarding the independence to take insulin injections when she needed them…not when the school could accommodate her. She hopes that by participating in the walk and highlighting the needs of diabetics, it will ensure that advocacy continues to help children with diabetes to be as independent as possible.

Kristen is currently studying nursing at Northeastern University.

We hope that you will help honor Bob for all that he has done for Mass. Highway Association by taking part in this year’s Golf Tournament.

For more information email Laura Trahan at Environmental Partners: lat@envpartners.com

Tuesday, August 20, 2013 Brookmeadow Country Club Canton, MA

Serving the Bonding and Insurance needs of the N.E. construction industry for over 40 years.

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JUNE, 2013

Navigating the 16 Mandatory Steps of Federal Affirmative Action Compliance Christina Lewis is a Partner in the Labor & Employment Law Group at Hinckley Allen, LLP.

As any contractor who has performed work for the federal government knows, federal and federally-assisted construction contracts carry myriad requirements and protocols that contractors and subcontractors must follow to be paid – and, in many cases, to avoid penalties and sanctions for noncompliance. For contracts valued at $10,000 or more, those cases include mandatory compliance with federal affirmative action requirements, which are strictly enforced by the Office of Federal Contract Compliance Programs (OFCCP), a division of the Department of Labor. Consistent with the Federal Government’s trend of heightened enforcement, the OFCCP recently has increased the frequency and intensity of its affirmative action audits. This has resulted in significantly more violations against contractors, many of which are being resolved through conciliation agreements. Federal contractors must therefore be vigilant in complying with their affirmative action obligations.

This article provides a general overview of the comprehensive and often complicated federal affirmative action requirements and offers suggestions on how best to comply with these obligations.

JUNE, 2013

Christina Lewis, Esq.

Do the Affirmative Action Requirements Apply to Me? There are three federal affirmative action mandates that apply to federal contracts. First, Executive Order 11246 (the “Executive Order”) applies to all contractors and subcontractors holding federal and federally-assisted construction contracts exceeding $10,000. The Executive Order requires certain affirmative action steps to ensure equal opportunities for minorities and women.

Second, Section 503 of the Rehabilitation Act of 1973 (“Section 503”) requires affirmative action for qualified individuals with disabilities for all federal contracts over $10,000. Section 503 also stipulates that contractors and subcontractors who hold contracts over $50,000 or who have 50 or more employees must develop and maintain a written Affirmative Action Program. Section 503 applies only to federal contracts, and not to federally-assisted ones.

Third, the Vietnam Era Veterans Readjustment Assistance Act of 1974 (“VEVRAA”) requires affirmative action for all personnel practices regarding covered veterans on contracts of $100,000 or more [1]. The law requires certain affirmative action steps for disabled continued on page 46

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Construction & Public Contracts continued from page 45 veterans, Armed Forces service medal veterans, recently separated veterans, and other protected veterans who served during a war, a campaign, or an expedition for which a campaign badge was authorized.

Covered contractors and subcontractors with 50 or more employees must develop and maintain a written VEVRAA affirmative action program. Like Section 503, this law applies to federal contracts only, and does not apply to federally-assisted contracts.

Compliance with the Affirmative Action Obligations Contractors and subcontractors must use good faith efforts to meet specific affirmative action goals.

The goal for the utilization of women under the Executive Order is 6.9% of work hours. The goal for minority utilization varies by geographic area and is published in the Federal Register and by the OFCCP. Although these goals are not treated as quotas, they serve as targets for recruitment and outreach, and the OFCCP takes the position that these goals should be attainable by applying good faith efforts.

The Executive Order regulations apply to all contracts over $10,000 and therefore must be strictly fol-

lowed in all such cases. The Executive Order regulations enumerate 16 – yes, that’s 16 – steps that contractors and subcontractors must follow to demonstrate a good faith effort to meet utilization goals.

If a contractor is audited by the OFCCP, the agency will look for evidence that the contractor has complied with all 16 steps. It is essential that contractors and subcontractors be familiar with the 16 steps and document all efforts to comply with them. Below is a summary of each step and what contractors can do to ensure compliance.

