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Local Business Owners Find Obamacare, Regs Harmful
BOARDMAN, Ohio -- While small-business owners say they experienced a robust 2013 in terms of sales and new accounts locally, many are concerned about what they see as onerous regulations and mandates that could hamper, even derail, this growth.
That was the consensus of eight representatives of small businesses who participated in a recent roundtable discussion hosted by The Business Journal. The discussion appears in our January edition, which should be in readers’ mailboxes Tuesday. Excerpts also will be featured on the DailyBUZZ webcast posted at Business Journal Daily.com.
Tim Crowe of Crowe's Cabinets, John Thompson of Omega Door Inc., Claudia Kovach of City Machine Technologies Inc., Dave Hughes of Specialty Fab Inc., Paul Lyden of the Lyden Oil Co., Becky Wall of Dearing Compressor & Pump, Erin Mellinger of Fitness Together, and Sam Boak of Boak & Sons all provided insight into the challenges their firms face.
Mellinger, the owner of two Fitness Together personal training franchises in Canfield and Poland, reports her business has grown to where she anticipates opening a third location.
The first two were started through conventional bank financing, Mellinger reports. "Borrowing the money wasn't easy, but I've always been thinking 'big picture' and been very conservative with my money," she says.
So conservative, in fact, that Mellinger says that she’ll be able to open her third site without borrowing a single dime.
Others are reporting similar success stories when it comes to the level of business in the region.
"In the Valley, we're very busy," says Paul Lyden, vice president of Lyden Oil, Youngstown. The company, which is a wholesale supplier of oil and gas across six states, reports that the energy sector in this region is strong, but remains stagnant in other areas of the country where the company does business. "It's flat or just creeping along," he says.
Northeastern Ohio has seen a dramatic boost over the last several years since oil and gas exploration accelerated in eastern Ohio's Utica shale. "It's very, very strong," Lyden observes.
However, Lyden says, he feels there's a “target on my business” by the Obama administration because of environmental regulations that placed a burden on his company and those it supports. "They're calling it a war on coal. I call it a war on carbon," he remarks.
Companies such as Dearing Compressor are also experiencing an increase in business from the exploding energy sector, says Dearing Vice President Becky Wall. "Our growth because of the shale operations has been magnificent," she reports. "We're planning an expansion that has started as we speak."
Dearing manufactures large compressor systems used in the oil and gas industry and is adding 25,000 square feet to its Lake Park Road operations in Boardman, Wall reports.
The company is still in hiring mode, targeting skilled workers such as welders for new positions at Dearing, she says. However, Wall says, the arrival of larger oil and gas interests such as pipeline companies has led to increased competition for the same talent pool within the region.
"This year, we've experienced our first exposure to turnover," she reports, because employers in the oil and gas industry have lured some qualified tradesmen away.
All of those who attended reported their respective businesses are doing very well. "We're in our sixth year of having at least 15% growth per year," reports Sam Boak, president of Boak & Sons Insulation and Roofing in Austintown. "Our growth though is basically going outside of the Valley," he acknowledges. "Cleveland, Pittsburgh and the Akron-Canton area – that seems to be the growth we can go after."
This growth is tempered for some by new federal programs such as the Affordable Care Act, the full implementation delayed of which has been postponed to 2015 for employers with 50 or more full-time in their workforces.
Most of the participants voiced concerns over the impact of the law on their companies.
John Thompson, president of Omega Door Co. in Youngstown, responded that he doesn't foresee a major impact, while others believe that it may force them to abandon their long-term policy of providing health-care benefits to their employees.
"I have no guarantees after next June," lamented Tim Crowe of Crowe's Cabinets, Lowellville. The company renewed early its health insurance policy for 2014, but he doubts the company will provide coverage in 2015. "I don't think it's going to happen."
Should the Affordable Care Act stand as is, Crowe said he could expect at least a 40% to 50% increase in premiums for less coverage. "That's a tough pill to swallow, especially when you're paying the whole bill," he says.
Claudia Kovach reported that her company, City Machine Technologies Inc., Youngstown, has experienced a 15% to 18% increase in health-care costs over the last several years. "We spend $2,000 a day on health care before we even turn on the lights."
Although some type of health-care reform is needed, The Affordable Care act isn't the answer, says Dave Hughes, president of Specialty Fab in North Lima.
"The program we have in place right now is not helping anyone," Hughes says. "It's caused more confusion and harm than anything else. I still don't see any leadership."
At one time, Hughes reports, health-care insurance for employees made up 5% of his company’s overhead costs. Today, it's close to 30%, he says.
Lyden added that the skyrocketing premiums have forced Lyden Oil to change its health-care provider. "Our contract with our provider this year is going up 33%," he says. "We're in the process of switching providers, and we'll only experience a 17% increase this year."
He added that consultants have estimated the company should expect another 60% increase in costs over the next two years. Also, as these rates increase, so do the taxes a company pays provide health insurance to employees, Lyden notes.
As the law stands, Lyden says, it would be more beneficial for his company to forgo a health-care plan, pay a penalty tax, and give its 180 or so employees a $5,000 a year raise and direct them to shop for their own health care through federal or state exchanges.
"We would save a couple hundred thousand dollars, probably," Lyden estimates.
Boak adds that the uncertainty related to Obamacare is wreaking havoc on future bids or budgets for small companies such as his. "We don't know how to budget our company because we don't know what are health-care costs will be next year."
Other regulations are also making it difficult for small businesses, especially manufacturers, to move forward.
Specialty Fab's Hughes relates that manufacturing companies such as his are "getting squeezed and squeezed" all the time because of tighter regulations administered through the U.S. Environmental Protection Agency.
"It's getting to the point where we as manufactures may not be able to open the doors up in the summertime because we're making too much pollution inside our businesses," he says.
Lyden interjects that many of these regulations set standards that are simply impossible to meet. "The EPA is probably one of the largest job killers in the United States," he said. "They come up with rules and regulations that are not attainable," which then forces manufacturing concerns to shift production to other countries and shed jobs here.
EPA regulations have also led to the shuttering of coal-fired electric generation plants, as many electric companies move to natural gas to fuel their operations, City Machine’s Kovach adds. This, in turn, has forced electric rates to rise.
At the state level, Ohio must reform its worker compensation laws, Boak says. For example, when his company does business across the state line in Pennsylvania, it is forced to purchase workers compensation from that state at a higher rate because of a tariff policy in place.
Ohio, however, doesn't have such a policy, and Pennsylvania companies doing work in Ohio pay lower workers compensation premiums. “We should create the same tariff. I've lost a significant amount of business in Ohio from Pennsylvania companies because there isn't a tariff on them,” he says.
Also, small manufacturers and businesses across the region are finding it more difficult to hire quality, trained workers.
On the other hand, the area's vocational schools and training centers have prepared some students with the basic skills necessary to get a job in manufacturing, others say.
"There's a learning curve," City Machine’s Kovach says of these new hires, especially getting them to understand shift work in manufacturing. "The United States runs 24/7 and you need to get on the truck and work 24/7 and do shift work as well."
Three of Crowe's Cabinets top employees were hired right out of the Columbiana County Career and Technical Center and are still with the company 15 years later.
"You have to be patient," he says. "There might be some tougher times early on but as they get older, they produce."
Still, many business owners believe the greatest fight isn’t with their toughest industry competitors but their own government.
“It takes a lot to put your boots on in the morning," Lyden says of running a business today. "One of your biggest competitors right off the bat is Uncle Sam. It’s a challenge."
Copyright 2014, The Business Journal, Youngstown, Ohio.
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