Tech Talk – March 2018

How to Get Paid for Floor Prep Work

By Tom D. Lynch, CSI

I bet you’re thinking, “This ought to be good. What does this guy know that I haven’t already tried? Getting architects and owners to agree to pay for floor-prep work is about as easy as it is to get a concrete contractor to provide a perfectly flat and level floor in the first place.” And the answer to this question could very well be “You just read it.” He who pours the concrete that does not meet the specs should fix the floor so that it does meet the specs or pay someone else – like you – to fix it for him. Sound simple? It’s not.

Part one: the problem 

The problem is getting the concrete guy to meet whose specs; his Division 3 specs or our Division 9 specs? The Division 9 specs most times spell out precise finish floor requirements as if it were the tile installer’s responsibility even though he did not pour the concrete. The Division 3 specs in general do not get specific when it comes to finish floor requirements. The Tile Council of North America (TCNA) gives very definite requirements for substrate tolerances but does not spell out whose responsibility it is to provide them. We therefore have a dilemma.

A couple years ago the American Society of Concrete Contractors (ASCC) in conjunction with the Flooring Contractors Association (FCCA) and the National Wood Flooring Association (NWFA) issued a joint statement titled the “ASCC Position Statement #6” to address this issue. Without going into great detail about the differences between the two specs, the conclusion of the ASCC and the NWFA was as follows:

“….suggest that the owner provide a bid allowance, established by the A/E and based on the floor covering requirements, for any necessary grinding and patching to close the gap between Division 3 tolerances and Division 9 tolerances.”

This sounded good to everyone except the owners who unfortunately have to foot the bill. Where is the control over quality with this plan? There is none, and that is the flaw with this position. Issuing blank checks in the construction industry just doesn’t work.

There is more to this issue than meets the eye, and must be considered. The floor covering industry is changing, and changing fast. With the ever-increasing demand for large-bodied tiles plus the advent of gauged porcelain slabs and panels, the demands for flat and level floors has increased dramatically. Add to this the ever-growing demand for luxury vinyl tiles (LVT) that also demand extremely flat and level floors, and it is plain to see that nearly every type of floor covering other than carpet requires a minimum of 1/8” in 10’ flatness levels.

Case in point

Progress is not being made along these fronts and it is not fair to anyone involved. Let me give you an example: In the spring of last year I received a frantic phone call from a good tile contractor friend of mine in Houston, Texas. He had a large ceramic and resilient tile project in progress for one of the largest building contractors in the country and was up against the wall with a substrate issue that was going nowhere toward resolution. The concrete floors were so bad that his “more than fair” estimate to repair them came to well over $100,000 and no one would listen to him. For some reason, the owner of the project was protecting the concrete contractor and would not consider paying out any money to resolve the issue.

After a day of taking laser readings and laying out a complete diagram of the floor variations we were able to convince the GC that the floors were in fact, that bad. It was obviously not my friend’s fault, but the owner still would not relent. So, I advised my client to offer to sell all the tile materials that were already on site to the owner and let him find someone else to perform the install. My reasoning was that my client – as a professional flooring contractor – could not in good conscience knowingly perform an inferior installation. Unless he was allowed to repair the floors and get paid to do it, he was willing to walk. The GC, by the way, respected him greatly for taking the position that he did, and the owner finally relented.

The moral of the story is to stand by what you know is correct and proper. A tile contractor should never be forced to give in and fix someone else’s concrete work for free. A solution must be made.

Part two: the solution

This is not simply a concrete slab issue nor only a ceramic tile issue, but rather an issue involving both trades that must be worked out together in such a manner as to be acceptable to architects and fair to owners. I propose a new specification section: 09300.5 Concrete Floor Prep. The Division 3 specification will also need some revisions made to it. The system would be as follows:

The concrete slab shall be poured 1/2” below the desired finish floor height. No fine finished trowel surface will be required. Basically a bull float and broom finish is all that is needed. This will save money in two ways. First, 1/2” less material will be used and secondly there will be no fine finish troweling labor required.

This is where section 09300.5 kicks in. Just prior to beginning the tile installation, the tile contractor shall pour a 1/2” thick layer of cementitious self-leveler product over the entire floor bringing it up to the finished floor elevation that is required. Any crowns, curls, humps, or other defects in the flatness of the concrete will be rectified during this process ensuring that a perfectly flat and level floor will be provided.

The specified floor covering product can then be installed in accordance with the appropriate specifications. The cost of installing the finished floor product should also be somewhat lower than normal considering that there will be no floor-prep work needed as it has already been provided for in #2 above.

There is no doubt that the total cost of this system will be slightly higher because self-levelers cost more to install than poured concrete, but that cost will be known up front on bid day. And let’s face it, costs of anything on bid day are usually much lower than add-on costs for extras later on.

