Think of Cuyahoga County Treasurer Jim Rokakis as government's answer to Dirty Harry. With a metaphorical .357 Magnum cocked and readied for firing, he squints at his subject and snarls out a rhetorical challenge: "Feel lucky, punk?" His weapon is the lien he just slapped on a commercial building, then sold to a private collection agency. And his targets aren't two-bit street hoods but owners of commercial or residential property who try to weasel out of paying property taxes.
Rokakis was in the Ohio legislature when he began noticing that something was terribly amiss in Cuyahoga County's system of collecting property taxes. The county's delinquent real estate taxes-as high as $150 million at one point-were larger than those of the next five most populous Ohio counties combined. "This chasing you when you owe us-it's costly and time consuming and I'm not sure it's that efficient." County prosecutors, already mired in the usual assortment of cases dealing with street crime and drug violations, just weren't up the task of becoming bill collectors, too.
So he and other legislators succeeded in getting the state law changed to permit the sale of liens to private collection agencies, thereby becoming one of 30 states which permits the privatization of tax collections. Later, after he had become county treasurer, Rokakis auctioned off the county's liens to a company in Atlanta, which is allowed to tack on 18 percent in interest to the arrearages it attempts to collect.
Of course, there's a subplot at work in all of this, too. As a relatively young man with his eye set on higher office some day, it wouldn't be such a bad thing for Rokakis to have earned a reputation for stinginess with the public purse strings. That way, if he were to one day run for, say, county commissioner or mayor, he could run on the platform of fiscal conservatism, with some tangible accomplishments about which to boast.
And by all accounts, the change in tactics is working. The 90-day notices that began going out to deadbeats last year, warning them they had only that period to go on a repayment plan or face foreclosure, prompted many people to do so. As of September, $29 million in delinquencies had either gone on payment plan or were paid in full. "We're roughly 25 percent ahead of last year" in property taxes collected, says Mike Sweeney, supervisor of the county's delinquent tax department. "There's a direct correlation between those increases and changes in the system."
Of course, unpaid bills will always give rise to world-class excuse artists. Rokakis chuckles over the lawyer who sought leniency for his elderly client, a tax delinquent since 1973. "His lawyer called and told me I should have sympathy for his client, because he's 82. My line was, 'yeah, but he was 57 when he stopped paying his taxes.'"
Rokakis recalls as particularly illuminating an exchange he once had with a prominent developer who was chronically in arrears. "He owed a lot of money, and I asked him, knowing that he wasn't poor: 'Why do you owe all this money to me?' And he just basically gave me the order of his payments. 'I pay myself first, I pay my employees, I pay my suppliers, I keep my bank line of credit healthy,' and he gave me the rest of this long list. He was with his lawyer, and he said, 'The only person I pay after you is him.'"
The intent of the new lien sale system is pretty modest, says Rokakis, a man of practical bent. "All we're trying to do is move up on the order of payment. Instead of paying me second last, pay me fourth or fifth, as opposed to ninth or tenth."
Theres an age-old struggle between academia, which seeks the pursuit of knowledge for its own purposes, and business, which has an interest in applying and focusing it toward specific corporate ends. The tension was nicely captured by a recent comment of Cleveland State Universitys Donald Golden, chairman of the department of computer and information science. We cant tailor programs to the day-to-day needs of particular organizations, but we dont want to be an ivory tower institution, either.
While the professor was speaking about courses obtained for credit toward a degree, theres been an exploding trend toward noncredit college education customized around the needs of particular companies. And colleges and universities in this area have been only too happy to mold their offerings around the markets needs.
Well go out anywhere, anytime to talk to a company about custom-designing programs for them, says Dr. Ferris Anthony, dean of continuing education at Cleveland State University. Since 1975, he boasts, Weve taken our classes off-campus and offered them in hotels, hospitals and libraries. We were the first, by far, to do custom-designed, on-site training. Any size company, anyplace.
Other institutions have also moved aggressively to chase that market. While the Case Western Reserve Universitys Weatherhead School of Business Corporate University has concentrated mostly on providing customized courses for the largest companiesgenerally those with $500 million or more in salesJohn Carroll University has custom-designed an on-site MBA program for employees of credit card issuer MBNA.
