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Builders here anxiously await next boom

IBJ Apr14 Page 01 Image 0002    Builders nationally are feeling rejuvenated after a rough half-decade, but locally some contractors are still waiting for the recovery to kick in.
    Tim Garvey, chief executive officer, bemoans the members he’s lost in recent years at Southern Illinois Builders Association. Two of them were among the longest-tenured. J.J. Wuellner and Sons in Godfrey closed its doors this year after 111 years in business. And Keeley Brothers, a highway contractor from East St. Louis, shuttered its doors a few years ago after being in business since 1895.
    “Most of our members have survived the tough times, and they are not over yet,” Garvey said. “It takes some strength and belt tightening and a resolve to make it. I’m pleased that we haven’t had more that have gone by the boards.”
    Garvey makes no bones about what he says is needed, and that is long-term infrastructure spending plans at both the state and federal level, goals that seem heady given the mid-term election season.
    Those are measures that he and other builders are pushing in Springfield, Ill., and Washington, D.C.
    “One of the big things facing us as a nation is the transportation trust fund going broke. We are dwindling reserves down to fumes, and we have to address that highway reauthorization this year. It’s kind of tough, because 2016 (an election year when little gets done legislatively) will come quicker than you know it.
    “That’s on the highway side. On the building side of things, we’re seeing some light at the end of the tunnel, but not so much in this state, despite the fact that you’d expect to have some sort of largesse, having the president of the United States being from this great state of ours,” he said.
    Illinois needs to approve a new state capital bill, he said, and generate money by maximizing its bonding authority. Gov. Pat Quinn said during his budget address on March 26 that he would appoint a bipartisan commission to come up with a new capital plan.
    “What we’re really looking for, is a truly long-term, sustainable infrastructure funding plan, both for roads and for all aspects of infrastructure — schools, bridges, roads, airport, waterway systems and treatment systems,” Garvey said. “Everybody’s talking about what kind of shape the roads are in after the bad winter we went through, but if the condition of the roads drops from 85 percent satisfactory conditions to 65 percent in five years, with no additional revenue, that crisis is going to grow in tremendous proportion,” Garvey said.
    Stephen E. Sandherr, CEO of the Associated General Contractors of America, said recently that funding of projects is at “chronic levels” and must be addressed.
    “It is encouraging to see President Obama pushing for a long-term bill to fund desperately needed highway and transit investments,” Sandherr said in a statement. “We look forward to reviewing details about the measure, which recognizes the federal transportation funding shortfalls that threaten to curtail investments in highway and transit projects as early as this summer. The president clearly understands that any new transportation bill must include new sources of revenue to meet the needs of our aging transportation system.”
    Sandherr’s group is also encouraged by the position taken last month by Dave Camp, Republican chairman of the House Ways and Means Committee, who acknowledges the coming highway trust fund crisis in a recently issued tax reform discussion draft.
    “However, the most significant impact of these announcements should be to motivate Congress and the president to fix the Highway Trust Fund before this summer and to enact a new, fully funded, long-term measure before Sept. 30,” Sandherr said.
    Andrew Flach, spokesman for U.S. Rep. Rodney Davis, R-Taylorville, who represents a wide swatch of southern Illinois, notes that Davis serves on the transportation and infrastructure committee.

