Utility & Transportation
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West Bay Construction Celebrates 25 Years In Construction
JUNE 2020
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president’s message
From the desk of: dave smith
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hope this message finds you healthy and well after months of managing the unimaginable and once again showing the world how creative and determined we are as an industry. It brings great pride to know that after having been determined not only essential but “life sustaining,” our industry continues to do its part by providing the public with tremendous support and by keeping our infrastructure safe. We are grateful to the NJ DOT, Turnpike, and other agencies that facilitated projects and worked with us through many challenges. Now as restrictions on the public ease and the world seeks to restart, we must remain diligent in setting the standard for working in the new environment COVID-19 has created. However, we must also focus on restarting the economy. No economy works if the people in it do not. We need jobs, and not just the same number of jobs prior to COVID; we need more. We need to create opportunities for those whose jobs are forever lost. We need to work with leadership to re-train these workers who will likely have the opportunity not only to feed their families, but also to grow in our industry. Investing in our infrastructure has long been considered by most economists to be one of the greatest tools for the government to stimulate the economy. This growth cannot happen without many sources of new and or additional funding. One of many ways we are working to secure this funding is through the appointment of
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Bob Briant to the Governor’s New Jersey Restart & Recovery Advisory Council. We are proud to have this opportunity to help and are focusing on a number of actions that Governor Murphy and the legislature can take now to significantly stimulate New Jersey’s economy. Following Bob Briant’s Op-Ed theme published by NJ.com, “New Jersey can build its way to economic recovery,” the following are several of UTCA’s proposals: 1. Increase the NJ DOT’s annual capital program by $600 million per year for the next two years by using the TTFA’s under-utilized bonding capacity. 2. Approve the NJ Turnpike and South Jersey Transportation Authority’s planned toll increase as is. 3. Pass a $500 million bond to fund water supply projects and use the NJ I-Bank to leverage those funds to produce a $1.5 billion program and 4. Create a State Investment Bank to fund certain P3 infrastructure projects in New Jersey. If any of these proposals are implemented, New Jersey will immediately benefit economically! The UTCA, its staff, and Board of Directors are committed to a better New Jersey economy. Please remain vigilant and safe.
Best regards,
Dave Smith
CONTENTS
Cover story
42 West bay construction completes 25 years
DEPARTMENTS 2 7 13 19 27 35 51
President’sMessage Financial Overview Legal Dig Accounting Corner Legislative News
42
FEATURES 62 otterstedt insurance agency celebrates 100+ years
NEWS
65 the future of funding 67 ppp loan forgiveness
labor relations
75 covid-19's impact goes beyond insurance
The pipeline
79 leveraging employee benefits technology to improve 83
your company's bottom line in memoriam
Published Bimonthly During 2020
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Utility & Transportation Contractor | june| 2020 3
By: michael h. meyers, mountain hill investment partners
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hope everyone is doing well during these challenging times. Financial markets have been volatile and that certainly has an impact on your 401K plan. Employees are likely spending considerable time thinking about this and other aspects of their financial lives. Although no one has a precise blueprint for how the 401K landscape will look a year from now, I have been at this a long time and do know that employees will always need and appreciate help and guidance. In my last article, I discussed where the puck was going in the 401K space and that in my view, it is going towards employee education and financial well-being. The term for this in my industry is “financial wellness.” The economic shutdown is fast-tracking new ways of living, changing how we travel, where we work, and how we shop. The same can be said for financial wellness programs. A robust education and support system for 401K plans will attract and retain talent moving forward. This support system is necessary for maintaining a healthy 401K plan, and times like these are exactly why employee benefits are so critical. Employees should feel like they are prepared, playing offense rather than defense. What is Financial Wellness? The premise of financial wellness is to create a balance between financial well-being today while preparing financially for tomorrow. This includes addressing behaviors that promote positive financial decision-making as well as identifying those that might negatively impact an employee’s financial situation. Helping employees understand and manage their finances is an ongoing process because life happens and priorities, needs, and goals change. Finances are connected to all areas of our lives, and employers who understand the need to provide support and
focus on employees’ financial wellness are in the best position to recruit talent in the future. In Bank of America’s 2019 annual Workplace Benefits Report, employees were asked to rank their financial wellness program features. “Advice from a professional” ranked number one, followed by “information on financial topics separate from 401(K) education.” The report revealed that 53% of companies today offer financial wellness programs compared to just 24% back in 2015. This is the ninth edition of the report, which tracks the importance of benefit programs and uncovers an expanded set of opportunities for employers to improve their employees’ financial wellness. It is based on a nationwide survey of 996 employers and 804 employees.
Financial overview
is your 401k really an employee benefit? make it so!!
Most record keepers such as Vanguard, Fidelity, Ascensus, and Voya have financial wellness components built into their offerings, but they do little to engage employees. Many of you may have found yourself in the position of offering advice to employees, and while it is fine to share past experiences, giving financial advice is not your role; it is the role of the plan advisor to work with human resources and benefits coordinators to educate employees and to build out a financial wellness program. This can be done, for example, following 401K committee quarterly meetings, with breakout sessions for employee age groups to focus the discussions more efficiently. Advisors should make themselves available in the workplace afterward for one-on-one meetings (teleconference for now) and sign-up sheets can be used to schedule offsite or after-hours meetings for others. Why is This Important? Employees cannot make the right decisions about their 401Ks without taking all other aspects of their financial lives into consideration. Also, real advice and guidance from advisors cannot be given unless they too know the full picture. I recommend that employers engage advisors who will go beyond giving advice about what investment selections employees should make. That decision is important of course, but they should be discussing topics such as emergency savings, something that is proving critical for many people in our environment today. For employees who have debt outside of a mortgage or student loans, advisors should ask: are they working aggressively to pay that off? Financial markets will certainly not beat the usury interest rates charged by credit card companies. It sounds counterintuitive, but sometimes our advice is to stop contributing to the 401K to
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Financial overview
handle this obligation first. Are employees taking the appropriate amount of risk in their 401Ks? Those who had a panic-like reaction to the swift drop in financial markets in March are probably not invested appropriately. It is normal to feel trepidation when markets move sharply lower, but with the right guidance, investors should understand how their investments may perform during times like these. With that knowledge in hand, they will be mentally prepared for periods of extreme volatility and less inclined to do anything drastic. We offer financial planning for all employees, especially those nearing retirement, and spend considerable time discussing risk and the importance of continuing to follow their plan during uncertain times. Some people will be drawing on their retirement accounts immediately following retirement, while others may wait until they are required to. Time plays a big role in discussing how much risk someone should be taking and what an appropriate asset allocation looks like.
2. Have human resources or a benefits coordinator engage with your plan advisor to review the financial wellness platform and come up with a plan of action to address employees and promote its use. 3. Make financial wellness part of your corporate culture by scheduling recurring meetings where the advisor can discuss relevant topics to a large group or to smaller age-specific groups. 4. Benchmark your plan. Survey employees to get a better understanding of what they care most about to ensure these sessions are time well spent for everyone. 5. Engage an independent advisor to be your advocate if you haven’t already.
Financial wellness can also help drive improvements in employee health, quality of life, and productivity in the workplace. The American Institute of Stress reports that workplace and financial stress costs U.S. businesses $300 billion each year, or roughly $1,685 per employee. Effectively, engaging an expert who offers financial wellness services to help manage and reduce employees’ stress can pay for itself!
My firm works as an advisor and co-fiduciary to corporate 401(K) plans in the construction industry. We work with many UTCA member firms to build education programs designed to engage employees and provide them with the knowledge to create positive outcomes in their financial lives. Employees are counting on your firm’s 401(K) plan to provide for them in retirement; be sure they have the tools and knowledge to use this equipment safely. Call me, Mike Meyers, at (732) 291-3338 for more information or to schedule a plan review.
What Can You Do?
Disclaimer:
1. Find out what your record keeper offers in terms of financial wellness platforms. It will typically be a digital solution built into the employees’ online access. Most of these come at no additional cost, and while some are better than others, anything is a good start.
Mountain Hill Investment Partners is an SEC Registered Investment Adviser. We have a clearing and custody relationship with Fidelity Brokerage Services LLC, Member NYSE/SIPC.
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Effects of COVID-19 Health Crisis on Construction Projects in New Jersey
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he COVID-19 health crisis has affected every aspect of living and working in the State. Fortunately for the utility and transportation industry, Governor Murphy exempted this kind of work from the shutdown, although problems still plagued the Association members, from employees’ health concerns to supply-chain delays. Non-essential construction projects resumed more recently and while that may be a welcome sign of getting our economy up and running again, it will likely exacerbate the difficulties facing both contractors and their employees. Unlike essential workers such as police, EMTs, or grocery store cashiers, construction workers’ public exposure while working is limited. One of the issues that reopening presents is how contracting COVID-19 will be construed under applicable law. While workers should be covered by worker’s compensation if appropriate, they should have to show some causation, such as having contracted the virus from another employee. Pending legislation being considered at the time of writing may provide additional guidance on this issue. Be sure to consult with counsel about the provisions of the new law that will be adopted. Bear in mind that contractors must record COVID-19 incidents with OSHA on the OSHA 300 list if an employee is diagnosed with the illness, contracted the illness through work, and recording is required per OSHA general recording criteria (i.e., requires medical treatment beyond first-aid). If an employee tests positive, you should notify co-workers who may have been exposed, although you may want to consult with an attorney about confidentiality issues. Other issues are specific to the public contracting sphere. Although State agencies such as the New Jersey Department of Transportation have procured contracts through electronic means for many years, local government units have lagged behind. Electronic bid submission is still not allowed because local units do not yet have a secure e-bidding system. The Division of Local Government Services is encouraging municipalities and school districts to provide a lock box outside of administrative offices for secure drop-off of bid packages, but many local agencies are simply providing directions to bidders about when and where to personally deliver their bids or are providing additional time for mail or courier delivery. Rather than the usual 10 days for responses after an advertisement, the DLGS is encouraging local public units to provide 20-30 days for construction project responses.
