Take them out to the ball game

NJBIZ.com

Minor league general managers must be creative to attract entertainment dollars in increasingly crowded market

By Ken Tarbous

May 28. 2012 11:45PM

In New Jersey, the business of minor league sports is about much more than what happens on the field, as baseball teams that play here compete for entertainment dollars in a crowded marketplace.

"My focus … is on everything outside of the white lines," said Will Smith, general manager and chief operating officer of the Trenton Thunder, who describes the team as "a business, really, that happens to have sport as the backdrop."

General managers say drawing families to games is vital to their business success.

"Our formula is all about affordable family entertainment," said Greg Lockard, president of the New Jersey Jackals that play at Montclair State University. "Generally, people are very interested in coming to the ballpark and having fun with their family in a safe environment."

Part of the nightly fun are the popular sideshows — sponsored and themed games featuring promotions, giveaways and special events like Scout sleepovers, firefighter nights, athlete and celebrity appearances, and fireworks. "Our fans come here because of the events," said Adam Lorber, Riversharks general manager.

Those events are of even greater importance now, as competition with movie theaters, bowling alleys and other low-cost options has gotten more intense over the past several years. But "probably our chief competition is the 55-inch flatscreen you've got on your wall in your living room," said Geoff Brown, general manager of the Lakewood BlueClaws. "We got to get you off the couch. We've got to get you outside."

The minor leagues are divided into two camps: independent teams and those affiliated with Major League Baseball. New Jersey has the BlueClaws, the Philadelphia Phillies' single-A affiliate; and Thunder, the New York Yankees' double-A club. The independent teams here are the Camden Riversharks, Jackals, Newark Bears and Somerset Patriots.

Major revenue areas are tickets, concession, and merchandise sales and advertising — and putting people in the seats is the most important aspect of business, Brown said.

"Tickets are the driver, because nothing else happens if you don't do the tickets," Brown said. "If nobody's here to see the signs, we're not going to sell any signs. If nobody is here to buy the hot dogs, we're not going to sell any hot dogs."

Brown and Smith, who buys marketing lists to target groups such as small businesses, churches and civic organizations, both said their teams' ticket sales are split approximately 40 percent groups, 30 percent package plans and 30 percent individual sales.

The upscale demographics of fans of affiliated teams — with median household incomes of $73,000 per year, versus $52,000 for all adults, according to Scarborough Sports Marketing — drive sponsorships and stadium and program ads aimed at consumers' elusive eyes and ears.

"Social media is coming to the forefront. People are listening to their iPods now. How do you reach them in the car? Newspapers are morphing into websites. Here we have a three-hour captive audience," said Patrick McVerry, Somerset Patriots president and general manager.

Larry Grimes, president of The Sports Advisory Group, which does team valuations and sells franchises, said the Riversharks — because of proximity to South Jersey's population centers and Philadelphia, and a stadium sponsorship with Campbell Soup — generate as much revenue as many single-A affiliated teams. But many markets have challenges in drawing fans, Grimes said.

"Sometimes you get into a market where fans just won't support the team, no matter what you do," Grimes said.

The Newark Bears' difficulties selling tickets — and the team's ownership changes — have been well documented over the past few years. Danielle Dronet, co-owner and CEO of the Bears, said the team has been repairing relationships with sponsors and advertisers, and since June 2011, when the new ownership took over the team, it has repaid 96 percent of the more than $1.6 million of debts it inherited.

"So if you can imagine trying to pay all of those off and also running a stadium — it is very expensive," Dronet said.

The Bears have been promoting two-for-one ticket and hot dog deals, dollar-beer nights and diamond giveaways. On opening night this season, nearly 900 tickets were sold, with another 1,200 fans attending the team's second game this year, high-water marks for weeknight games for the past two years, Dronet said.

Team general managers declined to provide financial data, but according to Andrew Zimbalist, an economist at Smith College, approximately 50 percent of affiliated teams in the country turn a profit, though independent teams have a more difficult time.

Zimbalist said owners continue on for a variety of reasons, including establishing business contacts, enjoying status in their communities and the possibility of making money in the long term.

"For a long time, there's been a trend that the asset value of the teams goes up, so even if you're not making money on a year-to-year basis, you can possibly make some money or capital gain when you sell the team," Zimbalist said.

Getting town hall out of the junkyard

NJBIZ.com

N.J. cities face battle in repairing credit ratings

By Ken Tarbous

March 05. 2012 3:00AM

New Jersey leads the nation with the highest number of local governments holding speculative-grade, or junk, credit ratings, according to Moody’s Investors Service.

