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How Does the Housing Slowdown Affect Nonresidential Construction?

The following is from AGC News and Views - Volume 4 -- Issue 12 -- July 19, 2007 :

How Housing Helps or Hinders Nonresidential Construction

The woes of home builders, borrowers and would-be sellers have been much in the news, and seem likely to stay there. On July 18, for instance, the government reported that housing starts in June climbed 2.3 percent from the downwardly revised May total but were 19 percent below the June 2006 level.

More ominously, building permits, generally a reliable indicator of near-term future starts, fell 7.5 percent in June and were 25 percent lower than one year before. A day earlier, the National Association of Home Builders reported that its monthly index of builders’ expectations about activity six months ahead, as well as current traffic, fell to the lowest level since 1991.

Yet the bad news for housing has not slowed nonresidential activity appreciably, and may have helped nonresidential contractors find cheaper materials and more workers. Census Bureau numbers on construction spending show that in the first five months of 2007, nonresidential spending rose 15 percent, nearly offsetting an 18.5 percent decline in residential spending.

The escalation of materials costs has slowed dramatically in the past year, due in part to the slack demand for homebuilding inputs. The Bureau of Labor Statistics (BLS) reported on July 17 that the producer price index for construction inputs rose just 2.6 percent in the 12 months from June 2006 to June 2007, compared to increases of 9.1 percent in calendar 2004 and 8.2 percent in 2005. Two contributors to the cooldown were materials widely used in homebuilding: prices fell 13 percent in the last 12 months for gypsum products and 5.4 percent for lumber and plywood.

Residential building and specialty trade employment, two of BLS’s construction employment categories, appears to have fallen only 3.5 percent in the 12 months through June, according to estimates BLS released on July 6. Nonresidential building, specialty trade and heavy and civil engineering employment appear to have risen only 2.6 percent during that span. But reports from general contractors, as well as the data on the large swings in residential and nonresidential spending, suggest there has been a much bigger shift in employment. It is likely many employees of firms counted as residential specialty contractors are actually doing nonresidential work these days. That has helped general contractors keep more projects on track.

Of course, the housing slowdown also lowers demand for some types of nonresidential construction. When a subdivision isn’t built, neither are the accompanying stores, streets, schools and public facilities. But all of these categories are getting a boost from rising personal income and tax receipts. In general, nonresidential construction is probably get more help than hindrance from the lack of demand from homebuilding.

For more information, contact Ken Simonson at (703) 837-5313 or simonsonk@agc.org.

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Parents Can Get Credit for Sending Kids to Day Camp

Here is some useful news from the IRS:

Here’s a tax break for the busy summer. Many working parents must arrange for care of their children under 13 years of age during the school vacation period. A popular solution — with a tax benefit — is a day camp program.

The cost of day camp can count as an expense towards the child and dependent care credit. Expenses for overnight camps do not qualify. If your childcare provider is a sitter at your home, you'll get some tax benefit if you qualify for the credit.

The credit is generally 20% to 35% of non-reimbursed expenses; up to $3000 in expenses for one child and up to $6000 for two or more children. The actual credit is also based on your income.

You figure the credit on up to $3,000 of expenses for one child, $6,000 for two or more children.  The credit rate ranges from 20% to 35% of expenses, depending on your income.  The 35% rate applies if your income is under $15,000; the 20% rate, if your income is over $43,000.

For more information, check out IRS Publication 503, Child and Dependent Care Expenses available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Immigration Reform in Georgia

The following is from the Georgia AGC Newsletter:

Georgia's Immigration Reform (SB 529) went into effect July 1, 2007

 

Part of legislation requires some employers to use Employment Eligibility Verification Program

While the United States Senate failed to pass immigration reform earlier this year, Georgia's SB 529, which was passed during the 2006 Georgia General Assembly, went into effect July 1, 2007. Large companies, contractors and subcontractors that employ more than 500 employees, and enter into contracts with state and local governmental entities are now required to participate in the Employment Eligibility Verification Program. This is an online database run by the US Citizenship and Immigration Services. Also known as the Basic Pilot Program, the verification is free to employers who are required to check the status of all new workers hired on or after July 1, 2007 to verify if their Social Security numbers are valid. Employers can register for the program by going to this website.

During the first year SB 529 is in effect, only companies with 500 employees or more will be required to participate if they want to take part in in state or local government contracts. By July 1, 2008 companies that employ more than 100 will be required to participate, and by 2009 all companies will be required to participate. During the rule making process, Georgia Branch, AGC questioned whether the 500 employee threshold applied to Georgia employment numbers or corporate-wide national employment numbers. The final rules to implement SB 529 do not appear to provide further clarification on this point, and therefore the broader interpretation, involving national corporate-wide employment numbers should be used to determine applicability.

View the Georgia Department of Labor’s new rules for Chapter 300-10-1, "Public Employers, Their Contractors and Subcontractors Required to Verify New Employee Work Eligibility Through a Federal Work Authorization Program." This is a PDF file format and requires Adobe Acrobat Reader to view or print.

If you have any questions concerning SB 529 or the Georgia Department of Labor Rules to implement, contact Mark Woodall, Director, Governmental Affairs at 678-298-4116.

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Great News on Retainage from Tennessee

The state of Tennessee has enacted legislation to limit retainage to 5%.  It also requires that retainage be held in interest bearing accounts.  You can read more details here.