Great design is inspired by vision. We design buildings and spaces that allow people to thrive – physically, emotionally, and spiritually. Our unique service journey is rooted in effective delivery strategies and informed by principles of health and wellness. We believe that healthy spaces lead to healthy people, and healthy people lead to a healthy world.
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Chris Martin
Tracy Sturla Keystone Contractors Association
Jon O’Brien
Jon@KeystoneContractors.com (717) 731-6272
Denise Dolgos Beth Martin Erin McCullough
Susan Matson Tracy Sturla Tracy@AtlasStories.com (412) 749-9299
This year, the KCA participated in Employee Voter Registration Week, which was held September 26-30. This is an important initiative that encourages private sector citizens to register and vote in the crucial 2022 midterm elections. As a participant, we provided companies with more information for employees on the importance of voting. According to the Business-Industry Political Action Committee, BIPAC, Employer to Employee Engagement Study, employees appreciate being provided this information:
• 62% of employees said employer-provided information fostered a stronger employeremployee relationship.
• 84% of employees said employer-provided information was very or somewhat helpful in deciding which candidate(s) to vote for.
• 72% of employees who received employerprovided information considered themselves more informed citizens and voters.
So far this year, the primary elections have been a rollercoaster ride, to say the least. But in November, we will have the opportunity to vote for elected officials at the local, state, and federal levels to truly make a difference in the future of our country and communities. Plus, in Pennsylvania, we’ll have a chance to elect a new governor.
Our industry faces many significant challenges such as workforce development, price escalation, archaic public procurement requirements, etc. It’s important to remember that the individuals we elect (or re-elect) can shape the policies that directly impact how we do business and how we support our families. We can’t afford to sit these elections out.
By participating in and recognizing the importance of Employee Voter Registration Week, our hope is that our industry and organization will be better represented at the polls on Election Day. We can register, vote, and make a difference this election!
Pennsylvania’s construction industry votes! Let’s get out the vote for the midterm elections!
Interested in sharing a message, opinion, or letter? Members can submit ideas to Tracy Sturla at Tracy@AtlasStories.com
I’m excited about this issue of The Keystone Contractor!
KCA members are amazing in their technological advancements as was illustrated in the last issue of The Keystone Contractor. Now, this issue takes it to another level — a level that I thoroughly enjoy. Let’s talk high-performance, healthy buildings.
I was fortunate to enter Pennsylvania’s commercial construction industry when and where I did. In the early 2000s, I started working in the commercial coatings and paintings world, but the real construction sustainability education started in 2005. That year, I started working in Pittsburgh at the KCA’s ally, the Master Builders’ Association of Western PA (MBA).
During those early days at the MBA, I met an individual who would become one of my good friends — Michael Kuhn, now president of Jendoco Construction. Back then when we met, Michael said to me, “What do you know about green construction?” Being ‘green’ in this new industry, I speechlessly stared at him. Knowing I knew very little (which is a nice way of saying I knew nothing), Michael scheduled lunch with Rebecca Flora, who was the founding executive director and a major factor in the launching of Pittsburgh’s Green Building Alliance (GBA). GBA pre-dated the U.S. Green Building Council (USGBC).
During that lunch, Rebecca went on to educate me on the certification of buildings and the accreditation of professionals. However, the thing that has stuck out the most to me since that meeting almost two decades ago was Rebecca saying that her job was to make sure she wouldn’t have a job in the future and that the GBA would no longer exist. Her point was that the construction industry needs to work towards a day when healthy, highperformance buildings are common and organizations like GBA no longer have to promote the benefits of green construction. Organizations like the GBA still exist, but I think you’ll agree with me that the construction industry has come a long way since those days.
After that memorable lunch, Michael and I would go on to start the MBA’s Green Builders Committee, Rebecca would spread her wings beyond the confluence of Pittsburgh to influence green construction at a national level with the USGBC, and eventually, I would land in central Pennsylvania at the KCA.
For me, this awesome journey continues, and I’m fortunate enough to continue my green construction education by learning about the sustainable building techniques and methods implemented on KCA jobsites that you can read about in this issue.
The premier event for workplace safety in Pennsylvania will be held Oct. 31 and Nov. 1 in Hershey.
The Governor’s Occupational Safety and Health Conference includes more than 35 sessions by industry, medical, law enforcement, and academic professionals.
Presenters will provide guidance on traditional topics of concern to the construction industry such as fall prevention, traffic control, and managing hazards such as heat, confined spaces, scaffolding, and electricity. Experts also will provide instruction on emerging issues such as medical marijuana in the workplace and the latest from OSHA.
The conference has information that is applicable to every role in the industry, from managers who are responsible for day-to-day safety on jobsites to executives who are responsible for developing safety plans, safety training, and a culture of safety.
Some lessons are applicable to life both on and off the job, such as how to improve communications to de-escalate potential confrontations and how to prevent and respond to an active shooter.
The Governor’s Occupational Safety and Health Conference also includes an exhibition center showcasing the latest products and services.
The event will be held at the Hershey Lodge. Details about the sessions and speakers, and how to register, are available at www.pasafetyconference.com.
Listen to Paula Loht talk about the GOSH Conference.
PLAY EPISODE
A new partnership between the Keystone Contractors Association, trade unions, and the Pennsylvania Department of Labor and Industry is designed to show veterans associations and PA CareerLink representatives all the roles that veterans might fill in the field.
The strong work ethic, timeliness, positive attitude, and experience in working as part of a team make veterans a good fit for construction, said Jon O’Brien, executive director of the Keystone Contractors Association, who served in the Navy.
The first step, he said, is correcting the misconception that all construction work occurs on the jobsite.
“Employers have a vision that if you’re a veteran, you should be a carpenter or a plumber. So, we had that stigma that we had to address. These veteran groups had the same mindset as well, saying the only jobs in construction are field jobs.”
O’Brien said KCA is focused on broadening the scope of thinking by pointing out that construction has roles to fill in financial management, accounting, estimation, project management, human resources, and other tasks.
He’s also working hard to break the mindset among state job advisors to first steer veterans to the state’s exploding warehouse industry, which is competing with construction, manufacturing, and other fields for workers.
He said PA CareerLink representatives who focus on working with veterans have peppered him with questions about what it’s like to work in construction.
“What’s it like to be a field guy? What’s it like to be a carpenter? What’s the training? What’s the jobsite like?”
O’Brien figured the best way to answer some of those questions was to show them. He has coordinated with labor unions to host tours at three training centers this year.
Tours and demonstrations have been held at the Eastern Atlantic States Regional Council of Carpenters’ training centers in Duncansville and Lebanon, and the Laborers’ District Council Training and Learning Center in Philadelphia.
Attending the events were CareerLink representatives, veterans’ organizations, and KCA members.
“It’s beneficial too for the union side and the contractor side, in that we’re learning from them,” O’Brien said. “What questions do veterans bring to these groups? What are their concerns when finding a new career? It kind of opens our eyes and helps us when approaching them.
“It’s been positive the whole way around.”
Future tours and demonstrations are planned, including with the International Union of Operating Engineers. Career fairs also may be held in conjunction with CareerLink.
