Tuesday , December 11, 2018

December 2013

Featured In This Issue

December 2015


When the city of Augusta, Ga., began receiving calls from residents complaining of sewer overflows, they were faced with a perplexing problem. The calls seemed to be coming from one area of town, but with over 36,000 feet of sewer pipe in that one drainage basin, they had no idea where the actual blockage was located. As a result, the city utility department would have to clean the entire basin at a cost of over $1.10 per foot.


To the rescue came InfoSense, a Charlotte-based startup that manufactures an innovative acoustic (sound waves) pipe inspection system that can determine exactly which pipes need to be cleaned. Using the InfoSense technology, Augusta spent just three to four days inspecting the pipes in the troubled area and determined that only 1,600 to 2,000 feet of pipe actually needed to be cleaned. The resulting savings from just that single project more than paid for their acquisition of the inspection system.


InfoSense is the outgrowth of a unique development partnership between UNC Charlotte and the Charlotte-Mecklenburg Utility Department (CMUD). The new technology is revolutionizing sewer line maintenance and is an example of how creative collaboration between government, business, and academia can help solve difficult problems.


Concept Development


In 2005, senior administrators and engineers from CMUD held a brainstorming session with the UNC Charlotte Electrical and Computer Engineering Department to discuss how the University might assist in solving a variety of issues faced by the utility. One issue that floated to the top early in the discussions was how to combat sanitary sewer overflows.


CMUD maintains over 4,000 miles of sewer pipe countywide, with over 100,000 individual segments. (A segment is the portion of the system between any two manhole cover access points, with the average segment being about 220 feet long.) CMUD was experiencing roughly one overflow per day somewhere in the system, but with so many miles of pipe and so many segments, the probability that any one section would overflow on any given day was extremely low. As a result, it was almost impossible to predict when and where a problem might occur.


On average, CMUD had been cleaning up to 25 percent of their system annually, or about 1,000 miles. But 70 percent of those 1,000 miles didn’t actually need cleaning; they just had no practical way to inspect the lines. Robotic camera systems were the most common alternative, but the cost to inspect with camera technology was almost the same as just going ahead and cleaning the pipes. So what CMUD wanted was a cost-effective way to figure out which specific segments needed cleaning, so they could focus their efforts on the real problems.


Ivan Howitt was one of the UNC Charlotte engineering professors who participated in that first brainstorming session. After several follow-up meetings, he came up with the concept of using sound waves to determine whether a pipe was dirty or clean. In March 2006, Howitt submitted a proposal for a joint development effort, and the study received funding approval in 2007.


Working with CMUD senior engineer John Fishburne, Howitt and several graduate students began working to explore acoustic technology and to prove whether the concept would actually work. The field environment is difficult because every sewer line looks different, and the variation in the ambient noise levels can be quite significant – very quiet at one spot and incredibly noisy at another.


“One of the things that is somewhat novel about this development is it was actually developed in the field, and we did very little lab experimentation,” says Howitt. “We immediately went into the field because we felt the field environment was going to be so difficult. Actually developing the algorithm in the field is, I think, one of the key reasons why we got it to work. That was the advantage of having access to Charlotte’s system. They were a great resource.”


Once Howitt and his team had proven to themselves that the concept worked, he wrote a National Science Foundation (NSF) grant proposal, which resulted in a funding grant under the Small Business Innovative Research (SBIR) program in 2009. The SBIR grant allowed Howitt to refine his algorithm and to develop a working product.


The system consists of a transmitter placed in one manhole that sends an acoustic signal to a receiver placed down an adjacent manhole. Based on the strength of the signal heard by the receiver, Howitt’s algorithm determines how dirty that pipe segment is, and whether it needs to be cleaned.


CMUD began to see the technology’s real potential, so they agreed to fund a pilot project by purchasing a prototype unit. By the end of 2010, the prototype had been further refined and CMUD purchased four more units. The product would eventually be dubbed the SL-RAT (Sewer Line—Rapid Assessment Tool).


On to Commercialization


The research and development initiative had now morphed into a commercial product, and Howitt knew he needed a company and he needed a team with business experience to complement his technology expertise. So with the help of Paul Wetenhall at UNC Charlotte’s Ben Craig Center business incubator, Howitt began working to commercialize his product. Because the initial development work was done at the university, UNC Charlotte owned the patent, but Howitt was able to negotiate an exclusive license for the new company.


A mutual friend then introduced Howitt to Alex Churchill, who would wind up joining InfoSense in early 2011. Churchill brought financial and business experience gleaned from his years in business consulting and management positions at companies like Blue Rhino and Allied Waste. Churchill was looking for a new entrepreneurial opportunity that he could get involved with from the ground up, and InfoSense seemed to fit the bill perfectly.


“Ivan had enough information to show that camera inspections cost $1 per foot and this product was in the range of $0.10 per foot to operate, so his product looked to be about 1/10 the cost of the alternative,” recalls Churchill. “I also knew he had a customer and they liked what they bought enough to buy more, so I felt this could be a real company.”


Churchill came on board as chief operating officer and immediately began working to refine the marketing and business plan while Howitt continued to refine the product with CMUD. A few months later in July 2011, the third member of the management team, George Selembo, came on board.


Selembo had an extensive background in successful startup companies in businesses ranging from student housing to wastewater treatment equipment. He had retired to Charlotte in 2010 before he even turned 40. Selembo was enjoying life and working as an adjunct faculty member at UNC Charlotte when he had the opportunity to meet Howitt and hear about his product.


Selembo bought stock in InfoSense and offered to work for free for the first six months to see if the new management team had the personal chemistry needed to run a successful new enterprise. They did.


“I had a background in startup companies, but I also knew the challenges Ivan was going to face in bringing a new technology to the wastewater industry,” offers Selembo. “I had been on the treatment side and he was on the collection side, but there’s a similar challenge there for new technology.”


Selembo, who now serves as CEO, helped the new company compete for a variety of grants, which have allowed them to fund their marketing and development efforts without giving up ownership in the company to venture capital firms. InfoSense has won grants from the NC IDEA competition, the Charlotte Chamber’s PowerUp competition, and the Charlotte Venture Challenge.


“Unlike many of the other startup companies, we had a commercial product,” says Selembo. “We actually made something and had a real, viable product, so a lot of the risk was already taken out because we were ready to hit the street and go to market.”


Marketing Success


InfoSense officially started marketing in 2012 when they began building a national network of sales reps. The company’s sales network now covers 41 states and has sold over 50 SL-RAT units to customers nationwide. These independent sales reps also sell other products to the sewer industry, so they already had the relationships InfoSense needed to build.


“In this industry, it’s about having connections with the local municipalities,” explains Selembo. “We don’t have the broad product line to support a full-time sales staff, so we outsource sales. But we spend a lot of time supporting and training them.”


Each SL-RAT costs in the neighborhood of $20,000 for the transmitter and receiver combo, plus a carrying case. Components for the system are sourced from suppliers across the country, but all final assembly is done at the InfoSense facility on Tremont Avenue.


Each sales rep firm is provided with a demonstration unit that their reps can use for presentations, because demonstrations have proven to be one of the most effective ways to overcome initial doubts about the new technology. InfoSense says their sales close rate is almost 100 percent, and potential customers include municipalities who choose to do the inspections in-house or contractors who do such work for multiple municipalities.


“We encourage the reps to leave the unit with a customer for a week,” says Churchill. “We suggest they train the customer and let them use it. You can train someone to do this in five minutes.”


The success in Charlotte-Mecklenburg has been the springboard for their success, and they have continually improved the product based upon input from CMUD and other customers. Some of these improvements include GPS-enabling, improved menus, and making the SL-RAT more robust.


“Charlotte has been using the product for two-and-a-half years and they’ve probably done 1.5 million feet of inspections with their five devices,” says Howitt, who is now on leave of absence from UNC Charlotte. “The algorithm has actually been relatively stable over that time, but the operators have trained me on how to make the device more rugged for the environment it’s used in.”


Future Applications


While the initial commercial application for Howitt’s acoustic technology has been in sewer lines, the company believes the technology could find its way into other types of pipelines, including those supplying oil and natural gas.


“The advantage of the sewer systems is there are not a lot of people developing new technology for sewer lines,” says Howitt. “This is the first new technology to revolutionize the collection system operations, and we also see many more opportunities.”