Under applicable law, local units must still read bids aloud at a public bid opening. The units will likely require any bidders who want to attend the bid opening to wear masks, and social distancing will be maintained. There may also be an option to view the bid opening remotely, but that option must be a supplement to the public bid opening, not a substitute for it. If this option is offered, make sure you find out in advance about the details of the livestreaming technology being used. Local units are also being encouraged to scan in at least the three lowest bids and post them on their website, so take advantage of this procedure to review the bids of competitors. Note that many municipalities and school districts are conducting meetings by electronic means, so you may be able to obtain information about the results of a bid in that manner.
Legal Dig
By: adrienne l. isacoff, florio, perrucci, steinhardt & cappelli
The Department of Community Affairs is, on an emergency basis, temporarily relaxing the Uniform Construction Code regulatory provisions concerning Minor work (N.J.A.C. 5:232.17A), Inspections (N.J.A.C. 5:23-2.18), and Certificate requirements (N.J.A.C. 5:23-2.23). The Department has also issued new guidance for construction offices on State and local plan review and inspections. You can review the notice of emergency rule adoption and the guidance document at: https://www.nj.gov/dca/divisions/codes/alerts/pdfs/ COVID_RelaxMod.pdf https://www.nj.gov/dca/divisions/codes/alerts/pdfs/ COVID_memo.pdf These are just some of the many issues facing the construction industry as we all struggle to weather this crisis. Most importantly, stay well and strong for your family, your community, and your business.
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r&d tax credit - can construction & engineering companies really qualify? By: louis sandor iii, cpa, ccifp, partner & peter sullivan, CPA
Originally introduced in the Economic Recovery Act of 1981, the R&D credit covers expenses paid or incurred for qualified research. The research must be undertaken to discover technological information and must be intended to develop a new or improved business component for the taxpayer. All activities of the research must be substantive elements of a process of experimentation to improve function, performance, reliability, or quality. The R&D credit can be utilized by mainly two means: a payroll tax offset for small business taxpayers or a dollar-for-dollar income tax reduction. Taxpayers may be eligible for the Qualified Small Business Tax Credit if their gross receipts are less than $5 million in the year the credit is taken and they incurred gross receipts for five or fewer years. The payroll tax credit offset cannot exceed $250,000 and may be used against the employer portion of social security liability. Those not eligible for the Qualified Small Business Tax Credit may be eligible for the regular R&D credit, but it is important to note that these taxpayers must incur federal or state income taxes in order to monetize the credit. In the first year of taking a credit, the taxpayer may be able to
look back to the three prior years to claim the credit. Any unused credit carries over for twenty years. In recent years, The Internal Revenue Service (IRS) created a four-part test to define what qualifies as research activities for the credit: 1) Technological in Nature Test – The process of experimentation used to discover information must fundamentally rely on principles of the physical or biological sciences, engineering, or computer science. A taxpayer may employ existing technologies and may rely on existing principles of the physical or biological sciences, engineering, or computer science to satisfy this requirement. 2) Permitted Purpose Test – The purpose of the research must be to create a new or improved product or process resulting in increased performance, function, reliability, or quality. 3) Technical Uncertainty Test – The activities are intended to discover information that would eliminate uncertainty concerning the development or improvement of a product. Uncertainty exists if the information available to the taxpayer does not establish the capability or method for developing or improving the product or the appropriate design of the product.
Accounting Corner
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ou may not be aware that your company may qualify for federal and state research and development (R&D) tax credits. We are not talking about the white lab coat drug research programs that can cost millions of dollars with no definitive ability to recoup costs until an approved drug is developed. Instead, we are talking about your everyday activities to construct something or being involved in constructing something. But beware, claiming credits requires a thorough contract review to determine experimental risk and rights of research.
4) The Process of Experimentation Test – The activity seeks to eliminate or resolve a technical uncertainty which involves an evaluation or alternative solutions or approaches and is performed through modeling, simulation, systematic trial and error, or other methods. Once the four-part test has been met, one must identify the cost of qualified activities to compute the credit. Expenses that qualify include wages paid to an employee engaging in qualified research activities, supplies used or consumed during qualified activities, and any expenses paid to third party contractors who assist with the qualifying activity. Research expenses conducted outside of the United States or its territories, research funded by another party, ordinary product testing, market research, and aesthetic cosmetic design do not qualify. Construction activities that are novel and innovative in nature that may qualify for the R&D credit include the following:
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• Exploring means and methods and construction techniques • Preparing structure and facility design for constructability • Developing and improving construction equipment development • Designing LEED/green initiatives • Designing HVAC systems • Designing electrical system design
Accounting Corner
• Utilizing Building Information Modeling (BIM) for sub-system coordination • Analyzing the functions of a design directed at improving performance, reliability, quality, safety, and/or life cycle costs • Performing Request for Information Process (RFIs) • Improving mechanical equipment sizing By now you are saying “yeah we do that, so why haven’t we taken this credit?” Well hold on, the devil is in the details of the contract review. The IRS or state taxing authorities will not grant you tax credits for simply doing your job according to the contract. There must be an element of trial and error, design or redesign, uncertainty, experimentation, or problem solving. There must also be risk, such as incurring the above with the uncertainty of reimbursement. Be on the lookout for costs incurred on out-ofscope work, job margin fades, cost overruns, and change orders. Contract language that clearly allows for the contractor’s reim-
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bursement of the above costs or limits risk will most likely not be eligible. Construction and engineering firms should be cognizant of the potential risks and issues in claiming R&D credits. Identifying the business component can be challenging for construction companies. For instance, if the construction company employs engineers to perform R&D on behalf of a third party, the contractor must have both economic risk with respect to the research and substantial rights to the results of the research. As such, contract analysis is essential when determining R&D. The determination of which party has the rights and risks usually depends upon which party retains ownership over the design schematics, developed processes, and related intellectual property. This can be leveraged and discussed during contract negotiations between construction companies and their customers. Lastly, one of the most critical aspects of the R&D credit is ensuring proper contemporaneous documentation. A taxpayer must retain records in sufficiently usable form and detail to substantiate that the expenditures claimed are eligible for the credit. The taxpayer must also clearly establish full compliance with all relevant statutory and regulatory requirements. Failure to maintain records in accordance with these rules is a basis to disallow the credit and incur potential penalties. For additional information regarding the next steps of determining if the R&D credit may apply to your projects, please contact Louis Sandor III, CPA, CCIFP (lsandor@withum.com).
in the lobby By: zoe baldwin
Our industry, for the most part, has been blessed to be able to continue working. Governor Murphy’s executive orders kept public works jobsites open and thousands of workers employed as much of the state was forced to shut down. UTCA CEO Bob Briant, Jr. worked very closely with the Governor to keep us working and is grateful for the Administration’s partnership and consideration during these unprecedented times.
ESSENTIAL WORKER PROTECTIONS Senate President Steve Sweeney and Assemblyman Tom Giblin have introduced legislation creating a rebuttable presumption that should an essential employee contract coronavirus, the contraction of the disease is considered work-related and fully compensable for the purposes of “ordinary and accidental disability retirement, and any other benefits provided by law to individuals suffering injury or illness through the course of their employment,” which includes workers compensation. The bill does contain language referencing job duties that require interaction with the public, but it is not as strong as we would like.
As for the legislature, public participation in the age of social distancing has taken on a different look. The Senate and Assembly now convene virtually, and interested parties can register to call-in and provide testimony remotely. There have been several voting sessions and committee hearings now as the body works to pass legislation relating to the pandemic and frontline workers. At this time, they are not hearing legislation relating to other issues, but are expected to start taking on recovery-focused legislation in the coming weeks.
The bill has been passed by the Senate Labor Committee and will now advance to a vote by the full senate. During the committee hearing, the chairman and committee staff consistently referenced the bill as being applicable only to essential workers whose job entails public interaction, despite the weakness of that clause. UTCA has expressed concerns on behalf of the industry and has been working with the Senate President.
FISCAL FOCUS One bill recently signed into law extends the State fiscal year to September 30, three months past the usual June 30 deadline. The move buys the state more time to analyze the impact of the coronavirus and stay-at-home orders on tax collections and to rewrite the budget accordingly. The Governor initially revealed his proposed budget in February and the budget committees had begun to hold hearings, but the process was interrupted by the shutdown.