Owners should also take into consideration that pouring large concrete slabs to a finished floor tolerance of 1/8” in ten feet is virtually impossible in the first place. There are simply too many variables during the curing and drying process to accomplish such perfection. Additional costs are a reality these days and this system will establish that total cost without confusion or cost over runs after the project is bid.

Specifications for the self-leveler product need not be excessive. A good quality self-leveler will produce a 28-day compressive strength of 4,000 psi. Depth per application ranges from 1” to 2” per pour. A primer is always recommended by each manufacturer.

I suggest that collaboration between the TCAA, the ASCC, and the NTCA will be needed to draft new language and get it distributed to the architectural community in order to get these important changes made. In my opinion this will be the total solution to the problem of how to get paid for performing floor-prep work. In the meantime the answer to that question is, “It can be difficult.”

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Tom Lynch is a 55-year veteran of the tile industry and one of the NTCA’s initial inductees to the “Recognized Industry Consultants” group. He can be reached at (336) 877-6951 or [email protected] or www.tomlynchconsultant.com. 

Economic Outlook

By Sean P. Boyle,
Vice President Marketing,
LATICRETE International

The article below provides a brief high-level summary of the construction outlook for both the residential and commercial markets, including an estimate of tile consumption for 2018.

Residential construction

Residential new and remodeling construction plays a significant role in tile consumption and is a key barometer to the overall economy. Over the past several years, the residential market has continued to climb out of the trough from the recession, and has shown growth throughout 2017. Home values increased again in 2017 while existing home inventory remained at normal levels. Overall, residential growth looks forward to continued expansion in 2018.

New Housing starts – 2017 total new housing starts increased overall only around 3% over 2016. Single-family starts were relatively healthy, increasing over 2016 by almost 9%, however multi-family construction dragged the overall category down – starts for multi-family were down close to 8% after some high growth years in 2014 and 2015 resulting in overbuilding for the segment. For 2018, new total housing starts are projected to only increase close to 3% again, with single-family up only around 5% and multi-family slightly down versus last year. Total units again will hover around 1.3M. The impact from the Tax Cuts and Jobs Act signed into law recently will most likely dampen housing activity in very high home value markets ($1M or greater homes). However, it will not impact the majority of U.S. home owners, since they are still able to deduct interest payments on mortgage debt up to $750,000 which includes new mortgages or improvements made from December 17 through 2026.

 

Residential Remodeling – Remodeling is the other and larger side of the residential market place and has performed nicely throughout 2017 and is forecasted to lead again in 2018. The housing industry continues to benefit from robust sales of existing homes and is running at historic lows of inventory. According to many construction indicators, there is widespread agreement that residential remodeling spending will increase in 2018 versus 2017, at a mid- to high-single digit rate.

Residential remodeling continues to benefit from factors impacting new housing starts. As with the last several years, Millennials are remaining at home longer, and older individuals are choosing to remain at home or “age in place.” This will spur home remodeling and will continue to result in solid growth again in 2018 with bathrooms, kitchens and in-law room additions driving remodeling activity. Rising home values and continued low interest rates are allowing homeowners to take out home-equity loans for the remodeling project. This is driving demand across all aspects of construction – especially for new tile or stone flooring!

Overall, we forecast the residential market to account for close to 60% of all tile consumption in the U.S. in 2018. It will drive growth for flooring, with kitchens and bathrooms as the main project types. The new tax law mentioned above will however bring down a percentage of remodeling spending on very expensive homes – as deductions on interest will be capped – but overall the segment will be strong in 2018.

 

Commercial Construction

We forecast the commercial construction segment to experience steady growth in 2018, between 3% and 5% in new square footage over 2017. The commercial segment is being aided by a continued easing of lending standards that allow for more of the much-needed financing for large projects, combined with an increase in demand for commercial lending. Whereas the Tax Cuts and Jobs Act may lessen housing activity in very high-end home markets, the impact of the law is favorable for commercial construction due to reduced corporate tax rates, thus providing an incentive for investment. In addition, favorable commercial lending policies and recent survey results among architects show an increase in demand for services, so the environment is very favorable for expansion.

Looking within the commercial segment, low single-digit growth is basically forecast across most verticals with education and office building activity leading the way. All regions across the U.S. – except the North East – are poised for growth, with starts in the South Central and Mid-West states forecast to have the largest percentage of growth when looking at value of total starts.

Tile consumption 

As previously mentioned, 2017 residential construction experienced another solid year of growth for new and remodeling activity, and commercial construction increased modestly in terms of square footage. Based on this, we believe tile and stone combined consumption will increase to ~ 3.5 billion square feet in 2017, an increase around 4%.

