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Summer 2008 OCMA News |
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Summer 2008 OCMA News |
SUMMER 2008 OCMA NEWS Healthy Families Act Sure Isn’t Healthy for Ohio Manufacturing The future of your company and the Ohio economy is at risk because of a ballot initiative mandating that Ohio businesses must provide sick leave to their employees. This is very serious and all OCMA member companies and their employees need to understand the potential for disastrous outcomes if this ballot initiative passes in November.
As discussed by OCMA General Counsel Mike Frantz, Frantz Ward LLP, at the OCMA HR Committee meeting in June and the OCMA annual meeting in July, the so-called Ohio Health Families Act (OHFA) would require employers with 25 or more employees to provide seven (7) days of paid sick leave each year to employees working at least thirty (30) hours per week. Part-time employees would be entitled to pro-rated sick leave under the initiative. The time off can be used for: 1) the employee’s own illness, injury, or medical condition; 2) to obtain a medical diagnosis or preventative care; or 3) for these reasons applying to an employee’s child, parent, or spouse. Importantly, the initiative outlines several measures that make the provision of time off even more harmful to your company’s operations. Sick leave can be taken in the smallest increment in which your company calculates other leave time. If your company tracks time in fifteen (15) minute increments, employees are allowed to take this minimal time off as sick time. Unless an employee is absent for three (3) consecutive days, no medical certification/verification can be required. Even if an employee is required to provide medical certification, the employee is not required to provide such certification for thirty (30) days after the event. Additionally, employers may not: 1) discharge or discriminate against an employee for using sick leave; 2) use sick leave utilization as a negative factor in any way for employee evaluation or hiring; or 3) count the use of paid sick leave under a no-fault attendance policy. Even employers who already have generous sick leave policies may incur additional cost. Though the OHFA states that employers who already provide leave that is “at least equivalent” to that required would not have to modify their policies, it is not clear what “equivalent” means. Adding to the confusion, the OHFA prohibits employers from eliminating or reducing leave in existence on the date of enactment in order to comply with the act. This raises fears that even employers that already provide sick leave will be required to provide an additional seven (7) days of leave. Mike Frantz warned “ Most problematic for employers is the fact that the OHFA creates a new right to sue for any violation of its provisions or for any alleged retaliation against an employee related to the sick leave policy. The act further allows successful litigants to recover treble damages and attorneys fees from employers who are found to have violated the OHFA.” Recent polls indicate that this issue is currently polling with approximately 70% approval. It is imperative that OCMA member companies make every effort to educate themselves and their employees about the dire consequences that could follow if this initiative is enacted. The matter of the cost of the leave is one thing, but just as importantly to our industry is the outright removal of your capacity to manage production time. With employees calling off at the last minute or showing up to work fifteen (15) minutes late and saying they were sick, this initiative will guarantee that no new manufacturers will be locating in Ohio and unfortunately many such companies will be leaving Ohio. OCMA will be monitoring this situation closely. Governor Strickland has been trying to convince both sides to come to some workable compromise that would mitigate some of the issues raised by business. However, this initiative was placed on the ballot in a cynical political move to drive Democratic voter turnout in November so a compromise is unlikely. Assuming the ballot initiative moves forward, OCMA will plan to have a workshop prior to the election to advise OCMA members about what actions they should take to minimize the potential impact of this initiative on your company. OCMA Presents Annual President’s Awards
At the July 17th annual meeting of the OCMA, outgoing OCMA President Jeff Otterstedt, Clow Water Systems, presented the “Company of the Year” award to OCMA Past President George Deckebach, representing Miami-Cast, Inc. and the “Supplier of the Year” award to Craig Schmeisser and Mike Blankestyn, RMT, Inc. The awards, established more than a decade ago in 1994, recognize the value to OCMA of contributions made by its member companies and the individuals who give their valuable time to advance not only the OCMA, but also more importantly, the metal casting industry in Ohio. George Deckebach was virtually drafted to become OCMA Vice President in 2005. Several foundry closures had reduced OCMA leadership severely, but George was nearing retirement and was reluctant to take on this additional responsibility. Thankfully he accepted. During his tenure as President, the Ohio metal casting industry faced a severe challenge from OSHA. OSHA established a Local Emphasis Program (LEP) for Primary Metal Industries including foundries. Under George’s leadership, OCMA convened a January 2007 meeting with OSHA Regional Director Nancy Newman, Safety and Health Attorney Rebecca Bennett, Frantz Ward LLP, and Safety Consultant Jack Schuldt to alert OCMA membership to the challenge. OCMA also sponsored a health and safety workshop in March 2007 to assist OCMA members prepare for their LEP inspections. The July 2007 OCMA annual meeting featured a presentation on global warming and the threat from Lieberman/Warner, well before the Congress took up this dangerous proposal. Lastly, George established and chaired an OCMA subcommittee that explored the long-range financial future of OCMA. The subcommittee discussions led to the first ever Strategic Planning meeting that set forth OCMA objectives for the next 5-10 years.
