AIA Bulletin

For the second consecutive year, Ohio CPAs have amended their predictions for when a sustainable U.S. economic recovery

will occur, expressing continued concerns over sta te and federal financial challenges and a complicated, unpredictable

regulatory environment they say is delaying a turnaround.

Recovery will begin in 2012 or beyond, predicted 64 percent of CPAs responding to the Ohio Society of CPAs’ (OSCPA)

eighth annual Ohio Business Poll this year. In the 2009 Poll, about a third (36 percent) of respondents predicted that the

U.S. economy would begin a sustainable recovery in the second half of 2010 and 26 percent put the turnaround in the first

half of 2011. 

CPAs also gave the Obama administration a ‘poor’ or ‘very poor’ rating for its impact on key national issues such as the tax

climate (79 percent), health care reform (77 percent), the business climate (77 percent) and the national economy (75

percent).

When asked to choose the top three factors delaying Ohio’s economic recovery, CPAs ranked the loss of industry and

manufacturing as primary (73 percent) followed by the state and local tax climate (67 percent) and the unpredictable

regulatory environment (57 percent).

To address Ohio’s financial problems, CPAs recommended that Ohio conduct widespread performance audits to identify cost

savings and efficiencies (61 percent) and establish a long-range financial planning process (40 percent). Both

recommendations were included in OSCPA’s Ohio Budget Advisory Task Force report presented to Gov. Strickland and state

caucus leaders in Fall 2009.

Beyond the budget, CPAs ranked their top recommendations among issues they feel need to be addressed in Ohio over the

next 12 months. They include the following: loss of jobs (88 percent), followed by government regulation (55 percent) and

municipal income tax administration (35 percent).

“Clearly, Ohio has suffered a huge loss of jobs in the recent recession, and that should be a top focus for our elected

officials,” said OSCPA Chair Peter A. Margaritis, CPA. “But there are other pressing issues affecting progress for Ohio that

need to be addressed as well.”

Margaritis said that list includes simplifying Ohio’s outdated municipal income tax collection structure. He explained in a

release that Ohio has 579 municipalities that assess an income tax, and many have diverse filing requirements. “This puts a

regulatory burden on businesses and individuals, increases administrative costs to local government entities and thwarts

Ohio’s efforts to attract out-of-state employers.”

More than half (55 percent) of CPAs responding ranked centralizing Ohio’s municipal tax collection process at the top of

priorities for reform or improvement to Ohio’s business tax structure. Others were ensuring greater uniformity of the

municipal income tax wage base (49 percent) and reducing the impact of or eliminating Ohio’s estate tax (42 percent).

A total of 79 percent of respondents predicted that it will take three or more years for Ohio’s unemployment rate to return

to the 5.8 percent level at the beginning of the recession. However, CPAs were more positive on business investment

prospects in 2011, with 45 percent of those surveyed predicting capital investments would continue at 2010 levels and 35

percent predicting they will increase. Only 15 percent forecast a decline in capital investments for the coming year.

The growing cost of health care remains a big concern for CPAs, with 56 percent of those participating in the Business Poll

forecasting increases of more than 10 percent for their companies and clients in 2011 and 29 percent expecting increases

of between 5 percent and 10 percent. Despite the anticipated extra cost, most said they would continue to offer coverage

to employees, deeming it a critical benefit and competitive advantage.

More than 500 OSCPA members responded to the November survey. Of those, 71 percent work in public accounting, 24

percent are employed in the corporate sector and the rest are educators or government employees.

An architect and past AIA-Ohio President will Chair the most important Committee of the next Ohio General Assembly.  

Senate President-elect Tom Niehaus (R-New Richmond) announced Friday that he will appoint Sen. Chris Widener, FAIA (R-Springfield) chair of the Senate Finance and Financial Institutions Committee in the 129th General Assembly. Widener currently serves as the panel’s vice chairman.