Based upon the above-forecasted growth in each market for 2018, we can segment the ceramic tile and stone industry accordingly, and calculate the respective share in square footage of each segment with applicable growth percentages based upon the 2018 outlook. A conservative estimate range for 2018 indicates combined tile and stone consumption growth of between 4% and 6% to approximately 3.7 billion square feet.

Tile and stone consumption estimates are naturally subject to all the macro-economic and subsequent construction market risks as well. The recent tax law – coupled with a charged political environment – plus a myriad of changes in key markets around the world can instantly impact forecasts.

As with last year, all of the major institutions that track and forecast construction activity are projecting growth for 2018 at various rates.  It is that consensus which makes us confident that we are looking forward to an exciting 2018, and continued growth of ceramic tile and stone!

Business Tip – March 2018

Tax reform: yes, it is a big deal

By Pat O’Connor, Kent and O’Connor, Washington, D.C.

Tax reform legislation raced through Congress at lightning speed. So quickly, in fact, analysts are still digesting its contents and assessing its impact. Critics say it favors the rich. Proponents promise it will unleash the American economy. Others worry about the long-term impact on the national debt. Yet, the truth is, nobody really knows for sure how this legislation will reshape the economy or our society at large.

From the perspective of corporate taxation, we can say for certain, passage of the Tax Cut and Jobs Act of 2017 is a big deal. For years, the United States has clung to an outdated 1986 era corporate tax code and a 1960s system of taxing “worldwide” income that most other countries abandoned long ago. At 35%, the U.S. corporate rate towered over other developed countries’ rates. In a global economy, where companies can choose where to produce and invest, these features pushed many companies and trillions of dollars overseas. Bold structural changes were needed. And, the new law does just that.

Already, as of mid-January, over 220 companies have responded, either by providing bonuses, wage increases, or both to employees. AT&T gave $1,000 bonuses to 200,000 hourly employees and announced they will boost capital spending in the U.S. by $1 billion in 2018. Starbucks employees received wage increases and expanded benefits. Some dismiss these gestures as little more than window dressing with no real impact. Yet, others see this as an early indicator of positive things to come as the consequences of tax reform work their way through the economy. (Ed. Note: Conversely, since the reform has been enacted, we’ve seen major retailers close hundreds of store locations, and lay off thousands of workers. Whether coincidental timing or deliberate scheduling, the effects on discretionary income are yet to be seen.)

The new 21% corporate tax rate and the switch to a territorial system of corporate taxation are key changes. But these are not the only ones. Other changes include:

100% Expensing: The bill provides a full and immediate write-off of most machinery and equipment purchased for use in a trade or business, including both new and used property.

Increased “Luxury” Auto Depreciation Limits: The bill increases limits on passenger vehicle depreciation – commonly referred to as the “luxury vehicle depreciation limit.” The limits are increased from $3,160 to $10,000 in the first year; from $5,100 to $16,000 in the second year; from $3,050 to $9,600 in the third year; and from $1,875 to $5,760 in the fourth and later years.

Limit on Interest Deduction: For companies with more than $25 million in gross receipts, the bill limits the deduction for corporate interest paid. The deduction cannot exceed the sum of i) business interest income plus ii) 30% of the adjusted taxable income of the corporation.

Entertainment Expenses: No deduction will be allowed for entertainment expenses, although the company can still deduct 50% of the cost of meals for employees on work travel.

Credit for Family and Medical Leave: In 2018 and 2019, employers can claim a tax credit of 12.5 to 25% for wages paid to employees while on paid family and medical leave.

A new deduction for pass-through entities

One of the most intriguing and complicated changes is the new tax benefit for “pass-through” entities, which includes S-corporations, partnerships, sole proprietors and most LLCs. The essence of the new Section 199A is a deduction of 20% of the entity’s Qualified Business Income (QBI). The potential tax savings is prompting many business owners to rethink their operation. Here’s how it works:

Let’s say Joe owns a tile installation business, called Tile LLC, where the income is taxed as a sole proprietor on Joe’s individual tax return. In 2018, Tile LLC has a profit of $250,000, which is reported on Joe’s Form 1040, Schedule C. Subject to certain income restrictions, Joe will receive a $50,000 deduction (20% of his Qualified Business Income) on his individual tax return!

However, the restrictions on the QBI deduction add a great deal of complexity:

First, there is an income threshold to consider. If Joe is married and files a joint tax return, he and his wife’s taxable income must be less than $315,000 to claim the full 20% QBI deduction (less than $157,500 for single taxpayers). For incomes over $315,000, a partial deduction is allowed for joint taxable incomes up to $415,000.

