Latest Tax Hike Proposal Hits Architects Harder

The new “Go Home” tax proposal in Olympia will hit architects squarely on the chin. It proposes a 20% Business & Occupations Tax hike on service businesses on architects. This tax hike would cost architecture and engineering firms over $23 million the first year and roughly $70 million over its three year term.

WA Lost 2,400 A&E Jobs This Year

Washington lost 2,400 A&E jobs in just January and February this year.  Since July 2008, Washington has lost 7,000 A&E jobs. Here is a graph from the Federal Bureau of Labor Statistics on the jobs situation for our industry.

Architects Cannot Afford a 20% Tax Hike

Architects already pay the highest B&O tax rate of 1.5% of gross receipts. The latest compromise increases the rate to 1.8% for over three years.

We agree with Governor Gregoire when she says that higher costs on the construction industry will prolong the recession. This tax increase will hamper architecture, and thus construction, from helping Washington State out of the current economic recession.

The state is relying upon construction. Construction relies upon architects. Put simply, if a project is not designed it cannot be constructed.

Every dollar spent on design supports $10 to $15 in construction. Every $10 million dollars spent on building construction typically requires 160,000 labor hours and creates 285 full-time, family wage jobs.

Don’t Raise Taxes on Businesses that are Barely Surviving

A&E firms in our state are coping with the current recession by closing offices, cutting staff, lowering benefits and reducing wages.

The direct impact of the current recession cannot be told just by the employment figures for. Many laid off architects are working from home trying to get design projects or performing consulting work. And, firms are reducing hours and using furloughs to keep staff employed but at reduced salaries. Their income is just a fraction of their previous job, but they are not technically “unemployed.” So, they don’t show up in the government reports

Since the B&O tax is levied on gross receipts, any additional tax burden will come directly out of staff, salaries and benefits. This tax is also being levied on contracts that have already been signed, but for which the work is ongoing.

The Double Whammy of Budgets and Taxes

This tax increase is a double-whammy on architects who are being hurt by other state decisions. In the proposed budget, the state is transferring almost $1 billion out of the capital budget to the operating budget. As a result, state funding for design projects has been cut dramatically.

At a time when the private sector cannot get credit for major construction, the state had curtailed its spending because of these budget transfers.

Thus, the state has cost architects their jobs through both its spending and taxing decisions.

No Design = No Construction, AIA|WA Testifies on the Capitol Budget

AIAWA testified in the House Capitol Budget committee yesterday regarding the broad based policy impacts of the 2010 Supplemental Capital Budget.

In this budget architects and design professionals took a disproportionally large loss, with some estimates saying that up to half of the construction/design budget was cut with the remaining dollars going toward “shovel ready” projects. The AIAWA testified to the mis-placement of design dollars noting that if buildings are not designed years in advance they can’t be built – so ultimately, if there are no design jobs there will be no construction jobs.

The AIAWA further noted our concern that the Governor is planning to transfer more money from the construction budget to put towards programs. Another cut would undeniably impact jobs in the construction/design sector. For every 10 million we spend on construction projects there are about 285 full-time jobs, with benefits, provided. New cuts could put hundreds of people out of work.

You can see the full hearing by clicking here. You can see testimony from AIAWA Director, Stan Bowman, below.

AIA|WA Testifies in Support of Design Funding in Capital Budget

The House Capital Budget Committee held its first hearing of 2010 on the Governor’s supplemental Capital Budget.

The news was not encouraging for architects, engineers and contractors who do public work. Because of lowered revenue the capital budget about $500 in the hole for the current biennium. More concerning is that the Governor is proposing to take another $157 million out of construction and put it into the state’s general fund programs.
Every $10 million dollars spent on building construction typically requires 160,000 labor hours and creates 285 full-time, family wage jobs. With private sector construction at a standstill, we need the state to protect its public construction dollars and invest them in design and construction jobs.

