From the Government Studio

First, Do No Harm (Part 2)


Construction, Incentives and Mandates

Jim Nielson, AIA, is a Senior Principal with CRSA and a Utah State Representative. First, Do No Harm is a series of posts about how what happens on Utah’s Capitol Hill affects public, business, and personal budgets. In this segment, we look at some of the laws passed in 2014 that may impact all of our financial health. This includes legislation that affects the A/E Industry, as well as broader changes.Patriotic Pumpkin

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Construction

We in the design and construction industry see the legislature’s impact on our bottom line quite directly. When the legislature funds and authorizes public construction projects, RFPs for design and construction services follow almost immediately. Earlier this year the Utah Legislature gave the green light to around $200 million in public construction. For many firms, fees from such projects make up a significant part of their annual revenues.

Not as obvious is the impact on our sector of stricter licensing and code requirements, and of preconstruction and construction lien reforms. State law may increase complexity and add requirements to the design process. It may also make it easier or harder to file and enforce a lien. Any of these things will increase or decrease design and construction costs. Based on market forces, designers and builders may absorb these added costs, or they may be passed on to clients. In the end, costs incurred due to state mandates like these can and often do upset the balance sheet of businesses within the construction sector along with those that hire them.

Incentives for Economic Development

As evidenced in some of the other laws discussed in these posts, air quality was a major focus during the 2014 session. The legislature passed tax credits and incentives for plug-in hybrids, renewable energy, and small business job creation. Other measures exempted tax on business inputs, thereby avoiding double taxation.

The legislature also approved $123,000 in incentives for employing the homeless (H.B. 140). I was proud to be a co-sponsor.

As part of one of the largest incentives approved, the State of Utah will forgo $75 million in new tax revenues over the life of its agreement with a new convention hotel. Gross tax receipts are expected to be substantially greater than this $75 million tax increment. The expectation is that the hotel will assist the Salt Palace in booking more and larger conventions.

Tax incentives are intended to foster economic growth and create jobs, thereby increasing overall tax revenues in the long run. Strong evidence points to their effectiveness in doing so. 

Mandates

Mandates also affect individuals and other professionals. While we may agree that a mandate is important, we should remember their impact on public and private budgets. Two mandates for autism treatments, for example, add over $8 million in public costs and will also lead to additional insurance premium increases born by policyholders.

Other mandates from the legislature’s 2014 general session that affect costs include:

  • Additional safeguards in higher education grievance processes (H.B. 72),
  • Expanding Worker’s Compensation coverage for in-home workers (H.B. 94),
  • Relaxation of code requirements on certain multi-family housing (2nd Sub. H.B. 245), and
  • Adding carbon monoxide detectors in public schools (S.B. 58).

Mandates can and often do create additional requirements for professional services. For example, code mandates may increase complexity and scope of work for design professionals. Other new policy requirements can make work or provide opportunities for accountants, attorneys or other professionals.  Perhaps this is why some have referred to the Dodd–Frank Wall Street Reform and Consumer Protection Act as a jobs bill. Closer to home, a change in requirements for members in the State Tax Commission, a quasi-judicial agency, doesn’t seem to affect costs directly but requires that commissioners be recruited from a broader pool of professionals, including accountants, appraisers, and others with tax experience. Read the next part here.Utah Capitol at Dusk

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4 thoughts on “First, Do No Harm (Part 2)

  1. Pingback: First, Do No Harm (Part 4) | The CRSA Blog

  2. Pingback: First, Do No Harm (Part 3) | The CRSA Blog

  3. Pingback: First, Do No Harm (Part 1) | The CRSA Blog

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