Obama Signs Spending-Tax Break Package With Big Gains for Construction
The construction industry should get a substantial lift in coming months, thanks to a newly enacted $1.14-trillion government-wide fiscal year 2016 spending measure that boosts most major federal construction accounts, with General Services Administration and Dept. of Veterans Affairs programs scoring exceptional increases. But there were some funding cuts, such as in Environmental Protection Agency water infrastructure, which was pared slightly.
The giant appropriations bill was part of a package that also included extensions for a long list of tax incentives for individuals and businesses, including construction firms, with some items extended permanently. The "extenders" bill would cost the Treasury $622 billion over 10 years, the congressional Joint Committee on Taxation estimates.
The last steps to the bill's enactment were quick. President Obama signed the tax-cut and spending measure on Dec. 18, just hours after the Senate cleared it, by a 65-33 vote. The House had dealt with the two elements separately, passing the appropriations provisions early on Dec. 18 and the tax portion one day earlier.
Looking at the measure's construction spending numbers, Jimmy Christianson, director of government affairs for the Associated General Contractors of America's federal and heavy construction division, says, "It will be a much better fiscal year in 2016 for construction than it was in 2015, and even [better] compared to some years prior."
The biggest construction winner in the omnibus spending bill is GSA’s construction and acquisition account, which would more than triple, to $1.6 billion. That total includes $948 million for new courthouses that rank highest on the federal judiciary’s priority list.
What makes the increase even more stunning is that, as Christianson notes, Senate appropriators earlier this year had called for just $181.5 million for FY 16 GSA new construction and House appropriators recommended zero.
Another surprise was the surge in spending for VA’s major construction account, which would more than double, to $1.2 billion. VA has faced fierce criticism on Capitol Hill for cost overruns on big hospital projects, especially one in Aurora, Colo.
Appropriators did tie a tight string to $649 million of VA’s 2016 allocation, saying the department couldn’t use that portion until it enters an agreement with another “federal entity” to manage hospital projects whose cost is $100 million or more.
Christianson says one factor behind the big increase in VA construction money is that Aurora and other over-budget projects were delaying other plans in the queue. He adds, "You have a lot of members of Congress who are waiting for … their medical facilities for their veterans. They want them, you know, four years ago."
Highway and transit programs also fared well, as appropriators adhered to the increased authorizations in the recently enacted five-year Fixing America’s Surface Transportation Act.
The omnibus hikes the federal-aid highway obligation ceiling—the largest federal construction line item—by more than $2 billion, or 5%, to $42.4 billion. It also lifts the Federal Transit Administration’s budget by 8%, to $11.8 billion.
The Federal Aviation Administration’s Airport Improvement Program, which provides infrastructure construction grants, saw its obligation limit frozen at 2015’s level of $3.35 billion.
The bill continues the Dept. of Transportation’s popular Transportation Investment Generating Economic Recovery grant program, but keeps its funding flat at $500 million. State and local demand has regularly far outpaced available funding for the grants, which help finance projects in a wide range of transportation modes, from bridges to pathways.
Military construction also recorded a strong increase, with funding climbing 16% to $7.2 billion. Air Force and Navy-Marine Corps construction posted large double-digit increases.
Waterways interests cheered the omnibus' numbers for the Army Corps of Engineers civil works program. Appropriators increased that account by 10%, to just under $6 billion. The Waterways Council Inc. says that total is the highest ever for Corps civil works.
Mike Toohey, the council’s president and CEO, said in a statement, “Some things are worth the wait and this is certainly true for the FY16 omnibus appropriations agreement that provides record-level funding for the Corps’ civil works mission.”
Kurt Nagle, American Association of Port Authorities president and CEO, was pleased that the civil works total included $1.2 billion from the Harbor Maintenance Trust Fund, up 7% from 2015 and reaching the industry's spend-out target from that fund. Nagle, in a statement, also welcomed the bill's money for six new construction starts for navigation projects.
Marco Giamberardino, National Electrical Contractors Association executive director for government affairs, said in an email, "The increases in the GSA, Army Corps and 'mil con' will be expanded opportunities and jobs for our contractors." He added that having the full FY 2016 bill in place would give contractors "a predictable funding stream during the busy construction season."
One of the few construction program cuts came in EPA’s state and tribal water grants, which was nicked by 0.8%, to $3.5 billion. Within that total, EPA’s aid to clean water State Revolving Funds (SRFs) was trimmed 4%, to $1.4 billion, and drinking water SRFs were reduced by 5%, to $863 million.
Still, the National Association of Clean Water Agencies calls the EPA funding for clean water SRFs "robust" and notes that the omnibus' figure is much better than the Obama administration's proposed 30% cut.
Adam Krantz, the association's CEO, added in a statement, "Most important for NACWA, this bill removes very controversial and dangerous language regarding sewer overflows in the Great Lakes that was included in the Senate version." The final bill instead takes what Krantz termed "a common sense approach" using the Great Lakes Restoration Initiative and "reasonable, responsible reporting of combined-sewer overflow events."
Funding for the State Dept.’s embassy security upgrades and construction was cut by 16%, to $689 million.
Construction groups also welcome several items in the tax measure, including an extension through 2016 of a deduction for energy-efficient commercial buildings and a permanent extension of the tax code's Section 179 provision allowing small businesses to expense capital equipment purchases up to certain amounts.
Liam Donovan, Associated Builders and Contractors legislative and political affairs director, calls the Section 179 expensing provision a "huge boost for small-busness certainty."
NECA's Giamberardino was pleased that the bill also delays for two years the tax on expensive health-care plans that provide strong benefits. Many business groups and labor unions have been seeking to at least postpone the coming tax on those so-called Cadillac plans, which is an important revenue source to offset some of the cost of the Affordable Care Act.
He said the tax "unjustly penalizes employers who do the right thing by providing excellent coverage to their employees."
The tax bill also has five-year extensions for credits for renewable energy, including wind, solar and geothermal projects.
(Story updated on Dec. 18 with House and Senate votes and bill's enactment.)