While we certainly understand that this legislation is not ideal, there are a few important things to note:
The state’s financial outlook is vastly different than it was before the outbreak of COVID-19 and in response, the Department of Treasury has frozen nearly $1 billion of current spending from its planned $41 billion FY20 budget. UTCA continues to work closely with the Administration, Legislature, and relevant departments to ensure all capital program operations will be fully funded and proceed without issue.
• OSHA has stated that this will not be considered in the OSHA 300 log
GIVE ME JUST A LITTLE MORE TIME The legislature has also moved to codify and supplement some of the Governor’s executive orders, such as recent legislation that effectively extends state permits to protect existing approvals from expiring due to the COVID
Legislative News
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crisis. This legislation is a corollary to Governor Murphy’s Executive Order 136, which relaxes DEP deadlines for issuing environmental permits as well as reporting deadlines for recycling and solid waste facilities.
ays can feel like weeks recently with the deluge of news and executive orders as the state works to cope with the fallout from the COVID-19 pandemic. This missive comes to you from mid-May as Governor Murphy and the legislature look for strategies to reopen safely and begin the State’s steep climb toward economic recovery.
• The bill explicitly states that “any workers’ compensation claims paid as a result of the rebuttable presumption shall not be considered in calculating an employer’s Experience Modifier Rate or otherwise affect an employer’s insurance premium rate for the employer’s workers’ compensation policy” and
• UTCA fought hard to classify our jobsites as essential so we could keep working; now, we must keep those arguments in mind as we ask to be removed from the consequences. ONE BID PACKAGE TO RULE THEM ALL As we have previously reported, one of UTCA’s highest legislative priorities is to standardize bid packages for projects bid under Local Public Contracts Law. We are pleased to report that the effort is steadily advancing following a recent meeting with interested parties including the Municipal Engineers, the League of Municipalities, the
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While we don’t have a precise understanding of when the legislature will begin considering non-COVID/recovery bills, our aim is to have this proposal introduced and ready to go. We look forward to keeping you updated as this long-awaited measure advances.
two main concepts: how to be better prepared for work under any future shutdown and how to be prepared for speedy procurement in the face of budget deficits and possible federal stimulus funding tranches. We’re looking to sure up the way construction is defined in the case of any future shutdowns; to make sure local governments are better prepared to continue bidding and awarding work under extenuating circumstances; and to ensure the state is well positioned to get any stimulus funding out to bid as quickly as possible. We look forward to sharing more detail on these policies as they develop.
DIRTY DIRT In January, Governor Murphy signed into law legislation that expanded the scope of businesses needing to acquire an A-901 license and set a registration deadline of April 20, 2020. However, in early May Governor Murphy signed Executive Order 136 which, among other things, extended this deadline due to the coronavirus. Prior to the EO, UTCA had been awaiting DEP guidance regarding applicability to businesses conducting generally accepted construction practices, as this issue was incredibly unclear from initial Department guidance.
WITH A LITTLE HELP FROM THE FEDS At the time of this writing, Congress has yet to introduce an infrastructure-based stimulus package, despite the fact that the concept enjoys bi-partisan support in congress and backing from the President. UTCA has been in regular contact with our Congressional delegation voicing support for this tried-and-true economic recovery measure, and has also been working with our national association, the American Road and Transportation Builders Association to that end.
The intent of the legislation was to increase regulatory control over soil and fill recyclable material services. UTCA was neutral as it moved through the legislative process because the language was specific to those businesses and did not include self-generators in the licensing provisions.
We have also been in contact with House Transportation & Infrastructure Committee staff regarding a possible recovery bill, advocating that the plan should avoid the previous focus on “shovel-ready” projects and should include the toll-credit marketplace provision that passed in the recent Senate surface transportation bill. Staff was receptive to both points.
Legislative News
County Engineers, the Association of Counties, NJ Department of Transportation, and NJ Department of Community Affairs. We have begun to receive specific feedback on our draft proposal and are working to update the document to reflect input from that conversation.
UTCA Director of Utility and Environmental Operations, Dan Kennedy, has been on the ground in this effort and has been working directly with NJDEP to ensure that implementation of the new law does not extend past the sponsors’ intent. We are glad for this extension from the Governor and will continue to work toward a rational roll out of the new law. LESSONS LEARNED UTCA is in the process of developing a package of policies that respond to some of the lessons learned operating in a partial state shutdown. For now, we are focused on
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On the water front, we have been advocating through the Clean Water Construction Coalition for a number of items that would be helpful to a jobs-based recovery including: for the reauthorization of the Clean Water SRF at $40B and the Drinking Water SRF at $25.4B; for permanent flexibility for states to transfer funds between the two SRFs; and for the EPA to require State SRFs to streamline the review and approval process for the replacement / improvement of existing water infrastructure assets as a condition of these funds.
managing workplace issues during the covid-19 pandemic By: Jonathan landesman, cohen seglias, pallas greenhall & furman
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whole new set of laws have been implemented at the federal and state level during the COVID-19 pandemic. Employers need to understand these laws to manage their employees and avoid legal liability. This article will detail some key issues that every employer needs to recognize. Unemployment Compensation
Many contractors wonder whether a laid-off or furloughed employee who refused to return to work will continue to be deemed eligible for unemployment compensation benefits. The answer is no. When an employer recalls an employee to work following a layoff or furlough, the employer should do so in writing to confirm that work is available and that everything possible is being done to ensure a safe working environment. If the employee refuses to return to work after receiving this notice, in most cases it is appropriate to deem the employee to have voluntarily resigned his employment. In these circumstances, the Department of Labor should determine that the employee voluntarily quit and is ineligible for benefits. Paid Sick and Paid Family Leave Effective April 1, 2020, employees working for employers with fewer than 500 employees are eligible for paid sick leave and paid family leave under the Families First Coronavirus Response Act (FFCRA). Employees are eligible for up to 80 hours of paid sick leave (up to $511 per day) when they are sick with the coronavirus or have been quarantined. Sick leave is also available for employees caring for a household member with coronavirus (capped at $200 per day). Thus, when an employee is sick, taking care of a sick family member, or quarantined, the employee is eligible for FFCRA sick leave or, as noted above, can file a claim for unemployment compensation benefits. That being said, em-
In addition, the FFCRA provides up to 12 weeks of paid family leave (at $200 per day) when an employee is required to stay home to care for a child whose school or daycare is closed because of the coronavirus. To provide some relief on this issue, the DOL has issued guidance on the rules for providing leave when the employee is not the primary child caretaker and when the child is 14 or older. Taking Temperature and Other Inquiries The Equal Employment Opportunity Commission issued guidelines saying that, in most cases, it is legal to take an employee’s temperature when he reports for work. Although thermometers are not always calibrated perfectly, most employers use 100.4 degrees as a hard cutoff. Instead of scanning employees for their temperature, a growing number of employers are having their employees fill out a questionnaire every morning when reporting for work. The questionnaires vary, but most seek information about the employees’ temperature, confirmation that the employees are not experiencing flu-like symptoms, and that no one in their household has been experiencing flu-like symptoms or tested positive for coronavirus. Whether your company is taking temperatures or asking employees to complete a questionnaire, one trap to avoid is failing to pay employees for all their compensable hours. Although the Department of Labor has not implemented specific regulations on this issue, based upon already existing regulations and legal precedent, the safe bet for any employer is to count any time spent by hourly, non-exempt employees standing in lines, completing surveys, or having their temperatures taken as compensable hours worked even if done before the start of the workday.
Labor Relations
Historically, to be eligible for unemployment compensation benefits, a claimant was required to certify that he was ready, willing, and able to work, and that work was unavailable. Now, under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a claimant can receive unemployment compensation benefits if he is unable to work because he is ill with coronavirus, caring for a household member with coronavirus, or quarantined by a physician. In addition, the CARES Act provides claimants with an additional $600 per week through July 31, 2020 and extends benefits for an additional 13 weeks for a total of 39 weeks of benefits in most states.
ployers should not lay off or furlough employees because they have requested time off that would qualify under the FFCRA.