The 16 Not-So-Easy Steps for Compliance First, contractors and subcontractors must maintain a work environment free from harassment, intimidation, and coercion. To comply with this step, contractors and subcontractors must have a written sexual harassment policy with a clear complaint procedure, and the policy must be distributed to all employees. Contractors must adopt a comprehensive Equal Employment Opportunity (“EEO”) policy, and this policy should be posted in a common area at the main office and at all construction jobsites. To demonstrate compliance, contractors should have their employees sign their sexual harassment policy continued on page 47

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Fourth, contractors and subcontractors must notify the Deputy Assistant Secretary in writing if the contractor’s union has not referred a woman or minority individual back to the contractor. This step is necessary when the contractor feels that the union has impeded the company’s efforts to comply with its EEO obligations. If this occurs, the contractor should maintain copies of all correspondence and any meeting minutes in which this issue is discussed. The OFCCP is clear that a collective bargaining agreement does not excuse a contractor’s affirmative action obligations.

Fifth, contractors and subcontractors must develop on-the-job training opportunities or provide opportunities to participate in training programs that continued on page 48

Construction & Public Contracts continued from page 46

yearly, train their employees on their policies at least annually, and maintain all such training materials and a list of all individuals who attended the training. The OFCCP also encourages contractors to hold meetings to train supervisory personnel on their duty to maintain a workplace free of harassment.

Second, contractors and subcontractors must establish and maintain a current list of minority and female recruitment sources and must provide written notification to these recruitment sources when the contractor or its unions have employment opportunities available. To demonstrate compliance with this step, contractors must maintain a record of the responses received from these organizations (which THE DRISCOLL DIFFERENCE: might include Job Corps, Urban League, YWCA, National Association of Women in Construction, etc.). Contractors should keep copies of all letters sent to these organizations and any responses received. If there are telephone calls or other correspondence with these organizations, contractors should maintain a log documenting all such communications.

Third, contractors and subcontractors must maintain files containing the names, addresses, and telephone numbers of each minority or female off-the-street applicant and minority or female referral from a union, recruitment source, or community organization.

Contractors and subcontractors must document what action was taken regarding each applicant. To comply with this step, contractors should develop an “applicant flow log,” which lists the name, addresses, phone numbers, and trades of each minority or female applicant or referral and which indicates the action taken with respect to each applicant. Unionized contractors must still comply with this obligation even though they hire their workers from the union hall: If the contractor receives a minority or female off-the-street applicant, the contractor is expected to refer the applicant to the union for a referral back to the contractor.

JUNE, 2013

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continued from page 47 expressly include minorities and women. Contractors are expected to maintain records of employee participation in training programs.

Sixth, contractors have an obligation to disseminate their EEO polices internally. The EEO policy should be sent to unions, should be in all policy manuals and collective bargaining agreements, and should be publicized in any company newsletters. The EEO policy must also be posted at all jobsites and in a central location at the company’s main office. The government requires contractors to review the EEO policy with all management personnel and with all minority and female employees at least once a year.

Seventh, at least once a year, contractors and subcontractors must review EEO policies with all employees having any responsibility for hiring, assignment, layoff, termination, or other employment decisions. Contractors must maintain records that identify the time and place of these meetings, the persons who attended, and the topics covered.

Eighth, contractors must disseminate their EEO policies externally – for example, through advertising, which must include the EEO “tag line” (i.e., “this contractor is an equal opportunity employer”).

Ninth, contractors and subcontractors must direct recruitment efforts to minority and female community organizations, to schools with minority or female students, and to minority and female recruitment and training organizations. Contractors must maintain written records of contacts, which should specify the date of the contact, the person contacted, and the result. If a union is responsible for acceptance of individuals into training programs, contractors must obtain from the union a list of who was referred from the recruitment sources and who was accepted into the program. Notably, the OFCCP states that recruitment sources must be notified of training and apprenticeship opportunities one month before the company accepts applications for such programs.

Tenth, contractors and subcontractors must encourage current minority and female employees to recruit other minorities and females to work for the company. Contractors should maintain diaries or logs indicating these discussions with minority and female employees. Any audit by the OFCCP will involve an interview of the contractor’s minority and female employees to confirm compliance.

Eleventh, to the extent contractors or subcontractors use any tests or other selection criteria in their hiring procedures, these tests must not have a disparate impact on minorities and women.

