Sign of the times
Rockland Trust has entered an arena that is gaining widespread attention because of the dramatic run-up in real estate prices since 1999 – that of 1031 exchanges. This tool provides a way for investors to defer paying capital gains taxes when they sell highly appreciated property.
More financial planners and accountants are recommending this strategy to individual property owners as well as businesses and institutional customers.
Essentially, someone can sell investment property and exchange it for other property with at least the same value to defer capital gains and use that money for other investments. However, the exchange must be conducted through specialized intermediary companies, one of which Rockland Trust acquired on January 1 – in what is the first such move by a bank serving Cape Cod and Plymouth County.
The company is Compass Exchange Advisors LLC, which will become a wholly-owned subsidiary of Rockland Trust. It hired Compass’ owners, Thomas E. St. Jean and Andrew F. Gelson, Esq., as managing directors.
With increasing competition for customers in this market, banks are beginning to diversify into other related areas such as insurance and wealth management.
Reliance on 1031s has grown astronomically in recent years; it is pervasive on the West Coast, but only now developing a foothold on the East Coast.
This move by Rockland Trust is expected to improve the bank’s capability to generate deposits and increase its fee revenues. Rockland Trust itself is a subsidiary of Independent Bank Corporation; it currently has $2.9 billion in assets.
Can you benefit from 1031s? Cape Business’ upcoming Personal Finance edition (March/April) will feature coverage of this tax-planning tool. To learn more about the publication, click here or call Bob Viamari at (508) 385-3811.
Move to tax seasonal rentals gaining momentum
With what appears to be a permanent decline in occupancy tax revenues from motels, B&Bs and hotels, more Cape towns are lining up to tax seasonal rentals.
Adding to this momentum, state Rep. Cleon Turner, D-Dennis, is proposing legislation to let towns expand the 5 percent hotel and motel room tax to include private rentals and timeshares. It would affect any home, apartment, condo or timeshare rented consecutively for 90 days or less.
Chambers of commerce and many businesses – including real estate agents – oppose such a move, fearing it would only cut into already diminished summer tourism or further discourage new homebuyers.
Home and condo owners probably would pass on any increased tax with higher rental rates; and some potential second-home owners may choose not to buy on the Cape – especially because they depend on summer rental incomes to help carry mortgage costs. Others argue that these owners already are paying property taxes and do not tax municipal services because they don’t live here year-round.
Turner says that Town Meeting approval would be required before a town could tax seasonal rentals. Proponents believe the tax could bring towns such as Chatham as much as $1 million a year in new revenue.
These towns are on record as supporting the expanded tax: Provincetown, Eastham, Orleans, Chatham, Harwich, Brewster, Dennis and Falmouth.
Despite the momentum, chances of any rapid passage are slim. The Legislature’s leadership appears reluctant to consider any kind of tax plan. What might provide Turner with some leverage: It really will be up to individual towns to levy the tax, which frees the legislature from any direct accusation it is “raising” taxes.
Dealing with unhappy customers
When it comes to difficult customers, do you want to be right or do you want to be profitable? Here’s our answer from Retail Details guru Doug Fleener:
"A retailer recently asked my advice about an unhappy customer who wanted a refund. My recommendation was that she refund the woman. My reasoning is that, first of all, you don’t want unhappy people to make your life miserable. Giving her the refund makes her happy, which makes you happy. Second, it doesn’t matter who is right or wrong; the customer is going to say negative things about you. Not only will you never do business with him or her again, you also risk losing his or her friends and family. Over a couple years it could add up to five to 10 times the refund amount.
“Another retailer had a similar incident and not only refunded the customer’s money, but gave her the product as well. Here was a customer who was angry and probably planning to never ever do business with that store again. When he later ran into her, the previously unhappy customer started telling her friend the story and ‘how great’ the retailer was. Now that’s how to be a profitable retailer!
“At the same time, you don’t have to accept unacceptable behavior! What’s unacceptable: cursing, yelling, screaming, bullying, pointing, poking, pushing, hitting – basically any kind of behavior that doesn’t befit an adult.
“Finally, don’t forget to help your employees learn techniques for interacting with unhappy customers. Model this behavior for them. When they see that you’re happy about resolving an issue so that the customer leaves happy, your employees will do the same.”
Fleener will be appearing as a speaker at the 2007 "Class Act" Spring Seminar Series sponsored by the Yarmouth Area Chamber of Commerce and TD Banknorth. To learn more about this series, contact Lynn Mason-Small at (508) 778-1008 or communications@yarmouthcapecod.com.
