region's business 31 january 2013

ENTERPRISE AWARDS FINALISTS NAMEDTHE PENSION BOMB IS ABOUT TO HIT

A JOURNAL OF BUSINESS AND POLITICSPHILADELPHIA EDITION JANUARY 31, 2013

PENSION REFORM LIKELY TO TARGET CURRENT EMPLOYEES

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

REGION’S BUSINESS

APARTMENT BUILDING NOW A MANSION

RegionsBusiness.com

$2.00 U.S.

ETHE MOVE TO LIMIT CORRUPTION IN THE

COURTSYOU CAN’T OUTSOURCE YOUR LIABILITY ON BACKGROUND CHECKS

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3REGIONSBUSINESS.COM

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

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PRESIDENT AND PUBLISHER James D. McDonaldEDITORIAL DIRECTOR Karl M. SmithASSOCIATE EDITOR Terrence CaseyCONTENT TEAM Brandon BakerCONTRIBUTORS Elissa Vallano, Don LeeADVERTISING DIRECTOR Larry SmallacombeDIRECTOR OF BUSINESS DEVELOPMENT Jim Bauer

REGION’S BUSINESS

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

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30

25

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

28

31 JANUARY 2013

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

18Tax Reform Aimed at Family Businesses ! A proposal in Harrisburg would make it easier to hand down the family business.

CONTENTS

22

Complex Picturefor Top Court! With one justice facingprison time and anotherseeking retention, despite thefact that he would facemandatory retirement in amatter of months,the makeup ofPennsylvania’sSupreme Courtwill soon change.

Taking Money Offthe Judicial Scales! A proposed bill would eliminateelections for the judges onPennsylvania’s top three courts.

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

172013: YEAR OF THE INNOVATOR

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

4 REGIONSBUSINESS.COM31 JANUARY 2013

Karl Smith is the Editorial Director for Region’s Business. You can contact him at [email protected].

How many times have I looked at something and said, “I never would have thought of that”?

Plenty, of course.So when I saw a story about

lawsuits being filed against Sub-way because their footlong sand-wiches weren’t, well, a foot long, the first thing that came to mind was, “I would have never thought to measure my sandwich.”

It started when an Australian teen took a picture of a Subway sandwich alongside a tape mea-sure that clearly indicated that the sandwich was not a foot long. Posted to Facebook, it went viral - more than 117,000 likes, more than 2,700 shares and more than 5,100 comments.

If you’re Subway, or even a Sub-way franchise owner, this would all be bad enough in terms of PR,

but that wasn’t the end of it.Lawsuits were filed. That’s

lawsuits as in plural. Then came word a lawyer was crafting a class action lawsuit.

It took a while (more than a week, in fact), but Subway eventually stepped up and said it would make sure all of the foot-long sandwiches were, in fact, 12 full inches of sandwich.

The curmudgeons roll their eyes and wonder why this teen made such a big deal out of it.

After all, a little math shows that a footlong Subway sandwich coming up an inch short costs you about 42 cents, not exactly a king’s ransom.

But if you’re a regular, that can add up, especially over the course of a few years. If you had a teen who ate at Subway once a

month through high school, the kid would end up spending about $20 too much. And multiply that across a graduating class of, say, 500 kids and you’ve got $10,000. Now just consider there are 501 public school districts in Pennsyl-vania and suddenly you’re talking about real money.

Other companies should take heed, because there’s plenty to be learned out of this one.

The first lesson for Subway is simple - give people what they pay for. If you advertise a “foot-long” sub and people pay for a “footlong” sub, they should get a sub that is a foot long.

There will be times when you can’t agree with your customer on how things are measured. Was it good customer service? Did the job get done in a timely man-

ner? Was the person serving you friendly enough?

But when things are black and white - size, weight, deadlines, price - it’s a simple yes or no.

The second lesson is clear - you cannot ignore social media. That’s evident to most people now, but this should hammer it home for any doubters. The Australian teen did not set out to bring a major corporation to its knees. He merely expressed himself on Facebook. The results were unintended consequences.

In the end, customers usu-ally aren’t asking for much, they merely want what they pay for - a simple, honest exchange.

Coming up short - even a little bit, an inch in this case - should never happen.

Lesson From Subway: Measure Up Or Else

EDITOR’SDESK

5REGIONSBUSINESS.COM31 JANUARY 2013

WEEKLY BRIEFING

BY THE NUMBERS

NHL Lockout Hurts NBC Sports Network

58,000Average number of homes

that tuned into the NBC Sports Network during

prime time in December, according to Nielsen

158,000Average number of homes

that tuned into the NBC Sports Network during

prime time in December 2011

80MHomes with access to the

NBC Sports Network

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Lottery Tops $1B in Revenue

$1.06BPennsylvania Lottery

net revenue in FY 2012, according to the Department

of Revenue

$955MPennsylvania Lottery

net revenue in FY 2011

$3.48BTotal game sales in FY 2012

$2.36BTotal cost of sales in FY

2012

Union Approves Deal With Papers

An estimated 98 percent of Teamsters members voted in favor of a two-year labor contract with The Inquirer and Philadel-phia Daily News, union head John Laigale told the Inquirer early this week.

Under the deal, full-time jobs are protected and buyouts were o!ered to union members, the Inquirer reported.

Local 628 is comprised of about 300 members who drive trucks and patrol company buildings.

McCord Could Refuse Payment to Camelot

Pennsylvania Treasurer Rob McCord said he is considering withholding pay-ments to Camelot Global Services even if the attorney general’s o"ce approves the privatization of the daily operations of the Pennsylvania Lottery.

PENNSYLVANIA LOTTERY

MEDIA

Budget Chief: Pension Reform Likely To Target Future Benefits

BY ERIC BOEHM

HARRISBURG — Facing nearly $1 bil-lion in new pension costs in the next two years, Pennsylvania appears to be inching toward reforming retirement benefits for state employees and public school teach-ers.

Monday, Budget Secretary Charles Zog-by o!ered a preview of how the Corbett administration plans to deal with Penn-sylvania’s $40 billion unfunded pension debt and rising annual costs.

Part of the plan would target future ben-efits of current employees while keeping previously earned benefits and benefits for retirees in place, Mr. Zogby said during an appearance at the Pennsylvania Press Club luncheon.

“We’re not looking to take back what anyone has already earned,” Mr. Zogby said. “But for teachers and school employ-ees, there may well be proposed changes to your pension benefits going forward.”

It will be another week before we know how the numbers add up, and the possible savings. Gov. Tom Corbett is scheduled to give his annual budget address February 5.

Mr. Zogby said Corbett “very likely” will lay out a plan to achieve savings by reduc-ing how future benefits are calculated.

Failing to reform the state’s pensions is essential to avoiding “deep, immediate and painful cuts” in the state budget both this year and in the future, Mr. Zogby said.

Pension costs will skyrocket from $1.1 billion this year to $2.9 bil-lion by the fiscal year beginning July 2016, according to projec-tions from the state’s Independent Fiscal O"ce.

Unions are opposed to any reduction in benefits for current employees, even those benefits that are yet to be earned.

William Dando, director of the political and leg-islative department for AFSCME Council 13, which represents more than 65,000 state employees, said pen-sion benefits should be locked in from the time an employee is hired

until they stop receiving benefits at death.If the state does go after future benefits

for current employees, the union would see grounds for a lawsuit, he said.

“It’s going to all depend on what the governor lays out on Tuesday,” Mr. Dando said.

But Dave Patti, president and CEO of the Pennsylvania Business Council, said arrangements between employees and employers is always subject to change — at least they should be.

In the early 2000s the state increased benefits for public sector workers — part of the cause of the current pension crisis

— so it should also be able to ratchet back future benefits for new hires and existing employees, Mr. Patti said.

“I don’t think it only goes in one direc-tion,” he said.

Since the bulk of pension cost increases this year — about 70 percent of the $511 million increase due in the new fiscal year that begins July 1 — are in the pub-lic school teacher’s pension system, Mr. Zogby said it makes sense to tie savings in those pension costs to higher funding for school districts..

— PaIndependent

RIGHT NOW I CERTAINLY AM TAKING

A LOOK AT THIS WITH INCREASING CONCERN.’—PENNSYLVANIA TREASURER ROB MCCORD

UGI Fined $500,000 for 2011 Explosion

The Pennsylvania Public Utility Com-mission fined UGI Utilities $500,000 last week for a 2011 natural gas explosion that killed five people and destroyed half of a block, the Allentown Morning Call reported

UGI, the state’s largest gas utility, was originally fined less than $400,000. The utility was given five days to accept or reject the fine.