Thats not all, says JCUs continuing education director Christine Gibbons. We just did a five-session program for Consolidated Natural Gasfundamental finance for nonfinance managers. The school has mounted a similar program for The Cleveland Clinic Foundation and recently put together a custom-designed course on supply-chain management for a local logistics company.
While many of its nondegree courses are offered in certificate programs, CSU in particular has been attuned to the degree-completion market. Thats huge, says Dean Anthony. You have adults who have completed a year or two of college and never went back.
Employers can step in to offer tuition reimbursement. Why? Because in many cases, they can take a tax deduction for doing so, making tuition reimbursement a particularly attractive fringe benefit.
Since the late 1970s, the federal government has permitted companies to take tax deductions in return for offering employees tuition assistance. The tax code does contain some qualifiers, according to Patricia Shlonsky, an attorney with Ulmer & Berne LLP. They include:
- Taxable tuition reimbursement is capped at $5,250 per employee in each calendar year.
- Such educational benefits must be offered under a written plan, which does not discriminate in favor of highly paid employees.
- No more than 5 percent of the total educational assistance paid by the company can go toward company shareholders or other owners, or their family members.
- Educational reimbursement cannot be offered through so-called cafeteria plans, which allow employees to select from among a number of different fringe benefits.
- The program cannot fund graduate level courses leading to professional degrees, such as those in law, medicine or businessincluding, surprisingly, MBAs.
Throughout higher education, says CSUs Ferris Anthony, the trend today is responsive education. Our campus isnt just CSU, its the entire town. And employers in the Cleveland area really support their employees going back to school.
Employers checklist: Tuition reimbursement no-nos
Here are a few items barred under Section 127 of the federal tax code, which sets the rules for educational assistance programs eligible for corporate tax credits:
- No reimbursement for courses leading to graduate professional degreesincluding MBAs.
- No more than $5,250 per employee each year.
- No discrimination for highly paid employees.
- No tuition reimbursement through cafeteria plans.
- No more than 5 percent of company tuition spending on owners and their families.
It may come as a surprise, but under current tax law, a company cannot take a tax deduction for underwriting employees MBAs.
That may soon change.
Buried in President Clintons recent budget proposal to Congress was a provision calling for the reinstatement of tax deductions for employer-provided educational assistance for graduate level courses, including MBAs. The reason? Well-educated workers are essential to an economy experiencing technological change and facing global competition, according to language in the budget proposal. Making the change will expand educational opportunity and increase productivity. It probably doesnt hurt that the Oxford-educated president is among the best educated Oval Office occupants ever.
This tax provision has an odd history. As the tax laws applying to employer educational credits were originally written in the late 1970s, they didnt apply to graduate or professional courses. Employers were free to reimburse employees for graduate work, but couldnt take a deduction (and thus rarely offered it as a fringe benefit). In 1990, Congress changed the law so employers could deduct up to $5,250 each year, per employee, for educational assistance. Then, inexplicably, the Small Business Job Protection Act of 1996 took it away.
This is one of those things thats typically a victim when the Congressional Budget Office has to get the budget balanced, says tax specialist Chris Bray, National Director of Wealth Transfer Planning for Sterling, a division of National City Bank which serves high net worth clients. The flip-flopping deduction has also been a victim of expiration dates written into the law, which lapse before any corrective action is taken.
Its hard to tell what the impact of a reinstated tax deduction would be. At Baldwin-Wallace College, where 400 students study for their MBAs and executive MBAs while working, a recent study found that 75 percent received some type of reimbursement from their employers, says Peggy Shepard, coordinator of B-Ws graduate business programs. But those employers are mostly a whos who of the largest companies in the area, including Key Bank, National City, Sherwin-Williams, Ameritech and the Cleveland Clinic.
For smaller, privately held employers, some think even the reinstated tax credit wont convince too many owners to offer educational assistance, especially since the law is written to guard against discriminating in favor of highly paid employees or owners and their families. While he says that any time you can take a tax deduction for anything, youre more likely to do it, tax attorney Gary Zwick says his experience with smaller clients tells him few will offer such fringe benefits. When a small employer gets into a situation where they have to offer it to everyone, they would tend not do it.
