Salem’s business climate: a roundtable

NHBR’s editors recently met with Salem area businesspeople at the Brookstone Grille in Derry to get their take on how the area’s economy is faring and what their expectations are for the future.Participants were:•Ed Callahan, vice president and general manager, Rockingham Park•Brian Hooper, vice president, MSI Mechanical Systems•Jamie Santo, president and chief executive, Santo Insurance•Beth Roth, attorney and vice chair, Salem Board of Selectman•Fred Weismann, senior vice president, Pentucket Bank•Donna Morris, executive director, Greater Salem Chamber of Commerce•Lee Marchman, vice president and general manager, Advanced Programs Inc.•Dean Kacos, chief operating officer, Mosaic Technology•Cindy Hall, general manager, Mall at Rockingham Park•Joe Friedman, president, Brooks PropertiesQ. What drives the Salem area economy?Fred Weismann: That’s a tough question because, as we discovered from the town’s Economic Development Action Committee, the people who work and live here see it differently from outsiders.We concluded that an outsider’s perception of Salem is that it’s driven by retail. We’re one of three major retail areas in the state. I think we as a town and region need to broaden that perception. There is a very diverse economy in Salem. There’s a major industrial segment on the West Side. I think it’s a hidden story that no one really realizes from the outside. That’s why we are trying to change the identity, or find the identity, of Salem because we can definitely do a lot of marketing in the future with the committee and town.Beth Roth: I think we have this identity crisis in Salem because we are a retail area of southern New Hampshire, but we also have manufacturing businesses, industrial businesses, some research labs and other things that are happening in this town. People are not aware of these businesses.Donna Morris: You left out that there are a lot of mom-and-pop shops too. We have large retail and commercial businesses, but 70 percent are small mom-and-pops in a range of different industries.Jamie Santo: I think Salem has always had an identity crisis with the Merrimack Valley community and New Hampshire. Whatever resources may come out to the North Country or the Seacoast, Salem almost has to be part of its own economy to be self-sufficient. And then we’re part of the Merrimack Valley – North Andover, Lawrence, Salem – but there’s no resources coming from Massachusetts to support New Hampshire.Dean Kacos: We have the same thing because you have REDC (Rockingham Economic Development Corp.), which is focused on the coast and you have Manchester and the Tri-City, which has its own entity, and we struggle with who we should be recognized with. We also struggle with how to exploit our industrial base. We have been trying to start meeting about what we could do to lift that curtain so maybe people can start to get a sense that there is an industrial community.We do most of our business outside of the area, so it’s less of an issue for us, but from a peer standpoint, it’s horrible. I don’t even know the people next to me and we’re in the same industrial park. We don’t have that collaboration or that base. We don’t have anything that draws us together.Weismann: If you look at the North Country, they have a great collaboration with many. If you look at Manchester, it used to be just considered Manchester but now it’s Greater Manchester. I can name five or six towns within the Seacoast that collaborate with each other. Where do we go? Do we get a group together to see how we get that regional area to come together or do we become part of Greater Manchester? I’m not sure about that.Ed Callahan: One problem is there is no east-west transportation from Salem. The roads to Nashua are not easily accessible. You can’t get to the Seacoast unless you go through Massachusetts. So Salem has been in a position where there’s a north-south route since I-93 opened, and 28 before that, which goes north to south.To the south of us, there’s regional discussion about economic development transportation, but it’s not going anywhere. There won’t be any movement in east-west transportation I’d say for the next 20 or so years. Route 93 expansion was on the 10 year list – well, it’s still on the list. This is a roadblock for economic development. You aren’t going to grow in Derry, Londonderry, Manchester or anywhere up north until that roadblock is lifted.In Salem, you cannot sustain a business without people from Massachusetts. To this day, we do 80 percent of our business with people from Massachusetts. If we had to live on New Hampshire, we would have closed in 1907.If you look at all of New England and what’s available, right off an exit on the interstate highway, there is not a property with over 170 acres that is potentially available for whatever you might want to do. There’s a lot that can be done to make money on that property.The town doesn’t want more residential, we don’t need it. It’s going to cost the school system money. Retail, if we would go retail, every store on 28 would want to move there and 28 would be a ghost town. I don’t think that’s going to work. Maybe ultimately it would help to go in and build another business park.But the facility has been involved with gambling since 1906 – probably 20, 30 years before that. With a gaming facility, the people of Massachusetts would come. We generate revenue. If the Legislature passed gaming, the state would receive somewhere in the range of $140 million to $200 million. Jobs would be created.Q. Is that the consensus in the Salem area, that people are supportive of having casino gambling at Rockingham Park?Morris: If you look at the history of Rockingham Park, people are all upset with the closing of the mills and the logging industry in the North Country. But when Rockingham Park closed racing here, we lost jobs, infrastructure, tax dollars for our roads and other services. It is the same analogy as having the logging industry closing. Our legislators didn’t understand that it was a huge economic hit to our development in Salem by allowing this historical building