“There is no secret that this is going to be a very challenging budget and that the budget bill is the single most important

piece of legislation we will do next year,” Niehaus said in a prepared statement. “Anyone who has worked with Chris

Widener knows him to be knowledgeable, hard-working, thorough and a good listener. He is the right senator at the right

time to head the Senate Finance and Financial Institutions Committee.”

“My highest priority is to ensure Ohio gets back on sound financial footing so we can create an atmosphere that will bring

new jobs and economic investment to every region of the state ,” Widener said. “I am honored by Sen. Niehaus’ confidence

in me and look forward to digging in and getting to work alongside House Chairman Amstutz and Gov.-elect Kasich on a

fiscally sound, balanced state budget bill.”

Widener has served in the Ohio Senate since 2009, representing the residents of Clark, Greene and Madison counties. Prior

to that, he served in the Ohio House of Representatives from 1999-2000 and then from 2003-2008. A fiscal conservative,

Widener has been recognized numerous times as a “Watchdog of the Treasury.”

He currently chairs the Senate Energy and Public Utilities Committee.

Widener, an architect by profession, resides in Springfield with his wife Sally and two children. Niehaus said that the rest of the committee assignments will be made at the beginning of the next General Assembly which convenes Jan. 3, 2011. However, Sen. Shannon Jones (R-Springboro), who is co-chair of the Legislature’s Budget Planning and Management Commission, has been rumored to be the Senate Finance vice chair pick.

Trade associations of subcontractors and bonding companies are taking Ohio State University to court for not requiring the construction manager of the $1 billion OSU Medical Center Tower to provide a bond guaranteeing payment for labor and materials.

The American Subcontractors Association (ASA), its Ohio affiliate, and the Surety & Fidelity Association of America (SFAA) asked the Ohio Supreme Court to order OSU to require Turner Construction Co., its construction manager for the ProjectONE contract, to furnish a bond.

OSU said in response Thursday that it intends to vigorously defend its interests in the lawsuit.

The project is the largest of three in a pilot program the General Assembly authorized to test alternative methods of managing public construction in the state.

Gov. Ted Strickland and OSU President Gordon Gee broke ground last June for the project that is expected to result in creation of 10,000 full-time jobs. At the same time, university trustees released $925 million for design, construction, and construction management contracts.

The trade associations told the court in an initial filing that state law governing construction of public improvements requires, among other things, that the contracting agency obtain a bond for performance of the work and payment of laborers, suppliers, and subcontractors.

They contend that while OSU’s contract with Turner complies with parts of the law for use of domestic steel and prevailing wage, it fails to require Turner also furnish a bond to guaranty performance and payment of laborers, materialmen, and subcontractors.

The associations said they met with OSU officials in an unsuccessful effort to resolve the matter without a need for litigation.

“Given the size of ProjectONE, the number of first and lower tier laborers, subcontractors, and suppliers it is likely to involve, and the number of years over which construction is already scheduled to occur, the absence of the vital protection and security that the bond would provide places at risk the financial stability of hundreds of thousands of Ohio workers and the viability of thousands of small business employers in dozens of communities throughout the state of Ohio,” attorney John Petro of Columbus said in the complaint.

He requested the court hear oral arguments in the matter.

The OSU Medical Center said Thursday that in its view, the state’s Construction Reform Law (HB 318 ) does not require that Turner furnish a performance and payment bond.

“Ohio State University has secured Turner’s performance by requiring a letter of credit, which is consistent with the national trend of moving away from requiring bonds on exceptionally large projects, such as this expansion,” said David Crawford, senior director-media relations.

“As prescribed in Ohio law, the ‘mechanics lien’ provision applies to this project and provides protections for subcontractors and suppliers to ensure they are paid for their services,” he said.

“Ohio State and Turner have numerous contractual mechanisms in place to protect the interests of subcontractors and suppliers. In addition, the contract requires that Turner supply insurance covering subcontractor defaults to increase opportunities for minority-owned firms and other small businesses who might not otherwise be able to obtain bonds for their work,” Mr. Crawford said.

