Is construction on the road to recovery in the Pittsburgh region? According to a recent article in the July/August Breaking Ground magazine, the amount of nonresidential contracts added from January to June 2013 totaled $1.45 billion, with $971 million added between April 1 and June 2013, representing a 20.8% increase from the same period in 2012. Residential starts were even better, with a 41.8% increase in the number of dwelling units and an 87% increase in the number of multifamily projects started.
The one thing these projects have in common is that they are all being developed by the private sector. The government has been facing decreases in revenue while debt continues to rise. This has resulted in decreased public spending for capital projects for the last few years. What does this mean for the near future of construction in the Pittsburgh region? One impact of the decrease in government spending will be a continued decrease in projects in the K-12 schools and Pennsylvania State System of Higher Education universities, and the heavy/highway sector will continue to see delays until the state legislature finalizes a spending plan.
As a step in the right direction on June 5, 2013, the Pennsylvania Senate passed Senate Bill 1, which would add an additional $2.5 billion annually to the state’s infrastructure and transit expenditures. The bill was passed with a bipartisanship vote of 45-5. The bill will add much needed funding to the state’s infrastructure and transit spending but it will also come at a cost. It would result in an increase in fees and fines and the removal of the cap on the Oil Company Franchise Tax rate over the next three years. The passage of this bill by the state Senate is the first step, but it still has to pass the House Transportation Committee. And although the bill received overwhelming support by both parties in the Senate, it is expected that the House Republicans will be opposed to any type of tax or revenue increase that is borne by the voters.
So is construction on the road to recovery? Only time will tell, but all signs are that we have turned a corner in first half of 2013, and regardless of what happens in the heavy/highway sector, expectations appear to be good for the rest of 2013 into 2014.
© 2013 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.
This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.