Telework Many employers have permitted their office employees to work from home during the pandemic, especially while statewide stayat-home orders remain in place. But what should an employer do when things begin to normalize and their business reopens? What if an employee who is not sick and is not requesting a leave of absence covered by the FFCRA asks to continue working from home because he is concerned? In some states, including New Jersey, executive orders ordering businesses to close their facili-
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ties specifically encourage employers to allow their employees to work from home to the extent possible. But these laws are suggestive only. Unless the governor or state legislature goes farther, employers are not required to make telework available acrossthe-board on an indefinite basis. Again, in this situation, creating specific documentation is critically important. If an employee refuses to return to the office and insists on working from home, the situation should be memorialized in writing delivered to the employee, and the employer may consider the employee to have voluntarily resigned if they refused available work. This situation becomes trickier if the employee is not merely afraid to come to work but indicates that he cannot report to work because of a medical condition or because of a family member’s condition. In these situations, there may be a legal obligation under the Americans with Disabilities Act to provide reasonable accommodations, including a teleworking option. Layoffs and Furloughs
Labor Relations
Employers use the terms “temporary layoff ” and “furlough” interchangeably, although the latter typically refers to a situation where the employee continues to receive health insurance benefits. When implementing layoffs, employers need to be mindful of potential discrimination issues. When selectively laying off employees, employers should be prepared to establish legitimate business reasons for their decision-making, such as seniority or prior written performance evaluations. By far, the most common
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type of claim relating to layoffs is age discrimination. Perhaps that is because employers often try to layoff the highest-paid employees in any given category, and the highest-paid employees tend to be older workers. Of course, for businesses that received Paycheck Protection Program (PPP) loans, layoffs and furloughs may have a negative impact when calculating loan forgiveness. However, the PPP rules generally look at the business’s overall headcount, and so terminating one individual and replacing them with another usually does not impact PPP forgiveness. Conclusion In addition to weathering the economic uncertainty and safety issues posed by the COVID-19 pandemic, employers must plan ahead to ensure compliance with all new rules and regulations governing the workplace. There will likely be an exponential increase in employment-related claims being filed in federal and state courts during the second half of 2020, and you can avoid being part of these proceedings by being proactive. Jonathan Landesman is a partner at Cohen Seglias Pallas Greenhall & Furman. He is co-chair of the firm’s Labor and Employment Group, representing hundreds of contractors and subcontractors with respect to the workplace and union issues. He is available at jlandesman@cohenseglias.com and 609.668.3183.
Cover Story
West Bay Construction, Inc. Completes 25 Years in Construction By: zoe baldwin
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fter completing a quarter-century in business building everything from playgrounds to storm drains and watermains, West Bay Construction Inc. of Absecon, NJ has established a stellar reputation as a small but mighty firm capable of any challenge. We spoke with Frank and Linda Corradetti about their recent milestone, reflecting on the past 25 years of accomplishment for a firm that started with a, “Why not?” “I started off working for a contractor in Washington DC and then I came back to NJ and began working for Ole Hansen & Son, a general contractor,” Frank tells me. “I thought I was going to be set for life there. Ole Hansen was a local bridge builder – a well-established company in its third generation – and I figured I’d be there for another 20 years but the owners decided to go in a different direction and close the heavy construction business. I was in my thirties and I had a young family, so I bounced around a little bit until opportunity approached me.” Frank had a partner when he first started, but he stepped back relatively early, leaving Frank with a big decision on his hands. “So, I talked it over with Linda – you need to have the support of your family! We knew it was either now or never and jointly decided it was worth the risk. And when you’re young, what do you have to lose? In your early thirties, worst case scenario I’d have to go back to working for somebody else. And that’s the Ameri-
West Bay installed a meandering porous walkway along the park banks of Lake Lily in Cape May Point
can Dream, right? Be your own boss, open your own company… they just leave out how hard the work is!” And work hard they did. The young firm began its legacy tackling storm drain, watermain, and sewer work, completing twelve projects during its first year in business. As Frank says, “It takes a lot in the beginning. We started out of our garage, where you work all day, you go in to eat dinner, then you go back out to the garage and work all night.” “When it first started, we had three kids and the youngest was only three,” Linda says. “I was a stay at home mom at the time and involved really in an ancillary way, helping here and there.” But business picked up quickly and Linda joined the firm fulltime. “I could do it from home which was great, and then we moved to a little office right down the street from where we lived so it was relatively easy to balance the work and home life.” “I don’t know anybody who succeeds in this business without putting in the time,” Frank adds. “It’s a lot of stress and it’s a lot of effort, but it’s really satisfying and we’re just fortunate enough to still be here doing the same thing 25 years later.” Frank and Linda are both engineers by training and graduates from Rutgers University, Frank with a degree in civil engineering and Linda with a degree in material science. Linda credits that background as a key ingredient to West Bay’s success. “I think you have to be able to think outside the box,” she tells me. “Our youngest daughter is an engineer as well, and she and Frank are very much outside-of-the-box thinkers. Having an analytical mind is half the battle.”
The West Bay Team (L-R): Frank Corradetti, Linda Corradetti, Justin Ramogasse, Kevin Blevin, and Bob Jones (Elsamarie Corradetti working remotely due to the Coronavirus Response).”
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The newly minted firm took its name from its first location in Somers Point, which is on the west side of the bay separating the barrier islands from the mainland. They also adopted a light-
house logo as homage to the shore communities in which they perform much of their work. “It’s a little different out here. We do a lot of work on the barrier islands and along the shore in Ocean, Cape May, and Atlantic Counties, so we’re used to working in wet and sandy soil conditions, and that’s a nice advantage.” After several years establishing their presence in the utility construction community, West Bay branched into military con-
"And that's the American Dream, right? Be your own boss, open your own company...they just leave out how hard the work is!"
West Bay pivoted back and began building their capabilities in pipework. “We just finished a challenging project in Brigantine which was storm sewer installation and road reconstruction. We also just completed a project with AE Stone, Inc. for Delaware River Port Authority at the Woodcrest Speedline Station. The AE Stone scope of work included the reconstruction and repaving of the parking lots and upgrades to the station utilities. West Bay was brought in to perform the sanitary sewer improvements which included gravity sewer, force main, and pump station construction.”
tracts. “We were doing a lot of work at the Coast Guard Base in Cape May County where their training center and boot camp are. We’ve also done a good amount of work with the Naval Facilities Engineering Command (NAVFAC) out at Lakehurst which is now part of the Joint Base MDL. Once you start doing the military work, you learn how to expand into the different bases.” Frank explains.
In addition to their expertise in utility construction West Bay has carved a niche for themselves in the field of recreation, producing everything from design-build playgrounds to bocce ball and tennis courts. In fact, they just finished up a small project for the city of Cape May Point in which they built a special porous asphalt walkway along the lake in a park.
One of the first projects included the construction of pump station foundations in Wildwood for the Coast Guard (USCG). Later, the company successfully completed a bulkhead repair where they drove steel sheet piles for the USCG Station Indian River in Delaware. West Bay would go on to complete a wide array of projects for USCG, including demolition, concrete work, fence installation, and a gymnasium rehabilitation, among others.
“We initially got qualified to do school work, and it seemed schools always had money for recreational improvements. We would go after site projects and there was always a playground or park equipment with it, so we got our people certified to become playground installers,” Frank explains. “You have to be certified, so not just anybody can come in and do it. The work is a little different and we like that.”
To support Department of Defense efforts at the Joint Base, the firm has also completed playgrounds, constructed parking lots, performed pavement rehabilitation, installed airplane tie-down anchors and grounding rods as well as a brick paver walkway with a custom made US Air Force emblem, milled and paved taxiways, and constructed fuel containment structures to contain spilled fuel from escaping into the environment.
Tackling a diverse array of projects allows West Bay to keep it local, which they prefer. “When we were a young company, we were really looking to grow our capabilities. We were fortunate in that we didn’t really have to travel too far. We travelled when we had to, but for the most part we tried to see what we could do in the area. At the time Atlantic City was going through a great growth period, so there was plenty of work locally. When things got a little tougher, we started doing the military work.”
West Bay has also performed design-build projects for the military including two playgrounds, an animal control fence system, and a complex rehabilitation of an inert warehouse which was used to store non-explosive equipment at Naval Weapons Station Earle.
Those military contracts brought the firm up to Lakehurst, which is about an hour away, “We generally try to stay in that radius,” Frank elaborates. “In addition to our work at the shore, we’ve done a fair amount in Gloucester, Camden, Burlington, and Sa-
Cover Story
West Bay installed concrete foundations for three new compressors in the background and the new fueling canopy at the NJ Transit Howell Bus Maintenance Garage.
Military work kept West Bay busy for a number of years into the late 2000s. As Frank explains, “Things were going well for a while but it started getting very competitive. The military budgets began getting - Frank Corradetti tighter which basically affected the way the military allotted the work. We decided to change direction and went back to our bread and butter which is utility work.”
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Cover Story
them on Ben Franklin Bridge repairs upgrading the cathodic protection system. Most of the projects the firm builds are from public owners, but looking to the future, Frank sees growth potential in the investor-owned market. “We were recently prequalified with NJ American Water, which is exciting. We had previously done work for them as a subcontractor through Henkels and McCoy, Inc. and now we’re actually starting to break into that market.” “We’ve also been looking forward for the gas tax to kick in so there will be more bridge rehabilitation projects.
Sea Isle City met the needs of the growing popularity of Bocce by adding a fast draining state of the art court.
lem Counties - just last year we did a nice inlet job with R.E. Pierson Construction, Co. for the City of Camden. For us, it’s about seeing what we can do in the area more so than trying to specialize in one thing and traveling all over the country with it.” According to Frank, it’s this diversity of projects that keeps the work interesting. “We’re a small company, and I’ve worked with small companies and I’ve worked with big companies, but what it comes down to is that I like the ability to pick interesting jobs – something that’s a little different.” One such job was a project for NJ Transit working with Nicosia Contracting International, LLC and Clean Energy Fuels Corporation. The project was improvements to a compressed natural gas fueling station at the NJ Transit Howell bus garage. West Bay handled all the structural and civil work including pouring of compressor and canopy concrete foundations and underground utilities.
