INDUSTRY

PDCA to Continue Involvement in Paint Dialogue, Signs MOU

PDCA Chief Executive Officer Dr. Ian Horen announced March 29 that PDCA will continue its involvement in a national post-consumer paint dialogue convened by the Product Stewardship Institute (PSI), the only paint contracting organization participating in this all-important initiative.

One of the principal outcomes of PSI’s activities over the last year and a half is a Memorandum of Understanding (MOU), which has been signed by PDCA and several other leading paint industry organizations and government agencies including the National Paint and Coatings Association and the U.S. Environmental Protection Agency. The MOU details a series of pilot projects aimed at reducing the generation of leftover paint and increasing reuse and recycling opportunities. The results of these projects will provide dialogue members with the information necessary to develop and implement a nationally-coordinated post-consumer paint management system.

The reason paint has become such a major concern is because of its high volume in the waste stream, subsequent costs to manage, and potential for increased reduction, recovery, reuse, and recycling. Paint may also contain low levels of volatile organic compounds, fungicides and, in the case of very old paint, hazardous metals such as mercury, lead, cadmium, and hexavalent chromium. In a draft report, EPA estimates that between 8.8 to 22 percent of paint sold could become leftover paint. Of all household hazardous wastes (HHW), paint is the single most expensive for local governments to collect and manage. Indeed, some municipalities report that the average cost of managing leftover paint as HHW from collection through recycling or disposal is approximately $8 per gallon.

In order to achieve its objective of reducing paint waste, PDCA and other participants in this effort have over the last year discussed strategies to promote the efficient collection, reuse, and recycling of leftover paint; to increase markets for products made from leftover paint; and to create a sustainable financing system to cover any resulting end-of-life management costs for past and future products. Consideration was also given to decreasing the improper disposal of leftover paint; attaining the highest value possible for leftover paint; and improving container collection and recycling.

PDCA and individual member companies have actively participated in the four in-person meetings of the dialogue in Boston, Sacramento, Washington, and Chicago, numerous conference calls and workgroup efforts, as well as the drafting of the PSI MOU. A PDCA member workgroup also provided input to PDCA staff.

Representing PDCA at this year’s meetings was PDCA legislative counsel David Poisson of Howe, Anderson & Steyer, P.C. Further information regarding PPSI’s activities this year, including background research, minutes, presentations, and other documents can found at www.productstewardship.us/prod_paint_nat_dia.

SICO Signs Distribution Pact with Kent Building Supplies

SICO Inc. has signed a distribution agreement with home-improvement retailer Kent Building Supplies.

Under the agreement, SICO will supply SICO-branded paint and MULCO-branded caulking compounds and adhesives to the 29 Kent Building Supplies outlets in all four of Canada’s Atlantic provinces, including seven big-box stores.

In a news release, SICO said the agreement will boost its market share in Atlantic Canada and is “in line with our strategic objective to promote our major national brands through target distribution channels.”

SICO makes and markets paints, coatings and related products.

SMALL BUSINESS

More Small Companies Boosting Prices

Small businesses are raising their prices, according to a report released last month by the National Federation of Independent Business. Approximately a third of small companies polled reported higher selling prices for their goods and services in February, up three percentage points from the previous month, while the number posting lower prices remained unchanged at 10 percent.

With seasonal adjustments, the percentage of those reporting higher prices minus the percentage of those reporting lower prices was a net 19 percent.

But for inflation concerns, compared with January, the numbers are clearly headed in the wrong direction for small businesses, according to the NFIB report. A year earlier, a net 13 percent of the companies posted a boost in prices, and for February of 2003 and 2002, more firms reported price declines than increases. Small businesses can expect that inflationary pressures will continue, according to the NFIB’s Economic Trends report, unless “energy takes a real dive.”

While inflation may be more of a concern recently, it’s still near the bottom of the most-important problem list. Only three percent of those polled by the NFIB consider it the single most important problem, just above the one percent that said the credit market was the biggest woe.

Small Business Lending on Rise, Study Shows

Lending by the most important institutional supplier of credit to small firms – namely, commercial banks – increased in 2002-2003, according to a report released last month by the U.S. Small Business Administration (SBA).

“Information about which banks are making small loans is critical to the health of small businesses,” said Dr. Chad Moutray, chief economist for the SBA Office of Advocacy. “This kind of information helps small businesses save time and shop efficiently for credit – and it also helps the banking sector understand the competition in their markets.”