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continued on page 49

JUNE, 2013

Construction & Public Contracts continued from page 48 Twelfth, at least once a year, contractors must inventory and evaluate all minority and female personnel for promotional opportunities. Contractors must keep written records of the promotional opportunities that are available and documents evidencing a review of women and minority candidate eligibility for these positions. Any internal announcements regarding promotional opportunities should state that women and minorities are encouraged to apply. Copies of all such announcements should be kept by the contractor.

Thirteenth, contractors must ensure that seniority practices, job classifications, work assignments, and other personnel practices do not have a disparate impact on minority or female employees.

Fourteenth, contractors must ensure all facilities are non-segregated, except for toilets and necessary changing facilities. All other company activities, such as parties, picnics, or trainings, should be open to and inclusive of all employees.

Fifteenth, contractors and subcontractors must maintain a record of all solicitations of offers for subcontracts from minority and female construction contractors and suppliers. To comply with this step, contractors must keep all correspondence to and from minority and female contractors. Contractors should

keep a list of subcontracts they have awarded to minority and female contractors or suppliers, and the dollar amounts involved.

Finally, the sixteenth step requires contractors and subcontractors to conduct, at least once a year, a review of all supervisors’ compliance with and performance under the company’s EEO policies. Contractors should amend their performance evaluations to include a category that rates the supervisor’s performance and knowledge of the company’s EEO policy and affirmative action obligations.

Federal contractors must comply with all 16 steps and must document all affirmative action efforts and training. Because this article is only a summary, contractors and subcontractors are strongly encouraged to consult with legal counsel in addressing questions regarding affirmative action compliance, which if not properly followed can have significant adverse consequences, including penalties and sanctions. n [1] For contracts entered into before December 1, 2003, the law applies to federal contracts valued at $25,000 or more.

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A

State to Release $21 Million for Dam, Seawall Repair or Removal

pplications will be available on August 2 for up to $21 million in grant funding from the state’s Dam and Seawall Repair or Removal Fund.

The grant funds will be split evenly among dam and seawall projects. Applications will be due by August 29.

The MMA and local officials attended public hearings on proposed regulations governing the fund held by the Executive Office of Energy and Environmental Affairs in Boston, Scituate, Springfield and Worcester on May 21 and 22.

The public comment period on the proposed regulations has been extended to June 7.

The grant program was created in response to concerns about some 3,000 dams in Massachusetts, most of which are in poor condition and some of which pose a threat to public safety. The dams also affect aquatic health by blocking fish passage, slowing stream flow, raising the temperature of water, and holding back contaminants, according to the Division of Ecological Restoration.

State officials estimate that 85% of the state’s dams no longer serve their original purpose. Removing unsafe and obsolete dams rids their owners of liability as well as insurance and maintenance costs, while reducing risks to public safety from flooding and enabling freshwater wildlife and plants to thrive.

A 2011 report by former State Auditor Joseph DeNucci identified 100 municipally owned dams in 62 communities that were rated in unsafe or poor condition. The report estimated that $60 million would be needed just to repair highhazard municipally owned dams.

JUNE, 2013

Seawalls along the state’s 1,700 miles of coastline are also deteriorating, particularly after a series of major coastal storms in recent years. A 2009 report by the Department of Conservation and Recreation found that 85% of coastal protection structures are beyond their expected lifespan of 50 years and have never seen major repairs.

At the MMA’s Annual Business Meeting in January, members unanimously supported a resolution that, among other things, called on the state to enact a dam removal and repair bill.

The MMA is a participant in the Massachusetts Dam Safety Alliance, which includes the American Council of Engineering Companies of Massachusetts, the Boston Society for Civil Engineers, the Massachusetts Association of Conservation Commissions, Mass Audubon, the Massachusetts Organization of Scientists and Engineers, the Massachusetts Rivers Alliance, and the Massachusetts Water Works Association. continued on page 52

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MMA continued from page 51

Greater New Bedford Refuse District Pursues Waste-to-Energy Project

T

he Greater New Bedford Refuse District and a local energy company, backed by $400,000 in state grants, are planning to set up a largescale program that will divert food waste and other organic matter from the local landfill and convert it to energy.

terials would be delivered to the plant in a liquefied form and placed in a storage tank before entering the digester.

The food and other organic waste, such as sewer sludge, will be converted to energy using a process called anaerobic digestion.

The remaining waste product, known as digestate, could be introduced into the portion of the landfill that is already capped, as a means of speeding up the process by which methane gas is produced, Alfonse said.