Frank also sees a future in design-build options, “I’m a licensed engineer, and West Bay has the capability to do design-build. I think one of the benefits of a design-build is that you get the experience of a contractor in the design phase. Whatever you design, you have to build, so you necessarily keep that in mind during the process. At the same time, you need to have the economics of it down to keep it affordable for the owner. In that way, you have the opportunity to use the contractors’ experience during design to build an economical and functional project. I think it’s a viable option that should be used more often on public projects.”
It’s easy for Frank and Linda to see a bright future for the firm since they have surrounded themselves with a dedicated, capable, and flexible team. “Frank and I are kind of that old-time mom and pop organization, and everybody pitches in to do a lot of things,” Linda says. “Our whole operation is set up so that we’re all working together and aware of what we’re all working on. You can’t have a gap if somebody’s out – especially now with the coronavirus – you must have a system in place where someone else can just pick up where - Linda Corradetti you left off. We don’t have the luxury of redundancy like a bigger organization.”
"Frank and I are kind of that old-time mom and pop organization, and everybody pitches in to do a lot of things."
“The bus garage was a challenging job. Construction was completed in stages keeping existing equipment operational while maintaining service and operations of the bus facility. Many of the projects we’re involved with are structure rehabilitations where you’re constantly working around older structures. Every project is different and being the size contractor we are, we can go after unique and different projects that interest us. We work with a lot of different generals, and we also do work as a general - and I like it that way! If it’s within our capabilities I’m not afraid to try it.” Frank says. Right now, West Bay has a few solid projects on its plate, including the one featured on our cover, which highlights a temporary access road and bridge the firm is building for Joseph M. Sanzari, Inc. that connect to a dredge disposal area just outside Atlantic City. They’re also working with IEW Construction Group, Inc. on a Delaware River Port Authority job over at the Commodore Barry Bridge doing deck repairs and will also be working with
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“We’ve been lucky to have a lot of good people working with us and I’ve got a supportive family,” Frank adds. “Linda has been right here with me the whole 25 years, and we’ve been fortunate to have talented field people we can rely on. A few have been here for many years like Superintendent Kevin Blevin and Foreman Bob Jones, and we’re grateful for key people like that who’ve stayed with us.” Looking back on the past quarter-century of hard work and perseverance, the Corradettis have much to be proud of and even more to look forward to. West Bay’s local focus, eye for detail, and talent for challenge will serve them well as they take on the next chapter in their growing legacy. UTCA congratulates Frank, Linda, and the West Bay Construction Inc. family on this milestone and wishes them all the best in the years to come.
charts, curves and living with risk By: dan kennedy, director of environmental & utility operations
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he last “Pipeline” I penned focused on the important role infrastructure plays in minimizing public health and safety risks. Writing with the coronavirus pandemic as the backdrop, which persists today, I had the hope that by the time of this edition’s release, the construction industry would still be at work. Thankfully, that is largely where we find ourselves today. We at UTCA recognize the core reason for this condition: the hard work and adaptations from your companies, our labor partners, project owners, and their consultants. As an industry, you have rolled with the punches. It has been a struggle at every level, and UTCA has been with you thought it all. CEO Bob Briant, Jr and staff have been laser-focused on helping you stay at work. I, for one, stand humbled as a witness to the collective effort you have made to keep projects moving and your people employed in a safe work environment.
As the economic realities of this shutdown became front and center, citizens and business owners have pushed government
Energy Master Plan – Words Matter We’ve gotten used to seeing the daily charting of infection cases on the news, but there is another chart that may pose longer-term risk to our state: climate change. Sea level rise, storm intensity and frequency, and other factors play into the design and durability of our infrastructure. Climate change is a variable that must be addressed, and the infrastructure construction industry should have a seat at the table where state policies are crafted. It was climate change, not epidemiology, that was on the top of the priority policy list for candidate Phil Murphy. Governor Phil Murphy has made climate change a top priority and progress on that front only recently stalled due to this pandemic. We have every expectation that it will be a theme of his administration that is not forgotten when things settle back into some sense of normal. Given that priority and positioning, UTCA must be poised and ready to engage on this issue proactively to ensure that ensuing policies are both rational and achievable. Climate scientists have told the world that we must limit emissions to stave off the worst effects of climate change. They recommend a global carbon budget with reductions coming from high emission sectors such as transportation. They say that the world has gone past the period where we can reduce our emissions casually. We are told that we need an annual reduction in emissions closer to seven or eight percent worldwide with a disproportionate share of this reduction coming from developed countries such as the United States. For context, this is on par with the emission reduction we are with seeing with the coronavirus lockdown, which has only been possible because of the closure of large swathes of the economy – something certainly not replicable and that we hope never to see again.
The Pipeline
As a society, we have largely embraced the governmental directives to change our work and everyday lives. We were told that these steps were necessary to slow the impact of this terrible virus. We did this to keep our regional healthcare system from being overwhelmed and to ensure that our communities had the capacity to meet various challenges. That was the goal, to “flatten the curve,” and so far, we have met this challenge. We remain vigilant as non-essential aspects of society slowly reopen because we know that we must reopen and get back to some version of normal before the virus is eliminated or we somehow become better protected from the virus
leaders to reopen. This push and pull we have been experiencing is instructive. One can draw on these lessons to inform our approach to other non-pandemic policies of a global scale that will be back to the forefront of statewide policy discussions before we know it. More specially, climate change.
The Governor has finalized a new Energy Master Plan (EMP) that thankfully accepts a “flatten the curve” mentality. The EMP goals, if met, translate to a lower, earlier emissions peak which will lower the impact on global temperature. How much of a dif-
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ference can NJ make? Well, that is a discussion for another day. For now, it seems that the EMP makes the case for acting now and making incremental progress. As they say, the devil will be in the detail. This approach incensed many in the environmental and clean energy advocacy camps. They pushed for a more draconian EMP. They wanted the EMP to say in black and white that we will “kill the virus,” the virus to them being emissions and any activity that causes any. Their goal is zero emissions immediately. UTCA has provided its members with updates regarding the EMP and is staying on top of the next steps with partners. UTCA understands the ambitious goals set by the Murphy administration and the legislature related to clean and renewable energy and sees opportunity and some risk in the direction set by the EMP. UTCA supports a diverse portfolio of energy resources and investments in associated infrastructure. The “kill the virus” mentality still exists in some camps, and the Governor will be pushed hard to use his authority to bend the EMP goals to this untenable alternative. We must and will stay diligent to avoid this mission creep.
The Pipeline
Implementing the EMP – DEP Positioned to Lead Reforms Alongside the release of the final EMP, a platform was released by an Executive and DEP Administrative Order to “modernize environmental laws” to address climate change. Branded “Protecting Against Climate Threats” (PACT), a yearlong stakeholder process lead by the DEP recently kicked off and will likely result in proposed changes to water, air quality, and land use regulations to “effectively respond to current climate threats and reduce future climate damages.” What could go wrong? A lot.
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Implementation of the stated PACT goals seem manageable if the same “flatten the curve” mentality of the EMP is embraced. DEP will have to repel the push to take more control of land use and infrastructure decisions. Taken to the extreme, DEP could complete its takeover of home rule and overtop the primacy of other state agencies such as DOT. DEP will undoubtedly be pushed to use this process to hit the brakes on surface transportation projects and all non-renewable energy projects. The following is a list of critical reforms that UTCA is engaged with as a stakeholder related to climate change and the PACT: - Reforms to Guidelines for Environmental Impact Statement / Assessment for Public Projects (EO 215, 1989) - Updates to the Coastal Resilience Plan (CRP) that address the issues specific to New Jersey's coastal zone - New Regulations to Govern Reductions in Climate Change Pollutants (Air Quality) - Sea Level Rise Technical Guidance - Reforms to a suite of land use rules (CAFRA, Wetlands, Stormwater, etc) - Grant Making – RGGI Funds We are working with partners and through coalitions to ensure that construction (infrastructure and general development needs) is strongly considered in these new standards. This is where the EMP rubber meets the road. If the PACT is used to stop infrastructure development (the virus, to some), the impact could be seen for generations. Our antenna is up, and we are on watch for those pushing aggressive alternative goals for the sake of our economy and society. We cannot eliminate all risks of life, and if we try to do so, it will be at our long-term peril.
Heavy Construction Landscape, Hardscape & Irrigation
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In New Jersey, Connecticut, Maryland and South Carolina with more states to come.
