By Kevin Bogardus and Megan R. Wilson - 04/23/13 12:14 AM EDT
What K Street had hoped would be a boom year is starting out as a bust.
Revenue was either down or flat at many of Washington’s leading lobby firms at the start of 2013 despite the arrival of a new Congress and a fresh legislative agenda from President Obama.
Industry king Patton Boggs reported a decline of nearly $2 million in its lobbying revenue, a sharp and stunning drop that called into question the industry’s bullish outlook for the year.
Lobbyists conceded the first quarter was a disappointment, but said the gloom that has hovered over the influence industry for the past two years is beginning to lift. Look to the next quarter, they said, for the comeback.
“The second quarter is when it is going to hit,” said Rich Gold of Holland & Knight. “We are just waiting for the revenues to come in. ... We are expecting an up year.”
O’Neill of Patton Boggs — which took in $10.4 million in lobbying fees after banking $12.2 million in the first quarter of 2012 — agreed that better times are ahead.
“While the year started slowly, we continue to be optimistic about the fights that lay ahead,” O’Neill said.
Lobbyists predicted a surge in business earlier this year as lawmakers moved past the 2012 campaign and got down to work on major issues like tax reform and immigration.
But the debate over budgetary matters, from the so-called “fiscal cliff” to sequestration, consumed Congress for the first three months of the year and kept legislating in a low gear.
Smitty Davis, a partner at Akin Gump Strauss Hauer & Feld, said clients need time to identify which items of legislation worry them and require lobbyists’ help.
“Bills are introduced in the beginning of the year,” Davis said — it’s not until spring that clients begin to identify problems in legislation and “have a better idea where they need help.”
Akin Gump, the perennial No. 2 in lobbying earnings, reported a slight increase in its revenue compared to this point last year. The firm earned $8 million in lobbying fees, up from the $7.9 million it earned for 2012’s first quarter.
Regulatory and legal work has kept K Street busy, though not all of that activity is reportable under the Lobbying Disclosure Act (LDA). And following the stagnant election-year period for Congress, influencers say things are getting back to normal.
“There has been more activity in Washington than there has been, really, for a whole year,” Davis said.
Monday was the deadline for lobby firms to file their quarterly reports under the LDA. As the reports trickled in, it became clear that K Street’s revival has yet to materialize.
Podesta Group reported $6.6 million in lobbying revenue for this past quarter, about equal to what the firm took in for the 2012 first quarter. Van Scoyoc Associates earned $4.7 million in lobbying fees, a decline from the $5 million it had at this point last year.
Holland & Knight took in $4.4 million for this year’s first quarter, a small dip from its $4.5 million earnings at this point last year. Gold, head of the firm’s public policy and regulation group, said pitching for potential clients got moved back as the lobby shop grappled with the budget battles.
“After the presidential election you normally have a lot of activity, but everyone was just trying to get past the fiscal cliff,” Gold said. “It got shifted to January and February instead of November and December.”
Now the firm has been able to sign a number of clients and is expecting a better second quarter, leading to a more profitable year in 2013, according to Gold.
Other lobbyists expressed the same sentiment.
Rob Chamberlin with McBee Strategic Consulting said there was action in the first quarter that isn’t showing up in the lobbying revenue figures.
The firm made $2.6 million in 2013’s first quarter — down from the $3 million made during the same time last year — but Chamberlin said he’s optimistic.
The firm “put some more things in the pipeline that, in past quarters, have not been there,” he said. “There are folks who need help navigating through both Congress and the issues, which usually means more business in the lobbying world.”
Al Mottur, managing partner of the Washington office of Brownstein Hyatt Farber Schreck, pointed to the Senate’s comprehensive immigration reform bill and tax reform as good sources of business. Brownstein Hyatt took in $5.3 million this past quarter, compared to $5.6 million at this point last year.
Nevertheless, Mottur said the firm is busy and that he expects it will beat its 2012 lobbying earnings this year, just like it did in 2012 compared to 2011.
“I think we are going to do that again. We are expecting to increase our revenues this year,” Mottur said.
Some firms were able to beat the industry trend and report gains.
BGR Group earned $3.7 million in lobbying fees, climbing from the $3.1 million it had for 2012’s first quarter. Alston & Bird also saw lobbying revenues climb, with $3.4 million this past quarter compared to $3.3 million for 2012’s first quarter.
Several on K Street claimed momentum for the industry and said lobbyists are poised for one of their biggest years ever.
“2013 is going to be a more intense, significant and productive time on the Hill, with more in play and accomplished than any year since 2009,” said Bruce Mehlman, a partner with Mehlman Vogel Castagnetti.
Mehlman’s firm took in $3.4 million for 2013’s first quarter, a jump from the $3.2 million the shop earned at this point last year.
— This story was updated on April 23 with new numbers from Alston & Bird.