Seeing through the rubble

NJBIZ: How have you guys been coping with the economy?

McEldowney: Business activity is depressed in the engineering and the construction industries, so those of us who are in those sectors have had to make adjustments to how we run our business and how we operate. The depression in the amount of business has nothing to do with the demand for business. I’m in the civil engineering sector, which involves sewers, roads, water supply. Any time you flush a toilet, you need a civil engineer, so a civil engineer is never going to go out of business, but the public sector is a key part of what civil engineers and environmental engineers will do. You’re probably well aware that the studies that have come out through the American Society of Civil Engineers have given very bad ratings to New Jersey for the condition of the infrastructure, including water supply systems, road systems, sewer systems. There’s almost an unlimited amount of work out there to be done for the engineering and construction industry to become involved in.

There are a few things that those in the engineering sector have done on a short-term basis to deal with this. In the long term, I think there’s a lot of opportunity to grow, for both engineering and construction. Short term, however, we have our challenges, in New Jersey particularly. One thing that involves smaller firms, and the larger firms particularly, is to make surgical cuts in their staff, as opposed to just doing a wholesale layoff from top to bottom. They look at utilization of their individual staff positions and certainly those individuals who have a higher utilization factor — in other words, the total number of billable hours versus the total number of hours a person works. The higher that utilization ratio, the more productive that person is, and the better able that person is to bring in revenue to the company. So I think management will look at each individual employee that is on the level of doing engineering, design and construction management, and determining which employees basically are carrying their weight. And those who aren’t will either be reassigned or maybe cut from the work force.

I’m more involved in business development than perhaps a younger employee. The business development has to be considered very seriously during difficult times. Whereas some firms may very well look to cut costs in marketing and business development, it may be counterintuitive. We need to spend more time and a greater percentage of our resources in trying to find work.

We all know that New Jersey got about $1.6 billion in stimulus money. We are all aware of that, and everybody is charged up about it.

Epifano: Where is it?

McEldowney: It’s mostly gone to huge projects — $200 million road projects. Route 287 down near Piscataway took at least $200 million of that $1.6 billion. Now, we all know that 70 percent of the jobs are in small business. I would say that almost zero dollars of the stimulus money went to small business, which is where the jobs are. One of my gripes has been that the stimulus has not been directed to where the jobs are. The whole thing is about job growth. If you have jobs, people pay taxes, the economy grows. If you don’t have jobs, you have economic problems. This is a very fundamental policy problem with the stimulus program as it affects New Jersey — $1.6 billion really hasn’t filtered down to the small-size business, so the smaller companies have had to cope with that. We had this one project that was in the early stages, it was a large sewer project, and stimulus money was going to be directed toward that project. We were making an application. The environmental aspects that were associated with the project and the [Department of Environmental Protection’s] inflexibility posed such roadblocks, that it turned out to become impossible to make that project shovel-ready, and the project never came to fruition, and the town gave up on it — and the money probably went to some other state.

NJBIZ: Would the rest of you agree that you haven’t seen much of the stimulus money trickle to your business?

Epifano: I would suggest that paving project in Piscataway, I think that’s employing Crisdel [Group] — he’s a large highway contractor and he’s got large subcontractors, all sorts of suppliers involved in that project. So people are probably seeing it more than we’re seeing it. Just because it’s one large chunk doesn’t mean it’s not trickling per se, but I’m not seeing any personally.

McNamara: But if you take the ratio of how much money went into one company and one set of employees, where if you take that money and diversify it across the board to all the small companies that can benefit, you end up with more jobs instead of just the one, because you take that and you start building a lot more properties and developments and infrastructures, you’ll actually create more jobs.

Redington: But does the federal government have the ability to transfer that money directly to the small, private business? That’s the question. They don’t really have a route to do that. They can give federal grants and federal funds to work on federal projects, state jobs and such. But how can they help a plumber, an electrician, a private-sector guy?

McNamara: Actually, they can through the tax basis. If you go through the tax basis, you get tax credits out, and you can open up the doors to so many different people because you have more money in your company. Let’s say you’re a food process company, my tax base is now half of what it used to be and I’ve got X amount more dollars, and I’m going to put an addition up, I’m going to hire more people, I’m going to expand.

McEldowney: You made a very good point. A good example of that, how the tax system can be a generator is solar energy. Solar energy — it really doesn’t make a lot of economic sense, to go out and spend a lot of capital for solar panels, when the payback is so long. However, the state of New Jersey has the second-best program in the country — second only to California — for encouraging the use of alternative-energy sources such as solar power. In the [Solar Renewable Energy Certificate] program, tax incentives, tax write-offs, tax credits are generated initially, and then during the life of the solar system, there are SRECs that are generated that get paid back to the individual. Right now, a typical house might be a 10-kilowatt system, but generate 11 or 12 SRECs a year. Those SRECs are selling for over $660 an SREC. So it will take a relatively short amount of time. I have a system in my house. My electric bill is $3 a month. I’m going to have that paid off in about two years.

McNamara: I build houses on the side besides my fire-protection business. I just built a house, I built a green house, I built it with geothermal, spray foam insulation. I didn’t do solar, I’m just starting to get into solar. The cost of the house in utilities is $100 a month.

McEldowney: The stimulus failed. They missed the mark by providing tax incentives that would encourage and stimulate the economy in a way that just putting public money into large construction projects don’t.