“Ivan has come up with the technology and the patent is very general,” says Selembo. “It applies for applications in all pipelines, and we expect there are going to be other product developments in a lot of other application areas that are going to do very, very well for us. We don’t know what they all are yet, but we have a great, solid flagship product that is supporting all of these activities.”


The support from the Charlotte community, and UNC Charlotte in particular, has been key to the company’s great start and its bright future.


“One of the compelling things about our company is this was all developed in Charlotte,” concludes Selembo. “It’s a public, private, academic partnership that developed this technology. UNC Charlotte finds ways to get things done in this community, and they are cheering you on all the way.”

Robbie Delaney probably wasn’t the first person who ever got an idea for a business while he scanned an in-flight magazine at 30,000 feet. He might not have even been the only one on that particular flight from Texas to North Carolina toying with the idea of starting something new, but the difference is that Delaney got off the plane and did something about it.


Just 27 at the time, with a degree in construction management from East Carolina University and working as a project engineer on a construction job in Texas, Delaney was looking for a way to spend less time on out-of-state job sites and more time in Charlotte with his fiancée, Caroline.


The in-flight article touted the success of craft breweries and predicted that the next logical step in the industry’s evolution would be craft spirits. It gave Delaney an idea—he wanted in on that next wave of success.


Delaney, a beer drinker, got the idea to make rum from his friend, Scott Huff. “But there was a big difference in our intentions,” jokes Delaney. “I wanted to start a business. Scott wanted to learn how to make alcohol.”


The article listed some serious impediments to starting a distillery: huge bond requirements and start up costs that could exceed $200, 000. Originally Delaney thought he might have to find investors but after researching the industry, its regulations and how liquor was made, he changed his mind.


“I realized I didn’t need to buy a still; I could make one,” says Delaney. “There was information online and in books but I really learned how to build it the way I learned carpentry—you look at how things are put together.”


Delaney’s original still held 35 gallons; his new one holds 150. He and his friend Jon Drexler built the new still using mostly reclaimed parts.


“The tank is an old dairy tank,” explains Delaney. “It took about three months to build and cost a fraction of commercially manufactured stills.”


The old still is now a memory, its parts cannibalized for the new one. But Delaney can still remember the day he used the old still to make his first batch of rum.


“We had close to 20 people there and I had my fingers crossed because I’d never even given it a test run so I really didn’t know what the thing was going to do.


“It started to spit and I believe the first batch got up to 85 percent alcohol which was pretty good given I’d never run a still before. Not all of it was great alcohol, but we did get some that was respectable tasting. I said to myself, ‘We can actually do this. This is going to happen.’”


The Work Before the Work


That was February of 2012, but a lot of work preceded that moment. From his years in construction, Delaney was used to obtaining building permits, but nothing prepared him for the paperwork involved in opening a distillery.


“My federal permitting was 78 pages long, mostly handwritten,” says Delaney. “It was the hardest thing I’d ever done. But you can’t even apply for a federal permit until your equipment is at least 90 percent installed, so you have to start locally.”


Delaney found 500 square feet of warehouse space in Belmont’s Riverside Complex. “I moved into a facility but I had to modify it to fit the equipment,” he continues. “I had to get a zoning permit and a building permit to do the needed construction. Once I got a certificate of occupancy from the county, I could install my equipment, and once the equipment was installed, I could start the federal permitting process.”


Delaney turned in his application for federal permitting in November of 2011 and received approval in a record two months. When he received his state permit on February 12, 2012, Muddy River Distillery became the first rum distillery in North Carolina.


In keeping with the state’s colorful moonshining heritage, legal craft distilleries are starting to pop up in many parts of North Carolina. The state’s Alcoholic Beverage Control Commission (ABC) lists 13 distilleries statewide. Perhaps not surprisingly, many are grouped in the western mountain counties best known for their moonshining history.


Delaney welcomes the new competition, preferring to see other craft distillers as a way to help grow the industry. “The craft distillers are trying to band together to influence legislation in much the same way craft beer brewers have gotten together,” says Delaney.


He’s also found camaraderie among others in the growing industry. “When I was starting out, Carolina Distillery, makers of Carriage House Brandy, gave me a lot of help on the regulation and process side,” he continues. “They were a huge influence and welcomed me with open arms into North Carolina spirits.


“Right now there’s a guy who calls me who wants to start his own rum distillery. He’s got his facility and equipment and we talk. We’re friends.”


Delaney appears to have camaraderie and support from many. Neighbor Alternative Beverage helped Delaney source sweeteners. Drexler, who helped him build the still, drew up blueprints for their new facility. Good friends painted walls and Delaney’s mom, a designer, is decorating the front showroom and tasting bar and lounge area.


At 6,100 square feet, the new space, in the same business complex, allows Muddy River space for their free distillery tours and rum tastings as well as room to grow. And while Delaney kept his day job in the first months of business, the only construction he does now is on the new facility.


“We built the floor and the wall behind the still and moved all the plumbing and electrical to behind the wall,” explains Delaney. “This used to be an old dyeing mill and it was a terrible looking place. In fact, before we started fixing it up, the show ‘Homeland’ was looking at it as a location for a torture scene because it was that creepy.”


Delaney doesn’t think it’s creepy anymore and in fact, he slept in a tent in the warehouse a couple of times last week, putting in even longer hours than the usual 16-hour long run days because of increased demand for Muddy River’s latest product.


The company’s first product, Carolina Rum, was launched in early September of 2012. At $19.95 for a 750 milliliter bottle, Delaney describes it as a mid-range white rum. Traditionally, white rum is used for mixing, but Delaney believes that his Carolina Rum brand is sweet and smooth enough for sipping.


Delaney has reinvested revenues from Carolina Rum sales back in to the business, allowing the expansion into the new facility and the development of Muddy River’s latest offering, a dark sipping rum called Queen Charlotte’s Reserve.


Queen Charlotte Reserve is aged in American white oak barrels with a medium char or toast inside and sells for $27.95 per 750 milliliter bottle. To ensure product consistency, Delaney only uses new barrels from the same cooperage for each batch.


Making a Name


Muddy River Distillery is a husband and wife operation. Delaney married his fiancée a year last July and while Caroline Delaney is often the ‘last say’ in quality control, Robbie Delaney defers to her judgment as to what batches pass the final taste test. She is also the sales and marketing side of the company. Those responsibilities include navigating the state’s ABC system.


North Carolina is one of 17 control states. All sale, purchase, transportation, manufacture, consumption and possession of alcohol in the state are controlled by the agency which consists of 165 local boards operating 418 retail stores.


Each board decides what their stores will carry so Caroline, who studied accounting at North Carolina State University, gave up her accounting job and now travels across the state, meeting with and presenting to local boards.


“The biggest thing with ABC is forming a relationship,” explains Caroline. “We tell them that we’re just normal people, not a huge conglomerate. When you’ve met Robbie and me, you’ve met our whole company. Many of the boards understand that and they will make an effort to push our product.”


“We’re in over 300 liquor stores now,” adds Robbie, “mainly in the larger cities like Charlotte, Raleigh and Wilmington, but some of the smaller boards are our biggest promoters.”


Bars and restaurants are also the focus of Caroline’s marketing efforts. Muddy River rums are now served in restaurants around the state including locally at Harry’s Grill and Tavern in Ayrsley, the Dandelion Market downtown, and at Halcyon Restaurant in the Mint Museum.


Alexander Michael’s Restaurant and Tavern and the Corner Pub, only a brief walk from the Delaneys’ home in Fourth Ward, also carry the rums and are big supporters of Muddy River Distillery.


Down the street from the distillery, The String Bean on North Main in Belmont has been carrying Carolina Rum since it was first available.


“We take a lot of pride in selling local beers and wines so when a distillery opened up, we wanted to support them as well,” says Nate Helton, front of house manager and liquor and wine buyer for the String Bean. “We’re unique because we carry so many local items in our market and incorporate local fresh ingredients in our menu. We use Muddy River rums in some of our drinks and the customers really like it. They’re very interested in trying something local.”


The Delaneys have plans for expansion into other states. “We’ve already got the permit for South Carolina sales but marketing in South Carolina is very different because it’s not a control state,” says Robbie. “Most companies work through a broker but we figured we might be too small right now to get much attention from a brokerage. That’s why we created our own brokerage and licensed ourselves to promote our own product.”


