Renata Kowalczyk

Editor’s note: The following post comes from Jennifer Shelton, director of the Western Washington University’s Small Business Development Center (SBCD). The SBDC and Whatcom Community College are hosting the ThinkBiz 2010 conference Sept. 9 & 10.

I first met Renata Kowalczyk at a Whatcom Community College instructor event for ThinkBiz 2010. She was lively and intelligent. We connected because she was born in Poland as was my mother.

A few months later, we reconnected at the Temple Bar to discuss her co-working space project. I was so inspired by her story that I wanted to share it.

Living her American dream

Renata came to New York City from Europe to pursue the American dream. She obtained her bachelor’s degree in economics from Baruch College – City University of New York and her master’s degree from Columbia University.

She spent 11 years working for major corporations such as JP Morgan Chase and Merrill Lynch doing process design and re-design as a Six Sigma Black Belt, product and business development, and eCommerce project management and consulting. She was living the dream in a penthouse in Manhattan, engaged in business and volunteer activities, yet she felt empty.

Renata says her “Eat, Pray, Love” moment came at 6:32 a.m. in Penn Station on a cold New York November.

She had missed her train to an important client meeting by one minute and looked anxiously at the big Penn Station train time schedule as it changed rapidly to show status of departing trains.

A vision for her life hit her strongly like a metaphor. Day after day was disappearing at a rapid pace, just like the Penn Station timetable showing the departing trains. “Is this really the life that I want for myself?” she asked.

Then and there she started to write a list of what she really wanted in life:

“I want to live in a small college town, surrounded by mountains and the ocean. I want to live in a community that cares about sustainability and works together to build a strong local economy. I want to live where people know and care about each other.”

She realized her current life did not contain anything on the list. She didn’t know if the place she imagined even existed. Within a week, two random people told her it did, and it was called Bellingham, Washington.

She decided that her path to get there would be through academia, so she left her career and started a doctoral program in human and organizational learning at George Washington University in Washington, D.C. It was during the 2008 elections and Washington, D.C. was alive with possibility of change. The energy was riveting. Once again she was moved to reconsider her path.

She asked herself, “Am I willing to spend the next five to seven years reading and writing about life, or am I ready to step into life now and make an immediate contribution?” After her second semester she left D.C. and came to Bellingham.

Her purpose was clear. She was to take her experience and knowledge from living in a communist country and then living the American dream and put it into making a difference within the Bellingham community and the surrounding areas.

Renata, who expects to return to her doctorate in the future, now teaches classes at Whatcom Community College on how to be a consultant, building community and connection, and customized project management for organizations.

Her recent client, SPIE has this to say about their experience with her, “Thank you again for the great class – I only wish the whole building could have sat in on it!”

She’s also paying it forward, and was recently appointed to the Board of Trustees for the Kulshan Community Land Trust (KCLT). This 11-year-old organization is dedicated to creating healthy communities through permanently affordable homeownership with 94 properties currently in the trust.

Creating co-work spaces

The other gift Renata brings to our community is the creation of co-working spaces. The co-working spaces came out of her need to find people to collaborate with while she worked out of her home and coffee shops as a solo entrepreneur.  “In my corporate life, I took for granted the ability to share ideas with others in the office or ask for assistance.” She started searching for solutions and found out there is an entire industry dedicated to co-working spaces.

Her vision for Bellingham is to take co-working space to the next level. At the highest level, every neighborhood will have a co-working space within a 30-minute walk. With a potential for walkable access to a collaborative office with resources and meeting rooms, people won’t have to drive as much. They would exchange the time spent on the road for an experience of connection, community building and quality of life.

The Bellingham Co-working Community was launched on Meetup and Facebook in late June as a seed for the first co-working space. Renata anticipates the first space to be up and running by the end of this year. Her commitment is that by 2020, all people are connected creating thriving communities.

The work she is doing fits exactly with the list she wrote that fateful day in Penn Station.

Within one week of meeting Renata I have already been motivated to revisit my purpose and set intentions in my life’s work for our community.

I encourage you to meet her at the upcoming ThinkBiz 2010 event where she will be leading a workshop on consulting. It is ideal content for any business service professional, account manager or solo entrepreneur. www.thinkbiznw.com

In the few years since the programs began, a number of groups have benefitted from the work of the leadership teams. Recently, one Leadership Skagit (LS) team chose to support the Skagit Domestic Violence and Sexual Assault Services with a project to spruce up the organization’s “House of Hope” safe house. The Leadership Skagit team hosted two work parties in the spring that resulted in the renovation of seven bedrooms and common living areas in the house as well as an extensive remodel of a bathroom.

