State plans fifth round of Downtown Revitalization Initiative

Get our email updates

Stay up-to-date on the companies, people and issues that impact businesses in Syracuse, Central New York and beyond.

ALBANY, N.Y. — New York will offer a fifth round of the Downtown Revitalization Initiative (DRI) with $200 million available for communities across the 10 Regional Economic Development Council (REDC) regions. The funding seeks to “bring new life to their downtowns through a comprehensive strategic planning process,” followed by the implementation of key projects,” the […]

Already an Subcriber? Log in

Get Instant Access to This Article

Become a Central New York Business Journal subscriber and get immediate access to all of our subscriber-only content and much more.

Learn More and Become a Subscriber

The funding seeks to “bring new life to their downtowns through a comprehensive strategic planning process,” followed by the implementation of key projects,” the New York governor’s office announced.

As part of DRI’s fifth round, the state will announce up to two funding awards — for a total of $20 million — per REDC region.

REDCs will decide whether to nominate two $10 million awardees or one $20 million awardee for downtown-redevelopment projects upon review of the submitted applications.

As is the case with past DRI rounds, each selected community will develop a plan that “articulates a vision for the revitalization” of its downtown and identifies a list of projects. The state will then award DRI funds for selected projects that have the “greatest potential to jumpstart revitalization and realize the community’s vision for the downtown,” per the governor’s office.

Applying

Applications for DRI’s fifth round — which are available on the DRI website — should be submitted to the appropriate Regional Economic Development Council by Sept. 15. All applications should be submitted with a $10 million award in mind but may indicate that they would also like to be considered for a $20 million award. Applicants that indicate interest in being considered for a $20 million award must respond to supplemental application questions in which they describe and confirm “specific transformative or catalytic” DRI projects and “demonstrate the readiness of those projects and local capacity to manage” the full $20 million in DRI funds.

New York Secretary of State Rossana Rosado is leading the initiative. Communities receive support from private-sector experts and a team of state-agency staff led by the New York State Department of State in partnership with Empire State Development and New York State Homes and Community Renewal.

About DRI, past regional winners

Launched in 2016, the Downtown Revitalization Initiative seeks to “accelerate and expand the revitalization of downtowns and neighborhoods to serve as centers of activity and catalysts for investment in all 10 regions of the state,” the state says.

New York has awarded DRI funding to communities across upstate New York. By region, the recipients have included in Central New York (Oswego, Cortland, Auburn, and Fulton); in the Mohawk Valley (Oneonta, Rome, Amsterdam, and Utica); in the Southern Tier (Elmira, Watkins Glen, Owego, and Hornell); in the North Country (Plattsburgh, Watertown, Saranac Lake, and Potsdam) and in the Finger Lakes (Geneva, Batavia, Penn Yan, and Seneca Falls).

Würth Baer Supply renews lease for industrial space in DeWitt

Construction, Design & Real Estate, Small Business, Subscriber Only

DeWITT, N.Y. — Würth Baer Supply Company recently renewed its lease of 30,000 square feet of industrial space at 5928 Court Street Road in DeWitt. Mark Rupprecht of CBRE/Syracuse and Jessica Sutter of CBRE, Inc. handled this lease transaction. No lease terms were disclosed. Orange Properties Owner, LLC owns the property at 5928 Court Street

Already an Subcriber? Log in

Get Instant Access to This Article

Become a Central New York Business Journal subscriber and get immediate access to all of our subscriber-only content and much more.

Learn More and Become a Subscriber

VIEWPOINT: How to Motivate and Coach Employees for Success

Business Mentors, Employee Benefits & Human Resources, Subscriber Only

Already an Subcriber? Log in

Get Instant Access to This Article

Become a Central New York Business Journal subscriber and get immediate access to all of our subscriber-only content and much more.

Learn More and Become a Subscriber

I talk to lots of people each day and that I hear is a lack of love, support, motivation, and recognition from their direct manager or supervisor. Too many people in management positions think the only reason someone works is for money. Many managers believe that the paycheck is why people work and there is no reason to tell anyone thanks for doing a great job. We nitpick things they are doing wrong and fail to recognize and celebrate what they are doing right.

These people I am talking to are ready to leave, want to leave, or are waiting for the job they really want. When you lose an employee today it is much harder to find a replacement. Especially someone good.