Winning Awards


The Delaneys are also considering adding a spiced rum to their product line. In the meantime, they’re continuing to get their name out by doing events. They’ve presented at Johnson & Wales University and participated in events in Winston-Salem for the American Culinary Federation of North Carolina and at North Carolina State University’s State Club.


They’re also preparing for the Big Sip Expo in Greensboro this month. The expo showcases the products of local, regional and national beverage makers. Last year, Muddy River Distillery beat out six other distilleries for first place in the spirits category and came in second overall.


Robbie lists the winning day as a highlight for the company but admits that the event, the first for Muddy River Distillery, was intimidating.


“I walked in, looked around and wanted to run away,” he says. “There were companies there that had brought display stills bigger than our real still. They were pulling these things in on trailers and we show up with the display my mom built for us.”


Along with building displays, the Delaneys are thinking about adding an employee. “We need more marketing people,” Robbie explains, “but I really think I can sell my product best, so we’ll probably get someone to distill and I’ll go out and sell with Caroline.”


Ideas of expansion into Virginia and venturing into online sales are discussed but Robbie is clear about what’s most important. “Our goal is to be North Carolina’s rum,” he declares. “When people in North Carolina think of rum, I want them to think of us.”

Angela Overcash and Robbi Jones couldn’t be more different. One is a chemist; the other an office, accounting and project manager. One loves science; the other business.


“I’ve never had a chemistry class in my life,” says Jones, president and project manager. “But I’ve learned a lot. It all makes sense to me on paper, just don’t put me in the lab.” Overcash also serves as a project manager, but on the science side, and is the liaison between the laboratory and the client.


Together they own and run Charlotte-based Prism Laboratories, Inc., a water and soil analysis company formed in 1992. “We were from different walks of life but each of us had something to bring to the table,” says Overcash.


Overcash is originally from Kannapolis. She graduated from Duke University with a degree in chemistry in 1986 and worked with CompuChem prior to coming to Charlotte. Jones is from Marietta, Ohio, and came to Charlotte at the age of 19. She attended Queens College in Charlotte.


Their paths crossed in 1987 when Overcash joined a water analysis laboratory where Jones was working. Within five years, Jones and Overcash, along with five others, owned the company. A name change to Prism Laboratories, Inc. completed the deal.


Over the years, two of the owners left the company and Jones and Overcash bought out the remaining three. By 2006, it was just the two of them in partnership.


Through the Looking Glass


Prism Laboratories provides analytical services for drinking water, storm water, waste water, soil, hazardous wastes and brown fields. Prism Laboratories staff also test the effectiveness of remedial action and trace problems back to their sources. The company is comprised of an integrated team of environmental and administrative professionals organized to serve the analytical needs of the consulting and industrial communities.


Most clients are permitted through the City of Charlotte and various other cities and counties, for example: builders, engineers, environmental consultants and homeowners. Clients include Duke Energy, Charlotte Mecklenburg Utilities Department, Colonial Pipeline, Zapata Engineering, Ashland Chemical Company and Georgia Pacific.


Prism Laboratories is currently certified throughout the Southeast and is NELAC-accredited through the state of Florida. The laboratory is ISO certified for DoD analysis.


“We frequently get calls from builders saying, ‘We’ve got a hole in the ground and we need to know if there’s anything (bad) in it,’” says Overcash. “It stalls their crews, so it is costly and they want the information fast.”


“People also call with health concerns or feeling sick, worried about the safety of their wells,” adds Jones. “Additionally, we do a lot of work in conjunction with home sales, where bacteria testing is usually required by the bank.”


Typically, Prism Laboratories staff will be looking for coliform bacteria, a group of toxic types of bacteria in water that can make people sick. The lab looks specifically for fecal coliforms. “You don’t want to be drinking water with that in it,” says Jones.


Prism Laboratories educates people how to cleanse their wells through chlorination and with the use of ultra-violet lights and water softeners. Not all substances are harmful to people. The presence of some leads to hard water that limits the lather and suds and effectiveness of soaps. Others may build up in pipes over time.


Overcash says she is often amazed: “The federal regulations on ground water regarding what is allowed are extremely low, measured in parts per billion or even trillion gallons of water. Still, we see ground water where toxins are so concentrated, you can see inches of layers in the water sample with your naked eye.”


An example would be the chemical tetrachloryl used in dry cleaning. Much of the toxic substances are found in landfills or from industries that had pits behind them prior to regulations. Many of them dumped waste into a creek or river which carried it into the groundwater. It is known that ground water flows through aquifers and, over long periods of time, around the world.


Every kind of industry produces wastes that could ultimately end up in the water supply. In the food industry, for example, there are lots of sugar and oils. Concentrated sugar is harmful for people but it also creates an imbalance that may cause algae to grow or prevent sunlight from entering a body of water. Prism Laboratories tests for oil and grease for every industry.


They also typically test for eight RCRA heavy metals: arsenic, selenium, cadmium, barium, chromium, lead, silver and mercury. These are all metals that, if ingested, will forever remain in the human body. PCBs also do not degrade. Some water contains salts that are so heavy that they solidify or solids such as shreds of paper.


In Charlotte, testing of soil is common where there are rusty, leaking home oil tanks.


Prism Laboratories recently completed a large project to clean up a pesticide named dieldrin from a large property site that was up for sale. A lot of pesticides and herbicides are now banned but still remain in the environment. For example, toluene, used in making glues, tape, paint, gasoline and cleaning solvents is a terrible carcinogen that is still seen at significant levels.


The company also screens for conflict metals, those mined only in the Congo using child and slave labor that are used in textiles. The U.S. has banned these metals but has to test to make sure that they are not coming into the country illegally in the form of curtains and upholstery material and the like. It is a similar situation with sulphur in sheetrock coming in from China.


“All industries have some kind of wastewater prior to going to the local wastewater treatment plant. We test water going into (influent) and coming out (effluent) of the wastewater treatment plant,” says Overcash. “Sometimes we are asked to trace the material back to the industry source.”


Prism Laboratories does not have to report their findings to any body of government. “That’s up to the consultants and their clients,” says Overcash They do, however, have to report findings when drinking water is supplied to the public such as in a mobile home park or a school outside of the city limits.


Prism Laboratories also works with brown fields, places such as towns or industrial companies that have gone bankrupt or where the owner has died and there is no direct source of funds to clean up the property. Federal funds exist for this purpose of restoring properties that are meaningful to the community such as public parks.


Focusing Operations


Prism Laboratories, a $3-plus million dollar company, has reached several benchmarks in the past 21 years. A significant one came in 2006 when the company purchased a second building.


“We outgrew our first building, so when the computer service business next door decided to sell, it was like manna from heaven,” remembers Jones. Having two buildings has allowed the company to separate functions: offices are on the main floor of the more newly acquired building; volatile labs are downstairs, and there is a separate clean room for low-level mercury and other low-level metals.


The analytical laboratory consists of four departments: Metals, Wet Chemistry, Semi-Volatiles and Volatiles. The 15,000-square-foot facility is equipped with the latest instrumentation and technology for environmental analyses. “All we need now is a covered walkway between the two buildings,” jokes Jones.


Then, in 2010, the company switched to a state-of-the-art data handling system known as an ELEMENT Laboratory Management and Information System (LIMS).


“For years, scientists and lab technicians had to key in test results, a very time-consuming task,” says Overcash. “Now, the data system can receive the data directly from the instrumentation. We just had to prove that nothing got transcribed in the process. As soon as a test runs, we can see the status of samples. It has really impacted operations and efficiency.”


Jones also cites the company’s recently redesigned website which allows clients to track samples: “Clients can see their historical data which is extremely useful for them. In the future, we’ll head for the cloud,” says Jones.


Success has been accompanied by some challenges, according to the partners. “The ups and downs of the business—not knowing when business is coming is the main thing,” says Jones.


“Real estate transactions drive a lot of what we do. We were seriously impacted for about a year and a half during the 2008-2011 recession,” says Jones. The company weathered the economic downturn with a line of credit, personal loans, tightening up the budget and taking a hard look at expenses. “There were a few people who left during that time whom we did not replace, but we didn’t actually have any layoffs,” says Jones.


Another challenge for Prism Laboratories is the demand for speed. “Rarely do you have a long lead time to do the samples,” says Overcash. “It used to be a 10-day turnaround; now clients want results in five. It’s a struggle because our competition is bigger and can be quicker but we have, nevertheless, done a good job. So we took a good long look at our production line for ways to tighten it up.”


