PUBLICATION OF ASSOCIATED BUILDERS AND CONTRACTORS OF MICHIGAN SPRING 2011
Jobs for Michigan:
Pass fair and open competition law Push tax reform Also: ABC members bring Merit Shop message to Capitol Some signs point to construction recovery
Inside
4 Executive Perspective
Pursuit of liberty drives ABC reform efforts Pro-worker, pro-freedom, pro-accountability reform has been the focus of legislative and grassroots efforts, which are nearing success.
5 Feature Article
Legislature works to end union-only PLAs Michigan Merit chronicles the lengthy fight to ban PLAs in Michigan and how a more informed legislature has made a critical difference.
11 Feature Article
Members bring Merit Shop message to the Capitol The mood at the annual Legislative Conference was decidedly upbeat as members from across the state gathered in Lansing to meet one on one with House and Senate leaders and express the urgent need for passage of PLA reform.
15 Economic Outlook
Construction recovery may be in the making Some economic indicators, such as more commercial contracts and real estate activity, point to a potential recovery for the construction industry. by Don Wilson, ABC of Michigan economist
21 Feature
ABC pledges strong support to governor’s tax reform plan ABC of Michigan President Chris Fisher met privately with Gov. Rick Snyder recently to discuss the administration’s tax reform plan. Reforms are expected to help turnaround jobs losses statewide, including more than 82,000 in the construction industry alone. VOLUME V, ISSUE. 1 Tax reform and ending union-only PLAs are key to restarting the construction industry in Michigan.
Legislative Update 19
www.abcmi.com
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UI reform will save $1 billion for job providers
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Legislators Bolger and Haveman earn ABC awards
Spring 2011 3
ASSOCIATED BUILDERS and CONTRACTORS of MICHIGAN 2011 BOARD of DIRECTORS Jim Cripps – Chairman Cripps Fontaine Excavating – Western MI Chapter
Pursuit of liberty drives ABC reform efforts
David Mollitor Jr. – Vice Chairman Consolidated Electrical – Central MI Chapter
Little else is more precious than liberty. That inalienable right is a single-word synopsis of the spring issue of Michigan Merit.
Rod Kloha – Past Chairman Circle “K” Service, Inc. – Saginaw Valley Chapter Dave Sheffield – Secretary/Treasurer Onslow-Sheffield, Inc. – Southeastern MI Chapter Chris Beckering Pioneer Construction – Western MI Chapter Bill Buyak Capital Steel – Central MI Chapter Brad Blasy Balsy Electric – Saginaw Valley Chapter Erick Forshee TIC, Inc. – Saginaw Valley Chapter Scott Gillespie The Gillespie Co. – Central MI Chapter Rick Jackson Jackson Associates – Southeastern MI Chapter Bill Molnar Wm. Molnar Roofing Co. – Southeastern MI Chapter Jack VandeGuchte Sobie Company, Inc. – Western MI Chapter Daniel Welch Welch Tile & Marble – Western MI Chapter Michigan Merit Contributors Publisher: Christopher Fisher Managing Editor: Mary Boardway, CAE Communications Coordinator: Kelly Dancsok ABCMI Economist: Don Wilson Publication management: Lezotte Miller Public Relations, Inc. Advertising: Arion Media Printing: Bradford Printing Michigan Merit (ISSN# 1938-9051) is the official publication of Associated Builders and Contractors Inc. of Michigan (ABC of Michigan) and is published quarterly at 230 N. Washington Sq., Suite 202, Lansing, MI 48933, (517) 853-2545. Please direct all inquiries to the previous address. Articles written by outside authors do not necessarily reflect the views of Associated Builders and Contractors Inc. of Michigan. ABC of Michigan reserves the right to reject or edit all material submitted for publication. The appearance of an advertisement in Michigan Merit does not constitute endorsement of the advertiser, its products or services, nor do Michigan Merit or Associated Builders and Contractors Inc. of Michigan guarantee or warrant any claims or offers made by the advertisers. Permission to reprint in whole or in part is hereby granted, provided the following credit line is used: “Reprinted by permission from Michigan Merit, a publication of Associated Builders and Contractors Inc. of Michigan.”
Michigan is on the cusp of passing legislation that will stipulate that no worker and no business can be prohibited from work opportunities on taxpayerfunded construction projects because of their decision to affiliate or not affiliate with a labor organization. While it’s hard to believe that such common sense legislation was not passed years ago, 2011 is the year the pro-worker, pro-freedom, pro-accountability, pro-business, pro-taxpayer reform can finally become reality. Special interests have tried to prohibit entire groups of citizens who help fund projects with their own tax dollars from working on them. With passage of legislation to prohibit such sweetheart deals, the days when cronyism and blatant discrimination are tolerated will be gone. Unfair competition resulting in inflated Unfair competition construction costs will be a thing of the resulting in inflated past. The fiscal accountability taxpayers deserve on public construction will return. construction costs
will be a thing
A project labor agreement stipulates that of the past. only workers and companies that are subject to or abide by a union collective bargaining agreement can perform work. Judging a person or company based upon labor affiliation is wrong. Just as a government mandate for a “non union-only” project is insulting, it is likewise insulting to mandate a “union-only project.” Both extremes are despicable. ABC is urging an end to the costly and discriminatory handouts and is now awaiting final legislative action to ensure that all government construction is awarded based upon merit to the lowest, most responsible and qualified bidder to ensure equal opportunity for everyone and protect the hardearned tax dollars of Michigan citizens. Liberty is the essence driving ABC-led efforts at the state Capitol to end, once and for all, discriminatory and costly union-only PLAs. We welcome you to join the fight. Yours for the Merit Shop,
Chris Fisher
4 Spring 2011
Michigan Merit
“Michigan deserves the accountability and equal opportunity that results from fiscal responsibility and open competition.”