ProjectONE includes construction of a central, single tower that will house a new Arthur G. James Cancer Hospital and Richard J. Solove Research Institute, along with a new critical care building, integrated spaces for research, education and patient care, and upgrades to existing facilities.

OSU has said 6,000 of the full-time jobs created over the course of the project would be at the medical center. At least 4,000 indirect, full-time jobs would be generated throughout the region from spending by the university, its faculty, staff and visitors.

By 2015, ProjectONE is forecast to pump $4.1 billion annually into the Ohio economy.

During a press conference Monday where he nominated former Director of the Ohio Department of Transportation, Jerry Wray (Newark) to resume that agency’s top job, Governor-elect Kasich also indicated changes would be sought in payment of prevailing wage on construction projects.

“Prevailing wage drives up the cost of every construction project. That’s something that the legislature is going to have to talk about. Look, if you can get more product at a lower cost, I mean, hello, that makes a lot of sense. So we will be pushing these kinds of ideas,” he said.

Funding for charter school construction and more paired-down building design requirements are some of the changes Republicans are contemplating as they prepare to regain control of the agency that has provided districts billions of dollars for new schools.

However, the most immediate change to the Ohio School Facilities Commission is likely to be a reversal of the Strickland Administration policy that allows school districts to apply prevailing wage requirements and project labor agreements to construction contracts, non-voting member Sen. Gary Cates  (R-West Chester) said in a recent interview.

Republican John Kasich’s victory in the recent gubernatorial election means two of the three OSFC voting members will be his cabinet members – Budget Director Tim Keen and Bob Blair the newly appointed director of the Department of Administrative Services. The third member is the state superintendent, which is appointed by the State Board of Education.

Sen. Cates, chairman of the Senate Education Committee, said prevailing wage requirements and PLAs – topics that have been subjects of controversy for the commission since Democrats gained control – would almost certainly be on the chopping block early next year.

“We should not mandate or dictate to school districts what they have to do to participate,” he said.

Prior to Democratic Gov. Ted Strickland’s tenure, Republicans prohibited the labor-friendly contract provisions from school construction projects receiving OSFC funding.

The Strickland-led OSFC removed the prohibition on prevailing wage and PLAs, arguing that local school districts should have the ability to determine labor policies that best fit their needs. Democrats generally argue that pro-union contractors maintain a higher quality of workmanship and ensure better wages for local workers. 

The administration stresses that the labor policy change was permissive and school districts themselves decide whether to apply the provisions, but Sen. Cates charged it had been used for political ends. “There’s an awful lot of intimidation that can accompany that too,” he said.

Sen. Cates said he would like a Kasich-controlled OSFC to allow more flexibility in building design because the current guidelines, such as minimum square footage limits, discourage many schools from participating in the program. Some parochial schools have built lower-cost facilities that are perfectly functional, yet wouldn’t meet the commission’s stringent requirements, he said.

As the program has crept upwards on the “equity list,” which prioritizes poorer districts, wealthier school systems that need facility upgrades often face difficulty in generating the local matching requirement, he said.

“I would like for the School Facilities Commission to include a more basic option, in terms of participation – maybe allow school buildings that don’t have all the bells and whistles,” he said. “We should be looking at how we reduce cost to both the districts and the state by providing more basic options.”

Another change Sen. Cates would like to see is making OSFC funding available to publicly funded, privately operated charter schools – a change that would likely provoke considerable Democratic opposition.

“Charter schools are public schools and certainly if the reason is to provide adequate facilities to school children, I could see doing that because these are not private entities. They are in fact public schools,” he said. “I think we have to remove discriminatory measures against charter schools simply because they’re not the traditional public schools.”

Charter schools often obtain shuttered school district buildings that are in need of costly renovations, he said. “They can go in and make them functional and with some support there, it seems to me that it would be in the best interest to not have to spend money to tear a building down when it can be used.”

Democrats have long criticized the expenditure of public funds on privately operated schools, saying the entities lack accountability to taxpayers and are linked to major GOP donors. The Strickland Administration has tried to restrict funding for charter schools.