If UGI does nothing, the order will be made final, according to the Morning Call report.

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WEEKLY BRIEFING

REAL ESTATE

Region’s House Prices Drop

4.2%Average decrease of house prices in Philadelphia since

last quarter, according to an Econsult Solutions report

0.4%Increase in house prices

from a year ago

3,164Arms-length sales of single-

family homes this quarter

3.7%Decrease in sales of single-

family homes from last quarter

13.4%Increase in sales of single-family homes from last year

$88Median price per square

foot

307Sales in the most expensive category (more than $200

per square foot)

33Homes valued at more than

$1 million sold

13Homes valued at more than

$1 million sold a year ago

PennDOT Orders Comprehensive Bridge Assessment

County and municipal planning departments across the state have been ordered by the Pennsylvania Department of Transportation to rate the condition of small bridges.

PennDOT keeps an inventory of about 12,000 bridges that are longer than 20 feet. Bridges smaller than that are cur-rently undocumented.

Needed improvements to smaller bridges must be identified and funded by counties and municipalities, accord-ing to PennDOT.

SEPTA Moving Forward With Silverliner VI Cars

SEPTA met last week with 12 manu-facturing companies to begin replacing 231 Silverliner IV cars, even though it is still waiting for some Silverliner V cars, the Philadelphia Inquirer reported.

The newest train cars, expected to cost $3 million each, will replace cars that are almost 40 years old.

PLCB CEO Conti Rehired Temporarily

Pennsylvania Liquor Control Board CEO Joe Conti announced last week that he would be retiring from his role this week. But then Governor Tom Corbett, who has publicly stated that he opposes the position entirely, signed o! on the rehiring of Mr. Conti as a temporary employee.

Mr. Conti will make more than $80 per hour and will collect his pension on top of that rate. He will retain the job for up to 95 days.

LIQUOR CONTROL BOARD

TRANSPORTATION

Midtown Village Residential Tower Clears Legal Hurdle

BY ISAAC RIDDLE

Plans to build a 26-story mixed-use residential tower with hotel and ground-floor retail on the 1200

block of Walnut Street in the Midtown Village-Gayborhood section of Washing-ton Square West have cleared a major legal hurdle.

An appeal of the zoning/use permit issued to the developers last August has been denied, meaning that the project can now move forward.

The project is being developed by U3 Ventures and is designed by New York- and Mexico City-based architectural firm TEN Arquitectos.

The original proposal for the site called for a 30-story structure that combined 299 residential units and 152 hotel rooms with ground floor retail.

The project has been informally called “Fergie’s Tower” due to the presence of the popular Fergie’s Pub on the Sansom Street side of the lot.

U3 Ventures first received approval for the project in 2009. After concerns about the height restrictions were resolved, by 2011 it appeared the project was back on track.

The current proposal calls for 26 floors instead of the original 30 but will still be a mix of residential and hotel units with ground floor retail.

According to the developer, site work has already been completed. The lot that stretched from 1213 to 1219 Walnut has been consolidated after a vacant building

at 1213 that had housed the Jewish Fed-eration of Greater Philadelphia’s thrift shop was demolished in 2011.

The project received a zoning variance that eliminated parking requirements for the building. The developers noted that the neighborhood has plenty of nearby parking structures for residences.

“Fergie’s Tower” is one of many projects in the neighborhood that have experienced strong opposition from some neighbors. A proposed upscale pool hall called 1200 Bank, at the former Beneficial Bank build-ing at 12th and Chestnut streets, received strong opposition from neighbors of the adjacent White Building condominiums.

This post originally appeared on the Philadelphia Real Estate Blog

(philadelphiarealestate.com)

TEN ARQUITECTOS

DEVELOPMENT

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

The parish house for the Philadelphia Episcopal Cathedral PHILADELPHIAREALESTATE.COM


WEEKLYBRIEFING

RETAIL

Philadelphia’s Top Luxury Retailers

Per Lei 2 E. State St., Media

Sophy Curson122 S 19th St, Philadelphia

Nicole Miller Philadelphia 200 S. Broad St., Philadelphia

Frank Agostino840 W. Lancaster Ave., Bryn Mawr

Burberry1705 Walnut Street, Philadelphia

Tiffany & Co.1414 Walnut Street, Philadelphia

Joan Shepp1616 Walnut St.,Philadelphia

Adresse1706 Locust St., Philadelphia

Boyds1818 Chestnut St., Philadelphia

Barneys New York Co-Op Philadelphia1811 Walnut St., Philadelphia

Lagos Fine Jewelry1735 Walnut St., Philadelphia

Saks Fifth Avenue2 Bala Plaza, Bala Cynwyd

Barbour1517 Walnut St., Philadelphia

Knit Wit1718 Walnut St., Philadelphia

Commonwealth Proper1732 Spruce St., Philadelphia

RACKED.COM

Maryland Defense Contractor Moving Staff To Lansdale

British defense contractor Cobham plc will lay o! 138 employees and close two Maryland locations and move operations to Lansdale, Pa., The Baltimore Sun reported this week.

About 70 of the cut positions will be relocated to the Lansdale site, the com-pany announced.

“It is with genuine disappointment that Cobham must take these actions due to the contraction of the US defense market for our products,” the company said in a statement.

MANUFACTURING

Corbett Unveils PLCB Plan, GOP Leaders Mull Alternatives

Governor Tom Corbett laid out his plan for privatization of sales of liquor and wine in Pennsylvania during a press conference Wednesday afternoon.

The move will give consumers in the Commonwealth a choice “virtually every other American has today,” the governor said in his opening remarks.

Over a four-year transition to privati-zation, 1,200 retail licenses for wine and spirits will be auctioned o! by counties.

Businesses eligible for application include grocery stores, convenience stores, pharmacies, large retailers and beer dis-tributors.

As in other states, Pennsylvanians would be able to purchase beer, liquor and wine in one store, the governor said.

Selling the necessary licenses will allow the state to make a $1 billion investment in public education, focusing on safety, early learning, science and technology programs and individualized learning.

Senate President Pro Tempore Joe Scarnati, R-Jefferson, said before the announcement that he would be willing to hear privatization proposals to sell o! the state liquor system, but he supports legislation that would change how the Pennsylvania Liquor Control Board does business, ultimately allowing it to make more money.

For several years Senate Republicans have pushed for “modernization” plans making the state system more convenient to consumers — and profi table for the state.

“I think we can put a couple trains on the track and continue to work through this,” Sen. Scarnati said.

Modernization reforms, involving changes to pricing, hiring and retail oper-ation, could make the state $75 million to $100 million annually, according to Sen. Scarnati, who said that money could fl ow to the state budget. The LCB brought in more than $1.5 billion in sales in fi scal 2010-11, $105 million of which went to the state’s general fund. But the state would still control the system.

Speaker of the House Sam Smith, R-Je! erson, said he envisions Pennsylva-nia considering a hybrid plan that allows some private sales, such as beer in grocery stores, or allowing beer distributors to buy licenses to sell wine while keeping spirits under state control.

“It seems to me, logically, that here what we might end up with is a hybrid where you’re succeeding in providing private opportunities but not exactly abolishing the system as we know it,” he said.

Pennsylvania Independent contrib-uted to this report.

DEP Receives $7.25M, Revives Solar Program

ENERGY

Cobham plc’s Lansdale facility SUBMITTED

The Department of Environmen-tal Protection announced it received $7.25 million from the Common-wealth Financing Authority to com-plete the agency’s Sunshine Solar Program.

The program had been in a waiting-list phase since August 2011 because the demand exceeded available funds.

“This additional funding will go a long way to help fund solar projects for homeowners and small businesses across Pennsylvania,” DEP Secretary Mike Krancer said. “The funding is enough to provide rebates for all projects currently on the waiting list and...400 additional installations.”

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

—GOVERNOR TOM CORBETT


WEEKLYBRIEFING

EDUCATION

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

Proposed City Casino Receives 9 Pct. Investment

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PHL Local Gaming, LLC, one of six bidders for the available casino management license in Philadelphia, announced busi-ness leader Dr. Walter Lomax Jr., together with his family, has committed to make a signifi cant investment in the South Phila-delphia-based gaming company at a level that, as presently con-stituted, would equal about 9 percent of the total equity in the venture.

It was also disclosed that the Lomax family will, along with other investors, have the oppor-tunity to make additional equity investments in PHL Local Gaming LLC, up to a total of $40 million, over time. As part of the Lomax investment, Dr. Lomax will become a member

of PHL Local Gaming’s Board of Managers.

