American Jobs Act – What Is In It For Your Construction Business?

Please, ladies and gentlemen, don’t shoot the messenger. I don’t write the legislation, I just report what is in it so your business can take advantage of the appropriations if you so choose. Having said that, here is a breakdown of what is in the 155 page American Jobs Act of 2011, as introduced by the Obama administration, which affects the construction industry, segment by segment.

      If your construction industry group or business would like a more detailed presentation of the provisions of this proposed federal law, I am available to speak to your organization about it. Just send me an e-mail at the address below proposing a time and location.

All Segments of Construction

·        Buy American iron, steel and manufactured goods

·        Employee payroll tax cut from 4.2% to 3.1%

·        Employer payroll tax cut from 6.2% to 3.1%

·        Zero payroll tax on pay increases up to $50 million in increased wages

·        100% first year write off for new equipment in 2011

·        50% first year write off for new equipment in 2012

·        Tax credit for hiring veterans unemployed 6 months or more increased from $4,800 to $9,600

·        Tax credit for new hiring of veterans unemployed 6 months or more of $5,600 and $2,400 for new hiring of veterans unemployed 4 weeks to 6 months

·        Tax credit of $4,000 for new hiring of any person unemployed for 6 months or more

·        $1.5 billion for job training, including registered apprenticeship programs

·        Prohibits hiring discrimination against the unemployed

·        Requires payment of Davis Bacon prevailing wages on any project receiving funding

Residential Construction

·        Project Rebuild appropriates $15 billion for rehabilitation of vacant and foreclosed homes and neighborhood stabilization

·        Includes homeownership assistance and homebuyer rehabilitation funding

·        Prohibits use of funds for demolition of existing public housing

·        Prohibits flipping of rehabilitated properties

·        Includes requirements to hire a certain portion of labor force from the project vicinity

Commercial Construction

·        School Building Modernization: $25 billion for elementary and secondary school buildings, plus another $5 billion for community colleges

·        Up to 30% of $15 billion in Project Rebuild funds may be used for commercial building rehabilitation that will help stabilize neighborhoods

Industrial Construction

·        $6.5 billion for construction of a new nationwide public safety broadband network

Government Construction

·        Increases SBA surety bond guarantees from $2 million up to $5 million

·        $27 billion for highway and railway construction under current formulas

·        $4 billion for intercity and high speed passenger rail corridor construction with 100% federal share

·        $3 billion for public transit construction with 100% federal share

·        $2 billion for Amtrak construction upgrades

·        $6 billion for fixed bus guideway construction

·        $5 billion for competitive surface transportation construction grants

·        $10 billion initial funding for American Infrastructure Financing Authority to provide direct loans or loan guarantees financing infrastructure construction projects which can repay by means of tolls, user fees or other dedicated revenue sources in 35 years or less

Obama’s Jobs Speech

Thursday evening September 8 at 7 p.m. Washington D. C. time President Obama will speak to a joint session of Congress about initiatives he is proposing to put 25.4 million unemployed and underemployed Americans back to work in a growing economy. Outside Obama’s senior staff no one is exactly certain what his proposals will include, but we expect to hear him talk about the following, not necessarily in the order presented here:

Construction Industry

About half of the Obama Administration proposals will be aimed directly at the ultra-high unemployment among skilled construction tradespeople:

FAA Reauthorization

The current temporary reauthorization of funding for the FAA expires September 16. When Congressman John Mica forced a shutdown of FAA runway and tower construction projects, that Congressional action stopped work on $2.5 billion of infrastructure construction until Transportation Secretary LaHood pushed through emergency legislation to put tradespeople back to work on these projects. The money to pay these workers will stop flowing again on September 17 unless a clean FAA reauthorization bill is enacted and signed into law by then, or another temporary extension is passed.

