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Too often CEOs choose to let outside experts and internal officers take responsibility for their brand’s voice—that’s a big mistake. CEOs need to assert personal responsibility for the voice of their company, transforming the role of communications people from would-be superheroes to trusted advisors.

The problem with delegating the vision responsibility is that messages become the voice of the author, not necessarily that of the CEO. When the boss hasn’t created and owned the message, it’s often just pretty wallpaper. And because it’s not truly representing the customer’s experience or perception, it’s not long-trusted. It’s far better when perceptions grow from a vision crafted by the person in charge. In fact, crafting that vision is perhaps the CEO’s most important job!

So how does a boss decide what the company should be saying? Here’s a process that sets the path toward a clear and sensible vision.

• Do some ambassador  research. Hire a third party to find out just how ambassadors (customers, employees,  prospects, friends, etc.) describe your company, products and brand experience. What are they saying behind your back? Why are they loyal to you? What could you do better?

• Construct a corporate/brand DNA blueprint. From what you know,  decide on a course. Identify a new  vision for the firm as it moves forward. Who might best get you there? What will make you special? How will you support that promise? What’s your brand personality?

• Analyze and articulate your values and the organization’s mission. What personal and corporate values will support your DNA? What is your company in business to do? Can you simplify your mission to a sentence or two that is easy to understand and remember?

• Empower your managers to create  innovations that support your idea. Hold brainstorming sessions, facilitated by a third party, to encourage your managers to explore activities that support your new concept. Empowered subordinates, feeling ownership, will take pride in your brand vision.

• Call in marketing people to massage your message. Once your story has been internalized operationally, let your great communicators do their thing. They’ll have clarity and a new story to work with that grows directly from the brand vision. Your communications will have a better chance for success because the promises they make will prove truer to the customers’ experience.

Allan Gorman is the owner of Brandspa, LLC, a brand-marketing company dedicated to  helping midsize firms increase their economic value by growing their intangible value. He can be reached at agorman@brandspa.net.

Lounge back as you take in the dazzling images and deafening sound, and it’s easy to imagine you’re in a state-of-the-art movie theater. But thanks to the latest technology, you can have that ultimate experience without leaving your house. In fact, today’s media rooms are more sophisticated than ever, and whether you’re planning to build a fabulous home theater from scratch or are updating the one you have, proper planning is key to getting it right. Here, the top tips that will keep you entertained in style:

• Hire a “personal trainer” for your electronics. With so many subtleties involved, creating a system yourself can be overwhelming. The pros know what’s best, what’s new and what’s just unnecessary flash. “Quality, dependability, simplicity, logic—these are what define a great home theater,” says Nick Lehotzky of Electronics Design Group in Piscataway. “We’ll choose  components that ‘play well together.’”  Estimate a 16- to 20-week time frame from planning stages to final installation, advises Joe McNeill, Electronics Design Group’s senior systems consultant. He also suggests periodic updates to maintain your cutting-edge system. To find a professional certified by the Custom Electronic Design & Installation Association, log on to www.cedia.net.

• Custom-program a single remote for easy navigation. “A dependable, high-quality remote that’s easy to use is the key to your entire system,” says Ron Roslasky of Home Systems in Pompton Plains. “Let’s say friends drop by when you’re on the phone and you ask them to wait in the media room. If you find them happily channel-surfing when you walk in, that’s the mark of a good system.” You have two choices: a touch-screen remote (one with virtual “buttons” on a backlit screen that usually requires two hands to operate) or a traditional tactile hard-button remote (once you get familiar with where the buttons are, you can operate it with one hand without looking).

• Blow the budget on sound. Walk into a movie theater and close your eyes: A huge part of the experience is the surround sound. The same is true for home theaters. “We’re seeing much more focus on audio these days,” says Daniel Clark, system designer at  Frankentek in Medford. “Today, the gold standard is 7.1 surround sound.” Translation: The latest models have seven speakers: three up front, two in back, two at ear level in the middle, plus a subwoofer to replicate the lowest frequencies. High-end  surround sound can mean an investment of $100,000 or more just for the aural components.

• Wire everything now. It’s easy to replace a projector or a TV, but much of a home theater system is fairly permanent, often hidden behind the walls. So consider installing a complete wiring system if you’re building or remodeling your home. “It costs three times as much to retrofit a room once the plumbing, insulation and drywall are in,” says Edward G. Wickham, CIO at  Frankentek, “but it’s easy and cheap when the walls are open. We’ve been running fiber,  together with our standard wires, into new construction for 10 years now. Our customers are always happy to have it when it’s time to upgrade their electronics.” Plus, if you move, a complete wiring system can make your home more attractive to buyers than one that’s not wired. Some builders estimate it can boost resale value as much as 14 percent.  

Mary Seehafer Sears writes about lifestyles from Morris Plains.

About 200 million Americans now participate in drug plans administered by pharmacy benefit management companies (PBMs). So it’s no wonder these companies—including prominent names such as Express Scripts, Medco Health Solutions and Caremark Rx—have become a commanding force in shaping the prescription drug market. SUNRx Inc. is looking to add its name to that list. But the six-year-old Mount Laurel company, with revenues of $29.4 million in 2006, is taking a different path, challenging the established PBM business model.

PBMs are often touted for their ability to use marketplace clout to control drug costs, slow the growth of copayments and obtain discounts for customers. However, critics of the traditional model argue that the companies squeeze manufacturers and retailers hard without passing enough of the savings along to clients.

According to a government report, PBMs lower the average cost of brand-name drugs by 18 percent compared with prices paid when no third party is involved in administering drug purchases. While critics don’t dispute these figures, they insist that PBMs keep a disproportionate share of the rebates received from drug manufacturers—more than they disclose to their clients.

Timothy Liebmann, chairman of SUNRx, says his company operates on a straightforward business model. “What sets us apart from our competition is that we’re completely transparent,” he explains. “We believe in full disclosure.”

Perhaps company founder Gerard Ferro, Liebmann’s predecessor as CEO, was more direct when he told Inc. magazine in 2007, “All clients know they are getting screwed by their prescription benefit manager but haven’t been able to get their fingers around how. We show them.”

RETHINKING THE MODEL
SUNRx designs and executes customized prescription benefit plans, as well as  develops formularies that result in lower costs. Its programs and services include specialty pharmacy, claims adjudication, plan and rebate analysis, industry trends and forecasting, drug utilization review and disease management.

The company works with four independently owned mail-order pharmacies in addition to a retail network of more than 52,000 pharmacies nationwide, including major chains. It charges a flat fee for services and allows clients to keep rebates and variances in price spreads. If SUNRx negotiates a better discount or dispensing fee for one client, the improved pricing is passed on to all clients.

Liebmann attributes SUNRx’s ability to deliver cost-efficient service to technology, including fully customized software that provides a 360-degree view of client and internal data. The company currently has about 100 clients, the majority of which are unions. It also serves third-party administrators (TPAs).

INTELLIGENT GROWTH
The company’s business model is clearly working. It has been growing at an annual rate of approximately 1,300 percent since 2001, when it was launched with financing from its founders and venture capital.  In 2006, it ranked fifth in the  Philadelphia/Camden/Wilmington metropolitan region on the Inc. 5000 roster of growth companies. (Based at that time in Cherry Hill, SUNRx recently moved to larger offices in nearby Mount Laurel. The company now employs 35 people.)

For two consecutive years, SUNRx also made the list of the 10 fastest-growing privately held companies in the Philadelphia region. The company was number one in 2005 and number nine in 2006. (Liebmann points out that the 2006 rankings had an unusually high bar, with the two-year growth rate for the lowest-ranked company on the list exceeding 80 percent.)

“Continued, measured growth is our biggest challenge,” says Liebmann, who became CEO in 2007 when he and  his partners invested in the company, backed by private financing. “We don’t  want to grow simply for the sake of  building a revenue base. We want to grow profitably and intelligently, with  outstanding clients and customer service.

“We expect to bring in a lot of new  business, and we need to make sure the company can support that business operationally,” he adds. “Like the CEO of any successful growth company, my biggest challenge is to keep all the parts moving at the same time.”