While other investors may, eventually, be invited to par-ticipate as stakeholders, it has been determined that Joseph G. Procacci, who conceived the PHL concept, and who serves as the company’s CEO, will always retain 60 percent of the gaming entity’s equity.

Commenting on the Lomax investment, Mr. Procacci said:

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

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

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

GAMING

IN ADDITION TO CAPITAL, THEY BRING PROVEN BUSINESS ACUMEN.’

—JOSEPH PROCACCI,

CEO OF PHL LOCAL GAMING


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WEEKLYBRIEFING

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RESTAURANT ROUNDUP

15ANDWALNUT.COM

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

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Venturing Into Capital InvestingIn his classic bestseller Venture

Capital Handbook, leading venture capitalist David Gladstone showed

companies how to get funding and work with early stage inves-tors.

In his revision of the classic, Venture Capital Investing, he looks at venture capital through the eyes of the investor.

Mr. Glad-stone shows VC investors and angels exactly how to weed through scores of business proposals and find the gem that will deliver outstanding returns, especially in soft economic times.

companies how to get funding and work with early stage inves-tors.

In his revision of the classic, Venture Capital Investing, he looks at venture capital through the eyes of the

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Investment index manager MSCI Inc., announced it has entered into a definitive agreement to acquire Wayne, Pa.-based investment software company InvestorForce Holdings, Inc., from ICG Group, Inc., of Rad-nor, Pa., for a total of $23.5 million.

The transaction is expected to close in the first quarter of 2013, subject to customary closing con-ditions.

“We believe the combination of MSCI and InvestorForce presents a unique opportunity to strengthen the network between asset owners, investment consultants and managers around the world,” said Henry Fernandez, Chair-man and CEO, MSCI Inc.

“This acquisition enhances MSCI’s position as a leader in performance analysis and risk transparency and fur-thers our goal of providing investment

decision support tools to institutional investors across all client segments and asset classes.”

Jim Morrissey, CEO of Investor-Force, said, “InvestorForce’s goal has long been to drive e!ciencies for and expand the influence of the investment consultant. We believe that becoming part of MSCI, with its global footprint and resources, will significantly enhance our ability to do just that.

DEALBOOK

PHARMACEUTICAL

PolyMedix Considers Sale

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

SOFTWARE

InvestorForce Sold For $23M

Nike Signs Equipment Deal With Regional Soccer Group

Nike and Eastern Pennsylvania Youth Soccer signed a four-year deal

making Nike the group’s sole pro-vider of apparel and equipment. Financial terms were undisclosed.

Nike will also provide the o!-cial game ball for Eastern Pennsyl-

vania State Cups.

YOUTH SPORTS

Endoscopy Center AcquiredPhysicians Endoscopy acquired a majority share of

the Endoscopy Center of Bucks County in Newtown, Pa., the group announced last week.

The deal, which took place December 31, 2012, was PE’s sixth acquisition of the year.

Eight physicians currently work at the three-pro-cedure center, which first opened in 2006. Its sta" is expected to perform more than 7,000 procedures each year.

HEALTH CARE

WE ARE VERY EXCITED ABOUT THE BENEFITS THIS TRANSACTION WILL BRING TO OUR CLIENTS AND EMPLOYEES.’

—JIM MORRISSEY, INVESTORFORCE CEO


POLITICAL COMMENTARY

Philadelphia City Council members voted last week to overturn Mayor Michael Nut-ter’s veto of a bill that would change the five-month old zoning code.

The bill, introduced and championed by Councilwoman Jannie Blackwell, expands requirements for developers to notify neighbors of the nature of their project.

Mayor Nutter ostensibly vetoed the bill because he felt the new zoning code should be fully implemented before bills are passed altering it.

Some council members felt the requirements placed too much of a burden on developers and would result in the unnec-essary slowing of progress on certain projects.

The bill chiefly concerns the role of Registered Community Organizations (RCOs) in the process of development that involves zoning variances or special applications with the City

Planning Commission. RCOs are community groups based upon geographic borders that represent property owners and other stakeholders in a given neighborhood or defined area.

Prior to the bill, developers were required to provide written notice and information to RCOs on any planned projects that would bring them before the zoning board, which is often the case for projects of any particu-lar significance.

After a required period of time, there would then be a single

meeting for the RCO and devel-oper to discuss any concerns.

The bill expands this process greatly by requiring developers also to notify every property owner, in writing, within a one-block radius of the proposed project as well as the council member for that area.

Additionally, the developer must provide written notice of the meeting to the public and allow for their participation.

Under the bill, the council member or other interested RCOs may request additional

meetings through the Zoning Board.

The overturning of a may-oral veto requires a two-thirds majority in council, and here council voted 13-3 in favor of the reversal.

Councilman Dennis O’Brien was not present to vote.

Councilman Bill Green was the most vocal in his opposition to the bill, stating that council would “rue the day this veto was overturned” because the changes would slow down development and job creation.

Councilman Green felt that some developers would simply have too much trouble comply-ing with the heavy notification requirements.

Councilwoman Blackwell responded to Councilman Green’s statements by stating they were “simply not true.”

Apparently the majority of City Council agreed and her col-leagues gave her the two-thirds majority to force her bill into law.

Councilman: Overturned Veto Will Slow Development

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

CONTRIBUTE

Send comments, letters and essays to [email protected]. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.

SUSAN SERMONETA


Obama Appointments Set Dangerous Precedent

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

CONTRIBUTE


A federal appeals court recently dealt President Obama a humili-ating defeat and political setback. A panel of the D.C. Court of Appeals unanimously struck down several so-called “recess appointments” to the National Labor Relations Board.

The court ruled Obama had abused his powers and acted when the Senate was not actually in recess. It was a major blow to Obama and those encouraging him to rule by fi at and a “unitary executive model” that sidesteps the duly elected Congress.

Their scheme is pretty simple: If Congress won’t pass Obama’s environmental legislation because lawmakers think it’s bad policy, get the EPA to use rule-making to accomplish the same thing. If they can’t ram more gun control laws through Congress, just issue executive orders. If the

Senate hasn’t yet exercised the power to confi rm vetted nomi-nees, just wait until the senators aren’t here and make “recess appointments” that don’t require confi rmation.

It’s disdain and contempt for our constitutional system of checks and balances.

The court’s opinion — “Allow-ing the president to defi ne the scope of his own appointments power would eviscerate the Constitution’s separation of powers” — was a pretty strong rebuke. It’s confi rmation that the separation of powers created by our founders is a check and balance, and a guard against an imperial presidency.

But the Obama Administration did what has become one of its hallmarks: It doubled down. The NLRB chairman said it would keep doing business as usual.

Without the illegal appoint-ments the NLRB lacked a quorum. That throws into question several hundred of its rulings. The board wants to play “chicken” by continuing to make rulings. Presumably it believes it can do this pending Supreme Court review.

The proper response would be to constitute the NLRB by the proper means — getting nomi-nees confi rmed by the Senate.

All this has special signifi cance for the business community, most of which objected to the appoint-ments. They are now faced with uncertainty and serious ques-tions about NLRB rulings made by the illegal appointees.

Additionally, the business com-munity is faced with a potential scramble in other sectors. One specifi c example is the “recess” appointment of Richard Cordry

to head the Consumer Financial Protection Bureau. The CFPB holds sway on rules clarifying how lenders can satisfy new mortgage standards where clarity and certainty is vital.

The confusion and chaos caused by these appointments are only symptoms of a disease that must be cured. No president is above the law.

Surely there will be other court challenges to unconstitutional power grabs by the administra-tion. Congress isn’t without a few swords in this fi ght. They could de-fund the NLRB as early as March when the continuing resolution expires, for one small example.

The beginning of the second Obama term looks like a rough ride. It doesn’t need to be that way. Abiding by the rule of law is the best way to smooth the path.

POLITICAL COMMENTARY

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PENNSYLVANIA POLITICS

HARRISBURG — The family business — an epitome of the American dream, where the entrepreneurial spirit is alive and well.

Of course, reality tests these dreams. Businesses may not make it past their first year, let alone their first genera-tion. Their business plan may have failed. Maybe they didn’t find an audience. Or maybe overhead costs may have gone up unexpectedly.

But, some of these busi-nesses actually do OK. Some are corner bakeries where families buy cookies every holiday.

Some are privately held retail, selling diamonds or suits or carpeting.

Some might even find themselves on the Fortune 500 list, one day.

But here in the Keystone State, there is another concern that owners of family busi-nesses have to deal with — passing down one of these businesses from one genera-tion to the next comes with a tax bill from the Common-wealth of Pennsylvania.