Legislature works to end union-only PLAs
Sen. John Moolenaar
State Rep. Joe Haveman’s building background meant that he brought a deep understanding of issues involving the construction industry with him when he took office in 2008. Although the Holland Republican rarely had firsthand experience with project labor agreements (PLAs) while working as director of business development for GDK Construction Co. in Holland, he was well aware of the controversial policies that require contractors that work on construction projects to abide by collective bargaining agreements — whether or not the company is unionized. www.abcmi.com
The agreements, critics say, are unfair to the vast majority of construction firms and workers who are nonunionized and, by effectively limiting competition, drive up costs on taxpayer-funded projects. “On the west side of the state, we rarely saw them,” Haveman says, referring to west Michigan’s history of not being as heavily unionized as the rest of the state. “But I was aware of the issue before I came to the Legislature.” His knowledge about PLAs, and how “they cost more and deplete the competition,” led him to introduce legislation early this year that would
prohibit PLAs on publicly funded construction projects in Michigan. That and a companion bill introduced in the state Senate by Sen. John Moolenaar, R-Midland, represented a very real possibility that Merit Shop contractors will no longer have to worry about being effectively shut out from participating in publicly funded projects for which PLAs are adopted. “Michigan deserves the accountability and equal opportunity that results from fiscal responsibility and open competition,” Moolenaar said upon introducing his bill in the Senate along with 20 co-sponsors, Spring 2011 5
representing a majority of members serving in the Michigan Senate. Haveman’s measure, House Bill 4287, gained the support of a caucus majority when it circulated for cosponsorship in the Michigan House. The legislation’s approval would also represent a major milestone for Associated Builders and Contractors of Michigan, which has made ending union-only PLAs a top priority.
Legislation marches forward Haveman’s House Bill 4287 was approved in mid-March by the House Commerce Committee and went before the entire chamber for consideration. A few days earlier, the state Senate Committee on Reforms, Restructuring and Reinventing OK’d Moolenar’s companion bill, Senate Bill 165. Both pieces of legislation would establish the Fair and Open Competition in Government Contracting Act, which would prohibit
discriminatory PLAs on taxpayerfunded projects undertaken by state government, public universities and colleges, school districts and local units of government such as cities, villages and townships. “This reform is about leveling the playing field so all businesses can compete against each other and save tax dollars,” said Moolenaar. “Taxpayers also benefit from having public construction that is completed by the lowest, most qualified bidder.” Dan Acciavatti, a former state representative whose family-owned company, New Haven-based Pamar Enterprises Inc., is a member of ABC’s Southeastern Michigan Chapter, also predicts eventual passage of the legislation. “I think we definitely have the momentum,” says Acciavatti, who testified in favor of House Bill 4287 during Commerce Committee hearings. Proponents of the legislation were also hopeful about the chances of new Republican Gov. Rick Snyder signing it into law.
A blow to the bottom line Michael Marks, vice president of ABC Central Michigan Chapter member MacKenzie Companies, a Grand Ledge-based operation with additional Michigan and U.S. offices that provide construction, demolition and excavation services, bristles at what he calls the “totally specious” claims that only unionized contractors are capable of producing a quality product and that they place a higher value on worksite safety. And while it’s true that a PLA may help remove the threat of a strike, he notes that it’s not even necessary for nonunion contractors — which by their very nature do not have labor-related work stoppages — to promise labor harmony. Although PLAs in one form or another have existed for years, it wasn’t until the downturn in Michigan’s economic fortunes that they became especially problematic, Marks says. Until recent years, “there was lots of work to go around
ABC members gather in the House Commerce Committee lobby to testify in support of HB 4287.
6 Spring 2011
Michigan Merit
The time to institute long-needed reforms is here. 2011 is a year that more Michigan construction are left facing one Thecannot timebetosquandered instituteaslong-needed reformsworkers is here.
of the worst industry downturns in history. With 82,300 Michigan construction jobs lost in the last ten 2011 is a year that cannot be squandered as more Michigan construction workers are left facing one years, the construction industry can no longer wait for indecisiveness or a lack of political willpower. of the worst industry downturns in history. With 82,300 Michigan construction jobs lost in the last ten years, the construction industry no longer and wait for indecisiveness a lack of political willpower. Michigan’s economic renewal thousands oforjobs are on the line. The time tocan institute long-needed reforms is here.