The Clean Energy Results Program grants were obtained a few months before the Department of Environmental Protection issued a solid waste master plan that aims to reduce the waste stream in Massachusetts by 30% by 2020. To achieve that goal, state officials are counting on the diversion of sizable amounts of food waste to anaerobic digestion and other options.

The Crapo Hill landfill, which has been in operation since 1995, receives waste from New Bedford and neighboring Dartmouth, as well as commercial solid waste brought in by various haulers.

Commonwealth Resources Management, which already manages a small landfill-to-gas plant at the landfill, would significantly expand its gasification process, according to Scott Alfonse, executive director of the Greater New Bedford Refuse District.

The waste stream that would be converted to energy would include fats, oils, grease, and other food wastes as well as sludge from wastewater treatment plants, according to Alfonse. Those ma-

“With a heat source, it is digested, and as it is digested, that gas builds up,” eventually being used as a power source, Alfonse said.

The pilot phase of the project, which will be reviewed by the Department of Environmental Protection, is expected to get under way at some point next year, according to Alfonse.

“The goal is to keep the capacity we have for as long as we can for those wastes that have no other way of being managed – they can’t be recycled, they can’t be composted, they can’t be digested,” Alfonse said.

Dartmouth Executive Administrator David Cressman also emphasized the importance of extending the landfill’s life. He noted that Dartmouth is home to several large institutions, including a campus of the University of Massachusetts and the Bristol County House of Corrections, that generate large amounts of food waste.

For more information, contact Scott Alfonse at (508) 763-5924.

Written by MMA Associate Editor Mitch Evich. n

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JUNE, 2013

John E. Merchant, CPA

Cullen, Murphy & Co., P.C.

IN THIS ISSUE • Diversify 529 Accounts • Maximizing Medical Deductions • Getting Started on a Succession Plan

Smart Tax, Business & Planning Ideas from

T

Diversify 529 Accounts Diversify 529 Accounts

otal college savings assets in 529 accounts reached $168.5 billion by the end of 2012, up 16.7% for the year, reports Financial Research Corp.

(FRC), Boston. Parents increasingly use these plans to fund future college costs because of the tax advantages. Any investment earnings inside the plan are untaxed, and withdrawals also are untaxed if the money is spent on higher education.

Most 529 assets are held in so-called “age-based” accounts. Generally, these accounts emphasize stocks for young beneficiaries. As the student grows older, closer to college age, age-based plans reduce their allocation to stocks and increase holdings of bonds. This method decreases the chance of a steep loss when the 529 beneficiary goes to college and payments are due.

Action Plans Age-based 529 accounts offer benefits, especially for parents who prefer to let professionals handle the asset mix in their college fund. However, if you are willing to take a more active role, you might be able to squeeze more tax savings juice out of the 529 orange.

One way to do this is to invest in multiple 529

JUNE, 2013

Action plans

Age-based 529 accoun especially for parents w professionals handle th their college fund. How willing to take a more might be able to squee juice out of the 529 or One way to do this multiple 529 plans. Yo among the plans offere state. With each plan y different investment st Example 1: Ron an plans. You can choose among the Total college savings assets in 529plans offered wantby to invest $10,000 nearly every state.

With$168.5 each plan choose,Kevin’ use a accounts reached billionyou by the s college fund. Th different end investment strategy. of 2012, up 16.7% for the year, a year in state A’s 529 p reports1: Financial Research Corp.

(FRC), Example Ron and Sarah Parker wantmoney to in-into a stock fun Boston.

Parents increasingly use these invest vest $10,000 a year in their son Kevin’s college fund.$4,000 a year in plans$6,000 to fund afuture costsA’s because using a bond fund ther They invest yearcollege in state 529 plan, putof the tax advantages.

Any investment After ting the money into a stock fund; the Parkers also doing this for earningsa inside plan areB’s untaxed, Parkers invest $4,000 year the in state 529 plan, using a have $110,000 and withdrawals also are untaxed if the fund and $60,000 in s bond fund there. money is spent on higher education.

Kevin will go to colleg After doing thisassets for 12 the ParkersParkers have want to take $ Most 529 are years, held in so-called $110,000“age-based” in state A’s stock fund and $60,000 in state accounts. Generally, these 529 plans. For tax effic B’s bondaccounts fund. Kevin will go to college andcome from Kev emphasize stocks for youngthis year, should the Parkers want to take $15,000 from his 529 plans. beneficiaries. As the student grows older, account, which has the For tax efficiency, all $15,000 should come from Kevcloser to college age, age-based plans That account has more in’s statereduce A 529 account, which has the stock martheir allocation to stocks and withdrawals from that ket gain.increase That account more takingprofits into unta holdings ofhas bonds.

