Road Work Ahead : Transportation Bill Is Glad Tidings for Depressed Construction Industry
The nation’s battered construction industry is celebrating the arrival of an early Christmas present: the new $151-billion federal highway construction and mass transit program.
The landmark transportation bill, which President Bush is expected to sign into law Wednesday, boosts federal spending on highway and mass transit construction a whopping 69% over funding levels in the previous transportation bill.
The massive, six-year program ensures that transportation-related construction remains one of the few bright spots in the building industry, which employs nearly 5% of the California work force. Construction companies have chased after transportation and public works projects as a nationwide real estate slump has resulted in a dearth of commercial and residential construction.
The financial benefits of the bill will spread beyond the building industry. Every $1 million in new construction creates about 34 full-time jobs--nearly two-thirds of them outside the building trade, according to the Construction Industry Research Board.
“The industry has not been in a recession--it’s been in a depression,” said William D. Toohey Jr., vice president of the American Road and Transportation Builders Assn., a Washington-based trade group. “This (transportation bill) will be a shot in the arm for the highway construction industry.”
Industry officials project that a million construction-related jobs will be created during the life of the bill. That’s good news to the legions of iron workers, carpenters, cement masons and others that have lost their jobs during the current slump.
In Los Angeles County, an estimated 30% of construction workers are jobless, said Richard Slawson, an official with the Los Angeles County Building Construction Trades Council, a federation of 18 construction unions.
“It will put large numbers of construction people back to work again,” said Slawson of the transportation program.
“It’s very positive for the industry,” said John Cash, chief financial officer at San Bernardino-based Kasler Corp., which is building the interchange between the San Diego and the Century freeways. “The 10 busiest freeways are in Southern California, and there is a lot of work to be done.”
The impact of the legislation has already been felt even without a presidential signature. Several states that had delayed the release of transportation funds loosened their purse strings once Congress approved the bill late last month.
“There were projects that were beginning to slow down because the states were starting to run out of money,” said Richard F. Rossi, a construction industry analyst at Dean Witter Reynolds. “Those projects will now start to move.”
“I think you will see the money start getting into circulation by probably the middle of next year,” said Stan Herzog, executive vice president of Herzog Contracting, the St. Joseph, Mo.-based firm that built most of the Los Angeles Blue Line.
“We are glad it passed,” Herzog said. “We thought things were going to shut down.”
But industry observers note that the incremental $61 billion raised under the new transportation bill won’t be spent all at once or in one place. “That’s certainly a sizable amount of money, but when you spread that around 50 states, you are not talking about a sudden surge,” said Rossi at Dean Witter. “It will make things better than what they otherwise might be.”
It might be two or three years before the bulk of the transportation funds start flowing into private industry, said Rita Castle, federal issues manager at Caterpillar Inc., maker of earth moving and heavy construction equipment.
“It’s very hard to know when we will start to see the maximum flow,” said Castle.
California’s share of federal transportation dollars will rise by about one-third to approximately $12 billion over six years. In addition, those federal dollars will be bolstered by matching state and county transportation funds.
With the slump in commercial and residential real estate, transportation projects, as well as other public works programs, have become the only major source of new construction.
“There isn’t much of anything else going on, particularly here in California,” said John N. Simon, a construction industry analyst at Seidler Amdec Securities in Los Angeles. “The competition is incredibly fierce on some of the small projects.”
This year, Granite Construction of Watsonville, Calif., expects transportation and public works projects to account for 75% of its revenue versus 65% in 1990. Some of transportation projects Granite has or will bid on--such as a Metro Rail subway station and an Orange County toll road--rely on the new transportation bill to supply the needed money.