Michigan’s economic renewal and thousands of jobs are onthe theCostly line. Prohibit Anti-Competitive Repeal Job-Killing Eliminate of the worst industry downturns in history. With 82,300 Michigan construction jobs lost in the last ten Union-Only PLAs industry can noRepeal Prevailing Michigan Business Tax years, the construction longer wait for Wage indecisiveness or a lack of political willpower. Prohibit Anti-Competitive Job-Killing Eliminate the Costly 2011 is a year that cannot be squandered as more Michigan construction workers are left facing one
Union-Only PLAs Prevailing Wage Michigan Michigan’s economic renewal and thousands of jobs are on Business the line. Tax
Union-only Project labor agreements end open, fair Prohibit(PLAs) Anti-Competitive Union-only Project labor and competitive biddingPLAs on public Union-Only agreements (PLAs) end open, fair construction projects. and competitive bidding on public PLAs mandateprojects. union-only deals as a construction Union-only Project labor condition of working on taxpayer agreements (PLAs) end open, PLAs mandate union-only deals as afair funded construction and competitive projects. bidding on public condition of working on taxpayer construction projects. exclude Union-only PLAs unjustly funded construction projects. the of Michigan’s 75 PLAs percent mandate union-only deals as a Union-only PLAs unjustly exclude construction workforce thaton chooscondition of working taxpayer the percent Michigan’s es not75 to belong to aofunion. funded construction projects. construction workforce that choos Union-only PLAs unjustly PLAs contractors basedexclude on es not block to belong to a union. 75 percent of Michigan’s unionthe affiliation from being awardconstruction workforce that choosPLAs block contractors based on ed contracts on public construces not to belong to a union. union affiliation from being awardtion projects. ed contracts on public construcblock contractors based on PLAs PLAs cut competition, increasing tion projects. union affiliation from being awardtaxpayer construction costs. on public construcPLAs ed cutcontracts competition, increasing tion projects.strongly supports ABC of Michigan taxpayer construction costs. legislation thatcompetition, will guarantee PLAs cut increasing ABC oftaxpayer Michigan stronglyunion supports costs.and equality for allconstruction workers, legislation that non-union alike,will byguarantee neither ABC of Michigan strongly supports equality for all workers, union and prohibiting nor requiring legislation that will guarantee non-union alike, by neither agreements unions. equalitywith for all workers, union and prohibiting non-union nor alike, requiring by neither agreements with unions. prohibiting nor requiring
Prevailing wage increases taxpayer funded construction costs by 10 Repeal Job-Killing Prevailing wage increases taxpayer percent without any additional gain Wage Prevailing funded costs by 10 or returnconstruction on investment. percent without any additional gain Jobreturn growth suffers because of these or onwage investment. Prevailing increases taxpayer extra construction costs funded costs ofbythese 10 Job growthconstruction suffers because percent without any additional gain Michigan’s prevailing extra construction costs wage law or return on investment. dictates that wages must be Michigan’s prevailing wage law determined exclusively by union Job growth suffers because of these dictates that wages must wage resulting in be an extra submissions, construction costs determined exclusively by union uncompetitive special interest wage Michigan’s prevailing wage inlaw wage submissions, resulting an monopoly . dictates that wages must be uncompetitive special interest wage determined exclusively union The average free by market, monopoly . wage submissions, resultingwage in anin competitive construction uncompetitive special interest wage The average market, Michigan is more free than $20 per monopoly . competitive in hour. These construction are attractivewage wages Michigan is more than $20 Theare average free market, and higher than most in per the competitive wage in hour. These construction are attractive wages state. Michigan is more $20in per and are higher thanthan most the Prevailing unjustly wages exists hour. Thesewage are attractive state. and are higher than most almost exclusively for in the the Prevailing wage unjustly exists state. construction industry, as there are almost for the noPrevailing such exclusively wage requirements for wage unjustly exists construction industry, as there are virtually any other industry. almost exclusively for the noconstruction such wage requirements for industry, as there are virtually anywage other requirements industry. no such for
ABC of Michigan’s statewide survey
of memberthe firms tracks crucial Eliminate Costly ABC of Michigan’s statewideifsurvey industry data, including Business Tax their Michigan of member firms tracks crucial
Michigan Business Tax liability is industry if their higher ordata, lowerincluding than what Michigan Business Tax liability is liability was under the survey old Single ABC of Michigan’s statewide higher or lower than what their of Business memberTax. firms tracks crucial liabilitydata, was including under theif old industry theirSingle Business Tax. Michigan Business Tax liability is The survey found that 83 percent of higher or lower than what their firms now have a higher tax liability, liability was Single The found that 83 percent of withsurvey overunder halfthe ofold those firms Business Tax. have a higher tax liability, firms now experiencing an increase of at least with over half of those firms 50 percent. The survey found that 83 percent of experiencing an increase of at least firms now have a higher tax liability, 50 Thepercent. Michigan Tax has with over half ofBusiness those firms increased an theincrease cost of of doing business experiencing at least Michigan Business TaxMichhas in Michigan, thereby making 50The percent. increased the cost of doing business igan less competitive and elimiin Michigan, thereby The Michigan Business making Tax hasMichnating job opportunities. increased the cost of doing business igan less competitive and elimiin nating Michigan, thereby making job opportunities. ABC supports GovernorMichSnyder’s igan less competitive and elimiproposal to eliminate the Michigan nating job opportunities. ABC supports Governor business Tax and replace itSnyder’s with a proposal to eliminate the Michigan flat six percent corporate ABC supports Governor Snyder’sprofits business Tax and the replace it with a tax. to eliminate proposal Michigan flat six percent corporate business Tax and replace it with profits a flattax. six percent corporate profits
Associated Builders and Contractors (ABC) is a national construction tradeother association with nearly 25,000 Merit tax. Shop firms employing two million working virtually any industry. agreements unions. men and women. ABC ofwith Michigan works in partnership with four chapters of ABC representing approximately 1000 member firms employing more than 40,000 Michigan residents. ABC supports and open competition, freeassociation enterprise,with freedom choiceMerit for workers concerning union and Associated Builders and Contractors (ABC) isfair a national construction trade nearlyof25,000 Shop firms employing twomembership million working training programs, balanced budgets, lower and reasonable range fromMerit someShop of1000 the largest construction companies the men and women. Builders ABC of and Michigan works intaxes, partnership with fourregulation. chapters ofOur ABCmembers representing approximately member firms moreinthan Associated Contractors (ABC) is a national construction trade association with nearly 25,000 firms employing twoemploying million working countryMichigan to small businesses five or fewer employees. Most ABCchapters members Michigan perform commercial, industrial, and public works construction, men and women. ABCwith of Michigan works partnership with four of in ABC representing approximately member firms employing more than and 40,000 residents. ABC supports fairin and open competition, free enterprise, freedom of choice for 1000 workers concerning union membership with very few Michigan members involved in residential construction. 40,000 residents. ABC supports fair and competition, free enterprise, freedom of choice for workers union membership and in the training programs, balanced budgets, lower taxes, and open reasonable regulation. Our members range from some of theconcerning largest construction companies balanced budgets, loweremployees. taxes, and reasonable members perform range from some of theindustrial, largest construction companies in the countrytraining to smallprograms, businesses with five or fewer Most ABCregulation. members Our in Michigan commercial, and public works construction, www.abcmi.com country to small businesses five or fewer employees. Most ABC members in Michigan perform commercial, industrial, and public works construction, with very few members involved with in residential construction. with very few members involved in residential construction.