“Science-minded people don’t like to be rushed, in particular, which is good,” says Overcash. “Sometimes we have to ask clients, ‘Do you want quality or speed?’ We don’t ever overlook something because the client is in a hurry, but we try to understand that they are often in a tough spot, sitting there with equipment and crews costing them by the minute.


“Quality control is extremely tight. Anything can happen to cause us to have to do it over. Being a small business, it’s a high pressure atmosphere. We don’t compete with smaller labs; we compete with large ones,” continues Overcash.


“Many small laboratories get absorbed by large enterprises. It’s a challenge to stay independent. On the other hand, we can offer a better quality of service because we’re small,” adds Jones, citing the ability to make decisions and change directions in-house.


Laboratories are often frustrated with Environmental Protection Agency (EPA) regulations that are unachievable. “The EPA figures out the level of a chemical or substance that will harm human beings and request tests that reflect those levels. The problem is that there is no technology and instrumentation available to test for that level,” says Jones.


Prism Laboratories’ 34 employees include laboratory technicians, field technicians, project and quality control managers. One of the most important jobs is sample receiving due to short testing times. All laboratory staff have either an associates or bachelors degree in a science.


“We have a mix of employees who were hired at entry level and trained up and those who came in with previous experience,” says Overcash.” On the business side, there is a controller, an IT director and sales staff.


“Employees who handle samples are OSHA trained and put through Prism Laboratories’ own safety training program as well. Samples are treated with worst case scenarios in mind. Lab coats, gloves and leather shoes are standard.”


“It’s a fast-paced culture,” says Jones. “We never know what’s coming through the door.”


Cutting Edge


On the Prism Laboratories agenda are efforts to increase the company’s work with the U.S. Department of Defense. “With these larger consultant groups, contracts are often awarded for three years, something that would enable us to plan ahead,” says Overcash. The work typically involves cleaning up old military bases.


In response to the constant push for greater sensitivity, Jones and Overcash will soon make a couple of major equipment purchases—an inductively coupled plasma (ICP) mass spectrometer (“a hot fire is what that is,” says Overcash) and an electric conductivity detector (ECD). The ICP mass spectrometer burns metals and puts them in their elemental state.


“It knows the mass of a chemical without us having to figure it out,” says Overcash. The ECD tests for pesticides and PCBs. “Equipment and instrumentation is getting more and more sensitive. It’s like computers and smart phones—there’s always a better one coming out,” says Jones.


Together, the partners plan to maintain a cutting-edge laboratory.

A scan of business announcements of new presidents, chief executives, and appointments to boards of directors in industries as diverse as distribution, higher education, supermarket retail and health care will often turn up something in common—Coleman Lew + Associates were involved in the placement.


Charlotte-based Coleman Lew + Associates is a high-end, international, retained executive search and leadership development firm. “Our core competency is identifying, evaluating and recruiting leaders for our clients,” explains Kenneth D. Carrick Jr., president of Coleman Lew.


The firm’s mantra is “Opportunity is an open chair,” and they’ve taken advantage of quite a few as Charlotte’s largest placement firm. They are adept in executive search and leadership development, networking globally to scout and recruit the best hires. Serving a widely diverse roster of public, private, non-profit and international clients for over three decades, they’ve more than shown the complement of that mantra, “Nobody can fill our chair.”


A Generalist Approach


“We help our clients solve a leadership need,” explains Carrick. “For whatever reason, whether it be retirement, promotion, attrition, reorganization, termination or starting something new, our clients have a leadership need and we can think creatively and help them in recruiting and evaluating those leaders. We do it in a consultative capacity. We’re a partner to our clients.”


Carrick, who graduated summa cum laude with a bachelor’s degree from Catawba College and an MBA from Wake Forest University, has been with the firm for 28 years and has conducted over 200 executive searches, developing a strong client base in retail, manufacturing, education, non-profits, banking and energy.


Other focus industries for the firm include health care, distribution, construction, government and financial services but as founder and chairman Charles E. (Chuck) Lew states, “There are no limits as to what industry we can assist. As long as we understand the business or entity, we’re comfortable working with them.”


Because they serve a multitude of industries, Coleman Lew is considered a generalist firm but it began in 1979 specializing in searches for the food retail and food distribution industries.


Lew, who earned a bachelor’s degree from The Ohio State University and pursued graduate studies at Xavier University, served in Vietnam as a Marine and worked as a general manager of an office products company before starting his recruiting career in the Columbus, Ohio, office of a national firm.


When he decided to start his own firm, Lew looked at the Southeast and Southwest as potential locations. Tampa/St. Petersburg, Birmingham, Richmond, Nashville and New Orleans were all under consideration, but one visit to Charlotte made the decision.


“I came to Charlotte first,” says Lew. “I’d never been here before in my life but I drove here with my wife and her sister and it looked like a really nice place to live. We never even looked at another city.


“Charlotte also had the best statistics,” Lew continues. “Back in 1979, there were 5.2 million people within a 200-mile radius of Charlotte and cities like Greensboro, Winston-Salem, Columbia, Greenville or the Raleigh/Durham/Chapel Hill area preferred to do business in Charlotte over Atlanta or Philadelphia, so it was actually a large market.”


Coleman Lew’s transition to a generalist firm began 17 years ago, spawned from need, organic evolution and intentional design.


Lew explains, “We had clients all over the country in the food retail and food distribution industries but we had too many clients in certain sectors and the industry was consolidating. Since we don’t recruit from our clients, that shrunk our pool of candidates.”


Some diversification grew from existing business. “Our retail and food distribution business led us to other parts of distribution,” says Carrick, “and manufacturers who hired us for our expertise in distribution would then hire us for searches in manufacturing.”


The purchase of another search firm specializing in banking and nonprofit brought those industries on board and the move into higher education was strategic and purposeful.


Both Lew and Carrick agree there are distinct advantages to being a generalist firm. “For high level positions like the next CEO of a business, you not only want to look in that industry but you want to look at ‘out of the box’ candidates from an adjacent industry or even someone with an entirely different background,” Lew explains. “Some specialized firms act almost like clearing houses where they’re placing people that have the same set of experiences and there’s no value added.


“We’ve done some searches where there is no one logical place to source candidates and so our expertise is consulting with a company or a board and figuring out what they want and where that person might come from.”


“An example might be a search for a college president,” adds Carrick. “The traditional path to college president is through the academic ranks. That would be where a specialist firm would focus. But in searches that we’ve managed, we try to think as broadly as possible. For instance, one college hired a company CEO who had a Ph.D. and another hired a fundraiser from a major university.”


“This happens a fair amount of the time, especially at high level positions,” Lew adds.


Each Search is Unique


No matter the search, it all begins with the client. “We have to know the client, their culture, what they want in a leader,” Carrick says. “It’s much more than just getting a position description. The technical expertise of a person is only a small part of whether a person is successful in a new position. They have to be able to fit and work within the culture. You have to define all that up front. Our first step with any client is listening to them and understanding.”


After fully understanding the need, Coleman Lew uses a proactive approach to identify people to meet the client’s goal followed by a comprehensive evaluation phase before candidates are presented to a client.


“We conduct an historical interview where we walk somebody through their life,” explains Lew. “We find out where they’re from, how they grew up, why they decided to go to a particular college and if they’ve made position changes, why they occurred.”


“We deal with the most complex element in an organization—their people, so instead of just looking at a snapshot like a resume, we create a movie,” Carrick says. “When we present a candidate, we give the client an executive summary. We also provide a written evaluation of seven different areas of pertinent information that the client may not pick up from just reading the resume and we spend time verbally covering each candidate with a client. We can also offer personality profiles as additional information on candidates.


“Our disciplined, thorough process allows the client to make a more informed and better choice to meet their objective than they would have been able to do on their own.


“If we do our job correctly, by the time our clients get to their finalists, all of them will have the skills to do the job. It’s then a matter of who they think fits best in their organization.”


After completing the initial vetting, Coleman Lew presents a select group of candidates who meet as closely as possible the client’s objectives and then moves into an advisory role to help clients in their own evaluation process, checking backgrounds and references and assisting in crafting the offer.


Coleman Lew is proud of their success rate. Industry-wide, only about 60 to 65 percent of searches are ever completed. Coleman Lew greatly exceeds that with completed searches at 92 to 93 percent. Lew credits their success to “people and process.”