Each day you can motivate your staff or turn them off. When you put employees down, they get depressed, and their effectiveness disappears. A manager’s job is to coach up your workforce and bring out the best in everyone you manage to help foster their success and your success.

When organizations treat their employees well, coach them effectively, and continually work to motivate empowered performance — everyone wins.

The typical supervisor and manager have had virtually no training on leadership, management, and coaching skills. It is critical that you spend time and money each year developing these skills.

Coaching focuses on proper motivation, teamwork, expectations, and collaboration rather than a command-and-control approach. The modern manager as coach works as a team leader as well as a team member.

Employees think of managers as paper pushers, number crunchers, or administrators, while coaches are teachers and mentors who have their interests in mind in addition to the organization’s business goals. Managers are standoffish and reticent. In the eyes of employees, coaches are approachable. They are open-minded and accessible. Employees want to work with someone who is willing to see them as the people they are. They want to impress them and do their part to help the entire team succeed.

Employees want to feel wanted

We’re human: we want to feel wanted — by everyone in our workplace. This is especially true of you, the employees’ coach. When you or a co-worker doesn’t want an employee around, it is obvious to everyone. They will process that standoffishness consciously or subconsciously to the detriment of the team’s performance.

Employees want to feel needed

Employees want to know that their skills and talents are being used by their team and by the organization. Many of your staff members toil for years honing their skills and improving their experience. They want to feel like they are using what they have learned and that those skills are being utilized appropriately.

Employees want to feel like they belong

Employees want to feel like there is a place for them not only within the organization, but also within the team. Workers will spend more time at their job than any other single place during their lives except at their home. As humans, we thrive on creating and subsisting within our interpersonal relationships.

Employees want to feel valued

Employees desire recognition for the effort and performance from you, your organization, and from their co-workers. Not only do employees want to feel like they are using their skills, but they also want to feel like the organization appreciates their talents and values them when they meet and exceed expectations. Providing recognition is a way you can show employees that they are valued.

An employee who feels wanted, needed, and valued feels secure and supported in her job. This can lead to positive outcomes, including:

• Employees make more empowered decisions

• Employees work better with their customers and their co-workers

• Employees are unafraid to take risks

Keeping employees and motivating them for greater success is critical. Employees are 10 times more fragile than you think they are. Your success is in their hands.

John Tschohl is a professional speaker, trainer, and consultant. He is president and founder of Service Quality Institute, a global customer-service strategy and training firm with operations in more than 40 countries.

VIEWPOINT: Executive Order has Little Immediate Impact on Non-Compete Clauses

Business Mentors, Law, Accounting & Taxes, Subscriber Only

Already an Subcriber? Log in

Get Instant Access to This Article

Become a Central New York Business Journal subscriber and get immediate access to all of our subscriber-only content and much more.

Learn More and Become a Subscriber

On Friday, July 9, President Joe Biden signed an executive order on “Promoting Competition in the American Economy” aimed at limiting certain anti-competitive practices across multiple sectors, including agriculture, telecommunications, technology, and pharmaceuticals. The order highlights a multitude of anti-competitive practices in these sectors, including the increasing pervasiveness of non-competition and related agreements throughout the American economy. While the executive order itself does not prohibit non-competition agreements — and is not expected to have any immediate effect on their enforceability — employers should view the order as a possible precursor to further actions over the coming months and years.

With 72 initiatives, President Biden’s executive order is certainly sweeping in scope; however, as it relates to employee non-competition, non-solicitation, and related restrictive covenants, it is limited in both scope and immediate effect. Specifically, the order encourages the Federal Trade Commission (FTC) to create rules “to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” The order thus merely encourages, but does not mandate, the FTC to commence the rule-making process to limit the unfair use of non-competition covenants and other restrictive covenants, which may include non-solicitation, non-poaching, and/or non-servicing restrictions.

In other words, the executive order does not prohibit, or even limit, employee non-competition agreements or other restrictive covenants. Rather, at most, it previews possible future agency action designed to “curtail” (notably, not “ban” or “eliminate”) the “unfair use” of such agreements. To the extent that the FTC does act, as the order encourages it do, we expect that some definition will be provided on, among other things, how the FTC plans to “curtail” the use of such agreements and what is considered “unfair.” We will continue to monitor the situation and provide necessary updates if and when any such future action, agency or otherwise, occurs.