www.abcmi.com www.abcmi.com
Campaign shifts to high gear
“The employee would not realize any benefit from the money that he had to donate to the union funds, so, on a project that requires a PLA, our employees would actually have to take a pay cut.” Michael Marks, Vice President, MacKenzie Companies
for everyone,” he says. But now private sector jobs have largely dried up, and the majority of work available is through governmental units — those that are most likely to agree to union demands to enact PLAs, Marks says. “Unions have begun pushing PLAs in key markets, and we’ve been pushed right out of those markets,” he says. “This is basically a land grab by the unions.” One of those markets is Ann Arbor, where MacKenzie has had an office for 15 years. “We’re the only one in our field with an Ann Arbor presence, and we can no longer work in the city of Ann Arbor,” Marks says. Like MacKenzie, Pamar cannot be awarded work opportunities for its employees on PLA projects. “It’s a nonstarter for our company,” Acciavatti says. “The biggest impact is that we’re bidding less work than we used to.”
continued from page 6
Elections bring sudden shift The ray of hope for PLA critics comes after a sharp increase in usage of the agreements in recent years, particularly at higher-education institutions such as Michigan State University. Other key PLA battlegrounds for ABC members have been Ingham and Washtenaw counties. “Our strategy was to shine a light on the unfair and wasteful nature of these policies and to do our best to educate the public about them,” says Chris Fisher, ABC of Michigan president. In the last half of 2010, ABC took its fight against PLAs up a notch. A committee of ABC members from throughout the state created a task force to combat PLAs. Their campaign included such educational efforts as meeting
House Commerce Committee hears testimony on HB 4287
8 Spring 2011
Michigan Merit
with officials at the local or county levels and with newspaper editorial boards to discuss PLAs. The task force also launched a website, accountableconstruction.com, and began emailing the PLA Examiner newsletter every other week to keep ABC members and the general public abreast of developments on the PLA front. That groundwork has resulted in a significantly higher awareness level of several factors: 1) That Michigan businesses and workers are being discriminated against; 2) That taxpayers are paying the price for a lack of fiscal accountability; and 3) That the competitive bidding process was being infringed upon and replaced with special interest handouts to certain groups at the expense of others.
ABC members state their case
Marks said. “So, on a project that requires a PLA, our employees would actually have to take a pay cut.” PLAs also expose companies to pension withdrawal liability, he said. “This liability exists when the pension plan becomes underfunded,” Marks said. “Due to poor financial markets and the weak performance of these pensions plans, the possibility of a pension plan becoming underfunded and requiring additional contributions from the participants, over and above the contributions made during the project, has increased significantly.” Renee Sandborn, owner of Sandborn Construction, a Portlandbased excavating company and an ABC Central Michigan Chapter member, testified before the House committee that PLAs hurt women and minority workers. “Most women and minorities are not in unions, so PLAs exclude
The proposed Fair and Open Competition in Government Contracting Act would prohibit university boards and other government bodies to enact PLAs. With so much at stake, hearings on both the Senate and House versions drew sizable crowds. ABC was well represented. Marks testified before the Senate committee that MacKenzie employees would actually take pay cuts to work on a PLA project. The majority of PLA projects also have prevailing wage requirements, meaning workers would receive the prevailing wage but would also have to pay in to several union funds as required by the PLA. “The employee would not realize any benefit from the money that he had to donate to the union funds,”
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Spring 2011 9
them,” she said. “Since there are no unionized excavating firms in this area, when there is a union-only PLA, firms have to be brought in from outside the region.”
With Michigan losing 82,300 construction jobs in the past 10 years, policy changes can’t come too soon. Our message to the legislature is very simple – the time for reforms is here.” Chris Fisher, President, ABC of Michigan
Paul Bachman, an economist from Suffolk University in Boston, testified before the Senate committee on ABC’s behalf that using PLAs tends to drive up the cost of construction projects by 15 percent or more because they limit the pool of potential bidders. When Sen. Rebekah Warren, D-Ann Arbor, contended that Bachman had studied only Eastern PLAs, he replied, “The law of supply and demand doesn’t stop at the border of Michigan.”
Public awareness grows Regardless of the immediate fate of the Fair and Open Competition in Government Contracting Act, Fisher is heartened by the fact that the debate over PLAs is now firmly in the public arena. He recalls how early in his campaign against PLAs, he’d often receive blank looks when he mentioned them to reporters, editors and even public officials. “It was just something that wasn’t on their radar,” he says. “They viewed it as this sort of obscure, esoteric issue, and they didn’t fully grasp the insidious nature of PLAs.”
