WASHINGTON, D.C. - Heating, Airconditioning, Refrigeration Distributors International (HARDI) held its fourth annual legislative fly-in in mid-May. According to Talbot Gee, executive vice president and COO of HARDI, the 2011 fly-in was HARDI’s largest, with more than 60 members attending nearly 200 meetings on Capitol Hill in one day.

The general mood was upbeat, and the HARDI members who attended were engaged in their cause to promote business-friendly legislation.

COMMUNICATION WITH CONGRESS

The event was located at the Phoenix Park Hotel, two blocks away from the Capitol. This location provided attendees with convenient access to the Senate and House office buildings where their meetings were scheduled. On the afternoon before the meetings, participants attended a seminar by Stephanie Vance, a consultant who advised HARDI members on how to effectively communicate with Congress.

Vance advised attendees to be aware of the general mood in D.C. before visiting their representatives; for instance, she noted, deficit reduction is currently a hot political topic. Her presentation centered around what she called the three A’s of advocacy: the ask, the audience, and the anecdote. In order to be effective advocates, Vance explained, HARDI members should specifically ask representatives for their support, tailor their requests to the representative, and share personal anecdotes to bring the issue to life.

Vance also cautioned attendees to take a long-term view of their advocacy efforts. “On average, it takes seven years to move legislation through Congress,” she said. HARDI members who had attended previous fly-ins also offered advice, specifically noting that punctuality, politeness, diplomacy, and persistent follow-up were all good traits to exhibit during and after the meetings.

Next Jon Melchi, manager of government affairs at HARDI, presented HARDI’s six main recommendations for Congress. These industry issues included the following: repealing the estate tax, preserving Last-In-First-Out (LIFO), supporting the REINS Act, supporting the Natural Gas Act, merging the Department of Energy (DOE) and Environmental Protection Agency (EPA), and extending the 25C tax credit.

According to a HARDI document, the association supports House Resolution 1259, a bill that would permanently repeal the estate tax. “HARDI members believe that a long-term solution to the estate tax is of the utmost importance to protect small and family-owned businesses.”

Melchi explained that the repeal of LIFO, along with a retroactive tax on LIFO reserves, has been included in the president’s budget. He was joined by Jade West, senior vice president of government relations for the National Association of Wholesaler-Distributors (NAW). West told attendees that LIFO is an inventory method, not a tax deduction, and it has been a recognized accounting method for almost 70 years. She said that the repeal of LIFO, accompanied by a retroactive tax on LIFO reserves, “would be beyond devastating.”

Melchi added that even distributors who do not use LIFO could be negatively affected by repeal. “If your supplier is on LIFO, it could raise costs across the board,” he warned.

HARDI also expressed support for two bills currently in Congress to reduce federal regulation, the REINS Act (H.R. 10/S. 299) and a bill to merge the DOE and EPA (S. 892). The REINS Act was introduced in both houses of Congress by Sen. Rand Paul, R-Ky., and Rep. Geoff Davis, R-Ky. It would require congressional approval for major rules created by the executive branch and defines a major rule as one that is likely to result in an annual effect on the economy of $100 million or more.

Senate bill 892, The Consolidation of Department of Energy and Environmental Protection Agency Act of 2011, was introduced by Sen. Richard Burr, R-N.C. According to Melchi, merging the DOE and EPA would be a “godsend” for the HVACR industry since it is regulated by both agencies.

Additionally, HARDI encouraged attendees to advocate for passage of the Natural Gas Act (H.R. 1380) to provide incentives for business owners that want to retrofit fleets to run on natural gas. And, finally, HARDI advocated the extension of the 25C tax credit. According to Melchi, HARDI’s priorities in advocating for the 25C tax credits are to eliminate the lifetime limit and individual product caps.

SENATORS SPEAK OUT

On the second day of the fly-in, HARDI attendees were treated to a breakfast meeting with keynote speeches from two of the senators whose bills they were there to support - Rand Paul and Richard Burr.