Three municipalities — Collingswood, Harrison and Salem — are on the list because of high levels of risk related to projects in which the local governments has been involved, and two others — Camden and Irvington — have increased economic risk laid to falling real estate prices, foreclosures and other economic conditions, according to Moody’s, which does not rate all U.S. municipalities.

Most New Jersey municipalities borrow money by selling short-term notes or longer-term bonds to finance capital expenditures, such as infrastructure projects. Some towns also guarantee the financing — co-sign the loan, in essence — of projects like commercial redevelopment thought to be beneficial to the town and the tax base.

Credit ratings, in general, influence municipalities’ borrowing costs and the interest rates they pay on debt. Credit downgrades and low credit ratings typically make it more difficult, if not impossible, for local governments to sell their bonds to institutional investors — who want to be paid more interest for taking on the increased risk, if they will even buy the debt, said Jacki Shanes, a partner at law firm McCarter & English LLP, in Newark.

“If they can’t access the capital markets to do capital projects through note or bond issues, it’s a problem for the infrastructure,” Shanes said. “It really affects how they are going to maintain and improve their infrastructure.”

Since ratings agencies scrutinize ratables, surplus balances, and five-year plans and forecasts, municipalities need to focus improvements in those areas to earn upgrades to investment-grade ratings, finance experts say. The widespread decline in property values and the tax base, because of the economic downturn, is still putting pressure on the revenue side for municipalities, while local governments are limited in how far they can cut budgets, said Anthony Inverso, managing director at Phoenix Advisors LLC, which advises municipalities and other government entities on finance issues.

“In general, a strong bottom line is what’s going to help any municipality get to a higher credit rating, and that’s a combination of revenues at an appropriate level, and expenses that are in balance, and very basic revenues exceeding expenses,” Inverso said. “It’s obviously not straightforward from a municipality’s perspective, because you have to balance your tax base and you need to provide essential services.”

Winning an upgrade and maintaining investment-grade credit ratings are complex matters that rely on the timely flow of information and a dialogue between municipalities and ratings agencies, according to Noreen White, co-president, of Acacia Financial Group Inc., a financial adviser to local and state governments.

“Whether it’s good news or bad news, you don’t want to be waiting until you’re going to be issuing debt to let them know something bad has happened, or something has not happened that you expected,” White said.

Municipalities try to be proactive about fixing their ratings, taking actions that might satisfy analysts to upgrade them to the more attractive and financially lucrative investment grade ratings.

A firm stance on social media

NJBIZ.com

Some lawyers face tight reins on Twitter, while some are hands off

By Ken Tarbous

February 27. 2012 3:00AM 

 
While some law firms are laying down strict rules and guidelines to handle personal social media posts, others take a more hands-off approach, saying it can be difficult to enforce rules governing personal tweets and Facebook status updates.

Three years ago, Newark law firm Gibbons P.C. first began permitting its attorneys to have personal Facebook accounts, and it established a comprehensive social networking and social media policy, setting forth rules and guidelines.

"Our lawyers are literally the walking embodiment of the brand. We don't sell a soft drink or a pair of tennis shoes. We're selling legal advice, and legal advice is coming from an individual attorney," said Patrick C. Dunican Jr., chairman and managing director of Gibbons. "So anything that that individual attorney does to adversely cast aspersions on themselves will impact their ability to be a lawyer, and also will adversely impact the firm."

McCarter & English LLP, New Jersey's oldest law firm, takes a different approach. The firm is in the process of formalizing its social media policy, but doesn't actively monitor employee or partner personal account posts, in part because of employment law and privacy concerns, and workers' rights issues, said Alitia Faccone, a partner at the Newark firm.

"Monitoring is a tricky question," Faccone said. "I don't think we, as a firm, can mandate a policy that tells our lawyers or employees what they can and cannot do."

McCarter & English's formal policy will set guidelines for the responsible and effective use of social media within the context of the law practice, Faccone said, but the firm doesn't allow employees to use the firm's equipment or networks for personal social media purposes, Faccone said.

"I think our job as lawyers and law firms is to figure out a way to balance our ethical obligations, and all of social media is somewhat fraught with landmines if it's not used properly," Faccone said. "A lot of planning and forethought need to go into any kind of policy, whether you're a law firm or not."

Dunican said Gibbons relies on an honor system, but when word of potentially offending posts gets back to the firm, the sites are checked. Still, the firm has fallen victim to inappropriate social media postings. According to Dunican, in one incident, a law intern in the New York office posted on Facebook, "Off to the law firm now to be chained to my desk." In another incident, an associate in Gibbons' Newark office posted on Facebook, Dunican said, something along the lines of "Do only crazy people work at big law firms?"