The supplier of the year award was presented to RMT, Inc. based upon the critical support that Craig Schmeisser and Mike Blankestyn provided to the industry effort to minimize the burden of the USEPA Area Source Rule for Iron and Steel Foundries. As early as 2006, Craig was instrumental in convincing the AFS Area Source Working Group to challenge several of USEPA assumptions in preparation for the rule making. Along with other OCMA members participating in the Working Group, Craig argued that small foundries must be represented in the deliberations despite their lack of attendance at the meetings in Schaumburg. Working with Mike, Craig became the industry expert on the cost effectiveness and economic impact of the USEPA area source proposals and their data crunching demonstrated to the OMB experts that the USEPA proposals would put smaller foundries out of business if implemented as proposed. Craig was involved in high-level negotiations at the White House during the last days before the USEPA final proposal was made. His advocacy for the metal casting industry and especially small foundries was critical to the AFS Working Group’s success in exempting small foundries from onerous regulatory burdens. OCMA President Jeff Otterstedt, Clow Water Systems, presented a special Iron Pourer Award to OCMA Environmental Affairs Vice President Ryan Burke, OSCO Industries, Inc. for his yeoman’s work on the Area Source Rule for Iron and Steel Foundries. Ryan was a “voice crying in the wilderness” as the AFS 10-E Committee began its deliberations on the Area Source rule in 2006. Ryan was persuasive that the proposed rules were extremely burdensome on small foundry operations, that they went beyond the letter of the law, and that they threatened the very viability of the metal casting industry. Ryan argued successfully that small foundries needed to be represented on the AFS-formed Working Group and encouraged the Working Group to allow telephone conference call capability so that small foundries could participate in the meetings held in Schaumberg. Ryan argued relentlessly that the USEPA proposals would create unnecessary burdens on all foundries but especially smaller ones. He was particularly adamant when USEPA was prepared to place MACT-like regulations on area sources. Ryan along with Craig & Mike and other OCMA members had a tremendous impact on the final Area Source Rule for Iron and Steel Foundries. Without their strong leadership, the rule would have been much more burdensome, especially on smaller foundries
MEETING UPDATE
On Thursday, July 17, 2008, fifty (50) representatives of OCMA member companies attended the OCMA annual meeting in Columbus. The Honorable Larry Flowers, (R-19th District Canal Winchester), was the luncheon speaker. Rep. Flowers serves as the Majority Floor Leader, the third most powerful position in the Ohio House. He has been supportive of business in general and manufacturing specifically during his career in the House. The key points of his presentation are summarized below. 1. Rep. Flowers reminded the members that when Ohio Speaker of the House Jon Husted became speaker he held a retreat for the Republican members and they developed a “mission statement”. The mission statement included a commitment to revitalize Ohio’s economy and to return budget discipline to the House. The last two budgets enacted have had the smallest increase in forty years. 2. He outlined one of the problems of keeping the budget under control. Prior to becoming a state representative as a Fire Chief he considered a cut in his budget as one in which the monies available for the next year were less than the monies available for the next year. However, he has experienced a different definition as a legislator. Now, a cut in the budget is defined as when a state agency does not receive the budget request they made to the budget committee. If the agency asked for a 12% increase and they only received a 6% increase, this is considered a cut. 3. He reminded the members that the Republican House initiated
the major tax reform package that included elimination of the
hated tangible personal property tax and a 20% reduction in personal
income tax liability. He warned the audience to be vigilant concerning
the tax reform package. He indicated there are various groups
that would like to see the reforms changed. 5. He is very concerned about the Health Families Act (HFA) initiative. (See front-page story). He indicated that many of the state legislators are working to “turn around Ohio” and he fears that the imposition of the HFA would represent a “u-turn”. He urged the members in the audience to deliver a message to their community that this initiative would be very bad for business and very bad for Ohio. He believes that Ohio needs more “business friendly” legislation and greater funding of higher education to assist in improve the Ohio economy, not punitive measures that are likely to chase potential employers away.
