spot_img
Friday, February 14, 2025
Home Blog Page 576

Regional Report Western August 2010

0

Western

Brothers take the long view

For a decade, western North Carolina has tried to brand itself as a magnet for creative, digital-age businesses. Wall St. Cheat Sheet (wallstcheatsheet.com) fits that category. In November 2008, two South Florida natives, brothers Damien and Derek Hoffman, started the financial-advice website in Asheville. It now attracts more than 100,000 visitors a month and has been cited by The Wall Street Journal, MarketWatch, USA Today and other media outlets. Editor in Chief Damien, 32, has a bachelor’s in public policy from Duke and a law degree from the University of Miami. CEO Derek, 28, earned a bachelor’s in economics from the University of Michigan. They don’t disclose revenue but say their business is profitable.

Why Asheville?
Damien: I’d gone to Duke and loved North Carolina. I worked for an investment bank called Inner Circle LLP but got burned out on New York. My wife and I wanted to start a family and didn’t want to do it in Manhattan. We loved Asheville and thought this would be ideal. We came in January 2007.
Derek: I followed a year and half later from Chicago. I’d studied in Australia and visited New Zealand. Asheville reminded me of New Zealand. I’d worked for Procter & Gamble and Gillette and wanted to go out on my own. Damien and I started brainstorming. We’d always had an interest in economics and finance, so we launched Wall St. Cheat Sheet.

Asheville isn’t exactly a financial center.
Derek: It doesn’t matter. We’re in the digital era now, and we can communicate and work with other people online and through laptops, cell phones, social media. It’s the future — the mobile desk.

What stage is your business in?
Derek: We’re in the “garage phase,” just pulling the car out of the garage. We work with about 10 people on a contract or part-time basis.

How do you make money?
Damien: We sell subscriptions to our flagship newsletter — $15 a month, the cost of a stock trade — and sell premium products, like our precious-metals reports. That’s $29.95 a month. We get probably 70% of revenue from premium products, though that’ll probably become 50% as advertising revenue, sponsorships and partnering grow.

What’s your typical day like?
Damien: I check the news wires before I go to bed. About midnight, I look at what’s going on in Europe and Asia. I wake up early, hit the wires and try to figure out the top one or two financial stories of the day. Markets in the U.S. open at 9:30, so between then and 10:30 we follow up with three to five posts. There’s another wave of posts after lunch, based on what’s coming out of Washington, then between 4 and 6, several more. We have another wave at about 10:30. Then the process starts all over. We have contributors to the site, but it’s safe to say, we’re working 15 hours a day.

What will restore confidence in the market?
Damien: In the ’80s during the S&L crisis, more than a thousand bankers were jailed. Today, we’ve had only a handful of people handcuffed.

You’re big on precious metals.
Damien: There’s a lot of caution in the market now, given the European debt crisis. We’ve always found gold to be a haven, in addition to cash, in a cautious market.

 

ASHEVILLE — The city won a bid to host the Southern Conference Basketball Tournamentfor three years, beginning 2012. However, it must spend $5.5 million to upgrade its 36-year-old Civic Center if it wants to keep the tournament — and its expected annual economic impact of $4 million — past the first year.

WILKESBOROWells Fargo & Co. will close an operations center here by the middle of this month, cutting 85 duplicate jobs. The center was part of First Union before the Charlotte bank acquired Wachovia and took its name in 2001. San Francisco-based Wells bought Wachovia in 2008.

SAWMILLSAutomated Solutions moved here from Hickory. It plans to add 25 employees within three years, giving it nearly 40. The company makes packaging and plastic for the furniture industry.

BREVARD — The boards of Transylvania Regional Hospital and Asheville-based Mission Health System gave executives the green light to work out a deal that would make Transylvania an affiliate of Mission. They expect an agreement within a few months. Transylvania has about 40 general-purpose beds.

BREVARD — Former Republican Congressman Charles Taylor and his family agreed to sell about 8,000 acres in western North Carolina near the South Carolina border to the Carolina Mountain Land Conservancy and The Conservation Fund for about $33 million. That’s about half the property’s appraised value.

ETOWAH — A bankruptcy judge dismissed Seven Falls Golf and River Club’s Chapter 11 filing, leaving it open to foreclosure. Developer Eric Vinson owes his lender $26 million. Seven Falls was supposed to have 874 residential units.

Western North Carolina apple growers expect a good crop, aided by storms that cut the supply of apples from Michigan and New York. Last year was a tough one for Tar Heel growers — with just $16 million of the fruit sold, down from $25 million in 2008.

 

Regional Report Triangle August 2010

0

Triangle

Defying performance anxiety 

Even in good times, downtown theaters and sports arenas can run in the red their first few years, and the Durham Performing Arts Center had no warm economic wind at its back. It opened in November 2008 amid the chill of a nationwide economic crisis with home foreclosures rising, the stock market plunging and the statewide unemployment rate nearing double digits.

Yet DPAC, which boasts 2,800 seats and claims to be the largest indoor theatrical venue in the state, earned $1 million in the seven months that made up its first fiscal year. Its owner, the city, received more than $400,000 of the profit — more than four times what was expected. The numbers for the latest fiscal year, which ended in June, aren’t final yet, but DPAC continues to bring in tax revenue to the city and leisure dollars to nearby merchants.

In the 12 months ended May 30, the $1 city tax paid on each ticket added up to $303,770, according to the Durham Convention & Visitors Bureau. Local tax revenue generated, including sales and occupancy taxes, topped $1 million. Counting visitor spending in hotels, restaurants and other places, the bureau estimates that DPAC added $23.2 million to the local economy. In May, 85,000 people — a 96% occupancy rate — attended the 32 evening and matinee performances of the musical Wicked. “There was a need in our community for the type of programming that DPAC offers — a mixture of Broadway plays, concerts, comedies, musicals,” says Reginald Johnson, senior assistant to the city manager.

Why so successful in such a bleak economy? It doesn’t hurt that Durham County has the highest average weekly wage in the state and sits between the counties ranked third and fourth (page 18). Triangle residents tend to be better educated than most — the region has one of the highest concentrations of Ph.D.s in the country — and the local economy is buffered from economic shock by a hefty number of jobs in government and health care. While the unemployment rate in the finance-heavy Charlotte region rose above 13% earlier this year, the Triangle’s rate has stayed below 10% since DPAC opened.

But credit the city with knowing its limitations: It farmed out theater management and bookings to a partnership of Professional Facilities Management Inc. of Providence, R.I., and the Nederlander Organization, which is based in New York and owns or operates nine Broadway theaters. “They have buying power for many, many theaters,” says Shelly Green, CEO of the CVB. “A lot of the shows we’re getting in Durham have played on Broadway in one of the Nederlander theaters, so we’re getting them early and we’re getting some of the best shows.”

Talking turkey

Smithfield Foods Inc. isn’t happy with its minority stake in turkey processor Butterball LLC, and the Virginia-based meat packer either wants the 51% it doesn’t own or wants out of its joint venture with Goldsboro-based Maxwell Farms LLC. In June, it offered Maxwell Farms $200 million to go away and demanded an answer by mid-September. “We have been unhappy with the margins that we have achieved in that end of the business,” CEO Larry Pope told analysts. He says Garner-based Butterball needs an owner that will invest more, particularly in marketing. “We believe this is a tremendous household brand that has not been adequately supported.” Smithfield hasn’t produced great results itself. It lost $101.4 million in the fiscal year that ended in May, mainly because of losses in its hog-production segment. Maxwell Farms released a statement saying that it, too, wants to buy Butterball. Meanwhile, a rumor circulated that a Brazilian company, JBS SA, plans to buy Smithfield. A Smithfield spokesman wouldn’t comment.