Should the main owner pass away and will the business assets onto a family member, those assets are taxed 4.5 to 15 percent.

Lawmakers in Harrisburg are looking to end this practice this session. E!orts to exempt business assets from the inheritance tax are led by Rep. Steve Bloom, R-Cumberland, and Senate Majority Leader Dominic Pileggi, R-Delaware.

Those same lawmakers successfully passed a similar exemption for family farms last year.

Rep. Bloom said it’s a way to make Pennsylvania more

business-friendly, and he’s received bipartisan support from lawmakers representing urban and rural districts, who seem to agree that the tax is unfair. (It is, in a way, rather medieval, like paying taxes to the king to continue to live on the estate where you were born).

As Pennsylvania lawmakers enter this debate, they are rightly considering the e!ects the exemption would have on the state’s revenues.

Department of Revenue calculations estimate a loss of $9.9 million in fiscal 2013-14, though that would increase by several million over the next few years. But the figures are a drop in the bucket consider-ing the total revenues the inheritance tax collects on an annual basis: estimates for total inheritance tax collection in 2013-2014 are more than $886 million.

But taking out this revenue stream plays into a larger conversation about what Pennsylvania lawmakers are doing about the business tax

environment in the first place. The capital stock and fran-chise tax phase-out continues, and eliminating the corporate loan tax is also up for discus-sion.

O"cials from the Corbett administration have said the governor is even eying lowering the corporate net income tax from 9.99 percent, the highest in the nation. While that’s probably more of a pipe dream than anything else, considering revenues, the administration has made no small e!ort at its push to appear business friendly.

So, maybe removing the inheritance tax on business assets ends up being a discus-sion about how lawmakers can reshape the business tax environment. Maybe the sys-tem should be based on fair-ness and equity, as opposed to collecting on what’s available and on the books as taxable.

Maybe then, Pennsylvania’s family owned businesses would have a little bit more of a shot at staying in it for the long haul.

‘Death Tax’ Reforms Aim To Save Family Businesses

Melissa Daniels is a reporter for PA Independent, a part of the Franklin Center for Government and Public Integrity

CONTRIBUTE


Wolf Likely in Governor’s Race

Businessman and former Pa. Rev-enue Secretary Tom Wolf says he’s likely to jump into the Democratic primary for governor.

“I will likely be running to seek the Democratic nomination for governor. I really want to run,” he told the Pittsburgh Tribune-Review.

“We could do so much better, and I think I bring a unique inside-out-side perspective of having run a busi-ness, created jobs and also worked in government,” he said. But he won‘t run if “something convinces me that that is a fool’s errand.”

Mr. Wolf, 63, presently owns and operates Wolf Industries, a building supplies wholesaler in York, Pa. He served as Revenue Secretary from 2006 to 2008 under Gov. Ed Rendell.

—PoliticsPa.com

2014 ELECTION

Murphy On Race: ‘Not Happening’

Patrick Murphy is a veteran and former Congressman, but he won’t be a candidate for Governor in 2014.

The Bucks County Democrat dis-missed rumors that have circulated recently in some Pa. Democratic circles.

It’s “absolutely not happening,” he said.

Mr. Murphy rep-resented the 8th district in Congress from 2007 to 2011 and ran for Pa. Attor-ney General last year.

He served in Iraq from 2003-2004 as a JAG Corps attorney with the U.S. 82nd Airborne Division.

He’s presently a partner at the firm Fox Rothschild.

Only two Democrats — former Department Of Environmental Pro-tection Scretary John Hanger and Cumberland County pastor Max Mey-ers — have o"cially announced a bid.

—PoliticsPA.com

Beiler’s Bakery at Reading Terminal Market. STEPHEN BUGNO

16 REGIONSBUSINESS.COM31 JANUARY 20132013:

YEAR OF THE INNOVATOR

INNOVATION

PACT Names Enterprise Awards FinalistsThe Greater Philadelphia Alliance for Capital & Technologies named its finalists for the Enterprise Awards. Winning businesses will be named at the Enterprise Awards 20th Anniversary Black-Tie Gala, to be held May 9 at Valley Forge Casino Resort.

Technology Company of the Year

Health Advocate Lockheed Martin IS & GS –

Defense Quintiq

------------------------------

Technology CEO of the Year

EvolveIP, Thomas Gravina iPipeline, Tim Wallace

The Neat Company, James Foster

------------------------------

IT Innovator Award of Excellence

Mobiquity Rajant Corporation

Relay Networks

------------------------------

Emerging Technology Company

InstaMed Matcor

SkillSurvey

------------------------------

Technology Startup Company

CloudMine ThingWorx

Zonoff

Momentum Dynamics CEO Andrew Daga beside his invention, which wirelessly powers electric vehicles like the Chevy Volt. SUBMITTED PHOTO

Business: Momentum DynamicsFounder: Andrew DagaContact: andrew.daga@

momentumdynamics.com

BY BRANDON BAKER

Andrew Daga experienced his light-bulb moment — per-haps in a more literal sense

than most — while working with both NASA employees and Lockheed Mar-tin contractors on developing solar power technology for the Department of Defense.

In the process realizing that gas pric-es, circa 2008, had elevated to $4 per gallon, he decided to capitalize on the inevitable demand for electric-powered cars.

Today, he and his 15-person team at Momentum Dynamics boast what is debatably the most viable wireless charging technology for electric cars.

“It occurred to me that the average consumer would not be willing to plug in their car for eight hours a day,

on the road, waiting in the snow,” Mr. Daga said. “So, I found the technology, I found the team, and we started to develop it.”

Mr. Daga’s technological gamble originally started with the intention of licensing through a Boston startup, until his chief scientist advised him that, after seeing an initial prototype, the Momentum Dynamics team “could do better.”

A short four weeks later, they did.“You put together a mix of talent,

inspiration from another company, and great ideas, and you get results,” Mr. Daga said. “There’s a misconception that projects need to take a long time to develop, and they don’t.”

Since launching Momentum Dynam-ics in 2009 and crafting the original, more skeletal version of the charger, the company has been perfecting it in the form of a 30,000-watt, 10,000-volts wireless device akin to most wireless phone chargers, but producing enough energy to charge an electric car three times faster than the standard.

CAPITAL SEEKERS

Momentum Dynamics

Electric cars are chic, green and frustrating for drivers who don’t have eight hours to wait for the car to charge.

That’s the cue for Andrew Daga.

Please see Page 20 for the rest of the list

Steadily, but almost quietly, Philadelphia has become a hotspot for entrepreneurs. The combination of great ideas, available capital and a welcoming environment have set the stage to make 2013 a breakout year for innovation and new businesses.

To Learn More ...For more information on sponsorship opportunities or to suggest story ideas, call our main office at 610-940-1656.

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DIMENSIONTHE NEW DIMENSIONOF TELEVISION

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

BY BRANDON BAKER

aster than you can say “one, two, three,” second-screen TV develop-ment company OneTwoSee has more than tripled its employee count.

Starting with co-founders Jason Angelides and Chris Reynolds in early 2012 as part of the Seed Philly incubator, the company entered 2013 boasting nine employees and a lineup of major-player clients that include Comcast, DirecTV and NBC.

“This market, it’s moving so fast,” Mr. Angelides said. “I’ve seen the Internet growth phase and the mobile phase, but this phase we’re seeing now — interactive television — it’s just mind-blowingly fast-moving.”

The company, based in Center City at 1650 Arch Street, began testing for its social TV platform with reality television shows like “The Bachelor.” However, the bulk of OneT-woSee’s ongoing business involves application development for NBA, NHL and MLB sports programming.

“Second-screen viewing is a fundamental paradigm shift in television viewing, and 80 percent of people watching television are said to have a second-screen device in their hand — whether it be a tablet, a PC, or a phone,” Mr. Angelides said. “So, the question is, ‘What do you put in front of them to bridge the digital and linear gap?’ And with sports, we’ve done a pretty good job of it.”

Second-screen features for sports broad-casts include player coverage through Face-book and Twitter integration, fan photos, in-game statistical analysis and breaking news.

When planted on the couch in his o! -time, Mr. Angelides said he personally uses the plat-form.

“I may not be the Facebook generation — I’m 45 years old —but [our team uses these applications] on a regular basis,” he said. “Sometimes, when I watch TV, even if I have high-def, I can’t see who’s on the ice, or the camera angle’s not right. This way, I get the play-by-play on what’s happening.”

Despite the alarming rate at which interac-tive television technology is developing, Mr. Angelides isn’t intimidated by the path ahead.

