Winning the White House
October 1, 2008
On Nov. 4, will it be the junior senator from Illinois or the senior U.S. senator from Arizona? Will the voters choose to go with “straight talk” or “change (they) can believe in”?
For many HVAC and sheet metal associations, it’s not so much about endorsing Democrat Barack Obama or Republican John McCain. It’s about urging Congress and the next president of the United States, whomever it may be, to take an active approach to energy, sustainability and the economic issues that will help small businesses thrive.
Snips recently spoke with the chief lobbyists of some of the leading HVAC associations to find out what their political goals will be when a new president takes office in January.
The No. 1 issueFor the Plumbing-Heating-Cooling Contractors National Association, the top priority is the fostering the green-building movement, according to Jessica Johnson Bennett, the group’s director of government relations.
With all of the nation’s current economic problems, why would green building be at the top of the list for the PHCC? Bennett said green technology will play a pivotal role in spurring economic growth.
“It will also help to stimulate growth for small businesses,” she said.
Bennett said she believes that by providing customers with energy-efficient systems and “green” choices, the public will save energy and it will create job opportunities for mechanical contractors.
The good news, said Bennett, is that green technology has become a major focus for both presidential candidates.
“There are candidates on both sides of the aisles that understand our issues,” she said. “Both (Obama and McCain) are talking about the green movement.”
But while Congress is in support of cleaner and more efficient energy technology, how to accomplish it is still an open question.
Both the PHCC and the Air Conditioning Contractors of America sent members to testify before Congress July 10 to speak about sustainability and what legislators can do to promote the movement.
Questions remainEllis Guiles, government relations committee chairman for the ACCA and director of sales and marketing for Tag Mechanical in Syracuse, N.Y., was one of those who spoke at the hearing. Guiles told Congress it should extend tax incentives and accelerate the depreciation schedule of HVAC equipment.
“We spend $148 billion annually to heat, cool and create domestic water,” he said. “A 20 percent reduction would result in $28 billion in saved energy costs, substantial reduction in greenhouse gas emissions and lower utility bills for consumers.”
Guiles and the ACCA would like to see the passage of the Alternative Minimum Tax Extenders Act. The bill would reinstate expired tax incentives and keep current ones for energy-efficient HVAC systems.
Current tax incentives grant up to $500 in credits to homeowners who install high-efficiency appliances.
Charlie McCrudden, the ACCA’s government relations director, said that members have found the tax credit is a strong tool in encouraging homeowners to install higher-efficiency furnaces and air conditioners.
A similar law expired in 2007, but McCrudden said that many contractors and customers were not aware that the benefits existed, so Congress extended the bill for one more year. Now, the ACCA, along with the PHCC and the Sheet Metal and Air-Conditioning Contractors’ National Association, would like to see these tax credits receive a two-year extension.
The problem, according to McCrudden, is that the current Congress cannot agree on how to pay for the credits. The incentives would be part of a $50 billion package that also includes incentives on renewable energy sources, such as biofuel, geothermal, wind and solar applications.
Guiles also appealed to Congress that there needs to be a change in the depreciation schedule of HVAC equipment. Currently, HVACR equipment is on a 39-year depreciation schedule. However, Guiles said that most equipment only has a reasonable life expectancy of 20 years.
A depreciation schedule refers to an accounting method that determines how much useful life is left in a machine or other equipment. Businesses are allowed to deduct some of the costs associated with the equipment during this period.
“A shorter depreciation schedule would encourage small business owners to make investments in higher-efficiency equipment,” he said. “We hope and believe more representatives in Congress are beginning to understand the value of shortening the depreciation schedule and could possibly pass it as part of a bigger energy bill.”
Fuel costsWhile industry associations say that there is no quick fix, they believe Congress needs to also do something about the rising cost of fuel.
Gasoline prices are having a tremendous impact on mechanical contractors across the country. Just ask Tim Williford, vice president of finance and administration for Southern Piping Co. In June 2007, the commercial mechanical contractor in Wilson, N.C., spent approximately $100,000 to operate its fleet of 150 pickup trucks. A year later, it cost the company $160,000.
To cover the rising expenses, Williford said the company is “trying to find money anywhere.”
In fact, Southern Piping was to construct a new building for the business, but plans are now off. The company even had to forgo starting a wellness program for employees. With costs continuing to rise on everything from gas to supplies, Williford said every purchase is being scrutinized.
“I’m prepared to see gas prices go higher,” he said. “I never thought I’d see $4 a gallon gas, let alone $150 a barrel.”
As a member of the PHCC, Williford was asked to testify before the U.S House of Representatives’ House Small Business Committee and Subcommittee on Investigations and Oversight April 9.
He spoke on behalf of the 4,000 other members who are either adding fuel surcharges to their invoices or trying to absorb fuel costs. The PHCC solicited comments from members on the impact of fuel prices on their operations. Williford said 90 percent of those who responded said their businesses would suffer this year because of fuel costs.