If the entity is a personal services business (accounting, legal, consulting, and any other trade or business where the reputation or skill of one or more of its employees is the reason for the revenue, except for engineering or architectural services), no QBI deduction is allowed for pass-through income if the individual taxpayer’s taxable income is greater than $415,000 for joint filers.

For entities that are NOT personal services corporations and the pass-through income exceeds the income threshold described above, a QBI deduction is available, but may be limited. In this circumstance, the QBI deduction is the lesser of 20% of QBI or 50% of the W-2 wages paid to all employees by the entity; or, alternatively, 25% of W-2 wages plus 2.5% of the original cost of tangible depreciable assets.

For Subchapter S corporations, the rules requiring employee/owners to be “reasonably compensated” still apply. So, if Tile LLC is a Subchapter-S corporation, Joe would pay himself a reasonable salary of, say, $70,000 and receive a W-2 for that amount, leaving a pass-through profit of $180,000. The 20% QBI deduction would be $36,000.

Generally, an estate or trust is also able to deduct up to 20% of business income from a pass-through entity.

Yes, it’s complicated. Tax planners are eager to see guidance from the IRS to provide more detail on how this provision will be implemented.

But with change comes opportunity. And the opportunities created by the Tax Cut and Jobs Act of 2017 are indeed significant. While no company should rush headlong into a major restructuring, every company should explore whether their current structure continues to make sense. Almost overnight, we find ourselves in a new environment. Navigating this changed landscape will take skill, and the guidance of a knowledgeable accountant, but it will be well worth the effort.

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Pat O’Connor is a principal in Kent & O’Connor, Incorporated, a Washington, D.C.-based government affairs firm. A veteran of Capitol Hill with particular expertise in health, transportation and the environment, O’Connor works with trade associations and companies to find workable solutions to the most pressing regulatory and legislative issues. For more information, visit www.kentoconnor.com or call 202-223-6222.

Ask the Experts – March 2018

QUESTION

I am a homeowner having a glass tile install performed. The tile is a 3” x 12” glass subway tile with a color backing. It is being installed as the backsplash around the stove/oven. My tile contractor said to butt the glass tiles up to each other with no spacing in between – and to butt them up to the quartz countertop – but I was told by the tile store to use a 1/8” spacing.

All I am looking for is your technical opinion on the proper way to install the tiles regarding the spacing to give some instruction to my contractor for the install. The tile edges/corners are flat with no bumpers that would cause a spacing when they are butted up to each other.

ANSWER

We always encourage our members to follow the guidelines set forth in the TCNA Handbook. On page 37 of the Handbook it states “that in no circumstances shall the grout joint be less than a 1/16 of an inch.”

One of the reasons listed for a minimum requirement for grout joint size on all tile installations is “thermal expansion.” Glass tile is highly expansive. It also explains that the grout joint should be no smaller than three times the variation of the tiles themselves. That means if a particular group of tiles vary in size 1/16”, the smallest grout joint recommended for that particular group of tiles is 3/16” of an inch.

Most glass tile manufacturers have directions for the use of their products. I would encourage you to contact the manufacturer of the glass to get their recommended grout joint size. And make sure there is the appropriate sealant joint where ever the tile meets differing materials like a countertop or cabinet.

I hope this helps.

Robb Roderick, NTCA Technical Trainer

QUESTION

I plan to have a small bathroom tiled, shower walls with niche, shower floor, and floor (12” x 24” walls and 4” hex all floors). This is on concrete slab.

I’m working with a contractor who is bringing tilers in for the job and I’d like to make sure they are following standards. Can you tell me what the acceptable methods are for building/waterproofing a mud-pan, including shower wall and threshold?

I know they are creating a mud pan, but not sure what products or method they are using. I’m assuming there are a variety of products used and methods, which makes it complicated for the lay person. Any information/diagrams are appreciated.

Thank you!

ANSWER

You are correct that shower construction is complicated. It is critical that a shower is constructed properly.

Depending on the specifics of your installation, there are several methods for constructing showers published in the 2017 edition of the TCNA Handbook for Ceramic, Glass and Stone Tile Installation. These will guide a contractor who owns and uses them.

These methods include: B414, B441, B415, B420, B426, B431, B421, B422, B421C, B422C. These methods may vary somewhat depending on whether ceramic/porcelain or stone tiles are being installed. In addition, the Handbook contains several details for common configurations for curbs and membrane installation.

You are also correct that there are a variety of products on the market that are excellent for constructing successful shower and tile installations. Many of these materials meet or exceed the ANSI A118, ANSI A137.1 and ANSI A137.2 standards. A knowledgeable installer and contractor will be able to identify the appropriate materials and relate them to the TCNA Handbook method that is most appropriate for your installation.