Employers have a vision that if you’re a veteran, you should be a carpenter or a plumber...These veteran groups had the same mindset as well, saying the only jobs in construction are field jobs.
Jon O’Brien, KCA Executive Director
As the construction industry struggles to fill positions and grow its workforce, it is working harder to expose military veterans to careers.
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The pandemic, inflation, and rising energy costs are taking many commercial construction projects in new directions as owners prioritize energy efficiency and healthy workspaces.
That’s creating opportunities for contractors who are well-versed in building to performance-based standards such as LEED, WELL Building, and Passive House (also known as Passivhaus).
Techniques that previously might have been considered too expensive now are getting second looks as there is a bigger opportunity for owners to achieve a return on their investment sooner.
“I do think that the development market is so tight right now they want the cost savings related to energy, they want the savings related to health,” said Michael Kuhn, president of Jendoco Construction Corp. in Pittsburgh.
For example, building owners whose multi-year contracts are ending with electricity suppliers are finding themselves facing large increases when they renew, increases they had not budgeted for.
“We’re getting calls saying, ‘What can
we do?’” said John Hayden, director of engineering for Quandel Energy Solutions in Harrisburg. “Lighting projects make a lot of sense. We’re seeing a lot more interest in solar.
“It’s a no-brainer to do some of this stuff,” he said.
Requests to “tuneup” existing buildings also are rolling in.
“Some of my simplest projects and bestperforming projects are reusing existing equipment and tuning the systems up so they work more efficiently and effectively,” Hayden said.
Listen to Hayden discuss efficiency in building.
Some buildings were constructed using LEED or WELL Building concepts, but the owners opted not to go through the thirdparty certification process, resulting in them not performing as well as they could.
“Performance is where it’s at,” (continued)
Hayden said. “I’ve done projects on really efficient buildings that are run poorly because they weren’t commissioned. They got to 99% complete but not 100%. And that last 1% is making sure the building’s systems are operating in the way they were intended to.”
So, I do that last 1%, and suddenly I can take a building that has the potential to perform really well and cut the energy by half.”
Updated lighting, new windows, more efficient toilets, and updated HVAC systems can pay off. Replacing 20-year-old lighting can reduce costs by 50% to 60%. Tuning up dampers and replacing aging temperature sensors can pay big dividends on utility bills. Lighting and toilet upgrades can recoup the investment costs through lower utility bills in about seven years or less, Hayden said.
The Inflation Reduction Act that was enacted in August includes provisions that should further boost energy-efficient and green construction as demand for it grows.
The law includes money to update local energy codes and incentives to make it less expensive for developers to use sustainable building materials. It includes more than $5 billion in incentives to drive the incorporation of low-carbon materials into public projects including infrastructure and government buildings.
The legislation also expands tax deductions for some commercial buildings that are made more energy efficient.
Technology is making it easier to build better, too, including renovation projects that previously would have been considered cost prohibitive.
Aeroseal, an aerosol-based sealant that is blown into ductwork to seal openings, has greatly improved the performance of aging HVAC systems that would have cost millions more to replace, Hayden said. A project a few years ago at a Pennsylvania correctional facility reduced leakage by 90% and saved the facility an estimated $7,000 a year.
More owners are pursuing projects built using sustainable techniques not only because of their desire to save on energy costs and create a healthy space, but because they recognize climate changes, too. Longer periods of cold, greater humidity levels, and an increasing number of large rainfall events are driving interest.
“Generally, we’ve seen a desire for projects to want to be tuned into these latest ways of thinking,” said Marc Mondor, AIA, principal and co-founder of evolveEA, a green building and sustainability consulting and design firm based in Pittsburgh. Mondor is also the vice chair of the Pennsylvania Climate Change Advisory Committee.
Listen to Marc Mondor speak about sustainable design.
There is more interest in sustainable construction in sectors such as higher education, health care, and nonprofits, Kuhn said. They recognize they must do that to be competitive, but they also have altruistic goals and want to be leaders in their communities. The efforts can pay off for nonprofits because their good intentions can motivate donors.
“That resonates, it truly does,” said Kuhn, a LEED Accredited Professional.
For commercial projects, sustainability is part of the conversation, but sometimes it’s in a different context, trumped by concerns about value.
“The key is to look at that as an investment,” Mondor said. “Yeah, it costs more but you get a return. You can get a financial return typically, and that’s easily justifiable or determinable through energy modeling. But you can also get returns with regards to better indoor air quality, better health for employees, less turnover, more happiness with the building, so fewer callbacks. So, there’s a return that’s beyond just the financial.”
take it seriously have tended to do well,” Mondor said.
“If they don’t do it, their competitors will.”
He provides consulting services, advising contractors about how to handle such projects, what they need to do, and what the expectations are. His firm has managed Living Building Challenge (LBC), WELL Building, and LEED certifications for more than 100 projects.
The increased interest in designing and constructing buildings that emphasize the health of occupants and indoor air quality is prompting more professionals to become certified in WELL Building.
They include Katie Walsh, a registered architect who is a project manager at the Pittsburgh office of SmithGroup, an integrated architecture, engineering, and planning firm.
Listen to Katie Walsh discuss small projects and more.
It’s up to contractors to reconcile the value and help owners to recognize the return on investment they can achieve through a concept such as WELL Building, Kuhn said.
“It’s pretty easy for owners to be interested in but it is also a bit daunting when you look at the operational aspects of it and the auditing aspects of it,” he said. “Similar to LEED, people want to do good things and the right things, but on some level, the upfront costs for certifications, the auditing, and those types of things are less appealing to owners, and so the conversation then turns into that of, ‘we just want to do all of those things, but we don’t care about getting the certification.’”
With design-build projects becoming more common and architects having greater influence on projects in the early stages, it’s important for architects to be aware of sustainable building concepts so they can bring them forward early in the process, said Mondor, a past president of AIA Pennsylvania who is a WELL Accredited Professional and is licensed by the U.S. Green Building Council to teach LEED Basics.
“The earlier you can design those things, the smoother the project’s going to go, and the higher value contractors are going to be able to offer owners,” he said. “If you decide these things early, then everything flows from that. It’s a great way to minimize waste.”
And it’s up to contractors to have the knowledge to implement projects that are planned to standards such as WELL Building, PassivHaus, and LEED.
“Contractors who have decided to get really good at this or learn a lot about it or assign somebody to really
“What I liked about WELL was it incorporated science into the design,” said Walsh, who is a WELL accredited professional (WELL AP).
Jendoco Construction Corp. recently sent three team members to get certified in Passive House construction.
“You have to really understand the science involved in those details to be able to construct it properly because if you don’t, and you don’t construct it properly, then it fails,” Kuhn said. “For somebody who’s not in the dance right now, you need to go out and learn the systems so you can be a good collaborative value upfront.”
Stringent oversight is needed to make sure all requirements are met, ranging from how materials are secured to how waste is disposed of. Subcontractors must be trained on what materials, down to the paint and caulking, are appropriate.
“On a project that is WELL Building, LEED, and Passive House, if you don’t have very strict quality control, things can go bad very quickly,” Kuhn said. “Particularly in a WELL Building where there’s auditing done, in Passive House where there’s testing done, there’s a lot more risk involved if you don’t have the quality control during construction.”
