Kevin Settles, who owns three Bardenay restaurants in Boise, Eagle and Coeur dAlene, would like to open a fourth, possibly in Denver, Portland or Seattle.
But not now. He will wait to see what the Affordable Care Act does to his bank account first.
Jack Winderl, executive vice president and chief operating officer of United Heritage Insurance, isnt worried about health care reform. But the countrys inability to make headway on solving its debt crisis makes him squeamish. While the Meridian life, property and casualty insurance company is growing, Winderl says it could do better if someone would pour a little Pepto Bismol into the economys jittery stomach.
Across the country, small businesses are telling the same story: Uncertainty over what will happen with health reform, taxes, federal red ink and regulations are making them nervous about hiring and expanding, hampering the economic recovery.
A survey by the National Federation of Independent Business in August showed uncertainty over government policies ranks near the top of small-business concerns. The cost of health insurance was at the top, as it has been for years.
U.S. Sen. Mike Crapo, R-Idaho, was in Boise recently to hear the concerns.
We are facing huge problems, Crapo told the Idaho Statesman. Our tax policy is in flux. And what will happen with tax policy is causing people to hold their cash. There is a significant amount of available capital for expansion of business and employment, but it is largely on the sidelines.
Not everyone blames government gridlock for feeble hiring.
Weak demand, borne of a lack of consumer confidence, is the major culprit holding back growth and expansion, not government indecision, says Brian Greber, senior economist with Econorthwest, a Portland-based economic consulting firm with an office in Boise. If demand picked up, hiring and expansion would follow in a heartbeat, Greber says.
Business Insider talked with four Treasure Valley businesses about how government policy, health care reform and regulation are affecting their businesses.
1. BARDENAY: HEALTH CARE PUTS GROWTH ON HOLD
Kevin Settles says he has covered his costs for opening his third Bardenay restaurant, in Coeur dAlene, in 2007 as the country tumbled into recession. The store is projected to be in the black for the first time this year. His other two restaurants in Boise and Eagle are thriving.
Settles opened Bardenay in Boise in 1995 and produced one of the countrys first restaurant-distilleries. He has socked away some cash as the business has grown.
Everything points to him developing restaurant No. 4. Everything, that is, except the Affordable Care Act.
Settles employs about 170 people. Fifteen have company-sponsored health care insurance. He would like to do more, but the cost is prohibitive. He considered a policy a few years ago that would have cost about $180 a month per employee. But that policy with trimmed-down benefits is now $440, more than he can afford in a company whose revenues are $7 million to $10 million annually. I would love to provide health care for all my employees, but not at the expense of my business, Settles says.
Now, health care reform is about to take hold. Settles is better-informed than most business owners about health reform, as he serves on Gov. Butch Otters health care task force, looking at whether to provide a one-stop health exchange for people and businesses shopping for insurance. He estimates he would have to pay $120,000 a year in penalties for not providing health insurance to employees.
That $120,000 is not tax deductible as a business expense, Settles says. So rather than face a penalty, he would take that same amount and put it into some sort of health benefit for his employees.
But it is the uncertainty of what will happen exact costs, the size of any penalties that has Settles pulling back on thoughts of expanding his restaurants, hiring more people and generating more business.
I cannot tell you today whats going to happen, he says. This legislation was passed two years ago. We have less than a year and a half to go until I have to start paying the bill. I dont know what the bill is going to be.
So the cash he has put away will stay right where it is. If I come out being overly pessimistic and costs are affordable, we will have the money to open a fourth place, Settles says. If not, we will have the cash to survive while we reposition ourselves.
2. CLEARVIEW CLEANING: REFORM DOESN'T STOP THIS BUSINESS FROM HIRING
You might say Sylvia Hampel is cleaning up on her cleaning business.
She owns Clearview Cleaning, launched in 1995 with no employees, one commercial account and a couple of houses to clean. For night jobs, she would strap one of her young children to her back and go clean.
By 2007 she had 40 commercial clients. Last year the roster expanded to 72. Her customers include the Idaho Transportation Department, St. Lukes Health Care System, the city of Boise and Idaho Power Co..
In the midst of economic malaise, in which many businesses say they are reluctant to add employees, Hampel has doubled her workforce from 100 to more than 200 since early 2011. She offers health insurance for her eight full-time employees.
The business, which already stretches across the state to Idaho Falls and Pocatello, opened a Spokane office two months ago. Hampel, 47, expects to have up to 10 employees to serve clients there, including Banner Bank.
She declines to say how much revenue the company brings in annually. Like many small business owners, she is worried about the effect of health care reform on her business and whether she will be able to pay the tab.
But she is also driven by the basics of Economics 101 supply and demand in a growing business and believes she needs to provide jobs to people who are out of work, as she once was.
At age 16, Hampel was pregnant and on her own. She needed to find her own work. Three decades later, she hears from Boise refugees from Bosnia and Sudan who say they need work to support their families.
I feel sort of a kinship with them, she says. That is the position I was in.