The report, Small Business and Micro Business Lending in the United States for Data Years 2002-2003, includes lists of the top state lenders of loans under $1 million and $100,000, based on the Reports of Condition and Income (Call Report) and Community Reinvestment Act (CRA) data. Four sets of tables rank large Bank Holding Companies (BHC) and commercial banks nationally and by state. Findings also include:

• Small business loans outstanding (loans under $1 million) totaled $495 billion as of June 2003, an increase of $11.1 billion or 2.3 percent between June 2002 and June 2003, compared with an overall increase of 5.1 percent over the previous period, according to the Call Report data.

• In 2002, a total of $227.5 billion in small business loans under $1 million were extended by 905 CRA-reporting banks/BHCs, compared with $203 billion in 2001. Large multi-billion-dollar banks and BHCs made 5.3 million micro business loans valued at $73 billion in 2002, compared with 4.9 million loans valued at $62 billion in 2001.

• The CRA data confirm the findings in the Call Report data of the importance of multi-billion-dollar banks and BHCs in the market for the smallest loans.

SBA prepares an annual study of bank lending focusing on loans under $1 million (small business) and under $100,000 (micro business). This current study provides a brief review of bank lending activities in 2002-2003 based on two types of data reported by banks to their regulating agencies – the Call Reports for June 2003 and the CRA reports for 2002.

Tips for Small Businesses as Tax Season Arrives

Running a successful small business takes time, talent, and a little tax know-how. Here are some tax tips that can prevent you from overlooking valuable deductions and assist you in managing the tax liability for your small business.

Health insurance. On 2004 tax returns, self-employed taxpayers can deduct 100 percent of their health insurance costs.

Retirement plans. The rules governing eligibility, contribution limits, and deadlines vary depending on whether you have an IRA, SEP, or Keogh. But one thing is certain: contributing to a qualified retirement plan is a great way to reduce your tax bill and save for your future.

Business use of car. If you use your car for business, you can deduct expenses proportionate to your business use. One option is to maintain records of your actual expenses, such as gas, oil, repairs, insurance, and depreciation. Or you can use the Internal Revenue Service’s standard mileage rate, which is 37.5 cents per business mile for 2004. Parking and tolls are fully deductible regardless of which method you use.

Family employees. Self-employed business owners can reduce their overall income tax liability by hiring their children to help out. For 2004, your child could have earned up to $4,850, tax-free. Hiring your child shifts income from a higher to a lower tax bracket, and the salary gets deducted as a business expense, as long as the work done by your child is bona fide.

Section 179 Expensing Deduction. When you buy new or used computers, copiers, software, office furniture, or other business property, you can deduct 100 percent of the cost in the year it is placed in service rather than depreciating it over a number of years. For 2004, the expensing deduction is set at $102,000 (adjusted for inflation) and phases out dollar for dollar when total purchases for the year exceed $410,000.

Bonus Depreciation Deduction. If you purchased assets in 2004 that exceed the expensing deduction, you may be able to take a bonus first year depreciation deduction of 50 percent of the remaining costs of new property put in service before January 1, 2005. The remaining cost is subject to the regular depreciation schedule.

Travel and meal expenses. The cost of travel by plane, train or automobile and your lodging is 100 percent deductible as long as the travel was related to business. You also may deduct 50 percent of the cost of your meals while traveling.

Business expenses. Ordinary and necessary business expenses can be deducted. Deductible expenses include advertising and promotion, bank service fees, office supplies, interest on business credit cards and loans, subscriptions for magazines and journals related to your profession, postage, uniforms or special work clothing, among others.

Home office. To deduct expenses related to a home office, you must prove that the home office was (1) used exclusively and on a regular basis either as a place of business to meet with clients in the normal course of business or (2) it is used for management and administration activities of your business and you have no other fixed location where you can do a substantial amount of such administrative work.

Good records. Keeping well-organized and accurate records will simplify the task of preparing your tax return and protect your deduction should your return become subject to an audit.

Professional advice. Many small businesses pay more taxes than necessary, often as a result of missed deductions and lack of awareness about tax law changes. A competent tax professional can help your small business make the most of all available tax benefits.

Action on Association Health Plans Legislation Expected in This Congress

Legislation allowing the formation of association health plans (AHPs) cleared the House Education and the Workforce Committee on a party-line vote on March 16. The bill will now move to the House floor, probably sometime within the next few weeks.

The “Small Business Health Fairness Act”, introduced in the House Feb. 2, would allow small businesses to pool together through their trade associations and negotiate health care coverage for their employees and their families at lower rates.

