With Looming Federal Cuts, Washington Area Companies Manage Through Uncertainty

WASHINGTON, Nov. 30, 2011 /PRNewswire-USNewswire/ -- Companies and organizations in the metropolitan Washington region that work with the federal government are experiencing significant levels of uncertainty as they prepare for what could be unprecedented federal budget cuts over the next several years.

"We convened this briefing to help the business community as it struggles with the growing sense of uncertainty that is clouding the market," Jim Dinegar, President and CEO of the Greater Washington Board of Trade, told a conference of regional business leaders. "Today, through this briefing and session on scenario planning, we delivered guidance to ensure that our members were 'directionally correct' in their planning for the implications of any debt-reduction deal."

"Uncertainty seems like it will be growing over the next 12 months," said Kelly Toole, Firm Managing Partner for Tax, Baker Tilly.

Dinegar cited the results of a survey of Greater Washington Board of Trade members that found nearly 45 percent of respondents were so concerned about the future that they were making only limited commitments in hiring and other investments.

Presented by the Board of Trade, the half-day conference examined the implications of potentially dramatic federal spending budget cuts on regional sectors as diverse as defense contracting to hospitality, air travel, and real estate.

Speakers included industry experts, a trade association chief, a top political reporter, and industry consultants who advise companies and organizations on scenario planning.

While the speakers said the cuts will be real, many said the Washington region's diverse economy will help the area weather the storm.

The failure of the congressional Super Committee to reach agreement on budget cuts in November triggers a whopping $1.2 trillion in automatic spending cuts beginning in January 2013, unless Congress derails it or scales it back. 

Jonathan Allen, a reporter with Politico, who has been covering the machinations of the failed Super Committee on Capitol Hill, warned that business leaders should not expect Congress to save the day and put a stop to deep cuts.

"From the perspective of how do we reverse these cuts, it's not likely," he said.  

His advice to Washington-area businesses and organizations: "Be ready. Start planning now. It's going to be painful."

Stan Soloway, President & CEO, Professional Services Council, echoed that point of view. "It's not going to be pleasant or painless," he said. "It will be a rocky road" for regional business and organizations that rely on federal spending.

Businesses in the region that service the federal government already are cutting back their investments and research and development, anticipating budget reductions in 2013, said Soloway.

The budget cuts are expected to have an impact on air travel in the region.  Andrew Rountree, Chief Financial Officer for the Metropolitan Washington Airports Authority, said that the number of passengers flying from Dulles International Airport could drop by as much as 3 percent and 5.4 percent at Reagan International Airport.

But he added that because the region has a fairly diverse economy with lower-than-average unemployment rates, the airports are capable of weathering the reduction in federal spending.

"I am confident in the airports in the region," Rountree said.

In the real estate sector, officials said the impact of anticipated federal spending reductions can already be felt. Commercial real estate expert Greg Leisch, CEO of Delta Associates, said that employers are hesitant to hire, tenants are hesitant to rent and investors hesitant to build new buildings.

"Tenants are tentative to make commitment on the lease side, added Eric Mockler, President, Mid-Atlantic Region, Transwestern.

More information on the conference is available here:

http://www.bot.org/regional-priorities/emergency-preparedness/federal-debt-reduction-uncertainty.aspx

SOURCE Greater Washington Board of Trade