Where WELL Building differs from LEED is the need to be able to evaluate different optimizations and goals, not just from a construction and cost standpoint, but considering whether they make sense for the client or end-user, Kuhn said.
The key is to look at (sustainable construction) as an investment...it costs more but you get a return....a financial return typically, and that’s easily justifiable or determinable through energy modeling. But you can also get returns with regards to better indoor air quality, better health for employees, less turnover, more happiness with the building, so fewer callbacks.
“It starts with understanding what those systems are. If you don’t know what’s involved with WELL Building, there’s a lot of places where you can go to understand it and figure out what the role is,” he said.
While LEED is a building process with the environment in mind, WELL building is a process with people in mind. It is based on principles and techniques to design spaces that improve physical and mental health.
In the past two years, the square footage of certified WELL space has increased from about 1.2 billion to more than 4 billion, according to the International WELL Building Institute.
The concept exploded amid the COVID-19 pandemic, as companies sought to create safe places for people to work and live.
There are seven standards: air quality, water quality, nourishment, light, fitness, comfort, and mind (see next page for more details).
In 2020, the Desmone Architects building in Pittsburgh became the first WELL Gold Certified building in Pittsburgh and only the sixth WELL Certified space in Pennsylvania at the time.
Jendoco Construction Corp. was the contractor on the project, which Kuhn described as “the absolute pinnacle of how the collaborative approach can create success.”
He said Chris Klehm, a pioneer in sustainable construction who currently is Jendoco’s vice president of sustainability, worked closely with Desmone CEO Chip Desmone and President Eric Booth to put the project together.
Desmone couldn’t have timed the opening of its new building any better. It was completed about a year before the pandemic.
“We were kind of accidentally brilliant,” Desmone said.
“We at that point basically had one of the healthiest, cleanest buildings in Pittsburgh to occupy. I think it’s helped people get comfortable with returning to work and feeling a sense of safety and security in knowing that the building is focused on their health in its design.”
Desmone learned about WELL Building nearly a decade ago from the Design and Health Leadership Group of the American Institute of Architects. It struck him as “the future, or the next greatest thing, with regards to how architects can influence this intersection between design and human health.”
The WELL-certified section of its building, about 8,000 square feet, was constructed as an addition to
what previously was a parking lot. It was built with nonVOC materials and is cleaned daily with unscented cleaners that do not emit chemicals.
It has plentiful windows to allow for natural light. Photometric studies were done to ensure each workspace had sufficient lighting. Water stations are located throughout the building to encourage team members to drink plenty of water. Sound masking technology keeps workspaces quiet.
Air quality is monitored in real-time and shown on a computer screen that everyone can see. Fruit and healthy snacks are provided in a large dining area where staff is encouraged to gather instead of eating at their desks.
The stairs are larger than required by code and are located more prominently than the elevator to encourage walking. The stairs are marked with calorieburn counts to show the impact that walking has. Plants are plentiful.
“The incremental increase in employee satisfaction multiplied over 30 years going forward is significant, and it adds great value to the company,” Desmone said. “It solidifies our commitment to our people and our culture. It reduces turnover, which reduces the cost of onboarding new employees, and it just builds a better business for us. And in the end, that’s what we want and that’s what we want to be able to share with our employees.”
That’s a selling point for project owners to consider as they design their buildings.
Contractors don’t have to be specialists to take on a WELL project, Booth said.
“If the contractor is familiar with LEED, it’s not a big jump,” he said. “If you’ve got a contractor that’s used to doing quality work in a quality way, it is not going to be difficult to pick up. It’s just a matter of learning things and getting used to the standards and protocols and so forth. Any contractor that’s worked on highperformance buildings or LEED, this should not be a stretch.”
It’s important to point out that in order to do this effectively, there has to be a really strong partnership between all those involved in the project — owner, design team, contractor, from the beginning. Because a lot of the concepts have to do with construction itself, waste management, air quality, and so forth, the contractor really needs to be on the same page going into it,” Booth said.
WELL buildings can cost about 5% to 8% more.
“It’s not significant. The payback is notable for the quality of life it brings to the culture of your workspace. I
The incremental increase in employee satisfaction multiplied over 30 years going forward is significant, and it adds great value to the company. It solidifies our commitment to our people and our culture. It reduces turnover, which reduces the cost of onboarding new employees, and it just builds a better business for us.
Chip Desmone CEO, Desmone Architectsthink that payback is worth every penny,” Desmone said.
As Desmone Architects designs buildings for its clients, it introduces them to WELL techniques if they are not familiar with them and offers its building as a lab for interested parties to visit.
Many WELL concepts will be familiar to anyone in the design field.
“A lot of techniques we’ve been doing as designers for eons — natural light and so forth. The difference with WELL is that WELL actually puts measurements behind this. They actually did studies where they said this is the amount of light that’s good, this is the maximum amount of particles that should be in the air or in the water in order for it to become acceptable,” Booth said.
To achieve certification, projects must pass testing by the International WELL Building Institute and go through a renewal process every three years.
“It requires us to live it. That accountability was something that really spoke to us,” Booth said.
WELL Building has really caught on, Mondor said.
“We’re seeing more WELL buildings for (continued)
AIR • Optimize and achieve indoor air quality. Strategies include removal of airborne contaminants, prevention, and purification.
WATER • Optimize water quality while promoting accessibility. Strategies include the removal of contaminants through filtration and treatment, as well as strategic placement.
NOURISHMENT • Encourage healthy eating habits by providing occupants with healthier food choices, behavioral cues, and knowledge about nutrient quality.
LIGHT • Minimize disruption to the body’s circadian rhythm. Requirements for window performance and design, light output and lighting controls, and task-appropriate illumination levels are included to improve energy, mood, and productivity.
FITNESS • Utilize building design technologies and knowledge-based strategies to encourage physical activity. Requirements are designed to provide numerous opportunities for activity and exertion, enabling occupants to accommodate fitness regimens within their daily schedule.
COMFORT • Create an indoor environment that is distraction-free, productive, and soothing. Solutions include design standards and recommendations, thermal and acoustic controllability, and policy implementation covering acoustic and thermal parameters that are known sources of discomfort.
MIND • Support mental and emotional health, providing the occupant with regular feedback and knowledge about their environment through design elements, relaxation spaces, and state-ofthe-art technology.
clients who want to show that they are doing what they can for the environment or for users to come into the building and take pride in working there.”
Passive House construction concepts also are growing in popularity, Mondor said.
“Some of the benefits of Passive House are the energy performance is really good, but it also makes the spaces much quieter. You’re not getting any exterior noise. And, they’re so well-built that they’re far more durable.”
Passive House construction continues to be used most widely in residential projects, but some commercial projects are adopting it, including branches of the Carnegie Library in Pittsburgh.
“It’s heartening to see Passive House being applied to larger commercial buildings,” Mondor said.
The largest demand for sustainable projects is occurring in Pennsylvania’s urban areas, he said. It’s taking longer to catch on in rural areas, partly because there just aren’t nearby, affordable options for drywall recycling, wood mulching, metal smelting, masonry crushing, and other requirements to repurpose materials.