UNDER THE RADAR
No company, of course, can continue to grow at a 1,300 percent rate. “It’s understood that the later stages of growth are different from the early ones,” Liebmann notes. “As a privately held company, we  believe the best way to operate is under the radar screen. We don’t make our projections public, but it’s safe to say that we expect to continue to grow at a back-breaking pace.”

As for going public someday, “that’s something we need to evaluate as part of our growth plan,” Liebmann says. “First, we have to grow and be profitable. And the markets have to cooperate. That’s something that isn’t within our control.”

He adds, “We’ve been very successful  in terms of marketing. Looking ahead,  our goal is to establish ourself in less- competitive markets. If that brings us head-to-head with the big PBM companies, we’re prepared to take them on.”

Barbara Ross, a resident of Verona, is a corporate writer and business consultant for leading  financial services, pharmaceutical and consumer health care companies.

Gamblers sometimes suffer losses on the way to a big win. The same can be said of Atlantic City. The resort town hit its heyday in the early 20th century only to fade in the 1950s. But now with an explosion of long-anticipated development under way, it seems a safe bet that the city and its skyline are headed for new heights.

The revitalization began in 2003, when the Borgata became the first new casino-hotel to open in 13 years. Since then, it has been the top-grossing casino in Atlantic City every month except one. And the massive 2,000-room luxury casino-hotel isn’t even on the boardwalk but rather on the northern bayside of the barrier island.

“The Borgata was enthusiastically welcomed into the market,” says Alan Feldman, senior vice president of public affairs for MGM, a partner in the Borgata venture. “Many worried that its arrival would suck the life out of the boardwalk, but that didn’t happen. Rather it attracted a different type of client, and we believe this trend will continue.”

Indeed, the Borgata has set new benchmarks for local competition. It offers a plethora of dining, entertainment, shopping and spa amenities for guests not always drawn to gaming—a concept that Las Vegas leveraged to make itself a vacation destination but which Atlantic City was slow to adopt. In early 2008, Borgata’s newest addition, The Water Club, will be Atlantic City’s first boutique lifestyle hotel, adding another 800 rooms.

“Atlantic City had settled into a modest year-after-year growth pattern, but if it wants to distinguish itself from its competition, it can’t hang its hat solely on gambling,” Feldman says. “We’re now applying lessons learned at Borgata and our other openings to our new project.”

Feldman is referring to MGM’s planned $5 billion megaresort on the northern peninsula. Scheduled to open in 2012, this new arrival will be the tallest building in Atlantic City, with nearly 300,000 square feet of gaming space, 3,000 hotel rooms, a spa, a large theater, restaurants, nightclubs and 500,000 square feet of retail and convention space.

“The casinos realize they need to change from daytrip destinations to full-fledged resorts to stave off competition from other states,” says Linda Kassekert, chair of the New Jersey Casino Control Commission.

And so things also are stirring on the boardwalk. The newly formed gaming company Revel Entertainment has
announced plans for a $2.5 billion resort on the beachfront. It will ultimately contain two towers with almost 2,000 rooms each, a large casino and an additional 500,000 square feet of dining, spa, retail and entertainment space.

Harrah’s will soon finish its own 44-story, 961-room tower, which will be the tallest hotel-casino in Atlantic City and the second tallest in New Jersey (that is, for a brief period until MGM opens). The company has also made significant renovations to Bally’s, Showboat and Caesars.

The Trump organization, too, is sprucing up with $450 million in renovations and expansions on its three properties, including a new 40-story, 800-room hotel tower at the Trump Taj Mahal set to open in mid-2008. What’s more, the Tropicana is doing its own $30 million makeover.

And, of course, it’s hard to miss the current hole in the skyline created last October with the implosion of the Sands by Pinnacle Entertainment. Although no definitive plans have been released, the site promises to be the locale of yet another multibillion-dollar resort.

Real estate markets frown on economic uncertainty. And while New Jersey certainly isn’t immune to the current credit crisis or sluggish growth, its commercial and industrial real estate values are proving to be resilient.

“New Jersey will be influenced positively and negatively as regional, national and global economies expand and contract—this is an irrefutable fact,” says Ray Sohmer, senior managing director of CB Richard Ellis, a global real estate services firm with $4 billion in revenue. “However, based on past economic downturns, New Jersey tends to outperform other Northeast markets.”

So what sets the Garden State apart? Its proximity to New York City and the presence of significant world corporate headquarters are major contributing factors. And Sohmer notes that the state will continue to benefit from corporate mandates to reduce operating costs at a time when the commercial rental rate gap with Manhattan has never been greater.

Taking Stock
Class-A office space in midtown Manhattan is currently running at about $80 per square foot, while northern New Jersey is bargain-priced at $25, explains Gil Medina, executive managing director of Cushman & Wakefield and former Secretary of Commerce for New Jersey. “Yet demand in New York continues to outpace supply and will continue to do so for the next decade,” he continues. “New Jersey benefits from this overflow demand, especially along the Hudson waterfront.” 

Indeed, rents in the Hudson waterfront submarket continue to skyrocket, and space remains scarce. More than 1 million square feet was leased in 2007 alone, surpassing 2006 levels. Newark also is experiencing growth, with Morris County only a few steps behind.

And yet New Jersey’s overall leasing velocity has slowed tremendously in the past 18 months—but that statistic can be deceiving at times. Take, for instance, five new buildings in Princeton that have a collective vacancy rate of 92 percent (about 1 million square feet).

“Princeton is world-renowned for its intellectual capital, particularly in the area of life sciences; however, these buildings all came online at the same time,” explains Jon Meisel, executive vice president of Jones Lang LaSalle, one of the largest real estate money management firms with 160 offices worldwide and $47 billion of assets under management. “Still, I expect some tenant announcements to happen soon.

“New Jersey is unique—if you don’t build it, they don’t come,” he adds. “So few companies here plan more than a couple years in advance because they know there will always be space available.”

Special Blessing in Location
New Jersey’s pivotal location between New York and Philadelphia, as well as its accessibility to other major metropolitan centers on the East Coast and even Europe, has made it a logical global distribution and warehousing location, observes Medina. “It’s within overnight delivery of 60 million people with very large collective purchasing power,” he says. “The biggest challenge will be how to improve the state’s infrastructure. New Jersey ports are the third largest in the country and boast state-of-the-art technology, but the surrounding roadways, rail lines and loading facilities for these areas need to be improved to provide better access.”

The infrastructure’s impact on real estate is readily apparent. In general, the market north of Exit 10 on the New Jersey Turnpike remains strong, while areas farther south are experiencing vacant buildings and little tenant interest. Closer to Philadelphia, there’s been considerable growth as some builders and tenants migrate from crowded markets to set up big-box warehouse and distribution operations for products delivered through both New Jersey and Delaware ports.

The Meadowlands submarket benefits from the tremendous volume of users that absolutely must be in the immediate New York metropolitan area. That’s despite the region’s being dominated by essentially obsolete industrial buildings with low ceilings. (Interest has shifted from the 24- to 26-foot standard of the 1980s to 36-foot clearance at modern facilities.)

“Demand has started to boomerang back to New Jersey’s urban centers from lower Middlesex County and Pennsylvania as prices there continue to rise and entitlements become harder to secure,” notes Paul Rosen, vice president and regional manager of AMB Property Corp., a global industrial REIT player with a portfolio of 140 million square feet in 13 countries. “The ports and Newark Airport are increasingly active, putting even more demand on the surrounding mature markets.”

The View Ahead
Several major events are looming that will have a significant impact on the office market: Prudential is vacating 386,000 square feet in Roseland, NBC is moving 1,000 employees from Manhattan to Englewood Cliffs, Verizon is consolidating and selling its 428,000-square-foot Newark headquarters as well as two call centers in Madison and Scotch Plains, and Goldman Sachs received approval to build a second 30-story tower in Jersey City. What’s more, L’Oréal is evaluating a consolidation of its nine facilities, while Liz Claiborne, Cookson Electronics and Fabricated Plastics have all announced layoffs and factory closings.

