   The reports of Americans’ displays of compassion for, and solidarity with, the victims of September 11th’s events presented the most heartening example of a caring people who would not stand by as their fellow citizens suffered. It was clear from the moment the first plane hit the World Trade Center that our states truly are UNITED.
   From the New York public servants who risked, and in too many cases gave, their lives to the millions who immediately flocked to Red Cross centers to give blood, there was never a question of America’s resolve to help with the situation. And, as we would expect, the housing industry jumped in with both feet.
   Immediately following last week’s attack on America, the National Association of Realtors (NAR) responded by setting up a “REALTORS housing relief fund,” designed to “help pay mortgages and rental costs of the families devastated by the attacks in New York and Washington.” To open the fund, the NAR made an initial contribution of $1 million.
   The National Association of Home Builders was at its Fall Board of Directors meeting, in Hawaii, when the attack took place. But by Friday they announced the establishment of the “Home Builders Care Victim’s relief fund, set up through the National Housing Endowment, the philanthropic arm of NAHB, with a goal of collecting $5 million (roughly $25 per member).
   Now, as America deals with the aftermath of last Tuesday, the Builders Association wants to show its support. So, the September 26th meeting will focus on the political and international situation, and the relief effort.

NAHB Relief Effort:
By Wednesday we’ll have full details of the “Builders Care Victims’ Fund” and will explain the details as to how are members can get involved.

The International Situation:
Joining us that evening will be Mike Kelly, currently Public Affairs Director at Mott Community College. Mike has a strong education and background in Foreign Relations, has traveled extensively in Europe, and maintains many close relationships.

Also, a report from Consumers' Energy on a new gas meter program.

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Business News & Issues

   Auto sales were fell in August, but not as much as originally expected. However, GM still expects third quarter output to fall 6.6% from 2000’s level, and fourth quarter production down 3.3% from last year.
   Ford anticipates reductions of 12% and 8% respectively.
   The nation’s two largest auto companies saw sales slip 7.6% and 7.5% last month, while the Daimler/Chrysler group’s sales plunged 24% from its all time August record set a year earlier. But despite slower sales and expectations for the final half of the year, industry officials continue to see 2001 as the third strongest sales’ year in history.
   Not all GM and Ford corporation brands had off months, as SAAB and Volvo experienced double digit gains. Toyota also showed strong sales, up 7.2%.
   For the first eight months of the year, total vehicle sales are down 4.9% from 2000. However, Big Three sales are off 9.5%, to just under 7.3 million., as their collective share fell by 3.2%, from 66.3 to 63.1%.
   Japanese nameplates picked up most of the Big 3’s decline, rising 1.7%, as Korean brands increased their market share by 0.9% and European nameplate brands gained 0.5%.

   Sales appeared to be picking up in the first ten days of September, as they were down a modest 3% from the same period of 2000. However, beginning with Tuesday’s tragedy, the daily sales rate plummeted, from 35% on the 11th, to 42% on Friday.

   In this column two weeks ago we wrote about the most recent edition of the emergency farm bailout, and its $5.5 billion price tag which was intensifying the drain on the, already disappearing surplus. In the note, we stated that the drain could have been worse, as Congressional Democrats wanted $2 billion more. Well, in a sense of fair play, we may as well look at what Republicans are planning.
   Last week the Wall Street Journal wrote that, despite administration “misgivings, House Republicans are expected to plow ahead with a massive farm bill that will more than wipe out the remaining non-Social Security budget surpluses projected for the next few years.”
   Their plan, a $168 billion bill, would add $69.5 billion in direct government agriculture spending over the next ten years, similar in effect of an additional ten years of emergency farm aid at similar rates to those of the past four years. Of course, that wouldn’t prevent additional “emergency farm appropriations,” as the Congress has agreed to every year since the Freedom to Farm Bill’s been in effect.
   And, if that $69.5 billion raise sounds doubtful in light of recent events, think again ... control of Congress is at stake, and the Democrats are also focused on the farm states.

   Finally, this is no surprise to anyone paying Blue Cross premiums, but at least they’ll know they’re not alone. A BusinessWeek article featured the Health insurance cost crisis that’s hit America’s businesses, noting that premiums soared 11% on average this year, and companies are expecting an 13 to 16% rise next.
   Many employers have gone to plans raising deductibles, while others are forcing employees to pay part of the premium.
   The problem relates, primarily, to all the new drug opportunities and the propensity of the aging baby boom generation to use them ... somewhat amazing as they’re old enough to remember when health insurance was designed for catastrophic illness.