“You can look out fi ve years and say, ‘Well, a lot of this stu! is going to move into the smart television,” and that’s probably true,” he said. “But if you come back to the basic premise, the paradigm shift is happening where people want to complement the broadcast, and we understand what our mission is.”

FF

@OneTwoSeeTV OneTwoSee [email protected] OneTwoSee.com

2013:YEAR OF THE INNOVATOR



No Outsourcing Liability For Background ChecksEmployers outsourcing their

employee background checks should heed the warning of a local federal court judge: You can’t outsource legal liability.

Being involved to some extent in the process should help employers avoid legal liability. However, paying a “gatekeeper” to perform searches and send you “qualifi ed” employees only may be hazardous to your bot-tom line.

In a recent case in the U.S. District Court in Philadelphia, the Court faced a situation where employers contracted with LexisNexis to perform background checks on employ-ees and job applicants, to identify any negative history. LexisNexis assigned a “com-petitive” or “noncompetitive” score based on the background check.

Two individuals applied for jobs at Family Dollar Stores and Rite Aid, and the searches revealed reports of alleged thefts at their prior employers. Lexis-Nexis allegedly assigned both individuals “noncompetitive” scores and sent letters indicating that a search revealed a report

of an alleged theft at a prior employer.

The individuals could contact LexisNexis — not Family Dollar Stores or Rite Aid — if they wished to dispute the informa-tion.

Both alleged they asked LexisNexis for additional infor-mation, but neither received the information before an “adverse action” occurred, meaning they did not get the jobs. The employers did not participate in this process.

The individuals brought claims under the Fair Credit Reporting Act (“FCRA”), which contains provisions regarding employee background checks.

Potential exposure under FCRA is not trifl ing. It includes actual damages, which consist of alleged harm to reputation and missed opportunities, as well as emotional distress; statu-tory penalties up to $1,000 per incident; punitive damages; and attorney’s fees.

The Court denied the request to dismiss the lawsuit, explain-ing that before an adverse action can be taken against a job applicant or employee

based on a background check, FCRA requires the applicant or employee to receive a copy of the background report and have a chance to respond.

Signifi cantly, the Court noted that the employers may be liable under FCRA for the actions taken by LexisNexis on their behalf.

In other words, employers cannot escape liability by hiding behind an outside vendor when an adverse employment action occurs.

To protect against such a claim, or at least reduce the potential damage, employ-ers can adopt these proactive measures:

Double-Check the Checker — Employers should assure outside vendors don’t make decisions without the employer’s input.

Employers should assure they receive the background reports, and that they have some degree of participation in any employ-ment decision based on that report.

Employers permitting an outside vendor to perform background checks to “weed

out” unsuitable candidates, without any involvement, run the risk of exposure under FCRA.

Timing is Everything — Employers should assure the applicant or employee has the opportunity to respond to a background check that may be used to disqualify, discipline or terminate the applicant or employee before adverse action occurs.

In this recent case, the Court’s primary concern was the timing of events, where Lexis-Nexis allegedly made an adverse employment decision without giving the individuals a chance to respond.

Indeed, the “noncompetitive” score could have been used to support an adverse employ-ment action, so long as the individual had a chance to respond before adverse action occurred.

While there are measurable benefi ts to conducting employee background checks, it’s impor-tant to assure they’re performed correctly so employers don’t expose themselves to potential liability under FCRA.

Mark A. DiAntonio, Esq. focuses his practice on civil litigation and employment law matters. He can be reached at [email protected] or (215) 609-1563.

CONTRIBUTE


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Timely updates Original blogs Archived print content

@RegionsBusiness RegionsBusiness


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2013:YEAR OF THE INNOVATOR

Philadelphia a Mayors Challenge FinalistPhiladelphia is one of 20

American cities in the running for a $5 million grand prize in the Bloomberg Philanthro-pies Mayors Challenge.

The challenge seeks “inno-vative ideas that solve major challenges and improve city life — and that ultimately can be shared with cities across the nation,” according to its website, mayorschallenge.bloomberg.org.

Four runners-up in the challenge will receive a $1 million prize.

According to the challenge, Philadelphia will “develop a project that will revolution-ize how Philadelphia tackles major urban challenges and achieves meaningful change.

“Called the Philadelphia Social Enterprise Partnership (PSEP), PSEP changes how

city government interacts with the private sector by engaging entrepreneurs in framing social challenges and seeking solutions.

“With city government as an active partner, providing data and feedback throughout the process, the concept provides a new model for urban prob-

lem solving. “This project will be run

in collaboration with Good Company Ventures, a leading social enterprise incubator in Philadelphia.”

The Bloomberg Philan-thropies Mayors Challenge will reveal the winners in the second quarter.

Education Conference Brings Hundreds to City

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



INNOVATION

Continued from Page 18

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CleanTech Company of the Year

Holganix OxiCool

Renmatix

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Investment Deal of the Year

Kenexa Liquent SevOne

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Emerging Life Sciences Company

CD Diagnostics Halfpenny Technologies

Monitorforhire.com

------------------------------

Life Sciences Startup Company

Kerathin Trice Orthopedics

Vascular Magnetics

------------------------------

MedTech Honoree:

Leadership: Secant Medical

------------------------------

Legend Award (lifetime achievement)

Honoree:

David L. Cohen, Executive Vice President,

Comcast Corporation

‘Original Entrepreneur’ Ben Franklin Inspires Coworking Office Space Plan

BY BRANDON BAKER

Michael and Jennifer Maher are the proud new parents of two: their three-month-old son and four-month-old business, Benjamin’s Desk.

O!cially launched in October as what they describe as a “pre-mier” coworking space, Benja-min’s Desk first manifested as a loaded cloud bubble of ideas when Mr. Maher read about the growth of the shared-space industry in an article.

After mulling it over and doing his homework, exploring other spaces in New York and Boston with Mrs. Maher, the two waged their bets by leasing a space at

1701 Walnut Street in 2011. Walking into the space today,

members see a chic, substantial-ly-renovated space with three private o!ces, a shared kitchen, two phone rooms, a spacious shared conference room and a large, open area that houses eight large-sized tables and desks.

The launch, Mr. Maher said, has been a resounding success so far.

The space currently has 50 members, representing 22 dif-ferent companies. That list, he said, continues to grow at a lightning-speed pace.

“We think [coworking spaces] represent a trend that’s here to

stay,” Mr. Maher said. “For us, we want our members to be able to say, ‘I grew my revenues X amount in this space because of where I worked and who I met.’ So the collaboration part of our business isn’t just a buzz word, and neither is the creativity part. We live and breathe it.”

The two are fans of Benjamin Franklin’s jack-of-all-trades image, and Mr. Maher cited him as the “original entrepreneur.”

He and his wife often wonder, he said, what was on his desk at any given time, and thought it to be an appropriate title for the shared space’s melting pot com-munity.

Keeping up with their momen-

tum, the Mahers will soon be announcing what Mr. Maher called a “big partnership” with a firm that will be moving into their space.

More insight into what the space has in the works, he said, is soon to come.

DIARY OF A STARTUP

Wharton Course Helps Entrepreneurs WorldwideBY TSIVI RAVI

A farmer from Africa with only one tractor. A worker at a loading dock. A manager of an assembly line making electronic components.

These small business workers want to make their business more produc-tive but may not have the resources to go to the Wharton School.

With Wharton professor Chris-tian Terwiesch’s course on Coursera, people all around the world can take his class, “Introduction to Operations Management,” and learn how to use the operations management tools to enhance their businesses, lower costs and better serve their customers.

“I was curious to see if we could use the technology to increase the productivity of one faculty [member]

and dramatically reach more people,” Mr. Terwiesch said.

He began teaching his course in September. Approximately 90,000 users registered, and around 5,000 completed the course.

According to Mr. Terwiesch, 80 percent of the registered students were also working. Many of the stu-dents noted in the class’ discussion forum that they took the course to enhance their businesses.

Mr. Terweisch will teach his online class again this April, hoping to make the course better suited to his student base by emphasizing how to imple-ment the lessons learned in class as opposed to how to study for exams.

This article was originally pub-lished January 29 in The Daily Pennsylvanian.Christian Terwiesch THE WHARTON SCHOOL


Learn Business Basics at Chamber 101 Event

Eastern Montgomery County Chamber of Com-merce’s Chamber 101 allows prospective members to learn of the benefits of joining a chamber of com-merce.

The event will be held 8:30 to 9:30 a.m. February 1 at the chamber o!ce. Call 215-887-5122 or email [email protected] to register.