Now, articles about union-only PLAs regularly pop up on front pages, and some of the state’s largest newspapers have editorialized against them. Also joining ABC as part of a coalition fighting to end PLAs and weighing in before the legislature is the Michigan Infrastructure and Transportation Association, the National Federation of Independent Business, the Michigan Chamber of Commerce, the Michigan Association of Homebuilders, the Small Business Association of Michigan, the Michigan Farm Bureau, the American Subcontractors Association of Michigan and the Detroit Regional Chamber of Commerce. “As a result of education and public outreach, people are overwhelmingly supportive of passing legislation that ends discrimination and treats everyone equally”, says Fisher. “Like other reform-oriented states, Michigan must pass legislation to create a level playing field for everybody. Such a law will ensure that the state does not discriminate against any business or worker on the basis of union affiliation. Michigan taxpayers will also benefit from having public construction that is completed by the lowest, most responsible and qualified bidder to ensure greater accountability of public funds.”MM
Members of ABC of Michigan’s PLA Taskforce meet to discuss strategy. From left: Mark Sawyer, Southeastern MI Chapter; Kevin Uhrig, Labor Ready Inc.; Barbara Lezotte, Lezotte Miller Inc., ABC PR Counsel; Harry Goossens, Total Fire Protection; Brent Brinks, Buist Electric.
10 Spring 2011
Michigan Merit
ABC Southeastern Michigan Chapter members Dave Sheffield, Onslow-Sheffield Inc; Rick Jackson, Jackson Associates; Rep. John Walsh, (R-Livonia); JuVonda Smith and Kevin Uhrig, Labor Ready Inc. gather to discuss Project Labor Agreements during the ABC of MI State Legislative Conference.
Members bring Merit Shop message to the Capitol With measures that would promote Merit Shop principles receiving a favorable reception in the revamped and pro-business state Legislature, the mood was decidedly different at this year’s Associated Builders and Contractors of Michigan Legislative Conference, held March 22 in downtown Lansing. In recent years, with organized labor-backed Democrats largely setting the agenda at the state Capitol, ABC was often on the defensive and found itself in the role of trying to keep bad public policies from becoming even worse, said ABC of Michigan president Chris Fisher. “It’s a little bit different www.abcmi.com
circumstances right now,” Fisher told the 100 ABC members in attendance from throughout the state in his opening remarks. “It’s safe to say we’re on the offensive now.” He cited progress toward banning union-only project labor agreements on publicly funded construction projects in Michigan (For more on PLAs and the legislation that would prohibit them, see the feature story on page 5), eliminating the prevailing wage, which Fisher noted, “does diminish the amount of construction work available, and it affects our bottom lines,” and repealing the Michigan Business Tax so that small businesses are no longer doubletaxed. Spring 2011 11
Rep. Joel Johnson (R-Clare) discusses PLA legislation with Andy Weisbrodt, Three Rivers Corporation.
“I believe that this time reform will prevail, because we have no other choice.” Nolan Finley, Editorial Page Editor, The Detroit News
With Michigan losing 82,300 construction jobs in the past 10 years, policy changes can’t come too soon, Fisher stressed. “Our message to the Legislature is very simple — the time for reforms is here.”
Nolan Finley, editorial page editor at The Detroit News, echoed the theme as keynote speaker during the morning of the daylong conference. “I believe that this time reform will prevail, because we have no other choice,” said Finley, who went
on to cite several examples of how organized labor has manipulated the governmental system for its benefit and to the expense of the vast majority of average taxpayers. He cited organized labor’s “vast war chest” of campaign funds, accumulated through union dues collected from members who have no choice but to pay them, as a key reason for unions’ success. Such funds are used to elect politicians who are then beholden to unions — even when those public officials are charged with setting unionized government workers’ pay and benefits. So in effect, “unions are sitting on both sides of the (bargaining) table,” Finley noted. The result is municipal pension plans that allow workers to retire at relatively young ages and receive
Rep Bruce Rendon (R-Lake City), Chris Fisher, Rep. Aric Nesbitt (R-Lawson) Rep. Andrea LaFontaine (R-Richmond), Rep. Ken Goike (R-Ray Township), Rep. Wayne Schmidt (R-Traverse City) support fair and open competition.
12 Spring 2011
Michigan Merit
“We want to open it up and have you tell us what it means to your jobs.” Tim Walberg, U.S. Representative
Jim Cripps
more in benefits than they did in base pay when they were working, he said. Union influence is also why government winds up adopting policies such as PLAs and prevailing wage that benefit only unions, he said. “They were put there at the request of unions, and they were put there to serve unions,” Finley said, adding that private sector customers would never ask contractors about the wages and benefits they provide to their workers.
www.abcmi.com
“Your private sector customers are interested in value,” he said. “They trust that you’re going to take care of (providing proper compensation) to get good workers. So why should the public sector care? “Government has to work more like a business,” Finley added. “I think that’s the biggest contribution (new governor) Rick Snyder is going
to bring to state government.” Snyder, Finley said, understands that the proper role of government is to serve taxpayers and not the unions and special interests “who have bled it dry.” After Finley spoke, conference attendees broke up into teams and
Spring 2011 13
visited legislators in their offices. They then returned for lunch and remarks by new Michigan Speaker of the House Jase Bolger, R-Marshall. Bolger said the “overarching issue” facing the House GOP caucus is jobs. “But we don’t believe government will create these jobs – it’s you,” he told attendees. “What we have to get back to in Michigan is that entrepreneurial spirit,” he said. Bolger said he was confident that the Legislature would ultimately approve measures important to ABC members, such as repealing the Michigan Business Tax and banning PLAs. He also added that he was confident Snyder would approve the PLA prohibition. “Ultimately, I want you to know that this Legislature and governor are very much focused on results,” he said. Among other speakers during the conference was U.S. Rep. Tim Walberg, R-Tipton, who thanked ABC members for helping to send him back to Congress. He chairs the U.S. House subcommittee in charge of the federal Davis-Bacon prevailing wage act and expects to hold hearings on the act by the end of April. “We want to open it up and have you tell us what it means to your jobs,” he explained.MM
Sen. Phil Pavlov (R-St. Clair); Rep. Andrea LaFontaine (R-Richmond); former state Rep. Dan Acciavatti, Pamar Enterprises; Rep. Wayne Schmidt (R-Traverse City) and Rep. Dale Zorn (R-Ida) at ABC of MI legislative reception.