1. “The Research & Experimentation ( R& E) Tax Credit rewards risk-taking companies who invest resources in innovation and improvements that help expand the economy.” IRC 41 governs the R & E. It is a wage-based credit that may be applied retroactively, meaning credits may be claimed in the last three tax periods. Unused credit can be carried forward twenty (20) years. 2. The tax credit is one credit favorable to business that is supported by both Republicans and Democrats. A company utilizing the credit gets to expense wages AND take the R & E credit. Federal refunds are tax-free and interest is paid by the government on refunds. 3. Professional fees paid to suppliers helping to determine whether a company is eligible for the R & E credit are deductible. Fees associated with obtaining patents qualify for the tax credit. 4. “Qualified Research Activities” are those that result in a new or improved business component. A “business component” is any product, process, technique, formula, invention, and/or software that brings about improvement. Improvement does not have to be significant. Technological criteria requires a process of experimentation that must fundamentally rely upon principles of science including physical, biological, engineering, chemical, and/or computer sciences. “Discover” means to gain information new to the taxpayer (company) that is not freely available to the public. 5. “Qualified Research Activities” must be directed at the elimination of uncertainty. The information to be gained in the research must be intended to eliminate uncertainty. “Uncertainty” exists if, at the outset, the available information does not establish the taxpayer’s capability, method, or design of the business component. 6. “Qualified Research Activities” must include a process of experimentation. Research must substantially relate to new or improved function, performance, reliability, durability, or quality. Experimentation is the evaluation of multiple alternatives, including developing and testing hypotheses—systematic trial and error. Experimentation goes beyond “lab work”. It includes conference room and design/simulation time as well as shop floor experimentation time. 7. “Qualified Research Expenditures” are those made during the process of the Qualified Research Activities. W-2 wages for individuals directly performing “qualified services” as well as those individuals engaged in supervising and/or supporting those employees engaged in the qualified services. 8. Overall Examples of Qualified Activities for Metal Casters: - Design or Improve foundry equipment; 9. Specific Examples of Qualified Activities for Metal Casters: -Design and install a new melting system; 10. The Ohio Research and Development Investment Tax Credit is a non-refundable credit equal to seven percent of QREs (Qualified Research Expenditures) incurred in the stat e that exceed the taxpayer’s average annual QRE’s for the prior three years. During the franchise tax phase-out and the Commercial Activity Tax (CAT) phase-in, the research credit is applied against the franchise tax through the 2008 franchise tax report. The credit then automatically converts to a non-refundable credit against the CAT. The taxpayer can apply franchise tax credit carry forwards against its CAT liability for tax periods beginning on or after July 1, 2008. Mr. Wile’s PowerPoint presentation is available from the OCMA office. If you are interested in a copy, please call or e-mail.
Mr. Tom Froehle, McNeese Wallace & Nurick LLC, discussed the recently enacted electricity restructuring bill, Amended Substitute S.B. 221. The compromise bill was hammered out after tough negotiations between the Governor, large electricity users, and the utilities. The main thrust of the consumers of electricity was to avoid horrendous price increases that had taken place in states that had deregulated electricity pricing, but where a competitive market had not developed. Although many questions still remain about the ultimate impact of the electricity legislation, it is viewed as a victory for consumers at this point in time. The key points of his presentation are presented below:
2. Am. Substitute S.B. 221 follows Ohio’s failed experience with deregulated electricity production. In 1999, the Ohio General Assembly enacted S.B. 3, which intended to create a competitive market in electricity in Ohio. Ohio along with twenty-three other states passed deregulation legislation and anticipated that competition would improve service and pricing in the electricity industry. 3. Unfortunately, the deregulation experiment did not work well if at all. A market did not develop during the market development period and the PUCO had to intervene in 2005 to prevent outrageous price increases through rate stabilization plans. However, those rate caps were set to expire in January 2009, at which time Ohio utilities could switch to market rates. 4. In other states that had deregulated and gone to market rates, the results were disastrous. In Maryland, the initial rate increases exceeded 70% and in Illinois, more than 50%. The Ohio General Assembly enacted Am. Substitute S.B 221 to avoid that happening in Ohio. All of the groups involved in the legislative battle deserve credit for their ability to compromise including the utilities. It was a very difficult and complex issue and all sides deserve credit for reaching a workable consensus. 5. All utility customers will be under new rates beginning January 1, 2009. However, we do not what those rates will be right now. The utilities are required to file a standard service offer electing either an Electric Security Plan (ESP) or a Market Rate Option (MRO) by August 1, 2008. The ESP is a plan of limited term that largely signals a utilities desire to continue to be regulated. It is difficult to predict what choice the utilities will make, but it is good to remember that utilities are in a “comfortable” business with a guaranteed rate of return under regulation. 6. IF the utility does not file an ESP, but files an MRO it indicates that the utility believes a competitive market exists in their service area and they are requesting the PUCO to approve their request to go to market rates. Any utility filing an MRO can never go back to an ESP and the comforts of regulation. 7. The new legislation requires the utilities to generate 25% of electricity sold in Ohio to be generated from renewable and advanced energy sources by 2025. At least one-half of this standard must be met using renewable energy, with the other one-half coming from advanced energy including co-generation. 8. The new legislation permits special contracts for consumers with unique service requirements including contracts that promote economic development. To get these reduced rates, companies will need to perform certain activities. 9. Manufacturing consumers have an opportunity to create value to their utility to help them meet their requirements for renewable energy generation. For example, co-generation in a foundry may result in value for the utility and lower rates for the foundry. 10. Electricity rates are going to go higher even under the ESPs. The legislation allows for rate adjustments for increasing fuel costs, environmental improvement costs, and other business costs associated with electricity generation. 11. An opportunity exists for large electricity consumers to sell their capacity back to the utility or to reduce their load because the utility can then count as a credit to reaching the renewable requirement.