He added that like Southern Piping, many mechanical contractors are considering cuts to employee benefits, including retirement funds and health insurance.
Williford said that he believes a combination of things must be done, from increased drilling to help with fuel supplies, to investing in reusable energy sources.
Unlevel playing fieldAs if soaring fuel costs weren’t enough, some in the industry feel that if the government has its way, there will be a very uneven playing field for contractors.
The ACCA will be working next year to make sure that the U.S. Department of Energy does not create regional energy-efficiency standards.
Under a federal rule that took effect in January 2006, air-conditioner manufacturers were no longer able to manufacture air-conditioning systems with less than a 13 seasonal energy-efficiency rating, although existing stocks of less-efficient equipment could still be sold.
Now however, if the Energy Department has its way, this one nationwide efficiency standard could be scrapped. The ACCA’s McCrudden said the DOE is exploring the possibility of regional SEER standards. Many industry associations, including the ACCA, oppose the idea.
The logic behind the DOE’s proposal is that a hot and humid state like Florida should have a higher SEER requirement than a cooler, drier state such as Maine, where air conditioning is used less frequently
The problem, McCrudden said, is that no appliances are currently sold under regional standards and one rule for the entire country makes “life easier” for contractors and homeowners.
He also wonders how regional standards would be enforced, especially near border areas where contractors could bring in less-efficient “illegal products” made for sale in other states.
McCrudden likes to call them “moonlighters and bootleggers.” He said imagine a scenario where Florida requires 15-SEER-rated units, while Georgia only requires 13-SEER equipment. What would stop a contractor from getting a cheaper 13-SEER unit in Georgia and bringing it to a customer in Florida?
“This creates an uneven playing field,” said McCrudden. “Enforcement is very difficult because we don’t know who would enforce it.”
Another issue that is making it difficult for contractors to do business centers on immigration.
Bennett from the PHCC said that to stay in line with some immigration laws, HVAC and plumbing contractors are being mandated to use a database system called E-verify. The program was formerly known as the Employment Eligibility Verification Program, created by the U.S. Office of Homeland Security. The database is required for federal contractors.
But some states are requiring private employers to use the system and fine an employee if their Social Security number is not matched in the database.
While the purpose behind the database is legitimate, Bennett said the system could be “very inaccurate.”
Under some state laws, employers must first hire an employee and then run the database check. If there is no match, the employee is either terminated or they must correct the error in the system.
“This impacts many small contractors who do not have human-resource people to handle these issues,” said Bennett.
For reprints of this article, contact Jill DeVries at (248) 244-1726 or e-mail email@example.com.
Some groups do express election preferencesWhile most industry associations are not willing to throw their support behind one candidate or another, some are definitely taking sides.
The Sheet Metal Workers union has endorsed Sen. Barack Obama (D-Ill.) for president, while the Associated Builders and Contractors are backing Sen. John McCain (R-Ariz.).
Vincent Panvini, government affairs director for the Sheet Metal Workers, said that the union had originally endorsed Sen. Hillary Clinton. But now that Obama has locked the democratic nomination, the union is backing the Illinois senator because Panvini said the country “can’t keep going down this path.”
“The middle class is shrinking and middle class built this country,” he added.
Panvini also said that the union has consistently backed Democratic candidates for president because “they are for the working people.”
There are several things the union would like to see done next year, and Panvini said the group believes Obama is the candidate to get it done.
First, Panvini said that member sheet metal contractors are paying between $9 and $13 an hour per employee for health care. Instead, Panvini said the union would like to see universal, U.S. government-backed health care, which would save all employers these costs.
The union would also like to see the passage of the Employee Free Choice Act, which Panvini said would make it easier for employees to join unions.
The McCain-backing ABC, in contrast, is opposed to the Employee Free Choice Act, which amends the National Labor Relations Act. Under current law, an employer has the ability to require a secret ballot when employees vote whether to join a union.
According to Chris Singerling, political affairs director for the ABC, the Employee Free Choice Act would “take away a worker’s right to a private ballot.”
He explained that workers would no longer have to vote with a secret ballot, but simply sign a card. If there are enough signatures, the workshop is organized.
The Free Choice Act passed the U.S. House of Representatives in February 2007, but was unable to reach a vote in the Senate.
Singerling said he believes that the Employee Free Choice Act will come back up for a vote in Congress, and a Democratic president would sign it into law.
“Some of the issues we face as an industry are going to hinge on what happens in November,” Singerling said.
Besides the Employee Free Choice Act, Singerling said ABC is also concerned about “green jobs.” More specifically, Congress passed the Green Jobs Act, which was part of the Independence and Security Act of 2007, signed into law by President George W. Bush.
The act outlined a number of energy priorities from the fuel economy to energy savings. It also created energy efficiency and renewable energy worker training programs that would provide green education.
But Singerling said that under that act, training funds are reserved for union workers. This would make the nonunion ABC ineligible for such funds.
“It boils down to the simple fact that ABC and McCain see things more eye to eye,” said Singerling. “He is more pro-business.”