to go.Roth: The services that were supporting the race track, the veterinarians in the area, the suppliers of the feed and grain. I look at 3,500 jobs that were affected. There was an outcry when a paper mill closes, but we didn’t get the outcry out here.Callahan: And it would preserve that green space that’s out there. We know of 125 farms that were registered with us in the early ‘90s that have gone under.There really aren’t a whole lot left. There are about 100 out there that have survived with show horses.I understand that the industry isn’t what it was, but the fact of the matter is that you have a private owner that owns a very attractive property. There have been many, many proposals and offers over the year. Ultimately the owner is going to have to go in a direction that benefits them. The state will lose a dramatic potential revenue source.Lee Marchman: In talking to people outside of New Hampshire, when you mention Salem, N.H., the first thing they think of is Rockingham Park. So Rockingham Park, because of how long it’s been around, has a lot of marketing power. It’s a question of how do you get your state to take advantage of that?Morris: The chamber of commerce has been writing letters to the governor that we are in favor of gambling. We point out what a good community member Rockingham Park is. We just had a business expo that we hadn’t done for years, and that was due to the generosity of the park to allow us to have it in their facility to help all businesses. They have donated millions to nonprofits. They’re just a solid community member.Everyone in Salem is aware of it, but no one else realizes it. That’s one of the things that we struggle with, because we have a gem but we struggle with the identity. Sometimes I feel like I never have to leave – I live here, I work here, I can go to the racetrack, the mall and the doctor’s. I’m like five miles to anything I need, and it’s wonderful. I love it here. And it’s a great community of people. But sometimes I think the rest of New Hampshire doesn’t understand that.Kacos: We had a business roundtable about this time last year with the governor. One of the things we talked about was providing sources of funding and making them available to businesses in the area and making them aware of what funding was available. He agreed to work with us to come up with a program and bring it back to the community and have an expo. He had it in Portsmouth.Brian Hooper: I’m in the construction industry and on the board of directors of ABC. Every networking event we do is either in Concord or Manchester – or anywhere BUT Salem.So last year I made a big deal about why we don’t ever do anything in southern New Hampshire and we set one up, and it was great, but it was like pulling teeth. They never think of Salem, they always think of “the rainbow,” which is everywhere else in the state but Salem.We have created, maybe not by choice, but this identity or image of Salem, and we have to work hard to change that.Joe Friedman: We have properties on both side of the border. We say that we wish we had more of our Massachusetts properties here in New Hampshire because the New Hampshire market for office and industrial space is much stronger. It’s stronger here than Nashua, Manchester, Concord too.We also have very good infrastructure in terms of telecom, infrastructure for the future. Back-up power, which everyone doesn’t know about, but for modern companies is extremely important. I’m told Salem is a bit of a hub and may even become more so in the future.The perception that New Hampshire is cheaper is not really there, though. When you look at the business profits tax and that set against individual savings on a state tax, the Massachusetts companies that come here realize there isn’t that much of an advantage. And we have some of the highest rents compared to the rest of New Hampshire, with the exception of perhaps downtown Portsmouth.Weismann: Right now, Nashua is competing with Manchester, Manchester is competing with the Seacoast. We’re all competing against each other as well as other states. It doesn’t make a lot of sense.Cindy Hall: The governor came down to assist us with the tax freeze situation when Massachusetts was having their special weekend. I think one thing we might be lacking is having a regular dialogue with those in Concord, rather than simply when we want something. You have to have a relationship first.I do see through that conversation with the retail association located in Concord and how they are constantly lobbying and representing the communication. I feel very in tune. Whether I take advantage of that or have the time to or not, they were very helpful.Santo: You said our rent is a little higher than other states. What’s the value of New Hampshire that you are seeing and that your tenants see?Friedman: Part of it is the labor force, a less expensive labor force than in Massachusetts. It’s easy to get around. It’s close to the airports, both Logan and Manchester. Fantastic retail, there are a lot of amenities and restaurants.Having a business infrastructure already there is good too. On Stiles Road, there are a lot of medical tenants. More medical tenants want to be around other medical tenants because of the referrals. So you start growing more medical, and I’m already starting to see more medical interest in Salem.Morris: That’s something we haven’t talked a lot about – that there is a lot of redevelopment going on that we didn’t see five years ago. There are restaurant renovations, a new Lowe’s coming in. There are still vacant spaces, but there’s less. There’s construction going on and they are filling up.Hall: And in real estate you have to go through these cycles. You can’t get it back at a good number unless it comes down. It’s been very vibrant. Part of my job is to market all over Massachusetts, all over the area from seacoast to Concord. We are very vibrant.Q. In other regional roundtables, we’ve talked about attracting and keeping young professionals in the area.Morris: One thing that was said before is there is opportunity in any situation. I went to the Merrimack Valley MVP