Whenever you look at what's to come, you must first look at what has happened in the recent past. To put it mildly, 2011 has been a roller-coaster year, and most of it has been far beyond the control of HVACR contractors.
Lower federal tax credits
Before 2011 even began, Congress extended the popular 25C tax credits through the end of 2011, but at a much lower value. The drop in the tax credits to a maximum of $500 for high efficiency units, instead of the previous $1,500, has made them less attractive to homeowners. In fact, some contractors feel that at the current levels, they offer little incentive to home-owners to purchase higher efficiency units. Since these tax credits expire at the end of the 2011, Air Conditioning Contractors of America (ACCA) will be working with many of its industry partners to get them extended again and will try to get them brought back to the higher level.
Turmoil in Congress
Political games are starting early ahead of the 2012 elections, with both the Democrats and Republicans in Congress taking firm stances with little wiggle room. We saw this in the spring when they narrowly reached an agreement on a budget that prevented the federal government from shutting down and then again in the dog days of summer, when they debated raising the debt ceiling. Both of these struggles did little to help the economy, sending a message that hope of bipartisanship to get the country back on track was not the preferred option.
Regional standards finalized
Then late in October, the Department of Energy finalized new energy conservation standards for residential HVAC appliances, along with regional equipment standards. The next step will be for DOE to figure out how to enforce these standards, which will be hashed out in 2012.
Even though it sounds like nothing good happened in 2011, it's far from the truth.
How have our contractors' attitudes changed?
ACCA continued to gauge how contractors feel about short-term growth through its Contractor Comfort Index (CCI). 2011 was the second year that contractors were asked how they feel about new customer acquisition, existing business and employment numbers.
With an index of 50 or above indicating anticipated growth, in 2011 contractors continued to tell us that they were feeling cautiously optimistic. The CCI had a high of 69 in April and a low of 51 in September.
Two negative programs repealed
In April, Congress repealed the onerous 1099 filing requirement they tucked into the Obama health care bill (Ed. Note: Patient Protection and Affordable Care Act). ACCA was one of the first groups to recognize this provision and worked to get it repealed so that small businesses, like HVACR companies, would not face the burden of unnecessary paperwork.
Then in late October, the House of Representatives voted to repeal a pending 3 percent withholding tax that was part of the Tax Reconciliation Act of 2005 and would have gone into effect in 2013. This tax requires that federal, state and local governments withhold 3 percent from payments for most goods and services. This would have been a huge burden on contractors, who would have had to increase their prices to cover the withholding or take a huge financial hit. The Senate followed suit, voting to repeal the withholding tax in early November, and President Obama signed it into law.
And it was HOT, HOT, HOT!
This summer was a sizzler, and for most contractors, that means they were busy. With record-breaking temperatures across the country, 2011 was one of the hottest summers since 1985.
So, that was a quick look at 2011, but what does it all mean for 2012?
We know that 2012 will be an interesting year, due to it being a presidential election year and with control of the Senate being up for grabs. We can expect a lot more political games from both parties trying to make the other look less favorable heading into the election.
There will also be changes when it comes to government spending. The concerns about spending and the skyrocketing debt mean the government will be cutting back in 2012. This will have an impact on spending in the construction industry and on tax incentives that are set to expire at the end of the year. By December, Congress will have to decide what to do with the current estate tax and whether or not to extend the Bush tax cuts that set lower tax rates for individuals and small businesses organized as pass-through entities.
Outside of Washington, D.C., contractors will need to again focus on their business, not just their work. The strong contractors who have survived the recession and continue to find success in these uncertain times have done just that. They have put the processes in place and begun to focus on their financial operations, building customer loyalty, providing the right education and training for employees, concentrating on smart marketing and looking at appropriate markets to expand business.
ACCA understands how important it is to continue to look for new opportunities. This past fall, we notified members that we were starting the Radiant and Hydronics Council to help fill the need for a contractor-led organization that focused on this market segment's growing needs. Throughout 2012, this council will establish itself as the premier organization for contractors wanting to be more successful in the radiant and hydronics fields. This will start being seen through new online training courses focused on advanced topics, a new e-newsletter, a new Radiant & Hydronics Forum as part of our Annual Contracting Week and learning labs at the annual conference.
Speaking of the annual conference, it is scheduled for March 2012. We have reworked the schedule to allow for more focused learning, by having 45-minute and 90-minute learning labs. We've also added an additional half day to the end of the conference that will give attendees the opportunity to learn about how to move their business to the next level of success with advice from Jason Young, a former Southwest Airlines executive.
ACCA is also moving forward on a Quality Assured program for existing homes. The Quality Assured program for new homes has been extremely popular, with ACCA recognizing more than 100 contractors in the first six months, and the program is steadily growing. We have been asked since we launched the new homes program about an existing homes program, so we know the desire for the program is strong and will bene-fit the entire industry in the long run.
We have developed these programs to support contractors who focus on their businesses, staying strong and surviving. And as we've seen in recent years, only the strong survive, and that ultimately makes the industry better.
While I don't have a crystal ball, there is one thing that is certain: 2012 will be an interesting year.
Paul T. Stalknecht is president and chief executive officer of the Air Conditioning Contractors of America (ACCA). Contact him at 703/575-4477 or [email protected].