Net zero construction — buildings that generate more energy than they use over a 12-month period — also are becoming more popular, Mondor said. They typically use solar panels to create energy, selling any excess back to the grid through Pennsylvania’s net metering process.
Walsh is hopeful that another emerging building technique, mass timber, will catch on.
It uses engineered wood products — thick, compressed layers that can be used for load-bearing walls and floors and roofs — that are environmentally friendly because they are not as carbon-intensive. The material can create efficiencies in the construction process, which is a significant contributor to carbon emissions.
Mass timber is being used more often in housing construction along the West Coast but will take some time to become an economical option in Pennsylvania, she said.
“I think it’s going to be a game changer if we could start to get that rolling,” Walsh said. “It’s happening on the coast, and I think coming into Pennsylvania would be interesting not only in design but also in our construction processes.”
Sustainable building practices also are opportunities
...how we build better also has to layer in addressing historic planning policies and evolving our construction and architectural processes.
to improve equity within communities and break down barriers, Walsh said.
For example, harmful air pollution recently was linked to bad urban planning policies from nearly 100 years ago. Though some policies were outlawed 50 years ago, their repercussions remain, Walsh said, especially in marginalized neighborhoods that can be five degrees or hotter due to less green space, more paved surfaces, and lack of cooling elements. In addition to those environments being uncomfortable to live in, they also contribute to poor environmental air quality.
“There’s an urban infrastructure that needs to be updated,” Walsh said. “And I think how we build better also has to layer in addressing historic planning policies and evolving our construction and architectural processes.”
“I think incorporating where your project’s materials are coming from, who is building it and designing it is part of being sustainable,” she said. “How are we building a better city? It’s not just ‘green’ — I think there’s an equitable and cultural piece connected with it, too.” KC
Inflation and rising interest rates are starting to take their toll on some construction sectors, but one sector continues to be strong with no signs of slowing – multifamily housing construction.
The July housing report from the U.S. Department of Housing and Urban Development showed starts of multifamily structures with five or more units was 16.4% higher than at the same time in 2021.
Several factors are driving that demand. Some people cannot afford to buy a home, particularly at current mortgage rates. Much of the nation’s multifamily housing is aging and needs to be replaced or renovated. And Pennsylvania’s aging population is looking for smaller spaces without maintenance responsibilities or property tax bills. The market for senior apartments is “very active,” said Joe Chicora, senior project manager/project executive at Quandel Construction Group in Harrisburg.
Quandel had five senior housing facilities in progress in late August. They typically are 30 to 50 units and are funded through the Pennsylvania Housing Finance Agency.
Market rate and affordable multifamily projects also are in demand.
“The reality is that the demand for affordable housing greatly outpaces the supply in this country,” said Rebecca Warntz, vice president of design and construction at Enterprise Community Development, a nonprofit developer and operator of affordable and mixed-income housing in the mid-Atlantic region.
The demand for multifamily housing started increasing about a decade ago in the Baltimore and Washington, D.C. markets, and in the last few years, that demand has also been increasing in suburban and rural markets including those in Pennsylvania, Warntz said.
“Stable and secure housing is essential for people to focus on their goals like career aspirations and education as well as their physical and mental health. Developing more multifamily housing is truly necessary to building thriving communities,” she said.
With such a tremendous need, more contractors have become interested in multifamily construction.
“We have seen builders over the last several years moving into the multifamily market who didn’t operate there before,” Warntz said.
With the cost and availability of labor and materials still volatile, preconstruction is becoming even more critical for Enterprise Community Development.
“It’s important for our contractors to provide us with welldeveloped material purchasing schedules that begin six months or more before the anticipated start of
construction,” Warntz said.
Selecting contractors early has been a tactic that works for Enterprise Community Development. In turn, those contractors can line up their subcontractors to ensure labor is available when projects are ready to start.
There are financial hurdles, too.
“The current combination of increased interest rates and increasing construction costs is creating greater funding gaps in our projects, making it more challenging to get to financial closing, which in turn is delaying construction starts,” Warntz said. “However, we still have a very robust backlog, and we continue working with our public and private partners to move those projects forward with the focus of continuing to increase and preserve the affordable housing supply.”
Renovating the glut of unused office space could be an emerging market for multifamily construction, Chicora said.
“You look at all the office space that’s on the market now because everybody’s working at home. I’ve seen a couple already that have been converted into housing and I wouldn’t be surprised that if they can’t start leasing or renting out these spaces, they’ll convert them,” he said.
“It’s just a matter of time until it kicks in because of these developers that own these office buildings, they’re half empty or three-quarters empty, and it doesn’t pay to keep them open with the tenants that they do have because the buildings aren’t full.”
Converting office space into
apartments or condominiums is easy on the upper floors, but the ground floor requires substantial renovating to break up concrete floors to install plumbing, Chicora said.
Renovation of outdated multifamily housing also is a busy market, Warntz said. Enterprise Community Development has about 660 new units in construction or preconstruction and about 1,100 existing units undergoing renovations. Additional projects are in the conceptual stage.
Renovation projects include modernizing high-rises that were built in the 1960s and 1970s to replace major systems, install fire sprinklers, introduce fresh air, and improve energy efficiency.
are large, complex projects, and we’re going (continued)
“Those
The current combination of increased interest rates and increasing construction costs is creating greater funding gaps in our projects, making it more challenging to get to financial closing, which in turn is delaying construction starts.
Rebecca Warntz Vice President of Design and Construction at Enterprise Community Development
to continue seeing more of them as the existing multifamily housing stock continues to age,” Warntz said. Enterprise, which has a portfolio of 112 properties and 12,500 housing units in Pennsylvania, Maryland, Virginia, and Washington, D.C., has long been committed to building its projects in sustainable fashion.
“Enterprise committed to building sustainable, energy-efficient homes long before it was mandated or mainstream,” Warntz said. “In the early 2000s, Enterprise developed the Green Communities Criteria. It was the first green building standard for homes to be implemented nationally. It is still among the
most stringent and comprehensive sustainable standards. It goes well beyond addressing the basics of things like energy efficiency, water conservation, and air quality because it also places an emphasis on the health and resilience of our residents and includes some criteria similar to WELL [Building].”
“At a bare minimum, all of our new construction projects are Energy Star certified and Enterprise
Green Communities certified, and we are often Zero Energy Ready certified as well,” she said. “We do also have experience delivering LEED silver and gold certified properties. But energy efficiency and durability are top of mind for us when we’re designing our projects so that our properties are costeffective to maintain and operate, and also so that our residents aren’t being overtaxed by high utility bills.”
Advantage Steel & Construction, LLC.
Alexander Building Construction LLC
Atlas Marketing
Babst, Calland, Clements &Zomnir, P.C.
Barry Issett & Associates
Beckley & Madden, LLC
Benell Inc.
Bhaumik Engineering LLC
Bill Anskis Inc.
BL Companies
Bognet Construction
Bowles Rice Brightbill Industries
Brown Schultz Sheridan & Fritz
Burns White
Business Information Group, Inc.
Caretti, Inc.
Carlisle Area Chamber of Commerce
Carlisle Construction Materials
CBIZ Insurance Services, Inc.