Gary Elza, GE Insulation; Andy Weisbrodt, Three Rivers Corporation; Sen. John Moolenaar (R-Midland); Rod Kloha, Circle K Services and Shawn Pnacek, Three Rivers Corp. discuss fair and open competition in construction. Rep. Jase Bolger (R-Marshall), Speaker of the House.
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14 Spring 2011
Michigan Merit
Michigan Economic Indicators
Construction recovery may be in the making
By Don Wilson, ABC MI Economist
In Michigan, and across the nation, signs point to revival in the construction industry and other private sectors of the economy, as data in Graph #1 portrays, and monthly metrics for Jan. 2011 confirm. (Graph #1 sets forth calendar quarter measures of activity in six major sectors of the Michigan economy, which account for more than 80 percent all statewide business activity.) In the Oct. – Dec. 2010 period, the pace of construction industry activity (based on payroll hours) was 4.8 percent higher than in the same period one year ago. The 4.8 percent increase ranks the industry fourth in the pace of year-over-year change among the six sectors. Non-residential contracts on the rise The recent level of work put into place suggests stability is developing in the industry, which is a pre-requisite for an upturn. Graph # 2 compares indices of the value of all building contracts (residential and non-residential), non-residential contracts separately and all building
www.abcmi.com
work put into place based on contractors’ payroll hours. In 2010’s fourth quarter, all building contract awards (adjusted for change in building costs) were only fractionally lower, 0.3 percent, than in last year’s fourth quarter, while non-residential contracts were down 8.9 percent and work put into place was 12.8 percent lower. However, Jan. 2011 data shows that the value of all building contract awards across the state was the same as in Jan. 2010, stimulated by a 74 percent rise in non-residential contracts, a 9 percent decrease in residential contracts and work put into place rising by 8 percent. Upturn in contracts bodes well for industry Graphs #3 and #4 detail where change is occurring with indices of the value of non-residential building contracts awarded for projects in the service areas of ABC of Michigan’s four regional affiliates. Southeastern Michigan contracts fell 25 percent in 2010’s fourth quarter, as shown in Graph #3, following a 9 percent upturn in the third quarter. In the Saginaw Valley area, a 203
Spring 2011 15
Graph 1 MICHIGAN PRIVATE SECTOR ACTIVITY BY MAJOR ECONOMIC SEGMENT Services / Wholesaling Trade / Retail Trde Index
(2001 = 100)
Manufacturing / Construction / Real Estate Index
Employment increases may be a factor Improvements in regional employment offer some insight as summarized below. In January 2011, the overall private sector workforce increased 1.7 percent in Southeastern Michigan, 1.4 percent in Saginaw Valley, 2.6 percent in Central Michigan and 2.8 percent in the Western Michigan and 2.1 percent statewide. Other information regarding the status of non-residential construction is limited, except data available by subscription. However, statewide or regional information in select trade publications, newsletters or websites provides further insight. The American Institute of Architects (AIA) conducts a Region Rate of Change in Private Sector Employment monthly survey of the value of 09 Q4 10 Q1 10 Q2 10 Q3 10 Q4 “work on the S.E. Mich. -8.3 -4.9 -2.2 -1.5 -1.4 boards” at a panel of AIA memberSaginaw Valley -4.1 -1.1 1.4 1.6 1.0 owned firms to Central Mich. -5.8 -2.2 -0- 1.4 0.4 study the trends of billings from Western Mich. -2.7 2.7 6.2 7.7 5.0 month-to-month. Statewide -6.6 -3.0 -0.4 0.6 -0The results are percent upturn in the Oct. – Dec. period succeeded a 14 percent expansion in the July – Sept. period. As displayed in Graph #4, building contracts in central Michigan rose 13 percent in 2010’s fourth quarter, compared with 91 percent increase in the third quarter. Contracts authorized in Western Michigan grew 111 percent in the third quarter and then declined 36 percent in the fourth quarter. While one month’s data does not make a trend, January data for contract awards show a year-over-year 105 percent upturn in Southeastern Michigan, 405 percent in Saginaw Valley, 68 percent in Central Michigan and an 85 percent downturn in Western Michigan.