Thisgrowth, method so paper decreases of a steep whenprofits for into college costs. withdrawals from the thatchance account turnsloss paper the 529 beneficiary goes to college and Example 2: Assum untaxed earnings used for college costs. payments are due. example 1, except that continued on page 55

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Financial Management continued from page 53 Example 2: Assume the same facts as example 1, except that Kevin is still too young for college.

Instead, suppose that the Parkers need $15,000 in cash to meet a medical emergency. They decide that the best available source is Kevin’s 529 money. In this situation, they should tap the lower-growth state B bond fund.

With a total value of $60,000 that includes $12,000 of earnings, the earnings ratio is only 12/60, or 20%. On a $15,000 distribution, for expenses other than higher education, only 20% ($3,000) will be a taxable distribution. When you withdraw 529 funds for purposes other than higher education, you’ll owe ordinary income tax plus a 10% penalty for nonqualified withdrawals. If the Parkers are in a 25% tax bracket, they’ll owe a total of 35% (including the 10% penalty) on the $3,000 taxable distribution. Thus, they can withdraw $15,000 from Kevin’s 529 bond account, in this example, and owe only $1,050 in tax.

Fine Points

Trusted Advice Countable Costs • No tax is due on a distribution from a qualified tuition program, also called a “529 plan,” unless the amount distributed is greater than the beneficiary's adjusted qualified education expenses, which are the beneficiary’s qualified education expenses less any tax- free educational assistance.

• To be qualified education expenses, expenses for tuition, fees, books, supplies, and equipment must be required for enrollment or attendance at an eligible educational institution.

• Virtually all accredited public, nonprofit, and proprietary postsecondary educational institutions will qualify.

• For room and board expenses to be qualified education expenses, the student must be enrolled for at least half the full-time academic workload for the course of study he or she is pursuing.

Regardless of how many 529 plans you use, you should begin by evaluating your own state’s plan.

Many states offer residents a tax break for contributing to their plan; contributions may be deductible for state income tax, although annual ceilings might apply.

In addition, when you withdraw Water Works Specialists money from a 529 plan to pay for college, be sure the distributions Water - Sewer - Drain Supplies and outlays match up within a calat a Competitive Price “Our Products Are Some endar year. Otherwise, you may of the Most Trusted owe tax and a 10% penalty.

Waterworks Supplies Names in the Industry” Example 3: Assume again Sanitary Sewer Supplies 24 Hour that Kevin Parker goes to college Storm Sewer Supplies Sales & Service Safety Equipment & Tools this year. His parents withdraw Serving $15,000 from a 529 plan in 2013, Mechanical Piping all of but spend only $10,000 on Kevin’s Tapping Sleeves & Gate Installed/Cut New England higher education this year.

Line Stops In such a situation, the IRS will Cutting Chilled Water Lines & Steam Lines treat $5,000 of the Parkers’ 2013 Pressure Testing & Disinfection of New Mains distribution as a nonqualified withInstallation & Testing of Back Flow Preventors drawal and tax the withdrawn earnLarge Diameter Hydraulic Pipe Cutting ings at the Parkers’ ordinary income Hydrant Installation & Repair tax rate, plus a 10% penalty. Even if the Parkers spend another $5,000 on Kevin’s college costs in 2014 without taking a further withdrawal, the $5,000 nonqualified withdrawal from 2013 will still be taxed. continued on page 56

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Financial Management continued from page 55

Maximizing Medical Deductions

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nder federal health insurance legislation, you’ll probably find it more difficult to claim medical expenses as itemized deductions on Schedule A of your tax return, beginning in 2013. (See the November 2012 Financial Management.) You’ll get deductions only for expenses that exceed 10% of your adjusted gross income (AGI), up from 7.5% in prior years. (Through 2016, the threshold will remain at 7.5% of AGI if you or your spouse is age 65 or older at the close of the tax year.)

You cannot include medical expenses that were paid by insurance companies or other sources. This is true whether the payments were made directly to you, the person receiving the medical services (that is, your spouse or dependent), or to the provider of the medical services.