And with 19 speculative projects under way (the majority of which are in Middlesex County), the market could end up paralyzed for some time. The buildings that tend to hold on to tenants longer are those with flexible expansion capabilities and unique services.

Patrick J. Connelly, vice president of asset management for New Jersey real estate firm Matrix Development Group elaborates: “Last year, for example, Lifetime Brands executed a five-year extension when we expanded their 500,000-square-foot existing space. And at the Mercedes facility at Exit 8A, there’s a fully functioning Federal Express station operating inside to complement its parts-distribution business. Keep in mind, too, just a few years ago 350,000 square feet would have been considered a big facility. Now, there are plenty of 800,000- to 1.2 million-square-foot buildings. The older space, however, is still very appealing to smaller operators.”

Looking forward, most experts predict that both the office and industrial markets will remain flat for the foreseeable future, but the Garden State’s assets do present opportunities for growth.

Fasten your seat belts, New Jersey. There is, says Governor Jon S. Corzine, a “truck barreling down the
road” at us. The state’s bonded debt has soared to roughly $32 billion, the nation’s third highest, and payments on that debt will gobble up $2.6 billion in the fiscal year 2009 budget that might otherwise go to the
infrastructure and services that help make the Garden State a good place to do business.

In January’s State of the State address, Democrat Corzine offered his solution: a four-part financial restructuring plan that would lease operating authority over the New Jersey Turnpike, Garden State Parkway, Atlantic City Expressway and part of Highway 440 in Middlesex County to a new public benefit corporation (PBC). Bonds issued by the PBC would provide the cash to halve the debt and slice a cool billion off that annual debt-service bite. And, oh yes, tolls on those roads would head for the sky—they’d be hiked 50 percent every four years from 2010 to 2022, with additional increases based on the cost of living.

Why not just bill the voters or cut pork? Impossible, said Corzine. “Pigs will fly over the statehouse,” he declared, “before there’s a realistic level of new taxes or spending cuts that can fix this mess.” But his plan did have three other parts: a freeze on state spending for fiscal year 2009, a law that future spending increases can’t exceed recurring revenues and a constitutional amendment requiring voter approval for all future state borrowing without a dedicated revenue source.

Business leaders winced at what an end-to-end Turnpike trip would cost, under the plan, just 14 years from now: $44.10 instead of today’s $6.45, assuming 3 percent annual inflation. As the governor launched a series of 21 town hall meetings to sell his plan, some said his scheme would simply create more debt than ever—albeit in a different pocket. Others suspected that Corzine’s idea for “asset monetization”—squeezing value from future tolls—might be what Winston Churchill called democracy: the worst possible option, except for all the others.

 “It’s like taking out a Visa Platinum to pay off your Amex card,” says Republican State Senator Jennifer Beck of the 12th Legislative District. “It simply replaces one type of debt with another.”

Senator Beck says the plan discriminates against commuters who rely on the toll roads to get to work. She favors budget cuts instead, pointing out that she and her colleagues have identified 70 possible reductions in the last two budgets.

But Michael Egenton, vice president for environment and transportation at the New Jersey Chamber of Commerce, takes a more favorable view of the plan. “What CEO wouldn’t like to see the state keep spending within its means?” he says. “That is how a business operates.”

Behind Egenton’s receptivity, he admits, lies fear. “If this proposal doesn’t go through, I’m afraid Plan B could be more taxes on the business community because they’ve got to raise money from somewhere, and over the years we have been an easy target.”

One CEO who staunchly opposed the idea of selling highways cuts the PBC lease proposal a bit more slack. “Governor Corzine really does know finance,” says Jeffrey Tucker, CEO of the Cherry Hill–based freight brokerage firm Tucker Company, referring to the governor’s experience as a former co-chairman of the investment bank Goldman Sachs.

Tucker does oppose putting tolls on part of Highway 440, which is currently free. (The governor has said this part of his plan might be negotiable.) But he is pleased that proceeds from the bonds issued by the new PBC would be used only for cutting the debt and funding transportation improvements.

“Most of the trucking and manufacturing companies wouldn’t mind paying a little extra on tolls if we knew for darn sure that money was going back into the roads,” says Tucker.

So what’s in store? NJ CEO sought answers in three key areas:

Finances: a Novel Arrangement
Skeptics had initial questions the state’s Treasury Department couldn’t immediately answer. What firm (Goldman Sachs?) would underwrite the new PBC bonds? Whoever it is, says Senator Beck, “they stand to make an enormous amount of money off their fees. I’ll be curious to see what those numbers are.” At one town meeting Corzine estimated that underwriting and legal fees would run about 1 percent of the PBC’s total funding—a hefty sum.

“Moving debt from New Jersey’s state balance sheet to some new agency’s balance sheet doesn’t pay off anything,” says Doug Stives, a CPA and professor of accounting and income taxes at Monmouth University.

But Corzine’s contention that “PBC debt is not state debt” does get support (predictably, says Senator Beck) from financial experts. Mark Tenenhaus, a vice president at Moody’s Investors Service who serves on the committee that determines the state’s credit rating, says the governor’s scheme is not simply like using one credit card to pay off another.

“It does address the major issues that confront the state’s fiscal condition,” he asserts.

The governor says he expects bonds issued by the PBC to raise between $32 and $38 billion. Of that, $10 billion would be used to pay off existing obligations on toll roads and “create the appropriate bond reserves,” and $4 billion would be placed in a capital reserve for toll-road improvements and widenings. The remaining $18 to $24 billion would provide “an upfront payment … to reduce state debt and fund transportation improvements.”

The Internal Revenue Service was expected to rule on whether tax-exempt bonds could be used. But even if they can, Tenenhaus expects that taxable bonds, too, must be part of the mix. “It’s difficult to envision a tax-
exempt bond market being able to absorb that many bonds in basically one shot,” he says.

At least everyone agrees the problem is severe. Debt service eats up 7 percent of the state’s annual budget—and that share grows ominously. And the state’s Transportation Trust Fund is due to run out of revenues in 2011. “If we don’t have a consistent funding source for the TTF,” warns Egenton, “it will jeopardize federal matching funds for projects like the proposed Hudson River commuter rail tunnel.”

Politics: A Canny Approach
Corzine’s recent success in passing legislation to reform school financing “augurs well for this effort,” says Gerald Pomper, a retired political science professor at Rutgers University. “The main thing he has going for him is sheer necessity.”
 
Indisputably the Corzine plan would affect some New Jerseyans more than others. The
governor acknowledged this when he told reporters that regular-rider discounts might ease commuters’ burden to some extent.

Pomper says it was “very smart” of Corzine to tap his friend and onetime Senate opponent, former Republican Congressman Bob Franks, to lead the public campaign for legislative enactment of the plan. “Franks provides cover for some Republicans who might be persuaded anyway but need protection politically,” he observes.

Sacrifice makes stirring political rhetoric, to be sure. But a wise politician invokes the noble sentiments of sacrifice and then cushions the pain. That Corzine has done in two ways: by getting out-of-staters to help bail out New Jersey and by postponing the “tough love” at the toll booth till after the 2009 gubernatorial election.

An estimated 53 percent of Turnpike users and 33 percent of Parkway users are non–New Jerseyans. But passing the hat to out-of-staters is hardly a new idea.

“Look at Delaware,” says Matt Sundeen, a transportation analyst for the National Conference of State Legislatures. “It has a very small number of miles of I-95, but there are tolls there. Most of the people they’re tolling are from elsewhere, and it’s significant revenue for Delaware.” In a way, he adds, New Jersey is lucky to have a stream of tollable travelers passing through. “That gives it much more potential for solving transportation funding issues than, say, South Dakota.”

Corzine has vowed to put his job on the line to solve the state’s fiscal crisis. But the fact that the toll hikes don’t begin till 2010 may leave the worst of the voters’ wrath till he’s safely re-elected.

“I’d support raising tolls but only if he does it now,” says Stives. “Waiting is political hyprocrisy.”

But it doesn’t bother Pomper that voters won’t get an opportunity to render a direct verdict on the plan. “The defeat of the proposition last fall to reserve 1 cent of the sales tax for property tax relief indicates that voters are saying, ‘What do you guys get elected for? You figure it out,’” he says.

