There’s no sunrise yet on K Street

Greg Nash
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K Street is on track for another down year.

Several top firms are behind their earnings pace from 2012, new disclosure reports show, while others have seen their lobbying revenue plateau. 

Leaders in the influence industry had hoped the third quarter of the year would be a productive time on Capitol Hill. Instead, it was punctuated by an August recess and a government shutdown that brought most legislating to a dead stop.

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“The last three weeks were frustrating. All the oxygen was taken up in the room by all the other stuff,” said John Raffaelli, founding partner of Capitol Counsel.

Now that the shutdown is over and the debt ceiling is raised through February, lobbyists think there’s a real chance to turn things around. 

“With the pressure-release valve of the government shutdown, people are coming back to the table and they are realizing they need to get stuff done,” said Rich Gold, head of the public policy group at Holland & Knight.

Geoff Gonella, president and managing partner for Cornerstone Government Affairs, said he hopes lawmakers have learned a lesson about the need to compromise.

“What has happened over the last three weeks I hope will be motivation and impetus for Congress to work better,” Gonella said.

Legislative action has been sorely lacking for firms like Cornerstone, which earned $8.4 million in lobbying fees for the first nine months of 2013, down from the $8.5 million at this point in 2012.

Gonella said business is down on the lobbying side of the firm because Congress’s budget fights have jammed up the appropriations process.  

“Over the past couple of years, we have experienced more volatility, more going up and down, than we have seen in the past five or six years,” Gonella said, adding that the firm’s state-based operations are booming.

K Street king Patton Boggs was also down. The firm has earned $30.7 million so far in 2013, a drop from the $35.2 million the firm took in at this point last year. 

Kevin O’Neill, the firm’s deputy chairman of its public policy department, said regulatory work has been growing but “when you see declining activity in the legislative arena, that’s going to hit your LDA-reportable activity,” he said, referring to the Lobbying Disclosure Act.

Other firms are in the same boat.

Podesta Group has earned $20.5 million in lobbying revenue so far this year, down from $20.6 million in 2012. 

Van Scoyoc Associates reported about a $1 million drop from the first three quarters of 2012, with earnings of $15.4 million.

And Brownstein Hyatt Farber Schreck reported $16.9 million in lobbying revenue so far, a slide from the $17.1 million the firm had recorded by this point in 2012. 

Nevertheless, Al Mottur, managing partner of Brownstein Hyatt’s Washington office, said 2014 could be an up year for the influence industry if lawmakers buckle down on tax reform and immigration.

“We are optimistic. We have made investments in talent and we are seeing that pay off,” Mottur said. “All of that can be mitigated by an election year, where not much that happens, but I’m hopeful.” 

Some firms are thriving despite the gridlock in Congress.

Capitol Counsel’s earnings have jumped by 22 percent compared to the first three quarters of last year amid the drive for tax reform. The firm, which specializes in tax issues, banked $3.8 million from July to September, totaling $10.7 million thus far in 2013.

Raffaelli said clients are focused on the work of Sen. Max Baucus (D-Mont.) and Rep. Dave Camp (R-Mich.), who are pursuing an overhaul of the tax code that would have wide-ranging ramifications for businesses.

“Tax reform is one of those things that’s not going to happen until it does happen,” Raffaelli said. “Even if you don’t think it’s going to happen, you can’t ignore it.”

Other firms have also posted growth.

BGR Group took in $11.1 million in lobbying fees so far this year, a jump from the $10.1 million the firm had at this point last year. Akin Gump Strauss Hauer & Feld, one of K Street’s heavy hitters, had its lobbying revenue climb by 8 percent this year, with $25.1 million in earnings so far.

Smith Davis, an Akin Gump partner, says business on the Hill is slowly returning.

“The real difference for most of Washington policy community is whether things are going on in terms of business issues — not the big ones that grab headlines — but smaller ones that concern businesses,” Davis said. “That’s slowly thawing, and I think that thaw continues.”

Elmendorf Ryan’s earnings also climbed, with $7.3 million in lobbying revenue so far this year, a $1 million increase over this point in 2012.

“Even though Congress is not doing a lot, there is a possibility of Congress doing a lot. They are laying the groundwork,” said Steve Elmendorf, the firm’s president. 

But declining revenue is the reality for most of Washington’s lobby shops.

Holland & Knight reported earning $13.5 million in LDA revenue so far this year, slightly down from $13.6 million at this point in 2012. Gold said regulatory work, not covered by the LDA, remains a positive for the firm. 

K&L Gates has earned $12.4 million so far this year, down from its take of $13.5 million for the first three quarters of 2012. 

And Williams & Jensen couldn’t match the $13.6 million it had at this point last year, earning $13.1 million so far in 2013. 

Despite the tough business climate, many on K Street are upbeat about 2014.

The budget conference committee that was set up by the bill to reopen the government could be a godsend, they say.

“We are going to have at least a negotiation over the budget. Winners and losers are going to be picked. And when winners and losers get picked, you need help to make sure you’re a winner and not a loser,” Elmendorf said. 

“The pie is going to be split somehow.”