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The day we learned so much!

   When I came to the office last Tuesday, I was already angry. My anger was in response to issues the Flint Journal had dealt with the two previous days: The first was a story about programs to preserve Farmland; and the second was a report on the amounts of federal aid Michigan farmers received in 2000.
   These articles came on the heels of the reports earlier in the month that, not only did cong-ress approve an additional $5.5 billion emergency farm bail out (for the fourth consecutive year), its leaders were planning a budget busting $69.5 billion increase in FDA appropriations over the next decade.
   Frankly, I don’t have a real problem with the bailout. Over the past several decades the government's policies have been as much to blame for farm problems as the recipients themselves. However, I’m puzzled, by this continual effort to keep farmers on the take.
   Historically government policy has encouraged failing businesses to move into more profitable industries. Now, we seem to encourage an industry that continues to produce far more than is potentially marketable.
   Think of the concept. States all across the nation are coming up with programs to pay farmers, with public funds, so they can continue to collect more public funds.
   The Sunday Journal article told of the programs, current and planned, to keep farmland agricultural. And the Monday article told of the $500 million in government subsidies that were paid to Michigan farmers, much of it due to low grain prices due to overproduction. Where’s the public benefit in spending additional funds to aggravate this situation further?

However, by 9:00 a.m. the farm situation seemed inconsequential, in comparison to what was taking place on the east coast. There’s little to say that hasn’t already been said in regard to the events of September 11th. But what stood out and, yes, brought tears to my eyes almost hourly, was the response of the American people. It made me realize that a statement we, in the housing industry, have frequently made needed clarification. Yes, “the strength of America is in its homes.” But it’s not in the bricks and timber. It is, in fact, in those who inhabit our nearly 100 million dwellings.

Barry

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Taxation and Finance ---- Sales and Use Tax for Contractors

   The construction industry is mostly made up of businesses which construct or make improvements houses, buildings and undeveloped land (real property). In all but five states (Arizona, Hawaii, Mississippi, New Mexico, and Washington), construction firms do not have to collect sales taxes on the services they provide. However, they're treated as consumers of supplies and materials used in construction projects and must pay sales or use taxes at the time of purchase. The states that require construction contractors to pay sales tax on purchases may provide exemptions to this general rule. Whether you qualify for the exemptions will not only depend on the types of contracts that you negotiate with your clients, but also who your clients are (for example, are they non-profit or governmental agencies).
   There are also other issues that affect your tax liability, such as whether you business is a reseller of property, andwhich state you should pay taxes to, for jobs that you do out-of-state.
   In the following analysis, we're going to look at these issues and address possible solutions that may help you in your business as a construction contractor. As a construction contractor, the type of work you typically do for customers is related to the construction, improvement, modification, or demolition of buildings and land ("real property"). Generally, work is done under a signed written agreement with your customer that lays out the terms of the work to be done, the type of materials to be used, and an estimate of the total cost of the job. When negotiating a construction contract, most contractors use either a "lump-sum" contract or a "time and material" contract. While other types of contracts may be used in contracting with the government, these 2 are the most typically for nongovernmental contracts.
   With lump sum contract, you are agreeing to perform the contract for a lump-sum amount. This amount will include materials, supplies, services, overhead and prof-it all "lumped" together in one line item. Using a time and material contract, the stated contract amount will be based on and include actual rates for all workers at the site, and separately charge for supplies and materials used. In fact, you may even bill separately for overhead and profit margin. In some states, the type of contract you decide to use may have an effect on the timing of when you will have to pay sales taxes on materials and supplies purchased. For example, if you're putting up a building for a customer in Florida, you'll have to pay sales or use taxes when you purchase supplies and material if the construction contract is a lump-sum contract. In the alternative, if you separately state and itemize the materials, supplies and labor in a time and materials contract, then the state will treat you as a reseller. This means that you will not pay sales tax when you buy the materials and supplies. Instead, you must charge sales tax to the customer on the materials and supplies and will incur sales tax liability when your customer finally cuts you a check.