Under 40 awards, we had several people from the chamber who won recognition for being in the 40 under 40.What I noticed is even given the economy, several of these young people are taking a chance and starting their own companies. Maybe that is something that is going to keep them here. They aren’t able to find a job out there so they start their own company – why not?Q. If you could talk about your perceptions of the I-93 project.Callahan: I think the only problem with it is that it hasn’t been done yet.Kacos: I also think beyond that a lot of the discussions coming up now are with Exit 2.Basically, they are going to take four lanes of traffic and drop it into a one-lane road. There’s no forethought into how it’s going to tie into construction. And that’s a huge, huge project and one that Fred, Joe and I have just recently put together for people to focus on.Roth: Basically what happens with the volume, once it gets off the interstate – well that’s not a local problem. So the hands-off approach – you have to get the commissioner involved with the dialogue. We have Pelham Road, we have to do something with Pelham Road. That’s just constant – with the town and the state and the businesses in the area to come together and say, “Wait a minute – you are creating a massive problem for the community to deal with. And it’s impeding businesses.”Weismann: It sounds like we need to be much more proactive in getting our message to whoever and pointing out these concerns and issues that we have. Not necessarily as individuals, but as a town or a region and focus on doing that better. Maybe they will take us more seriously.Q. It wasn’t too long ago when you had a governor from Salem, the House speaker from Salem and a Senate president from Salem. Did you have the ear of Concord then?Callahan: Salem got screwed. Salem should have been able to accomplish an awful lot at that time. Whether it was a distinct attempt by them to appear not to be favorable, I’m not sure. But I truly believe that this local area got less than it should have.Marchman: When we moved into the state last year, in October we had a grand opening with Governor Lynch and some of the state and local reps. The coverage and attendance was great, and I think it had a lot to do with the fact that we moved here from Massachusetts.For the year that we have been here, it has worked out very, very well. When we left Massachusetts it was cheaper to come up here in terms of triple-net facilities and whatever. But one of the things Massachusetts did when we started getting very serious about moving to New Hampshire, they came to see me and started offering some tax benefits and so on and so forth. But it was a little too late in the process – we were probably about 90 percent active in the process.Friedman: We find that when we have tenants from Massachusetts looking, if there’s ever a need for the state to make a presentation or tell them what they have to offer we find that the Division of Economic Development is very helpful. The governor will come. The nice thing about a small state is you can meet the governor, the senators and the congressmen. It’s a nice feel to the state. And they will go all out for someone.Hooper: The feedback everyone is doing today – everyone is feeling people and touching people and trying to feel out the economy. I’m just trying to survive.That’s why I’m not really giving a lot of input. I’m soaking all of this in, but at the same time we’re doing layoffs. We’re all just trying to make sure we’re all here tomorrow.It’s tough for construction as a whole, for electricians, plumbers and HVAC guys to network with each other because everyone is trying to cut each other’s throats. All these other businesses can get together and have a cup of coffee, maybe go out to eat. But every guy is trying to steal maybe my best guy, or my next job.I’m on the board of directors with ABC up in Concord. There’s no one else from Salem, I’m the only one on the board from the southern New Hampshire area. Of the whole board, there are 11 members. There are three from Concord, three from northern New Hampshire, three from the Seacoast and one from Salem. There are really no voices from this area.I think it’s important to network, but in my industry it’s very tough.Hall: I think it may also depend on large versus small. Like you said, you are just making these changes now. Large, international companies such as mine, we made those changes immediately. We’re already at the compressed level. So we have the upside opportunity coming.Santo: One of the things that didn’t get brought up today, that isn’t unique to Salem, is health care. It’s the biggest concern right now. We’re seeing 20 to 40 percent increases right now in health care. I was just at the independent agents meeting in Portsmouth. We spent an entire day on nothing but health care.It’s a huge concern. That’s going to be one of the critical pieces in New Hampshire to prevent unemployment, because if someone is on the fence about hiring, it’s not just the salary, it’s the health-care costs.Kacos: We’re in the process of renewal right now. Without getting into too much detail, we insure the first $5,000 of everyone’s medical costs. Looking at last year’s numbers, our carrier paid out $10,000, our company paid out probably 10 times that. We just got an 18 percent increase. We asked why, they said it’s indefensible, it’s just 18 percent. That’s what the rep of the insurance company said – it’s indefensible but it’s 18 percent.What that means is it’s going to push more of our costs back on the employees who are struggling already because they haven’t really seen an increase in three or four years. It’s going to translate to not doing the right things at the right time – it’s a vicious cycle.Santo: If you were going to hire three people, and they are middle-aged, you are looking at an extra $50,000 bill. Just for the health-care costs. How many computers and space do you have to turn over just to get that $50,000? I just want to bring it up, being in the industry, it’s important for people to know.

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