The battle for financial restructuring tests the political skills of a chief executive known more for crunching numbers than for slapping backs. “It’s not going to be easy,” says Pomper. “The governor is the state’s most powerful person, but he doesn’t get everything he wants. And this governor has not always been skilled at getting support. He hasn’t spent a lot of time schmoozing.”

Infrastructure: A Pressing Need
Last August 1, when the collapse of Minneapolis’s I-35W bridge plunged dozens of cars and their occupants into the Mississippi, New Jersey and the nation got a reminder that infrastructure maintenance and repair can be a life-or-death affair.

“In the next 10 years, we have over 10,000 miles of highways that need to be resurfaced,” said Corzine. “We have 700 deficient bridges that need repairs, and we shouldn’t wait for a tragedy to motivate us to fix them.”

Repairs and improvements to highway systems are traditionally funded by gasoline taxes. But this year, with soaring oil prices causing pain at the pump for drivers also squeezed by the mortgage crisis, a major gas-tax increase may be untouchable—even though New Jersey’s gas tax is among the nation’s lowest.

Analyst Sundeen has studied the response of many cash-strapped states to the challenge of financing infrastructure improvements. He says it’s a new wrinkle that the Corzine plan “is using transportation dollars to solve larger debt concerns.”

Highway monetization itself is rather new in the United States, he adds. “The first time it was done here was when they sold for $1.8 billion the rights to operate the Chicago Skyway for 99 years. The next year, lawmakers in Indiana authorized a sale for $3.8 billion of rights to operate the Indiana Toll Road over 75 years.”

These arrangements have drawn criticism, but the analyst explains that they differ from the Corzine plan because they leased tolling authority to a private Spanish-Australian business entity. As Tenenhaus of Moody’s notes, Corzine is “adamant” that there be “no dividend payouts to anybody outside New Jersey.”

Sundeen believes the Corzine plan may have “some direct cost impact on businesses that use the toll highways.” But he adds that “it’s beneficial to companies when a government is solvent and paying off its debt so that funding is predictable and the state can do more business.” And an efficient, up-to-date and uncongested transportation system, he adds, is a key business asset too.

“Time is money,” says Sundeen. “If you ship your product and it’s sitting in traffic and not moving, that’s part of the cost of doing business.”

New Jersey’s highway tolls are currently modest compared with those of many states. And Tenenhaus doesn’t think enactment of the governor’s plan would be a deal-breaker for businesses thinking of locating in New Jersey.

“There are a host of reasons to be here, given the education levels, the market, the ports and everything that goes with them,” he says. “And the plan would deal with the state’s fiscal capacity and help fund infrastructure improvements like widening the Turnpike, all to the betterment of business.”

Whatever the fate of the governor’s proposal, it’s widely agreed that something must be done about that figurative truck he sees barreling down the road in our direction.

“It should have been stopped long ago, that truck,” Corzine declared. “But instead, it’s just picking up speed.” 

The state has great assets as a home for business—and faces major challenges too

By Janet Mcdonough

Charles Dickens said it well: “It was the best of times, it was the worst of times.” While he was writing about the era of the French Revolution, his words apply to New Jersey’s business climate today. A number of organizations have evaluated New Jersey and other states from a business perspective, and together their reports create an illuminating picture. New Jersey consistently ranks high by certain key measures and low by others. The Garden State, it seems, could also be dubbed the Bipolar State.

The weaknesses are well-known to New Jersey’s business leaders. They include sky-high taxes, a punishing cost of doing business, a bloated cost of living and a frequent inability to compete effectively. While those shortcomings are enough to make one’s heart hurt, there’s a bright side as well.

Poles apart, there are these blissful findings: New Jersey ranks quite high for growth prospects, quality of life, access to capital and leadership in technology and innovation.

Following is a look at the findings regarding New Jersey as a place to do business.

Overall,   Forbes    magazine    ranks  New Jersey  19th in its annual survey of “The Best States for Business.” That’s down from last year’s number 16. High expenses caused the state to weigh in at a lowly 46th when it comes to economical business costs. Among the sweeter findings: New Jersey garnered third place in the nation for quality of life and seventh for growth prospects.

The state was rated similarly by CNBC.com, placing 15th on “America’s Top States for Business.”  But New Jersey then sank to 45th for cost of doing business and 48th for cost of living. The latter poor  scores were offset by the state’s stellar standings for quality of life (first) and technology and innovation (second), as well as access to capital (fifth).

Taxes in New Jersey continue to be a tough row to hoe. The Tax Foundation’s 2007 State Business Tax Climate Index ranked New Jersey among the 10 worst states—a wilting 48th ranking overall, with a corporate tax index rank of 41st. The state’s personal income tax rank hit dirt—not pay dirt—at number 50.

John Galandak, president of the Paramus-based Commerce and Industry Association of New Jersey, said in the July 18 Bergen Record, “New Jersey should see people and businesses flocking to our state. And they would be if our business and personal costs were in line with the rest of the country.” 

Competitiveness Needs Tending
The Rutgers Economic Advisory Service study showed slow economic growth in New Jersey in 2006, with only 34,600 jobs added. It forecast a dip in new jobs for 2007 and a continuation of 2006 numbers through 2016. Of the three-quarters of new jobs in the private sector in 2006, most were in administrative support and food service industries, while high-wage sectors such as manufacturing and information continued to decline.

NJ Employment Watch indicated that New Jersey added 12,900 jobs in the private sector in the first seven months, putting the state on track to add just 26,000 jobs in 2007. New Jersey’s job growth rate is currently about half that of the nation.

Also, New Jersey is winning no blue ribbons for competitiveness. The Beacon Hill Institute for Public Policy Research in its State Competitiveness 2006 study listed New Jersey in 43rd place for economic competitiveness—down from 26th in 2003.

The New Jersey Chamber of Commerce, concerned that the state has become less competitive in recent years in attracting and retaining business, commissioned its own study in 2005 to determine where improvements were needed. Chamber leaders presented their study, New Jersey in Transition: Growing the Economy in a Corzine Administration, to Jon Corzine prior to his taking office as governor in hopes that the study’s recommendations would be addressed.

That report, for which Kate McEnroe of Atlanta-based Kate McEnroe Consulting interviewed company decision makers and third-party consultants who did not choose New Jersey, showed that the state is often not even considered by companies looking to relocate or expand, due to both its high costs and the attitudes of state and local organizations. Recommendations from that study included:

• Reduce or stabilize costs such as taxes and permit fees imposed on employers.
• Enhance the level of site selection information, such as online demographic data, available from the state and counties.
• Encourage the formation of regional development organizations and more public/private funding mechanisms to highlight and market each diverse region.
• Streamline state economic development and financing organization structures to provide a single point of contact and responsibility for project management.
• Respond to projects on the company’s timeline.

Sunny Spots in the Garden State
“We were heartened that the administration did take virtually that entire report and make it a basis for its Economic Growth Strategy,” says Chamber President Joan Verplanck, referring to a document that was released last September. “We’re expecting some modifications and refinements in version 2.0 of that economic development plan, which will probably include a new marketing plan for the state.”

In addition, the final pieces are nearly in place for the restructuring of the Department of Commerce to provide a better line of communication with New Jersey businesses.

“There has certainly been a push from us and others to have account executives meet firsthand with business people to get a handle on what’s happening,” Verplanck says. She noted that more hand-holding at state and regional levels with prospective companies is needed. “We can learn from the competition in other states, particularly Pennsylvania, which has been extremely effective and very, very well organized.”

On the N.J. budget front, 2007 marks the first in six years that did not see increases in taxes and fees. The budget provides $275 million in relief by modifying some business-tax policies. 

The state’s unemployment rate remained at 4.3 percent in June for the fourth consecutive month, rose to 4.6 percent in July and fell to 4.3 percent in August. The national unemployment rate stood at 4.6 percent. New Jersey is one of the wealthiest states, ranking third in the nation in per capita income. 