Example 1: Joel Gordon, age 45, has AGI of $100,000 in 2013 and $12,000 of unreimbursed medical expenses. The 10% threshold for Joel is $10,000, so he can deduct $2,000 of his medical bills. Under prior law, his 7.5% threshold would have been $7,500, and Joel could have claimed $4,500 in medical deductions.

The 10% Solution Even with a higher threshold, you shouldn’t give up on deducting medical expenses. Good recordkeeping and a knowledge of the rules can help you go over the 10% level in some years. In particular, you should be sure to track items, such as the following: Health insurance premiums. Even if you’re covered by an employer plan at work, you probably are contributing to the cost of your insurance. Many employers require some form of cost sharing, and employees’ share of the total has been increasing. If your contributions are withheld from your paychecks and are paid with your own after-tax dollars, don’t forget to include those amounts in your total outlays.

(Note that many people have pre-tax dollars withheld, in which case they are not deductible.) continued on page 57

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Financial Management continued from page 56

Dependents’ costs. You can include medical costs you pay for yourself and your spouse.

You also can count the medical costs you incur for someone who was your dependent either at the time the medical services were provided or at the time you paid the bill. The person must be either a “qualifying child” or a “qualifying relative,” generally someone who depends on you for the necessities of life. The specific definitions are complex; our office can help you determine whether someone is a dependent for purposes of the medical expense deduction.

Transportation. You can include in your medical expenses outlays for transportation that was primarily for, and essential to, medical care. Such travel can be by bus, taxi, train, or plane. When you’re taking a child for needed medical care, count those costs as well.

In addition, you can include your actual out-ofpocket for medical trips by car, such as gas and oil.

As an alternative, you can calculate the deductible transportation expense amount by adding up the number of miles you travel for medical reasons and multiplying the total miles by the standard medical mileage rate, which is 24 cents a mile in 2013.

You can add parking fees and tolls to your medical expenses, whether you use actual expenses or the standard mileage rate. Medical travel doesn’t include commuting to and from work or travel for the general improvement of your health.

p you deduct es. s. You can you pay for ouse. You also al costs you ho was your he time the e provided or at e bill. The person lifying child” ve,” generally ds on you for doctor, Seniors areprescribing likely to bethe in equipment a similar situation reThe specific garding Medicare, the federal government’s health or home improvement to treat a ex; our office can insurance program that mainly covers individuals 65 whether someone specific medical condition. IRS and older.

You can include the premiums you pay examples include access ramps, rposes of the for Medicare B (medical costs) and Part D (prewider Part doorways, and elevators, but uction. scriptionit’sdrugs).

Often, the government also possible to get deductionstakes those u can include costs from your Social Security checks, so you might for a swimming pool or central air ses outlays fornot realize you’ve paid them. Medicare Part B costs conditioning, if you proceed correctly. as primarily for, over $1,200 a year, so you should be sure to count The cost of permanent improvements cal care. Such the money withheld from Social Security for such may be included as a medical expense, axi, train, or plane. premiums. but you to must reduce the deduction child for needed In addition ordinary health insurance, you also by any increase in the home’ s value. care inose costs as well. can include premiums you pay for long-term If the improvement does not increase n include your surance (subject to age-based limits), dental insurthe value of your home, the entire for medical ance, and contact lens coverage in the medical outof the improvement can beon Schedule A. report as itemized deductions as and oil. Aslays youcost On the House deducted as a medical expense. n calculate the Instead of deducting health insurance premiAmounts you pay for special equipment inExample 2: Lynn Johnson has A, if you tion expenseums as itemized deductions on Schedule stalled in your home, or for home improvements, a severe formaofpartner arthritis, her the number are of self-employed, in and a partnership, or a can be included if the main purpose is medical care doctor her to swim regularly more than 2% tells shareholder of an S corporation, you edical reasons for you, your spouse, or a dependent. To justify the deduct insurance regain heryour rangehealth of motion.

Lynnpremiums, deduction, you should have a written recommenotal miles by not the onlytocan you can take the deduction “above the line” on page decides to install a pool in her home. dation from a doctor, prescribing the equipment or eage rate, which 1 of your tax return.