“What we sell is our service and our judgment,” adds Carrick. “We have always been a ‘high touch’ organization. Our focus has always, unwaveringly, been on quality and that’s reflected in our business.”


Coleman Lew’s focus on quality is reflected in their involvement in The Association of Executive Search Consultants (AESC). In 2010, Carrick was selected to be director of the Americas for the elite association that represents the top 250 search firms in the world.


“We adhere to the highest standards in the industry,” Carrick continues. “That is one of the reasons about 85 percent of our business is either repeat or referrals from an existing client. We have longstanding relationships with our clients.”


Coleman Lew’s longest current client relationship dates back over 30 years. Boyd L. George is the third generation and chairman and CEO of Alex Lee Inc., the largest privately-owned food services company in the Southeast. Alex Lee subsidiaries include Merchants Distributors Inc. and the retail supermarket chain, Lowes Food Stores.


George remembers his relationship with Coleman Lew began with a cold call from Lew in 1979. “Our first search with the company was for an industrial engineer,” George recalls. “We’ve been very pleased with their service over the years. That’s why we use them today and will continue to use them. It’s been a good association for us.”


Positioning for the Future


While Coleman Lew’s core business is executive search, they understand that hiring the right person for a position is only part of the challenge facing companies. This prompted them to expand into leadership development to foster the vitality and long term success of an organization.


Coleman Lew provides new leader integration, team development and executive coaching services to maximize employees’ potential, and executive assessment to identify and develop leaders within an organization.


Their planning services help companies refine goals, strengthen their brand and strategically position themselves for the future.


Coleman Lew also offers succession planning services assisting companies to successfully navigate leadership transitions. In this case, Coleman Lew not only offers this service but is actively using it themselves as they prepare for what Lew calls the “third generation” of the company.


“A big part of our business is helping clients move into the future,” says Lew. “It’s important for us too. We’re currently in the process of succession planning and we’ve brought in some very high-powered, very competent young people to take us into the future.”


Shana Plott, Laura C. Thomas and Danielle F. (Dany) Williams are Coleman Lew’s third generation. While the search business has traditionally been male-dominated, Coleman Lew is in the forefront of the trend toward women in industry leadership roles.


“We’ve seen a greater focus on recruiting women as board members and top executives,” says Plott, a graduate of the University of North Carolina at Chapel Hill whose background includes 20 years in the search industry and non-profit sector.


“More clients are specifically requesting a diverse slate of candidates,” adds Williams who joined the firm seven years ago as a researcher. Williams graduated Phi Beta Kappa, magna cum laude with a bachelor’s degree from the University of South Carolina Honors College. Her J.D. from the University of South Carolina Law School and experience as a litigation attorney has translated well to interviewing and assessing candidates.


“Digital media is another new trend for our clients,” says Thomas, a graduate of the University of North Carolina at Chapel Hill, who assisted in founding a charter school and worked as a top sales representative in the manufacturing industry before joining Coleman Lew.


“Not only is technology changing the world of search, it’s also changing what companies need to compete. Our clients have to reach their customers in a different way now. They need people that understand ‘big data’. It’s an example of how we can help our clients by articulating and designing what this talent looks like and how to find it,” adds Thomas.


Plott, Thomas and Williams all acknowledge that as their clients’ business has grown more global, executive search has become an international endeavor.


“Many would describe us as a boutique firm and that sounds as if we’re just local and limited,” says Williams. “But that isn’t the case. In a recent search we had a $4 billion European company looking for a person to run their facility that produced wire and cable for nuclear submarines.


“Through Skype I interviewed people in Belgium, Australia, India and many other places around the world. Few people had the expertise for the position. It was a challenge but also fun to be able to put that puzzle together.”


To assist in international searches, Coleman Lew has partnered with Penrhyn International. Penrhyn is a global consortium of premier retained executive search firms that can cooperate on international assignments.


Thomas is finishing up a search in which she assisted a Penrhyn associate firm in Amsterdam to fill a U.S. position for a company headquartered in Brussels. Soon she’ll request the assistance of their Penrhyn contact in China to find someone to oversee manufacturing and suppliers in China for a Carolinas-based apparel company.


Coleman Lew’s third generation feels well-prepared for whatever the future holds. “Chuck and Ken and others have built a phenomenal firm,” Plott says. “The onus is on us to ensure that their standards of excellence continue. The bar is set very high but we will make sure that our commitment to quality and client service continues.”

Where babies come from and the source of our drinking water are two great mysteries of life. We learn quickly enough the answer to the first question. The second lingers unresolved into adulthood and then is largely forgotten.


Groups concerned about H2O think adults need a water wakeup call, some statistic that puts the faucet in our face. Richard C. “Rick” Gaskins Jr., executive director of the Charlotte-based Catawba Riverkeepers Foundation (CRF), has a good one: If present trends continue and we fail to solve our water problems, Mecklenburg County will run out of water by mid-century.


Water Consumption


To solve that massive problem—and Gaskins is convinced that it is solvable—the water-drinking public first needs to return to its long unresolved water question: Where does our drinking water come from?


For a few of us, it is the well in the backyard. Lisa Corbitt of Mecklenburg County Groundwater and Wastewater Services estimates that 15 percent of the drinking water in Mecklenburg County comes from wells. Thousands dot the landscape, especially in Mint Hill, Davidson and Paw Creek. Statewide well use is a lot higher. Approximately 50 percent of North Carolina’s drinking water comes from wells according to Corbitt.


For the other 85 percent of Mecklenburg County, the major source of drinking water is the Catawba River. That’s the same Catawba River that topped American Rivers’ list of most endangered rivers in America in 2008 and is currently fifth on the list. Pegged as at risk from coal ash pollution are the drinking water, recreational enjoyment, wildlife habitat and the recreational economy. It is a river under tremendous stress.


“It is important for people to understand that Mecklenburg County is unusually dependent on the Catawba River,” says Gaskins. “Most large urban areas of the United States have multiple river sources of water. But if the Catawba River gets contaminated, where are you going to find that much water? Regardless of whether it’s for drinking or industrial use, the economy starts grinding to a halt if you don’t have plentiful clean water.”


Historically, dependence on the Catawba River water supply went into overdrive during the 20th century. That’s when entrepreneurs realized its vast economic potential. Beginning in 1904 with what is now Lake Wylie, power companies began erecting the first of 14 dams along the 320-mile Catawba River. That process continued until 1963 when the dam at Lake Norman was completed. All of the dams were eventually absorbed into Duke Energy.


The dams created 11 lakes along the Catawba, from Lake James in the mountains to Lake Wateree in South Carolina. An interrupted Catawba helped insure recreation, stimulate economic growth, and increase the fortunes of Duke Energy.


While no one owns the Catawba, Duke Energy manages and controls most of it. A 2006 study found that Duke consumed almost half—48 percent—of all the water taken from the Catawba every day and not returned. In some cases, an individual power plant uses 1.5 billion gallons a day. Yes, billion. Although most of that water is returned to the river, a significant portion evaporates.


“I don’t know of any other river in the country where power plants consume that much water,” says Gaskins.


The water Duke removes is used to cool its three coal-fired and two nuclear power plants before it is returned to the Catawba. In the summertime, the water Duke Energy takes in from the bottom of the Catawba is 68 degrees Fahrenheit; the water it returns can average 103 degrees Fahrenheit.


And what about drinking water?


The water removed from the Catawba River by the 67 city and municipal public water utilities in North Carolina and by utilities in South Carolina approaches 32 percent of total consumption. During its peak demand period in 2012, Mecklenburg County, for instance, removed 156 million gallons per day.


Water treatment plants clean and distribute water from the Catawba. After we drain and flush it, waste water treatment plants attempt to decontaminate raw sewage and gray water and, at least in theory, return cleaned water to the Catawba.


Other water consumers are agriculture at 18 percent and industry at a meager two percent. Agriculture in the Catawba basin is not only corn and soy beans, but also sod farms and ornamental nurseries. Instant lawns require a lot of water during their growth and development stages. The reason industry consumption is so low is that only a few industries are permitted to draw water directly from the Catawba. Most Charlotte industries use city water and are part of the county’s 156,000,000 gallon daily gulp.


