Third Crisis-era Message to Contractors
Three Steps to Surviving the Pandemic
From Dr Tom Schleifer
Step 1 – Face Facts
The Corona Virus pandemic has swooped down on the human race like a tornado onto a small midwestern trailer park. Its impact has been sudden, uncontrollable, devastating, life-changing, and fear inducing. We have never seen this:
- Our economy is experiencing an unprecedented abrupt cessation. Ad hoc public health policy mandates that everyone must stay in their home. All economic activity must simply stop.
- No one has ever experienced a natural disaster of this magnitude.
- No one knows what to do.
- The construction marketplace is in complete chaos.
- Some states, counties and cities have shut down construction while others government agencies across the country are issuing conflicting and inconsistent shut down orders.
- After Michigan reclassify all state transportation projects as “non-essential” and close them under the state’s stay-at-home order, Governor Gretchen Whitmer (D) clarified the state’s order to allow construction to proceed on state highway, bridge and road projects. [for now]
- Massachusetts largest construction union has fired off a letter to the governor, urging Baker, who has kept work on housing and infrastructure projects going amid the crisis, to shut down all but emergency work for the rest of the month, starting April 3.
Step 2 – The Herd Instinct–Don’t Panic
Animal scientists don’t fully understand how fear is instantly communicated through a
herd of horses or exactly how it occurs with a swarm of bees or a flock of birds. But the energy
of fear is a powerful force that moves entire populations of animals and insects.
The human being is, after all, an animal. We respond to danger in much the same way as
a herd of horses. Possibly for the first time in history, we have just experienced a slow-motion stampede ripple through the human race.
During the first thirty seconds of an equine stampede the initial shock of fear energy
begins to dissipate with the activity of flight. After the first impulsive burst of fear runs
through the herd, each horse begins to search for the actual danger that he’s fleeing and
gradually slows his flight and separates slightly from the other horses. Eventually,
the herd stops running and settles down into a sort of thoughtful graze. As the shock of
fear subsides, each horse begins to assess the danger that his instinct drove him to flee
from. This is nature’s way. Don’t panic.
Step 3 – Don’t Go It Alone–We Need To Work Together
Can The government Help? Congress passed the $2 trillion Cares Act in an attempt to blunt the crushing effect of this sudden economic collapse. Let’s take a careful look at how the Cares Act might impact our industry.
The Cares Act
- The Cares Act includes $339.9 billion in appropriations. Of that, ENR estimates, construction may be eligible for about $40 billion. This is primarily assisting government agencies to fund their construction needs.
- The law has $25 billion for “transit infrastructure grants.”
- The measure has $10 billion for Airport Improvement Program grants.
- The measure gives the Defense Dept. $1.5 billion to expand health facilities and modular field hospitals.
- The new law allots $606 million for Dept. of Veterans Affairs medical facilities to modify building systems for coronavirus patients. It also has $150 million in VA grants to states to reconfigure veteran’s facilities, such as nursing homes.
- The statute provides $5 billion in Housing and Urban Development Dept. community development block grants and $1.5 billion for Commerce Dept. economic development grants.
- The law’s tax provisions include allowing employers to defer payments of their share of Social Security payroll taxes through Dec. 31. They would have to pay half of the deferred taxes in 2021 and half in 2022.
- The package allows employers to “carry back” operating losses from 2018, 2019 and 2020 to offset taxable income in the previous five years.
- In addition to the Cares Act, The Treasury Dept. will be administering another $350 billion Paycheck Protection Program, which provides loans of up to $10 million to companies with 500 or fewer employees. If employers use loan proceeds for payroll, health insurance premiums and certain other expenses, 100% of the loan will be forgiven. [How this will work is unclear. For example: If a company has cash reserves or profits from the work in question, does the government still forgive the payroll portion of the loan? We won’t know until the administration of this program is written.]
We’re in This Together
Contractors are notoriously independent. For the most part, we go it alone. Resist that temptation this time. There are ways contractors can help each other which will be discussed at another time. We will need to see how these emergency government programs will work. However, anything that has to be paid back, even at zero interest, is debt, which goes on the balance sheet.
Face The Facts – Don’t Panic – Help Each Other; the first three steps of survival.