The Design-Build Efficiency and Jobs Act of 2013
Competing to win federal design/build projects can be expensive. The AIA’s Large Firm Roundtable recently conducted a study that found the median cost is roughly $260,000.“If you’re a small firm, that’s your profit for the year, potentially,” says Andrew Goldberg, managing director of government relations and outreach at AIA. If you’re one of eight to 10 finalists for a project, there’s a pretty small chance your investment will pay off. In an effort to reduce the risk, Sam Graves (R-Mo.) introduced this act in July. The bill would cut down on the number of finalists at the second stage of these competitions to between three and five. Currently moving through the House's Committee on Oversight and Government Reform, the bill could come up for a full vote in early 2014. If enacted, it would lessen the risk for architects to enter such competitions. “The government is losing out at having the best talent, and architects are really losing out on the chance to compete for this kind of work,” Goldberg says.
The National Design Services Act
Architecture students are graduating with higher student loan debt than almost every other profession. Just for undergraduates, the average debt is more than $40,000. And while the recession may technically be over, architecture jobs for recent grads aren’t exactly abundant. “A lot of emerging professionals are leaving the profession because they have huge debt and trouble getting work,” Goldberg says. “We really run the risk of losing an entire generation of young architects.” The AIA has drafted the National Design Services Act—modeled on similar programs for doctors and nurses—to allow graduates to work for nonprofit community design centers in underserved communities in exchange for student-loan relief. Goldberg says the benefit is threefold: It gives architects work, it reduces their loan debt, and it provides design services to communities who might not otherwise get them. Goldberg is hopeful that the idea will get a formal introduction in Congress in 2014. Students and recent grads are already supportive. Evan Litvin, a recent architecture grad in Philadelphia, started a petition on Change.org in support of the idea and has collected nearly 2,000 signatures.
Expiring Tax Credits
The end of 2013 was also the end of a fleet of tax incentives—55 temporary tax provisions in total. Most notable for designers is the tax break in Section 179D of the Internal Revenue Code, which incentivizes energy efficiency in commercial buildings. Architects, engineers, and contractors can deduct up to $1.80 per square foot for projects that achieve a 50 percent reduction in energy costs compared to those built to ASHRAE standards. This exemption has saved architecture firms hundreds of thousands of dollars. The AIA is now working to convince Congress to renew and retroactively apply this tax break, as is the National Association of Home Builders (NAHB). Lake Coulson, the NAHB’s vice president of federal government affairs, is confident that 179D will be extended. He’s also hoping to expand its scope beyond just new commercial buildings to retrofits of existing buildings. “Some of these older buildings that were built before there was an energy code, to bring them up to code—let alone put them 50 percent above code—would be quite challenging,” Coulson says. “Now there’s a reform effort to look at new models and create a sliding scale.”
It was almost a decade ago that Congress last passed a long-term transportation authorization bill. Ever since that bill expired in 2009, the House and Senate have kicked the can down the road with a series of short-term extensions. The latest is set to expire in September 2014, and prospects for a long-term bill are not promising. “Nobody expects that next year Congress is going to be able to get a long-term bill,” Goldberg says. But even if it’s just a short-term extension, Goldberg says there’s room to improve the bill. “It’s not just about highways, and it’s not even just about highways and rail. It’s also about how transportation connects communities, how it creates economic prosperity, how it can be more sustainable and promote safety,” he says. Jeff Shoaf, senior executive director of government and public affairs at the Associated General Contractors of America (AGC), says that a new, more robust transportation bill is critical, especially with the gas tax contributing less and less to the Highway Trust Fund. “We could get a situation where we potentially have a 100 percent cut in transportation funding in fiscal 2015,” Shoaf says. “It really needs a solution sooner rather than later.”
Fannie and Freddie
For architects and others in the building industry, there’s no work without clients. And for those clients, there’s often no ability to commission projects without financing. In the wake of the economic recession, the credit market has been slow to right itself. Some in Congress are looking at the federal government’s mortgage system—Fannie Mae and Freddie Mac—as part of the problem. The Protecting American Taxpayers and Homeowners Act of 2013, currently under consideration in the House, would dramatically shake up the way the federal government participates in the secondary mortgage market. The Republican-sponsored bill would wind down Fannie and Freddie over the course of five years and leave no federal guarantee supporting loans. NAHB’s Coulson argues that without the federal guarantee, home building will dwindle. The bill’s passage could negatively impact architects, Coulson warns, especially those working in the multifamily housing sector.
The call to revise the tax code has grown louder in recent years, and many analysts say Congress is getting closer to tackling this complex subject. For the building industry—from architects to contractors to engineers to home builders—the biggest hope is for better treatment of small businesses. The vast majority of architecture firms are small businesses, as are about 80 percent of the AGC’s constituency. Most of these companies are organized as S corporations, a distinction meaning that the owners or shareholders themselves are taxed instead of having the company pay a corporate rate. But many of the tax reform ideas being pushed right now offer more benefits on the corporate tax side, according to Goldberg. There’s still time to work things out, however. “We don’t expect tax reform to pass in 2014, but what happens is these bills get drafted and things get baked into them early, so we have to be at the table early on,” Goldberg says. He says it’s a lot like the design process: “You have to be part of the process from the very beginning to make sure that these good design principles are part of the project.”
Getting Congress Back to Work
If there’s only one thing the building industry really wants to see happen in Congress, it’s more actual work. In late 2013, the AIA released its annual Call for Issues survey, which asks members to share their concerns and objectives for the industry. One question asked what Congress could do to help the profession and the industry. “The way a lot of people answered is they want Congress to stop bickering and do its job,” Goldberg says. “Architects are working in a world where they have to actually get things done. They can’t filibuster, they can’t shut things down if they get mad.” AGC’s Shoaf says that his organization’s members just want Congress to work on a normal, predictable schedule on things like authorizations and appropriations to add some clarity to what’s been a chaotic system in recent years. “It’ll make the market mature, it’ll help companies attract and retain workers, and it’ll help the government get a better deal because they have a logical process that they’re following,” Shoaf says. The recently passed two-year budget agreement helps get closer to that goal, but Shoaf and Goldberg agree that what Congress needs most is a return to normal operating procedures.
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