Threats to Clean Water


There are major downsides to having the Catawba River so power-centric. Ash pits are one. Some refer to them as ash ponds, ash lagoons or ash basins. In North Carolina, these pits are unlined, so they are essentially massive holes in the ground where coal combustion waste is dumped. All of these unlined ash pits in North Carolina have contaminated ground water.


After years of inaction, environmental groups this year found a way forward. They threatened a law suit under the Clean Water Act, not once but three times. And it has worked.


In January 2013, the Southern Environmental Law Center (SELC), representing the Sierra Club, the Waterkeeper Alliance and the Western North Carolina Alliance, notified the North Carolina Department of Environment and Natural Resources (NCDENR) of its intention to file suit against Duke Energy for coal ash pollution at its power plant on Lake Julian, near Asheville.


In March 2013, SELC again notified the state that it intended to file a similar suit against Duke for coal ash pollution closer to home, at the Riverbend Steam Station on Mountain Island Lake on the Catawba River. The Catawba Riverkeepers were part of that suit. In June, SELC told the state it intended to sue over pollution on the Cape Fear River near Wilmington.


Finally NCDENR felt the heat. In August 2013, they filed lawsuits seeking injunctions against all of Duke’s coal fired power plants. Every Duke Energy ash pit in North Carolina was included in the state’s action.


“The lawsuits against Duke regarding ash ponds are currently in the preliminary stages,” says Gaskins. “To the best of my knowledge, Duke has not cleaned up any of the ash ponds it owns and certainly not any of its unlined ash ponds on the Catawba River.”


South Carolina Electric and Gas has reacted differently. It has agreed to clean up its ash pond on the Wateree River as a result of the lawsuit filed by SELC on behalf of Catawba Riverkeeper. “SCE&G is ahead of schedule on the cleanup,” says Gaskins.


Power plants, paper companies and industrial polluters are huge, highly visible targets for environmental groups. Going after them makes headlines. In Riverkeeper lingo, they are point sources of pollution.


But it’s the non-point sources that are North Carolina’s greatest polluters. “That’s you and me,” says Gaskins. “We want paved parking lots, big houses with huge roofs, golf courses and lush lawns. That means runoff fertilizers, herbicides, insecticides, toxic chemicals, bacteria and nutrients in our streams and rivers. All have harmful effects on drinking water supplies, recreation, fisheries and wildlife.”


Quantity More Contentious Than Quality


For all its attention in the press, water quality is not the top issue facing our area or the Catawba Riverkeepers. It’s water quantity—how much, not how clean.


Gaskins’ quote about Mecklenburg County running out of water by mid-century is founded on two hypotheses: economic growth in our area and the resulting demand for more water.


“The more parking lots we install, the more oil-contaminated water runs off to creeks and streams, not to the ground underneath the pavement. An inch of rain on a parking lot is producing 26,000 gallons of storm water runoff,” says Gaskins. “That runoff goes into the creeks almost instantaneously as compared to a natural environment where there would be very little runoff and most of the water would soak into the ground, recharging the groundwater table.”


Forests, grass, soil and trees create a steady flow to the river. Parking lots and streets—the consequence of economic growth—create what Gaskins calls “flashy flows.”


“To stop flashy flows, developers could, if we had the political will to demand it, create retention ponds next to the asphalt. Or put tanks underground to hold back the first three inches of a rain shower. It’s doable,” says Gaskins.


Economic growth will also drive demand for more power and thus more water. Gaskins’ solution: water conservation by Duke Energy. But what incentive is there for Duke Energy to conserve? It draws the water from the Catawba River at no cost. Even minimal conservation would not be cost-justified in a harsh economic world.


“If you have to spend a penny to save a gallon of water, it is costing Duke Energy money,” says Gaskins.


One of the most contentious issues facing the area is demand that comes in the form of inter-basin transfers or IBT. In 2002, the prolonged drought and expanded economic wealth led the cities of Concord and Kannapolis to request additional water from the Catawba River and the Yadkin-Pee Dee basin.


The cities wanted to withdraw a maximum of 36 million gallons per day from the Catawba River. All their drinking water came from three lakes where the combined draw was approximately 14 million gallons per day. After years of litigation, a settlement was worked out between the towns and Catawba Riverkeeper.


“We have a template for settling these issues,” says Gaskins. “It’s water conservation.” The cities that want to tap into the Catawba River have to institute water conservation programs. One such measure was that the cities require low flow plumbing fixtures in their building codes.


The result was that neither Concord nor Kannapolis have needed a single gallon of water from the Catawba River.


Riverkeeper Resources


Like non-profits everywhere, Catawba Riverkeepers Foundation has more mission than money. In round numbers, they raise around $300,000 each year with an additional $100,000 of in-kind donations from advocacy groups with a similar mission.


With those funds it hosts a soon-to-be revamped website, a newsletter, and designated Clean Up Days on the river. The group trains Citizen Patrols to identify sediment and erosion violations at construction sites. There is also a Youth Kayaking Program to get young people on the river.


“Once citizens see the problem through aerial photos or by kayak trips or field trips, they get it,” says Gaskins. “If they see pollution, they’ll be convinced.”


Gaskins and his staff are advocates for the Catawba. They speak out for its welfare at public hearings, in court and with public officials.


Chief among their allies are the Southern Environmental Law Center and the North Carolina Conservation Network. Donations from individuals and organizations make up 94 percent of CRF’s cash income. Grants and investment earnings bring in the other six percent.


The foundation came into existence as a result of concern among groups in the region that no entity was focused on the Catawba River. Local governments joined in and with the help of the Foundation for the Carolinas, the Catawba Riverkeepers was formed in 1997. The first Riverkeeper was hired in 1998.


Catawba River Foundation also relies on a cadre of volunteers stationed throughout the region. Some take an active role in serving as the Riverkeeper’s eyes and nose. Known as Lakekeepers, Covekeepers, Water Watchers and Steam Watchers, they are on the lookout for pollution. These volunteers regularly report their observations to the sole Riverkeeper on the payroll, Sam Perkins.


It is Perkins, known for his beagle-like inquisitiveness, who explores, samples and tests the waters and environs along the entire Catawba River basin. His monitoring role extends to any concentrated animal feeding operations (CAFOs). In Mecklenburg County, there are no Texas-style cattle feed lots, but there are plenty of dairies.


Perkins also trains and supervises volunteers and educates the public on water issues. Perkins’ background seems ideal for this work. He has bachelor’s degrees in journalism and environmental studies as well as a master’s of science in environmental studies, all from the University of North Carolina at Chapel Hill.


Gaskins comes to his role as the Catawba River’s water warrior after a long history of environmental activism. As a Duke University undergrad studying mechanical engineering, he led a team that built an award-winning energy-efficient automobile. At Harvard Law School, where he graduated cum laude, he chaired the environmental law society and was managing editor on the Harvard Environmental Law Review.


Before coming to Catawba Riverkeepers Foundation, Gaskins was in private practice as an environmental attorney. His resume includes past chair of the Environmental and Natural Resources Law section of the North Carolina Bar Association and past vice chair of the American Bar Association’s Toxic Torts and Environmental Litigation committee. One writer has described him as “a walking encyclopedia on toxic torts and environmental litigation.” He is the organization’s fifth director.


Though faced with the ever contentious issues involved with protecting water quantity, water quality and water security, Gaskins and Perkins are optimistic about the future.


“Everybody gets water,” says Gaskins. “Ultimately, people want clean water to drink and to swim in. They want to eat the fish they catch. With water, it’s us. We are causing the problem.”


On November 18, 2013, Mecklenburg County Superior Court ruled that the Catawba Riverkeepers deserve a seat at the table when the state negotiates with Duke Energy on the ash pond issue. The Riverkeepers are not in favor of a slap on the wrist, a small fine and a sweetheart promise to do better.


Perkins wants results: “We will work to see that Duke energy’s toxic coal ash in cleaned up.”


Like the Lorax in the Dr. Seuss classic, the Catawba Riverkeepers speak for the river.


Photo by Fenix Foto


Although the tax law is modified each year, the types of taxes we pay remain relatively constant. These include taxes on sales, income, property, estate/gift, social security, unemployment, etc. However, beginning in 2013, there is an introduction of two new taxes, which are part of the Affordable Care Act: Net Investment Income Tax and an additional Medicare Tax on wages and self-employment income.