If your contractor is a member of the National Tile Contractors Association I would be happy to speak with them and assist them with any questions or concerns they may have in selecting the appropriate method for constructing your shower. If your contractor is not a member of the NTCA, I would be happy to speak with them about becoming a member, and all of the professional benefits membership provides. A search for an NTCA member contractor near you can be done at this link: http://tile-assn.site-ym.com/search/custom.asp?id=2759 or http://bit.ly/2FJiak6.

I highly recommend employing a Ceramic Tile Education Foundation (CTEF) Certified Tile Installer (CTI). CTIs are installers who have proven their knowledge of skills in applying industry recognized standards, methods and best practices to ensure you get the correct installation from the substructure to the finished tile surface. CTIs can be located at this link: https://www.ceramictilefoundation.org/find-certified-tile-installers or http://bit.ly/2CSu5Jf.

I hope this helps!
Mark Heinlein – CTI #1112, Training Director,
Technical Trainer / Presenter

DAVID CASTELLUCCI RECEIVES 2017 NATURAL STONE INSTITUTE PERSON OF THE YEAR AWARD

Oberlin, OH, February 22, 2018—David Castellucci, Director of Business Development at Kenneth Castellucci & Associates in Lincoln, RI, has been named 2017 Person of the Year by the Natural Stone Institute.

Castellucci served as MIA president in 2016 during the first year of the association’s joint venture. In the past two years, he has also served as Chair of the Board Nomination Committee, Chair of the Branding Committee, speaker at Coverings and TISE, and advisor to the New England chapter. He has served on delegations to the Xiamen Stone Fair, Middle East Stone Show, Marmomac, Vitoria Stone Fair, and Carrara Marmotec. He also acted as chair of the 2017 Pinnacle Awards jury and as a legislative delegate to Washington DC to assist with industry promotional efforts.

David Castellucci (center) with 2017 BSI President Daniel Wood and 2017 MIA President Jon Lancto.

2017 BSI President Daniel Wood (Lurvey Supply) worked alongside Castellucci and commented: “David was there at every turn, leading and contributing. He was tireless in his encouragement of what we could become by joining forces.” 2017 MIA President Jon Lancto (Big Fish Consulting) agreed, adding that “every time we needed help on a key initiative, David volunteered to assist and lead.” 2015 MIA President Dan Rea (Coldspring) referred to Castellucci as a “road warrior,” referencing his willingness to represent the association at key industry events and trade shows. He commented: “David loves the member engagement and has been instrumental in advancing several industry initiatives during his travels.” Natural Stone Institute Executive Vice President Jane Bennet added: “David is a dedicated leader for the association and the industry. No one has devoted more hours to key committees and initiatives. David made a difference and is a role model for how a key volunteer can support the association and its staff.”

In fitting form, Castellucci is still contributing. In March he will join several industry volunteers on a delegation to the IZMIR Fair (Marble 24) in Turkey. This will be the association’s first visit to the fair in several years.

 

 

David Unger Named 2017 Natural Stone Craftsman of the Year

Oberlin, OH, February 27, 2018David Unger, plant manager at Dee Brown, Inc. in Garland, TX has been named 2017 Natural Stone Craftsman of the Year by the Natural Stone Institute.

David Unger (center) with 2017 BSI President Daniel Wood and 2018 MIA President Jon Lancto

Unger’s first experience with stone occurred over fifty years ago, when he helped his father face a fireplace. A successful apprenticeship as a bricklayer led to restoration work and fireplaces made from fieldstones. In 1999, Unger joined Dee Brown, Inc. as a foreman. He was quickly recruited for the fabrication plant, where he was at times the only person in the plant. As the company grew, he became the person who trained new hires. Unger and his team have produced stone for some of the finest residences in Dallas and provided backup support for such notable projects as Cowboy Stadium and the American Airlines Arena. Unger attributes his own success to the good crew in the plant.

 Robert V. Barnes III, President of Dee Brown, Inc. commented: “Unger is one of the most underappreciated employees we have. He’s always working in the background, unseen. To have him have the ability to be recognized in this way is very special. He exudes and exhibits qualities that would make my grandfather very proud.” W. Tracy Webster, Director of Corporate Safety for Dee Brown, agrees: “He and his team make project managers and foremen look like champions by completing the fabrication in a timely manner and with the high quality that we have grown to expect.”

 Unger reflected on receiving this award, saying: “I hope to pass on as much as possible what I have learned through my career. It’s the responsibility of a tradesman/craftsman to train successors. They say you’re not a journeyman if you don’t share what you know. You’ll find that you’re never done learning, because you’ll learn from others, always. I enjoy and take pride in my work and feel blessed with the direction my life and career have taken. This isn’t my whole story—I’m not finished yet.”