DBE, MBE, WBE, SBE & NMBE 1121 Springfield Road Union, NJ 07083 908-964-8883 www.aspennj.net
Feature Story
Otterstedt insurance agency celebrates 100+ Years By: jason rand, harrisonrand
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very day for over 100 years, the Otterstedt Insurance Agency has served continuously as a trusted advisor to its diverse community of clients. From the day Fred Otterstedt opened its doors in 1919 with 3 employees, the agency has been focused on the future and embraced smart and strategic growth to serve a broad array of clients and industries. Now in its 101st year, Otterstedt occupies a unique space as an insurance powerhouse with 6 locations throughout the state and over 100 employees and represents more than 35 of the nation's most trusted and well-respected insurance providers. This vibrant network of partners and professionals has been achieved through decades of dedication and a culture that remains focused on teamwork within the agency’s extensive footprint. Despite the ongoing mandated COVID-19 closures, Otterstedt’s unique strengths have allowed the workforce to pivot quickly and easily to continue to meet the needs of the organization’s clients in specialized industries. Over the past 45 years, John R. Lawrence, CIC, MBA, an equity partner at the Pompton Plains branch, has helped build an impressive team of construction and surety professionals who continue to meet the demands of the ever evolving business. “The pace of this industry has only accelerated and managing our growth takes a special kind of teamwork that integrates all points of view. Our in-house claims department, led by our general counsel and claims manager, Lydia Bashwiner, Esq. CWCP, NJWCP, provides superior insight and guidance to our clients and internal teams. By design, we have focused on emergency preparedness and built relationships based on trust and hard work. As our senior surety experts, Bryan Hyland and Mike Cronin effectively streamlined
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Pictured left to right are Bob Casazza, President & JoeParisi, Jr.,Chairman of the Board & CEO.
our remote surety process years ago. We understand the importance of having a plan that is focused on providing uninterrupted service to our clients. In particular, our bid clients are reassured knowing that we’re always at their side as an integral part of their advisory team to support their needs,” Lawrence said. “Senior Commercial Insurance Account Executives Kim Caboara, CIC, CISR and Danielle Carone, CIC in collaboration with the surety team ensure every detail of the bid process complies with contract insurance specifications. Our underwriting team works closely with us so that bid and performance bonds are prepared for pick up or overnighted to the client.” Joe Parisi, Jr., Chairman of the Board, continues to lead the organization into the future by implementing technology to facilitate and grow the business. His vision has been to integrate the heritage of quality service and expertise that his parents, Lucille and Joe, Sr., fostered in the decades under their leadership of Otterstedt with a technology-forward approach focused on adapting to current community needs and expectations. “This recent unprecedented event has only strengthened our commitment to the business community. We stand as true partners with our clients and haven't missed a single opportunity to provide the consistent service for which we're known. Our priority has been and will always be our clients and the continuity of their businesses," said Parisi. “I am proud of the fact that we’ve built an incredibly diversified team of industry experts who work together to provide comprehensive coverage to some of the most challenging and ambitious projects in the area. Our collective experience as a team benefits our clients from the standpoint that we are constantly thinking proactively and strategically how to best protect those we serve from every possible angle. This is a distinctive strength of Otterstedt. I know Joe, Sr. and Lucille would be proud of our progress.”
NEWS
the future of funding By: zoe baldwin
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n behalf of our Association, UTCA would like to thank all of our members for their unflagging dedication. You and your teams have kept safe and kept working through these uncertain times, and it is that tenacity and force of spirit that will help shield our industry from the worst of this economic downturn. Due to the economic slowdown caused by this pandemic, New Jersey’s gas tax and toll collections have dropped precipitously, and the full effect of the pandemic on our industry cannot yet be determined. Through his position on the board of the New Jersey Transportation Trust Fund Authority, CEO Bob Briant has been able to gain assurances that despite the present downtrend of gas tax and toll collections, both NJDOT and the NJ Turnpike expect their current and upcoming capital programs to remain level or increase (especially for the NJ Turnpike). Current projections for the State’s Transportation Trust Fund show that the Authority has enough bonding capacity to continue funding the planned capital program for the remaining four years of the current eight-year program. Collections for the 2022 program cannot yet be forecasted, but as of this writing, we expect traffic counts to rebound close to pre-COVID levels.
Fortunately for the industry, included in the Transportation Trust Fund reauthorization bill that was enacted in 2016 was language that requires a “true-up” of revenues every year. This provision enables the State Treasurer to increase the gas tax as necessary to maintain the current capital program funding levels without legislative approval. This will help protect the TTF and the industry from the loss of gas tax revenue caused by this pandemic.
On the federal front, we have been working with our congressional delegation as well as our national association, ARTBA, to support federal infrastructure-based stimulus funding. As of this writing, no concrete - Zoe Baldwin plans have been advanced by Congress, but we remain optimistic that this tried-and-true economic salve will be applied now as it has under similar times of crisis.
"Despite some dark clouds, there is brightness on the horizon"
And despite some dark clouds, there is brightness on the horizon. Over 1,000 of you submitted comments in support of the New Jersey Turnpike Authority and the South Jersey Transportation Authority toll increases. At the time of this writing, both plans are expected to be approved during the upcoming board meetings in late May. This welcome news is thanks in part to your efforts, which will bring a new stream of projects into the pipeline. This funding was needed and planned for well before the pandemic, but it has never been more necessary. Now more than ever, we must bring capital projects to construction quickly and efficiently, and both agencies have an excellent record of success. Utility work also continues to keep crews busy, with many ongoing projects still in full swing and a continuing slate of drinking water work on the horizon. Contractors can also expect to see a new line of combined sewage system projects to come online in the coming years as communities will be working to meet goals in their EPA-directed Long-Term Control Plans. Utility work helps the State meet important public health goals and we expect this sector will continue to flourish. We are grateful to be here in support of you and your companies as we all navigate this new normal. Rest assured that your Association has been working harder than ever to keep our industry open, operational, and funded.
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PPP Loan forgiveness By: sal schibell, lawson, rescinio, schibell & Assoc. Paycheck Protection Program Loans and Loan Forgiveness If your small business was slammed by the COVID-19 crisis, you can obtain a paycheck protection program loan (PPE loan) that is equal to 2.5 times your monthly payroll under Section 1106 of the CARES Act. If your monthly payroll runs $40,000, for example, your PPP loan amount might be $100,000. The calculated value of payroll includes not just wages but also employee benefits, state payroll taxes, and the business owner compensation replacement. What’s more, if you spend the loan proceeds on payroll, rent, interest, and utilities within eight weeks, the Small Business Administration forgives the loan. However, the following situations will limit your loan forgiveness:
Suppose a firm reduces the pay rate for one employee from $8,000 to $2,000. Perhaps this employee earns a sales commission, and the bad economy cuts sales for a few months. That 75% decrease in payroll (from $8,000 to $2,000) equals $6,000. A 25% decrease in payroll would be $2,000, so the reduction in pay rate in excess of 25% equals $4,000. Thus the amount eligible for forgiveness decreases by an equivalent $4,000. In review, if a small business started out with an initial amount eligible for forgiveness of $100,000, a 20% reduction in headcount might reduce that $100,000 to $80,000, and the subsequent pay rate reduction would subtract another $4,000, bringing the total amount eligible for forgiveness to $76,000.
Headcount Reduction
Missing the Rehire Window of Opportunity
According to Section 1106(d)(2)(A) of the CARES Act, reducing your workforce results in an equivalent reduction in loan forgiveness. This adjustment works simply; the amount eligible for forgiveness decreases by the percentage of full-time equivalent employees that you lose. Say you employed five full-time employees and ten halftime employees last year. Converted to full-time equivalent employees, you employed 10 workers. If you terminate two full-time workers, your count of full-time equivalent employees drops from 10 to 8 workers. This represents a 20% cut in headcount, which would reduce the initial amount eligible for forgiveness by 20%. If your firm had spent a total of $100,000 on payroll, interest, rent, and utilities, but you reduced your headcount by 20 percent, your loan amount drops by 20 percent to $80,000.
The Section 1106 statute includes a couple of mulligans. The first? Per the statute and a forthcoming interim final rule, if a firm either rehires or attempts to rehire employees who were laid off between February 15, 2020 and April 29 ,2020, it avoids a reduction in the initial amount eligible for forgiveness due to an earlier reduction in your headcount. To avoid this reduction, a firm needs to rehire the employee by June 30. The firm needs to make "a good faith written offer" to rehire the same employee at the same pay rate and for the same number of hours and then document the employee's rejection.
One thing to note: businesses can choose which period of employment is used to calculate a reduction in workers. A firm can compare its current employment to employment from February 15, 2019 through June 30, 2019 or from January 1, 2020 through February 29, 2020. Pay Rate Reductions After the formula adjusts the initial amount eligible for forgiveness based on headcount, it looks for any reductions in employee pay rates in excess of 25%. Section 1106(d)(d)(A) details this adjustment. Note that the formula ignores pay rate reductions for employees who earned more than $100,000 on an annualized basis in 2019. For everyone else, a pay rate reduction in excess of 25% is subtracted from the amount available for forgiveness.
