At the suggestion of the Chamber’s Young Professionals Group, the State Chamber will reconvene its Economic Development Committee early 2016. In the early 2000s, the committee was mothballed due to a quickly expanding Delaware economy. After the housing bust, the State Chamber’s policy efforts went into supporting policies to stabilize Delaware’s economy. Much has changed over the past few years and the time is right to put additional emphasis on economic development issues.
Mike Vanderslice, VP of Sales and Marketing for Environmental Alliance, will chair the committee and is part of the next generation of State Chamber leadership. The Committee membership will include younger executives as well as more seasoned leaders covering a diverse number of industries throughout the state. The Committee’s mission will focus on expanding economic opportunity, an issue that’s important to all Delawareans. Internally, the Committee will engage other DSCC Committees such as Tax, Transportation & Infrastructure, Environmental and Employee Relations along with Board of Governors in developing and advancing the State Chamber’s economic development policy. As part of the mission, the Committee will partner with DEDO, County and City Economic Development Offices, as well as local chambers to promote policies that support existing industries and foster a business climate that attracts new and innovative companies to Delaware.
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Last week, government affairs professionals representing clients in Delaware gathered for the State Chamber’s Annual Government Affairs retreat. During the conference presentations were given by University of Delaware Center for Demographics professor Ed Ratledge, Office of Management and budget director Ann Visalli, and State treasurer Ken Simpler. All three had a similar message—Delaware faces some tough challenges, but is also seeing some positive successes along the way.
Most notable is Delaware’s aging population that is continuing to strain both the State’s health care infrastructure network, and for those receiving Medicaid, straining the State’s budget. Close to 40% of all Delawareans receive some measure of state aid, either through Medicaid, or as part of the state employee system, and year over year increases ($81 million), are a large part of the expected $150 million budget shortfall expected for 2016. In addition to an aging population, new births are significantly down, and the next generation of workers are much lower in terms of overall numbers of the Boomer generation, who are aging out of the workforce and will require health care and other services. Of other interest was speculation on how JFC members plan to fill that $150 million budget gap, and so far focus is on a combination of raising corporate income tax and franchise tax rates—something the State Chamber has warned will stifle business growth and relocation in the Delaware. The next legislative session will be a roller coaster ride for sure as budget discussions heat up. As for good news, JP Morgan Chase announced they plan to create 1800 jobs over the next 4 years to fill their newly revamped Delaware Tech Center located on property purchased from AstraZeneca. Other large employers are evaluating their presence in Delaware, with hopeful signs of both staying and growing their workforce. There is good news to be had, and it is important to focus on it. It is just as important to make sure the State is making the right decisions to capitalize on the growth opportunities available, and to create an environment to foster economic growth. State Chamber members can expect vigorous discussion coming from Dover on how best to reach this goal, and they can count on the State Chamber to be in the middle of it all advocating for its members. by Mark DiMaio
Back by Popular Demand….. (hint – it’s not the album by Rapper Kurtis Blow) At the suggestion of the Chamber’s Young Professionals Group, the State Chamber will reconvene its Economic Development Committee later this fall. In the early 2000s, the committee was mothballed due to a quickly expanding Delaware economy. After the housing bust, the State Chamber’s policy efforts went into supporting policies to stabilize Delaware’s economy. Much has changed over the past few years and the time is right to put additional emphasis on economic development issues. Mike Vanderslice, VP of Sales and Marketing for Environmental Alliance, will chair the committee and is part of the next generation of State Chamber leadership. The Committee membership will include younger executives as well as more seasoned leaders covering a diverse number of industries throughout the state. The Committee’s mission will focus on expanding economic opportunity, an issue that’s important to all Delawareans. Internally, the Committee will engage other DSCC Committees such as Tax, Transportation & Infrastructure, Environmental and Employee Relations along with Board of Governors in developing and advancing the State Chamber’s economic development policy. As part of the mission, the Committee will partner with DEDO, County and City Economic Development Offices, as well as local chambers to promote policies that support existing industries and foster a business climate that attracts new and innovative companies to Delaware. by James DeChene