There is no AGI threshold for home improvement to treat a specific medical conLynn begins by having her 013. You can add these deductions; in fact, your self-employed health dition. IRS examples include access ramps, wider house appraised. After her home to your medical insurance deductions reduce your AGI, which may doorways, and elevators, but it’s also possible to pool has been installed, Lynn gets u use actual help you deduct other medical expenses. continued on page 58 another appraisal. She can claim the ard mileage difference between the amount she oesn’t include om work or travel has spent and the increase in her home’s value as a medical deduction. vement of your Say Lynn spends $40,000 installing her pool. The beforeand-after her we are offering a special UCANE As a wayappraisals of sayingindicate thank you home’ s value went from $350,000 r special members discount on new Website & Social Media projects. to $375,000 as a result of the n your home, improvement. Thus, Lynn spent ments, can $40,000, and her house appreciatedWalter Osterman, President in purpose direct line 561.301.3150 by $25,000. She can claim the u, your har ness o f t h e i n t er n e ing the force t $15,000 difference as a medical www.SocialMavens.com nt. To justify expense, which may allow her to take hould have a an itemized medical deduction. g tion from a

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Financial Management continued from page 57

Did You Know?

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ead of the Class: Among 529 college savings plans, Virginia’s CollegeAmerica Plan is by far the largest, with over $35 billion in assets and a 21% market share. New York’s 529 College Savings Program, Direct Plan, is in second place with a 7.1% share.

Source: Financial Research Corp. (FRC)

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get deductions for a swimming pool or central air conditioning, if you proceed correctly. The cost of permanent improvements may be included as a medical expense, but you must reduce the deduction by any increase in the home’s value.

If the improvement does not increase the value of your home, the entire cost of the improvement can be deducted as a medical expense.

Example 2: Lynn Johnson has a severe form of arthritis, and her doctor tells her to swim regularly to regain her range of motion. Lynn decides to install a pool in her home.

Lynn begins by having her house appraised. After her home pool has been installed, Lynn gets another appraisal. She can claim the difference between the amount she has spent and the increase in her home’s value as a medical deduction.

Say Lynn spends $40,000 installing her pool.

The before-and-after appraisals indicate her home’s value went from $350,000 to $375,000 as a result of the improvement. Thus, Lynn spent $40,000, and her house appreciated by $25,000. She can claim the $15,000 difference as a medical expense, which may allow her to take an itemized medical deduction. continued on page 59

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Financial Management continued from page 58

A

Getting Started on a Succession Plan

s a successful business owner, you still may reach a point where life’s realities are at odds with your career. Your health might decline, making it more difficult to keep up the pace, or you may just be tired of working so hard and decide to step aside.

Whatever the reason, you probably plan to sell your business and use the proceeds to help finance your retirement.

However, waiting until the last minute can be a trap. If you are eager to sell and move on with your life, you’ll be in a poor position to negotiate terms with prospective buyers.

Realize Reality Your chances of selling your company for its full value will increase if you develop a succession plan, and such a plan will be more effective if you begin years before an anticipated sale. A viable succession plan has many moving parts, but one way to start is to get a reasonable idea of what your company is worth.

You may have heard that another company in your industry was sold for a certain price or that businesses in your industry sell for X times net operating income. Thus, you have an idea of what a buyer would pay for your company. Your expectations, though, may prove to be inaccurate. In most cases, buyers will look at your company as a unique collection of products, services, customers, and employees, and they will make an offer based on their estimate of future profitability.

Consequently, you should have your company valued by a knowledgeable appraiser, ideally a few years before putting it up for sale. Look for someone experienced in appraising companies in your industry. You’ll probably have to pay several thousands of dollars for such a valuation, but you’ll know what you reasonably can expect to receive, and you might get ideas about how you can make your company more attractive to bidders.

be taking over your company. Will the new owner antagonize long-term employees or customers? If the deal calls for a buyout over time, will the new owner keep the company healthy enough to make the ongoing payments to you?

Such considerations may lead you to choose your successor as part of your succession plan. Your first thought might be a relative, assuming that person is capable and enthusiastic about taking over.

Keeping your business in the family may not be possible, though.

You may consider a current employee. Promoting from within can ensure that your successor already is familiar with your company’s staff, customers, and suppliers.

If you don’t already have a relative or current employee in mind, you can hire someone to groom for an eventual buyout. Whatever path you choose, it is best to start planning early.

Reprinted from CPA Client Bulletin. n

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