 

RESEARCH TRIANGLE PARK — A Spanish company agreed to buy Talecris Biotherapeutics Holdings for $3.4 billion. Both make medicine from blood plasma. Talecris employs about 2,100 at its headquarters here and a plant in Clayton. Grifols, based in Barcelona, didn’t say whether it will cut jobs or move Talecris’ headquarters.

MORRISVILLEPharmaceutical Product Development, a Wilmington-based contract research organization, spun off its drug-development business and created Furiex Pharmaceuticals. PPD stockholders received a share of Furiex for every 12 they held of PPD. In its first month of trading, Furiex fell 49% to $10.16 a share.

DURHAM — The pay of Duke University basketball coach Mike Krzyzewski more than tripled in four seasons, reaching nearly $4.2 million in the 2008-09 fiscal year. Krzyzewski has led the school to four national championships. UNC Chapel Hill pays coach Roy Williams, who has led the Tar Heels to two national championships, $334,000 a year.

DURHAM — New York-based Northwood Investors bought Research Tri-Center from Grosvenor Investment Management for about $77 million — 27% less than it cost London-based Grosvenor three years ago. Northwood outbid 29 rivals for the center, which includes about 1.5 million square feet of warehouse and office space.

The N.C. Division of Water Quality says cleaning up Falls Lake could cost as much as $1.5 billion and take 25 years. Local governments will pay most of it. The 12,500-acre reservoir, which provides drinking water for nearly 500,000 people in Wake County, contains high levels of nitrogen and phosphorus.

RALEIGH — New York-based lender iStar Financial took over Hue, a downtown condominium project that closed its sales offices here in late May without selling a unit. Los Angeles-based CityView turned over the deed to avoid foreclosure. It borrowed $36 million from iStar in 2007, planning for a 208-unit project.

CARYDeere & Co. will close its Charlotte engineering center next year and move about 90 jobs here. The Moline, Ill.-based maker of heavy equipment employs about 670 in Charlotte, Cary and Fuquay-Varina but doesn‘t disclose employment at each site.

DURHAMNovella Clinical acquired rival contract research organization Prologue Research International, based in Columbus, Ohio. Prologue focuses exclusively on cancer drugs. Terms weren’t disclosed. Novella will add Prologue’s 60 employees to its workforce, giving it about 800 workers. About 275 are based here.

DURHAMGilead Sciences will close its local operation by the end of the year, laying off about 150. Most of its work here involved developing treatments for hepatitis B and C. It will move that research to its headquarters in Forest City, Calif.

Regional Report Triad August 2010

0

Triad

Team of rivals vies to be data-center hub 

They’ve competed for jobs, attention and even baseball stadiums. But especially for jobs. Greensboro and Guilford County seethed when Winston-Salem and Forsyth County outbid them by about $25 million to land Dell Inc.’s computer plant, then watched as the Round Rock, Texas-based company announced plans to shutter the place. Though Winston and Forsyth got their money back, the episode showed what recruiters don’t like to admit: Intraregional competition in the Triad is alive and well. Both cities bid this year for a Caterpillar Corp. factory, with Winston-Salem still under consideration.

The rivalry between the region’s two largest cities could be entering the digital age, particularly as their economic developers step up recruitment of data centers — behemoth buildings filled with rows of computer servers. Greensboro recently landed a $600 million one from New York-based American Express Co. that will employ about 50 initially but could add about 100 jobs — without offering incentives. But both can point to support from site-selection experts.

The Boyd Co., a consultancy based in Princeton, N.J., published a study that concluded Winston-Salem has the nation’s fourth-lowest cost for operating data centers, while Ronald Bowman Jr., executive vice president of New York-based consultant Tishman Technologies Corp., says North Carolina in general and Greensboro in particular rank second among the world’s best sites for data centers. Boyd and Bowman agree that both places fill the basic requirements: cheap and reliable electricity, little threat of disruption from the weather, distance from likely terrorism targets, a good fiber-optic network and an educated workforce.

Recruiters for both cities say they’re pursuing data centers, but neither says it works against the other. “We even work projects together from time to time,” says Dan Lynch, president of the Greensboro Economic Development Alliance. His counterpart in the Twin City, Bob Leak of Winston-Salem Business Inc., says, “I don’t differentiate Winston-Salem from the rest of the region. I differentiate it against Richmond, Va., Washington, Atlanta and Jacksonville, Fla.” In fact, he admits, his city has roughly the same assets as Greensboro.

They have a point. John Boyd Jr., a principal at The Boyd Co., included Greensboro and High Point in his information about Winston-Salem. The real competition for data centers lies in the Midwest — particularly in states that have no corporate income taxes or sales taxes, he says. But Bowman believes Greensboro is the stronger candidate. “It has better fiber and power distribution.” It also has an intangible, courtesy of his global ranking. “There’s a certain amount of swagger that comes to a city once it gains attention. That gives the user a lot of confidence.”

But it might want to check that swagger at the door. Published reports in July said Microsoft Corp. was considering the region for a data-storage center that would cost at least $120 million — and possibly “billions.” Its location: Mebane, in Alamance County. Could a new rivalry be brewing?

Tobacco money helped build Winston-Salem, but the golden leaf’s stature in the Twin City is steadily withering. Starting in January, city workers must take a test to prove they are tobacco-free or pay an undetermined increase in their health-insurance premiums. Officials say that will cut the city’s health-care expenses, but they aren’t sure how much. In an unrelated move, R.J. Reynolds Tobacco will end cigarette production in the city by the middle of next year. It plans to shift 540 production workers and 40 salaried ones from a 49-year-old factory to a newer one in nearby Tobaccoville. That plant employs 1,100.

STARCaye Upholstery planned to close two factories in North Carolina by the beginning of the month. About 90 workers lost jobs here, while 70 were laid off in Taylorsville. The New Albany, Miss.-based company decided to close the plants after a bank rejected a buyout offer from management.

GREENSBORO — Passenger boardings at Piedmont Triad International Airport fell 36.1% between 1999 and last year. A dearth of discount airlines has prompted some passengers to drive to Charlotte or Raleigh for flights. Nevertheless, the airport’s new master plan calls for expansion over the next 50 years. It says the airport, which has shown increases in freight traffic, should add 50% more space and build a fourth runway.

WINSTON-SALEM — Baltimore-based Wexford Science + Technology will spend $87 million to renovate two former R.J. Reynolds Tobacco buildings at Piedmont Triad Research Park. The development will contain 282,000 square feet of laboratory, office and other space. Wake Forest University Baptist Medical Center plans to occupy 85% of the project.

GREENSBORO — Swiss industrial conglomerate ABB plans to close its local plant by the end of the year and consolidate operations in Pinetops. The plant here employs 48. All but 10 were offered the chance to move to the Edgecombe County factory, which employs about 250.

THOMASVILLEBNC Bancorp raised $35 million in capital, primarily from New York-based private-equity firm Aquiline Capital Partners. The money will allow the bank to move quickly on acquisitions. In April, it bought Myrtle Beach, S.C.-based Beach First National Bank.

REIDSVILLEWhiteRidge Plastics plans to add 55 jobs within three years, giving it about 155 employees here. The company, part of Akron, Ohio-based Myers Industries, makes parts for automobiles, agricultural equipment and other uses.

SUMMERFIELD — Atlanta-based SunTrust Banks dismissed foreclosure proceedings against Greensboro National Golf Club, canceling an auction of the 342-acre course and clubhouse. The bank allowed the owner, Eden-based Golf Venture, to search for a buyer but could reinstate foreclosure proceedings. Golf Venture owes $2.1 million.

Regional Report Eastern August 2010

0

Eastern

Is there any port in this storm?

Supporters have called the proposed North Carolina International Terminal “America’s Next Great Port.” Opponents liken it to the state’s costly and slow-developing industrial park near Kinston by calling it “a Global TransPark on steroids.” But the way things are going, the $2.3 billion project near Southport might never get the chance to back up either of those claims.