According to the Des Moines Register a recent 10-cent-per-gallon gasoline tax hike is boosting Iowa road construction funds and hasn’t dampened motorists’ enthusiasm for driving, state records show. Reports filed between April and July show that motor fuel tax collections totaled about $225 million, an increase of about $76 million over the same period last year, according to the Iowa Department of Revenue. Although the higher tax took effect March 1, reporting of the data lags by one month. On Saturday, the statewide average cost of gasoline in Iowa was $2.46 per gallon for mid-grade fuel, which was 83 cents a gallon less than the $3.29 per gallon for the same date a year ago, according to the AAA Daily Fuel Gauge Report, and the increased fuel tax revenue has enabled the Iowa DOT to add about $500 million worth of road projects to its five-year highway construction plan. Delaware faces a $780 million funding shortfall over the next 6 years for planned DELDOT projects, and with gas prices currently low, and expected to stay low for the foreseeable future, the discussion should be started on what a gas tax increase would look like for Delaware. The Chamber position has been supportive of a gas tax as long as the proceeds are solely used for transportation infrastructure and if there are spending offsets to cover any additional revenues required. By James DeChene
The Public Service Commission (PSC) and the Delaware Public Advocate (DPA) have directed Delmarva Power & Light (DP&L) to modify the way in which they charge their gas transport fees, including what’s known as “balancing”, plus assessing user fees on infrastructure purchased from other companies. DP&L contends that the change is needed to more appropriately allocate the “balancing fee” to all customers the costs for storage and swing capacity and pressure support associated with the Eastern Shore contract (the 3rd party pipeline that DP&L uses to transport the resource to meet all its customer demand). Simply put, the Public Service Commission (PSC) and Delaware Public Advocate (DPA) are urging DP&L to (1) increase the “balancing fee” for transport customers and (2) create a “pressure support fee”. The “balancing” fee is both the overage and underage of usage a company is charged on their gas usage, and a company can lower this fee if they become better “guess-timators” or “predictors” on what their usage will be on a given day. This is also known as ‘nominations’ or when a company predicts their usage for the following day or week. Transport customers can be industrial users, e.g., chemical companies, but also restaurants, apartment complexes and schools. PSC staff and DPA are concerned that residential customers are presently subsidizing 150 transport customers in the amount of $2.3M/year. The goal is to redistribute this $2.3M. Via this regulatory change, the balancing fee is projected to increase from $0.34 per mcf to $0.55 per mcf. Residential GCR customers create about 65% of the annual imbalance, but according to the report have been paying 90% of the balancing fee. Additionally, the user fee for transport on infrastructure will be a set rate of $.19 per mcf total used. The pressure support fee is associated with the support of the infrastructure for the Eastern Shore pipeline, which DP&L uses to transport gas. All users must contribute to this maintenance. The total bill spread across users is $4.3M/year. DP&L indicated that transport customers can minimize the impact of the increase in balancing fees by more accurately predicting their nominations. The State Chamber encourages all affected parties to attend a workshop on Tuesday, August 4th at PSC headquarters in Dover beginning at 9:30am. In anticipation of next week’s workshop, companies can assess how this change will affect their bottom lines by utilizing the following formula: 1) Proposed $0.55 Balancing Rate X Company Balancing Volume (Can be found on utility bill) PLUS 2) $0.19 Fixed Pressure Support Fee X Total Natural Gas Usage Compared to current costs, you will get the total financial impact. We recommend that each member apply this formula to their own companies and share with the State Chamber their total overall impact so that we can reiterate the average impact to the PSC and DPA next Tuesday. By James DeChene
