Following the tragedy of 9/11, the federal government scrambled to find legislative solutions that would provide a kick-start to a struggling American economy. In 2002, Congress passed and the President signed the Job Creation and Worker Assistance Act, which in part included tax incentives intended to spur equipment purchases by companies that could write off new equipment and put it in service in a short amount of time. In 2003, NUCA teamed up with its friends at the Associated Equipment Distributors (AED) to survey NUCA contractors to determine what impacts the depreciation tax bonus and small business expensing levels contained in the 2002 stimulus package had on the purchasing habits of utility contractors. NUCA and AED recently conducted a similar survey, but this time the data showed a very different picture.

That Was Then

The 2003 NUCA/AED survey results suggested a strong correlation between capital investment incentives enacted by Congress and equipment purchasing by businesses. Put simply, the 2002 capital investment incentives worked as intended. Here were some of the findings:

• Sixty-seven percent of respondents said that the tax provisions had prompted their companies to invest in new equipment in the prior 12 months.
  
• Sixty percent said that their companies had been prompted to purchase equipment in the previous 12 months because of the depreciation bonus.
  
• Ninety percent indicated that expansion of the depreciation bonus from 30 to 50 percent would lead their companies to purchase or to consider purchasing new equipment, with 33 percent saying that their companies would definitely purchase new equipment if the depreciation bonus were to be expanded.
  
• Seventy-two percent stated that increasing the small business expensing levels would lead their companies to purchase or consider purchasing new equipment, with 26 percent saying that they would definitely purchase new equipment if the expensing caps were raised.
  
• Ninety-three percent agreed with the following statement: “The enactment of economic stimulus legislation by Congress that encourages business investment will enhance worker productivity, encourage new manufacturing, create jobs and get the American economy moving again.”

This Is Now

Five years later (February 2008), another stimulus package was signed into law. The Economic Stimulus Act (ESA) reinstated the depreciation bonus and increased Sec. 179 expensing levels to stimulate business purchasing. The provisions allow companies to cut their 2008 taxes for purchased equipment that is put into use this year. NUCA and AED again teamed up to investigate if these similar tax write-offs would stimulate the economy through equipment purchases and new hires. As NUCA suspected, this time around there was more to the story than tax incentives.

The 2008 NUCA/AED survey asked if the capital investment incentives — 50 percent depreciation bonus and increased Sec. 179 expensing levels — provided in the February stimulus legislation were having a positive impact. Here are some of the relevant findings:

• One-quarter of respondents said they had purchased equipment in the first half of 2008 to take advantage of the tax provisions in the ESA.
  
• Twenty percent said they planned to buy equipment in the second half of this year to take advantage of the ESA.
  Sixty percent indicated that they would be more likely to buy equipment next year if these tax incentives were extended to the end of 2009.
  
• More than 70 percent of respondents said that they would be more likely to buy equipment or hire additional employees this year if Congress enacted legislation that increased federal investment in water infrastructure.
• This recent data reflects the dramatic change in the market over the past five years as a result of an ongoing war, a struggling economy, the downturn in the housing market and the overall lack of federal investment in America’s water and wastewater infrastructure.
  

Take a look at some of the comments in response to the following question:

“If you haven’t bought equipment to take advantage of the capital investment incentives in the Economic Stimulus Act, why not?”

• “There is not enough work to justify equipment purchases.”
  
• “Work is very slow, the worst in our 10 years of business; we’ll be grateful if we are able to keep paying for what we have.”
  
• “No work!”
  
• “Business has fallen so far off that it doesn’t make sense to spend any money at all. I am more worried about the survival of my business than the profitability after taxes.”
  
• “Why have it sit in our yard depreciating? We need a stimulus package for growth.”
  
• “We still have approximately 25 percent of our existing equipment fleet sitting idle because of the lack of construction projects. It would make no sense to buy more equipment regardless of how great the incentives are if we are unable to put it to use.”

The message here is simple, and it’s one that NUCA has expressed for years — tax incentives work when there’s enough work out there that provides the incentive to buy. A truly effective stimulus proposal would couple substantial investment in America’s suffering underground infrastructure market with tax incentives to encourage equipment purchases needed to do the work.

NUCA and AED Press Forward

NUCA and AED released this study on July 30 with a press teleconference, which was covered by several national trade and business publications. Additionally, House Transportation and Infrastructure Committee Chairman Jim Oberstar (D-MN), released a statement in support of the study’s findings. “Investment in our nation’s infrastructure has been one of my top priorities for the 110th Congress,” said Chairman Oberstar. “The AED-NUCA study demonstrates why infrastructure investment is so important ... I agree with the report’s conclusion that Congress needs to do more to help get the economy back on track, and investment in our nation’s water infrastructure should be high on that list. The Committee on Transportation and Infrastructure will continue to promote improving and upgrading the nation’s water infrastructure.”

The study was sent to every office in the House and Senate, and NUCA will continue to use the data to support several clean water initiatives to the end of the 110th Congress and into the 111th. We thank our friends at AED, a longtime active member of the Clean Water Council, for their hard work on this effort. We look forward to using this data to our advantage in the future.

Eben Wyman is NUCA Vice President of Government Relations.