In the meantime, [companies] may continue to utilize non-competition and related agreements, consistent with applicable law, which are reasonable in geographic and temporal scope and necessary to protect their legitimate business interests (e.g., the use, disclosure and/or loss of confidential and trade secret information, customer relationships and goodwill). However, with the potential of future action at the federal level limiting the use of such agreements, [firms] should exercise prudence on their employee restrictive covenants and take necessary steps to ensure that they are utilizing best practices with their restrictive covenants, including, without limitation, ensuring that adequate consideration is provided, avoiding a “one size fits all” approach, and periodically updating their restrictive covenants to account for any change in law.

Bradley A. Hoppe is a member (partner) in the Buffalo office of Syracuse–based law firm Bond, Schoeneck & King PLLC. He is chair of Bond’s manufacturing industry group. Contact Hoppe at bhoppe@bsk.com. Samuel P. Wiles is an associate in Bond’s Rochester office. He is a is a litigation attorney who counsels businesses in employment, commercial, health care, and property disputes. Contact Wiles at swiles@bsk.com. This article is drawn and edited from the law firm’s New York Labor and Employment Law Report blog.

OPINION: Encouraging Engagement in I-81 Public-Comment Period

Opinion, Subscriber Only

The U.S. Senate [on July 28] voted to move forward a historic $550 billion infrastructure bill. While there are still several legislative steps ahead of its full passage, it’s $110 billion investment for highways holds the power to transform communities like Central New York. Furthermore, it comes as the long-awaited Draft Environmental Impact Statement (DEIS) for the

Already an Subcriber? Log in

Get Instant Access to This Article

Become a Central New York Business Journal subscriber and get immediate access to all of our subscriber-only content and much more.

Learn More and Become a Subscriber

Furthermore, it comes as the long-awaited Draft Environmental Impact Statement (DEIS) for the I-81 Viaduct Project was released by the Federal Highway Administration and the New York State Department of Transportation (NYSDOT). The significance of the alignment of these cannot be understated as they represent an unprecedented, once-in-a-generation opportunity for our region.

To realize the full potential of the I-81 project and investments, CenterState CEO has long advocated for 10 Community Grid Plus recommendations (https://www.centerstateceo.com/sites/default/files/Community_Grid_Plus_10_Enhancements_2.19.pdf). These suggested enhancements are the direct result of our members’ thoughtful engagement in this process through our I-81 work group and focused member surveys. The inclusion of seven of the recommendations means their voices were heard.

Now it’s your turn. The New York State Department of Transportation is currently seeking input from all parts of the community. A summary of the DEIS can be read at https://parsonsecmpublic.s3.amazonaws.com/I-81-DEIS/07-2021/08%20Summary%20of%20Alternatives_July%202021.pdf.

The full DEIS can be viewed at https://static.parsons.com/I-81-DEIS/07-2021/. You can also get additional information on public-engagement opportunities, including public hearings and how to comment during the 60-day public comment period at https://webapps.dot.ny.gov/i-81-viaduct-project-public-outreach. I encourage your active participation in this comment period to ensure this project benefits from all voices across our community, including businesses, residents, and institutions that share a goal of greater prosperity in Syracuse and Central New York.

Our team is actively reviewing the full DEIS, and we will continue to update our members on important project developments. To learn more about how you can support CenterState CEO’s I-81 outreach and advocacy efforts, contact David Mankiewicz, senior VP of research, policy, and planning at dmankiewicz@centerstateceo.com or Jonathan Link Logan, director, Northside UP at jlinklogan@centerstateceo.com.

Robert M. Simpson is president and CEO of CenterState CEO, the primary economic-development organization for Central New York. This article is drawn and edited from the “CEO Focus” email newsletter that the organization sent to members on July 29.

OPINION: Why Voters Vote as They Do

Opinion, Subscriber Only

Maybe it’s just a professional preoccupation, but I have always been intrigued by why voters cast their ballots as they do. I’ve never made a formal study of it but have talked with plenty of them over the years, and one thing sticks with me from those conversations — there is no one thing. People

Already an Subcriber? Log in

Get Instant Access to This Article

Become a Central New York Business Journal subscriber and get immediate access to all of our subscriber-only content and much more.