16 Spring 2011
then converted to an index and are seasonally adjusted. The Architecture Billings Index is a leading indicator, which reflects the nine to 12 months time lag between the billing for architectural services and actual construction projects expenditures. The Midwest Billings Index, which tracks the value of work on the drawing boards of members in the Midwest (north central states including Michigan), rose to a level of 51.9 in the final three months of 2010, up from 49 in the third quarter and 44.7 in the final quarter of 2009. The Midwest Index rose again in Jan. 2011 to a level of 56.5, its highest level since Feb. 2006 (57.2). The index then edged off to 55.3 in Feb. 2011. A diffusion index reading above 50 indicates an increase in billings, while a reading below 50 signifies a decrease. Commercial loan delinquencies decline According to Realpoint Research LLC, a subsidiary of Morningstar, commercial mortgage backed security (CMBS) loans declined in recent months, indicating the commercial real estate lending market is starting to turn around. At the end of Jan. 2011, 14.1 percent of such loans for CMBS in Michigan were delinquent, down from 15.1 percent in June. The delinquency rate on commercial real estate loans held by banks is also falling. According to Federal Deposit Insurance Corporation data tabulated from call reports filed by Michigan based banks, delinquency fell from 3.9 percent in mid-2010 to 3.3 percent Michigan Merit
Graph 2 MICHIGAN BUILDING CONSTRUCTION INDUSTRY ACTIVITY (2002 = 100)
Non-residential Contracts / All Building Work Put into Place Index
at the end of 2010’s fourth quarter. Rates are falling as troubled loans are resolved with a gradual recovery in the pace of leasing that is raising
All Contracts (Residential & Non-residential Index
the rental income, which provides landlords with more funds to cover their mortgage payments and other outlays.
Leasing volume and occupancy levels must stabilize for a period of time before real estate owners and developers are inclined to initiate plans for the renovation and expansion of non-residential space after a recession. No data is tabulated regarding statewide leasing and occupancy patterns of non-residential buildings. However, data is tabulated and published for those types of properties in southeastern Michigan where 70 percent of statewide
Discount Bulk Fuel Member Benefit If you are buying gasoline, diesel or dyed diesel in bulk, your ABC membership now saves you money.
Now ABC Members can save 10% off the margin per gallon of fuel through a special arrangement with four oil companies across the state. Over the course of the year that could add up to a significant savings for your company. l
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This program covers diesel fuel, dyed-diesel and gasoline in bulk quantities. Covers wet-hosing, on-site fueling, above-ground and below-ground tanks. New and current ABC member customers of these vendors are both eligible for the discount. Vendors available across the state to serve the entire ABC of Michigan membership. These vendors are: Brenner Oil, Eiseler Oil, Foster Oil and Blarney Castle Oil. Members can also buy fuel at a fixed price for delivery over an extended period of time. This may allow you to bid jobs more accurately by locking in the price of fuel for the entire job.
Contact Brian Wohlscheid at (616) 218-3813 or brianw@brenneroil.com; or Mary Boardway at 517-853-2545 or boardway@abcmi.com to begin saving money on bulk fuel today! This is one more way that your ABC membership pays for itself. www.abcmi.com
Associated Builders and Contractores of
Michigan
Spring 2011 17
commercial and industrial properties investment is concentrated. According to the Real Estate Demand Index compiled by Allen & Associates, the amount of space under lease in industrial properties at the end of 2010’s fourth quarter was level with 2009’s fourth quarter, down 2.1 percent in offices and up 0.8 percent in retail. The industrial building occupancy in 2010’s fourth quarter was 86.7 percent compared to a rate of 86.6 percent in the previous year. Office space occupancy rose 0.1 percent, while the retail facilities rate declined 0.7 percent. Borrowing picks up in commercial real estate While data on construction and commercial real estate lending by Michigan based commercial and savings banks showed no improvement in 2010’s fourth quarter compared with recent earlier periods, weekly tabulations of outstanding loans at a cross section of Midwest banks by the Federal Reserve Bank of Chicago indicates there is a nascent pick-up in commercial real estate as well as commercial and industrial borrowing for purposes other than real estate. During the first eight weeks of 2011, commercial real estate loans were 4.8 percent higher than in the preceding eight weeks and non-real estate loans were up 4.1 percent.MM
18 Spring 2011
Graph 3 SOUTHEASTERN MICHIGAN / SAGINAW VALLEY NON-RESIDENTIAL BUILDING CONTRACT AWARDS
Southeastern Michigan Index (2002 = 100)
Saginaw Valley Index (2002 = 100)
Graph 4 CENTRAL & WESTERN MICHIGAN NON-RESIDENTIAL BUILDING CONTRACT AWARDS Central Michigan Index
(2002 = 100)
Western Michigan Index
Michigan Merit
Michigan Legislature takes aim at UI waste, fraud UI reform will save $1 billion for job providers Unemployment insurance (UI) reform signed by Gov. Rick Snyder at the end of March marks one of the biggest UI reforms Michigan has seen in decades and will save job providers, who fund the UI system, nearly $1 billion over three years. ABC of Michigan and other key business allies met personally with Gov. Snyder, Senate Majority Leader Randy Richardville and Speaker Jase Bolger to discuss House Bill 4408 introduced by Representative Jim Stamas. The legislation would not have passed without the help of Gov. Snyder, Senate and House leadership and the 24 senators and 65 House members voting for the bill. We cannot thank them enough for their vision and leadership on such a complicated issue. HB 4408 is a win-win solution for job providers hoping to create jobs and individuals struggling to find work because it: n
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Reduces state weekly benefit duration from 26 to 20 weeks for new claimants beginning in January of 2012. The change is expected to produce $300 million in annual savings. Requires the Unemployment Insurance Agency (UIA) to more aggressively pursue fraud and abuse in the UI system, which totaled more than $143 million
www.abcmi.com
in 2009 alone. The change is expected to save $50-80 million in the first year. n
Fulfills a promise made by Congress to allow displaced workers to continue receiving weeks 79 to 99 of benefits through December 2011.
Michigan’s UI Trust Fund is in deficit and has borrowed more than $3.9 billion from the federal government to continue paying benefits. Employer UI taxes will be increased to pay back the borrowed money. Cutting the state benefit from 26 to 20 weeks, beginning in 2012, along with the language to address fraud and waste in the system, will help lessen the increased payroll taxes required to bring the UI system into balance as required by law.