Note, however, that even if a firm avoids this headcount reduction by rehiring or attempting to rehire, it will still calculate a smaller initial amount eligible for forgiveness. For example, say a firm averages $40,000 a month in payroll during 2019. As a result, it receives a $100,000 loan. Assume, however, that the firm laid off its entire workforce before receiving the PPP loan and can't rehire them until June 30. Because the firm rehires employees by June 30, it avoids the headcount reduction adjustment, but without employees on the payroll during April, May, and June, it lacks payroll costs to plug into the initial amount eligible for forgiveness. Missing the Pay Cut Reversal Window of Opportunity If a firm reverses a reduction in salaries or wages by June 30, that reversal eliminates the requirement to reduce loan forgiveness eligibility based on pay rate cuts in April, May, and June. Again, though, note that the pay rate cuts reduce the payroll cost that plugs into the formula. For example, suppose a firm with
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NEWS
ten employees making $1,000 a week cuts wages to $500 a week. If the employer reverses the wage cuts by June 30, the wage cut adjustment doesn't need to be calculated. The firm doesn't need to calculate that a $500 per worker reduction is $250 more than a 25% decrease and it doesn't need to tally up these excess wage reductions and subtract the total from the initial "eligible for forgiveness" amount. However, the initial 50% cut in wages means the firm pays 50% less payroll. Bad Documentation Tax accountants will tell you that taxpayers often lose audits only because they lack good documentation. Something similar, surely, will happen with the PPP loans. The statute requires a borrower to provide rich, detailed, and high-quality documentation. Here is an abbreviated list of application requirements from Section 1106(1-4): • Payroll tax filings reported to the Internal Revenue Service • State income, payroll, and unemployment insurance filings • Documentation, including cancelled checks, payment receipts, transcripts of accounts, or other documents verifying payments on covered mortgage obligations, payments on covered lease obligations, and covered utility payments • Any other documentation the Administrator determines is necessary. Mark my words, many small business owners won't be able to provide this detail. And in that case, the statute says they lose forgiveness. In the words of Section 1106(F) of the law, "no recipient shall receive forgiveness without submitting the documentation required." One other thing to consider about documentation: the Section 1102 statute (the main law that creates the paycheck protection program) requires you to use the PPP funds for approved purposes. It is very possible that some small businesses will spend enough money on the appropriate expenses (payroll, rent, interest and utilities), but then lack the ability to prove the PPP loan funds provided the money that was spent. The 25% Non-Payroll-Costs Rule The statutes passed by Congress explain you can receive forgiveness if you spend the money on payroll, rent, interest, and utilities, but the Treasury and the Small Business Administration refined this in the Interim Final Rule to say that non-payroll costs can't represent more than 25% of the loan forgiveness amount. You can read this requirement two ways, but the friendly way to read this rule goes like this: You received a $100,000 loan. Due to state mandated closures, you could only spend $60,000 on payroll during the eight weeks the PPP loan forgiveness formula considers. You also spent $40,000 on rent, interest, and utilities. You might think you're okay in this situation, but you won't get forgiveness for the entire
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$100,000 even though your spending seems to be a valid use of the PPP loan funds. Instead, you will be limited to forgiveness for only half of the $40,000 you spent on rent, interest, and utilities. Why? Because with forgiveness for rent, interest, and utilities capped at 25%, $60,000 of forgiveness for payroll would only allow $80,000 of forgiveness total and $20,000 on other qualified expenses ($60,000/.75=$80,000). Failing to Spend at Least 75% on Payroll-Costs Rule Scattered through the Interim Final Rule is the repeated phrase the phrase "at least 75 percent of the PPP loan proceeds shall be used for payroll costs.“ What this means isn't clear to me. Is this the same thing as what I describe in above or does this mean something different? For example, does it mean that if you borrow $100,000 but then only spend $60,000 on payroll costs, you lose forgiveness? I flip-flop in my assessment of this, but you probably want to consider the possibility you lose forgiveness in this situation. If you read through the Interim Final Rule, the language seems clear: “the Administrator believes that the finite appropriations and the structure of the Act warrant a requirement that the borrowers use a substantial portion of the loan proceeds for payroll costs, consistent with Congress' overarching goal of keeping workers paid and employed." This discussion then goes on and makes the statement that the Secretary of the Treasury and the Small Business Administrator have decided that "75 percent is the appropriate percentage." Further, the discussion notes that this limitation on the use of funds "will help ensure that the finite appropriations available for these loans are directed toward payroll protection." Here’s where the harsh reading of the 75% rule comes in. Within the Interim Final Rule, two deceptively similar statements appear in proximity. First, no more than 25% the loan proceeds may be used for non-payroll costs. Second, no more than 25 percent of the forgiven amount may be for non-payroll costs. I don't believe that these two statements are equivalent. Accordingly, I will not be surprised if spending less than 75 percent on payroll eliminates the forgiveness. A Tip Related to a Harsh Reading of the 75 Percent Rule If you inadvertently received a PPP loan much larger than you should have, stay especially alert. Say, for example, that your PPP loan application erroneously treated amounts paid to 1099 independent contractors as wages. People understandably made this mistake. Early guidance lacked clarity. In this case, however, you received a far larger loan than you should have, and you may find it impossible to spend 75 percent or more on payroll. I'm not sure what you do about this. Perhaps consider hiring your contractors? Or maybe you want to return the loan? Or maybe you just want to plan to repay the loan? What a mess, right?
Self-Employed Folks Counting on Full Forgiveness
“For individuals with self-employment income who file a Schedule C, the Administrator, in consultation with the Secretary, has determined that it is appropriate to limit loan forgiveness to a proportionate eight-week share of 2019 net profit, as reflected in the individual's 2019 Form 1040 Schedule C. This is because many self-employed individuals have few of the overhead expenses that qualify for forgiveness under the Act. For example, many such individuals operate out of either their homes, vehicles, or sheds and thus do not incur qualifying mortgage interest, rent, or utility payments. As a result, most of their receipts will constitute net income. Allowing such a self-employed individual to treat the full amount of a PPP loan as net income would result in a windfall. The entire amount of the PPP loan (a maximum of
To illustrate this, if your 2019 Schedule C shows exactly $52,000 of profit, you earned $4,333 a month and $1,000 a week. Your loan equaled 2.5 times $4,333 or $10,833, but forgiveness equals eight times $1,000 or $8,000.
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A self-employed Schedule C business without employees apparently receives only partial forgiveness of a PPP loan. Here’s the complete language from the Additional Eligibility Criteria Interim Final Rule:
2.5 times monthly payroll costs) would be forgiven even though Congress designed this program to limit forgiveness to certain eligible expenses incurred in an eight-week covered period. Limiting forgiveness to eight weeks of net profit from the owner's 2019 Form 1040 Schedule C is consistent with the structure of the Act, which provides for loan forgiveness based on eight weeks of expenditure” (85 Fed. Reg. 21750).
A Closing Comment To my way of thinking, you want to uncouple the PPP loan from the forgiveness formula. Think about the loan as a loan, pure and simple. If you need a loan, the PPP loan works great, except for the goat rodeo element to applying. Other than that, the PPP loan may provide inexpensive flexible financing that helps you get through an almost unimaginably rough patch. The forgiveness, though? Consider that icing on the cake. If you get some or a bunch of forgiveness? Great. Count yourself fortunate. But don't bank on it.
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NEWS
Construction Update: covid-19's impact goes beyond insurance By: ian ackerman
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OVID-19 has changed not only the world, but also how businesses operate. The construction industry has not been immune to these changes and the new challenges that they present. Insurance Market Update Property and Builder’s Risk: Overall costs accelerated faster than anticipated in Q1 2020. Workers Compensation: Pricing remains competitive but is increasing for the first time in years. Casualty: Continued negative impact by mega verdicts. Management Liability and Cyber: Public company D&O is the most distressed line of coverage in the marketplace. Surety: Increased underwriting scrutiny of working capital and financial solvency. Hard Market: The hard market still exists in pockets. Captive Wire explains that “the COVID-19 pandemic will hit commercial insurers hard, and most may only return to technical profitability in the second half of 2021, assuming normal levels of catastrophe losses, according to Fitch Ratings.” 1
With a drop in investment returns due to COVID, unknown financial exposure to COVID-related claims, and the potential for reduced exposures due to declining sales and payroll figures, we anticipate seeing even more discipline from underwriters. 2019 saw some of the most aggressive rate increases in decades. Umbrella and excess insurance were particularly challenged heading into 2020, and we anticipate that trend to continue. Carriers have increased pressure on attachment points, increased rates, and have been unwilling to offer the same limits as in the recent past. This sentiment is true for loss-challenged and best-in-class accounts. Workers’ compensation costs generally remained stable or saw a reduction in rate, often increasing in premium based on growing payrolls. Expect continued underwriting scrutiny on height exposure and a reinvigorated focus on PPE and safety plans. Some states such as New Jersey and Pennsylvania have created new rating classification codes related to COVID-19 for workers who are either not working but being paid or have transitioned to modified job duties outside of their previous classification rating codes. General liability rates largely
remained stable with modest single-digit rates increases for accounts with favorable loss history while also often increasing in premium based on increased sales or payroll. Construction defect claims will continue to be a focus. Work in New York continues to be a challenge with limited players willing to take on the risk. Appetite for specialty work such as street and road, rigging and crane, excavation, and demolition remains limited to select markets. Surety Market Update Surety concentration on working capital and the financial solvency of contractors will only increase moving forward in 2020. Expect increased scrutiny of these areas with an eye specifically on contractors with balance sheets heavily skewed towards government, hospitality, retail, and other industries that may be disproportionately affected by COVID. The surety market has been a bit soft, and underwriting has been relatively lax; plan to see a much more disciplined approach to future underwriting. Surety underwriters will expect business owners to articulate a forward-thinking approach with business continuity and disaster response plans, 3-year plans with milestones, and updated monthly cash flow projections. COVID-19 Related Insurance Claim Concerns We anticipate claims and litigation regarding COVID-19 to continue for years into the future. Many different lines of insurance of insurance can and will see claims activity and legal challenges to insurance contracts. High impact areas that Gallagher has identified include but are not limited to workers’ compensation, general liability, directors and officers, management liability, property, business interruption, travel accident, and pollution. Multiple states have enacted executive orders, proposed legislation, or enacted legislation specific to regulating property and casualty insurance carriers’ responses to COVID. Business interruption and workers’ compensation lines of insurance have been under state, federal, and public scrutiny. The situation is very much still developing. Some states such as New Jersey and Pennsylvania have created mandates through state workers’ compensation bureaus to remove COVID-19-related claims from experience modification rating (EMR) factors. With workforces moving from traditional job site or office models to a more distributed remote work environment, cyber exposure has increased with bad actors using ransomware, phishing schemes, and social engineering attacks with much greater frequency. Some outlets have reported
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over a 100% increase in ransomware activity.