Learn More and Become a Subscriber

Some voters care mostly about a single issue — abortion, say, or climate change — and if a politician doesn’t meet muster on it, they don’t even give her or him a second glance. Or they care about a candidate’s ideology or party — conservative or liberal, Republican or Democrat — and don’t feel much need to look beyond the label. For some decades, split-ticket voting was fairly common: that is, voters chose a Republican presidential candidate and a House Democrat or, less commonly, a Democrat for the White House and a GOP House member. This has grown much less common — in both federal and state elections. As ideological camps have hardened, party affiliation is part and parcel of who many people are, and how they vote.

Sometimes, it’s not so much ideology as what a party’s leaders stand for. I remember asking one man in my district how he voted and why. He responded, “I always vote for FDR.” This was years after Roosevelt had died. “FDR’s not on the ticket anymore,” I told him. He laughed and said he knew that, but he always voted for whoever he believed would vote in accord with Roosevelt’s principles. This was not as whimsical as it sounds: he was saying, essentially, that the New Deal values Roosevelt pursued in office were still relevant to him, and he wanted candidates who’d uphold them.

What has always struck me, though, is that voters also find plenty of more particular reasons to cast a ballot one way or another. Sometimes, they care a lot about a particular project — a road, a new school, or some other piece of infrastructure. Or they worry about the taxpayer dollars required for that project, and so vote against anyone who supports it.

Sometimes, public policy has nothing to do with how they vote. Over the years, for instance, I’ve noticed repeatedly that likability matters a great deal, and may in fact override everything else. We tend, for instance, to like people who are positive, constructive, and forward-looking, and who make us feel hopeful. Or we like how they behave in public. I still remember an intriguing conversation with a group of Democratic women who told me they planned to vote for Ronald Reagan that election. Given their party affiliation, this surprised me. One of them explained, “Well, I like the way he treats his wife,” which drew nods from others in the room — they saw in Reagan’s graciousness toward Nancy a sign of character that drew them, and I’m confident they weren’t the only ones.

Of course, there are always the highly personal reasons. I ran into a fellow once who told me he always voted for a certain politician. “I don’t agree with anything he stands for,” the man said, “but he helped get my son out of Vietnam.” Another one told me I had his vote because he liked my short haircut. I refrained from saying I hoped there was more to it than that — but I certainly thought it.

In general, though, Americans seem to like candidates who display a basic sense of decency, know right from wrong, and show compassion for people who are struggling in their lives. We don’t always vote for them — sometimes, other issues rise to the fore in a given election. But I’m reminded of a conversation I had early one frosty morning, standing at a plant gate. An election was coming up, and I asked a man striding past me how he planned to vote. He was supporting the same ticket I was running on, he told me, adding, “I vote for the candidate I think will help the ordinary guy.” That’s a very American sentiment: We back candidates we think will bear our interests in mind and reflect our concerns — however we define them.

Lee Hamilton, 90, is a senior advisor for the Indiana University (IU) Center on Representative Government, distinguished scholar at IU Hamilton Lugar School of Global and International Studies, and professor of practice at the IU O’Neill School of Public and Environmental Affairs. Hamilton, a Democrat, was a member of the U.S. House of Representatives for 34 years (1965-1999), representing a district in south central Indiana.

VIEWPOINT: Cyber-“Ish” Tips: The Importance of Policy

Business Mentors, Subscriber Only, Technology

Whether your organization calls it cybersecurity, information security, or information assurance, a strong security program is an important element in determining the durability and success of your business. Without the proper policies, security controls, and trained staff, how will your business survive a cyber incident? Denial-of-service attacks, malware, ransomware, cyber extorsion, and more have all been receiving

Already an Subcriber? Log in

Get Instant Access to This Article

Become a Central New York Business Journal subscriber and get immediate access to all of our subscriber-only content and much more.