Vice President of the OCMA Environmental Affairs Committee, Ryan Burke, OSCO Industries, Inc., presented the environmental report. Key issues are outlined below: U.S. Court of Appeals Vacates the Clean Air Interstate Rule (CAIR) The U.S. Court of Appeals for the D.C. District has ruled to vacate the Clean Air Interstate Rule (CAIR). The rule issued by USEPA in 2005 required twenty-eight (28) mostly Eastern states to reduce smog-forming sulfur dioxide and smog-forming nitrogen oxide by about 70% by 2015. A coalition of electric power companies led by Duke Energy filed suit against the rule. The Appeals Court ruled that the Clean Air Act (CAA) did not give USEPA the authority to change pollution standards in the manner in which it did. Most State Implementation Plans (SIPs) relied upon CAIR as a primary control method to achieve air pollution standards for ozone and PM. Without the massive reductions in airborne emissions under CAIR, it is unclear how states like Ohio will be able to meet the National Ambient Air Quality Standards (NAAQS). Unfortunately for manufacturers in Ohio, Ohio EPA was relying upon these massive reductions in power plant emissions to meet NAAQS standards. Without CAIR, further restrictions on other industries such as metal casting could follow. As outlined on Joe Koncelik’s environmental law blog; “CAIR was designed to drive a second wave of major reductions that will be very difficult to replace without some new federal program. If state’s do not meet either the ozone or soot standards, the existing businesses will likely be squeezed for additional air pollution reductions” • OCMA is monitoring an Ohio EPA proposal that would alter
the malfunction rule. OCMA has joined with the OMA, Ohio Chemical
Technology Council, and Ohio Chamber of Commerce to compel the
Agency to amend or drop the proposed rule.
John Kurtz, Kurtz Bros., Inc. provided the report. • Ohio EPA Division of Surface Water indicates that the beneficial reuse rule proposal is still stuck in the Office of General Counsel. The Ohio Revised Code (ORC) does not refer to “beneficial reuse” only to “waste” and this has caused a problem with the proposed rule. The Division of Surface Water is allowing those companies that developed beneficial reuse projects under Policy 400.007 to continue to operate under the outline of the policy. However, any new beneficial reuse projects will need a permit with more testing.
Revised OCMA Dues Schedule Approved for FY 2009-20010 OCMA Treasurer John Burke, OSCO Industries, Inc. assisted by OCMA President Jeff Otterstedt, Clow Water Systems, OCMA Vice President Jim Flanagan, Babcock & Wilcox Company, OCMA Trustee John Vaught, Tri-Cast, Ltd., and OCMA Executive Director Russ Murray discussed the weakened financial status of OCMA and the need for increased revenues. The OCMA officers spoke about the importance of OCMA’s activities that result in less regulation and lower compliance costs for its members such as the recent Area Source Rule for Iron and Steel Foundries and the ARS beneficial reuse study that will great broaden opportunities for beneficial reuse. Burke told the members that OCMA had a unexpected budget deficit last fiscal year primarily due to the loss of Ford Motor Company and Ross Aluminum Foundries as members. The current year budget was also expected to be in the red despite virtually freezing expenses for everything except health care. If OCMA holds on to its present membership, the dues increase which will take effect in April 2009, will increase revenues by just about $12,000. This should eliminate the operating deficit and allow replacement of lost surplus funds. Per the OCMA Code of Regulations, the OCMA Board of Trustees voted unanimously to revise the Dues Schedule that was last revised seven (7) years ago, and the recommendation was subject to a secret ballot vote at the annual meeting. The dues schedule outlined below was approved unanimously.
Dues Category Current Dues Dues Effective April 1, 2009
The Changing of the Guard New Officers and Trustees of the OCMA Board elected at the Annual Meeting are as follows: Officers * President Jim Flanagan, Babcock & Wilcox Company Board of Trustees - Terms to expire in 2011 * Jeremiah Clegg, Burnham Foundry LLC. |
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