EASTERN MONTGOMERY COUNTY CHAMBER

Panel To Discuss Local Impact of ‘Fiscal Cliff’

“Jumping o" the Cli" – Ana-lyzing the Fiscal Cliff and the Impact of the American Taxpayer Relief Act on Business and the Economy” will be held 8 to 10 a.m. February 1 at the Delaware County Chamber of Commerce, 1001 Baltimore Pike, Springfield, Pa., in the Lower Level Confer-ence Room.

Tickets to the event are $40. Panelists include: Peter Barsz,

CPA at Merves, Amon & Barsz; Luke Tilley, Regional Economic Advisor at Federal Reserve Bank of Philadelphia; Graham Lee, Political Science Professor at St. Joseph’s University; and Iqbal “Monte” Mansur, Economics Professor at Widener University.

DELAWARE COUNTY CHAMBER

Governor Corbett to Address Chamber

The Greater Philadelphia Chamber of Commerce’s annual “Conversation with the Governor” returns 4:30 to 7 p.m. Thursday at The Academy of Natural Sciences.

Channel 6ABC’s Matt O’Donnell will moderate an interview of Governor Tom Cor-bett before hundreds of members of the Philadelphia business community.

Tickets to the event are $80 for members and $160 for non-members.

Also attending the discussion

are: Lt. Governor Jim Cawley; Chief of Staff Steve Aichele, Office of the Governor; Adju-tant General Major General

Wesley Craig; Secretary of Aging Brian Duke; Secretary of Bank-ing Glenn E. Moyer; Secretary of General Services Sheri Phillips; Secretary of Labor and Industry Julia Hearthway; Secretary of Administration Kelly Powell Logan;

Inspector General Kenya Mann Faulkner; and Secretary of the Commonwealth Carol Aichele.

GREATER PHILADELPHIA CHAMBER OF COMMERCE

CHAMBER REPORT

Perspective.Delivered weekly.

$40 annually.To subscribe, call

877.700.6245or

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REGION’S BUSINESSA JOURNAL OF BUSINESS & POLITICS

Corbett

Chamber Develops AppThe Lower Bucks County Chamber of Com-

merce, with the assistance of BrickSimple LLC, has developed a free app for both the Android and iOS markets.

The app “allows users to view Chamber events and share them to their calendar, Facebook and/or Twitter. It also provides users with a directory of Chamber members and businesses,” according to the app description.

LOWER BUCKS COUNTY CHAMBER OF COMMERCE


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

IS NEW PROPOSAL A CURTAIN CALL FOR

CORRUPTION INSTATE COURTS?

TEXT BYELISSA VALLANO

ILLUSTRATIONS BYDON LEE

IS NEW PROPOSAL A CURTAIN CALL FOR

CORRUPTION INSTATE COURTS?


here are few issues Penn-sylvania’s Democrats and Republicans often agree upon, but every once in a long while, there’s a problem too obvious to ignore. It’s one that requires the attention of both parties, as well as a single-mindedness to achieve the necessary resolution for the greater good. Unfortu-nately in this case, it’s a crisis

within the state’s court system.Senators Anthony H. Williams (D-Philadel-

phia) and Richard Alloway (R-Franklin) have proposed a bill to end Pennsylvania’s judicial elections and replace them with a commission of 15 members. The commission would consist of four members appointed by the governor, four by the General Assembly and the remain-ing seven as members of the general public. Sen. Williams is the lead sponsor of the bill with Sen. Alloway (also serving as the Vice Chair-man of the Senate Law and Justice Committee) backing the proposal.

“As citizens, we have to have utmost confi-dence in our judiciary, and right now, that’s simply not the case,” Sen. Williams told The Pennsylvania Independent.

According to Pennsylvanians for Modern Courts, state elections are currently held in odd-numbered years to fill vacancies. Appellate court and common pleas court candidates run in partisan elections for 10-year terms, while minor court candidates run in partisan elec-tions for six-year terms. The dominant politi-cal parties often endorse certain candidates to run, and for trial judges, a candidate may receive the endorsement of both parties. When a judge’s term is completed, he or she can stand for successive 10-year terms in retention elec-tions – which are nonpartisan and uncontested

REGIONAL SNAPSHOT

DelawareJudges are chosen through a merit selection process, appointed by the governor with the consent of the senate. Governors have adopted executive orders creating a judicial nominating commission to identify highly qualified candidates for judicial appointments.

With the exception of justices of the peace, judges serve twelve years (one of the longest terms for state court judges in the country).

Judges in Delaware do not run for retention. They must be reappointed through the same process by which they were originally appointed.

MarylandJudges are appointed by the governor with the consent of the senate (except for circuit court judges).

Governors have adopted executive orders creating judicial nominating commissions to recommend candidates for appointment.

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

New JerseyThe governor, with the approval of the senate, chooses all judges in New Jersey.

Judges stand for reappointment after seven years in office, and once reappointed, they serve until they reach the age of 70.

New YorkThe majority of New York’s trial court judges are chosen in partisan elections, with judicial candidates competing in primary elections to determine who will represent the party in the general election.

Candidates for the Supreme Court are chosen through a party convention system, in which primary voters elect convention delegates who choose candidates for the judgeships.

OhioJudicial candidates are nominated in partisan primary elections and are endorsed by political parties.

Judges in Ohio are selected in nonpartisan elections. Party affiliations are not listed on the ballot.

AMERICAN JUDICATURE SOCIETY (AJS)

Region’s Business had a chance to talk one-on-one with Gov. Corbett late last year. In a wide-ranging interview, we asked him about adding judicial reform on his already hefty agenda.

Region’s Business: Do you see any room on your agenda or need for judicial reform in Pennsylvania?

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

Region’s Business: The sense we get from business leaders here is that the court system can be rather onerous as they try to get things done. Is there an appetite on anyone’s part to take a hard look at the way the courts operate?

Gov. Corbett: The first way you look at it is, how do you get your judges. And I know there have been discussions in the past with people who would like to see merit selection and appointments for the appellate courts. I’ve never heard anyone really want to do that with the common pleas court. But if you’re talking about reform of the individual judges, that falls under the court system itself and outsiders are not going to be able to direct the court. Judiciary guards its own reform

of its judges if they need some sort of discipline or education or something like that. The other thing you could be talking about is tort reform. And we have seen some tort reform with the Fair Share Act. We’ll see what bills go into the hopper come next year and see what we think we may or may not be able to make it to my desk.

- From the Region’s Busi-ness issue of 8 December 2012.

GOV. CORBETT ON COURT REFORM

SERGE MELKI

T


– up until the manda-tory retirement age of 70 years old.

The primary issue with contested elections and the catalyst for Sen. Williams’ proposed bill lies in the financing of judicial candidates’ campaigns. Campaign donors will often appear before the judges they help elect, and this unavoidable conflict blurs the line of impar-tiality. Special interest groups are also active influencers in judicial elections, funding adver-tising campaigns and contributing to cam-paigns. This is especially problematic because there are currently no rules of conduct that require judges to recuse themselves in cases involving campaign con-tributors.

“Judges are supposed to make decisions based on the facts and the law, not based on how their campaign supporters want them to rule,” Lynn Marks, Executive Director of Pennsylvanians for Modern Courts, told The Pennsylvania Independent this month. “They criss-cross the state raising tons of money, all while promising to be unbiased when they are elected.”

This complication in the judicial process is as far-reaching as its con-sequences. According to the Brennan Center for Justice at New York Uni-versity School of Law, a non-partisan public policy and law institute that focuses on the fundamental issues of

democracy and justice, a total of $38.4 million was spent nationally on state high court elections in 2009-10. This figure is slightly less than the last non-presidential election cycle in 2005-06, but it managed to be the costliest for television advertising. Roughly $16.8 million was spent on television adver-tising campaigns, and outside forces accounted for nearly 30 percent of all money spent – a number far exceeding four years prior.

Pennsylvania is already battling one instance of alleged corruption in its high courts. The trial of suspended Supreme Court Justice Joan Orie Mel-vin is underway in Pittsburgh where she faces seven counts related to her

alleged use of public resources during her 2009 campaign that eventually culminated in her election. Sen. Jane Orie, her sister, was convicted of 14 counts of theft of services, conflict of interest and forgery last March relat-ing to the incident. She is now serving her sentence of up to ten years in state prison.