Learn More and Become a Subscriber

Security policies are the cornerstone of protecting an organization and often required for compliance with federal laws such as HIPAA (Health Insurance Portability and Accountability Act) or industry regulations like PCI (Payment Card Industry), as well as various state laws. An organization’s policies outline what is allowed, why, and how and are approved by senior management, so they have weight and authority. Properly written policies serve two purposes. Initially, they are proactive and establish guidelines for how the business will perform and secure things during its day-to-day operations. Policies such as “Acceptable Use” tell staff what they can and cannot do and advise them of the consequences of actions that might put the organization at risk. Other policies such as “Asset Management” help track vital (and expensive) equipment to prevent loss or theft. Secondly, well-written policies can help give guidance and help steer an organization during times of trouble or crisis. Important reactive policies like “Incident Response”, “Disaster Recovery” and “Business Continuity Planning” clearly establish the roles of staff, direct them how to proceed during trouble, and establish the importance of security within the organization.

A well-written policy should be phrased simply, with guidelines and directions that do not rely upon heavy technical terms, easy to follow guidance that allow all employees to understand and follow, even during times of stress.

According to PolicyAdvice.net: “Only 20% of businesses have offered cybersecurity training to their employees, whereas only 27% have actual cyber-security policies implemented to help prevent and deal with the aftermath of an attack.” How secure is your organization, does it have the proper security related policies to survive an “event?” Here is a list of 10 IT security policies that you should already have in place:

1. Information Security Policy: This policy is intended to document an organization’s protections and give guidance to limit the access and distribution of data to only those with authorized access. It is the master policy and should include policies and procedures to inform all users and networks within the organization meet minimum IT security and data-protection requirements.

2. Acceptable Use Policy (AUP): Guidance for the acceptable use and limitations of an organization’s IT assets and data. This policy should outline what the organization expects from its users, while they are using the organization’s computing assets. How users utilize these technologies can incur costs, or increase risk to the organization, this policy ensures that users understand the risks and limitations.

3. Remote Access Policy (RAP): A policy to outline and define acceptable methods of remotely connecting to the organization’s network from any endpoint (laptop, mobile phone, tablet, home desktop etc.) not located within the enterprise. The purpose of the RAP is to reduce risk introduced from devices outside the security perimeter.

4. Communications/Email Policy: How employees communicate with the public reflects on the business providing that communication. This policy is intended to formally document how to use the various communications media, what is acceptable and unacceptable use. Communications methods should include official social media, SMS (text), chat, blogs, and email.

5. Incident Response Policy (IRP): Security incidents happen, this policy helps your organization prepare and respond to the incident in a systematic way to minimize the impact to business, the loss and destruction of data, and accomplish a return of operations to a stable state. Whether it is a data breach, malware, insider, external attacker, or some other threat, having a proper IRP can mean the difference between a minor event to a catastrophic or crippling blow.

6. Business Continuity (BCP) / Disaster Recovery Policy (DRP): Business continuity and disaster recovery in the face of crisis are two of the more important policies. Too many businesses fail to establish (and test) their plans properly and formally for what to do when catastrophe strikes. These policies describe how the organization will operate in an emergency. When bad things happen, restoration and recovery are critical to the survival of a business.

7. 3rd-Party Vendor Policy: Partner organizations that provide data, software, hardware, or other goods and services all pose various degrees of risk to your organization. Whether it is on your premises or in the cloud, any third party that might have access to your data, critical systems, or networks could be used to gain access to your assets, or vice versa. This policy documents and details the process of validate, verification, controls, and mitigations for that relationship to define and minimize risk.

8. Change Management Policy (CMP): Change can be good, but unauthorized and unapproved changes can cause chaos and introduce unforeseen risks. A good CMP formalizes a process for requesting, reviewing, approving, implementing, and even reversing (if needed) IT and security-related changes within your organization.

9. Asset Management Policy: If you do not know where the devices that store your data are, how can you protect them? This policy outlines, directs, and governs how hardware and software are acquired, managed, and tracked for accountability. Understanding the lifecycle and location of an organization’s hardware and software is vital if it is to be properly protected.

10. Password Management & Standards Policy: Password policies often seem to make most users groan in agony, yet the creation, rotation, and management of passwords is a rather important issue. Password complexity and diversity are important concepts in protecting who can access what resources. This policy needs to outline the organization’s requirements so that users (who typically make their own passwords) use secure passwords. This policy should also address multi-factor authentication, an extremely strong security control to enhance usernames and passwords by utilizing an out-of-band extra factor for authentication.