Posts seen by the public, clients and other legal professionals — including lawyers on the other side of litigation or negotiations, and judges who sit on matters involving their attorneys — can damage cases and careers, legal professionals say. Bad business moves can include inappropriate online comments and photos, or disclosures of privileged or confidential information by firm employees, from the head of the firm to support staff.

For the most part, the basic standards of civil behavior that populate codes of conduct apply to social media, with the challenge of electronic media being its immediacy and worldwide reach, as opposed to pre-Internet days when audiences, for cocktail party conversation, for example, were more limited.

As professional services providers, law firms are acutely aware of the reputations of their employees and clients, and the instantaneous nature of social media and social networking websites has added another realm that could tarnish the name of a good lawyer or practice.

The New Jersey Supreme Court's Office of Attorney Ethics says that lawyers' online posts are subject to the same guidelines and restrictions as other writings, said Winnie Comfort, spokeswoman for the court. The court's Committee on Character does "various and sundry" checks on lawyers as part of the process for admission to the bar, but does not routinely check social media pages of attorneys as part of that process, Comfort said.

The New Jersey Bar Association doesn't have a standard policy on how lawyers and firms should be using social media, according to Kate Coscarelli, spokeswoman for the association.

David Wissert, the chair of the employment group and deputy general counsel of Lowenstein Sandler P.C., tracks the evolving legal and ethical standards on the use of social media, and speaks to industry groups about the implications for law firms. His firm has a social media policy that sets forth guidelines for lawyers and other employees.

In general, nationwide, government regulatory agencies do not check on lawyers' social media activities, Wissert said — at least, not yet.

"There was probably a time when you wouldn't expect committees on character to look at and ask about driving records, but they do that in New Jersey," Wissert said.

Credit union aims to lock up a piece of $1 trillion banking market

NJBIZ.com

ISLAMIC BANKING

But lender facing complications in catering to Muslim Sharia law

By Ken Tarbous

January 16. 2012 3:00AM 

North Jersey Federal Credit Union, in Totowa, has established itself as one of the few domestic players in the estimated $1 trillion global Islamic banking and finance market, offering products based on Sharia law prohibitions on earning and paying interest.

About two years ago, observant Muslims and local religious leaders in Paterson approached NJFCU, asking the institution to provide banking products — loan and savings vehicles — formed in compliance with their religious beliefs.

NJFCU already has accepted deposits topping $1 million for Islamic banking products, all of which are noninterest-bearing accounts, and the credit union is in the development stages on car and student loans, as well as home mortgages. But the structures of such banking products present challenges in meeting interpretations of Islamic law, which may differ from congregation to congregation.

"We thought this would be a perfect opportunity for us to serve an unbanked group," said Lourdes Cortez, NJFCU president and CEO, a Catholic who grew up in heavily Muslim south Paterson. "It has been a challenge to serve this community. We haven't been able to fully offer them all of the consumer loan products, because of the fact that it is difficult to have programs that will be able to calculate the interest on the consumer loans in the ways they need to have it reflected on their note and disclosure."

Some non-Islamic NJFCU members said they would yank their deposits, and the credit union faced outspoken critics of Islamic finance who say the system is designed to co-opt and displace Western capitalism, culture and democracy. But NJFCU and Cortez have continued to serve businesses and consumers in their membership field, which includes people who worship, go to school or conduct business in Bergen or Passaic counties, or underserved areas of Essex or Union counties.

NJFCU touts itself as the first credit union to offer products based on Sharia law, and state and national banking experts, including regulators, said they are not aware of another federal credit union that offers Islamic banking products to the degree that NJFCU does. However, those experts said it is difficult to say NJFCU is the first or only such institution offering these products, because examiners look at the structure of investments for adherence to regulations, not at religious motivations or rules for the products.

To be Sharia compliant, Islamic banking products need to be segregated from other accounts, and must be noninterest-bearing investments anchored in a moral and ethical system detailed in the Koran. But NJFCU has been having difficulty bringing their Islamic savings deposit account into strict compliance with religious law because of an inability to segregate funds, track them in a separate internal accounting system, and still adhere to federal regulations.

NJFCU is regulated by the National Credit Union Administration. The regulatory body confirmed that NJFCU has requested permission to set up banking services that conform to Sharia law, but the federal regulator did not provide further information or comment, saying the approval process is still in progress.

Cortez said even though her credit union is awaiting federal regulatory approval, members care more about the religious implications of the way their money is used, with the more orthodox Muslims eligible for the credit union shying from depositing their money because the funds are not segregated, and therefore not in strict adherence to Sharia law.

Global Islamic banking and finance is estimated to be a $1 trillion industry. With the Pew Forum on Religion & Public Life, a project of the Pew Research Center, estimating the U.S. Muslim population at 2.6 million in 2010, and growing, there's little doubt the subsector will continue to grow, as financial institutions capitalize on profit-making opportunities.