For the LS team, the project was not just about putting a fresh coat of paint on the shelter, but engaging the community and Skagit DV&SA Services in a new dialogue about how the agency supports the community and how the community can do likewise.

“Our ultimate goal is to foster long-term relationships between the businesses, business leaders of this community and the agency itself,” said Pamela Santangelo, one of the LS team members. Santangelo, of Burlington’s Computer Source, was joined in the group by Lynn Christofersen of Skagit County Community Action; Aldi Kllogjeri, Skagit State Bank; Isaac Nelson, Air Liquide; and Colleen Powell Port of Skagit.

The group raised more than $10,000 in monetary and in-kind donations for the project from businesses, community service groups and individuals. Among the many donors were Skagit State Bank, Air Liquide, Pat Rimmer Tire Center and a number of Skagit County Rotary groups.

In celebration of all the work, another member of the business community, Johnny Carino’s Italian in Burlington is hosting a dinner for the volunteers and supporters at the end of the month. It’s also an opportunity for those interested in becoming an on-going volunteer with the agency to learn more about the organization and how you can help. The dinner is on Thursday, Aug. 26, from 5-7 p.m. For further details or to RSVP for the event, contact Pamela Santangelo at Pamela@thefreshperspective.com.

In late 2008/early 2009, Treasury interest rates reached lows not seen since the 1940s. Once confidence began to inch its way back into investor’s minds, rates began to increase into the middle of 2009. Since then, rates have slowly moved back down to extremely low levels. What does this mean for investment portfolios going forward? To be more precise, what does this mean for bond returns? For this analysis, we’ll use the SBBI Intermediate Term Government Bond Index.

Interest rates fell from 13.96 percent at the end of 1981 to 2.42 percent at the end of 2009. Low risk, intermediate term government bonds returned a remarkable 8.5 percent per year during this period. Now interest rates have little downside left, but interest rates could stay very low for a long time. This is likely to result in bond returns that will be substantially lower than what we have experienced over the past 20 to 30 years. Investors need to adjust their expectations for future returns based on this new reality.

Learning from the past

Looking in the past at periods where interest rates were initially similar to where they are today may provide some guidance into future bond returns. For this analysis, we’ll look back at two similar interest rate environments, with varying economic backdrops.

The first period starts at the end of 1934 when yields on intermediate term government bonds stood at 2.49 percent. During the next 30 years interest rates fluctuated between 0.5 percent and 4 percent. The bonds returned 2.6 percent per year during this period. The economic backdrop began in the Great Depression and remained difficult until the latter part of the 1940s. Significant economic growth started in the ‘50s.

The second period started at the end of 1952 when yields on intermediate term government bonds stood at 2.35 percent. The next 30 years saw interest rates fluctuate between 1.72 percent and 13.96 percent. The bond market returned 5.2 percent per year during this period. This period began with robust economic growth that tailed off as inflation began to infect the economy in the 1970s. Note that the return on these bonds during 1982 (+29.1 percent), the last year of this period, had a significant positive impact on the average of 5.2 percent/year.

Looking to the future

What will be the return from bonds over the next five to 10 years? We simply cannot know the answer. However, investors should not expect returns equivalent to what we have experienced.

Investors also need to consider credit risks associated with owning bonds. In the past, Treasury bonds have been looked at as a risk-free asset. Over the last 30 years the intermediate term maturity of this risk free asset returned slightly more than 8 percent per year. Currently, investors are lucky to receive a 3 percent yield on Treasury bonds. The likelihood of the United States defaulting on its debt is incredibly low, even in an elevated debt environment.

However, corporate and municipal bonds, as well as international government bonds contain much higher credit risk compared to Treasuries. Given the current economic conditions it would not be surprising to see higher rates of default or restructuring in the near future within some of these sectors. Surprisingly, investors are not demanding significantly higher yields on these bonds. In fact, the yield to maturity on many intermediate term high quality corporate bonds is no more than the yield to maturity on equivalent maturity Treasuries. This happens very rarely.