Political will to build the terminal on 600 acres about four miles from the mouth of the Cape Fear River has been ebbing at all levels. The nearby communities of Southport, St. James, Caswell Beach, Boiling Springs and Bald Head Island fear the port will bring pollution as well as heavy train and truck traffic that will offend the tourists on which the local economy depends. Gov. Beverly Perdue did not include money for the project in her proposed budget this spring. Her spokeswoman says the governor supports the concept of an international terminal but wants public concerns addressed.

State legislators took aim at the port in June by prohibiting the use of general funds to advance the project in the 2010-11 budget. ”It’s a luxury we can’t afford,” says Rep. Pricey Harrison, a Guilford County Democrat who sponsored the legislation. She didn’t expect the measure to pass, but it sailed through the House by a 104-11 vote. The legislature appropriated $9.1 million for 17 other water-resource projects but left out the international terminal. With no funding from lawmakers, the state Department of Transportation in early July put on hold its plans to study road access to the port.

The state Department of Natural and Environmental Resources is considering whether it will provide the state’s portion for a feasibility study to examine channel alignments, environmental risks and economic issues, but it has no extra money. North Carolina would have to pony up about $4.7 million of the $10 million needed.

Even if it does, there’s no guarantee the study will happen. Rep. Mike McIntyre, the Democrat from Lumberton who represents southeastern North Carolina in Congress, turned thumbs down to the port, saying it would cost too much and could harm the environment and national security. It’s too close, he says, to a Progress Energy Corp. nuclear power plant and the Military Ocean Terminal at Sunny Point, which ships 90% of the ammunition going to Iraq and Afghanistan. McIntyre’s opposition will make it more difficult to secure federal funding for the feasibility study and construction.

Officials at the N.C. State Ports Authority, the terminal’s main champions, find themselves in a Catch-22: They need the money to do the studies that will address the concerns but might not be able to get the money to do the studies until they address the concerns. They contend that the terminal would support more than 400,000 jobs and enable North Carolina to compete for cargo carried on ships that dwarf those that now call on state ports in Wilmington and Morehead City. It could eventually handle 3 million cargo containers a year, 15 times the capacity of the port about 20 miles upriver in Wilmington.

The Ports Authority is trying to recruit a private partner to help develop the terminal, which CEO Thomas J. Eagar says would be an economic driver for the entire state. “To simply dismiss this project without thorough study would be irresponsible.” Ports officials declined to say if the agency would use its own money for the feasibility study and released a statement saying the Ports Authority “continues to believe in the opportunities and potential this project could provide the residents of North Carolina.”

Opponents caution that the port isn’t grounded for good. The next state legislature could approve funding and other members of the state’s congressional delegation could seek federal money. Susan Toth, a member of the opposition group No Port Southport Inc., says its goal is to have the property sold or made into a park — “to kill it once and for all.”

WILMINGTON — Rusty Carter, owner of packaging maker Atlantic Corporation of Wilmington, told state investigators he funneled more than $330,000 of his or the company’s money to candidates and party committees during the past decade — mostly to Democrats. He was convicted earlier this year of making illegal political donations.

MOYOCKXe Services, once known as Blackwater USA, is seeking a buyer. It has been criticized for its work in Iraq and Afghanistan, where it provided security for diplomats. The company said in a statement that it has made “significant” changes to become more attractive to buyers.

WHITEVILLE — The Federal Reserve and the state Commissioner of Banks ordered Waccamaw Bankshares to strengthen its credit-risk management. The company also agreed to submit plans to maintain sufficient capital and to suspend dividends unless approved by regulators.

GREENVILLEEast Carolina University’s medical school ranks seventh nationally for training primary-care physicians and placing them in rural and poor communities, according to a study by George Washington University. UNC Chapel Hill’s medical school ranks 57th of 141 schools studied.

PEMBROKE — Las Vegas-based gaming consultant Lewin International backed out of its contract to push the Lumbee tribe’s effort to win recognition by Congress. Lewin was working for a stake in future Lumbee economic ventures, including potential gambling, but says negative publicity about the contract had made it difficult to muster support for recognition.

WASHINGTON — Northport, Ala.-based Boone Newspapers formed a company to buy the Washington Daily News from Publisher Ashley Futrell Jr. and his family. The family and new Publisher Ray McKeithan will retain minority stakes in the newspaper, which won a Pulitzer Prize in 1990. Terms were not disclosed. McKeithan had been associate publisher and general manager.

Regional Report Charlotte August 2010

0

Charlotte

Sick banks are buzzard bait 

Nature has its own ways of repurposing its subjects. Vultures might feed on a dying animal, and bacteria consume what’s left. Better that than cadavers piling up. The U.S. financial system has even less tolerance for clutter. Sickly banks are often killed — “failed” is the polite term — and sold quickly to healthy ones, so as not to spook customers.

In the wake of the financial crisis of 2008, federal regulators essentially decided they needed more vultures. They expanded the pool of bidders for failing banks by creating “shelf charters,” which allow approved private-equity groups to sit on inactive charters while raising funds. Bankers with ties to the Queen City hope to take advantage of that opportunity and make money while cleaning up the carnage. “Clearly, there’s a fair amount of repair to the banking sector that’s necessary, and I wanted to be part of that repair process,” says Brian Simpson, a former capital-markets executive at Charlotte-based First Union Corp. who’s now CEO of Union National Holdings LLC.

Union National and another Charlotte-based group, Blue Ridge Bank NA, have applied for shelf charters. Union National plans to raise $2 billion. Blue Ridge — led by CEO Milton Jones, who retired last year as president of Bank of America Corp.’s Georgia market — wants to raise $1 billion.

They should have plenty of prey. U.S. bank failures are on the rise — 86 in just the first half of this year, compared with 140 in all of 2009. And the Queen City is an ideal base of operations, says Joseph A. Smith Jr., the state’s commissioner of banks. “There are a lot of high-quality bank executives in Charlotte with experience.”

But the trend is hardly exclusive to North Carolina. “We’re also seeing a lot of private-equity investors doing this in South Carolina, Georgia and Florida,” says Tony Plath, associate professor of finance at UNC Charlotte. In June, North American Financial Holdings Inc., with headquarters in Charlotte and Jacksonville, Fla., agreed to buy control of struggling TIB Financial Corp., based in Naples, Fla., for $175 million. North American CEO Gene Taylor was BofA’s head of corporate and investment banking until 2007. Investors include retired BofA CEO Hugh McColl.

While the potential buyers see an opportunity in ailing banks, the takeover targets know the other side of the equation. “It’s essentially a Faustian bargain: sell your soul to private equity,” Plath says. The process isn’t pretty, but, “at the end of the day, that’s what it will take to rebuild the industry.”

Wheeler dealer

Louis F. Harrelson cut plenty of deals in his 55-year career in car sales, but none were bigger than the one that kept him out of jail. Paying more than $1 million in fine and restitution, the 80-year-old former president of Charlotte-based Harrelson Automotive Group Inc. pleaded guilty to conspiracy to commit mail, wire and bank fraud. Federal prosecutors say he allowed employees to file false loan applications for customers, defrauding at least seven lenders who claim they lost a total of $1.2 million. The employees inflated trade-in values and lied about applicants’ monthly incomes. In June, Judge Frank Whitney approved the plea agreement, which calls for $972,000 in restitution and a $50,000 fine. It forced Harrelson to resign from all management and supervisory positions in the automotive industry and stay out of dealerships owned by him or his family for two years.

""

 

CHARLOTTE — New York-based Citco Fund Services (USA) opened an office here and plans to create 258 jobs within five years. It provides services to hedge funds and other financial organizations. The jobs will pay an average of $78,256 a year. The Mecklenburg County average is $48,770.