But few U.S. bankers understand the complexities of Islamic finance — a large part of why more financial institutions have not yet established products serving potential new customers and clients, according to Abed Awad, an attorney with Awad & Khoury LLP, in Hasbrouck Heights, and an adjunct faculty member who teaches Islamic banking and finance at the Rutgers School of Law and Seton Hall Law School.

Awad likened Islamic finance, which he said shares many ethical principles with Christianity and Judaism, to socially responsible mutual funds and investment products that support green technology or refrain from investing in companies that sell alcohol, tobacco or sexually tinged products.

"Among these ethical principles is economic equity, redistribution in wealth, fair dealings in business, transparency, honesty, fair profits — no excessive profit," Awad said.

The establishment of Sharia-based finance products could entice capital held offshore or overseas into the United States and New Jersey banking systems, Awad said.

 

Workers' comp rate hike spike blamed on jobs

NJBIZ.com

High unemployment, medical costs drive 6.9 percent increase

By Ken Tarbous

January 2. 2012 3:00AM

The 6.9 percent average hike in the rates used to set workers’ compensation premiums, which took effect Jan. 1, has been driven by macroeconomic forces and tied to New Jersey’s escalating medical costs and lower overall payrolls, a result of the relatively high unemployment rate, according to experts.

Net premiums, the funding source for benefits, have dropped from $1.90 billion in 2008 to $1.64 billion in 2010, according to the New Jersey Compensation Rating and Inspection Bureau, more commonly know as CRIB, which collects data on workers’ compensation and is under the supervision of the state Department of Banking and Insurance.

“When you combine, at one time, an increase in claims, a decrease in premium (paid into the system per-employee by companies) and increasing medical costs, it’s likely to have upward pressure on rates, and that’s what you’re seeing,” said Frederick A. Huber, executive director of CRIB.

Rates, which are part of a formula used to compute individual companies’ premiums, are set for approximately 560 “classification codes” representing industries, according to CRIB. Approximately 80 percent of those employer class rates increased Jan. 1, with the two hardest-hit sectors being manufacturing and construction, which have seen a drop in payroll and the eventual payroll-driven premiums collected by insurance companies, Huber said.

The increase in rates should be a wake-up call that New Jersey’s system must evolve to offer employers more affordable options for coverage in the mandatory insurance program, according to John J. Sarno, president and general counsel of the Employers Association of New Jersey.

“Those alternatives might be private plans. They could be self-insured plans,” Sarno said. “The program’s on automatic pilot. It’s viewed as a tax, and there’s just not a lot of innovation.”

Sarno said New Jersey’s small businesses, which dominate the landscape, have fewer resources than larger employers to explore insurance cooperatives and other cost-saving options.

“There hasn’t been any new thinking about workers’ compensation in over a hundred years. There’s been no new business model in over a century,” Sarno said.

Workers’ comp is a state-mandated insurance program that provides medical care, wage replacement and disability benefits to employees who suffer job-related illness or injuries, and death benefits to dependents of workers who die as a result of their job.

Under the program, workers forgo the right to sue employers for damages or pain and suffering.

In addition to rising rates, the maximum weekly workers’ comp benefit for all injuries except permanent partial disabilities climbed to $810 for 2012, from 2011’s maximum weekly benefit of $792, according to CRIB.

Each year, CRIB makes rate recommendations to the Department of Banking and Insurance commissioner, who reviews and makes a final determination on the rates, which are used by all insurance carriers covering workers’ comp in the state.

For 2011, rates went up 3.9 percent on average, which came on the heels of two decreases in rates.

The premiums employers pay for workers’ comp insurance are calculated using the classification rate and each company’s payroll, safety record and the cost of its claims — known in the insurance industry as “experience modification,” which is similar to what a driving record is to auto insurance. Insurance carriers are able to compete with one another by adjusting their premiums and products using deductibles, dividend programs and other product features.

In 2010, New Jersey Manufacturers Insurance Co. had a 22.4 percent workers’ comp market share, or $365.9 million in premiums; followed by Hartford Insurance Group, with 11.5 percent market share, or $187.5 million in premiums; followed by Liberty Mutual Insurance Cos., with 9.7 percent market share, or $158.6 million in premiums.

For employers’ part, they can help control workers’ comp costs by improving their safety records, according to Patrick Breslin, director of communications at New Jersey Manufacturers.

“The most direct way to control your workers’ comp costs is to prevent the accidents from happening in the first place,” Breslin said.

“The best reinforcement for safety practices is a low accident rate, which directly translates to lower premiums for that business.”