Central Contractors’ Supply Co., Inc./ Overhead Door Co. of Johnstown
Charlson Braber McCabe & Denmark
Civil & Environmental Consultants, Inc. CLA (ClftonLarsonAllen LLP)
Cohen Seglia Pallas Greenhall & Furman PC
Cresswell Brothers
Darr Construction Co.
EAS Roofing
Eastern PCM LLC
Edward A. Reider Inc.
Enerfab Power & Industrial Inc.
Enterprise
Eshbach Brothers LP
First Davis Corp
Foster & Foster Actuaries and Consultants
G.C. Zarnas & Co., Inc.
George M. Wildasin Ce Inc.
Grand Vistas
Houck Group
Houser-Ford Group at Morgan Stanley Jem Group, LLC
J.C. Orr & Son, Inc.
Johnston Construction Joseph Miorelli & Co.
Keener, Inc.
Keller Konchan, Inc.
Leibold Inc.
Lockton Companies, LLC
M.L. Acri, Inc
Macri Concrete
Marmat Inc.
Masonry Contractors Association of Central PA
Massaro Corporation
McClure Company McConkey Insurance & Benefits
McCrossin McCrossin Foundations
Mid-State Construction
Modernfold of Central PA Novinger’s, Inc.
NUCA Pennsylvania
PA Masonry dba PA Group, Inc.
Panzitta Enterprises
PBX
Pennsy Supply
Perdomo National Wrecking Co LLC.
Performance Construction Services, Inc.
PJ Dick
PPL Electric Utilities
Providence Engineering Corp Pullman SST, Inc
Quandel Construction Group
Ralph E. Jones, Inc
Reager & Adler, PC Rescue One
Ridgetop Interiors, Inc.
Rocky Bleier Construction Group
Sandra Palone & Associates, LLC
Saul Ewing Arnstein & Lehr LLP
Schlaegle Design Build Associates, Inc.
Schooley Mitchell of Pittsburgh
Seubert & Associates, Inc.
Serviam Construction
She Does Hauling
Smith Masonry, Inc.
Spartan Construction Services
Stalwart Insurance Group
Stambaugh Ness
Stouffer Mechanical Contractor LLC
Strategic Executive Consulting Strickler Agency, Inc.
The Blue Book
The SRS Group, LLC
Troianiello Masonry, Inc.
Willig Williams & Davidson
Barry Isett & Associates, Inc. opened their newest regional office in Olyphant on August 1, 2022 — a development that will expand Isett’s services to the businesses and residents of the greater Scranton area.
The engineering and consulting firm has grown to nine locations across eastern and central Pennsylvania, now taking residence in the Rock Creek Corporate Center — Suite 214, 1444 E. Lackawanna St., Olyphant.
“We have a commitment to our associates to provide a workspace that’s not only close to the clients they serve, but to their families and homes,” Gregg Pavlick, Isett’s vice president of the firm’s northeastern PA region. “Isett prides itself on maintaining both a healthy work environment and a healthy work-life balance for their associates.” Already home to 13 associates who relocated from other branch offices, the greater Scranton office can accommodate up to 23 employees.
The new facility will provide Isett associates with large, smart workspaces; several common spaces for meetings and team building; and other modern amenities that align with the company’s values of balance, ownership, service, and team. Creating this new space in the greater Scranton area will not only serve the need of current clients, but also of future partners. “We wanted to offer a place where Isett associates can meet with clients and partners in the greater Scranton area and throughout Lackawanna County,” Pavlick adds. “We are looking forward to enriching and supporting this community.”
Michael Metz-Topodas brings significant experience to his new role as a partner in Saul Ewing Arnstein & Lehr’s Construction practice, including representing clients in construction-related litigation and disputes and counseling them on construction law matters. He resides in the firm’s Philadelphia office.
Mr. Metz-Topodas represents general contractors, subcontractors, owners, designers, and suppliers on private, public, and federal projects. He handles construction disputes involving delay and inefficiency claims, design and construction defects, unforeseen site conditions, project scope disputes, bid protests, and payment claims, including mechanics liens, bond claims, and Miller Act claims. He also focuses on Occupational Safety and Health Administration (OSHA) regulatory compliance and citation defense for construction and industrial clients.
Mr. Metz-Topodas earned his J.D. from Temple University James E. Beasley School of Law and his B.A. from Swarthmore College. Before attending law school, Michael taught history and political science in private and public schools both abroad in Switzerland and Korea and here in the United States, including Strath Haven High School in Wallingford, PA.
On August 11, Merut Construction, sponsored and was an exhibitor at the 2022 PA Safety Day hosted by PA One Call at Mohegan Sun Pocono, Wilkes-Barre. Merut Construction is a woman-owned business headquartered in Swoyersville, PA that specializes in the services of hydro excavation and civil construction. The Pennsylvania 811 conference provides a forum for Pennsylvania stakeholders to learn about safe digging. Excavators, designers, public utilities, facility owners, project owners, municipal leaders, sewer and water authorities, public officials, emergency responders, damage prevention associates, and other underground excavation professionals were invited to attend.
Rutkoski Fencing, Inc. (RFI) looked to the Construction Industry Alliance for Suicide Prevention (CIASP) for September’s Suicide Prevention Month as a time for providing employees with crisis and mental health resources. RFI participated in and sponsored the Greater Northeast Out of the Darkness Walk, training, and toolbox talks, distributing nearly 1,000 hard hat stickers, creating awareness of EAP/MAPs, and encouraging mental health screenings.
According to data from the Census of Fatal Occupational Injuries, 5,333 fatal work injuries were recorded in the United States in 2019. This is a 2% increase from 5,250 in 2018, the U.S. Bureau of Labor Statistics reported.
Knowing that these statistics are actually family members and friends who have died at work, it is evident that emphasis on safety in the workplace is still needed.
Each year the Governor’s Occupational Safety and Health Conference offers over 35 sessions led by industry professionals. Solving addiction, handling heat-related hazards, traffic control,
workplace emergency preparedness, de-escalation, job safety analysis, falls, and scaffolding safety are just a few of the topics covered at the conference.
Safety professionals from over 25 states will connect in the classroom and the exhibit hall.
Find complete details at www.pasafetyconference.com and see us at the Hershey Lodge, in Hershey, PA, October 31November 1, 2022.
Pittsburgh has a lot of nicknames. The Steel City. The City of Champions. The City of Bridges.
It also deserves to be heralded as the Capital of Green Building.
The City of Pittsburgh’s green building renaissance was driven by the Green Building Alliance, an informal, volunteer group of architects and construction industry officials that formed in 1993.
the entire movement. There’s a lot of Pittsburgh’s DNA that is within the larger sustainability movement,” said Marc Mondor, AIA, principal and co-founder of evolveEA, a green building and sustainability consulting and design firm based in Pittsburgh.
Green construction was budding elsewhere at the time, too. But Pittsburgh quickly leaped ahead and became a leader.
By 2005, the city had more square footage certified as meeting the LEED (Leadership in Energy and Environmental Design) standard of the U.S. Green Building Council (USGBC) than any city in the nation. “We were able to kind of help drive
Mondor volunteered with the Green Building Alliance during its early days, then became part of the advisory committee and was on staff as project director for a few years. The alliance led the way behind the momentum of a few key projects and with key financial commitment from the city’s foundations, particularly the Heinz Endowments.