Health insurance for everyone not so easy
The authority charged with introducing health insurance plans that would be affordable to about 160,000 uninsured individuals has been somewhat stunned by the recent reaction of insurers unwilling to offer policies at premiums and deductibles at levels estimated by former Gov. Mitt Romney.
Bob Carey, director of planning and development at the Connector Authority, reports that monthly premiums from submitted plans that met the state’s minimum coverage requirements would cost $380, on average. Submitted premiums ranged from $250 for a 28-year-old to $580 for a 56-year-old.
“That’s something we need to think about. At the end of the day, do we want to put something for Minimum Creditable Coverage for $380?” said member Bruce Butler. The average rate is about $100 higher than what board members had initially expected to be.
Expect more hearings and jawboning as the deadline requiring insurance for everyone fast approaches. For more details on the health insurance story, go to www.capebusiness.net.
Women and business
Women, who represent 52 percent of the nation’s population, now own nearly 30 percent of all businesses across the country. We asked Linda Brantley, executive director of the Massachusetts Commission on the Status of Women: What are the competitive advantages for a woman in business?
“Collaborative style, consensus building, intuitive leadership, good communication and interpersonal skills and skilled at successfully juggling multiple priorities,” she said. “Conversely, access to capital has been a challenge, as women are not as comfortable or knowledgeable about asking for money,” noted Brantley. “Lack of a ‘good old girls’ network of contacts also handicaps success.”
That point was reinforced by Shafeena Rahman, an executive of The Community Bank. Rahman, who works out of Sandwich, is one of 10 businesswomen profiled in the upcoming March/April edition of Cape Business. She also has developed the Women’s Business Exchange for the bank.
Her next seminar, “Super Networking: Connecting the dots and leveling the playing field,” is scheduled for 9 a.m. on Wednesday, Jan. 31, at the Dan’l Webster Inn in Sandwich. If you wish to attend, please call her at (508) 833-1511. She recommends signing up as soon as possible, as seating is limited.
To learn more about advertising within Cape Business’ special report on women and business, please call Bob Viamari at (508) 385-3811.
Tax revenue picture not terribly optimistic
House Speaker Salvatore DiMasi expects tax revenue growth between 2 percent and 3 percent next fiscal year, potentially affecting local aid levels, and his budget chief warned it would be a “monumental task” to preserve existing funding levels.
“Basically, don’t get your hopes up for the kind of spending that we were able to do the last year or two years,” he told members during a closed House caucus on the budget outlook.
Meanwhile, Gov. Deval Patrick vowed to fight for his proposal to authorize cities and towns to impose so-called local option taxes, despite doubts voiced by DiMasi and Senate President Robert Travaglini.
State spending this year rose 7.5 percent. And the House budget panel predicts capital gains tax collections, which it says provides almost 10 percent of the tax base, will fall off $300 million over the next two years, making it difficult for the state to keep up with a host of new spending commitments.
Said DiMasi: “There shouldn't be any expectations of great increases in either local aid, Chapter 70, or spending and programs.”
House Ways and Means Chairman Robert DeLeo is preparing for a “structural deficit of nearly $800 million before any discussion of new initiatives. “[T]he challenges we face this year significantly exceed those we have dealt with in recent history. It will be a monumental task to simply maintain those commitments we have already made, to say nothing of expanding on those commitments.”
Will gas tax help plug looming state deficit?
The legislative warnings come as Gov. Deval Patrick assigns his department heads to show him cost savings of between 5 percent and 10 percent of their budgets for next fiscal year.
Patrick aides said he sees “significant savings” through wage and hour law enforcement, tightened Medicaid reimbursement, and cutting down on earmarks, a favorite way for individual lawmakers to ensure spending on their own priorities.
The governor, who is overseeing a $25.7 billion budget, signaled he didn’t expect to cover the entirety of a looming budget gap he tabs at more than $1 billion, saying, “There are a lot of different strategies, and it will take more than one to cover the projected deficit.”
Asked whether he planned to raise the gas tax in an effort to close the looming gap, Patrick said: “Ever? It’s not on my radar screen right now. That’s all I’ve got to say.”
Upcoming events
Satisfied employees are good employees, so how about treating yours as well as you do your customers? The Cape Cod Human Resources Association will hold its January breakfast meeting on Thursday, January 25, from 7:30 to 9 a.m. at the Hyannis Holiday Inn. Ann Egan of The Navigation Group will explore the meaning and effects of providing employees with good customer service.
To learn more about this event and other upcoming business events across the Cape, check the Cape Business Calendar.
To submit events, e-mail news@capebusiness.net.
This information cannot be duplicated or redistributed.
All information contained in this document is owned by Cape Business Publishing Group LLC and is protected by the copyright laws of the United States. Information includes, but is not limited to, photographs, graphics, design and text.