Transportation Infrastructure Funding In the aftermath of last year’s failed measure to raise the gas tax to help fund infrastructure projects, the goal this year was for the General Assembly to find $50 million to dedicate to infrastructure funding, with Governor Markell pledging to borrow another $50 million. After spending months negotiating on how to come up with the required money, the General Assembly passed legislation that will raise just under $24 million by increasing a number of DMV fees as well as the document fee associated with new car sales. In addition, $5 million of DOT operating expenses was transferred out of the Transportation Trust Fund responsible for funding infrastructure projects. As part of the negotiated deal, the money will be placed into a “lock box” dedicated for spending on transportation, the threshold for prevailing wage projects was raised, and prevailing wage will not be applied to the $20 million allocated to municipal street aid and the Community Transportation Fund, both of which fund local transportation improvements, such as filling potholes. The State Chamber expressed early support for all three add-ons, and lobbied diligently in support of a larger overall package that would have raised the goal of $50 million, and we hope that further action is taken in 2016 to help overcome the expected $780 million in anticipated shortfall over the next six years in much needed infrastructure projects. Beginning to Transfer DOT Operating Expenses from Transportation Trust Fund In 1991, due to the recession, the General Assembly moved a portion of DELDOT operating expenses out of the General Fund and into the Transportation Trust Fund in order to balance the budget without resorting to a tax increase. Over the intervening years, with increases in salaries, retirements, health care expenses and other costs continually rising, the ratio of operating expenses to actual money used to fund projects has increased dramatically, resulting in an estimated $780 million shortfall over the next 6 years for transportation projects. The General Assembly took the first step of transferring $5 million of operating expenses back into the General Fund, and has indicated the goal of both continuing the process, and increasing the amount transferred, in future years. Abandoned property Two bills were passed related to how Delaware collects abandoned property, also known as escheat. Currently representing 14% of the state’s operating budget, this $500+ million revenue stream has come under fire from the business community at large over the last few years, resulting in a taskforce that met over the summer and came up with many of the proposals that were contained in these bills. They include limiting the total number of audits any one outside contractor can be assigned and requires all contracts with such contract auditors to assure that they will not employ or compensate senior officials from the Department of Finance involved with their work for two years after such officials leave state employment. It also directs the Secretary of Finance to prepare and promulgate a detailed manual containing procedural guidelines for the conduct of Delaware unclaimed property examinations and to update its regulations accordingly. The second bill shortens significantly the “look back” period from 1981 to 1991, and going forward will be a rolling 22 year “look back” starting in 2017. The bill also changes how companies can be audited, specifying they must first be offered the opportunity to enter a Voluntary Disclosure Agreement program. The State Chamber was involved in the process from the outset, and is pleased to see sustentative modifications made to the program. Studies on Revenues and Spending The Delaware Economic and Financial Advisory Council (DEFAC) was directed by Executive Order to create a taskforce charged with reviewing Delaware’s revenue streams and how to plan for the future. The taskforce issued a lengthy report outlining ways in which to increase revenues to keep up with state spending. During the process, it was lamented that no similar taskforce was created to review state expenditures, and a concession was made by budget writers this year to have Pew Charitable Trusts study how and what the state spends money on in an effort to make government more efficient. That study should be completed in time for next year’s budget process. Budget As mentioned above the budget this year was a difficult process for the General Assembly to undertake, and ultimately did little to plan for the next fiscal year. The State Chamber was disappointed that one-time monies stemming from bank mortgage settlements were used to fill budget gaps, that there was no requirement that state employees contribute more to their health insurance costs, and that no serious review of overall state spending was undertaken this year. The State Chamber will continue to review areas in which the state can be more effective and efficient when creating its budget. No change to the Estate Tax The Chamber has called for the elimination of the Estate Tax, but no action was taken this year. A disincentive to retirees, as well as a costly and inefficient program, the state has not seen the tax perform as a revenue stream in any meaningful way, and it puts Delaware at a competitive disadvantage to states like Florida. Minimum Wage A bill expected to be introduced next year will call for an increase in the minimum wage. This comes on the heels of a taskforce created to study low wage workers and the impact an increase in the minimum wage would have on the economy, on workers and on businesses. With impacts being felt in cities like Seattle and Los