Despite Republicans retaking the Governor’s Office, Sen. Cates said he still sees a need for his proposal to revise the appointment process for the OSFC executive director. The bill, SB 175, would transfer appointing responsibility from commission members to the governor with the advice and consent of the Senate.

“I think we ought to do it regardless of who the governor is because it just removes any sort of impropriety that a move was made for political reasons,” he said. “We want to make sure it’s seen as being a public position and not something that can be viewed as being political.”

Gov.-elect John Kasich on Friday continued his steady stream of top staff selections, naming Bob Blair, a veteran of two state agencies, as his choice to lead the Department of Administrative Services.

Blair formerly served as human resources director and assistant director at the Ohio Department of Job and Family Services, and also was human resources director at the Ohio Department of Transportation. He currently works as business development manager in New Albanyfor EMH&T, an engineering, architecture and development firm. He also sits as a trustee on the Fairfield County Board of Health and the Pickerington Public Library.

“As we work to make state government more efficient and more effective, Bob brings a wealth of experience to my administration, and will have a key role in ensuring that taxpayers are getting their money’s worth out of state government,” Kasich said in a statement. “He will be instrumental in helping to create a modernized, 21^st century state government that maximizes public dollars and better serves the customer.”

“It is imperative that we critically examine how the state of Ohio administers services, manages its workforce, and eliminates waste, redundancies and inefficiencies throughout the system,” Blair said in a statement. “Ohioans, state employees and businesses that work with the state all deserve agencies that operate professionally and responsively, and I look forward to bringing a business-like approach to the public sector.”

Democrats on the Ohio School Facilities Commission (OSFC) received mixed news Thursday as they approached their final month on the bipartisan panel, getting the thumbs up on the embattled School for the Deaf/School for the Blind project and the thumbs down on nine of 10 school construction bonds on the Nov. 2 ballot.

OSFC Director Richard Murray, who, while not a voting member of the commission, appears destined to lose his job in January, led his November report with an update on scheduled construction for the School for the Deaf and School for the Blind. The project is at the center of a partisan skirmish over union participation in tax-funded school construction. Bids for the schools originally included project labor agreements (PLA), which allow for a labor-negotiated wage scale, but costs came in roughly 40 percent over-budget, providing additional fire for open-shop advocate Associated Builders and Contractors of Ohio (ABC) to attack Murray’s union ties. 

Democratic commission members J. Pari Sabety, director of the Office of Budget and Management, and Hugh Quill, director of the Department of Administrative Services, have rejected calls from Senate President Bill Harris (R-Ashland) and ABC for Murray’s resignation, but the commission nevertheless agreed to re-bid the dormitory portion of the School for the Blind/School for the Deaf project without PLAs. 

Thursday, the OSFC director provided the final numbers for the project: 4 percent over budget, or well within the accepted deviance.

“The bids are acceptable, and the contractors are ready to go,” he told Sabety, Quill and Chief Operating Officer Francis Pompey of the Ohio Department of Education, who sat on behalf of state Superintendent Deborah Delisle, one of OSFC’s three voting members.

The commission also includes four non-voting members from the Legislature – currently Senate Education Chairman Gary Cates (R-West Chester), Sen. Teresa Fedor (D-Toledo), Rep. Kris Jordan (R-Powell) and Rep. Matt Patten (D-Strongsville), a labor official who lost his seat in the General Election.

Commission members turned to issues farther down the ballot, receiving a Nov. 2 update from OSFC Chief Financial Officer Eric Bode. The report was sobering.

“It was our worst showing ever,” he said. “We had 10 bond issues on the local ballot for school facility construction, and only one passed.”

The result appeared to mirror eroding support for school funding issues this year, which saw a significant downturn over fall 2009. (See The Hannah Report, 11/4/10.)

Sabety, a Strickland hire who will lose her job to Kasich appointee Tim Keen in January, could not resist a little dark humor.

“That’s enough on the election.”

