James K. “Jim” Donaghy is executive chairman of New York City-based construction services firm STO Building Group, which ranks at No. 7 on ENR’s Top 400 Contractors list, reporting nearly $7.8 billion in 2019 revenue through its Structure Tone contracting unit and other subsidiaries. About 88% of that is in building construction and 60% is CM-at-risk work. As a veteran industry executive, he offers a candid view of how the incoming administration of president-elect Joe Biden can boost post-COVID industry recovery and growth, in an exchange with Debra K. Rubin, ENR Editor-at-Large for Business and Management.
What should priorities be for the new administration that will be most impactful to STO and to the construction sector?
A massive national infrastructure program addressing railroads, airports, highways and energy infrastructure—particularly sustainable energy including wind, solar, hydrogen and nuclear—would definitely help construction. Grants, loans or tax incentives to encourage modernization of existing buildings to improve energy efficiency would be useful to both our industry and the planet.
New York City, as an example, will not achieve its ambitious energy efficiency goals by waiting for the private sector to recover from current economic and social conditions. There must be a federal stimulus package in partnership with the city and its private sector leaders. This should include loans and tax incentives to small contractors that do much of the building but have suffered enormously from the pandemic.
What is your thinking on whether President-elect Biden can steer an expanded infrastructure program through Congress, if political leadership is divided?
By all indications, and looking at our recent political history, if there is a divided Congress, the $3-billion proposed stimulus package will be smaller. Biden’s team must get to work immediately, working with the Senate using a pro-business approach. Construction trades will benefit from a stimulus package 6-12 months after the broader market, after projects are approved and designed. For the timing to benefit the construction industry, we will need an approved stimulus package immediately—no later than early spring 2021. That’s a tall order in light of the discord in Congress.
What are your main concerns about likely reversals of executive orders issued by President Trump?
Trump’s plan and executive orders to bring back manufacturing must transcend politics and be considered from a job growth and technological point of view. The tax cuts and jobs act, which created over 8,000 opportunity zones in communities across the U.S., can be further developed.
From a construction point of view, robotics and digitization, from the job site to the factory floor, are revolutionizing construction. We must consider how to grow U.S. manufacturing in these areas, so job sites and production are as efficient as possible, giving clients less reason to buy product beyond our borders.
We have many thousands of students in STEM fields who are in families that earn below middle-class salaries. The new administration must consider how to tie together education with new manufacturing jobs in opportunity zones. Issues of job growth, the economy and education are closely tied, and good ideas should not be discarded due to a change in administration. In fact, president-elect Biden could have even more impact now during a recession with policies that help recover jobs and improve income levels in hard-hit regions.
What is business most concerned about related to the new administration?
Business is concerned with how it will work with the major cities, which have massive budget deficits, to prioritize safely returning the transportation, education and hospitality sectors to full operation. Without these, most big cities will lag behind the rest of the U.S. in returning to normal business conditions. The administration must have a pro-business approach. All companies, no matter how small or large, have balance sheet challenges. Starting with smaller companies, ensure less restrictive guidelines on lending, and consider tax strategies that can increase speed for these companies to hire back workers.
How can the Biden government best help private sector clients to recover?
Ensure job growth, have less restrictive regulations on loans to small businesses and offer federal tax credits for carbon emissions reduction investments in buildings over six stories in the hardest-hit cities. Work with both parties to ensure a massive infrastructure package is delivered in 2021.
How can the new administration do a better job of fixing the COVID-19 problem so businesses can reduce current site safety complexities, boost productivity and restore bottom lines?
Ensure continuation of Operation Warp Speed and consider prioritizing distribution of vaccines and therapies to cities that have been hit the hardest, along with elder care centers everywhere. Also set up a program of mobile testing and vaccination trucks to visit larger jobsites, starting with sites of over 100 workers in big cities, and establish a coalition of leaders from our hardest-hit U.S. industries to meet with peers in alliance nations to determine industry-by-industry best practices. Use federal tax credits to entice small businesses to implement the recommendations made until job growth and GDP recover.