“Greener” public buildings, higher-efficiency home furnaces and air conditioners - and lots of jobs - is what the HVAC industry hopes results from the $787 billion federal stimulus package passed by Congress in February.
President Barack Obama signed the legislation Feb. 17. It includes tax breaks for small-business owners and many families, additional unemployment benefits, money for relief aimed at the mortgage and credit markets, and most important to the construction industry, billions in state and federal infrastructure spending.
The Associated General Contractors of America estimated that the $135 billion in construction and infrastructure projects would create or save almost 2 million jobs between now and 2011.
“There’s no doubt the stimulus will have a positive impact for construction businesses and their workers across the country,” said Stephen Sandherr, the AGC’s chief executive officer. “When you get beyond the politics and the policy, the fact remains these investments will put people to work, save businesses and help rebuild aging infrastructure.”
Construction is among the industries most affected by the nation’s recession. While national unemployment sits at about 8 percent, the Bureau of Labor Statistics pegs the construction industry’s rate at 15.5 percent. Other sources estimate it even higher.
Much of the act’s spending has the potential to directly create work for the HVAC and sheet metal industries. According to an analysis by the Heating, Airconditioning & Refrigeration Distributors International, these include:
• More than $3 billion for the U.S. military to boost the energy efficiency of Department of Defense structures.
• Authorizes the energy secretary to give grants to states to pay for energy-efficiency incentive programs and encourage adoption of updated building codes including Standard 90.1 from the American Society of Heating, Refrigerating and Air-Conditioning Engineers. The standard deals with the efficiency of most U.S. structures.
• Spending $4.5 billion to make General Services Administration offices “high-performance green buildings.”
• Incentives to upgrade low-income housing.
• Homeowner tax credits for up to 30 percent of the cost - or $1,500 - for the installation of higher-efficiency furnaces and boilers, air-source heat pumps, central air conditioners, and hot water heaters in 2009 and 2010.
The AGC’s chief economist, Ken Simonson, said the stimulus package would create or save 650,000 construction jobs and an additional 300,000 in related industries.
“Whether or not you wear a hardhat for a living, these construction investments will make a difference for the better,” Simonson said. “Beyond the immediate benefits, the new infrastructure projects will make businesses more efficient, commuting more reliable and our economy more prosperous for years to come.”
The bills, an early test of the Obama administration’s political capital, were heavily criticized by House and Senate Republicans as too heavy on spending and too light on tax cuts.
The legislation passed the U.S. House without garnering any Republican support. To ensure passage in the Senate and avoid a filibuster by opponents, the bills’ spending was trimmed to garner the votes of three moderate GOP senators.
Officials with the Sheet Metal and Air-Conditioning Contractors’ National Association hailed the bill’s passage.
“This new federal energy efficiency infrastructure investment and related tax incentives bode well for our industry, our environment and our economy,” said SMACNA President John Ilten. “Our firms are eager to join in this massive federal construction effort to promote public building, energy efficiency, building retrofits and building-related infrastructure projects to quickly stimulate economic growth in the green-buildings sector of the construction market.”
Other industry association members gave the package less-glowing reviews. Kevin Schwalb, director of government relations for the Plumbing-Heating-Cooling Contractors-National Association, said that many of its members worry the package will do little to spur the economy and create jobs. But now that the bill has become law, Schwalb said PHCC members are interested in taking advantage of the benefits the legislation provides.
“They are looking for opportunities to be able to utilize the stimulus money to get involved,” Schwalb said. “Our guys aren’t sitting back and waiting for someone to call and say ‘Bring me a new air conditioner.’ ”
To help, the PHCC is making sure members know about any opportunities. The association has been sending out weekly e-mails on the stimulus money.
The majority of PHCC contractors are involved in light commercial and residential HVAC service and installation. Times have been tough for all contractors, but those involved in residential service and retrofit work have been doing much better than those in the new-construction market, Schwalb said.
“(Our members are) not hurting as much as those who are in new construction,” he said.
To help those new-construction contractors, the stimulus package provides for a new-home buyer tax credit. Schwalb pointed out that homeowners can receive up to $8,000 in tax incentives when they purchase a newly constructed home.
The decline and the eventual bust in the housing market has seen many new-construction contractors struggling to find any residential work. The goal of this tax incentive is to get home buyers to take a look at buying a brand-new home. In turn, it could create more jobs for new-construction contractors.
The stimulus bill has also allocated a large amount of funding for school projects. Schwalb said that the original House stimulus bill contained $24 billion for school construction. Later, this was lumped in with state funds in the Senate version. The final bill provides $14 billion for school retrofits.
While it is not the heavy funding PHCC was looking for, Schwalb said “it’s still a good opportunity for our guys.”
But it’s not just schools that will be receiving money for HVAC and construction upgrades. Charlie McCrudden, chief lobbyist for the Air Conditioning Contractors of America, said that there is more than $50 billion for improvements and upgrades to government, commercial and private buildings.
“The stimulus bill provides incentives for the residential market and spending dollars for the commercial markets, including for such projects as school construction and refurbishment,” he said. “HVACR improvements are just as ‘shovel ready’ as road projects, and provide a bonus in reduced energy use, lower utility bills and less carbon emissions.”
Residential benefitsFor many members of the ACCA and the PHCC, it is the residential tax credits that may prove to be most beneficial.
“Primarily, the biggest benefits are to taxpayers who make qualified energy-efficient improvements to their primary residences,” McCrudden said. “The total tax credit for furnaces and boilers was increased from $150 to $1,500, a 10-fold jump. For central air conditioners and heat pumps, the total amount a homeowner could claim went from $300 to $1,500, a fivefold increase.”
Until Dec. 31, 2010, homeowners can install energy-efficient equipment and receive up to 30 percent back on their taxes, up to $1,500. This goes for all energy upgrades, not just HVAC systems. Homeowners can use the tax incentive toward other products such as energy-efficient windows and insulation.
“For residential contractors, it’s easier to sell a homeowner to a higher-efficiency appliance because homeowners may qualify for up to $1,500 in tax credits,” McCrudden said.
This also provides contractors with an opportunity to replace a customer’s system rather than just fix it.
The ACCA and the PHCC are educating their members so they can educate their customers on the current advantages to replacing, rather than fixing, their systems.
The PHCC is providing its members with a template that can be presented to the homeowner. The template explains all of the tax credits and how they work. The contractor just needs to add his or her business information.
Finding the jobLooking for work?
McCrudden said that the stimulus money is already starting to flow and there are Web sites where contractors can track what construction-related products are receiving federal funding. The most useful site may be www.Recovery.gov
The Web site allows visitors to see exactly where their tax dollars are going. The site provides information on how much funding will be used toward education, tax relief, infrastructure and other areas.
The site also provides an interactive map. Contractors can click on their state and be redirected to a state recovery Web site. For example, by clicking on the state of California, users will be taken to www.Recovery.ca.gov. This site shows exactly what California intends to do with its estimated $50 billion in stimulus money.
The California site, like several of the other state sites, is providing periodic updates on the stimulus funds. Many of the states are also providing detailed information on construction projects where funds will be going.
The PHCC and the ACCA are encouraging their members to use these sites to research where projects are slated and to begin thinking about how they can bid on them.
SMACNA is taking a similar approach. It has developed a new site called Recovery Trak. Available through www.smacna.org, the Web site is for SMACNA members and provides a multitude of links to federal construction projects and how to get involved in them.
Some of the state SMACNA chapters are also sending out e-mails and Web links to give its members help in getting work on local construction projects.
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