Policies are not meant to be written and then sit on a shelf. The documents need to change and grow with the organization, being reviewed regularly, updated whenever there are significant changes, and tested to ensure they work. Policies should be briefed and shared with all staff as part of an organization’s security awareness and training programs so that they are part of your security apparatus. Industry best practices recommend that all policies be updated, reviewed, and tested for accuracy at least once a year.

Jeffrey Isherwood is a cybersecurity analyst at M.A. Polce Consulting Inc., a Rome–based provider of managed IT and security services to businesses and nonprofit organizations.

NONPROFIT MANAGEMENT: Outlining affiliation structures in the nonprofit sector

Business Mentors, Nonprofits, Subscriber Only

“Coming together is a beginning, staying together is progress, and working together is a success.” — Henry Ford One thing about the pandemic is now perfectly clear. That is, nonprofit health and human-service organizations have, for the most part, been given a reprieve from the $6 trillion-plus of federal stimulus initiatives. Just one example of this reprieve

Already an Subcriber? Log in

Get Instant Access to This Article

Become a Central New York Business Journal subscriber and get immediate access to all of our subscriber-only content and much more.

Learn More and Become a Subscriber

“Coming together is a beginning, staying together is progress, and working together is a success.” — Henry Ford

One thing about the pandemic is now perfectly clear. That is, nonprofit health and human-service organizations have, for the most part, been given a reprieve from the $6 trillion-plus of federal stimulus initiatives. Just one example of this reprieve is the New York State budget receiving a gift of $25 billion from the American Rescue Plan. Without this additional revenue to New York State, Gov. Cuomo had been predicting significant cost reduction and reform initiatives for the $83 billion state Medicaid program and other forms of state contract funding to Social Determinant of Health (SDOH) providers. In addition, we now have wage hikes and other forms of inflation accelerating throughout the economy. This situation will place many tax-exempt organizations in a position of assessing their ability to maintain autonomy or the need to pursue an affiliation/acquisition in the next 12-36 months.

The fact pattern described above, coupled with additional economic, pandemic, and demographic challenges, will prompt the need for updating and/or revising strategic plans to evaluate the likelihood of each tax-exempt organization being able to sustain financial viability. The extraordinary pressures faced by board and management of tax-exempt organizations will continue to force many nonprofits to merge or affiliate with other organizations. In a 2012 column, I coined the term of increased affiliations as representing the “WalMarting” of the nonprofit sector.

The following lists provide the primary external and internal factors that support the inevitability of increased merger and affiliation activity. As a result of the foregoing, maintaining autonomy may not be the best alternative strategy at this point.

External factors include the following:

• “Bigger is better and more efficient” in the eyes of government
• Fewer providers = less cost
• Aggregation / transfer of financial risk = less state administrative cost
• Government views smaller providers as “higher risk”
• Networking and consortiums may create favorable contracting leverage

Internal factors impacting agency strategy are as follows:

• Maintaining sophistication in information technology, particularly telehealth and telemedicine
• Affordability of electronic-medical records and documentation
• Maintaining regulatory compliance requirements
• Increased regulatory enforcement scrutiny and audits• Pressure on administrative efficiency and cost-driving expectations from 15 percent to 10 percent or less

There have been many local examples of success in tax-exempt service organizations collaborating to achieve an effective fulfillment of their collective mission. I believe that every nonprofit organization should have the strategic objective of continuing to assess the impact and outcomes of program services, while effectively managing the cost of service delivery.

In fact, every nonprofit should be able to candidly evaluate and answer the following two questions:

• What strategies can we implement that will make our organization more cost effective with improved service outcomes?

• What are the non-core competencies of our organization that could benefit from a strategic affiliation?

I have previously developed and strongly encourage many tax-exempt board and management-team members to consider the following continuum of contractual and structural alternatives between autonomy and acquisition. In between these two ends of the affiliation spectrum, we have:

• Co-optition
• Collaboration
• Shared-service agreement
• Contractual affiliation
• Network formation – independent provider associations
• Joint venture
• Partnership/corporation
• Merger

At the opposite end of this continuum is as an acquisition, which is generally a four-letter word for the acquired party to the transaction. Merger is, by far, the preferred terminology.