Imagine the scene. Youre sitting in a bagel shop, sipping coffee and reading the paper, when from out of the corner of your eye you notice an unusual foursome: a couple with their young toddler and a well-dressed young professional.
You dont mean to overhear their conversation, but its clear that the 30ish young man is an attorney, explaining various ins and outs of estate planning to the couple, who apparently own a tire shop.
So what we want to do is minimize the estate tax ... hes saying. Only he keeps getting interrupted by piercing yelps from the high chair-bound Josh, whos perhaps two years old. I have a four year old, so I certainly understand the phase, the young attorney says, trying to get back to business. Only Josh screams some more. Pained smiles all around. Eventually, we feel duty-bound to evacuate, hoping that some well-targeted babysitting might perhaps allow this couple to complete the task sometime before they retire.
George Fraser has made a pretty good career out of power networking. Several years ago, he began publishing Success Source, a guide to local contacts in the minority community. It succeeded so well that he branched out to publish guides in eight other cities. Black Enterprise magazine, taking note of his work, dubbed him black Americas premiere networker.
In the course of that work, Fraser has amassed a singularly impressive database of contacts, which he calls my industrial-strength Soul-O-Dex/Rolodex.
In his latest book, Race for Success: The 10 Best Opportunities for Blacks in America, published by William Morrow Co., he gives a glimpse of that list. In the dedication, he tips his hat to those whom I have helped and/or who have helped me ... network. But he doesnt stop there. He goes on to list them all by name, just over 1,000 names.
The list reads like a whos who of movers and shakers in Cleveland, with a generous sprinkling of prominent names in the national African-American and general business communities. Clevelanders he mentions include Cavs General Manager Wayne Embry, broadcasters Harry Boomer and Wayne Dawson, Cleveland Indian first baseman turned management consultant Andre Thornton and fellow inspirational author Hal Becker.
SBN publisher Fred Koury is in there, too. And he also thanks a couple of scions of prominent families, Henry Ford of the Detroit auto empire, and Jesse Jackson Jr., now a U.S. Congressman and the son of the former presidential candidate.
Lest doubters think Frasers networking skills are more flash than substance, consultant Bob Donaldson of Beachwood-based Delta Planning recently related a telling story about how Frasers wide contacts come in handy to his business friends.
Donaldson, a former McKinsey & Co. consultant whos been hard at work on his own book about entrepreneurism, received a call from a longtime Canadian associate who was in South Africa, trying to fulfill South African President Nelson Mandelas dream to build one million new homes for his countrymen.
The South Africans were looking for someone who might be able to establish a factory in that country to produce pre-fabricated houses. Stuck for referrals for his friend, Donaldson got hold of Fraser and asked if he had any appropriate names to pass along.
Sure enough, Fraser reached into his database and fished out a name of a contact in Atlanta, a man who was in the building business and who had been to South Africa.
Chalk up one more victory for the Soul-O-Dex.
The rumor mill was buzzing last fall with news of the letter. A Big Five accounting firm was said to be circulating word that all clients with annual billings below $100,000 would be gently shown the door.
In this town alone, said one senior dealmaking attorney, Chuck Emrick of Calfee, Halter & Griswold, that cuts out 20,000 small clients. Thats a bonanza for smaller [accounting] shops like Ciuni & Panichi, Meaden & Moore and Cohen & Co. And Ernst & Young wont be far behind in chasing middle-market clients, he predicted at the time.
After all the dust settles, though, some insist the accounting landscape wont really have changed all that much, letter or no letter.
The natural parallel is to the situation after the KPMG Peat Marwick merger of nearly a decade ago, says one observer. The larger firm promptly began shedding its middle-market clients, either by intentionally pricing itself out of the market or by advising clients to go elsewhere for accounting services.
When they did that, there wasnt a big shakeout, recalls Gary Zwick, a former Cohen & Co. tax attorney who now hangs his hat at the Cleveland law firm of Walter & Haverfield. Besides, even if the smaller accounting firms want to acquire that business, he predicts, they may have to grow larger themselves through acquisition to properly service the accounts.