Adding fuel to the already growing fire, Justice Orie Melvin’s attorneys asked her colleagues on the court to dismiss her charges. She filed a peti-tion earlier this month requesting the remaining six jurists on the high court block her trial and toss out the charges leveled against her. In its 16-page fil-ing, the defense wrote, “Immediate

action by this court is neces-sary to enforce the separation of powers and compel the dis-missal of the constitutionally impermissible charges.” The motion was declined.

Pennsylvania seems to be one of the few states willing to definitively tackle these issues of corruption, but the road ahead will be long and hard. If the bill is successful, the state constitution will have to be amended in order to implement a new merit selection process. Such sweep-ing changes would require approval by the House and Senate in consecutive legisla-tive session, which can be an involved and arduous pro-cess in and of itself. If that is achieved, it will then be intro-duced to voters in a statewide referendum. Best case scenar-io, the proposal would reach voters by May 2015.

It’s an unprecedented time in state’s legal system. The charges against Justice Orie Melvin have turned a spot-light on the corruption born of judicial elections, and the merit selection bill could revolutionize the Pennsylvania judiciary. The bill’s proposed Appellate Court Nominat-ing Commission would be designed with the express pur-pose of thoroughly assessing judicial candidates, carefully assembling a list of the most qualified candidates, and then presenting them to the gover-nor. The governor would then make his choices from that list

of prospective candidates, and those selections would then seek Senate confirmation. After serving an abbre-viated initial term, judges will then stand before voters in a nonpartisan, uncontested retention election.

If successful, the bill’s outcome would ensure the judges serving on the bench would be the most quali-fied candidate, not simply the best campaigner. It could serve as a model to the nation, inspiring other states to follow suit and amend their own troubled judicial elections. And in its most basic form, it could o!er peace of mind to anyone stepping foot into a Pennsylvania court room.

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

PENNSYLVANIANS FOR MODERN COURTS


With the proposed bill of Senators Anthony H. Williams and Richard Alloway being reviewed by state lawmakers, the future of Pennsylvania’s judicial elections lies in limbo. The bill proposes a hybrid system of appointing appellate judges that stipulates judges can petition state voters for retention after an initial term. But retention is not without its own weak-nesses to corruption.

The small groups of powerful campaign contributors that are able to sway judicial elections with largely untraceable dona-tions can exact that same influence over retention elections. Retention elections now account for 12 percent of all election spending, an increase of 11 percent over the previous decade. Retention was intro-duced in Pennsylvania in 1968, and since that time, only one Supreme Court justice (Russell M. Nigro in 2005) has failed to win an additional term.

Pennsylvania Supreme Court Chief Jus-tice Ronald D. Castille recently announced

his plan for running for retention in November despite quickly approaching the state’s mandatory judicial retirement age of 70. If he’s successful in his retention election, and the current retirement age regulation stands, he will have no choice but to step down in 2014, thereby opening the door for Governor Corbett to nominate his replacement. Fellow justice Max Baer will be also joining him on the ballot this fall.

Justice Castille was elected in 1993 and retained in 2003. The state’s mandatory retirement age is a source of contention for some Pennsylvania jurists, and its consti-tutionality is currently being challenged in federal court. Justice Castille has said he remains optimistic about the subsequent outcome, highlighting his 19 years of expe-rience on the Supreme Court bench dur-ing a time when stability is so desperately needed in the state’s courts.

Pennsylvania has seven justices, but only six are serving due to the trial of suspended

Supreme Court Justice Joan Orie Melvin. If Justice Castille had decided not to run for retention this year, there would have been another hotly contested, partisan election for his seat on bench. It’s a vicious cycle one would predict damned to repeat itself, but a season of change may be on the horizon.

Until the outcome of the bill is deter-mined, Pennsylvania’s high courts will be undergoing a number of potential changes, most notably regarding Justice Orie Mel-vin’s open seat. Her vacancy leaves the court equally divided between Republicans and Democrats – three a piece - and the state constitution indicates that the gov-ernor may fill any empty seat on the court as long as it’s within 10 months of an elec-tion (which it is). If Justice Orie Melvin is found guilty, Governor Corbett may opt to name her replacement until the seat finally returns to voters in 2015.

Supreme Court Facing Big Changes

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


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What’s the elevator pitch for the Greater Philadelphia Chamber of Commerce?

The Greater Philadelphia Chamber of Commerce represents its more than 5,000 member companies, which is a wide variety of large, Fortune 100 com-panies through entrepreneurial busi-nesses — from restaurants to startup technology companies — throughout the Greater Philadelphia region.

Why are you the man for the job?That’s actually a great question.

I’ve been meaning to ask that myself. I never lobbied to do the job.

The role of the chairman is to work on setting strategy and goals for the Chamber for the next year or two, and the attributes that I brought was a passion and caring for Philadelphia and the Greater Philadelphia tri-state

region, and the ability to work collab-oratively with leaders from various industries, companies, not-for-profi t industries and government.

What is the Chamber’s strategy?We believe in creating an environ-

ment that facilitates a private indus-try, working collaboratively with gov-ernment and the non-profi t sector to make the region as attractive for businesses to start their businesses here, grow their businesses here, move their businesses from some other region to this region.

What makes Philadelphia attrac-tive to businesses?

One of the great stories of the Greater Philadelphia region is our educational industry as well as our life sciences industry. We need to

continue to invest in that, cultivate that, advocate for that and continue to build upon that strength.

The unique opportunity we have right now is the Renaissance in man-ufacturing, due in part to the energy industry that is growing more rapid-ly, from an investment perspective, in the region due to the shale gas phe-nomenon.

And what that’s doing, obviously, is driving energy costs down for our region, certainly being close to that supply, but it also creates opportuni-ties for the Greater Philadelphia re-gion as a processing site for natural gas as well as an export location.

How does your job help with your chamber work?

I was always very active with the chamber on its executive committee,

but I also believe it’s very synergistic with my job as the Mid-Atlantic Re-gional Executive for Citizens Bank, because of my knowledge of the economy from so many great busi-ness leaders throughout our region.

Knowing what their needs are and how the Chamber can help them achieve their growth and create those job opportunities for businesses in the region makes it, again, that sym-biotic relationship.

If I can lead the chamber e! ectively and help grow our regional economy, that certainly helps every bank do-ing businesses in the Greater Phila-delphia region as well as most busi-nesses doing business in the Greater Philadelphia region. Spending week-ends devoted to chamber activities, it really is part of my job as a banking industry leader in the region.

A&Q

DANIEL FITZPATRICK’S

The Greater Philadelphia Chamber of Commerce Chairman and Citizens Bank regional executive says natural gas and world-class education put

the city in the middle of a Renaissance, but business leaders, innovators and government need to work together for improvements to come to fruition.

COLLABORATIVEASSIGNMENT

facebook.com/greaterphilachamber twitter.com/phillychamber greaterphilachamber.com

PHOTO BY REBECCA SAVEDOW


OPINION

Are you ready to pay an additional $1,000 in state and local taxes alone?

Prepared to see your child’s teacher laid o! ? Thanks to bad promises politicians made to good people, a pension crisis facing Pennsylvania threatens our American way of life, homes, cities and schools.

Already, more than 675 class-room teachers in Philadelphia public schools received pink slips over the past two school years. This unprecedented trend, fol-lowing years in sta! growth, will likely worsen due to skyrocketing pension costs with no fi nancial safety net built in to protect good teachers.

What’s more, homeowners will get socked with the pension bomb, too — for benefi ts that were promised by politicians but never paid for. School districts’ pen-sion payments (which only cover half the required payments) will rise substantially over the next four years. For Philadelphia families, that cost increase comes to approxi-mately $304 per homeowner, albeit largely born through the Philadelphia wage tax. Homeowners in suburban Philadelphia school districts will see local pension costs increase from between $244 and $626 per homeowner by 2017.

As scary as that seems, it is but the tip of this woeful economic iceberg. State govern-ment’s pension costs (for state employees and half of school employees’ pensions) are expected to rise by more than $2.5 billion over the next four years — or $523 annually per household.

That is, many families will pay more than $1,000 in additional taxes for pension debt we accumulated over the past decade, and get nothing more for their money.

So how did we get into this mess? Very simply, it is the culmination of a series of bad politics and policy decisions.

In 2001, following an economic boom, politicians thought pensions were well-fund-ed and stock market gains would continue indefi nitely, so they decided to boost pension benefi ts for themselves and government workers — even doing so retroactively.

When the stock market dropped, lawmakers erred again by voting to put o! paying for those losses for years.

Those bills are now coming due, and exacerbated by the big investment losses in 2008. But one can understand why law-makers made the choices they did. There’s a big political payo! for boosting benefi ts as government unions lobbied heavily for those changes.