R, P & T

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New Consumers’ Energy Program Change in gas meter setting policy

  On October 1st, Consumers Energy will begin a new program which will involve setting gas meters “before the customer’s fuel line in run.”
   This alteration of policy is directed at new single family homes and allows Consumers to set the meter, within 5 business days after service has been installed, “even if the builder doesn’t have the gas line tied into the tied into the gas meter template.”
   This program applies to gas service requested by a builder, with the standard, 250 Metris, meter installation.
   Previously Consumers required, at least, a fuel line and one appliance to be present prior to setting the gas meter. Now, once they receive notification that the gas service has been installed, they will auto-matically issue a gas meter set and turn on order, and schedule it for the 1st available date.
   If the builder’s fuel line is tied into the gas meter’s template when Consumers’ employee arrives, he (she) will set the meter and turn on the gas. If the fuel line’s not tied into the meter template, he will merely set the gas meter with no fuel line meter assembly and turn the gas on. Since the meter will be turned on, the monthly service charge ($6.50) will begin immediately, and any gas used will be billed.

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Beyond Seinfeld: It’s still about "Nothing" in particular

New Study Solves “puzzle” of the “marriage premium”
   We hear so much about the “marriage penalty, but not so much about the “marriage premium. Well, last week’s issue of BusinessWeek asked the question, “what explains the so-called marriage premium, the fact that married men tend to earn more than single men of similar backgrounds and education?” There are several theories on this phenomenon that’s divided economists for years.
   Well, a new study in the journal “Economic Inquiry” seems to have solved the puzzle. In its analysis of data covering nearly 2,700 men, the authors found that married men earn 12.4% more per hour than their single counterparts, after adjusting for age, work experience and education. What they found is that the marriage premium reflects, more than anything else, the “likelihood that wives shoulder household tasks.” The researchers found that the wage gap declines as wives put in more time working outside the home. While married men whose wives aren’t employed earn 31% more than men who were never married, men married to women with full time jobs earn only 3.4% more.

Hidden Tax Increases to begin showing up in ‘02
   The Wall Street Journal reports that hidden or tax increases, like limits on itemized deductions and phaseout on personal exemptions, will show up next year on filers with high income levels. For most the adjusted gross income level above the itemized deduction limit will rise to $137,300. The threshold for the personal exemption phaseout for married couples will rise to $206,000. On the brighter side, the standard deduction will rise to $4,700 for singles, and $7,850 for married couples.

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Association News and Events -- Fall Schedule Begins; Parade date near

As we were preparing for the first of our upcoming promotional events and our first General Membership meeting of the Fall we, like the rest of America, felt shocked and helpless by the events of last Tuesday. However, with a fax from NAHB last Friday, we immediately had a vehicle to show our concern (see Article 1).
However, we, like the rest of America, must return to a semblance of normalcy, and we’ve got a number of activities that are kicking into gear as we put summer behind us.

Were only 16 days away from the kick-off of the Fall Parade of Homes, and we’re finalizing advertising and promotional activities at the moment. The 21 model event will begin Saturday October 6, and run through the 21st, with normal fall hours.

Housing Quarterly magazine is scheduled to be mailed next Friday, September 28. With 64 pages, it will feature the usual look at housing in the metropolitan area, along with the major impact the industry’s had on keeping the nation’s economy out of recession during the first half of 2001.

As the 2000-01 school year came to an end last Spring, the BAMF committee that was working with Skill Center staff, reported a new plan to enhance the value of its Building Trades program. Next Monday is the first meeting of the school year where we will begin the process of putting the new program into effect. (Report Wednesday)

The Drain Commission has formed a committee to study the issue of non-point pollution and recommend compliance with coming Federal Standards. Vic Lukasavitz, Blake Rizzo and Barry Simon were appointed.

Economic Update: “big” question; what’s the impact of 9/11?

Note: We’ve received a relatively large number of calls from builders since last Tuesday, regarding the effects of the attack on America on the housing market, and the economy in general. Since the events of September 11, there have been a multitude of articles and news discussions on the latter. Rather than a normal Economic Update, the following is a general summary of those articles and discussions.

   With growth already nearing negative numbers as we awaited the Commerce Department’s final revision on Gross Domestic Product (GDP), concerns of slipping into a recession were already burdening the collective American psyche prior to last Tuesday’s attack on the nation. And, as the shock subsided, and America began its return toward normalcy, the impact of September 11 weighed heavily on the minds of many.
   Beginning this past Sunday, public discussion began to intensify beyond sorrow and retaliation, to include some semblance of focus on the economic impact, particularly in regards to consumer confidence and viability of certain industries that were hit the hardest by the the actions that brought about, what many call the darkest day in American history.
   If the 2nd quarter GDP data is revised downward, it’s likely that the nation will “technically” be in recession at the end of the 3rd quarter. As consumer spending was already waning, it’s likely that the decline from the immediate shock will be enough to bring 3rd quarter GDP numbers into the negative range; meeting the definition of recession, two consecutive quarters of negative growth.
   However, there are two primary factors that are primed to bring a quick turn -a-round. First, the American spirit continues to remain strong, suggesting the loss of consumerism will be shortened. And, secondly, the continual decline in business inventories since January will require replenishing in the near future, suggesting an imminent upturn in the manufacturing sector.
   So, although most economists have downgraded their forecasts for the remainder of ‘01, there seems to be little concern about a long term slowdown.