Paul began his speech with some good-natured jokes and then quickly launched into a sharp commentary on the federal budget. He noted that the government faces a $1.6 trillion deficit and said that bold leadership is needed to make spending cuts that will actually have an impact on the deficit. Paul spent a substantial portion of his talk focusing specifically on Social Security and said that the program faces a budget crisis for two reasons: there are fewer workers and people are living longer. He said that the way to fix Social Security is to raise the retirement age and means-test retirees for eligibility, adding that he believes this solution is “politically palatable.” He also noted that this solution would only raise the retirement age for workers under age 56. “We’re winning the public debate, but now we have to win the legislative battles,” Paul concluded.

He was followed by Burr, who also spoke about the deficit and entitlement programs. “If we were to cut 100 percent of discretionary spending and 100 percent of military spending, we would still be $200 billion short of balancing next year’s budget,” Burr said. “Our opportunity is to dig into the toughest issues: Medicare, Medicaid, and Social Security.”

Burr noted that he also wants to cut government spending by consolidating duplicative programs. He recently introduced bills to merge the EPA and DOE, and to merge the Departments of Labor and Commerce. He also intends to introduce a bill that would merge the Department of Education with the Department of Human & Health Services.

Burr got a big laugh from the audience when he said, “We may have to furlough a few bureaucrats in Washington - you won’t miss them.” He explained that this series of bills is based on recommendations from the Simpson-Bowles fiscal commission report.

Both senators received standing ovations from the attendees.

MEETINGS ON THE HILL

After listening to the senators, HARDI members headed up to Capitol Hill for a day of meetings. Most met with staffers of their senators and representatives. HARDI members reported that many of the staffers were well-informed and took notes about distributor concerns.

Betsy Keating, purchasing manager for Aireco Supply Inc. (Savage, Md.), met with Congressional staffers for Maryland and Virginia representatives. “My biggest priorities to talk to them about were the 25C tax credit and the estate tax,” she said, noting that 95 to 98 percent of Aireco’s customer base is composed of small family businesses that could disappear if the estate tax is not repealed. “If the families have to pay that estate tax, the small businesses would go away,” she said. “They’ll either be eaten up by a larger employer or just shut down completely and cause people to be out of work.” She added that her meetings went well, and the staffers were receptive to the issues she addressed.

Two HARDI members from Illco Inc., a wholesale-distributor serving the Chicago area, were also pleased with how their meetings went. According to Karen Madonia, chief financial officer, and Bill Bergamini, president, the 2011 fly-in was a different experience because many of their representatives are freshmen who are new to the Hill. “We met with five or six new representatives,” Bergamini said. “The House wasn’t in session, so we met mostly with staffers. They had a lot of time to spend with us, and they appeared to really listen - and hopefully they cared.”

According to Madonia, most of their time was spent talking about the estate tax and LIFO. She and Bergamini are second-generation members of their family business, and they are very concerned about how to ensure the viability of Illco through a generational transfer. Bergamini explained to staffers that the only assets distributors have are inventory and buildings, and these would have to be sold off to pay an estate tax.

Richard Cook, current president of HARDI and president of Johnson Supply (Houston), had meetings at the offices of both his senators and representatives. One of his priorities was to dissuade lawmakers from repealing LIFO. “We’re concerned that LIFO is perceived as some sort of tax dodge or tax break,” he said. “It’s just as legitimate as FIFO, LILO, or any of the other accounting methods to value inventory.”

Cook added that the 2011 fly-in was the best yet, in part because representatives showed real interest in hearing what their constituents had to say. “It’s our obligation as citizens in a republic or democracy to make these points of view known and to guide and advise our representatives,” he said.

MAKING AN IMPACT

After a full day of meetings, HARDI members returned to the hotel for a wrap-up session. “Our members do a fantastic job of representing the industry and advancing our interests,” Gee said. “I think the sky’s the limit, and we’re seeing results already with the access we’re gaining from doing these fly-ins.”

Publication date: 06/20/2011