“What Pittsburgh lacked at the time was support from our government,” said Michael Kuhn, president of Jendoco Construction Corporation in Pittsburgh, who served on the alliance’s board of directors from 2003 through 2008, and again from 2011 through 2018.
“There weren’t codes that were requiring, influencing, incentivizing
green construction like there were in Seattle and Chicago and other major cities. And so, I always say Pittsburgh was a leader not because of our government systems like Seattle and the others but despite that. It was really 100% — it was on the backs of our foundations and organizations like the Green Building Alliance,” Kuhn said.
Teresa Heinz wanted to renovate the Heinz Endowments offices using green building concepts. Soon after, seeking to make a broader investment in sustainable building, the foundation provided funding for the Green Building Alliance to formalize into a robust organization that could become a champion for sustainable construction.
That included naming Rebecca Flora as its first executive director in 1997.
A series of projects quickly followed that gave the fledgling organization powerful models to promote green building techniques. Pittsburgh was building a new
convention center. The Heinz Endowments supplemented the public funding with an additional $7 million in grants and loans, administered by the Green Building Alliance, to ensure the center was built green.
“If that hadn’t been funded and happened, we wouldn’t be able to have the convention center we have today, with green building fully integrated into it,” said Flora, who left the Green Building Alliance in 2008 and now owns ReMAKE Group, a consulting firm.
The Heinz Endowments, the Hillman Foundation, the Claude Worthington Benedum Foundation, the Buhl Foundation, the Richard King Mellon Foundation, and an anonymous foundation contributed $750,000 to create a design competition for the convention center, under Flora’s leadership.
In early 1999, the project was awarded to Rafael Viñoly Architects. By then, Flora already had influenced another major project, this time in the private construction sector.
In 1998, by cold-calling Gary Saulsen, director of corporate real estate at PNC, and selling him on the concept of sustainability, she helped to influence the green construction of Firstside Center, a 650,000-square-foot operations hub for PNC, the country’s fifthlargest bank at the time.
Two years later, the building opened with a silver certification under the LEED standards developed by the USGBC just a few years earlier. Every inch of hard floor was made from recycled material — 90% of the steel was recycled, along with
72% of the carpeting.
In 2003, the David L. Lawrence Convention Center opened as the world’s largest new building to achieve LEED Gold status.
There weren’t codes that were requiring, influencing, or incentivizing green construction like there was in Seattle and Chicago and other major cities... Pittsburgh was a leader not because of our government systems like Seattle and the others but despite that.
Kuhn President of Jendoco Construction CorporationHaving two major projects to show off was powerful ammunition in the Green Building Alliance’s arsenal as it promoted better building techniques. It started holding workshops for the construction
industry about green building.
“The construction industry and the architecture industry at the time really weren’t paying that much attention to any of this. But those were two big market stimulators that were really pulling the market,” Flora said. “So, what we were able to do at Green Building Alliance was essentially use those projects to attract both the construction industry and the architectural industry to come to workshops and try to get educated in this.”
The convention center currently is certified LEED Platinum for existing buildings. In 2019, 40% of all water used on-site was recycled wastewater, and 35% of all electricity used on-site was certified Green-e energy. Fifty-three percent of all waste was recycled, reused, donated, or composted instead of going to a landfill.
Roof skylights and walls of engineered glass allow abundant natural light, with three-quarters of the exhibition space naturally lighted.
A substantial amount of the materials used in construction is recycled and nontoxic. Natural airflow from the adjacent Allegheny River is captured by the building’s (continued)
shape to help with cooling and ventilation.
Initial modeling estimated that more than half a million dollars would be saved on energy costs annually because of the green building techniques, which were expected to cut energy use by about 35%.
The fact that PNC’s project was market rate was a significant commitment and showed commercial project owners that green building was feasible.
“They had to be able to justify that to their board, their stockholders, that this was a good investment,” Flora said.
PNC Chairman Jim Rohr publicly promoted the project and his company’s commitment to sustainability.
“That had huge credibility and impact,” Flora said. “PNC went on to be one of the nation’s leaders in terms of green buildings. As a financial institution, that was big.”
Jon O’Brien, executive director of the Keystone Contractors Association, broke into the commercial construction industry in Pittsburgh in 2002. He said Flora was one of many sustainability
pioneers in the city leading the way.
“The first time I met her, she said something I’ll never forget. The gist of the comment was: ‘My job is to make sure I don’t have this job in the future and the GBA no longer exists; we need to work toward a day when healthy, high-performance buildings are commonplace and organizations like GBA will no longer have to promote the benefits of green construction.’”
Once green building practices started to become more common, the Green Building Alliance expanded its focus with programs such as the Green Building Products Initiative and the Pittsburgh 2030 District.
The Green Building Products Initiative, funded by private and government grants, developed incentives for the manufacturing of green building materials.
“There was nobody else who was doing that type of work,” Kuhn said. “We generated a ton of new products.”
Pittsburgh 2030 is a collaborative effort by owners and operators of properties in the central business district and nearby
(continued)
neighborhoods to commit to using sustainable practices with the goal of reducing the carbon footprint and water use by 50% by 2030.
“It was big and bold and audacious,” Kuhn said. “And it was a challenge to try to convince the whole central business district that they should do this thing. But we put together a really great plan and have had tremendous success with it.”
The district currently is the largest 2030 District in North America, and it is a model of success. By 2021, it had reduced carbon dioxide emissions by two million metric tons and achieved reductions of $267 million in energy and $77 million in water use.
“When you start to think of the economic development, the health and wellness associated with that work, and you look at the spark we created here in Pittsburgh to what’s happened nationally and internationally, it’s remarkable,” Kuhn said.
“It’s a pretty cool story,” Flora added. “It’s nice to see it not get forgotten.” KC
The Keystone Contractors Association is pleased to announce the two winners of its annual scholarship. Hayden Woland of Watsontown, a student at Pennsylvania College of Technology, and Siani Marcus of Philadelphia, a student at Penn State University, were selected from the pool of 27 applicants. Each will receive a $5,000 scholarship.
Woland’s goal is to open his own construction management firm. He started working in commercial construction after graduating high school, performing duties including concrete carpentry, formwork, rebar tying, concrete finishing, grade beam pouring, and general carpentry. After about 18 months on the job, he knew the field was for him and he wanted to get a degree in construction management.
“From the first day I stepped on the jobsite, I knew where I wanted to be and what I wanted to do. Working under construction operations and project managers gave me many opportunities to realize I wanted to work as a construction manager in some capacity,” Woland, 21, a sophomore, wrote in his scholarship application.
Receiving a scholarship from the Keystone Contractors Association has helped him financially and in other ways. He said it has freed up money to participate in field trips, conferences, and other events where he could network to further his career. It also has created connections within KCA.
Marcus is pursuing a degree in architectural engineering, with the goal of becoming a project manager at a general contracting firm that is committed to sustainability. During an internship last year, her duties included monitoring project progression, coordinating jobsite deliveries, generating weekly cost-to-complete data as well as temperature and humidity reports, and revising Snap drawings.