Net Investment Income (NII) Tax

As the name suggests, this is a tax on investment income. For the purposes of this law, investment income includes interest, dividends, capital gain, net income from rental and royalties, and income from business activities where the owner is considered to be a “passive” participant (does not materially participate in the business operations). Although this may seem straightforward, there are a number of gray areas regarding its application. The IRS has addressed many of these in proposed regulations as well as Q & A sections on its website.


For NII tax purposes, income NOT subject to this tax includes: wages, unemployment compensation, operating income from a business that is not passive to the taxpayer, alimony, tax-exempt interest, self-employment income, and distributions from qualified retirement plans, such as IRAs.


A particularly confusing topic regarding this tax is the treatment of rental activities. The current IRS position is that rental activity, which does not rise to the level of being considered a trade or business, will be included as income subject to this tax. An example of a rental activity that qualifies as a business and is therefore NOT subject to this tax, would be a taxpayer whose full-time job is managing the rental properties he or she owns.


However, from the IRS examples released to date, they appear to expect very few rentals to qualify for this exclusion. So the question for taxpayers whose full-time job is not related to the rental is: How involved in the rental activities do I need to be? Some advisers argue that if a taxpayer is involved with continuity and regularity with the primary purpose of making a profit, a trade or business exists. If the taxpayer’s position conflicts with IRS regulations, disclosures may be required, which would prevent IRS penalties but will also draw IRS attention to the position.


The NII tax is assessed at a 3.8 percent rate and is applied to the lesser of (1) net investment income, or (2) the excess of modified adjusted gross income for the year over a threshold amount. These applicable thresholds are $250,000 for married taxpayers filing a joint return or a qualified surviving spouse, $125,000 for a married taxpayer filing a separate return, and $200,000 for anyone else. Therefore, for this tax to affect you, you must have a certain level of income and net investment income included in that amount.


So what are some strategies that could be used to lessen this new tax for you? In addition to taking your rental to the level of a business, or increasing your participation in other activities to avoid the “passive” taint, you can shift the mix of your investments to assets that produce income not subject to the tax (i.e. municipal bonds, annuities, or life insurance).


Another strategy could be to smooth out income from year-to-year in order to stay under the gross income threshold mentioned above in order to avoid spikes in any one year that could make you subject to the tax. If you are planning to sell your stock in a closely held C corporation, arranging the financing of the sale as an installment sale (to be received over a number of years) may be a tax planning tool.


Additional Medicare Tax

Wages and/or self-employment income in excess of the same thresholds as the NII tax will be taxed at a 0.9 percent rate. This tax is more straightforward and tax planning more difficult. However, one possibility is for taxpayers to plan ahead to defer income such as bonuses and remain under the income thresholds.


The problem is that the definition of wages for the calculation of this tax is “Medicare Wages” which makes 401(k) deferrals still subject to this tax and tax will be imposed on deferred compensation when the income vests to the employee. A tax adviser can help you understand how the wage base is determined.


Employers also are required to withhold this tax when wages for the year exceed $200,000. If the withholding exceeds the actual tax owed, or vice versa, the difference is resolved on the employee’s tax return.


These new taxes clearly add to the complexity of the federal tax system and require consideration from both businesses and individuals. As with any complex issue, you should consider seeking help from a tax adviser familiar with the applicable law.

In 2011, I was fortunate to check a major item off of my bucket list: Visit New Zealand’s South Island. Knowing it would be an expensive adventure, I meticulously researched each hotel, restaurant and activity using TripAdvisor.com to ensure that I would get the best experiential value based on the reviews of others.


Advertising spent on brochures, web design, billboard advertising, TV or radio had no influence on me and where I chose to spend my money. Every decision I made was based on the opinions of others.


Well, I wasn’t let down. I had the time of my life!


Recently, while driving home from uptown Charlotte, I pulled into the parking lot of a recommended restaurant in Dilworth and read reviews about it on Yelp.com. Had the reviews been negative, I wouldn’t have gone in. My consumer behavior is consistent with Generation Y who place a premium on experience over expense and make decisions from quick research using a smartphone.


This behavior is not limited to the service industry, as I, and others like me, have conveniently selected dentists, doctors, computer repair technicians and a myriad of other services using review sites.


There has been a lot of criticism in the media about review sites like Yelp.com and others because of ‘review padding’ by owners of establishments who create positive reviews for themselves. If a business operator delivers a poor product or service, no amount of padding can outweigh the tidal wave of negativity that will crash on a business from savvy consumers.


Review sites are here to stay and effectively utilizing them is a key to business success today and in the future.


Embrace Change

Word-of-mouth (WOM) has always been the most credible and effective mode of marketing, but its transmission beyond our small social circles had been limited by our interactions. Prior to the smartphone, an average consumer would tell three friends about a great experience and 10 about a bad experience.


Today, Facebook and Twitter deliver opinions, both good and bad, to thousands of people in seconds. A company’s survival centers around great service, selling an excellent product, and using new mediums for marketing.


Once considered to be in a different category from marketing, customer service has transitioned from being an extremity to being at the heart of influencing consumers on where to spend their money. Inspire your customers through exceptional service to utilize the technology available and create raving reviews.


Gaining Competitive Advantage: Leveraging WOM

Leveraging word-of-mouth is both effective and inexpensive when attempting to raise a company’s profile in a busy marketplace. An example of this is the story of my family and how they utilized TripAdvisor to transform their business.


My parents operate an eco-kayaking tour on the island of Antigua, competing with 67 other tour companies vying for cruise ship passengers arriving each day between November and April. How does a literal ‘mom and pop’ compete with no advertising budget and thrive? The answer: Craft a five-star experience complemented with superior service and then ask your customers to review the trip.


The result? Their business tripled after they moved up the TripAdvisor rankings from 26th to number one in the country. Their customers became the marketing team and word spread virally about the Antigua Paddles experience. Any company in any industry can adopt this strategy and be successful if implemented correctly.


The advent of the smartphone is a game-changer. At no time in history have consumers had the power to effect the success or failure of an organization’s outcome. The very survival of a company not only depends on a product or service but also how the customer feels and most importantly, how that feeling is shared.


Tips for Leveraging Review Sites

1. Know Your Ranking. Know where you stand and know what consumers are saying about you.

2. Create Raving Fans. Make exceptional customer service equally as important as the product.

3 Deliver. Deliver great service consistently everyday.

4. Address Negative Reviews. Post responses to any negative review, but never take a defensive position. Be positive in your comments and implement necessary changes to avoid the same negative review again.

5. Set Goals. Strive to break into the top-three ranked companies on various review sites.

6. Buy-In. Get buy-in from your staff to embrace a customer service culture and drive to hold a top online ranking.

7. Ask. Happy customers tend to be loyal and will happily write reviews to help with your success…you just need to ask them.

Succession planning is a process for business owners to determine exactly how a business can continue after its founders (or current owners) leave through either sale of the business, retirement, disability or death. It involves every aspect of the business and personal lives of the current owners and proposed future owners.


The typical end result of succession planning is the identification of an exit strategy for current owners that satisfies their ongoing needs and a plan for the identification and implementation of the structure necessary for the business to survive and thrive independently of its current owners.


Oftentimes, business owners do not consider that at some point, they will no longer be an owner of the business. Whether their exit is the result of a planned or unplanned departure and what happens to their business and their family before, during and after that departure can and should be positively affected by what they do today through the creation and implementation of an appropriate succession plan.


Though every plan and strategy will vary based on the objectives of each owner and each business, all succession plans have two common aspects: a plan for the transition of ownership; and a plan for the transition of management and control. The second aspect is both the most difficult and most important.


Possible Exit Strategies Available to Business Owners

1. A liquidation of the business: always an option, but this option is not likely to produce the highest value to the owner;


2. The sale of the business to “insiders” (other shareholders or employees): a possibility, however, in many cases, no other shareholder or employee will have funds to provide the “cash out” price except through the use of the assets and business operations of the business (which can create a problem of adequate financial security for the owner);


3. The sale of the business to “outsiders” (strategic buyer, financial buyer, foreign buyer): a possibility, but there is potential downside if the market learns that the business is “for sale;”


4. Creation of a “benevolent dictatorship” (leave it to the kids): a possibility, but the children may not know the business, and children typically will not have the funds to provide the “cash out” price except through the assets and business operations of the business;


5. A joint venture or merger: a possibility if it can be structured to provide results similar to “sale of business” to outsider; and


6. An initial public offering (IPO): only possible for a small minority of closely held business clients due to the complex issues involved.