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About the Natural Stone Institute

The Natural Stone Institute is a trade association representing every aspect of the natural stone industry. The current membership exceeds 2,000 members in over 50 countries. The association offers a wide array of technical and training resources, professional development opportunities, regulatory advocacy, and networking events. Two prominent publications—the Dimension Stone Design Manual and Building Stone Magazine—raise awareness within the natural stone industry and in the design community for best practices and uses of natural stone. Learn more at www.naturalstoneinstitute.org. 

Kathy Spanier Receives 2018 Women in Stone Pioneer Award

Oberlin, OH, February 20, 2018—Kathy Spanier, Director of Marketing for Coldspring in Cold Spring, MN, is the recipient of the 2018 Women in Stone Pioneer Award.

 For more than a decade, Spanier has made a powerful impact on the natural stone industry with her tireless efforts to position natural stone as a sustainable product within the building industry. She has been active in the Women in Stone initiative since its inception, and her vision and leadership were instrumental in creating the Women in Stone Mentorship Program. Getting involved is not a new concept to Spanier. Over the course of her 35 year marketing career she has continually assumed leadership roles in a number of industry associations.

 Brenda Edwards (TexaStone Quarries), recipient of the 2017 Women in Stone Pioneer Award, shares this about Spanier’s most recent accomplishments: “She has chaired the Sustainability Committee for the NSC 373 standard and gone far beyond the call of duty for that. She has also chaired the mentorship program for Women in Stone—she’s absolutely wonderful.” 2017 BSI President Daniel Wood (Lurvey Supply) commented: “Kathy has been a champion with sustainability efforts with stone and getting it positioned within all the green rating programs. We truly could not be where we are with our NSC 3737 standard without Kathy and her efforts.” Jane Bennett, Natural Stone Institute Executive Vice President, agrees: “She just took charge. That in itself is being a pioneer for the industry. Her leadership efforts were critical in advancing the NSC 373 standard.”

 Reflecting on this award, Spanier said: “It is a tremendous honor and privilege to receive this award! It’s an even greater honor to be placed in such a distinguished rank as last year’s honoree, Brenda Edwards, who has made a significant impact on the stone industry and Women in Stone. I would like to acknowledge the contributions and support given to me by my loving family, my remarkable friends in the stone industry, and my employer, Coldspring, that allowed me the opportunity to lead the efforts for the industry that led to this recognition.” 

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About the Natural Stone Institute

The Natural Stone Institute is a trade association representing every aspect of the natural stone industry. The current membership exceeds 2,000 members in over 50 countries. The association offers a wide array of technical and training resources, professional development opportunities, regulatory advocacy, and networking events. Two prominent publications—the Dimension Stone Design Manual and Building Stone Magazine—raise awareness within the natural stone industry and in the design community for best practices and uses of natural stone. Learn more at www.naturalstoneinstitute.org.

Jim Hogan receives 2017 Migliore Award for Lifetime Achievement

Oberlin, OH and Chestertown, NY, February 15, 2018Jim Hogan, Senior Vice President of Carrara Marble Company of America, is the recipient of the Natural Stone Institute’s 2017 Migliore Award for Lifetime Achievement.

2017 Migliore Award winner Jim Hogan with 2017 BSI President, Daniel Wood, and 2017 MIA President, Jon Lancto.

Hogan began his career in the stone industry in 1985 following an eleven year career as an airborne ranger in Special Forces for the US Army, during which he rose to the impressive rank of Lieutenant Colonel. Hogan applied his engineering degree to his job at Carrara Marble Company of America in southern California. His management helped grow the business into a powerhouse of the stone industry, now primarily involved in large scale commercial projects. Today, he is senior vice president, co-owner, and a member of the board of the directors of the company, whose works are showcases for excellence in natural stone work wherever they are located.

 Hogan began his service on the board of directors of the Marble Institute of America in 2002 and served as its president in 2008. He made his work within MIA a priority and took on his responsibilities as president with enthusiasm and thoughtful management. As president, Hogan was greeted by perhaps the greatest crisis in the history of the modern natural stone industry—the radon crisis. He rose to the occasion, working nearly full time with MIA staff to lead efforts to fight back against false claims regarding radon emission in natural stone. Long after the radon crisis, Hogan continues to contribute to the industry in countless ways, including reviewing technical papers and traveling to Washington DC for legislative visits on Capitol Hill.   

 In a letter nominating Hogan for this award, Scott Lardner (Rocky Mountain Stone) and Jonathan Zanger (Walker Zanger) commented: “Jim’s leadership during a very challenging time for our industry was unwavering and his continued commitment to the industry deserves recognition. We are proud to call Jim Hogan a friend and colleague and are pleased to nominate him for the Migliore Award for Lifetime Achievement.”

