For K Street, 2013 is off to a slow start

Correction: An earlier version of this story incorrectly stated Smitty Davis’s title. This version has been corrected.

April 28, 2013

The rebound K Street was hoping for in 2013 has yet to materialize.

The region’s 10 most profitable lobby shops posted a collective 8 percent drop in lobbying revenue during the first three months of 2013 compared with the same period last year. Lobbying revenue slid from a collective $59.7 million to $54.8 million at those firms during the first quarter of 2013 compared with the first quarter of 2012, according to filings submitted by firms to the Senate Office of Public Records last week.

The hit follows two consecutive years of decline among the lobbying industry’s leading firms. In January, the top 10 firms reported taking in 10 percent less in lobbying fees in 2012 than in 2011, dropping from $256.9 million to $232.6 million. The same firms saw a collective 3 percent drop in 2011, a sharp contrast from the two previous years when landmark legislation in health care and financial services reform helped generate record earnings at many firms.

Six of the 10 firms posted declines between 2 and 15 percent during the first quarter, including lobbying powerhouse Patton Boggs, which saw revenue drop nearly 15 percent from $12.2 million to $10.4 million. Most of the firms that grew revenue — Akin Gump, Podesta Group, Alston & Bird and BGR Group — did so modestly, between 1 and 2 percent, with the exception of BGR, which saw revenue rise 19 percent.

First-quarter declines at two firms, Ogilvy Government Relations and Cassidy & Associates, were large enough to bump them out of the top 10. They were replaced by BGR Group and Alston & Bird. Ogilvy, which last summer saw the departure of the firm’s chairman and chief executive, earned $1.5 million during the first quarter — less than one third of the $5 million the firm earned during the same period last year. Cassidy & Associates reported a 22 percent drop in revenue, from nearly $4 million to $3.1 million.

Lobbying activity typically slows around the time of presidential elections, and many lobbyists hoped that with the 2012 race behind them, legislative activity would pick up and drive more business their way. That has yet to happen — but part of it may be timing, said Rich Gold, head of public policy at Holland & Knight.

“Normally things pick up right after a presidential election, but because of the sequester, a lot of people held their breath until December 31,” Gold said. “A lot of [lobbyist] hiring that would’ve happened in the fourth quarter shifted to the first quarter. Basically not much happened in January and February. A lot of hiring occurred in March, so you’re not collecting the dollars until [the second quarter].”

Al Mottur, who leads the lobbying group at Brownstein Hyatt Farber Schreck, attributed the overall stagnating market to a “hangover effect” from the last Congress. Brownstein Hyatt saw revenue dip 5 percent in the first quarter, but was one of only two of the top 10 firms that grew in 2012.

“Usually there’s more business in a new congress, but there is a political hangover effect from the fact that congress has seemed less able to move major pieces of legislation in the committees and through the chambers, so business is perhaps being a little more cautious in engaging,” Mottur said.

But immigration and corporate tax reform are poised to drive work to K Street as corporations hire lobbyists to influence how immigration and tax measures play out in the House and Senate.

“It’s early in the new congress,” Mottur said. “Major initiatives that will be ongoing aren’t ripe yet. Those things will slowly germinate and generate business opportunities but they haven’t yet, with the exception of immigration. Tax reform is going to heat up. That will occasion a lot of lobbying.”

The true test for firms may come in the second quarter, after companies and associations have a chance to review new legislation and take positions on which portions of it they want to oppose or support.

“The first quarter of a new congress is going to be slower than most because you’re just introducing new bills,” said Smitty Davis, a partner in Akin Gump’s public policy group. “Enough time hasn’t transpired to know where the problems are with the legislation. In the second quarter, people begin to figure out where there may be problems they want to address.”

Catherine Ho covers law and lobbying for Capital Business, which she joined in 2011. She was previously a reporter at the Daily Journal in Los Angeles, covering LA civil courts and labor and employment law.
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