Consumers’ Confidence
In most crisis situations, consumers are expected to withdraw. However, the wave of patriotism that’s engulfed the American public, in support of the victims, suggests a more forward looking people. Furthermore, the confidence expressed in the nation’s leadership is almost unheard of. So, consumer activity could easily return to normal levels in a matter of weeks. In fact, a report this (Wednesday) morning said retail sales fell 1.4% last week, their largest weekly decline since March 31. However, it also noted that by the week- end, sales returned to “a near normal pace.”
So, barring another attack, there's little reason to believe that consumers will hold off for long, before returning to normal.

Stock Market
   Despite the sell-off on Monday when the stock exchanges reopened, there was no sense of panic. In fact, roughly 70% of the drop in the DOW Jones average took place in the first hour of trading, and much of the subsequent sell-off took place in the airline, tourism & entertainment industries, which reflect concerns about the public response to new rules and regulations.
   By Wednesday morning, the markets were relatively calm as investors seemed to be waiting for the Fed’s report at 2:00 p.m.

Mortgage Rates
   Financing costs of a home were at their lowest level of the year, as of last Friday. And, in anticipation of the Federal Reserve’s cut on Monday, bond values soared at the end of last week, causing yields to plummet to the 4.6% range, resulting in a continued downward trend in mortgage rates. By Tuesday rates were reported in the 6.4% range.

Housing Industry Update

Big Builders Pushing
   A rather surprising article appeared in an August Wall Street Journal edition relating to large developer/builders reaching out to the energy conscious buyer, focusing on California where energy scarcity made headlines all summer. Noting a host of factors—including “government incentives, more-affordable solar and other equipment and the potential for fewer battles with nearby residents and environmental groups—developers are building homes that are promising energy savings and a secure supply of electricity,” as they enter an “arena formerly the domain of custom home builders.”
   The feature explains how the energy crisis created opportunities for discounts and marketing enhancements, and continue to government incentives, including expedited permit approvals and lower permit fees.
   Nearly 70 utilities offer financial incentives for homes built in compliance with the Environmental Protection Agency’s “so-called Energy Star rating.”
   The article further pointed out that “mass production developers are taking advantage of rebates on solar projects,” with states like California and Florida refunding up to half the cost of the systems.

Public land logging
With massive demonstrations by environmentalists going on outside, logging executives sat inside the Bureau of Land Management office in Salem (OR), bidding on acres of Federal Timber at the bureau’s land auction early this month. What was formerly common practice in this timber dependent area was the first of its kind in several months, as tighter logging rules and a barrage of environmental lawsuits have nearly brought public land auctions to a halt.
An A.P. report on the auction gave the following figures:
· Last year, the bureau’s Oregon sales were equivalent to 69 million board feet of timber
· In 1990, its sales were nearly 20 times that, 1.17 billion board feet
· This year, officials are projecting 23 forest land sales amounting to just 52 million board feet, nearly 25% below last year’s level.
· In the Pacific Northwest, the industry was counting on a billion board feet per year, but doesn’t expect to see 10% of
· it this year, which is the primary reason dependence on foreign timber has risen from 20% to 40% since 1992
· Employment in Oregon’s lumber and wood products’ sector fell 24% over the past decade
In the Veritas cover story (8/17 Article 1) regarding the 19% tariff on Canadian timber, we noted a Wall Street Journal editorial mocking the decision as a “South Park strategy.” Its comments also attacked the timber industry for its passivity on the real problem, too much land out of harvest.

Look Here for Previous Issues of Veritas

Housing comes together for victims Meeting to focus on last Tuesday’s events; housing’s response

The day we learned so much!

Taxation and Finance ---- Sales and Use Tax for Contractors

New Consumers’ Energy Program Change in gas meter setting policy

Association News and Events -- Fall Schedule Begins; Parade date near