And there’s little downside to delaying payments (with government unions lobby-ing for those changes, too). Those costs will be paid through generational theft, foisted upon our children and grandchildren, who are still too young to vote.

Ultimately, the only solution is to get poli-tics out of pensions. This can only happen by moving from traditional pensions, where taxpayers provide a guaranteed government income for life, to a retirement plan popular in the private sector, similar to a 401(k).

In a 401(k), which most private companies switched to decades ago, lawmakers can’t play politics. If they promise to contribute six percent of salary, they must put that in, and can’t defer those costs to kids and grandkids. Further, 401(k)-style plans are predictable for elected o" cials, allowing them to plan for all costs and avoid massive property tax hikes, and they’re a! ordable for taxpayers.

Moreover, 401(k) plans o! er more convenience for workers. Younger workers especially will benefi t from the ability to

take a 401(k) with them as they change jobs instead of forfeiting retirement savings to advance their career. Older adults can pass their remaining 401(k) onto their children, whereas pension payouts end when retirees die, even if they paid in more than they col-lected. And all workers will benefi t from a sustainable retirement system that will actually be there when they retire.

Legislation with biparti-san support sponsored by Sen. Pat Browne (R-Lehigh) last session would place all new state and school employees in a 401(k)-style

retirement plan. As they say, “when you’re in a hole, stop digging,” and this legislation would stop digging a deeper pension hole and empower new government employees to have ownership over their retirement.

However, this reform doesn’t pay o! the pension shortfall we’ve already built up by overpromising pensions. These costs will continue to burden state taxpayers, schools and local governments for years.

Lawmakers must recognize the impact the pension bomb will have on Pennsylvania, and show courage to defuse it before the fallout reaches our already stressed families. They must resist the urge to repeat the spending splurge of years past, create new programs, or throw money at problems. Moreover, to fi nd funding for pensions without raising taxes on working families, lawmakers must fi nd signifi cant savings through prevailing wage reform, ending corporate welfare, and tackling bloated and wasteful welfare spending.

Today, the pension bomb facing Pennsyl-vania threatens homeowners with massive tax hikes and school teachers and other government workers with layo! s. If our children and grandchildren are to have a prosperous tomorrow, they can’t a! ord any more missteps from their leaders. Defusing the pension bomb, for their sake, must be job number one for state lawmakers this year.

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

CONTRIBUTE

Send comments, letters and essays to [email protected]. Opinions expressed byguest writers do not necessarily reflect thoseof Region’s Business.

Pension Bomb About To Hit Philadelphia-area Families

... homeowners will

get socked with

the pension bomb,

too — for benefi ts

that were promised

by politicians but

never paid for.


Details Needed to Make Court Reform Plan a True SuccessThere’s a great deal of

urgency in the state and federal legislatures these

days, mostly born out of the trend of government by crisis.

While Washington deals with debt ceiling limits and fi scal cli! s, Harrisburg attacks a massive pension crisis and the privatization of the lottery, turnpike and liquor stores. All of those issues demand intense scrutiny and swift action, but in a large and complex world, they cannot be the only entries on the government agenda.

In Harrisburg, at least, room has been found on the agenda for at least one more important issue.

Philadelphia State Senator Anthony Williams is the lead sponsor of a bill that would start the commonwealth down the road of judicial reform. While that sort of legislation is not, on the surface, the sort of headline-grabbing change that dominates media, it’s importance cannot be overstated. The integrity of Pennsylvania’s judicial system is a bedrock prin-ciple and the degradation of that integrity, even if slow and subtle, can cause a steady deterioration of the very fabric of our society.

Pennsylvania is currently only one of eight states that elects judges to its highest courts. Under the proposed legislation, which is also supported by Republican Sen. Richard Alloway of Franklin County (vice chairman of the Sen-ate Law and Justice Committee), a 15-member panel would draw up a short list of candidates for

vacancies on the state’s Supreme Court, Superior Court and Com-monwealth Court. The governor would then make a selection from that list. Numerous details must be worked out, not the least of which is how members of this select com-mittee are chosen.

The goal is to eliminate the con-fl ict created by the need to gener-ate millions of dollars in campaign funds. That infl uence, however, could be shifted to members of this selection committee and shifted in a rather shadowy manner.

The initial proposal has the governor appointing four mem-bers and the General Assembly appointing four members. The other seven would be members of the public, but there are no specif-ics on how they are selected. That’s a glaring loophole, but it might also create an opening for robust debate and discussion that will eventually lead to a strong bill that can sail through the process.

Such details are critical, but it’s encouraging to see Sens. Wil-liams and Alloway supporting an important and necessary piece of legislation that will not necessarily produce high-profi le political gain, but could lead to the strengthen-ing of a cornerstone of our state’s democracy. If they can extract campaign funds from the selec-tion of judges at the highest level through the creation of a commit-tee whose members are chosen in an ethical manner, it will change Pennsylvania - very much for the better - for generations.

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EDITORIAL BOARD

CEO and President James D. McDonaldEditorial Director Karl SmithAssociate Editor Terrence Casey

HOW TO CONTRIBUTE

To contribute, send comments, letters and essays to [email protected]. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business. We reserve the right to edit all submissions for content, style and length.

Pennsylvania Charter Schools Akin to Wild WestIt’s one thing to observe that publics schools might work better with fewer layers of regulation. It’s a different, and less useful thing, to claim that schools thrive best with NO regulation.

But that ideologues’ stance is what ruled the day when Pennsylvania’s charter initiative got started in the 1990s under Gov. Tom Ridge. As a result, oversight is weak.

And, predictably, charters in Pennsylvania have become a Wild West giving free rein to quick-buck artists, politicians seeking patronage pits, fringe theorists, and well-meaning bumblers.

CHRIS SATULLOON NEWSWORKS.ORG, 27 JANUARY 2013

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

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

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

CHRISTINA LONG ON PHILLY.COM, 28 JANUARY 2013

COMMENTARY FROM ACROSS THE WEB

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

OPINION


BY THE NUMBERS

9:32 p.m.Time the last Acela train leaves

Philadelphia’s 30th Street Station as part of Amtrak’s extended

service that started January 28. The train will arrive in New York

at 10:45 p.m. The last train to Washington leaves at 10:23 p.m.

3Number of roundtrips

Acela riders must take before March 2 to qualify

for a free Acela trip this summer.Vouchers will be redeemable from

July 1 to August 29.

8Number of charter school

applications for the 2013-14 school year denied by Secretary of Education Ron Tomalis, which

means all applications were denied, including three in the

Delaware Valley.

$48,000Amount paid by Philadelphia

councilwoman Blondell Reynolds Brown to settle with the city’s

Board of Ethics. She admitted to using campaign funds for personal

purposes and failing to disclose income in required statements.

828Number of tickets topro sports eventsdistributed lastyear by MayorNutter’s officeto the VeryImpressivePerformersprogram inrecognition ofacademicperformanceof city schoolstudents.

7.9Millions of viewers who watched the Season 3

premiere of the PBS show “Downton Abbey,” which is roughly quadruple the

ratings for an average PBS primetime show.

9.9Millions of viewers who

watched this year’s NFL Pro Bowl, down about 8 percent

from last year.

55%Percentage of opening

weekend box office revenue from the movie “Hansel

& Gretel: Witch Hunters” generated at 3-D theaters.

11%Percentage of opening

weekend box office revenue from the movie “Hansel & Gretel: Witch Hunters”

generated at IMAX theaters.

$5,634Average revenue per theater for the opening weekend of

“Hansel & Gretel.”

20Chip Kelly’s age when the Philadelphia

Eagles appeared in their first Super Bowl, which they lost to the Oakland

Raiders on January 25, 1981.

0Number of future Hall of Famers on the 1980 Philadelphia Eagles team that went to the franchise’s first Super Bowl. Their opponents,

the Oakland Raiders, hadthree Hall of Famers.

$300,000Estimated annual savings by SEPTA through reduced electricity costs at its Market Street

headquarters.

$34,706Energy rebates received by SEPTA for energy

efficiency initiatives at five facilities.

$144,969Revenue generated by SEPTA through its

waste oil recycling program, more than double the amount of money generated in 2010.

$130,385PECO rebates for projects at seven SEPTA

facilities that are in review or on a waiting list.

2009The year Chip Kelly accepted his first

head coaching position, taking over the top spot at the University of Oregon

after two years as the offensive coordinator.

1976The year the Philadelphia Eagles hired

Dick Vermeil, the last time the team hired a head coach from the college

ranks (though he had experience as an assistant coach in the NFL).

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