SALISBURY — Canadian auto-parts maker Magna Composites will expand three North Carolina factories and add 327 jobs within four years. It employs about 360 at plants near here, Lenoir and Newton. The local plant will gain 183 workers, while the Lenoir plant will add 134.

SHELBYClearwater Paper, a Spokane, Wash.-based maker of bathroom tissue and paper towels, plans to build a warehouse and factory that will employ about 250 within five years. Pay will average about $38,000 a year. The Cleveland County average is $31,200.

CHARLOTTEBank of America agreed to pay $108 million to settle federal claims against Countrywide Financial, the mortgage lender it purchased in 2008. The Federal Trade Commission says Countrywide, prior to its acquisition, charged excessive fees to struggling home buyers.

CHARLOTTE BofA also opened a 32-story tower that features conference rooms with living trees, floor-to-ceiling windows and cubicles with personal cooling and heating units. The building, part of a $540 million project that includes a Ritz-Carlton hotel, won’t be finished till next year.

CHARLOTTE — Snack maker Lance laid off about 2% of its workforce, about 100 people, as part of a cost-cutting effort expected to save $6 million a year. It employs about 1,200 here but wouldn’t say how many local jobs were lost.

CONCORDCharlotte Motor Speedway and parent Speedway Motorsports dropped a lawsuit against the city and Cabarrus County, hoping to resolve differences over a 2007 agreement that promised incentives of $80 million if the company built a $60 million drag strip and upgraded the racetrack. At issue is the timetable for the incentives.

CHARLOTTE — In an effort to protect itself against what it sees as unjust asbestos-liability claims, EnPro Industries placed a subsidiary, gasket maker Garlock Sealing Technologies, in Chapter 11 bankruptcy protection. Garlock, based in Palmyra, N.Y., says it intends to pay all creditors in full. EnPro makes diesel engines, seals and other products.

CHARLOTTE — An arbitrator ordered Wachovia to pay businessman Cameron Harris and his wife $10 million. The arbitrator found the bank partly responsible for the couple’s default on some loans because it ignored or refused their requests to exchange shares of Wachovia for Bank of America stock. Still pending is the Harrises’ suit claiming Wachovia lied about the bank’s poor health before it was sold in 2008 (Regional report, April).

Modem come of success

0

Fine Print – August 2010

Modem come of success
By G.D. Gearino

We think of the past as a simpler time, and indeed it was — specifically 2008, when private companies offered cable service and Internet access, cities contented themselves with matters like zoning issues and sign ordinances, and never did those twains meet. Well, they have now. The city of Wilson borrowed $28 million to build its own fiber-optic communications system, other cities have similar plans in development, and the General Assembly has been called upon to sort out the rules. Trouble is, this is one of those bizarre moments when everyone on all sides of the issue is wrong. Or, if you have a sunnier view of the world than I do, everyone is right.

It’s helpful to recall that our modern era isn’t really all that far removed from the time when electricity and indoor plumbing were absent from great chunks of the country. In fact, whenever I feel the need to establish my bona fides as a common man, I point out that childhood weekend visits to my grandparents’ home in rural Georgia involved trips to the outhouse and baths in a galvanized metal tub on the back porch. It’s odd, then, that just a generation or two later the absence of a top-speed Internet connection is considered a societal failing on par with that level of impoverishment — a void so unacceptable that government feels compelled to fill it. (Finland, in fact, has declared broadband access a legal right.) Odder still is the notion that Wilson County, where the state’s first municipally owned cable TV/phone/broadband Internet system became operational two years ago, has a poverty rate 50% higher than the rest of North Carolina. Those two facts, when joined in the same sentence, have a certain Marie Antoinette-ish quality to them: What to do when so many find it hard to meet basic needs? Why, make sure they can download video files quickly!

But the chronic urge among politicians to spend money and time on lesser problems as larger ones go unresolved is a topic for another day. Instead, let’s do this debate-style. I’ll pose the question — should local governments compete with private suppliers of cable TV/Internet access? — and argue both sides myself. (I’m a reflexive contrarian, so taking any opposite position, even simultaneously, is second nature.)

Yes, absolutely. Aside from anarchists — and affected property owners — no one objects when government undertakes big projects that benefit all: roads, dams, water and sewer, etc. A fiber-optic system is just another ambitious betterment of society. Besides, the legality of this was hashed out in the 1930s, when the U.S. Supreme Court ruled that the Tennessee Valley Authority could muscle into the power business, competing directly with private companies. Furthermore, the cable/Internet access business isn’t one that lends itself to vigorous competition, considering that both the up front capital costs to hard-wire a community and the ongoing tech upgrades to the system are discouragingly steep — meaning that consumers rarely have an actual competitive choice. And don’t forget that the company with the most to lose when North Carolina towns get into that business is Time Warner Cable, which many people find easy to hate. (Such is the fate of every near-monopoly; it comes with the territory.) Except for the most committed free-marketer, the prospect of Time Warner facing competition from a publicly owned system would seem like rough justice.

No, of course not. Anyone with the power to levy a tax tends to be a terrible businessman, because he is protected from the laws of supply and demand. Wilson’s two-year-old-fiber-optic system, called Greenlight, demonstrates how an operation that allegedly is entirely subscriber-financed in fact is cushioned by public money. To break even, Greenlight needs at least 30% of the city’s roughly 19,000 households and businesses signed on as customers, or about 5,600. To date, it has 4,900 or so — not enough to cover operations and debt service. To make up that shortfall, the city has dipped into its nest egg and borrowed money from its publicly owned natural-gas utility. Needless to say, a private company has no access to that comforting pool of public money. It has to cover a financial shortfall on its own or pass the cost along to customers. And to underscore the point that the game is rigged in favor of government, the city of Wilson also decided to triple the amount it charges Time Warner to hang cable from city-owned power poles — which would simultaneously saddle its competitor with higher costs and generate more income for a city budget stressed by Greenlight’s financial shortfalls. That’s a move any robber baron would be proud to sport on his résumé.

Having argued both sides, I’ll also award myself the right to cast the tie-breaking vote. But first, one final fact: Wilson built its system without asking voters whether they wanted it. In fact, a move in the General Assembly to require approval from voters before a city launched any such project died when municipal lobbyists pushed back. In the business world, executives pay close attention to the express wishes of their financial backers. In the political world, those financial backers are known as “taxpayers” — and if politicians want to run businesses, they ought to let their investors have a say in the matter. If they’re unwilling to do so, then the Nays have it.

Ghost in the machine

0

Capital Goods – August 2010

Ghost in the machine
By Scott Mooneyham

Not long ago, a crowd in the hundreds — large by the standards of your usual Raleigh political protest — showed up at the Legislative Building. A few milled about the halls. Others tried to buttonhole lawmakers. Some stood outside waving signs, a few reading: “Ban the NC Senate.” They had come to try to save video poker — or rather its latest incarnation, those “Internet sweepstakes cafes” popping up across the state. Many of the protesters must have had no inkling of recent Tar Heel political history, else they would have known, standing outside in the oppressive heat, the only thing they would accomplish was working up a good sweat.

The key event of that history, as it related to their cause, revolved around the previous speaker of the North Carolina House, a man who held that post a record-tying four terms. Jim Black, the mumbling optometrist from Matthews, a Charlotte suburb, became one of the most powerful people in the state. He was once the legislative champion of the video poker industry. Today, he’s in prison. Those two facts aren’t unrelated.

The probe that sent him to the pen was wide-ranging, and the criminal charges to which he ultimately pleaded guilty in 2007 had to do with taking cash from a trio of chiropractors looking for legislative favors. That exchange in a restaurant bathroom may be the basis behind the public-corruption charges, but the FBI investigation began with video poker and the thousands of dollars in donations he took in from an industry operating on the fringes of the law. As much as Black’s former colleagues in the General Assembly would like to forget about it, they haven’t. In 2006, a year before he would resign his House seat in disgrace, legislators voted to ban video poker. A year later, the machines began appearing again in convenience stores, operating as computer sweepstakes games, with customers buying prepaid cards. In 2008, legislators outlawed them again.