Even companies and consultants who did not choose the state cited positives about New Jersey in the chamber-commissioned study: It has a more favorable business climate than New York City. What’s more, interaction with New Jersey’s pharmaceutical companies is a plus, along with workforce quality and skills. Also attractive are state incentive programs such as the Business Employment Incentive Program and New Jersey’s workers’ compensation environment.

Other studies illustrate New Jersey’s benefits. The 2007 State New Economy Index, by the Ewing Marion Kauffman Foundation and the Information Technology and Innovation Foundation, ranked New Jersey as one of five states leading an economic transformation in adapting to an increasingly global-, knowledge- and innovation-based “new economy.”

And CNN.com listed New Jersey as having seven of the 100 fastest-growing tech companies in the U.S. for 2007—third behind California (37) and Massachusetts (8).

According to a 2007 biotechnology industry study conducted by Deloitte & Touche, the number of biotechnology-related jobs in New Jersey rose to 10,071 in 2006 from 7,834 in 2003, an increase of 28 percent.

To help promote the state, a number of business organizations are involved in a strategic alliance with Forbes magazine to create a special insert on benefits of New Jersey for businesses, Verplanck says. That insert, targeted at some of the bigger growth markets such as Asia, is expected to be published in January.

“We would very much like to have their North American headquarters somewhere in New Jersey,” she says.

3 Real Buildings Shed Light

by Robin Holleran

Whether you own your business or operate it for others, you’ll face the decision of when to own and when to lease facilities. Arriving at the right answer is often not all that straightforward. At times, the prices paid and motivations behind these acts seem to be more influenced by the pull of the moon than logic.

“The commercial market is a function of economic conditions, interest rates, and supply and demand,” says Steve Fleming, a senior vice president at The Staubach Company, an organization devoted exclusively to user representation in the office, industrial and retail markets. “We have some clients who’ve been able to sell their buildings at a considerable profit after 10 years, while others only expect to recover their initial investment after the same time period.”

Prior to committing to any real estate investment, the following questions should be considered, according to Fleming:

• What amount of flexibility is required in a company’s long-term business plan? (Flexibility applies to both finance and space requirements.)
  
• Where is the highest return on capital generated—in the core business or in a real estate investment?
  
• What are current and projected market values for both leased and owned real estate? How do the projected economics compare for both scenarios over a 10- or 15-year time frame?
•  Are the assumptions used in the buy-versus-lease projections realistic? Assumptions can be manipulated to make any scenario attractive, and it’s easy to fall into the trap of being overly optimistic.
•  What impact does a purchase/lease decision have on the balance sheet?
•  Are there any specialized aspects of the property or business operations (such as machinery or equipment) that need to be considered?

Because each situation is so different, the ultimate drivers of a deal can be any number of qualitative and quantitative factors unique to the company and/or individual(s) involved, although in Fleming’s experience, the decision to buy is often based purely on personal philosophy.

Rick Coyne, a CPA with the Princeton office of Withum-Smith+Brown, recently advised a Monmouth County client on a $10 million building acquisition. The first, and simplest, financial test was determining how the monthly payments on a commercial real estate loan compared with the company’s current lease payments.

In doing this, he ran several different scenarios using a 20 percent cash deposit and either an 8 percent rate for a 20-year term or a 7½ percent rate for a 25-year term (we’ll skip the adjustable rate options). In addition, Coyne recommends a 6 percent opportunity cost be calculated on the deposit monies being committed to long-term real estate rather than being reinvested in the core business operations.

“Anything more than 6 percent would be a high-risk investment anyway; anything less and you might as well put the money in the bank or other safe investment vehicle,” Coyne observes. “I also generally don’t factor in capital gains, especially if this is a dedicated client that expects to stay in the building for some time, because depreciation is subject to recapture at the time of sale anyway. Besides, capital gains rates are difficult to reasonably project because they’re likely to be raised.

Coyne also tends to lean toward a conservative analysis of a real estate investment, especially in these less-than-certain economic times, and not consider any potential appreciation on the future sale of the building. If a proforma is still economically feasible with a sale 10 to 12 years down the road at the same price for which it was purchased, then the deal is a slam dunk.

This brings in the whole issue of assumptions and market values. Projections are only as good as the numbers used—and nobody, despite claims of any prophetic abilities, can accurately foresee future values.

Otteau Appraisal Group, a leading real estate consulting and appraisal firm in East Brunswick, tracks a multitude of variables throughout the residential and commercial markets. According to Niels Guldbjerg, vice president of the firm, there are four very distinct sectors of the office market, each experiencing different conditions. The top-quality, often very large, Class A headquarters buildings are currently experiencing the largest vacancy rates, while Class B is faring slightly better, and Class C is still holding strong. Flex buildings, a combination of storage or manufacturing spaces with a smaller component of low- to moderate-quality office space, are also holding their value.

Flex space works well for many businesses because the rental rate is significantly lower than that of regular office space, and as the name suggests, it provides for great flexibility for a tenant or an owner. “If an owner needs additional office space, he can often convert some of the warehouse space into office or vice versa,” Guldbjerg observes.

Each submarket in New Jersey also contains its own set of variables, making it all the more important to fully investigate each area prior to making a decision to purchase or lease. Many investors also buy buildings that are slightly larger than what’s required for their current needs. This way, they can lease the excess space, preferably on a short-term basis, and use the income to cover some of the building’s carrying costs yet still retain the option of retaking the space as their business grows.

In addition to financial considerations, Coyne points out that not everyone is well suited to handle the day-to-day headaches that accompany property ownership. It’s one thing to call the landlord when the air conditioning isn’t working; but it’s quite another to deal with the issue yourself and with potentially angry tenants.

Also, moving costs can vary considerably from one use to another. It doesn’t take much for an office to unplug a few computers and pack-up a few file cabinets, but a manufacturing business with 17-ton equipment bolted to the ground with an underground water system is an entirely different situation. In those circumstances, a business wants to move once and stay put for a long time.

Despite the words of warning contained in the news, Coyne believes the time may be ripe for investing in commercial real estate as many “old school” property owners are starting to divest of their holdings. This suggestion, of course, comes with the caveat that the company has sufficient cash flow to endure a recession should one come.

“The last thing anyone wants is to be put in the same dilemma as many homeowners now trying to carry variable rate mortgages on homes with values less than the mortgage,” concludes Coyne.

By Robin Holleran

With more pharmaceutical companies than any other state, New Jersey is proudly known by many as the “Medicine Chest of the Nation.” But with dire newscasts about drying pipelines, heightening safety scrutiny, overseas competition from emerging low-cost countries and patent expirations, it’s hard not to wonder if those who rely on the pharmaceutical industry for their livelihood shouldn’t be scouring their own medicine cabinets for a strong sedative.

Despite the well-publicized problems, it’s not all doom and gloom. True, Big Pharma may never see the same dizzying growth it once enjoyed, but here in New Jersey, the industry continues to be one of the state’s largest employers, with compensation packages that reflect extraordinarily high education and skill levels, and it still contributes a stunning $26.5 billion to the local economy.

Thoroughly Ingrained
“The presence of the Pharma and medical industry in the New Jersey region goes back over 100 years, when General Johnson outgrew his bandage manufacturing facilities in Brooklyn. Soon thereafter, George Merck and the Squibb brothers followed, setting a migration pattern that continues today, observes Bob Franks, President of the HealthCare Institute of New Jersey (HINJ), a leading trade association for the research-based pharmaceutical and medical technology industry. Because of this rich history, the concentration of scientists here per square mile is greater than any other place on the planet. In addition, there are a large number of professional firms—legal, accounting and otherwise—that provide specialized services. This array of resources and infrastructure attracts firms from other states, as well as Europe and Asia.

Franks portrays the current hiccups in the industry as part of its natural evolution. For years, healthcare was largely a palliative practice with a limited number of antibiotics. As the science improved and ailments were better identified, more targeted and highly effective drugs were developed. “If you look in your cabinet, in most cases, the vast majority of medications probably weren’t available even 10 years ago,” adds Franks. “As spending increased on newly available drugs, it only makes sense that the industry would come under greater scrutiny.”

