Herkimer ARC focuses on new revenues through HI division

HERKIMER — “Not-for-profit is a tax status, not a business strategy,” quotes Kevin Crosley, the president and CEO of the Herkimer ARC, a 501(c)(3) corporation established in 1969 to enable people with disabilities in Herkimer County to achieve full potential and enriched lives.

Crosley is a pragmatist who understands that necessity is the handmaiden of invention. The necessity is HARC’s $1 million Medicaid budget cut last year. “We’re under siege … In 2012, Medicaid represented 80 percent of the company’s $22 million revenue stream … The challenge faced [by HARC] is how to generate the income to continue supporting over 700 people with disabilities and the 400 employees [required] to run the operation at 38 sites … while anticipating future reductions in Medicaid reimbursements,” he says.

For Crosley, the answer is to diversify the nonprofit’s income streams. At the helm of HARC for seven years, he is pursuing a growth strategy by creating partnerships both with for-profit and not-for profit-companies. In 2012, Herkimer Industries (HI), the vocational division of HARC, generated $3.2 million in sales. In 2013, HI budgeted an increase to $5.2 million. HI has an administrative and sales staff of 12 and 150 workers, respectively, who Crosley calls “consumers of services.”

Some of the growth comes from reaching out to area companies like Fiberdyne Labs, Inc., a privately held firm headquartered in the Frankfort Business Park. Fiberdyne, founded in 1992, manufactures fiber-optic, networking products and photonic devices for the cable and telecommunications industry, and employs 145 in its 22,000-square-foot manufacturing facility. Crosley broached the idea to Fiberdyne that they become strategic partners, with HI opening sales opportunities because of its affiliation with the federal AbilityOne Program and as a preferred vendor for the New York State Industries for the Disabled (NYSID). The AbilityOne program is the largest source of employment for people with disabilities by providing products and services for the federal government, including the Department of Defense. NYSID acts as a broker for companies to do business with New York state agencies. HI could also offer assembly and packaging assistance to supplement Fiberdyne’s engineering and manufacturing capabilities.

A recent collaboration with Fiberdyne involved the redesign of the armed-forces recruiting station in New York City’s Times Square. The project involved designing, manufacturing, and installing two LED American flags, each 14 feet by 33 feet and each containing 110,460 lights, on the sides of the walk-in station. Crosley says “… this was the most exciting project we’ve worked on in the Herkimer ARC’s history. I think the legacy of the flags will carry on for many years….” The flag project subsequently led to an LED billboard at the same recruiting station that was installed after last Thanksgiving.

Crosley is encouraged that for-profit businesses are now reaching out to HI in search of collaboration. “McQuade & Bannigan [a Utica-based distributor of construction tools, equipment, and products with offices in Watertown and Syracuse] initially worked with us to sell $150,000 of rain gear to the New York State Department of Transportation. The two firms now sell eye wear, ear protectors, hard-hat covers, and other safety items,” says Crosley.

“McQuade & Bannigan has even convinced one of its original-equipment manufacturers to allow HI to add value to the products, work formerly done by the manufacturer,” says Michael Lamb, HI’s director of industrial operations. Lamb is an area native and Clarkson University graduate with a degree in chemical engineering. He worked at General Electric and Honeywell before returning to the area to join HI.

In his pursuit of partnerships, Crosley reached out to Goodwill Industries of Greater New York and Northern New Jersey, serving thousands in the region with employment and education, to encourage it to open a store in Herkimer, a concept which was not part of Goodwill’s plans. He proposed that they create a joint venture and share in the surplus. The two entities opened a 7,000-foot retail store at 129 E. Albany St. in Herkimer to sell “gently used goods,” a term coined by Crosley. HI is a 49 percent owner. The store’s sales were up 19 percent last year, and HARC’s CEO expects continued growth. The Herkimer store — renamed the Goodwill-HARC Store and Donation Center — is the only Goodwill venture to have this arrangement.

While partnerships are an important component of HARC’s growth strategy, it is just one component of a broader strategy. In July 2011, HI bought Advanced Technologies, a privately held, regional, first-responder equipment distributor, from Stefano Napolitano. Advanced Technologies is now another division of HARC. While retaining the retail operation, which occupies 1,100 square feet located at 246 N. Main St. in Herkimer, HI also has an online store that went live on Jan. 14. Crosley expects to expand the Advanced Technology business to $1 million in revenue per year within two years. The purchase was made from surplus funds, accumulated by the agency.

HI also owns a large manufacturing facility at 420 E. German St. in Herkimer.  The formerly abandoned plant, now called the HARC Business Park building, contains 120,000 square feet, of which HI occupies 70,000.  It currently leases 10,000 feet and is looking for additional tenants to occupy the remaining 40,000 feet. Crosley says that “… the goals of the facility are to foster the success of small and start-up businesses, to create new or maintain jobs in Herkimer County, and most importantly, to encourage and foster employment of individuals who have developmental or other disabilities.” HARC also depends on a number of annual fundraising efforts. The best-known is the New York International wine auction that grossed $255,000 in 2012.

While HARC’s current ratio of revenue is 80 percent from Medicaid and 20 percent from other sources, Crosley has set a short-term goal of changing the ratio to 70/30. His long-term goal is 50/50. To reach this mark, Crosley is assisted by the leadership team at HI. In addition to Lamb, Linda Hines is the production manager, Burt Belden is the production manager of HARC Business Park, Suzanne Bakiewicz is national business-development director, James Carroll is a contracting specialist, Joe Maiola is the state-contract sales representative, and Barbara Ulrich is the program assistant.

According to Crosley, “HARC occupies approximately 300,000 square feet of space in the 38 sites combined, more than 90 percent of which it owns. There are no mortgages on either Advanced Technologies or on the HI operations in the Business Park.”

Contact Poltenson at npoltenson@tmvbj.com