Angeles, both of which saw dramatic increases in minimum wages—up to $15 an hour, the General Assembly should look to those examples as a cautionary tale before considering a mandated wage hike, and instead look to how businesses like Walmart and Target have already raised their minimum wages to above the Federal level as the economy has improved. Adjustments to PIT, Corporate Franchise Tax and Gross Receipts Tax Already on the table is a proposal to add two top tiers of personal income tax levels as well as a proposal to increase corporate franchise tax thresholds. These come on top of earlier proposals to cut corporate income tax rates, and increase the Gross receipts tax. The State Chamber is on record urging the General Assembly not to simply raise taxes to close budget holes, but to focus first and foremost on areas in state government that can be trimmed or eliminated. By James DeChene
As the sun rose on July 1st, the first half of the 148th General Assembly Session drew to a close. The first six months of 2015 saw legislative action on a variety of issues, though in terms of highlights, discussion and action education reform was the “it” topic. Bills ranged from the controversial “opt-out” bill, to starting the process to change how and where children in Wilmington are educated, to schools evaluating the amount of standardized testing offered each year. Thrown into the mix were broader discussions on transportation infrastructure spending, modifying the state’s abandoned property, or escheat collection, and looming over everything is the pending budget crisis expected next year. As the dust settles, it’s a good time to review a few key pieces of legislation that passed this year that will impact the business community. Transportation Infrastructure Funding In the aftermath of last year’s failed measure to raise the gas tax to help fund infrastructure projects, the goal this year was for the General Assembly to find $50 million to dedicate to infrastructure funding, with Governor Markell pledging to borrow another $50 million. After spending months negotiating on how to come up with the required money, the General Assembly passed legislation that will raise just under $24 million by raising a number of DMV fees as well as the document fee associated with new car sales. In addition, $5 million of DOT operating expenses was transferred out of the Transportation Trust Fund responsible for funding infrastructure projects. As part of the negotiated deal, the money will be placed into a “lock box” dedicated for spending on transportation, the threshold for prevailing wage projects was raised, and prevailing wage will not be applied to the $20 million allocated to municipal street aid and the Community Transportation Fund, both of which fund local transportation improvements, such as filling potholes. The State Chamber expressed early support for all three add-ons, and lobbied diligently in support of a larger overall package that would have raised the goal of $50 million, and we hope that further action is taken in 2016 to help overcome the expected $780 million in anticipated shortfall over the next six years in much needed infrastructure projects. Abandoned property Two bills were passed related to how Delaware collects abandoned property, also known as escheat. Currently representing 14% of the state’s operating budget, this $500+ million revenue stream has come under fire from the business community at large over the last few years, resulting in a taskforce that met over the summer and came up with many of the proposals that were contained in these bills. They include limiting the total number of audits any one outside contractor can be assigned and requires all contracts with such contract auditors to assure that they will not employ or compensate senior officials from the Department of Finance involved with their work for two years after such officials leave state employment. It also directs the Secretary of Finance to prepare and promulgate a detailed manual containing procedural guidelines for the conduct of Delaware unclaimed property examinations and to update its regulations accordingly. The second bill shortens significantly the “look back” period from 1981 to 1991, and going forward will be a rolling 22 year “look back” starting in 2017. The bill also changes how companies can be audited, specifying they must first be offered the opportunity to enter a Voluntary Disclosure Agreement program. The State Chamber was involved in the process from the outset, and is pleased to see sustentative modifications made to the program. Privacy Policy Based on California statute, this technical and complex bill proposed by the Attorney General’s office, has the following impact impact to the Delaware business community will be that for any business that operates a website that collects personally identifiable information, the company must post prominently on their website a privacy policy outlining what information is collected and how it is handled. The Attorney General’s office has pledged to draft the policy statement, with the input of the State