This is a good article for our construction clients for information on the new relief package. Most of our bond clients are for construction - surety bonds (whether it be construction bonds, bid bonds, or performance bonds). For our clients, this can be some good information and help you plan for the upcoming year or two.
What's in the new COVID-19 relief package for contractors?
Billions for roads, harbors, schools, military housing, broadband and clean energy is aimed at spurring construction.
The term “construction” appears 636 times in the $908 billion pandemic relief package and $1.4 trillion omnibus spending bill passed by Congress and signed by President Donald Trump at the end of December.
In other words, while the relief package was less than half the size of the initial $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act, there’s still plenty in the overall bill for contractors to be happy about.
“Lots of construction spending is always a good thing, as long as everyone has access to it,” said Kristen Swearingen, vice president of legislative and political affairs at Associated Builders and Contractors. Her cautionary tone refers to the Protecting the Right to Organize Act, which many nonunion contractors oppose, potentially being passed in the 117th Congress after Democrats regained control of the Senate this week.
But in general, construction advocates said the new pandemic relief package should be viewed as a win.
“This bill for the construction industry has a lot of good things overall,” said Jimmy Christianson, vice president of government relations at the Associated General Contractors of America. “I would say on the list of the many things we were asking for, we got probably 80%.”
Nevertheless, one lament is that the package doesn’t include liability protection for employers against lawsuits from employees who were exposed to or became infected with COVID-19 at work.
With the caveat that legislative analysts and construction observers still are digesting the 5,593-page document, here’s a closer look at some of the provisions that should help contractors in 2021:
Paycheck Protection Program. There are several wins for contractors in the the legislation's renewed PPP funding, including a provision to ensure expenses paid for with forgiven PPP loans are tax deductible, an issue many contractors were wringing their hands over last fall.
A related benefit is the expansion of the Employee Retention Tax Credit, which gives qualifying employers a $5,000 credit per worker for employees not paid with PPP funds in 2020, as well as a $7,000 credit per worker per quarter in the first half of 2021.
“That's a huge deal for construction companies and employees to help manage the continuing uncertainty that’s still happening,” said Christianson.
State transportation funding. One of the headline numbers for contractors is the $10 billion earmarked for state DOTs, many of which saw their funding decline in 2020. That should provide relief for road and other civil builders who have increasingly felt the impacts of stalled projects.
“It will help mitigate the impact of bid-letting delays and project cancellations that we saw in 2020 throughout the country,” Christianson said. “And the fact that it's dedicated funding means that states can't use it for other things.”
School construction. The package also includes $82 billion for education, at least some of which can be used for construction and renovations post-COVID-19, when students return en masse to classrooms.
“In the more significant construction category, we're looking at HVAC replacement and expansion,” Christianson said. “You might see bigger classrooms to have more spacing between kids, more classrooms and auxiliary facilities being set up to deal with social distancing issues.”
Waterfront infrastructure construction. The $10 billion Water Resources Development Act, which was included in the package, authorizes federal funding for infrastructure projects to improve America’s ports, harbors and inland waterways, and will be implemented via the U.S. Army Corp of Engineers.
“It helps ports expand their operations and helps with harbor maintenance and dredging, as well as construction in and around ports,” Christianson said. “I think the dredgers are excited.”
Broadband infrastructure. The legislation contains $7 billion dedicated to expanding broadband internet infrastructure and access, particularly to rural communities. About $3.3 billion of that is earmarked for programs “that are actually turning dirt,” Christianson said. “So that’s a good opportunity for utility contractors.”
Clean energy. The deal also includes approximately $35 billion to fund wind, solar and other clean energy projects, according to The New York Times, an area that an increasing number of contractors are focusing on. AECOM, Fluor and Jacobs all mentioned environmental initiatives or expanded practices on recent earnings calls, as well as increased interest from clients. Christianson said market forces have led to a heightened focus on environmental projects recently.
“A lot of our members do utility-scale solar, and this legislation brings a lot more certainty to the renewable energy market that we've been hoping for,” Christianson said. “You're also seeing an interest from owners, public and private, who want to do their part on environmentally conscious construction, as well as from the shareholders of these companies.”
Military housing. The National Defense Authorization Act, which was passed last week after Congress overrode President Trump's veto, includes approximately $11.8 billion for military construction, military family housing and work associated with base realignment and closure rounds. “A lot of our members are active in building military family housing,” Swearingen said.
Tax credits and other incentives. Finally, the pandemic relief plan includes a five-year extension of the $25 billion New Markets Tax Credit, which incentivizes community development and economic growth through the use of tax credits that attract private investment to distressed communities.
It also further expands the Low-Income Housing Tax Credit, as well as the 179D Energy Efficiency Tax Deduction, which allows owners of new or existing buildings to deduct $1.80 per square foot for energy-efficient components or improvements.
“There are a lot of good incentives in here for public and private construction,” Christianson said.
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