“That experience really opened me up to how the industry works and pointed me in the right direction,” Marcus wrote in her scholarship application. “I had the chance to be hands-on in renovating inner-city facilities on a larger scale and had the opportunity to work directly under a project manager. Performing these duties solidified that I was on the right path and got me excited for the future to come.”
Her goals include being able “to provide affordable and sustainable housing and facilities to marginalized communities.”
The scholarship program is part of the Keystone Contractors Association’s commitment to attracting outstanding people to the construction sectors and supporting quality educational programs that enhance the success of the industry.
The competition is open to Pennsylvania residents who are undergraduate or graduate-level students enrolled in an institution of higher education within the state. Applicants are judged on multiple criteria including academic standing, career path within the industry, extracurricular activities, and leadership.
In the January edition of The Keystone Contractor Magazine, Dr. Anriban Basu, chairman and CEO of Sage Policy Group in Baltimore, offered an economic forecast for 2022. As the year closes, The Keystone Contractor interviewed him again to get his thoughts on the economic ups and downs and a look at what to expect ahead.
Q: Did your forecast that 2022 would be a “fair to middling” year for contractors hold true?
A: Yeah, that’s exactly right. There were some very positive aspects of economic life. Contractors were still busy; backlog remained elevated at least to date; they were able to pass along a lot of their cost increases; margins seemed pretty stable. But they had to deal with those high construction materials costs; they’ve had struggles trying to find and hold onto workers, particularly skilled workers...Contractors, I think, have navigated the situation quite nicely. All this volatility in various markets, but because of the supply side issues, it simply has not been a spectacular year.
Q: What have been the positive points in the construction industry in 2022?
A: I think construction has held up pretty well. Construction has added jobs as a U.S. industry over the course of the pandemic. Homebuilders for a time did very, very well. Obviously, the home-building community is now saying that we’re in a recession, and that’s what happens when you go from 3% to 5% mortgage rates on 30-year-fixed mortgages in very short order. But for much of this period, home prices were rising; residential contractors were doing well; commercial construction, institutional construction was pretty strong; all that fulfillment center construction, data center construction, and manufacturing center facility construction offset some of the weakness we’ve seen in lodging and retail construction.
A: Is construction ready for its own future? Will it have the workforce that it needs going forward? Is there enough adoption of new technology? Or are contractors continuing to do business as they might have done business 30 or 40 years ago? When I look at the typical construction jobsite, whether in Pennsylvania or across the country, I don’t see it look that much different than when I was a child. Largely men, some people working on equipment, some people standing around, and one person holding a sign saying, “Men Working,” which obviously should be more gender neutral, but the point is a lot of things haven’t changed. Construction, infamously or famously, has not generated the productivity (continued)
increases enjoyed by other industries like retail, manufacturing, finance, and so on and so forth. So, are we ready for this infrastructure build-out? Are we ready for our own construction future? It’s not obvious that we are. The adoption of technology seems to be quite slow in many firms. One of the reasons that we cannot adopt new technologies quickly is that the workforce cannot handle learning those new skills. They are struggling to do what they are doing right now, the way they have been doing it.
That doesn’t make as much difference when the economy is red hot and there are project owners that are flush with cash and looking to move forward with projects. But what happens when the economy is weaker and low bid wins again? People are looking to squeeze costs. And if you’re a contractor who has not installed the latest technologies, who has not trained their workers in the latest technologies, then all of a sudden, you’re at a cost disadvantage. And often it’s the case that larger firms are more likely to embrace new technology because their balance sheets are bigger. They can afford to buy that technology and train their workers on that new technology and still be patient enough so that while that training is occurring, they’re still getting their work done. They have that kind of flexibility that a small firm would not have. So, what would you expect to happen in construction? Big firms are set to gain market share. And smaller firms are set to lose market share.
And with their smaller balance sheets, that means a lot of small businesses are probably in jeopardy over the next five to 10 years.
One can imagine, going forward, a lot of mergers and acquisition activity in construction. We’ve actually seen a lot of that during this cycle … I think in the long term you’re going to see a lot of consolidation. One of the other factors, of course, is that many of these construction firms are owned by baby boomers who are about to enter a new stage of their lives, and, therefore, they might just retire the business or try to sell it to a buyer. That fuels consolidation within the industry.
Q: How has inflation impacted the construction industry in Pennsylvania in 2022?
A: Massively. Just massively … materials prices are up 17.4% on a year-to-year basis. Overall inflation economy-wide is 8.5%. Workers are still hard to find and very expensive. Obviously, Pennsylvania is about to receive or has received a lot of money from the federal government to finance infrastructure. And so, for heads of departments of transportation, it’s a very tricky time in economic history because when you greenlight a project when costs are so high, how do you ensure that the taxpayer is going to get the desired rate of return on investment?
Obviously, that affects contractors in many different ways. Do projects get greenlighted? Do they move forward? What is the profit margin? Do they have to shrink their profit margin in order to induce the project owner to move forward? That has been the defining aspect or characteristic of 2022. Inflation seems to be improving. We probably have already achieved peak inflation, but my goodness, no one has been spared and certainly not the contractor community.
Q: How has inflation specifically impacted commercial construction?
A: I think on the commercial side, it’s actually been worse … Money is flowing in to finance public construction. But on the private side, the commercial side, what do we see? An enormously high national office vacancy rate … that’s not good for office construction. In 2020, we experienced a wave of retail bankruptcies...so, guess what? Vacancy in malls is still high. That frustrates retail construction. And then hotel occupancy continues to be quite a bit lower than it was pre-pandemic, in particular because business travel has not returned aggressively. Businesspeople have often not returned to the office yet. CEOs are having a devil of a time getting people to come back to the office. So, you put all of that together, and high construction costs,
and very significant shortages of workers — a lot of commercial project owners are saying look, I’m not moving forward with this project because it doesn’t make sense economically and it doesn’t make sense financially given these high costs. And so, obviously, that’s bad for contractors.
Here’s the amazing thing about this … you talk to contractors; they’ll tell you we’re operating at capacity. We can’t do any more work than we’re doing. Which tells me, by the way, how much capacity has shrunk over the course of the pandemic. How many workers have left, how difficult it is for contractors to get work done, because if construction spending is down in many categories and contractors are still busy, it must be the case that something is down on the supply side of the industry.
Q: What is the short-term forecast for contractors?
A: I think that for much of this pandemic period, many contractors have said to me that we’ve been able to pass along our cost increases to project owners. There was a time up until earlier this year that the Federal Reserve was still increasing money supply; money was floating through the economy; interest rates were rock bottom; and project owners said, “I want to take advantage of these low-interest rates, this liquidity I have access to, and I’m going to move forward with the project. Yes, my costs are much higher in terms of what I’m paying for the delivery of construction services, but I want to move forward. I need to deploy this capital; I want to deploy this capital; I’ve got a project here that can move forward; I’ve got contractors lined up. Let’s greenlight this project--let’s move forward.” And contractors were in a position in which their costs were up; they were able to pass along those cost increases to project owners; and, in many cases, profit margins actually expanded for much of this pandemic.