But like Ahab trying to kill his white whale, legislators can’t seem to strike a final, fatal blow. Court decisions in three counties last year helped to revive the machine operators and their games. (One ruling has been overturned. Two others are on appeal.) The judges ruled that the ban didn’t cover Internet sweepstakes cafes, where purchasers ostensibly paid not to gamble but for Internet time to play the games. Before long, “cafes” could be found in once-shuttered clothing stores, old warehouses and in strip malls built a few years ago at the height of the real-estate boom.

Operators say they employ 10,000 people in 900 parlors across the state. In trying to save those businesses, they did something rare for any industry: They asked for regulation and taxation, touting the tax revenue that the machines could generate — as much as $500 million a year — as a way for a cash-strapped state to balance its budget.

If the Black corruption probe still haunts the state House, the will of Marc Basnight still prevails in the state Senate. The Dare County Democrat and longtime president pro tem of the upper chamber has never been a fan of video poker. A decade ago, he pushed the Senate to pass legislation prohibiting the games, telling about seeing a child left alone by a parent plugging quarters into a machine. Black and the House blocked the legislation. Ten years later, the House appeared poised to act first to undo those court rulings and ban video gaming a third time. Then House Democrats hesitated, some swayed by e-mails from the machine owners and their employees.

Basnight and his chamber were having none of it. In three days, the Senate stripped the contents from a House bill, rolled new language responding to the court rulings into it, moved the bill through a committee and passed it. A few days later, the protesters showed up at the Legislative Building. They failed to understand that the game was already over. A ghost, the revenant of a man who still lives but is no longer there, haunts the House. On July 7, it passed the Senate bill 86-27.

Even before the House acted, industry officials predicted that the effort would be futile, that technology would again offer a loophole, a way around the ban, which takes effect Dec. 1. People who want to gamble are going to gamble, you know. Some machine owners also argue that legislators are only protecting their own gambling enterprise — the state lottery.

Perhaps the industry will prove correct about the futility. If so, state legislators will have at least made their intent clear to the courts. They don’t want small-scale casinos, no matter what you call them, popping up anywhere and everywhere. They also don’t want to be reminded of a past path to corruption by failing to make that intent clear.

Scott Mooneyham is the editor of The Insider, www.ncinsider.com.

Economies of scales

0

Economies of scales

Here’s a business that isn’t hurt the more things are battered.
By David Bailey
 

Dad was the original bean counter,” says Jon Burns, president of Riverview Inn, a Charlotte restaurant that last year sold about a million dollars worth of seafood, fried in some 10 tons of oil. From his no-nonsense office, which is in stark contrast to the cheesy faux pirate fort of a restaurant his father opened on the banks of the Catawba River 64 years ago, Burns produces a spreadsheet.

“Going across and coming down is every item we have on the menu, every combination item, every child’s plate, every soft drink, every iced tea, every Coke, every toothpick,” says Irwen W. Burns Jr., who upon retiring earlier this year sold his share of the restaurant to his younger brother. “Our dad started it, and it’s gotten more extensive since then.” Like father, like sons. “This is probably 90% of our success. While most people wait till the end of the month or the end of the year to look at their figures, we do it every week. We take it down every day.”

“I don’t see how they do it,” says Raymond Stowe, who runs Catfish Cove — across the river in Gaston County — by the seat of his tan khakis. He insists that he has no idea what his margins are and, after all these years, is not about to start keeping track of them. His accounting method is pay as you go, something he learned from his mentor, Luther R. Lineberger, who started Gaston County’s legendary Lineberger’s Fish Fry in 1948. “I know when I get through every week, I got extra money. I pay for everything every week.” If there’s still money in the cash register, he’s doing OK. “We make money, and that’s the bottom line. And if you don’t make money, you don’t stay in business.”

Like Catfish Cove and Riverview Inn, homegrown fried-seafood restaurants across North Carolina are thriving. “We’ve been extremely fortunate, and our sales have been doing very well in this economy,” Irwen Burns says. And that in the face of rising seafood prices, the deepest recession in decades and the encroachment of fast-food outfits like Long John Silver’s and Captain D’s. One of the prime reasons is they give you so much food for the money, says Don R. Lineberger, the son of Luther Lineberger. “You need to serve your customers the kind of food they’re accustomed to, prepared the way they want it, for a reasonable price, delivered in quantity.”

But there’s another tradition that goes much deeper than the Carolina-fried, megaportion-plus-value formula. As North Carolina fish camps and fried-seafood restaurants have shifted into second- and third-generation ownership over the last six decades, those that have survived have owners who have followed the formula of the men who founded them in the 1940s. Just as Stowe or the Burns brothers would never dream of changing the recipe for the homemade tartar sauce, the slaw or buttermilk-batter, they would never think of tinkering with their mentors’ recipe for financial success. They run their restaurants just like their kitchens — the old-fashioned, fiscally conservative way.

Fish camps are a great example of the principle that a region’s distinctive cooking is often its working people’s food,” says Tom Hanchett, staff historian of the Levine Museum of the New South in Charlotte. Just as Gaston County’s rivers and streams were once full of catfish and bream, its mills “had more looms and spindles than any other county in the U.S. — meaning more mill workers with a few coins to spend on a restaurant meal on Saturday nights.” It’s not surprising that fish camps took off there, Hanchett says, “nor surprising that they are found today anywhere in North Carolina where people value lots of good food for their dollar.”

And just what is a fish camp? “A family-oriented restaurant where they fry everything they see,” humorist Bill Melton wrote in a guide for Yankees in the Gaston Gazette. “I’ve been going to the same one [Riverside in Dallas] all my life,” he says. “I grew up going there every Friday night, and you saw everybody you knew.” (As Burns Jr. says of customer loyalty, “Fish camps in this area are very much like churches. People who go to the Baptist church won’t go to the Episcopal church.”) But aren’t people eating less fried food these days? “Lord, no,” Melton says. “Not here. Absolutely not.” Some might order grilled salmon for a week or so after bypass surgery. “But they’ll ease back after a while when they forget they’ve been that close to death.”

No story about fried fish would be complete without mentioning Calabash, the self-proclaimed Seafood Capital of the World, with only 1,400 residents but two dozen restaurants beneath its shady oaks. Calabash clearly came first, says Cathy Altman, a native of the coastal town who is president and CEO of the Brunswick County Chamber of Commerce. “Arguments often ensue over who opened the first fish camp here, the Becks or the Colemans. In the ’30s, both families already were holding outdoor oyster roasts. Both had moved inside by 1940 and had added the now-famous fried seafood to their repertoire.”

Wherever fish camps started, North Carolina can lay claim to the first use of the words “to designate a restaurant specializing in fish dishes,” according to Dictionary of American Regional English. “Often the lake on which the camp was situated provided the fish for a nearby restaurant, to which the term ‘fish camp’ came also to be applied. Later, other fish restaurants, many having no lake to draw upon, took on the name of ‘fish camp.’”

Eloise Armstrong Buthe, who is 77 and grew up on her father’s farm on the edge of the South Fork of the Catawba River, has no doubt about where Gaston County fish camps got their start. In the mid-1930s, she says in a short memoir that has not been published, her father, “Buck” Armstrong, along with Luther Lineberger and others working at Cramerton Mills “got together a big seine to skim through the river.” They caught mostly carp and catfish — no “high-society fish like tilapia, grouper, salmon and other yuppie-type fish.” As word got out and the Friday fish fry became a regular event, the men “tore down an old log barn from our home place, brought the logs down to the site and put together a long rectangular building, with a large rock fireplace at the north end.” (Someone’s house in Cramerton’s Lakewood neighborhood likely sits atop the site nowadays, she speculates.)