Sink or Swim
Not everyone is quite so positive. PricewaterhouseCoopers’ survey Pharma 2020:  The Vision—Which Path Will You Take? contends that despite unprecedented global demand for its product (tripling to an estimated $1.3 trillion by 2020), Pharma is at a pivotal point in its evolution. Many of the larger global corporations suffer from a pipeline shortage of new compounds, lagging financial performance, rising sales and marketing expenditures, increased legal and regulatory constraints, and a tarnished reputation. At the same time, current expenditure levels are unsustainable without solid evidence of long-term benefits.

“The PWC report is a bit harsh,” says Jeff Mraz, a partner with Deloitte & Touche, the firm that conducted a survey of HINJ members for a true reading of statewide activities. “The Pharma industry is making deliberate efforts to change and better address consumer needs. Research too has shifted to difficult medical issues rather than relaunching existing drugs or developing lifestyle treatments. Pharma also takes an unfair share of criticism. Medications are just 15 percent of total healthcare costs, but because they tend to require a larger percentage of out-of-pocket costs, they receive inordinate attention. The talent in New Jersey still remains a strong draw for pharmaceutical companies. It would be very difficult for these companies to find personnel with the necessary education and experience in many other parts of the country.”

A Very Fluid Business
One of the largest companies to relocate to New Jersey recently is Bayer. Its pharmaceutical commercial operations, global oncology, specialized therapeutics and U.S.-based global drug development divisions are consolidating and relocating from California and Connecticut to two headquarters locations in Wayne and Montville. Certainly Bayer did its homework and had faith in New Jersey before instituting such upheaval.

Other changes under way are centered around the science. Pharma is devoting considerable research and development resources to innovations based on genetic mapping and the human genome. Although mastering the tools of these emerging technologies has been much more difficult than anyone imagined, Franks believes that as the science improves, the industry will be poised for a renaissance as it capitalizes on new discoveries. He already sees Big Pharma casting nets farther than ever to secure what has become a record number of collaborations with the academic world, research-based manufacturers and innovative pharmaceutical companies.
 
The Kenilworth-based Pharma company Schering-Plough, for one, not only has four internally generated compounds on the  fast track but also recently acquired Organon Biosciences NV, based in the Netherlands, for $14.4 billion. It also has entered into agreements with California-based biopharmaceutical company Novacea to commercialize a prostate cancer compound, three-year old Manhattan-based biopharmaceutical company PeriCor Therapeutics for rights to a treatment for a cardiac surgery complication, and Massachusetts-based AVEO Pharmaceuticals to develop and commercialize a targeted cancer therapy.

Innovations Underfoot
There is also a bio-buzz stirring within New Jersey’s borders. “In 1998, there were 80 biotech firms in the state. Today there are 235,” notes Debbie Hart, President of BioNJ (previously known as the Biotechnology Council of New Jersey). “New Jersey has all the important ingredients that attract these companies. The presence of Big Pharma and the skilled labor it brings is a major draw, but there are also top-notch research facilities, countless state programs designed to help the industry, large specialized venture capital firms in Princeton and on Wall Street, and the inherent ability to partner with nearby Big Pharma. Just last month, five small companies approached us about moving to the state—and yesterday alone brought two calls.”

Catering to smaller, more innovative firms has spawned a number of supporting businesses that also contribute to New Jersey’s overall economic health. “Big companies have their own budgets and won’t use outsiders. But smaller, specialized service companies are often more adept at measuring results and adapting,” says Michael White, President and CEO of PharmaKinnex, a marketing and sales support company that’s grown to $3 million annual revenue in three years. “New Jersey has not stopped growing and is a great place to start a business if you know what you’re doing and have the passion for the business.”

New Jersey is also making a concerted effort to support the life sciences. In December 2005, it was the first state to invest public funds in human embryonic stem cell research, with an advance of $5 million to 17 research teams from university, industry and nonprofit laboratories, and it also operates a number of programs to attract and retain the industry.

“Celgene is now the largest biotech firm in New Jersey, but in 1998, it had 35 employees and only six weeks’ cash in the bank,” adds Hart. “Right around that time, the state passed a tax credit program that allows qualified businesses to raise funds by selling unused operating losses to other companies. Now Celgene has 1,500 employees and a $25 billion market cap.”

Dan Greenleaf, President of VioQuest Pharmaceuticals, a startup company that specializes in targeted, genome-driven cancer therapies, spent much of his early career with Big Pharma during the heyday of double-digit growth. In a recent interview, he spoke frankly about the state of affairs of the pharmaceutical industry: “We will never see that type of Big Pharma wealth generation again, but there are now some incredible opportunities for smaller companies. Because the blockbuster model is essentially broken, larger companies are striking deals, sometimes paying 50 percent premiums over Wall Street valuations for companies with compounds at the end of Phase II trials. It is also a good time for smaller organizations to recruit top talent. Ten years ago, people wouldn’t leave the mother ship. The ones who want to make a difference now will.”

Giving Back
And it’s not just individuals who have adopted a more altruistic philosophy. This past year, pharmaceutical companies elevated their corporate citizenship efforts as well, increasing their donations by a whopping 74 percent. Of the $4.1 billion contributed globally by HINJ members, an estimated $264 million directly benefited New Jersey causes. The largest chunk of these funds was composed of product contributions to patient assistance programs aimed at improving access to healthcare to the needy. That gives a whole new spin to the promotional motto “New Jersey and You—Perfect Together.”

A conversation with William J. Pesce President and CEO of John Wiley & Sons

by Janet McDonough

Since its founding, John Wiley & Sons has survived the War of 1812, the Civil War, two world wars, the Great Depression, hyperinflation and countless recessions. As one of the world’s oldest publishers celebrates its bicentennial, sixth- and seventh-generation Wiley family members are still actively engaged in the company.

There have been 41 U.S. presidents since 1807 but only 10 Wiley presidents. As for President and CEO William J. Pesce, his name may not be on the building, but he couldn’t be more ardent about Wiley if it were. NJ CEO recently caught up with Pesce, who shared his vision for the years ahead.

NJ CEO: As Wiley celebrates 200 years of business success, how might your vision compare with that of the company’s founders?

WJP: Our culture—one that values enduring relationships and quality—distinguishes us from other companies in this industry. And our willingness to adapt and evolve has helped us sustain momentum since 1807.
 
Charles Wiley started out primarily as a publisher of American literature—the back room of his shop was a gathering place for young authors such as James Fenimore Cooper and Washington Irving. Today, we provide “must-have” information and services, in print and online, ranging from scientific, technical and medical information to higher- education textbooks to “For Dummies”® books, Frommer’s®  travel guides and Betty Crocker®  cookbooks.

The common ground is our belief that publishing is a noble endeavor. We place tremendous value on relationships and the quality of our publications.   

NJ CEO: How is today’s sophisticated technology playing a role at Wiley?

WJP: We’ve invested hundreds of millions of dollars in “enabling” technology, digitizing content to make it more accessible, flexible and customizable. Our goal is to serve our customers better. To the extent that technology can make that happen, we’re interested.  When print on paper works best, we continue to support print.  

NJ CEO: Some fear that technology threatens print publishers. What’s your take on that?

WJP: It’s not print or electronic—it’s print and electronic. Our experience is that technology enables us to serve customers better and has created opportunities that would be very difficult to take advantage of in a print-only world. There’s a role for us in the electronic world, helping busy people find information they need as efficiently as possible—helping them achieve their personal and professional dreams and aspirations.
 
In September 2001, we acquired Frommer’s as part of an acquisition of Hungry Minds, which also included the For Dummies series and Webster’s New World™ dictionaries. We launched frommers.com, allowing us to more actively engage customers through blogs, online forums, maps and walking tours. Frommers.com brings value to our customers through a wider range of services (e.g. trip booking), reinforces our brand, helps sell more books and opens new revenue streams for Wiley through sponsors and advertisers.

NJ CEO: You’ve made a lot of acquisitions in recent years. Is that an important part of Wiley’s growth?

WJP: We’re not looking at growth for growth’s sake. We’d rather be among the best than the biggest. The growth Wiley has experienced is a blend of organic growth—existing businesses outperforming the industry—and strategic acquisitions. We consider whether Wiley and a potential     acquisition can deliver synergistic value that couldn’t be achieved as individual companies. You must prove that there’s a strategic benefit and pay a responsible price—or walk away if it’s too expensive.