As for health care reform? The main provisions of the law take effect in about a year and a half, and Hampel says she cant live her life by what may happen that far down the road.
Right now people need jobs, she says.
But shes taking a risk. She doesnt know if she will have to pay a penalty that could reach $2,000 per employee under the Affordable Care Act for not providing health insurance. The penalty could be assessed to companies with 50 or more employees whose workforces average 30 hours or more a week.
Can we afford that? Absolutely not, she says. Will 200 people be out of work? Yes, its a possibility.
But right now her business is growing. Im hoping this is going to work itself out somehow, or that somehow we are going to have to pass through those costs, and I think our clients understand.
3. WESTSIDE DRIVE IN: DISCOURAGED BY REGULATIONS, INSURANCE COSTS
Eighteen years ago, Boise chef Lou Aaron realized a dream. He bought the Westside Drive In at 1939 W. State St., a meager burger joint, and turned it into a 1950s-style soda-and-sandwich shop unafraid to serve prime rib dinners on the weekends.
The first year, revenues were $115,000. Now they are $1.2 million.
He was eager to grow, and in 2007 he opened a second store in Downtown Boise. That December, the recession hit. In 2008, gas peaked at more than $4 a gallon. In 2009, Aaron closed the Downtown restaurant.
Now he faces other challenges: the Affordable Care Act and growing regulations that dampen his entrepreneurial spirit.
I dont want to grow, he says.
Regulations on his business and on people he does business with cost him money, Aaron says.
One example: A year ago he paid $5.75 a pound for prime rib. Today it is $7.49. At least some of that cost increase was caused by the government mandate that up to 40 percent of the countrys corn crop go into ethanol production.
That pulled nearly half the corn crop off the table and away from cattle. Then the drought hit, and some cattle producers started killing their animals for lack of feed, he says. All of that drove prices higher.
Corn affects everything, he says.
Some members of Congress, including Crapo, have asked the Environmental Protection Agency to use its authority to waive the governments mandatory set-aside of corn for use in ethanol production because of the drought. The Renewable Fuels Standard gives the EPA administrator authority to reduce the amount of renewable fuels that go into gasoline if the economy or the environment could be harmed.
Cutting corn free from those requirements could moderate prices Aaron says he must pay for his food.
At the same time, he sees the Affordable Care Act coming his way, and that is likely to keep him from hiring more than 50 employees, a threshold at which he worries he could be required to pay a penalty if he doesnt provide health insurance. He has 36 employees now.
Aaron offers insurance to employees who work 30 hours or more each week. That covers seven employees.
At one time, he paid all the cost. But rising costs led him to cut his contribution to 50 percent. If he takes his employee base above 50, he worries he could incur a penalty of up to $2,000 per employee if he doesnt provide health insurance.
But Ron Osborne of Western Benefits Solution says the penalty is based on the total number of hours employees work, divided by the number of employees. If the result totals 30 hours a week or more, businesses could face a penalty, but not on the first 30 workers who would be eligible.
Regulations and uncertainty over insurance are twin problems that have Aaron looking for ways to expand his business without expanding his headaches. This year, he started licensing his Westside Drive In operation. The first licensees store opened in February at 1113 E. ParkCenter Blvd. in Boise. It has the same look, menu and feel of Aarons Westside restaurant, but he isnt hiring the employees or taking on operation costs thats done by the licensee. Aaron provides know-how, recipes and standards that include guidance on how employees should talk with customers.
His goal is to have five stores in five years.
4: UNITED HERITAGE: GOVERNMENT INACTION LEADS TO LOST CHANCES
Jack Winderl, executive vice president and chief operating officer for United Heritage Insurance, likes to say that his company is successful despite government.
In the midst of a tepid economy, property and casualty insurance revenues are up 10 percent a year. Life is up 4 percent a year. The private mutual company, which concentrates on rural parts of the country where some of the big insurance companies dont tread, hires four to five people a year, many in technology, to remain competitive in a business that increasingly relies on computers to do its work.
Health care reform, which has many small businesses concerned, isnt high on United Heritages list of worries, because the company already provides health insurance to its 150 employees. It doesnt see the government adding much to its cost.
So in a blah economy, where businesses complain that government dithering is negatively affecting their operations, what does United Heritage have to worry about?
The deficit and taxes. If Congress cant come to some agreement to reduce the deficit and find a way to reduce government, the result could be recession, Winderl says.
Recessions tend to bring lower interest rates as borrowers and savers are seeing now, Winderl says. But that can mean companies like United Heritage dont earn as much interest on investments to pay policy holders. Moreover, during the recession, United Heritage saw many of its policy holders cash in their annuities to pay day-to-day expenses.
The country also needs a simpler tax structure, he said.
Since the recession, United Heritage has been building up its cash reserve to have plenty of cushion in case another recession strikes. But more money in a holding pattern against the possibility of another downturn means less money to expand.
If holding onto more cash werent necessary, we would have more policy holders, we would be growing fast, and we would need more people, he says.
Bill Roberts: 377-6408 Twitter: @IDS_BillRoberts