OSFC moved to its long list of monthly business, including LEED (Leadership in Energy and Environmental Design) certification of new school construction. Murray announced the commission’s first LEED Gold certification at a K-12 facility, coming in Buckeye Central Local School District inCrawford County. The $21.2 million building houses the district’s 700 students.

“Buckeye Central’s success was a great inspiration to the other districts we are working with across the state,” Murray said. “It’s important to note, however, that this is not a singular event. We have over 130 buildings that are currently in the certification process, including another 87 that are on track for Gold certification. In addition, there are six buildings that may even achieve a LEED Platinum certification, the highest rating available.”

The debate surrounding the sweeping federal health care reform legislation that passed earlier this year captivated the attention of the nation for the better part of 2010. Now, the daunting task of implementing this far-reaching legislation has begun. Ohio is beginning the process of implementing one of the bill’s major provisions:  creation of the new state “exchanges”.

Generally, an exchange is a tool to help consumers better understand and choose an appropriate health plan. Under the new law, all states are required to either operate their own exchanges or allow the federal government to operate one for them. As always, however, the devil is in the details and the health care reform law gives states very wide latitude in deciding how to set up their exchanges. Practically speaking, this means each state exchange could be very different and Ohio will need to determine the approach that best fits our state.

The new law dictates that the state exchanges carry out a multitude of different functions. They are tasked with everything from providing a toll-free phone number for consumer questions to operating a website that helps consumers compare various insurance plans. Each state, including Ohio, must also decide which health plans will be sold in its exchange. That’s a lot of power in one little exchange.

The Ohio Health Benefits Exchange Task Force that is just beginning its work to examine the critical issues surrounding exchanges and formulating guidance for best addressing Ohio’s needs. We’ll keep you posted as this issues progresses.

Chief of Staff: Beth Hansen
Hansen served as campaign manager for the Kasich-Taylor campaign. Previously Hansen served as State Director to U.S. Senator George Voinovich for 11 years and worked in the U.S. House of Representatives in Washington, DC. She’s also held leadership roles in political campaigns in Ohio and the Midwest. She is a graduate of the University of Michigan.

Policy Director: Wayne Struble
Struble is a long-time Kasich advisor, having served as Staff Director for the U.S. House Budget Committee when Kasich was Chairman. He previously served as Chief of Staff to U.S. Congressman Steve Austria and U.S. Congressman David Hobson. He has masters degrees from the University of Notre Dame and the University of Missouri at St. Louis.

Director of the Office of Budget and Management: Tim Keen
Keen joins the Kasich-Taylor team from the Auditor of State’s Office, where he serves as Senior Policy Advisor. He previously served as Director of the Office of Budget and Management under Ohio Governor Bob Taft and in other senior budget policy positions in the Ohio Legislative Budget Office, the Ohio House of Representatives and the Ohio Senate.

The State Controlling Board approved a $750,000 Clean Ohio Assistance Fund grant for the Greater Cincinnati Development Authority to support brownfield redevelopment.

The grant will assist with asbestos abatement at the former Federal Reserve Building. The property has supported office and commercial operations since the 1800s. The development partner, ACG Federal Reserve LLC, will contribute nearly $5 million in matching funds for acquisition and remediation activities.

After rehabilitation, ACG Federal Reserve will invest nearly $17 million to develop 88 luxury apartments and 59,415 square feet of commercial space over five floors. The commercial space will be occupied by existing tenants of the building and will result in the retention of 100 jobs, according to DOD. The redevelopment will also result in the creation of two jobs to service the residential apartments.

“This project is a great example of what public/private partnerships can accomplish in the state,” Ms. Patt-McDaniel said.

The development plan includes LEED certification and the preservation of the unique architectural features of the historic building, according to DOD. By transforming vacant office space into residential space, the redevelopment plans are also aligned with Cincinnati’s GO Cincinnati strategic plan.

The Clean Ohio Assistance Fund, within the Clean Ohio Fund, restores, protects, and connects the state’s important natural and urban places by preserving green space and farmland, improving outdoor recreation, and cleaning up brownfield sites to encourage redevelopment and revitalize communities.