That is changing now. Because borrowing costs have risen for those project owners, the economy has become more uncertain; everyone has been talking about the risk of a recession and so, all of a sudden, some contractors are probably finding that it’s harder to pass along those cost increases. The supply chain issues are still there. It is true, steel prices, oil prices, some other prices have fallen recently, that’s true, from their peaks, but they’re still much higher than they were pre-pandemic. And so, the high costs are still there, but the ability to pass along those cost increases has dissipated, and all things being equal, that translates into shrinking profit margins. I think that’s what you’re going to see during the next six months. I honestly think that in many construction
I understand that the markets have been rallying recently; certain key interest rates have been coming down recently. All that’s good. But I don’t think it’s going to persist through 2023. Because with higher interest rates, more consumers stuck with credit card debt, with the number of job openings starting to fall, the labor market starting to see more layoffs, that kind of thing, I think 2023 could be a problematic year for the broader economy. And that means for some contractors, 2023 and 2024 could also be somewhat more problematic than, let’s say, years like 2021 and 2022 when they were really busy.
For public contractors, those that depend on public construction outlays, I think it’s going to be a fabulous period. Because we’ve got all this money in government coffers … But for private contractors, meaning contractors that do largely private work including commercial work, I think it’s going to be more challenging. These commercial real estate segments are quite weak. They are going to stay weak. There is a preference now in the American population to work from home, or to work remotely … I think this catches up to contractors that specialize in private work. In 2023, I think that, for many of them, backlog will begin to fade. It might already be fading just a bit. And then 2024 could be somewhat problematic as well.
Typically, if you look at commercial construction, it lags behind the overall economy by 12 to 18 months. So, if the economy’s weak today, commercial construction gets weaker in 12 months. Why is that? Because construction takes time. So, if the project is ongoing, the contractor is going to be busy for a while. But eventually, that backlog ebbs, and that project is done and now there is not a next project, necessarily. Or if there is a next project, one has to bid very low to get that project.
Many in the business community know that for decades Pennsylvania’s corporate net income tax has been among the highest in the country. Our 9.9% CNIT has made us less competitive in attracting new businesses and frustrated our existing business community, who may have considered moving to a neighboring state for a more inviting tax climate. Our CNIT has slowed the commonwealth’s economic growth.
Our hope is that by reducing the CNIT — first dropping it to 8.99% in 2023, followed by gradual deductions until 2031 — we’ll not only be more attractive to businesses operating outside of the commonwealth, but also spur the companies that are already here to expand and grow. These businesses will hire more Pennsylvanians, provide our college grads with a reason to stay in PA, and provide our economy a boost.
Pennsylvania is well-positioned to help drive the global economy. We have a first-rate workforce, our location gives us access to 40% U.S. population, and we have institutions, including our universities, that are innovating and leading in a variety of industries. Improving our business tax climate will allow us to capitalize on those strengths and build a stronger economy for our businesses, our workforce, and our communities.
Although House Democrats backed a more aggressive reduction in the CNIT as part of the Propel PA plan we introduced in late 2021, the one-point reduction to 8.99% scheduled for 2023 is a promising first step.
However, that 8.99% is still high, especially among our neighboring states, so Pennsylvania needs to do more. The plan approved in the 2022/23 budget calls for a gradual reduction over the next nine years, cutting the CNIT by a half point every year until it reaches 4.99% in 2031, effectively halving the current rate.
At that time, Pennsylvania will have one of the 10 lowest rates in the country and the lowest rate in the region.
Why did it take 27 years to get this rate reduced?
A combination of two things changed this tax-cutting effort this year.
1. The aftershocks that the COVID-19 pandemic had on Pennsylvania’s economy warranted a bold initiative to maintain and recruit businesses to our commonwealth. Reducing the CNIT will be a powerful tool to accomplish this objective.
2. Years of fiscal responsibility by the legislature, coupled with two years of peak revenue, created the right environment for this reduction to occur now.
What kind of revenue does PA anticipate it will generate with this rate reduction?
As President Reagan once stated, “A rising tide lifts all boats.” Reducing the CNIT rate will create greater economic opportunity for Pennsylvania. Not only does the data show a strong connection between a lower CNI tax and higher population, home values,
and workers’ wages, but these goals are able to be achieved without impairing the Commonwealth’s General Fund revenue or raising taxes on Pennsylvanians. Research demonstrates that states with the lowest CNIT rates experienced 10% higher growth in state revenues from 2000 to 2020 compared to those states with higher CNIT rates according to the U.S. Census Bureau.
Average State Tax Revenue Growth: 2000 to 2022
How do new businesses take advantage of this reduction? Do they just need a headquarters here or do they need to manufacture a product or both?
The Corporate Net Income (CNI) tax reduction will positively impact companies headquartered across the commonwealth and those with income in the state. This reduction will positively impact any company subject to Pennsylvania corporate tax liability, and as such, will benefit not only large entities, but also have an effect on smalland medium-sized businesses. The reduction of the CNI tax will provide a better business environment in Pennsylvania and will help foster economic growth among new and existing businesses in our state.
What does this mean for companies that are just distributors?
Everyone benefits from the reduction of the CNI tax — from manufacturers to distributors – and everything in between. This reduction will foster a business climate that allows Pennsylvania to attract new businesses to the region — and in turn, increase the economic growth of the entire state. For two decades, we know from analysis conducted by the Pennsylvania Economy League of Greater Pittsburgh, Pennsylvania’s annual tax revenue has consistently returned approximately 5.3% of the state’s gross domestic product, regardless of tax changes or increases. The only sustainable way to grow our tax revenue is to adopt policies and practices that grow our GDP.
The reduction of the corporate tax will allow our state’s economy to flourish, our businesses to grow, and will bolster our supply chain industry, which includes distributors. With positive policies in place, it sets the stage for Pennsylvania to become a competitive business environment if and when reshoring occurs. This holds the opportunity for increased population and the associated tax revenues from that growth that can be invested in infrastructure and better quality of life for all residents.
Pennsylvania state veteran employment representatives toured the Eastern Atlantic States Regional Council of Carpenters Lebanon Training Center and the Laborers’ International Union of North America (LiUNA) Mid-Atlantic Region Philadelphia Training & Learning Center. This initiative was developed to help organizations assist veterans in transitioning from military to civilian careers.
FROM LEFT TO RIGHT: Angel Hernandez (LiUNA Mid-Atlantic Region Representative), Jon O’Brien (KCA), PA Veteran Employment Representatives from CareerLink, and Eric Remetta (LiUNA Mid-Atlantic Region Representative).
Working to Empower People for Advancement, WEPA, is renovating an old building in downtown Lebanon, PA. After renovations, WEPA’s new training center will help advance the community by assisting individuals with language barriers to succeed in a variety of trades such as construction, healthcare, restaurant, and hospitality industries.
FROM LEFT TO RIGHT: Rafael Torres (WEPA) and Representatives from Eastern Atlantic States Regional Council of Carpenters.
The Keystone Contractors Association is a Pennsylvania commercial construction trade association dedicated to improving the construction industry by focusing on safety, education and training, labor relations, community service, career development, and government relations.
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