As affiliations and mergers continue to increase in the nonprofit sector, the following information should be viewed as a primer for affiliations and the most popular structures being implemented.

I. Corporate Restructuring Utilizing a Passive or Active Parent Entity

Typically, the board and management of the nonprofit-program service provider, working with appropriate legal and financial advisors, will discuss, evaluate, and determine the most appropriate approach to forming a parent-entity structure. This structure should only be established in situations where there are clearly defined benefits that will facilitate future growth of the organization’s programs and services as well as providing for appropriate legal protections between and among the parent entity and its respective affiliates.

In conducting the evaluation referred to above, it is beneficial for the following initiatives to be completed.

• To identify the benefits to be derived from a corporate restructuring by conducting a needs assessment that would summarize the strengths, weaknesses, opportunities, and threats (SWOT) that may be relevant for board and management consideration.

• To identify the advantages, disadvantages, challenges, and opportunities that may be derived by a corporate restructuring process for board and management to consider regarding preferred corporate-restructuring models.

II. Passive vs. Active-Parent Entity Structures — What’s the Difference?

• Passive-parent entity — The passive parent corporate restructuring model is by far the most common approach utilized in the nonprofit sector. The passive-parent board retains “sole member” status in all the subsidiary/affiliate entities that provide charitable services under a tax-exempt 501(c)(3) exemption. For-profit subsidiaries/affiliates of a passive parent, depending upon the structure of the taxable entity, will have the passive parent as its sole member or 100 percent shareholder.

• Active-Parent Entity — The passive-parent entity model may or may not evolve to an active-parent entity model. The decision to move to an active-parent model can be influenced by several variables that can be characterized as either advantages or disadvantages. However, the primary difference between an active or passive-parent entity model is that active-parent entities are subject to far more regulatory reporting requirements and related policies and procedures that satisfy all the governance regulatory requirements related to the subsidiary/affiliate entities that provide programs and services. In an active-parent entity model, the senior management / executive leadership team typically become employees of the active-parent entity.

It is possible, under either the passive or active-parent entity structure, to have the management / executive leadership team personnel continue to be employed by the primary program service entity or through the establishment of a separate and distinct management / administrative / shared-service organization.

III. Common Alternative Corporate Entities in a Parent Model

The following corporate entities are the most common structures established by tax-exempt organizations providing health and human services in New York state.

1) Management-Services Organization (MSO) — As described above, the MSO entity structure can be used as a transition model for purposes of evaluating future affiliate entities for the parent.

2) Existing and Newly Established Program Service Entities under a Common Parent Entity (Passive Parent) — This is the most common affiliation structure used over the past 15 years as the hospital industry has gone through its own consolidation / affiliation process. This model typically allows for the local governing board of each entity to remain intact, with the combination of board members from each entity on the parent entity’s board. This model provides the parent entity with usually five or six reserve powers that represent what is commonly referred to as “sole member” status.

3) Passive-Parent Entity Structure with Limited Decision-Making Control by the Parent Board — In this model, current, and future affiliated entities would be under the auspices of a parent entity similar to Alternative #2. However, the reserve powers in this model provide for greater autonomy to the board and management of current and future affiliated entities.

4) For-Profit Entities — If it is determined that the activity is a for-profit business activity, it could be substantial enough to jeopardize the tax-exempt status of the parent entity or its affiliates, one or more for-profit taxable corporate entities may be formed. The for-profit entities established are also considered to be subsidiaries of the parent entity.

5) Full-Merger Alternative — In this model, the programs and services of the current operating entities are determined to be most effectively provided in a single merged entity with separate lines of business established based on the different programs and services provided. In this model, board and management would ultimately determine that neither the passive nor active-parent model is in the best interest of the future growth prospects of the organization. This single-entity structure would result in full control by a single governing board and a single management team.

Please be advised that any future substantial asset transfer from one 501(c)(3) public charity to another falls under the potential need for regulatory review and approval by the New York State Attorney General’s Office and its Charities Bureau.

Remember to keep your eyes focused on the mission of your organization. Do not allow the issues of who gets what job or who gets what number of votes to dictate your ultimate decisions.

Gerald J. Archibald, CPA, is a partner in charge of the management advisory services at The Bonadio Group. Contact him at garchibald@bonadio.com