Also concerning is that the Governor is not proposing to rectify the inequities in the budget toward design projects. Design projects were disproportionately cut in the 2009-2011 Capital Budget. Depending on the numbers used, design was cut between 50% and 75% from the previous budget.
AIA|WA testified at the hearing to encourage lawmakers to consider the impacts of such low design funding. If design is not funded now, then construction projects will not be ready when the economy improves and there is money to be spent. Starting from scratch it takes three to four years to move a project through design to construction.
The design professions employ more than 37,000 workers with an average annual wage of $71,491 (in 2008). Total wages were $2.65 billion from 2,956 firms. However, 2008 was the height of design employment. Since August 2008, employment had dropped by more than 4,200 design workers.
This is just the direct employment of design professionals. Also affected are office support staff, consultants, interior designers, computer aided drawing (CAD) technicians, drafters, construction cost estimators and many more. Adding in these workers would multiply by many times the impact of the current recession on the industry.
AIA|WA will continue to advocate for restoration of design projects not funded in the current budget.

You can view the hearing at www.tvw.org.

AIA/WA Testifies on a New Bond Bill

Rep. Hans Dunshee introduced a new bond bill, HB 2334, to fund higher education and elementary and secondary education projects. The bill focuses on “funding construction of safety, health, and energy-saving improvements to public facilities.” In addition, the bill says that “energy efficiency projects shall take priority” for funding.

AIA/WA testified in support of the goals of this legislation today the House Capital Budget Committee. Video of the testimony will be available here soon. For now you can listen to testimony by clicking below.

The money and purposes of projects in this legislation are certainly needed. The proposed state budget transfers $750 million out of the Capital budget and into the operating budget. That is creating a significant long-term problem for capital projects.

The AIA/WA also has a few concerns namely: accountability provisions in the bill and the section on “performance based contracting.”

The legislation supplies funds for building regardless of demonstrated value or worthiness of projects. Further, the bill does not ensure that institutions taking these funds, and making improvements, have a long term master plans for the buildings that will keep them from building inadequate facilities that they can’t alter cost effectively for a long time.

In summary, the design and construction monies in this bill are needed. Saving energy and improving health and safety are worthy endeavors. But, they are just a part of the purposes for which our buildings are built and operated.

Senate and House Release Damaging Budgets

The House and Senate Capitol Budget’s were released April 1. Both bills could negatively affect architects. The AIA/WA has testified in hearings for both. You can see the testimony in the House Capitol Budget Committee below. AIA/WA has also contacted House and Senate Committees responsible for creation of the budget with our grave concerns.


Budget Concerns for Architects
The Senate Budget assumes $743 million in Capital monies being transferred to the Operating Budget. Most of the monies are backfilled using bond revenue. The Senate is taking cash that they would normally use to pay for capital projects this biennium and transferring it to the general fund. They will then use long term bonds for one time revenue and put that money back into the Capital Budget.

It is like using your Visa to pay your American Express. You incur long-term debt for what is otherwise a onetime expense. Even with the backfill of some of the programs using bonds, it creates a negative bow-wave for construction and reduces the total number of projects that can be funded in the capital budget.

Even more alarming is the fact that these budgets do not balance design and construction services. A key principle articulated in the budget description for higher education projects effectively eliminates funding for pre-design funding. The section reads “create construction jobs now by targeting investments to projects that will create jobs sooner rather than later. This principle is operationalized in the Senate proposal by prioritizing projects that are closer to being ‘shovel ready’ over those that are not, and by authorizing no pre-design and very few design projects, in order to provide as much funding as possible for construction.”

It is very shortsighted to not plan for future construction. In past recessions, public projects have been a bridge to when private construction restarts. The AIA/WA will continue to urge the legislature to rethink the cuts to pre-design and design and the transfer of Capital monies.

Alternative Public Works Reauthorization

The House Capital Budget Committee held a hearing today on Substitute HB 1506 to reauthorize the alternative public works law. This law allows certain state and local agencies to use design-build, general contractor/construction manager and job order contracting procurement methods. The AIA Washington participated in the development of this bill through the Capital Projects Advisory Review Board. Prospects for the bill look positive. The bill is expected to next be heard by the House Appropriations Committee.