Gorin: A Key Concern for the Park Industry is Being Addressed
David Gorin, former ARVC CEO, is president of David Gorin & Associates, providing management consulting services to the outdoor hospitality industry. He’s also a partner in King & Gorin, specializing in Washington representation for associations and businesses in travel, tourism, transportation, recreation and public lands. Contact him at email@example.com or at (703) 448-6863.
On Sept. 9, congressional leaders struck a deal late to extend temporarily the expiring laws governing the nation’s highways at roughly their current funding levels.
The bill would authorize programs for the current surface transportation laws through March 2012. Highway programs would be funded at the fiscal 2011 level of $41.7 billion, far above the $27 billion approved in their budget earlier this year. Because the extension is for six months and not a full year, the actual amount authorized is half of the fiscal 2011 level.
Without action, authorization for the highway program would expire at the end of September and both President Barack Obama and members of Congress have warned that scenario could cost hundreds of thousands of jobs.
House Transportation and Infrastructure Committee Chairman John Mica, R-Fla., secured an agreement from Republican leaders to find revenue later to ensure that the money spent from the highway trust fund on the short-term extension does not leave him without the funds necessary to win approval of a long-term reauthorization of surface transportation laws next year.
The higher funding level for highway programs may cause heartburn with some House and Senate members but transportation projects generally win support from both Republicans and Democrats, in part because they are an easy way to show folks back home that they are bringing jobs and infrastructure to their districts.
The text of the bill was posted to the House Rules Committee website late on Sept. 9, meaning it was likely to be considered on the floor during the week of Sept. 12. (This column is being written on Sept. 13).
This is an important step both for the economy in terms of jobs and for the park industry in terms of continuation of highway improvement projects important to RVers traveling the nation’s highways.
What’s Going on With Park Models?
Over the last few years, there’s been a growing perception that the park industry is moving rapidly and dramatically in the direction of rental units in RV parks and campgrounds and that park models are becoming increasingly popular among park owners and park guests as the rental unit of choice.
In preparing for a presentation later this week, I was reviewing the reported park model shipment data provided by the Recreational Park Trailer Industry Association (RPTIA). RPTIA tracks shipments based on the sale of its certification seal that is affixed to each unit shipped by its members.
I was surprised to find that park model sales have declined significantly in recent years. We all know that every industry has been dramatically impacted by the 2008 and 2009 recession, but we also know that many industries experienced a turn around to at least some degree in 2010 and into 2011. The RV industry has had a strong sales increase in 2010 and into mid-2011. The park model industry, despite all of the hype in park industry trade press and company press releases, seems to remain in the recession.
Sales of park models seemed to have peaked in 2006 with RPTIA reporting shipments of 10,100 units. The decline began in 2007 when shipments dropped about 10% to 9,000 and then continued in 2008 to 6,900, to 4,400 in 2009 and 3,700 in 2010. RPTIA reports shipments at 1,400 units through May 2011, indicating an annual pace of perhaps 3,400 to 3,800 or so for the year.
A couple of possibilities exist here:
- •Are there companies shipping park models that are not RPTIA members and therefore not included in the shipment numbers announced by the association? RPTIA, I believe, says it represents at least 80% of the production, which would indicate that perhaps the figures are missing maybe 700 or so units for 2011 and a bit more in the earlier years.
- Are non-park model rental or long-term stay units and accommodations (destination trailers or large fifth-wheels, for example) taking a larger part of the market (cabins, yurts, RV trailers)?
- Are perceptions being swayed by promotional releases, online conversations, company pronouncements or other hype that’s leading us to believe that park models and rental units are growing at a faster pace than is the actual situation?
Assuming roughly 10,000 commercial RV parks and campgrounds are out there, it would appear that relatively few parks either have large numbers of park models or that many parks have just a couple of these units.
The point is, is the rental side of the RV park business growing and are park models a significant part of that growth or is something else happening here – more RV trailers, more non-park model cabins, more yurts, more RV trailers?
There are further complications with park models these days as more and more parks and now even mobile home communities are touting park models as downsized housing and micro-living. RV parks across the country are latching on to the idea of annual site leases to accommodate both park models and destination trailers, leading one to believe that these units are suitable and intended for full time living or residences. The thought of park models becoming domiciles or residences has been an anathema to RPTIA and to many park owners. The park industry needs to be careful here. Promoting park models as a year-round vacation option, offering annual site leases and other similar practices that would tend to encourage year-round residency has long been an issue with local regulators and housing authorities. Caution on how park models are used, sold, promoted and discussed is critical.
Any comments? Be interested in any reader thoughts on this.
Taxes, Jobs and Political Stuff
On Sept. 8, the president offered his plan for a new stimulus effort. Within five minutes, there was a slew of press releases from Democrats praising it and from Republicans criticizing it. Washington – the home of all partisan, all day and all night. Having said that, I think there is a good chance Congress will pass some variation of the tax relief.
And on Sept. 12, the president announced how he intends to pay for the stimulus and tax relief and once again opened up Pandora’s Box – tax increases for individuals earning above $200,000 and for families earning above $250,000.
And the battle begins again.
What’s in it for small business?
Payroll Tax Relief
The president has proposed that employers get a reduction in their “payroll” taxes on wages paid. While everybody is using the term “payroll” tax, there are actually two separate taxes included in the federal “payroll” tax. The president is proposing a cut in one – what is commonly referred to as the “Social Security” tax. The Federal Insurance Contributions Act (FICA) is comprised of the Social Security (6.2%) tax and the Medicare (1.45%) tax. The president is proposing that the employer pay only 3.1% of the employer’s share of the Social Security tax for 2012.
Employers and employees “only” pay the Social Security tax on wages below a certain level. The annual income cap for the Social Security portion of FICA is $106,800 for 2011.
Although the exact language is not yet available, it may be safe to assume that the self-employed will be eligible for this reduction as well as for the reduced “employee” portion also proposed by the president. Those considered as self-employed pay both halves of the “payroll” tax.
The president is proposing to extend and expand the current temporary “payroll tax” break for employees. It currently is a 2% reduction in the Social Security tax. He would increase it to a 3.1% reduction for 2012.
New Hires and Increased Wages
The president has proposed a complete refund of the Social Security taxes paid by an employer on the wages of added workers or wage increases for current workers above the level of this year’s payroll. There would be additional targeted tax cuts for hiring the long-term unemployed as well as veterans who have been out of work six months or more.
The president has proposed the extension of the current temporary 100% first year full expensing. This is not Section 179 expensing but the full expensing based on the depreciation "bonus" concept. Section 179 still exists but as the result of legislation last year, for practical purposes, hardly anyone will use it this year.
Section 179 has two components. It allows a business to write off a certain amount of a purchase of capital assets in the first year. However, the more a business buys in a year, the smaller the amount that can be written off by Section 179. After a certain amount of assets are purchased, only regular depreciation can be used.
In recent years, the use of legislative depreciation “bonuses” allowed more to be written off in the first year. The significance of it is that the business is not constrained by the amount of assets bought in the year. The business can write off essentially everything purchased.
When the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act, Public Law 111-312 was signed into law on Dec. 17, 2010, they went for the whole enchilada (as the expression goes). The law extended and expanded the additional first-year depreciation "bonus" to equal 100% of the cost of qualified property placed in service after Sept. 8, 2010, and before Jan. 1, 2012. So as a result, while Section 179 is still on the books, the full expensing makes it a moot point for most business – for this year.
The president's new proposal would extend the 100% full first year expensing through 2012.
The president’s plan includes $50 billion in immediate investments for highways, transit, rail and aviation. This is in addition to the funding discussed above for the regular extension of the federal highway program.