Treasury bonds did an incredible job of counteracting stock market declines over the last 30 years. For instance, while stocks declined nearly 38 percent in 2009, Treasury bonds returned more than 10 percent. Looking forward, stocks will continue to move in their usual volatile fashion, but bonds will likely return much less as there is simply little room for yields to move to the downside. Whether it’s low interest rates or increased credit/default risk on various types of bonds, investors should be looking for other ways to diversify their portfolio if volatility is a major concern over the short run.

Egan Ludwig, CFA, is vice president of Waycross Investment Management in Bellingham. Reach him at Egan@waycross.com or 360.671.0148.

I sat down with NWEC board President Bruce MacCormack last month to talk about the organization’s new direction.

Formerly the Bellingham/Whatcom Economic Development Council, the organization changed its name and its leadership, and has emerged from a phase of reorganization re-energized to help grow business from within the county’s borders as well as attracting companies from further afield.

“We knew we had to rediscover ourselves and what our position was in this community,” MacCormack said. To that end, the organization commissioned a county-wide survey to understand the needs of business.

“People wanted someone to step up and create an economic strategic plan for the county,” he relates, which is now under way.

As Whatcom County’s recognized ADO (associate development organization), developing a “regional economic strategy” plan is part of NWEC’s duties.  The plan involves the cities, county, port and utilities as well as other stakeholders and is set to be unveiled at the first of next year, MacCormack said.

As an economic development entity, the top priorities of the council are maintaining jobs, creating new jobs, helping small business and startups prosper and survive, and helping companies get funding, MacCormack said. He sees a lot of the economic development being generated by small- and mid-sized companies, rather than the big guys.

“A huge percentage of the way the economy is going to re-grow is through small business,” he said.

In that vein, MacCormack is most excited about the NWEC’s business accelerator program, the Innovation Resource Center (IRC). The IRC just received a $99,000 grant from the U.S. Department of Agriculture to fund the endeavor, which aims to help grow and mentor startup businesses.

Businesses selected for the IRC will not only share bricks-and-mortar infrastructure, but will have access to educational, government and business resources such as training, funding and mentoring.

“The attraction will be to come together and grow themselves in a safe environment,” MacCormack said. While most startups will be local businesses, they may also hail from other counties, states or Canadian businesses hoping to get a foothold in the United States, he added.

MacCormack predicts government funding for startups will become less prevalent, and hopes the private sector will step in to help drive economic development. “You’re going to see less emphasis on government funding in the future and more emphasis on private sector intervention,” he said, pointing to both Skagit County and Spokane as areas where the private sector is greatly involved economic development.

“We’ve somehow got to encourage greater participation by private business,” MacCormack said. And he doesn’t mean only on a financial level, but business leaders using their experience to coach new and growing small businesses.

Business leaders can engage with NWEC in a number of ways, including joining the membership organization, volunteering for a committee or advisory team, or simply sharing experience and opinions with the group. To learn more, visit www.nwecon.org.

NWEC searches for new leader

The Northwest Economic Council’s executive director for the last four years, Nancy Jordan, stepped down from the position in early July. NWEC Board Chairman Bruce MacCormack said a search is under way for a senior executive who will oversee the IRC, NWEC Foundation, the strategic economic plan and other organizational initiatives.

Keynote speaker for the event was political and communications strategist Cathy Allen, founder of Seattle-based The Connections Group. Her topic: “How to be a 21^st Century Suffragette.”

Allen, who has worked to get women elected throughout the world, including the Middle East, knows a thing or two about mobilizing folks to get out and vote, and many of her observations regarding energizing the younger generation to be politically active can apply to business as well.

No longer is mentoring a simple informational interview and a few job leads, notes Allen, but a true partnership. Hire, respect and give young workers a genuine opportunity to make a difference in your organization, she suggests.

Also realize the younger generation doesn’t necessarily want to be tied to a long-term commitment, such as becoming a member of Rotary, but prefers finite time commitments such as working on a specific volunteer project.

I think Allen’s comments ring true. Young people are great at multi-tasking and using technology to their advantage. They may do things differently than older generations, but given the proper expectations, they can get the job done.

I’ve found a lot of personal satisfaction in the mentoring relationships I’ve had with WWU students. Their knowledge and skills benefitted the magazine, and in turn their experiences here helped in their future job searches.

Whether running a business or nonprofit, establishing a partnership with younger generations can bring a new ideas and a burst of energy into your organization.