NJ CEO: One big change for Wiley happened in 2002 when, after being located in New York City since 1807, its world headquarters moved to Hoboken. What prompted that move to New Jersey?

WJP: Our long-term lease expired in 2001, so we took a comprehensive look at where to relocate. We looked at surrounding states, urban and suburban locations, and outside the region. That process brought us to the Hoboken waterfront—Wiley is the first global headquarters to move here in a very long time. Our main reasons: lower cost, a train station within walking distance, proximity to New York and airports, a great building and an urban atmosphere. Wiley people like to be around culture and the arts.  

NJ CEO: What are your personal goals?

WJP: I love what I do at Wiley—it’s my idea of a good time! I’m as committed as ever to leading Wiley and, hopefully, continuing to generate outstanding results. I also very much want to serve as a role model for the next generation of leadership.
 
I place a lot of importance on treating our colleagues with dignity and respect, as human beings first and professionals second. There’s nothing I care more about than proving that you can lead an organization this way and be strong financially. Wiley’s numbers wouldn’t happen without our culture, strategy, attention to detail and execution.  

NJ CEO: What do you see as the essential qualities of a CEO?

WJP: They’re pretty fundamental points that, sadly, too many people miss. One is that you should never, ever forget where you came from—it keeps you humble. In my opinion, the business scandals we read about come from arrogance and greed. My father was a plumber with a third-grade education, functionally illiterate. I’m a first-generation college graduate—and I say that proudly. A lot of what I believe in as a leader—treating people with dignity and respect no matter what their title—came from my upbringing.
 
A leader must have a clear vision of the future and the credibility to lead people to places they would not have gone on their own. I believe you must be passionate and have conviction, articulating that vision so people will be inspired to embark on the journey with you. And you have to walk the talk, always backing your words with actions, because ultimately that’s what people will remember. That’s a CEO’s legacy.

The ultimate sports car sparks passion

By Susan Brierly

It was a car enthusiast’s dream. Row after row of pristine Ferraris gleaming in the morning sunlight—more than 90 of them meticulously aligned with hoods propped up, ready for inspection, as if in military salute. The scene would have brought a tear to the eye of any member of the venerable Ferrari Club of America.

It was the Penn-Jersey region’s 20th Annual Garden State Ferrari Fall Festival in Florham Park—a special members-only event that attracted die-hard auto fans from several states.

While most luxury cars were driven to the event by their owners or “handlers,” others were transported by motor coach. The large turnout was attributed to the clear skies—because many of these cars never would have made it out of their garages if rain had been in the forecast.

“You gotta love these cars,” said Dr. Jerry Molitor of Chester, co-founder of the region, past president and former host of the Fall Festival.

“The history of Enzo Ferrari and the Ferrari mystique lives on for all of us here. Whether you’re passionate about the vintage varieties or the newer models, there’s only one Ferrari, and we think it’s worth all the time and money and care that ownership requires.”

When Molitor isn’t discussing, restoring and racing cars, you’ll find him cruising around the fast-paced radiology department at Union Hospital in Union.

“This goes way beyond a hobby for me,” he says with a grin.

Living Enzo's Dream
Security was tight at the Fall Festival, and that’s a good thing. Molitor estimates that a cool $20 million in world-class sports cars basked in the sun that day, and many different types of Ferraris were in attendance—coupes, Spiders and competition cars.

At the top of the hill, the vintage models congregated in casually elegant colors like silver, gray and brown. And assembled in the central parking area were the newer, flashier models—most of them in the traditional Italian racing car shade of “rosso corsa” red with prancing horse logo—being waxed and buffed and re-waxed and re-buffed by guys who clearly relish every minute of it. After all, why else would these sane and successful business executives be eager to fork over about $300,000 for a vehicle that wouldn’t be delivered for 12 months?

Larry Gardner of Sparta, V.P. of Operations/Franchise for Toys “R” Us International, brought two of his playthings to the event—a 2003 red 360 Modena (sporting license plate TRUINTL) and a 1980 blue 400i.

When asked if Ferraris are a hobby or an obsession, Gardner reflected while his wife, Gloria, shot him a playful glance. “Let’s just say this is a lifestyle choice for us,” she chided. And Gloria should know—she’s the self-appointed V.P. of Logistics, chief coordinator of Gardner’s many shows and races. “I admit, automobiles are my passion,” he said, “and Ferrari remains the standard to which we aspire.”

The Best of the Best
Midmorning, as car owners made final preparations before judges began their rounds, Jim Wickstead, CEO of Wickstead Design Associates in Cedar Knolls, made a grand entrance in his 1961 silver 250 SWB. Every head turned as his short-wheelbase beauty was personally directed to the top of the viewing area to be displayed alongside the other vintage models. As Wickstead navigated up the driveway and parked (very carefully) in his spot, more than one Ferrari enthusiast was overheard remarking, “Now there’s the car I’d love to own.”

No wonder—the gorgeous and valuable 250 SWB is in pristine condition after the entrepreneur and industrial designer personally and painstakingly restored its every element in a 10-year labor of love. “I acquired it at the Paris Auto Show more than a decade ago, and it’s been my hobby ever since,” Wickstead said.

Meanwhile, Jerry Morici of Clifton, President of Jerome S. Morici LLC, coolly parked his 1967 275 GTB4 Spider convertible in a sunny spot. Those in the know quickly gathered around, noting that his model was conceived as a hardtop but re-engineered to be a Spider. A mere technicality, everyone agreed, because it’s a stunning model that looks jaunty in its hunter-green color.

For purists who prefer a Ferrari in its original condition, a favorite was the 1972 365 GTC/4 owned by Dr. Brian Silverman of Cranford, Director of Overlook Hospital’s Dental Center. The 12-cylinder engine was immaculate, and Silverman beamed as he showed it off to assembled fans. “Only 500 of this model were made in 1971 and 1972,” he said. “You don’t see many of them on the road any more, and this one has its original leather and ‘Colorado marrone’ brown paint.”

But enough of the waxing, buffing and hobnobbing. Morici checked his watch and concluded it was time to hit the road. He slid behind the wheel of his exquisite dark-green Spider and, as he put pedal to metal, proclaimed, “This is why I love my Ferrari. This car is for driving.”

This Mendham CEO’s business is buzzing

By Susan Brierly

For Steven Goldthwaite, President and CEO of New Jersey–based Metem Corporation, life is abuzz on all fronts—personal and corporate.

In his personal time, Goldthwaite enjoys beekeeping because it’s a relaxing hobby that produces a big return on minimal effort. “Beekeeping suits my business schedule because I don’t have to tend to it every day,” he says. “You just set up the hives and let the bees work their magic. The biggest challenge is keeping bears away from the honey.”

When not attending to the hives at his Mendham and Rockaway, N.J., homes, Goldthwaite runs a 200-person manufacturing business started in 1962 by his father, Val Goldthwaite. Metem Corporation specializes in high-precision metal- working for industrial gas turbines and aerospace engines. Its primary customers are GE and Siemens.

“In the midst of global warming, gas turbine technology is a significantly cleaner technology than coal-fired power plants,” notes Goldthwaite. “In fact, 30 percent of all North American energy comes from industrial gas turbine technology.” Metem is experiencing steady growth from its privately held facilities in Parsippany and Allentown, Pa. And the company just established a European presence by opening a facility in Budapest.

“We’re making a real difference by manufacturing energy-efficient parts that help turn the lights on for millions of people around the world,” Goldthwaite adds. “My role as CEO is to grow our business globally and introduce new technology and processes to the manufacture of turbine engine components.”

That really sounds like a honey of an opportunity.

Six hospital and healthcare system CEOs discuss challenges and opportunities

By Barbara Ross

How healthy is New Jersey’s healthcare delivery system? Uwe E. Reinhardt, the well-known economist and Princeton professor, has been sounding a warning for years: Hospitals here and across the country are straining under the burden of economic, technological and other forces, most of which are beyond their control. In New Jersey, many hospitals are beyond strained—they’re in fiscal crisis.