Chamber and other business groups, and provide it for free so that it both meets the requirements, and does not force businesses to spend upwards of $5000 to have language drafted by legal counsel. Budget As mentioned above the budget this year was a difficult process for the General Assembly to undertake, and ultimately did nothing to plan for the next fiscal year. The State Chamber was disappointed that one-time monies stemming from bank mortgage settlements were used to fill budget gaps, that there was no included requirement that state employees contribute more to their health insurance costs, and that no serious review of overall state spending was undertaken this year. The State Chamber will continue to review areas in which the state can be more effective and efficient when creating its budget. Next Year According to the June Delaware Economic and Financial Advisory Council report, the state faces upwards of a $160 million budget shortfall for FY2017. What this means for the business community is that the needed money will come from either agency and program cuts or through increases in taxes, or, more likely, a combination of both. Already on the table is a proposal to add two top tiers of personal income tax levels as well as a proposal to increase corporate franchise tax thresholds. These come on top of earlier proposals to cut corporate income tax rates, and increase the Gross receipts tax. The State Chamber is on record urging the General Assembly not to simply raise taxes to close budget holes, but to focus first and foremost on areas in state government that can be trimmed or eliminated. The state has contracted with Pew Charitable Trusts to review the budget process and other groups have commissioned their own studies to find ways to make Delaware leaner. Next year will be a test of how well our elected officials lead. It’s also important to remember that next year is an election year, and that simple fact always throws a number of monkey wrenches into the process. The State Chamber will be on hand as the voice of Delaware business to ensure our elected officials know how their decisions impact the future of Delaware business. The Delaware State Chamber of Commerce is supportive of the $30MM in additional revenue allocated by the General Assembly slated for transportation infrastructure investment, although it falls short of the proposed $50MM discussed at the beginning of the year.
“The passage of HB140, along with the transfer of $5MM into the General Fund means a total of $60MM in dedicated infrastructure investment,” said DSCC president Rich Heffron. “Though we had hoped for a total of $100MM to help fill the expected $780MM hole over the next few years, this is definitely a step in the right direction. The inclusion of a “lock box” provision and prevailing wage reform were welcome, and substantial, additions to the legislation. We hope when the General Assembly comes back in January they will make a concerted effort to continue to address Delaware’s desperate need for infrastructure investment.” About the Delaware State Chamber of Commerce The mission of the DSCC is to promote an economic climate that enables businesses of all sizes and types to become more competitive in a constantly changing, increasingly global, and unpredictable environment. The Small Business Alliance, a sub-committee of the DSCC, serves Delaware businesses with fewer than 150 employees. The DSCC is the principal political advocate for business interests of all sizes. For more info, visit www.dscc.com. Follow us on Twitter @DEStateChamber. By James DeChene
The State House of Representatives today took the first official step in reaching a proposed $100 million total infrastructure deal. Tasked by Governor Markell to find $50 million, the first bill in a package of legislation was heard in, and released from, the House Revenue and Finance Committee. Why is this important? Delaware’s infrastructure is suffering from a lack of investment over the years due to a number of factors, including a tough economy, cars and trucks getting better fuel mileage (less gas tax paid at the pump), and the number of projects outstripping overall funding (DELDOT faces a $800 million shortfall over the next 5 years as projects continue to pile up). The money in the state Highway Trust fund goes to more than just roads. All projects undertaken by DELDOT are funded through the HTF, including rail, bridge, road and drainage pipe work, among others. HB 140 raises $23 million in new revenue by raising .5% the fee paid on the sale of automobiles, along with a range of DMV fee increases. The bill will be heard on the floor tomorrow, where it will be voted on by the House. The next steps, if passed, are to go through the Senate committee and floor vote, where it will be signed by the Governor. 2 remaining pieces are awaiting action, including the transfer of DELDOT operating expenses out of the Highway Trust Fund and into the General Fund, as well as some sort of tax on gasoline, either at the wholesaler level, or at the pump. |
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