An identical bill was passed by the full House last year by a vote of 252-162, with the support of 37 Democrats, including Rep. Nydia Velazquez (D-NY), ranking Democratic member of the House Small Business Committee. AHPs did not reach the Senate floor for consideration last year. Sens. Jim Talent (R-MO) and Olympia Snowe (R-ME) have introduced a companion bill in the Senate this year.

AHP legislation is strongly endorsed by President Bush and a broad coalition of more than 160 organizations, including PDCA, the U.S. Chamber of Commerce and the National Federation of Independent Business. The primary opposition to AHPs continues to come from the Blue Cross and Blue Shield Association (BCBSA), which claims AHPs would not solve the uninsured problem in America and would raise premiums for many small employers.

ENVIRONMENT

California Hotbed of Regulatory Activity

California has more climate-protection efforts under way than any other state.

“Californians have always considered themselves leaders in environmental policy,” said Alan Lloyd, secretary of the state Environmental Protection Agency. “For us, addressing climate change is a natural progression.”

Golden State programs or regulations that are on the books or in the works include:

• Automakers will be required to reduce the greenhouse gases emitted by new cars and trucks sold in the state. The mandate, scheduled to take effect next January, would apply to new vehicles beginning with the 2009 model year. Although the rule is being challenged in court, 11 states are preparing to follow California's lead.

• Local utility companies contracting to buy power in 2007 or later must estimate how much more the energy would cost if the state or federal government were to begin regulating greenhouse-gas emissions. The aim is to force electric-power companies to consider the probable future costs of coal and to thus discourage them from flocking to coal while it’s still a relatively cheap option.

• Power companies will have to generate at least 20 percent of their energy from renewable sources annually, beginning in 2017.

• The California Public Employees’ Retirement System, the country’s largest pension fund, is asking all companies in its $180 billion portfolio to disclose data on their carbon dioxide emissions. The board is also supporting shareholder resolutions at Ford and General Motors that seek information on how the automakers will comply with California’s new greenhouse-gas emissions standards.

• Republican Governor Arnold Schwarzenegger is championing state legislation to create rebates and tax credits for homes and businesses that install solar-power systems. According to Schwarzenegger, the measures would spur installation of 1 million solar-power systems over the next 13 years.

• To encourage automakers to build hydrogen-fueled cars, and to encourage Californians to buy them, Schwarzenegger is seeking to build a system of hydrogen refueling stations along the state’s major highways.

• The state has adopted energy-efficiency standards for dozens of products, such as residential ceiling fans and commercial refrigerators. Eight of those standards were imposed in 2004.

Michigan Paint Manufacturer Faces Prison for Illegal Waste Storage

Michigan Industrial Finishes Corporation president Norman Solomon pleaded guilty February 25 in U.S. District Court for the Eastern District of Michigan in Detroit to violating the Resource Conservation and Recovery Act by illegally storing more than 2,000 55-gallon drums and other containers of highly-flammable paint-related solvents.

In his plea, the defendant admitted to storing the drums illegally for more than 90 days at a time between 1997 and 2004 despite the fact that he had entered into a consent decree with the Michigan Department of Environmental Quality in 1997 to resolve the storage issues.

The ignitable spent solvents being stored illegally included xylene, toluene and methyl ethyl ketone. EPA estimates that Superfund cleanup costs at the site will be approximately $4 million.

EMPLOYMENT

Job Growth Slower Than Expected

U.S. employers added 110,000 jobs to their payrolls in March, the smallest increase since July, as businesses remained reluctant to hire in the face of surging energy prices and rising interest rates.

The monthly Labor Department jobs report did show the nation’s unemployment rate falling to 5.2 percent, a level last seen in January but not consistently reached since the September 11, 2001, attacks. The rate was down from 5.7 percent a year earlier.

“Today’s announcement that the unemployment rate fell to 5.2 percent and 110,000 new jobs have been created is good news for the direction of America’s economy,” Treasury Secretary John W. Snow said.

But many economists and labor experts were not as optimistic, noting that consensus forecasts had expected payroll increases well above 200,000 jobs. Employment in February was also revised downward by 27,000 jobs.

“Some will point to the addition of 110,000 jobs as being good news, but it falls well short of Wall Street expectations,” said John A. Challenger, chief executive of Challenger, Gray & Christmas Inc.,, a global employment firm.

The small payroll numbers came on the heels of news that the economy grew at a healthy rate last year, that business activity continues to expand, and that demand for good and services remains strong.