In any event, at least one industry veteran believes the Big Five would be short-sighted to focus all their energies on the largest clients. What about developing their pipelines of future large public company clients? Forrest Hayes, formerly head of Arthur Andersens Cleveland office, and now a private investor, predicts that, in time, the large accounting firms will come to their senses and change their minds. If you dont serve the middle market when they need you, he says, those clients wont come back when they grow larger.
There are New York Stock Exchange and NASDAQ companies in this town today that wouldnt be around if we hadnt served them in their early days, he says.
Aside from that, though, he has deep reservations about the wave of consolidations rolling across the profession, with small- and medium-sized accounting firms being rolled up into much larger regional and national organizations.
I really have my suspicions about accounting firms being part of a rollup. Its such a personal business. You serve these clients one by one.
There was a kind of bitter irony to the timing.
Just as the annual tax crunch was coming to an end April 15th, and the last few employers were filing their last-moment returns, a new government-imposed paperwork burden was taking effect. It could result in a flurry of court summonses, indicating that the targeted employer had just five days to formally respond to garnishment notices.
It all came in mid-April with the March 30th implementation of Ohios new garnishment process. The main change, says Alan Weinberg, managing partner of Ohios largest creditors rights law firm, Weltman, Weinberg & Reis, is that the garnishment order is now a continuous instrument.
Before, the garnishment only applied to one pay, Weinberg says. If you [employee] happened to be out sick, tough. And you could only be garnisheed once a month, by any one creditor.
Now, if theres more than one creditor trying to reclaim money, they dont get kicked out, they get put in line. Creditors can garnishee up to 25 percent of each paycheck until the debt is fully paid.
Creditors advocates, who pushed the changes, are quick to point out that under the new law, their clients wont be getting any more money than before. To the contrary, the repayments will merely be stretched out over a longer period.
One feature of the new law that creditors especially like is its portability. A creditor seeking repayment will no longer have to chase deadbeats around the state. A garnishment order rendered by Cleveland Municipal Court, for instance, will now have the full force of law throughout the state. And employers will be paid a $10 fee for processing each continuous order of garnishment, which in most cases will be routed through outsourced computerized payroll services anyway.
Nevertheless, some are predicting that it is employers who will be left holding the bag as the new rules sink in. The courts are prepared for this and the creditors law firms are prepared, says one lawyer. But the employers dont have a clue. All of a sudden, theyre going to get all of these continuous garnishment forms.
On the first day the rules took effect, April 15th, one statewide law firm alone filed 5,000 garnishment orders across Ohio, including 1,100 in Cleveland. Cleveland Muny Court is probably looking at 3,000-3,500 garnishment proceedings in all, says one observer.
Some are also concerned that employers faced with multiple garnishments of particular employees will be stuck with an especially tricky accounting issue: the burden will be on them to apply garnisheed wages to the proper creditor when more than one is lined up awaiting payment. If they stumble, the law permits creditors to seek redress under civil liability statutes. Because the regulations themselves provide so little guidance on that complicated issue, some have already begun calling for the Ohio legislature to add technical corrections to the rules.
While its widely predicted that the new rules will spur employers to terminate some of the worst offenders, other experts suggest that employers should instead consider using the new regulations as a stimulus for teaching employees how to better manage their finances. Says Nancy Deevers, director of education and community relations for 35-year-old Consumer Credit Counseling Services of Northeast Ohio: You should maybe think about having us out to do seminars on solving debt problems, as an employee assistance program.
For more information, contact Consumer Credit Counseling, at (216) 781-8624.
Dave Brock sees it all the time, that nervous hesitation among sales people when he asks them to invest some time in sharpening their tools rather than continuing to hunt by the same methods they always have. He was doing a training session not long ago before 2,000 sales people for a telecommunications company when it happened again.
I asked for three or four days of their time, and I could see the panic in their eyes at the thought of losing that time in the field.
As a lifelong sales man beginning with IBM in its heyday, for whom he sold mainframes to banks in New York City, and more recently as a sales and marketing executive with Cleveland-based Keithley Instruments hes not surprised.
Everybodys time-starved, and everybodys reluctant to spend time away from the field, especially experienced people, says Brock, whos now a principal in Cleveland Heights-based Partners in Excellence. But as a consultant whose core work is in teaching companies and their sales forces how to develop better sales strategies for the new economy, its a tough nut, this resistance to working smarter rather than simply harder.