Reinhardt is the chair of Governor Jon S. Corzine’s Commission on Rationalizing Health Care Resources, a 12-member team charged with making policy decisions on a wide range of healthcare issues, from managed care to the identification of essential New Jersey hospitals. A full report with recommendations for the redistribution of healthcare services is due in December. 

But New Jersey’s hospital and healthcare system executives don’t need to wait for the report to know they need to make changes if they are to thrive, or even survive, in the coming decade. NJ CEO asked leaders from five healthcare systems and one independent hospital—each holding the title of president and chief executive officer—to provide a view from 30,000 feet of the healthcare landscape in the next five to 10 years. Participating were Gary Blan, Saint Clare’s Health System; Ronald J. Del Mauro, Saint Barnabas Health Care System; Gary S. Horan, Trinitas Hospital; Richard P. Miller, Virtua Health; Audrey Meyers, Valley Health System; and Joseph A. Trunfio, Atlantic Health.

INVESTING IN TECHNOLOGY
Hospital executives agree that the recent explosion of clinical and information technologies will continue to transform the healthcare landscape. Technologically advanced hospitals have greater potential to improve outcomes in patient care, reduce medical errors and compete for market share against other hospitals.

On the clinical side, telemedicine is opening new diagnostic possibilities by enabling real-time consultations between specialists in different locations. Virtua Health, a four-hospital system serving Burlington, Camden and Gloucester counties, was the first in the state to launch a teleneurology program in its emergency department. When a stroke patient comes into the ER at a Virtua hospital, doctors there can consult with neurologists at the University of Massachusetts on the best course of treatment. “The goal is speed and quality of care,” Miller says.

New Jersey hospitals are also pioneering advances in robotic surgery, which allows surgeons to perform complex and delicate procedures through very small incisions. Surgeons at Saint Barnabas Health Care System were the first in the state to perform a robot-assisted closed-chest mitral valve repair. Morristown Memorial Hospital, part of Atlantic Health, was the first hospital on the East Coast to correct female pelvic prolapse using robotic instruments. While robotic surgery is not appropriate for every patient, it can speed recovery times, decrease the risk of infection and shorten hospital stays.

On the IT side, hospitals are investing in digital and wireless technologies to manage clinical, administrative and financial information more efficiently. Benefits include significant reductions in medication errors and service costs (such as chart management and medical transcription), as well as fewer inappropriate denials and delays with payers.

Trunfio says instant communication is a big benefit of the new technologies. Atlantic Health physicians can access patient information—including digitized images—from the hospital, office or even their cars. A wireless voice communication system connects nurses on hospital floors to physicians and other nurses, enabling them to spend more time at the patient’s bedside. The system also reduces noise levels by eliminating pages.

Many hospitals, such as those of Virtua, have adopted process-improvement tools more familiar to manufacturing environments to reduce costs and waste while improving safety and quality. Miller says Virtua was one of the first healthcare systems in the state to train its clinicians in Six Sigma and Lean methodologies.    

A TREND TOWARD SPECIALTY HOSPITALS
Increasingly, technologically sophisticated medicine will be practiced at specialized regional healthcare centers that provide resources community hospitals can’t afford. Atlantic Health, which serves a six-county area in northwestern New Jersey with pediatric, women’s health, cardiovascular, cancer and neuroscience facilities, has $1 billion in annual revenue, and the budget for some of its specialty service lines “approaches that of an entire community hospital,” according to Trunfio.

As a result, Atlantic is able to hire subspecialists in areas such as neonatology, pulmonary medicine and cardiology. The system also has its own ambulances and helicopters to transfer patients, including high-risk mothers and newborns, from community hospitals to Atlantic facilities for treatment.

“It’s a ‘chicken and egg’ business model,” Triunfo observes. “As the patient base grows, so does the need to recruit subspecialists—who in turn attract more patients.”

At the other end of the continuum, many of the same-day surgical and diagnostic procedures now performed at acute care hospitals are shifting to outpatient facilities. In New Jersey and elsewhere, the trend is toward multiple-service centers. One of the most comprehensive is the Saint Barnabas Ambulatory Care Center in Livingston, which claims to perform more ambulatory surgeries than any other in the state. In addition, the center offers a wide range of nonsurgical services, from dialysis and wound care to sports medicine.

Not everyone agrees that the mass migration to outpatient facilities is beneficial. Gary S. Carter, President and CEO of the New Jersey Hospital Association (NJHA), worries that these facilities aren’t required to meet the same quality and licensing requirements as hospitals. Nor do they provide vital community services such as emergency departments. For many New Jerseyans, the ER remains the front door to the hospital. Hospitals statewide treat 2.6 million patients in their emergency rooms in an average year.
 
BUILDING FOR THE FUTURE
Aging physical structures are also a concern for hospital executives. Meyers says hospitals across the country are treating patients in facilities that were constructed decades ago, when the knowledge base and technological resources were much more limited. She points out that the rapid changes in medical equipment and technology can’t be accommodated easily in outdated facilities.

Through its Renewal plan, Ridgewood-based Valley Health System is seeking approval—and a change in the village zoning code—to replace two of its oldest buildings with three new structures featuring single-patient rooms. Meyers says extensive research shows that patients cared for in such rooms benefit from shorter stays, lower rates of hospital-acquired infections and reduced risk of medication errors.

Other hospitals around the state have also embarked on costly modernization programs. In November, Virtua Health broke ground for a 376-bed full-service medical center in Voorhees Township and it is also planning an ambulatory care center. The combined project is scheduled for completion in late 2010.

Financing modernization is a challenge for many hospitals, particularly those once operated by religious orders. Saint Clare’s Health System, with four hospitals in northwestern New Jersey, is now part of the Marian Health System in Tulsa, a not-for-profit Catholic healthcare system sponsored by the Sisters of the Sorrowful Mother. The system is seeking approval from the state of New Jersey to change its sponsorship to Catholic Health Initiatives, a Denver-based nonprofit health corporation with facilities in 19 states. Blan says this affiliation would provide greater access to capital, as well as savings through shared services and best practices.

A FISCAL CRISIS FOR HOSPITALS
Financial pressures have forced the closing of 21 New Jersey hospitals in the last 15 years, with others close to bankruptcy. In September 2007, Pascack Valley Hospital in Westwood announced that it would close after years of operating losses and an unsuccessful attempt to merge with the larger, more financially stable Hackensack University Medical Center.         

For hospitals in inner-city areas, consolidation is often the key to survival. Trinitas Hospital in Elizabeth emerged in 2000 from the consolidation of two hospitals and the closure of a third. Trinitas now operates an acute care hospital as well as an outpatient facility.

“The consolidation strengthened us financially. We were able to improve our physical plant, replace all of our hospital beds, upgrade technology and significantly increase our ER capacity,” Horan says. The Trinitas emergency department now treats 65,000 patients annually, with growth capacity for 85,000. 

As the board chair of the Hospital Alliance of New Jersey, which consists of 12 “essential safety net” hospitals, Horan is concerned that other hospitals might not pull through. “More than half of the hospitals in New Jersey are operating in the red,” he says. “When so many hospitals are not doing well, it’s clear there’s an underlying cause.”
Most would agree that lack of appropriate reimbursement for hospital services—along with a growing uninsured and Medicaid population—is the major cause of financial distress. According to the NJHA, which represents more than 100 New Jersey hospitals, Medicaid covers just 70 percent of hospital costs on average, while Medicare pays roughly 90 percent.  

Furthermore, New Jersey law requires hospitals to provide care for all comers, regardless of their ability to pay. The state in turn pays hospitals to provide charity care. But as the number of poor and uninsured patients in New Jersey increases, the gap is widening between the actual cost of such care (an estimated $1.2 billion in 2007) and the state’s reimbursement to hospitals ($716 million).

“Clearly, one of the biggest challenges for hospitals in New Jersey and elsewhere is to deliver a wide range of quality healthcare services within the financial constraints of reimbursement,” Del Mauro says. “The next five years will be difficult, but on the plus side we have opportunities to create a new kind of delivery system.”