Don Lineberger, vice president of business development at First National Bank in Gastonia, vividly recalls “Armstrong’s hut,” as it was known. He helped his father, who generally did the frying, by cleaning fish and making slaw. (Adding a little apple to the cabbage was the secret ingredient). During World War II, the mill was the primary provider of the khaki uniform material used by the Army, and catching fish provided the hands a much-needed diversion. In 1948, Luther Lineberger started frying fish on weekends at his own place on New Hope Road, charging by the plate. “After 19 years on third shift at the mill, Dad decided he had enough business to quit his job and go full time into the fish-fry business.”

It was a rustic establishment, with fish fried over an outdoor brick fireplace and customers eating at picnic tables under a tin roof, cedar shavings underfoot. As the operation expanded, one thing never changed: Lineberger’s Fish Fry was always closed on Sundays. And it certainly didn’t serve beer; Gaston County was dry at the time. Don Lineberger, now 77, remembers painting a sign in the 1940s that said: “No Cursing, No Drinking Allowed.”

At the restaurant’s peak in the 1960s and ’70s, as many as 8,000 people a week ate there. The Linebergers had to hire off-duty cops to control traffic on Fridays and Saturdays. In 1998, 20 years after Lineberger’s death, the family sold the place to Angelo and Maria Spero, who refurbished and reopened it as Mayfair Seafood. Within a year of the sale, it burned to the ground, as wood-frame restaurants using a lot of hot, boiling oil sometimes will. (Riverview Inn burned down in 1972 and was rebuilt in the fall of 1973).

In 1958, 13-year-old Raymond Stowe had taken a job washing dishes at Lineberger’s. “When I got to be 18, I started cooking fish, and I cooked fish there until I was 45,” he says modestly. Don Lineberger, however, says Stowe was the restaurant’s general manager for many years until 1989, when he left to open Catfish Cove. Like Lineberger’s Fish Fry (and unlike Riverview Inn, which has a bar and buffet), his Belmont restaurant is a bare-bones, no-frills establishment. He credits the elder Lineberger for much of what he knows about running a fish camp. His recipe for slaw, cocktail sauce, catfish batter, fried shrimp and oysters — you name it — all came from “Paw” Lineberger. “All these fish camps up and down the road do the same thing,” he says. Success in the fried-seafood business does not involve secret recipes: It comes from working hard, making sure you get a good raw product at a decent price, whether it’s fresh or frozen, continuously taking care of it and not straying from tradition in the kitchen or at the cash register.

Stowe uses fresh oysters from the Gulf, fresh North Carolina catfish from the Pee Dee River, fresh whole flounder from up and down the Eastern Seaboard when it’s available and frozen flounder from the same place when it’s not. Shrimp, perch, flounder fillets and scallops are all flash-frozen. Food industry insiders say that few, if any, diners have palates sophisticated enough to be able to tell the difference between properly handled frozen and fresh seafood. “I’d say less than 5% of the dining public can tell the difference between fresh and frozen shrimp if they’re fried,” says Jay Pierce, who learned to cook seafood from Emeril Lagasse in New Orleans. Now the chef at Lucky 32 Southern Kitchen in Greensboro, he says the popularity of fried seafood is why the fishing industry is geared toward providing frozen shrimp, flounder fillets, perch and other seafood from around the world at volume discount.

But buying seafood is tricky and requires years of experience, he adds, experience that gives veteran fish-camp owners an edge — especially when prices go up, as they have since the Gulf oil spill. Stowe says he always tries to buy enough shrimp in November — quite literally tons of it — to last him at least through May. (His wholesaler stores and delivers it as Stowe needs it.) Around May, with shrimp season beginning in June, he sometimes buys excess inventory from his suppliers to take him into summer, gambling that prices might come down then. He also buys flounder fillets by the ton since he uses 300 pounds in a week. What’s essential, he says, is having a good relationship with your supplier.

Stowe makes the most money on flounder fillets, freshwater perch and shrimp — all of which are frozen, volume-oriented products. For instance, all last winter and spring he used frozen medium-size, peeled and de-veined Gulf shrimp, which he had bought for less than $3 a pound. A whole order of “green shrimp,” as fish camps call them, weighs about a pound and is priced at $12.50 — giving him a protein-cost-to-menu-price ratio of 25%, a good number. (Since this is all-you-can-eat fare, diners can reorder, but given the size of the portion, Stowe says, no more than one in 10 will.) The smaller Calabash shrimp he served last winter and spring cost him less than $2 a pound. A whole order sells for $10.95 — an even better margin. “He’s getting fast-food, global-domination prices because he’s doing that sort of volume,” Pierce says.

Most diners opt for “half” orders of shrimp, with a serving size of about a third of a pound. Half orders of green shrimp go for $10.50 and of Calabash shrimp, $8.95. Flounder fillets, generally from China, and perch from the Great Lakes carry an even more favorable cost-to-price ratio. Granted, dinners come with potatoes, slaw, hush puppies and salad bar, but since Catfish Cove and most other fish camps make their sides from scratch, their cost is almost negligible.

Shrimp prices started rising in May after the BP oil spill in the Gulf of Mexico — and that was for shrimp caught last year. But Stowe refuses to get all hot and bothered just yet. “Nobody knows how this thing is going to turn out yet. I still got green shrimp from last year, from where I got some in November.” In early July, he hadn’t raised prices for that item. Running out of Calabash-style shrimp, he found the price had gone up $1.50 to $2 a pound from what he had paid last year, so he raised the menu price by a dollar an order — his first increase in two years. In June, he took oysters off the menu when he could only get frozen ones. “They just have a real strong taste,” he says. Riverview Inn did likewise. “We have not raised our prices at this time,” Jon Burns said in late June, “but who knows what the future will bring?”

Whatever happens, customers seem to be getting a better value than ever before. Gluttons can get all the green shrimp they can stuff their faces with at Catfish Cove for $12.50, and that includes a visit to the salad bar. In 1979, Lineberger’s all-you-can-eat green-shrimp dinner cost $5 a plate. Adjusted for inflation, that would cost you $3.50 more than the same plate at Catfish Cove. In 1951, Lineberger’s sold a catfish plate for $1.50. In today’s dollars, that would be $12.56, a dollar more than Catfish Cove charges.

Across the river in Mecklenburg County, Riverview Inn couldn’t be more different from Gaston County’s spartan fish camps. Originally from Pennsylvania and married to a Charlotte girl, Irwen Burns Sr. opened the restaurant in 1946 after moving back to the Queen City from New York, where he had covered the entertainment industry for a trade paper. “Dad was doing fine, making 25 bucks a week,” his namesake son says. “He asked his boss for a $5-a-week raise, and his boss said he couldn’t afford it, so he got mad and moved down here.” Brother-in-law Bill Leigh, who ran Leigh Sandwiches in Gastonia, had an idea. “He told dad if he’d open up a family-friendly fish camp he thought he could make a good living.”

Reporting on show business apparently had rubbed off on Burns, and the Riverview Inn’s dining-as-entertainment concept was carefully considered and ahead of its time. With the war just ended and materials still in short supply, the restaurant was constructed of old slab oak. “The facade was built with a stockade effect like a fort, with fake cannons and a crow’s nest with a lookout.” Burns even hired a man with a genuine peg leg who dressed up as Captain Windy and served as a greeter. The restaurant provided coloring books and comics to amuse the kiddies and was the first in those parts to offer them free dining. Although it struggled for two or three years, it took off in the late ’40s and early ’50s as Charlotte grew.