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Contractual Obligations and Liability Contractors need to review and understand their existing contracts specifically looking for clauses that could provide financial relief, additional time to meet contractual obligations or other helpful remedies. Understanding contractual obligations, providing adequate notice of potential delays, maintaining detailed CPM schedules, and managing jobsite risk are all integral to protecting a business’s financial interests. All future contracts must be scrutinized with the potential for future pandemics in mind. The industry has already reported instances of new and unfavorable contractual terms related to COVID-19. Managing Cash Flow and Protecting the Balance Sheet Some contract provisions such as those frequently found in AIA contracts may allow a contractor to require an owner to substantiate that they can pay, even after a job has commenced. Use these provisions to your advantage. Prepare for labor rate increases, especially considering the already limited supply of skilled work, and potential increases in material costs along with delays in receiving materials from factories or supply chains that have been challenged or taken completely offline.
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Matt Dawes Account Executive – Construction Practice Phone: 908-938-0152 Email: matthew_dawes@ajg.com Ian Ackerman Insurance Broker & Consultant -- Construction Practice Phone: 973-536-2895 Email: ian_ackerman@ajg.com Jim Gilmore NJ North Construction Practice Leader Phone: 201-213-0713 Email: Jim_Gilmore@ajg.com 1“Commercial Market Hardens but Pandemic To Delay Insurer Profitability.” Captive Wire, 14 May 2020, www.captive.com/ news/2020/05/14/commercial-market-hardens-pandemic-to-delay-insurer-profitability.
By: tim fitzpatrick, senior vice president, employee benefits, ioa & nancy damato, rda benefit services
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ecent events have drastically changed how many businesses operate, and technology is playing a much greater role than ever before. With many employees working remotely and some still reporting to the jobsite, a new set of challenges emerges. Compliance with the day-to-day tasks of managing employees and administering their employee benefit plans has not changed, however. Communicating the details of their benefits offerings, tracking eligibility, and processing enrollments, among other tasks, are very important and time-consuming responsibilities. These tasks typically fall to a company’s human resources or finance department, and many smaller companies rely on a more all-purpose role, such as an office manager. These individuals are often more than qualified to handle these tasks, but the question becomes, is this the most efficient strategy, especially when everyone may not be in the same location? Many small and mid-sized companies manually administer their employee benefits program through paper communication. This involves the dissemination of physical benefits summaries and requires the collection of paper applications for coverage. Although this can be an effective strategy if executed properly, there are some serious issues worth consideration: • Compliance – are you able to properly track and document an offer of coverage and a subsequent election or waiver of that coverage? How about state and federally required notices, such as COBRA? Are you sure you are providing all the necessary notices to your employees? • Communication – are you able to effectively outline all benefits offered and the accompanying rules, such as new hire waiting periods, that go along with them? Do you have a new system in place with employees working remotely? • Time – how much time is your internal team spending on this process? What is your process for providing new benefit information to your employees so that they have enough time to decide during Open Enrollment? If outsourced properly, can their time be spent in a more strategic and cost-effective manner? • Money - using manual processes to track employee information and perform payroll calculations often results in human errors. Using an employee benefits platform has proven to reduce these costly errors. One example provided by the general agency Savoy projects that a company with 75 employees could save up to $28,000 annually by changing over to an online system.
NEWS
leveraging employee benefits technology to improve your company's bottom line “Ben Admin” systems are software solutions designed to centralize your HR records and synchronize your employee data across several systems. This includes payroll, new hire onboarding, benefits, and paid time off. These tools allow you to streamline the communication and tracking process for your company’s benefits package through an online portal designed specifically for your firm. The primary and most obvious advantage to these systems is online enrollment. Managing a manual enrollment process during the best of circumstances can be difficult, but recent events are exposing the limitations of this strategy as remote working and furloughs are becoming more prevalent. “Online enrollment has been around for years, but this pandemic is highlighting one of its basic advantages, paperless enrollment,” Employee Navigator CEO, George Reese, explains. “In light of the new social distancing environment we find ourselves in, the ‘new normal’ won’t include in-person enrollment meetings for quite some time.” When evaluating a benefits administration system, there are some key points to consider. Cost, flexibility in design, integration with current carrier and payroll systems, and the ability to create a digital paper trail are all important factors in assessing what solution is the right fit for an organization. There are many more variables to consider so it is important for employers to enlist the help of a trusted advisor such as their insurance broker. Many brokers have established relationships with vendors in this space and can offer their clients product and pricing advantages over the open market. George Reese continues, “While any broker can set-up and manage an enrollment solution, companies only benefit from brokers who have invested in developing operational expertise in this area that can supercharge the benefits of an online enrollment platform.” Companies will need to adapt in the wake of the Coronavirus crisis and develop new and more efficient methods for connecting with their employees. Benefits administration systems can help in this endeavor by adding considerable value to an organization’s backend processes. They can create greater efficiencies in workflow and help to streamline the communication process, doing so in a more compliant manner. Employers should thoroughly evaluate how they can best leverage technology to maximize the advantages of an employee benefits platform and modernize their business processes. Contributions from George Reese, CEO, Employee Navigator and Colleen Patterson, Director of Employer Services and Compliance, Savoy
SOLUTION: Employee Benefit Administration Systems
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NEWS
in memoriam By: zoe baldwin An industry is formed when individual companies come together to champion the best interests of the group. Like in a family, this unity creates strength and empathy and forges bonds that will last a lifetime, which is why it is with great sadness that we pause to remember two extended family members lost this April: Dick Foster of PKF-Mark III and Travis Hutchinson of Selco Manufacturing Corp.
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ick Foster grew up in Massachusetts, graduated from MIT, and spent time in the Air Force before starting his construction career with contractor Peter Kiewit Sons. In 1966, Dick and two Kiewit co-workers, Bill Perkins and Al Kanak, joined forces to form PKF. The firm grew steadily to become PKF-Mark III, and in 1979, Dick was named President and then later CEO. His leadership was legend, and his integrity and commitment to “do what was right” remains the foundation of the company’s motto today: “Excellence Built on Integrity.” Dick led by example, knew the details of every job, and had a serious commitment to safety. An organized and clean site was a safe and productive one in Dick’s mind, and he made a point of regularly walking through jobsites to inspect. He expected everything down to bolts and nuts, making sure they were in bins and buckets and not left in the dirt where they could be lost or a hazard. At the same time, he was unabashed in recognizing that PKF was in business to produce a profit for its shareholders — a mindset that helped the firm grow and thrive under his leadership. With a reputation for being firm but fair, Dick was a leader and an inspiration to all who knew him. Through the countless construction projects built by his firm and through his active role in the Boy Scouts and broader community, the impact of Dick’s life and career will be felt for generations to come. Dick passed away on April 28, 2020 at the age of 90.
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ravis Hutchinson grew up in Long Island before moving to New Jersey to study chemical engineering at Rutgers University, where he also served as starting pitcher on the baseball team. He met his wife Peggy and married in 1964 before continuing his education at the New Jersey Institute of Technology and later at New York University. Though we knew him as the owner of Selco Manufacturing, Travis got his start in engineering, working for Air Reduction, M.W. Kellogg Company of New York City, and later with Combustion Engineering (C-E) Lummus in Bloomfield, NJ. He rose to become the CEO of Lummus in 1981, which was a global leader in the petrol chemical industry. By 1986, Travis was looking for a change and struck off on his own with the purchase of Selco Manufacturing Corporation. At the time, Selco was a small, six-person company in West Paterson, New Jersey that produced third rail components for the New York City subway system. Under Travis’ leadership, Selco grew steadily and expanded into several construction markets, ultimately becoming a leading supplier to the MTA Railroads, state and city departments of transportation, and to contractors across the region. The company is both AISC and ISO certified and continues to be a leading manufacturer of rail transit products and steel fabrications used to build and maintain America’s infrastructure. In recent years, Travis continued to work passionately and contribute at Selco while working alongside his son Peter, who assumed the leadership of the firm in 2018. Travis passed on April 11, 2020 at 77 years of age and will be sorely missed.
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