Haveman R-Holland, was named ABC of Michigan’s 2011 Legislator of the Year at the annual Legislative Conference in March. ABC of Michigan presents the Liberty Award to an individual who demonstrates commitment to the free-enterprise philosophy of the Merit Shop, which is premised on the belief that every company has the right to bid and be awarded
Bolger and Havemen earn ABC awards Speaker of the House Jase Bolger R-Marshall, earned the Associated Builders and Contractors of Michigan Liberty Award and Rep. Joe
ABC of Michigan President Chris Fisher (right) presents the Liberty Award to House Speaker Jase Bolger (R-Marshall).
Spring 2011 19
Rep. Joe Haveman (R-Holland) receives ABC’s “Legislator of the Year” award.
contracts based solely on merit. “Jase Bolger truly recognizes the importance of creating more jobs in Michigan,” says Chris Fisher, ABC of Michigan president. “The Legislature’s efforts to ensure more fair and open competition will help improve our economy and create more jobs.” Haveman earned “Legislator of the Year” for his leadership on the proposed ban on project labor agreements in Michigan, which was introduced 2175 Commons Parkway Okemos, MI 48864 as House Bill 517-381-1900 4287 in February. www.lezottemiller.com
The bill will create fair and open competition on publicly funded construction projects and eliminate the exclusionary practice of awarding construction projects only to firms with unionized employees.MM
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20 Spring 2011
Michigan Merit
ABC of Michigan President Chris Fisher meets privately with Gov. Rick Snyder to discuss tax reform.
ABC strongly supports governor’s tax reform plan ABC of Michigan announced that the 2011 Board of Directors has unanimously voted to support Gov. Rick Snyder’s budget and tax reform plan, which will help create an environment conducive to job growth and making our state more competitive. “We believe the governor and legislative leaders have crafted a fair and long-overdue plan that will make Michigan competitive and help grow www.abcmi.com
our state’s struggling economy,” says Chris Fisher, president of Associated Builders and Contractors of Michigan. “Our membership of large- and small-business owners appreciates the governor’s understanding of what it will take to create more jobs. The Michigan construction industry alone has seen more than 82,000 jobs disappear in the last decade.” “Michigan’s construction industry has been one of the hardest hit by the economy downturn of the last decade,” Snyder commented in a meeting with Fisher on April 14. “I appreciate working with ABC members to get Michigan back on track by improving our state’s broken tax system to help create jobs.” “Our member firms want to grow, take on more projects and add employees,” explains Fisher. “By lightening companies’ tax burden, the state will help clear the path to job growth. Companies have been hesitant to hire employees in recent years in part because the current tax structure has discouraged growth by increasing taxes on Michigan commercial and industrial construction firms. The proposed tax overhaul was a key topic at ABC of Michigan’s Legislative Conference in March. In a statewide survey of member construction firms, there was unanimous support for the plan with 77 percent of contractors indicating that it would allow them to save or protect jobs. Earlier tax surveys of Michigan construction firms consistently indicated that a staggering 83 percent of respondents saw their tax burden increase under the current Michigan Spring 2011 21
“I appreciate ABCs leadership to help reinvent Michigan and create jobs. Reforming our tax system will send a clear message to the construction industry that Michigan is open for business so ABC members and their employees can thrive in our state.” Gov. Rick Snyder Gov. Snyder outlines tax reform plans and the potential impact on the construction industry in Michigan during a meeting with Chris Fisher.
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Ending the current double taxation on LLCs and “S” corporations;
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A simple, flat 6 percent corporate income tax on “C” corporations;
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Small businesses, partnerships, sole proprietorships, limited liability corporations, “S”corporations etc., will pay a 4.35 percent tax on business profits under the individual income tax;
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Leveling the playing field to allow all businesses and industries — large and small — to grow and create jobs.
“I appreciate ABCs leadership to help reinvent Michigan and create jobs,” Snyder said. “Reforming our tax system will send a clear message to the construction industry that Michigan is open for business so ABC members and their employees 22 Spring 2011
“It will help our industry get back can thrive in our state.” to work and create jobs as more According to the Council on and more companies invest in our State Taxation Model, passage of state.”MM the plan will dramatically improve Michigan’s overall competitiveness, resulting in the ONLINE state having VIDEO/DVD the 16th best PRINT state and local business tax climate — up from 30th currently. Overall, Michigan businesses and individuals will Summit Training Source is the Premier see a net tax Builder in Safety Training Programs cut of more than Reduce costly accident and injuries and increase productivity by $700 million building your workers’ knowledge on the importance of best safety over a three-year practices. Summit’s extensive line-up of construction specific training period. titles teaches workers what they need to know to make a positive “This reform impact on the safety culture at your site. Construction titles include: plan will be • Hand & Power Tools Safety • Aerial Lift Safety a win-win for • OSHA 10 & 30 Hour Training • Scaffolding Safety the state’s • Construction Safety Orientation • AND MORE! construction • Fall Protection economy,” concluded 2011 Construct your safety board chair library today with Jim Cripps of Summit’s over 600 Cripps-Fontain training programs. Excavating in 800.842.0466 I www.safetyontheweb.com Kalamazoo.
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Business Tax (MBT), even though construction activity in Michigan has declined since passage of the MBT in 2007. On April 12, Gov. Snyder, Lt. Gov. Brian Calley, House Speaker Jase Bolger and Senate Majority Leader Randy Richardville announced their commitment to the new tax reform plan. Business tax highlights include:
Michigan Merit
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