But in many ways, Riverview Inn resembles its cousins on the other side of the Catawba and across the state. “The key is, we give you more food for the amount of money than anywhere in the world,” Jon Burns says. Half orders of perch, catfish, whitefish, flounder and deviled crab are value-priced at under $10. Today, Riverview Inn, which can seat 600, fries something like 100 tons of seafood a year. And uses word-of-mouth to move it. “We’ve gone for years and years without advertising,” Irwen Burns says. The brothers don’t believe in coupons, though they give discounts to “Riverview Regulars.” Community involvement is their best marketing, Jon Burns says. Every Wednesday night, a classic-car “Cruise In” attracts thousands, with proceeds going to the Shriners Hospital for Children.

Last year was not the greatest Riverview Inn has had, but the restaurant is doing OK, considering the economy: “Sales were down last year like everyone else,” Jon says. “We were right around a million.” One thing is for sure, he adds: “Our margin is too close.” How’s this summer looking? “A little better. We are seeing a small improvement.” Looking forward, Irwen, who is 67, says, “Unfortunately, we’ve run out of family. I’ve already retired.” Says his younger brother, who is 55: “I have thought about selling the restaurant, but we are not actively pursuing that right now.”

Having family working in the operation is a huge advantage, Don Lineberger says. “I was once talking to this Greek restaurateur, and he said the way to make money in a restaurant is keep your food cost at one third, the cost for your labor and all other expenses at one third, and take one third home.” After a pause that says wait for it, he adds: “And in order to be sure to accomplish that, you need one family member on the cash register at all times and another at any door that’s unlocked.”

Stowe, who’s 65, says he’s fortunate to have his son and daughter-in-law working with him. In October, Catfish Cove will celebrate its 21st anniversary. He’ll be in the kitchen, frying the flounder, shrimp and perch. Kent will be broiling fish and, with Summer, running the front of the house, seeing that customers are taken care of. Twenty years from now, if someone comes back and orders a seafood platter, will his son be serving it? Without missing a beat, Stowe says ,“Yes, I think he will be.” Paw Lineberger’s legacy will live on.

 

Libby Hill casts a wide net

For the president of Greensboro-based Libby Hill Seafood Restaurants Inc., the reputation that his grandfather and father established is a tough act to follow — quality fare at rock-bottom prices. “One of the challenges we have today is people are used to seafood being an inexpensive protein,” Justin Conrad says.

In 1953, Luke and Elizabeth Conrad opened the first one in a roadhouse on the outskirts of Greensboro that the sheriff had padlocked because of “bawdy activity.” Over the years, various family members worked there and at other places they opened. Like his uncle and father, Conrad managed one for many years. Now owner-operators run the nine restaurants — four in Greensboro and one each in High Point, Hickory, Reidsville, Mount Airy and Danville, Va. It’s an arrangement Conrad likens to convenience stores where operators buy gasoline from the company that owns the buildings.

“We own every building where there’s a Libby Hill. We own everything, the equipment, the furniture, the plates, everything except for the inventory.” Think of the owner-operators as contract employees, he says. “The operators have the right to operate the business at that location on a yearly basis. It gives them a very good incentive for working hard because, obviously, at the end of the day whatever’s left over in the cash register belongs to them. Their bonus structure, so to speak, is only regulated by how hard they’re willing to work toward their numbers and profitability.”

With degradation of the marine environment — Conrad blamed the recent closing of the Galax, Va., restaurant on the Gulf oil spill and weak economy — pressure from governments worldwide to limit overfishing and rising cost of diesel fuel for fishing boats, running a value-oriented seafood restaurant has become a challenging proposition. “The product price is considerably more expensive than it was way back when,” Conrad says.

He should know. He buys all of Libby Hill’s seafood at the source — whether that’s in North Carolina, Alaska or South Africa — cutting out the middleman. “We deal directly with the producer, the person who owns the boats or owns the plant.” Seafood is shipped straight to the commissary and distribution center in Greensboro, 30,000 pounds per truckload. The trout comes from African waters off the Cape of Good Hope. Perch and clams arrive from New England. Flounder and whitefish are from Alaska, scallops from Canada, oysters from the Gulf of Mexico or Atlantic, the shrimp from the Carolina coast, Gulf or Guyana.

The restaurant’s low prices are an economic reality he inherited and can’t change: “We do it out of necessity because our customers can’t afford higher prices. They are blue-collar workers for the most part, senior citizens or people raising families.” Has he raised prices yet in response to the Gulf spill? “Not yet, but unfortunately it is unavoidable.”

Keeping prices low means a never-ending quest for low-cost seafood, which turned his father — Marshall Conrad, now chairman of the board — into a global traveler. “Dad spent a lot of time traveling to places like Canada or Alaska, the West Coast and Seattle, sourcing product for us. Many of those relationships are still with us and are very good relationships.”

He recalls his father getting a call seven or eight years ago from a longtime supplier who had a deal that seemed to be too good to be true. “It was cold-water shrimp — a very good, high-quality product.” And the price was right. “Somebody at McDonald’s in Europe had this great idea that they were going to offer a shrimp burger. Well, at the 11th hour, after the packer had already produced this product, McDonald’s canceled the order.” Marshall Conrad bought all of it.

“With this facility, we were able to take them. What we got was a Cadillac for a Chevrolet price. It was the best shrimp I ever ate in my life, and we had it for about six months. But that’s how the relationships we’ve developed over the years benefit us.”

Regional Report Western September 2010

0

Western

An M.D. with an MBA takes the top position at Mission

Ronald Paulus’ epiphany came five years before Congress passed health-care reform in March. As executive vice president of clinical operations and chief innovation officer at Geisinger Health System, based in Danville, Pa., he had asked business owners frustrated by rising health-care costs what they expected him to do about it.

Their response? “If something goes wrong, could you be on the hook for it, so we know whatever price we agree upon is what we’re going to pay?” Paulus came back with one of the nation’s first plans that offered fixed prices and a guarantee. When complications arise, the hospital pays.

That put Geisinger on the map and made Paulus, 47, a star in his field. Since the beginning of 2009, he has testified before Washington hearings more than 30 times, trumpeting the importance of accountability. This month, he becomes president and CEO of Asheville-based Mission Health System and Mission Hospital. “He’s a firecracker,” says William Hathaway, a cardiologist who will become Mission’s medical chief of staff in January. “We don’t know where reform is going to take us, but Ron Paulus is as capable as anybody I’ve ever met of adapting to the changing landscape.”

At Mission, though, Paulus will have to adapt to a landscape that sprouts more than just the brambles of reform. He will succeed interim CEO Carleton Rider, who replaced Joseph Damore in January after a rebellion by some physicians (cover story, April). The split at the system’s flagship Mission Hospital, one of the state’s best, stemmed not only from personality clashes but policies that stressed cost control. Damore held Mission’s annual increases to less than 4%, compared with 7% or more at similar hospitals in the state. Mission is also the only hospital in North Carolina that operates under a state-monitored Certificate of Public Advantage, which limits annual increases.

Paulus’ mission at Mission: Heal the rift with physicians while simultaneously positioning the system for reform that likely will place an even greater emphasis on cost-effective care. His dual credentials — M.D. plus MBA — should give him a leg up on both fronts. The hospital system won’t disclose his compensation, but Damore received more than $900,000 in salary and benefits in 2008, according to tax records.

Paulus is well aware of the controversy surrounding his predecessor. His management style, he says, is to “thoughtfully and politely question the status quo,” which should fit well at Mission. He also can be blunt. In talking with doctors during interviews, “I told them if they didn’t want me to come, I didn’t need to be here. I really wanted to be at Mission, but if they didn’t want me, I was willing to bow out.”