Surface Transportation Reauthorization

There has not been the customary six year Highway Trust Fund reauthorization since Obama took office. Instead, highway, water and rail transportation infrastructure construction across the country has been financed by a series of three and six month temporary extensions. Some of the slack has been taken up by stimulus appropriations, but the stimulus was intended to add to, not substitute for, regular surface transportation initiatives, and as a result, the economy has not been stimulated.

House Republicans on the Transportation and Infrastructure Committee are proposing to slash the level of appropriations from past legislation by more than half. Look for Obama to seek $550 billion in appropriations over the next six years, rather than the $230 billion Republican six year proposal.

Infrastructure Bank

The idea of a federal infrastructure bank to draw private investment into toll highway, rail and port facility construction – projects in which private investors could earn a reasonable return on their investment – has succeeded in facilitating infrastructure construction in Europe and elsewhere. This is a pet project of the Obama administration, plus there are two versions of proposals already put forward by Senator John Kerry (D. Mass.) – who proposes a $10 billion federal start up appropriation – and Representative Rosa DeLauro (D. Conn.) - who proposes $25 billion in federal seed money. Both versions would include investments in highway, rail, waterway, drinking water and sewage treatment, and energy projects. DeLauro’s version would also include broadband communications construction.

Commercial Building Retrofits

Another proposal which has been the subject of Obama administration trial balloons lately is the idea of a tax incentive to promote private investment in retrofitting existing commercial buildings for greater energy efficiency. This would put thousands of skilled tradespeople back to work without any direct federal expenditure, and would bring millions of private dollars now on the sidelines back into our economy. Also, it has the additional factor of appealing to Republicans, who are more likely to support an initiative that looks like a tax cut for business. Apparently Obama’s Jobs and Competitiveness Council is behind this proposal.

School Building Renovations

This proposal will be buried in the middle of the speech somewhere. Obama is always an advocate for improving the education systems of America, but because this particular initiative would involve new direct federal expenditures, it will likely draw strong opposition from across the aisle.

Broadband Tower Construction

While the stimulus early in Obama’s term appropriated a great deal of cash for studying the broadband needs of unserved and underserved areas of the nation, there has not been a lot of actual communication tower construction with those funds. Only about 68% of U. S. land area is currently covered by broadband communication networks – Obama will seek expansion of that coverage to 98%. This is another program which could bring private investment into play with minimal direct federal expenditures, as revenue from broadband users could ultimately repay investors for most of the cost of connecting outlying populations to cable TV and the internet.

Power Grid Modernization

This has been another favorite of Obama’s, as part of his alternative energy initiatives and climate change reduction legislation. Of course, power grid modernization should also attract considerable private investment from utility companies if the right incentives are enacted. And, significant segments of the skilled construction trades would be put back to work should power grid construction expand significantly. The massive outages on the east coast from recent storm damage will highlight the need for this sort of infrastructure investment.

Local Construction Initiatives

You may not hear anything about this one in Obama’s speech, but Representative Judy Biggert (R. Ill. 13^th District) announced a couple weeks ago that Veterans Administration Secretary Eric Shinseki has approved construction to transform the old Silver Cross Hospital building in Joliet, Illinois into a 60,000 s.f. VA outpatient clinic to serve the growing south suburban population of returning veterans. Silver Cross is moving into a new hospital facility in New Lenox.

Other Obama Proposals

Of course the construction industry won’t be the president’s only target for economic improvement. His speech will likely also include initiatives like tax incentives, direct federal expenditures, and cutting red tape to improve the economic competitiveness of American private enterprise. In the tax incentive category, look for proposals to extend the temporary 2% reduction in payroll tax rates; a tax credit for putting new employees on company payrolls; and an additional tax credit for hiring returning armed forces veterans. Proposed direct federal expenditures could include further extension of unemployment benefits for out of work Americans; assistance to local school districts for hiring more teachers; and specialized job training programs aimed at the long term unemployed. Finally, in the competitiveness category, we expect Obama to push ratification of three pending free trade treaties; and improvements in patent law to speed up commercialization of new American inventions.