As he sees it, the Catch-22 is this: If Im a sales professional, most of what I do is more of what I know works. Which doesnt work anymore, he says. Most professionals are prisoners of their own experience. And yet theyre often extremely reluctant to invest any significant time in reorienting their methods.
While any client who has hired him has presumably bought into his proposition of reengineering the sales process, that buy-in from upper management doesnt necessarily translate to individual sales people, who often resist a new approach or simply tune out sales trainers and consultants, he notes. The trick, he says, is to convince individual sales people that their time would be well-spent to learn new methods, rather than simply working harder, doing the same things theyve always done.
To do that, Brock appeals to them as a fellow career sales man.
If you make [your ideas] simple enough, real-world enough, and demonstrate that youve walked in their shoes, you can get them to trust you, he says. I know that I can improve their effectiveness by 30 or 40 percent if he can get their buy-in.
I would say probably 80 percent of the time, people dont need to hire us, meaning consulting organizations. They need to put in place processes to listen better. But in start-ups and many privately held companies, theres a real ego problem.
And with fast growth, high-tech companies, he thinks thats only compounded.
Success really masks bad processes and underperformance. You see companies that are growing at double-digit rates, and the management becomes consumed by that.
He thinks they might better invest some time and energy into listening to their organizations, rather than retaining outsiders like him to try to solve problems.
Classically, people in organizations dont know how to listen to their own organizations and exploit the best ideas, he says.
Unfortunately, though fortunately for him and other consultants, many companies place more stock in ideas they receive from outside experts whom theyve paid to diagnose and fix problems than in the people theyve hired to do the job each day.
The good news?
Nimble organizations are learning how to listen better to their employees, Brock says.
John Ettorre (email@example.com) is contributing editor at SBN.
It began as a simple idea to capitalize on the proximity of Major League Baseballs annual summer classic to spur traffic at a jewelry store along a lightly trafficked downtown retail corridor, East 4th Street.
In celebration of Major League Baseballs All Star game at Clevelands Jacobs Field in 1996, Bob Zimmer decided that his jewelry store, Sisser Jewelers, would temporarily double as an exhibit hall. In anticipation, he began investing in a collection of memorabilia associated with the old Negro Baseball Leagues, the only place talented black baseball players could play before Major League Baseball began to relax its color line in the 1940s.
I brought in three or four Negro League players for the All Star game, Zimmer recalls. It was just going to be a one-week event. But after meeting a lot of the guys, its become a passion.
Thus inspired, he began collecting more Negro League memorabilia lots of it. It now climbs the walls of his shop like the ivy which clings to the outfield fence at Chicagos Wrigley Field, competing for a shoppers attention with the modest wedding rings and other jewelry in the display cases. Some of the baseball items are for sale; others are purely for display.
Whatever I can replace is for sale, Zimmer says.
But his long-term vision for all this is either bold or absurd, depending on your viewpoint: He wants to establish a Negro League Baseball Museum on the now-gutted second floor above his jewelry shop. It would be accompanied by a gift shop, educational outreach to the schools and perhaps even the Ohio Baseball Hall of Fame, an organization currently without a home, which hes been trying to persuade to relocate to his location.
Its almost here now, he says, but there are some components we need to make this a community educational institution.
While at first blush a little odd, on closer inspection, its probably not such a bad strategy for Sisser, which has done business in this neighborhood under the same name since 1912. The focus on the Negro Leagues helps the white-owned store better bond with its customer base in a predominately black retail district. And it capitalizes on the increased traffic of nearby Jacobs Field, providing browsers with a baseball-themed reason to visit the store.
Zimmer needs every customer he can get for the store his father purchased from the Sisser family in 1955.
The store never really sold or stocked high-priced jewelry, says the senior Zimmer, who in semi-retirement continues to come in a couple of days a week. Instead, its clientele largely comprised middle class black families.
But that market has softened considerably since Cleveland City Hall began using federal funding in the last few years to build gleaming new strip retail malls in formerly abandoned Cleveland neighborhoods beyond the downtown area. The result is that instead of coming downtown to find a modestly priced piece of jewelry, many of Sissers former clients do so at stores closer to their homes.