His role in the health-care trenches might be tougher. Though George Renfro, chairman of Mission’s board, calls Paulus “a game changer,” he comes from a system where most physicians were employed by hospitals. Some Asheville doctors objected when Mission set up Mission Medical Associates to acquire practices. Similarly, the concept of bundling or fixed-price, warranted care that thrust Paulus into the limelight at Geisinger, is popular with consumers and businesses that pay employee health bills, but many doctors fear it will strangle their incomes.

On the other hand, it might help them do their jobs better. At Geisinger, Paulus’ approach led to an 80% reduction in mortality for in-hospital heart bypass operations. “A lot of people in the past thought higher quality meant higher cost,” Hathaway says. “Instead, higher quality often means a huge cost savings. Ron has pushed that, and he’s had a great track record.”

ASHEVILLECherryville Federal Savings and Loan agreed to become the seventh member of HomeTrust Banking Partnership, a group of mutual banks that have merged to share some management and support services. The Cherryville’s $101.4 million in assets will boost the HomeTrust total to $1.7 billion.

FOREST CITYCMI Enterprises opened a factory here and plans to employ 50 within about a year. The Miami-based company makes leather and other soft materials for boats, cars and other uses.

ASHEVILLE — G. Gordon Greenwood, 63, retired after 10 years as CEO of Weststar Financial Services and its banking subsidiary, Bank of Asheville. Randall C. Hall, 45, was appointed interim CEO. He has been chief financial officer since 1999.

ASHEVILLE — A federal appeals court overturned a lower-court ruling that required Tennessee Valley Authority to speed installation of better emission controls at four power plants affecting air quality in the region. North Carolina officials didn’t immediately say if the state would appeal.

BRYSON CITY — The International Canoe Federation will hold the 2013 Freestyle World Championships on the Nantahala River. Tourism officials say it will give the region an economic boost and validate the Nantahala Gorge as a top whitewater venue.

MARIONEdwards Wood Products bought Blue Ridge Wood Products out of foreclosure. Terms weren’t disclosed. Marshville-based Edwards reopened the sawmill and hopes to employ 32 by mid-2011.

The Federal Deposit Insurance Corp. has ordered changes at two Asheville banks. It directed Pisgah Community Bank to improve its balance sheet and put itself up for sale or a merger. Blue Ridge Savings Bankwas ordered to raise capital and appoint a majority of independent directors to its board. Blue Ridge is owned by former Congressman Charles Taylor, a Republican from Brevard. It has more than $200 million in assets and lost $15.5 million in 2009. Pisgah, which opened in 2008, has about $60 million in assets and lost $1.4 million last year.

 

Regional Report Triangle September 2010

0

Triangle

Research universities can learn a lesson from business 

Universities, especially those focusing on research, can and should be agents of societal change, says Information America co-founder Burton B. “Buck” Goldstein, entrepreneur-in-residence in the Department of Economics at UNC Chapel Hill. With their intellectual and financial resources, universities must help confront and solve such challenges as climate change, poverty, childhood diseases and an impending worldwide shortage of clean water. He is co-author with UNC Chapel Hill Chancellor Holden Thorp of Engines of Innovation: The Entrepreneurial University in the 21st Century, which will be published next month by the University of North Carolina Press.

How can this be applied to higher education?
Entrepreneurial thinking is nothing new to higher learning. Many of the greatest universities were founded as a partnership between educators and entrepreneurial thinkers. Stanford University is a great example, as are Cornell, Johns Hopkins and, frankly, UNC, where a series of entrepreneurs including [chemist John Motley] Morehead [III] played an important role in creating a vision, employing resources effectively and executing the notion of encouraging excellence. We think a real opportunity is at the intersection of innovation and execution, and entrepreneurial thinking plays a critical role at that intersection.

You’re not talking about entrepreneurship in the business sense.
Entrepreneurship should not be equated with commercialism. The tools are not the same, and we are not talking about maximizing revenues for universities. We are talking about maximizing the impact that universities can have.

You say universities should do more to solve world problems. What’s preventing that?
The sort of intellectual battle you see is, in some ways, between a discipline and work designed to advance within a discipline versus a problem orientation that is multidisciplinary in nature. Engineering is a good example. Engineering is problem-oriented by definition, but many disciplines are focused much more on advancing the nature of the discipline.

Why has it become the university’s role to try to solve society’s problems?
Commercial enterprises can’t afford it. The days of private industry supporting innovation are almost totally past, and most government money for research and innovation ends up at universities.

How is the entrepreneurial approach being used by universities in the Triangle?
If you pick up any alumni magazine at State or Duke or NCCU, the word “entrepreneur” will appear many times. It is permeating the culture at virtually all of the schools. But I don’t feel comfortable talking about anywhere other than UNC.

What’s going on there?
A great example is the DeSimone Lab, where entrepreneurial scientists spun out Liquidia — an emerging company here. Geoffrey Sayre-McCord is head of the philosophy department. He teamed with Gary Parr, a New York investment banker, to build an ethics program in a very entrepreneurial manner. So it’s not just creating companies. It’s creating programs. It’s creating initiatives. It’s saying, ‘Here’s a problem. How do we go after it?’

How can schools do this better?
The key is welcoming outside entrepreneurs to the conversation and the academic community. We, at Carolina, are doing a lot with entrepreneurs-in-residence — in the medical school, in the pharmacy school, throughout the university. Even music has one. You expand the dialogue, and you expand the ways of thinking about opportunities and problems. And that impacts the culture.

The Office of State Budget and Management says Wake County, with 920,307 residents, now is North Carolina’s most-populous county. Mecklenburg has 909,493 residents, with more than two-thirds of them in Charlotte, its largest city. More than half of Wake’s residents live outside its largest city, Raleigh. The county’s growth means it needs 102 new hospital beds by 2013, according to the N.C. State Medical Facilities Plan. That’s likely to trigger a fight among the region’s largest hospital systems, as well as outside systems. Applications for the new beds will be accepted next year.

RESEARCH TRIANGLE PARKIBM will add 600 jobs at its mortgage-processing unit in Research Triangle Park within two years. The Armonk, N.Y.-based computer-services company already employs about 10,000 there. The jobs will pay an average of about $50,000 a year, less than the Durham County average of $57,772. It also confirmed that it has abandoned plans for a similarly sized expansion in Charlotte, announced in 2008.

FOUR OAKS Becton Dickinson will open a distribution center here next year and create 187 jobs by 2014. The company makes medical supplies and is based in Franklin Lakes, N.J. The jobs will pay average annual salaries of $28,771, below the county average of $31,408.

CHAPEL HILL — Insurance giant Blue Cross and Blue Shield of North Carolina plans to cut administrative costs 20% by 2014, partly in response to federal health-care reform. It will cut its $1 billion budget by eliminating open positions, shedding jobs through attrition and early retirement and streamlining operations. It also could lay off some of its 4,400 employees, most of them in the Triangle.

ROXBOROCertainTeed Gypsum plans to open a wallboard factory next year and employ 89 in three years. Salaries will average $55,247, well above the Person County average of $39,524. The Tampa, Fla.-based company will receive $300,000 in state incentives.

Triangle companies raised $112.2 million in venture capital during the second quarter — the biggest haul since the fourth quarter of 2008. It was a 77% increase over the first quarter and 10% over the same quarter of 2009. The largest chunk, $44.5 million, went to Morrisville-based medical-device maker TearScience.

WENDELL — Delta Apparel bought HMP Apparel, which does business as The Cotton Exchange. Greenville, S.C.-based Delta made HMP a division of its Fayetteville-based M.J. Soffee subsidiary. Terms of the deal weren’t announced, but Delta said it would keep HMP’s 290 employees.

RESEARCH TRIANGLE PARKKuehne + Nagel planned to begin laying off 115 employees here in August, primarily because it lost a shipping contract with Nortel Networks, which dismantled much of its Triangle operation. The Swiss logistics company says the cuts represent most of its employees here.