The selection of an exit strategy and exit planning should commence no later than five years prior to the desired departure of the owner.


Consensus on a succession plan is best obtained when there is an atmosphere that permits sharing of information (especially financial data) and a clear willingness to seek and give input before major decisions are made.


Key Elements of the Succession Planning Process

The succession planning process is a complicated one which involves consideration of the following elements:

• the business’s strategic plan,

• the business’s current financial condition and cash flow,

• the corporate finance and options available,

• relationships among the owners and their families,

• stakeholders’ interests (current owners, potential successors, management and key employees),

• leadership abilities of potential successors,

• planning already in place (estate planning, life insurance planning, retirement planning, investment and funding mechanism planning, and business valuation),

• planning for the disability or death of the owners,

• organizational and entity structure as related tax effects,

• executive compensation planning (current and deferred),

• equity and non-equity incentive arrangements,

• owner’s agreements (buy-sell, cross-purchase, redemption, etc.), and

• the negotiation and mediation skills necessary in order to create and implement a succession plan which satisfies the interest of all stakeholders.


In next month’s article, we will discuss a Five Step Process for helping business owners create the optimum succession plan for their businesses which best meets the business and personal objectives of current and future owners and also leads to maximizing the value of the business.

Charlotte is #1 in Employee Engagement

Charlotte has the highest level of employee engagement of all major U.S. cities, according to a recently released survey by Quantum Workplace, a company that provides the tools and strategic advice to improve employee engagement, organizational culture and financial success. Additionally, only Charlotte and Denver have shown consistent and significant increases in engagement since 2009.


What does that mean, exactly? “Engagement involves the presence of three outcomes among employees. First is discretionary effort—meaning employee willingness to go the extra mile; second is intent to stay; and third is advocacy—the employee’s willingness to brag about their workplace,” says Greg Harris, president and chief executive of Quantum.


Harris says that the biggest differentiator for Charlotte is the wildly high favorable ratings for the survey item that says, “I see professional growth and career development opportunities for myself at this organization.” For whatever reason, he says, employee responses to that item in Charlotte were miles above other cities.


Quantum Workplace has compiled its annual ranking since 2003. It evaluates 37 key items falling into 10 areas of engagement including perceptions of teamwork, manager effectiveness, trust in senior leaders, trust in coworkers, retention, alignment with goals, feeling valued, individual contributions, job satisfaction and benefits.


“The list is most helpful for employers as they recruit and Chambers of Commerce as they attract This data provides a lens into the quality of workplaces by city. This list gives cities a benchmark to build a story around attracting and retaining great talent.”


Levels of Employee Engagement

Top Five Cities

1.         Charlotte, N.C.

2.         Denver, Colo.

3.         Sacramento, Calif.

4.         San Antonio, Tex.

5.         Washington, D.C.


Bottom Five Cities

1.         Cincinatti, Ohio

2.         Omaha, Neb.

3.         Las Vegas, Nev.

4.         Albuquerque, N.M.

5.         Kansas City, Mo.


2014—The Year for Charlotte to Flourish

At its annual meeting on December 3, 2013 at the NASCAR Hall of Fame, the Charlotte Chamber celebrated its successes in 2013 under the leadership of Brett Carter, chief distribution officer of Duke Energy, and launched new objectives for 2014 with the installation of Michael Tarwater, chief executive of Carolinas Healthcare System. They also presented Dan DiMicco, executive chairman of Nucor, with its Citizen of the Carolinas award. With over 2,000 in attendance, its theme “Flourish” exemplified the ambitions of Chamber leadership to boost economic growth in a healthy and vigorous way.


In preparation for the Annual Meeting, Chamber leaders gathered at Pinehurst for the annual planning event that centered on the principle of finding ways to make Charlotte a healthier, more vibrant place to live and work. According to incoming chairman Tarwater, “Of the accolades in which Charlotte has earned high marks, healthy is not one of them. Yet more and more companies looking to relocate and more and more workers looking to plant roots in new communities are adding healthy criteria to their list of wants.”


Within the planning session, Chamber leaders talked about encouraging healthier workplaces and healthier lifestyles with the ambition of raising the identity of Charlotte as health conscious and focused upon green space planning, better public transportation, cleaner water and air so that the overall environment will be respected and cared for even as we experience economic growth.


Over 130 Charlotte business leaders participated in the 2013 Inner-City visit to Houston, Tex., and were able to compare notes on transportation, energy and health care sectors. Chamber leaders selected Minneapolis, Minn., for the 2014 Inter-City visit.



New Mayor Targets Job Creation

Newly-elected Mayor Patrick Cannon was sworn in to his new position at a Charlotte City Council Meeting on December 2, 2013. Having been chosen by 53 percent of the voters, Mayor Cannon defeated Republican Edwin Peacock.


In his remarks upon being elected, Cannon targeted job creation, both white and blue collar jobs; zoning, permitting and other steps to establish a more “business-friendly” community; and getting focused on building a “global distribution hub” taking advantage of the Charlotte Douglas International Airport, the new $93 million Charlotte Regional Intermodal Facility and Charlotte’s central location along the East Coast in the coming years.


Citing the low costs of the Charlotte airport, Cannon expects to compete with other distribution hubs to bring business to Charlotte and the region.

Publisher's Posts

Greater Charlotte Biz was delighted to host John Silvia, Wells Fargo Securities chief economist, at our Fall Biz Symposium. We asked John to address a number of possible disruptions to the economy in 2014 and suggest how they might affect businesses during the coming year.


John spoke of the nomination of Janet Yellen as the new Chair of the Federal Reserve in January 2014. He commented that she is likely to keep the same or similar policy path as Chairman Bernanke. While she is viewed as slightly more dovish than Bernanke, she is expected to keep rates short through 2015. She is not expected to disrupt the financial picture dramatically.


The first and primary challenge of the New Year will come early when the House and Senate have established a new deadline for action on the federal budget, deficit reduction and on long-term debt. A joint committee formed with members of both houses has been charged with seeking an accord by December 13 on taxes and spending before another shutdown of the federal government. Unfortunately, everything in the budget is formed by a special interest and reaching a successful compromise will not be easy. The U.S. borrowing authority has been extended to at least February 7, although the actual hard deadline is likely to be closer to March of 2014.


Silvia explained that we have experienced a sustained recovery in 2013, but still below an historical experience with a benchmark of 2.75 percent trend from 1982 to 2012. He commented that long rates had risen to a point where the 10-year yield was at nearly 3 percent, but would return downward to about 2.5 percent. He said that there would likely be no tapering from the Fed until at least March of 2014. He also projected that rising rates are not expected to threaten the housing market recovery and that housing would be a strong point in our economic recovery breaching the 1 million-unit mark in 2014 and 2015.


Uppermost of concern to Silvia are the federal government long-term entitlements including Social Security, Medicare and Medicaid. He projects that mandatory outlays will nearly double in the next 10 years. He commented that the disability program is expected to run a cash shortage in just three years and that health care will seriously burden our budgets very quickly.


In terms of national security, John remarked that concerns in Syria, Iran and North Korea have resulted in a flight to safety for government bonds with yields down to nearly 4 percent.


Silvia does not expect that the brinksmanship of the political parties will change despite mid-term elections, but slight adjustments will be made to the makeup of the House and the Senate. Currently those elections are expected to be a toss-up—meaning the risk of partisanship will continue going forward.


What we can all hope for is a productive government that will foster greater economic growth in the near term. At the same time, confusion over the Affordable Care Act is causing businesses to be overly cautious until they can be more confident about the access and costs of this new system.


One of the biggest worries for the U.S. economy is the declining workforce. Looking at the change in its composition, we see that less and less young people are part of the labor force as older people are having to work later into life. Both male and female youth as well as adult females have been leaving the labor force since the recession and not returning.


What was most encouraging to Silvia was his forecast. He expects that growth will pick up, hitting 2.5 percent in the second half of 2014. Business fixed investment and personal consumption are expected to increase steadily and the housing market will be strong.


In summary, Silvia contends that the recovery continues and even picks up steam unless or until our public policy makers stall and disrupt our economy from its recovery.


And from Greater Charlotte Biz, we wish you the very best of holidays and an incredibly prosperous 2014!


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Thank you, John Paul Galles