 

Construction Wages: skilled workers command higher pay

 Contributors: Sasha David, BuildZoom; and Bart Bettiga and Lesley Goddin, NTCAIn a recent study published on BuildZoom (buildzoom.com), author Sasha David analyzed wage data from the American Community Survey (ACS) to determine which construction jobs pay the most – and the least. (The full BuildZoom story can be found at http://bit.ly/2osxF8B.)

The study looks at the diversity of jobs that exist in construction, and also identifies broad patterns that identify higher-paid workers as well as “certain cities that offer better pay across the board for all construction jobs,” David said.

Median_National_Incomes_In_Construction_2016

It’s important to note that cement, concrete and terrazzo workers in this study are shown to make $35,000/year and brickmasons, block masons and stone masons as well as carpet, floor and tile installers and finishers make $30,000/year – a far cry from elevator installers and repairers at $80,000 annually, or construction and building inspectors at $55, 000.

David’s analysis indicates that higher wages are often commanded by supervisors, engineers and inspectors, but skilled “blue collar” positions also can bring in more robust salaries.

“People tend to associate white-collar or office jobs with higher salaries compared to blue-collar or manual labor, but the rankings show that this is not necessarily the case,” she said. “Working with elevators or boilers requires physical work, but these are among the highest paid jobs in the industry.”

 

Skilled labor = higher wages

An important factor in this wage analysis, David said, is level of skill required. “Occupations that require more training or technical expertise consistently pay higher than those with lower barriers to entry,” says BuildZoom’s Chief Economist, Dr. Issi Romem.

David added, “The highest-paying occupations often require specialized apprenticeships, licenses or certifications that demonstrate an understanding of the trade and command a premium in the market, such as a grounding in mechanics for elevator technicians, circuitry for electricians, or water systems for boilermakers. Of course, licensing can also serve as a means for controlling the number of people practicing and by reducing the supply of those tradesmen, increase their wages.

“Towards the bottom of the list are trades that generally have lower barriers to entry. Floor installers, construction laborers, drywall installers, painters and roofers are listed on the Bureau of Labor Statistics as having ‘no formal education credentials’ required, while professions with average pay including pipelayers, sheet metal workers, glaziers, insulation workers, and carpenters typically require ‘a high school diploma or equivalent.’

“There are people in our industry and outside of our trade who contest that tile installation costs are already too high,” said Bart Bettiga, NTCA Executive Director. “But I believe that the overall cost of installation will come down if we have more highly skilled people installing tile and stone.  These products are not meant to be put in by an untrained workforce.  Tile and stone are most often selected because they are considered to be a permanent finish.  For this to be the case, we need to have a highly trained and a highly compensated workforce.”

This finding that correlates higher wages with a skilled workforce is of particular interest to NTCA, which has its core mission to educate and train installers and raise their skill level.

“For the past several years, the NTCA has been developing its online apprenticeship curriculum,” said Bart Bettiga, NTCA Executive Director.  “We have worked with several of our members to help them use this educational tool to recruit new people into the trade and to train their current staff.  It is our hope that this program can be integrated with supervised and field-related training.

“The reason this is so important is that we believe that tile installation is a highly skilled craft that takes several years to master,” Bettiga added. “Why is this important?  Because we have a big job to do, and it is perfectly illustrated in this paper.  We must raise the wages of our trained tile installers if we are going to recruit talented young people into our trade.  We cannot continue to be grouped with other flooring trades that quite frankly are not as complex, nor do they take as long to master.  Tile installers should be making wages like other trades that are considered to be highly skilled.”

6_trades_in_10_largest_citiesLocation impacts wages

David’s analysis also shows “ordering of occupations from highest-paid to lowest-paid at the national level,” and “within individual metro areas. Within any given city, supervisors are paid the most and painters the least, with an overall downward slope.”

Some cities are more generous with construction wages. For instance, carpet and flooring workers earn more than the national average in both the San Jose/San Francisco/Oakland region and the New York/Newark /Pennsylvania/Connecticut regions than Dallas/Fort Worth or Miami/Fort Lauderdale.

 

Cities with Higher Wages in Construction Occupations: San Jose, San Francisco , Oakland, Calif.

Cities with Higher Wages in Construction Occupations – New York-Newark, NJ, NY, CT, PA

 

 

 

 

 

 

 

 

 

 

“The higher incomes in San Jose and New York suggest they may be related to how expensive it is to live in those cities,” David said. “The Cost of Living Index measures the difference in the price levels of goods, services, and rent across the US, where 100 is set as the average national cost of living. San Jose and New York have Cost of Living Indexes of 124 and 121, which are respectively the second and fifth most expensive cities in the US.”