    “He absolute agrees we have to have a new surface transportation reauthorization bill. There have been some roundtable discussions. Our hope is we can get something out of committee by summer.”
    Money will be the tricky part, he agreed.
    “Different funding mechanisms are going to be needed, and those have been part of the discussions, Flach said.
    Davis has been a congressman for two years and was an aide to Congressman John Shimkus for several years before that.
    “That is one of the things he ran on when he ran in 2012,” Flach said, adding that the last such bill was authorized in ‘05. Davis is up for re-election in the fall,
    Ken Simonson, the chief economist for the Associated General Contractors, said construction spending in 2013 rose 9.3 percent to post its biggest increase since 2006, amid growing demand for public and private construction nationally. That, despite harsh winter weather in many parts of the country.
    Association officials warn that federal investments in highway repairs could decline rapidly this summer because of funding shortfalls, undermining the sector’s recovery.
    Construction firms added jobs in 38 states between January 2013 and January 2014, while 27 states experienced construction employment gains between December and January, according to a recent analysis of Labor Department data by the Associated General Contractors.
    Association officials said the fact so many states added construction jobs despite harsh winter conditions is a sign that demand appears to be recovering.
    “Especially considering the fact many parts of the country experienced very harsh weather in January, these construction jobs figures are particularly robust,” Simonson said. “Yet some of these gains will be at risk if federal transportation funding comes to halt this summer as predicted.”
    Kansas led all states with a 10.7 percent rise (5,900 jobs) in construction employment between January 2013 and January 2014.
    Illinois was 30th on the list for 12-month change, with 2,900 more jobs, a 1.5 percent increase.
    Missouri finished down 1,200 jobs for a loss of 1.1 percent and an overall ranking of 45th.
    “Contractors are clearly more optimistic about the outlook for private nonresidential markets this year, as shown by their upbeat answers to an AGC survey in January,” Simonson told reporters in a recent teleconference. “In addition, apartment construction is still very strong in much of the country, and homebuilding should remain positive.”
    Nationally, builders seem more optimistic than they do locally. In an in-depth survey of member firms, 800 plus responded to AGC’s questions about hiring this year.
    “They’re more optimistic than they have been in a long time,” Simonson said, noting that many plan to hire additional laborers this year. Three quarters of those surveyed indicated the intent to buy construction equipment.
    Nearly half in the survey also said they believe training programs are poor or below average, expect competition to get tougher and don’t have faith in government.
    “It appears Washington is not here to help as far as contractors are concerned,” Simonson said. Assuming that legislators “can find a way to work together, 2014 should be a better year than any year since 2009.”
    The same thing in Springfield, Garvey said, noting the efforts of his legislative committee.
    “What we’re doing now is trying to convince our lawmakers in Springfield that the way to climb our way out of the economic doldrums that we’re in is to basically invest in something that is one of our most important forms of continued investment for years to come. I want to make sure that the country I leave behind when I go is at least as good of shape if not better … for my kids and grandkids.”
    SIBA is urging a new capital program, which hasn’t been renewed for years.
    “We’re looking for leadership from our members on the House and Senate side to come to grips with this thing,” Garvey said. We’ve been patient, we know that the bigger issue was trying to solve this pension crisis that stood in the way, and I’m still not convinced that they’ve solved it, but the bottom line is these road needs are independent of anything with the pensions. They go on and continue and we need to address those as well.”
    Do elected public officials know what needs to be done or are they stymied by things outside their control?
    “That’s a good question,” Garvey said. “I think they get it far better than much of the public is willing to give them credit for. They know what needs to be done. It’s a matter of how and whose ox is going to be gored. That’s the rub. Once they decide to pull together and get it done, there are some great things that can be done.”
    One of “the more learned guys in Springfield,” he said, is Sen. Dave Luechtefeld, R-Okawville. “He’s studied this whole situation, and he’s been telling us for some time that we’ve got a fiscal crisis of monumental proportions. That pension reform measure didn’t tackle everything, and you’ve got the sunset of the (67 percent income tax increase) coming at the end of 2014 (which the governor’s budget plan calls for continuing). I mean, it’s a never-ending horn of plenty for problems facing the state. Those woes have visited upon businesses of all types but contractors equally.”
    Sen. Kyle McCarter, R-Lebanon, who represents the state’s 54th Senate District, said he could not support a capital plan at this juncture.
    “I think it is unrealistic and irresponsible at this time. You don’t build a two-car garage onto your house if you can’t pay your light bill. Our state is no different. We need to deal with this issue in a new way. We should commit in law to allocate the surplus of each year’s budget to Education, Roads & Bridges, a rainy day fund, and debt reduction equally. In this way legislators will be able to bring back the important things to their district by reducing spending and obtaining efficiencies in government. With this plan you don’t have to negotiate each year or five years about a capital plan.”
    Garvey said builders have relied in part on the private side of construction.
    “The tightening of financing has blunted a lot of that sort of thing. It’s held some opportunities back for building. The financial institutions are being very conservative on investing in projects. We have been fortunate in Southern Illinois that we’ve had some projects that kept our building trades people busy — like Prairie State (Energy Campus in Washington County), ConocoPhillips (Roxana refinery work) and U.S. Steel (upgrades in Granite City). But those projects are done. What we really need are some of these smaller, private projects to kick into gear.”

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