The state unemployment rate fell for the first time in more than three years from 9.5 percent in March to 9.2 percent in April. However, in Whatcom and Skagit counties, much of the job growth resulted from seasonal work in agriculture and, in Whatcom County, the lower rate in April can be explained in part because approximately 16 percent of the labor force seeking employment in March dropped out of the labor force in April. In addition, these numbers don’t account for the underemployed people who are working in jobs they are over qualified for. We have an extraordinary talented labor pool in our area that is operating substantially below it’s potential. Unfortunately, that’s the good news.

The challenge we now face is avoiding higher unemployment as the new norm. This won’t be easy if the political class at all levels of government can’t control the severe problem of too much government spending and debt. As I write this column the national debt has exceeded $13 trillion. That equals $117,975 per tax-payer and amounts to a 90 percent debt-to-gross-domestic-product ratio and doesn’t include the debt associated with unfunded entitlement programs and the losses from Fannie and Freddie that total $145 billion and rising.

The political class has dug an enormous economic hole for us and their current policy seems to be to keep digging. The private sector is heavily burdened and concerned about future tax increases and increased cost of doing business associated with a complex 2,700 page health-care reform bill, a financial reform bill expected to be more than 2,000 pages (which does not address Fannie or Freddie), and other initiatives like cap and trade and talks about a European-style value-added tax.

In addition, in mid-May USA Today reported that paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year. In the same time frame, government-provided benefits rose to a record high. This trend is unsustainable. The government depends on the taxes from the private sector to pay for these expanding programs. With private incomes shrinking and government spending increasing, the math just doesn’t work.

Why is this particularly important to those of us living in Whatcom and Skagit counties? In our region, government is our largest employer. In the past, this has been a great benefit and to a certain degree, it’s why we’ve never really experienced the economic high of the highs or low of the lows. However, the lack of fiscal discipline at the federal and state levels and the down trend in private incomes will have a clear negative impact on local governments and our regional economy. Western Washington University is in the process of managing approximately $13 million in budget cuts as are most other state institutions and virtually every local government agency is dealing with similar challenges.

So, what is the solution? First, we must send a clear message to Washington D.C. and Washington state that we’ve had enough. We must demand fiscal discipline. We’ll have that opportunity in November.

Second, we must refocus local efforts on economic development and job creation in the private sector. A number of groups including the Economic Development Association of Skagit County and the Northwest Economic Council of Whatcom County have been at the heart of these efforts. In the past, the focus has been on touting the quality of life and strong labor force in an effort to attract companies to relocate to our region. In order to make these efforts successful, it requires strong cooperation from local governments in making us a business-friendly region. Skagit County has been successful in that regard. Whatcom County has not. In the current economic environment, if we’re going to create jobs, it’s going to require our government officials backing up their rhetoric with action and it will require focusing on existing small and early-stage companies, which is where most of the jobs are likely to come from.

And third, local governments are going to be required to discipline themselves financially and understand they will be facing challenges that will be trickling down from the federal and state levels. Raising taxes and imposing costly regulations on businesses and productive individuals in this environment is typically the first reaction. Instead, officials should re-examine their priorities and be prepared to make some tough choices.

Fannie Mae just asked the government for another $8.4 billion in aid after posting an $11.5 billion first quarter loss. This comes just a week after Freddie announced its own request for another $10.6 billion. Both companies warned of additional future losses requiring more government bailout dollars, which will be unlimited after the Obama administration raised the $400 billion debt limit late last year. With the promise of apparently endless bailout dollars, what incentive do Fannie and Freddie have to reform themselves? None!

Government subsidies for failing business practices will only promote additional failing practices. It provides incentive for companies to take their focus off improving their products and fixing problems and places it on to lobbying Congress for more money. The original justification for bailing out these giants was the American dream of home ownership for every American. We should keep in mind that the American dream is not about home ownership alone. It’s about the values associated with reaping what you sow in a just world.

Fannie and Freddie have created a positive perception of themselves as a homeowner’s friend and they have generated substantial political clout with strong contributions to political campaigns, but they are potentially the most dangerous type of enterprise. They allow private banks and mortgage companies to take substantial risks, pocket any profits for themselves, then dump the investments to Fannie and Freddie and count on taxpayers to take care of the losses.

Fannie and Freddie need to be broken into smaller private mortgage entities in order to eliminate the market distortions they create. There are many other reasonable ideas to consider, but one thing is for sure… it is disingenuous and irresponsible to leave them out of financial reform discussions.

Tony Larson, Publisher