Our traditional customer base has softened a little, Zimmer admits. And thats why a focus on the Negro Leagues worked really well in attracting a new segment of customers.
Bob Zimmer began coming to his dads store in 1979 to clean jewelry, and hes stayed ever since. As the shopping district, which runs between Euclid and Prospect avenues, began to look its age many of the buildings are at least a century old he became a neighborhood activist, sweeping the street regularly.
But he also decided to begin pressing the city to reinvest in the infrastructure. Thus, a decade ago, when Mike White was first elected mayor of Cleveland, Zimmer went to City Hall and asked him to consider investing in turning around the East 4th corridor, he recalls.
The city did respond with some improvements. But the real catalyst for turning around the areas fortunes was the voters passage of a county sin tax levy to build Gateway just a couple of blocks away.
Its proximity to Jacobs Field and Gund Arena has been the best possible tonic for the formerly depressed area. It has spurred an unprecedented building and rehabilitation boom, which has turned the neighborhood from eyesore to eye-opener, and at least modestly spurred foot traffic.
The improvements have only served to spur Zimmers desire to branch out from jewelry. Hes thrilled that his dad still helps out on the sales floor during part of the week.
That allows me to focus on the Negro League Museum, he says.
Hes not strictly bound to Negro League themes. In late summer, he hosted a traveling photographic display of Latin American ballplayers, adding memorabilia from the Mexican Baseball Hall of Fame, and promoted it all with a postcard.
If only there were a way to make a living from all this, he seems to suggest. At the moment, profits from the jewelry side of the business fund Zimmers Negro League avocation. Does he look forward to a time when thats no longer the case?
That would be nice, because I have a lot more fun meeting the players and bringing them in. How to reach: A. Sisser Jewelers, (216) 621-3524, www.sisser.com
John Ettorre (firstname.lastname@example.org) is a contributing editor at SBN.
Now that youve gotten started with a simple Web site, you may be thinking about the next step: How to move at least portions of your business to a new platform, the World Wide Web. In other words, how your company can begin to do e-commerce.
Len Pagon, founder of Web developer New Media, offered suggestions for what he calls the e-visioning process at a recent gathering hosted by his company. They included:
Consider a vertical rather than horizontal approach to getting connected with stakeholders.
As they embark on e-commerce, a lot of business owners naturally try to simultaneously connect their companies with everyone vendors, customers, distributors and staff. But Pagon thinks a more sensible approach is to first pay attention to the group which will provide the biggest bang for the buck key, high-volume clients.
Instead of diluting your efforts by trying to deal with everybody, you can focus in on the 10 or 20 percent that will get you there quickest, he says. That gets your highest volume online and more transactions online quickly. Lets pick your highest-volume customer today and get them connected.
Dont worry about perfection, just get version 1.0.
People inexperienced with the Web can get a little gun-shy and bogged down in too much planning of the site up front. A more effective way to build an e-commerce site is through a series of prototypes which people can react to (with their comments incorporated into future redesigns).
I dont want to look at 20 pages of plans, I want to try it [the site]. So prototyping is a good way of getting ready to launch, says Pagon.
After all, you can always do a soft, or beta, launch, where youre still essentially looking for bugs and tinkering with the final version.
Give people some good reason to interact with your site.
Pagon calls it a prominent call to action, but by whatever name, youd better give visitors some reason to come and to return. Whether its some kind of contest to spark interest, splashy or otherwise unusual prose to nab readers, or some other inducement which stands out from the clutter of the Web, youd better offer visitors something to stimulate their doing business with you.
Dont overreact to perceived threats from purely Web competitors.
All the attention thats been given to pure dot.com sites which exist only in cyberspace, with no physical structure behind them and all the predictions about how they spell the death-knell for bricks-and-mortar competitors, is faulty, he thinks.
Theres a new catch phrase: clicks-and-mortar. The people that are really going to have a lot of strength are the people who have both a physical presence with stores or other tangible facilities, as well as a virtual presence on the Web. Dot.com companies are good, because they get past the inertia. But the problem is, theyre not leveraging their brick-and-mortar assets. How to reach: New Media, (216) 518-7900
John Ettorre (email@example.com) is a contributing editor at SBN.