Postcard from Schneider Downs Construction Industry Webinar

Due to Coronavirus pandemic-related reasons, travel plans for many of us have been very limited since March 2020.  Trips and stories about travel to the Outer Banks, Disney, Yellowstone or the Grand Canyon have been replaced with travel to exotic locations such as local parks and walking trails, the grocery store, the drive-through line at Chick-fil-A and the parking lots in Robinson Town Centre.  I am not necessarily the biggest postcard type person, but clearly none of those hotspot destinations are postcard-worthy.  With that being said, Schneider Downs’ Construction Industry Update was on October 27 (via webinar of course), and if you happened to miss it, it was absolutely postcard-worthy.  Therefore, without further ado, here is my lone postcard for 2020, direct from the balmy confines of my kitchen table, of our 2020 Construction Industry Update.  

Construction Market Outlook

Tall Timber Group’s Jeff Burd was our keynote speaker and delivered an update on the current construction market and outlook for the next year or two.  On a macro level, GDP is expected to be down 3% - 4% year over year, many large construction projects have been delayed, unemployment (although stabilized) is still high, and construction company owners continue to adjust workforce downward to reflect demand.  A medical solution to solve the virus and a construction stimulus package are both still direly needed.  On a positive note, interest rates continue to be low, leaving the opportunity for growth to outpace cost of borrowing.  Additionally, overall cash reserves and liquidity are strong, consumer spending continues to show signs of recovery and construction costs are rising at less than a 2% pace.

On a micro level in the Pittsburgh market, health care and higher education, which comprise approximately 40% of the construction market, continue to be important players and both have shown sign of recovery.  Health care has resumed non-essential treatments and procedures and enrollments in local colleges and universities have stabilized.  The local housing market has been relatively unaffected, as the year started with low inventory and development and higher demand.  Overall, local construction is expected to be down approximately 30% in the Pittsburgh market as major projects (USS, UPMC, Airport, Presby, PTT) have experienced delays and the Shell Cracker Plant is operating at about two-thirds of its workforce.  

The outlook for the 2021 Pittsburgh market is expected to be positive for industrial, multi-family, technology and life sciences construction, while hospitality and office construction, particularly in the central business district, is expected to trend downward.  As interest rates continue to remain low and large capital reserves exist, real estate becomes an attractive option looking forward.  Non-residential construction expects a recovery in 2021, as major projects are anticipated to go back online.  However, overall backlog absent major projects is not strong heading into 2021 due to the economic downturn, and periods of hyper-competition could ensue, with potential for business failures, foreclosures and bankruptcies on the rise.  Additionally, the uncertainty regarding the election results will likely influence a potential stimulus package, projects in health care and federal research, as well as the state’s overall economic position and status.

Paycheck Protection Program (PPP) Loan Forgiveness

Next up, Schneider Downs Business Advisory group covered the Paycheck Protection Program (PPP) Loan Forgiveness applications, including requirements for which forms to utilize based on the underlining requirements.  Form 3508EZ can be utilized if the borrower meets one of three of the following criteria:  (1) Self-employed independent contractor with no employees and did not include employee salaries in the average monthly payroll calculation on the application.  (2) For employees with less than $100,000 in earnings, salary wages were not reduced greater than 25% in the covered period, and the number of employees or average paid hours from January 1, 2020 through the covered period were not reduced.  (3) For employees with less than $100,000 in earnings, salary wages were not reduced greater than 25% in the covered period, and the applicant was unable to operate during the covered period due to Coronavirus pandemic compliance regulations.  Additionally, our Business Advisory group walked through how to complete the standard Form 3508 and noted that banks have 60 days following the submission of the forgiveness application to review and approve, while the SBA has 90 days to review and approve the applications once the financial institutions have provided reviewed submissions to the SBA.

Tax Opportunities

On the income tax planning front, experts from Schneider Downs Tax Advisory group focused on planning ideas to maximize tax opportunities over the next few months.  After leading off with a discussion of both the Republican and Democrat tax plans and proposals, they covered impact of PPP loan forgiveness, including IRS Notice 2020-32, which excludes business expenses paid with PPP funds from being deductible.  Additionally, they focused on opportunities associated with employee retention credits, employee payroll deferrals, sick pay and FMLA credits, NOL carrybacks, quick refunds, and gifting strategies and considerations.

ADAPT (Automation & Data Analytics Process Team)

Finally, the talented group from Schneider Downs ADAPT (Automation & Data Analytics Process Team) took the stage and covered how construction companies can utilize software and automation tools to manage their data, discover outliers, exceptions and trends, solve operational and financial problems, and visualize large amounts of data from multiple sources in state-of-the-art, interactive dash boards.  Their expertise and software allow them to install, configure and integrate your data sources into a warehouse, automate business processes, implement customized interactive dashboards, tackle complex data analytic projects, assess data readiness and provide industry best practices.  Additionally, and particularly important to the construction industry, these tools can be key resources in risk identification and risk management.

If you have an interest in any of the topics from our 2020 Construction Industry Update, do not hesitate to reach out to me, or any of the Schneider Downs professionals in our Construction Industry Focus Group. Safe travels!

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