“Wages are consistently higher across all construction occupations in certain cities, in line with the cost of living,” summarized Romem.

On the other hand, cost of living is lower in Dallas and Miami, with indices of 100 and 106 respectively, David pointed out. These lower costs of living  give“people greater purchasing power than expensive cities like San Francisco or New York,” she said.

<Cities with lower wages charts – 2>

Cities with lower wages in construction- Miami, Ft. Lauderdale, Port St. Lucie, FL

Cities with lower wages in construction – Dallas, Ft. Worth, Texas; Oklahoma

 

 

 

 

 

 

 

 

 

 

So how do construction occupations rank in your city? Use the dropdown at http://bit.ly/2osxF8B  to display the rankings for your city.

The above rankings and spider charts for large cities are available for download in the links below.

See the BuildZoom story at http://bit.ly/2osxF8B for notes and methodology and downloads for Occupation Rankings by Metro Area and Metro Area Comparisons to National Median.

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Raised in Tokyo and Honolulu, Sasha has implemented international marketing campaigns on five continents. She is fascinated by the intersection of technology and socioeconomic development, and is a street food enthusiast.

 

When Key Employees Stall Your Exit

Vincent Mastrovito

An important part of a successful ownership transfer, regardless of Exit Path, is the presence of key employees. Key employees are those who have a direct and significant impact on business value, meaningfully participate in the business’ strategic future, and whose combination of skills and experience would be exceedingly difficult to replace.

Because of their role in the business, key employees can just as easily stall your business exit as facilitate it. Consider the story of Maria Villalobos, who had her Exit Plan stalled by one of her key employees.

Maria Villalobos was nearing her retirement. Over 30 years, she built her one-woman plumbing company into a 55-employee regional powerhouse. Her ambition had led her to plan for her business exit on her own, based on information she had gleaned and absorbed over the years. She hired a business valuation specialist, who valued her company at $11 million, enough for her and her family to live comfortably. She recruited a business broker to assemble a deal team and find the right buyer. And over 15 years, she had invested in training three key employees—Armand, Petra, and Donald—to run specific portions of the business after she retired.

As her business broker fielded offers, Maria gathered her key employees to tell them her intentions.

“I know I’ve been talking about retiring for a couple years now, but I’m finally ready to pull the trigger,” she told them. “My broker’s gathered some offers, and we’re going to be considering them this month.”

“It’s about time,” Donald said cheerily. “You’ve earned this.”

“Congratulations, Maria!” Petra added.

“That’s great,” Armand said.

“I couldn’t have gotten here without you all,” Maria said, smiling.

“So, what are the offers?” Armand asked.

Maria had built trust with her key employees over their 15 years together, and felt comfortable giving them an idea.

“A good amount. North of $10 million. And once we finalize the deal, you three will basically be in charge.”

Maria told them that she would update them as she finalized the deal and adjourned the meeting. She ended up signing a letter of intent that would get her the $11 million purchase price, contingent on her key employees’ continued work with the company after the transfer. Maria shared this information with her key employees.

One week before she was set to sign off on the deal, Armand requested a meeting.

“I want part of the deal,” he told Maria.

Maria was stunned. “You’re going to have more responsibilities, more pay,” she said.

“That’s not enough,” Armand responded. “You said you couldn’t have gotten here without me. I know what you’re selling for, and I want $3 million, or I’ll walk. I’ve got a couple of job offers on the table right now that pay better anyway.”

“I can’t do that.” Maria said. “I won’t.”

“Well, good luck then,” Armand said.

Armand tendered his immediate resignation and began working for a direct competitor. Maria was forced to inform her buyer, who pulled the deal. She tried putting her business back on the market, but every offer she received was less than $5 million, based on the hole left by Armand’s absence and her first failed attempt to sell. One buyer offered her $7 million, but only if she stayed to fulfill Armand’s duties for at least five years. It took Maria an additional five years to sell her business for the money she needed.

For as diligent as Maria was, there were several pieces of her plan that she neglected. She failed to handcuff Armand to the business. She failed to have her key employees sign a covenant not to compete. She failed to incentivize all of her key employees properly. In the end, by trying to plan her exit by herself and without a full range of expertise, she overlooked several key aspects to a successful exit. It ended up costing her millions of dollars and half a decade of her time.

If you’re unsure about which aspects of your business exit you might be missing, or you want to maximize and protect your company’s value as you approach your business exit, contact us today. You don’t have to expose yourself to unforeseen risks and unfamiliar territories by planning your exit alone.

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial advisor. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial advisor. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

For information, contact:

Vincent Mastrovito

[email protected] 

 

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