Contractors Not Counting On Stimulus Spending

by Talk Business & Politics ([email protected]) 85 views 

(To see the list of the top contractors in Northwest Arkansas, click here.)

The national construction industry predicts it will lose 30 percent of its jobs this year without the help of a federal stimulus package.

The Associated General Contractors of America, the county’s largest trade association of non-residential builders, is lobbying for government spending on roads, bridges, schools and other infrastructure in order to give the industry a much-needed lift.

According to the group’s forecast, which is based on a survey of its more than 33,000 member companies, contractors will continue to be one of the hardest hit sectors in 2009 unless the business climate changes soon.

Ninety-two percent of building contractors and 93 percent of road builders are reporting they’re experiencing or expecting declining activity.

The forecast also found that contractors believe investments in infrastructure projects would dramatically improve the outlook for 2009.

Eighty-five percent of construction companies reported that they would either cancel layoffs or add new employees if states embarked on stimulus-funded infrastructure projects.

Contractors in Northwest Arkansas, however, said they aren’t counting on an immediate impact from the public spending package but are pursuing projects that have guaranteed funding.

Patrick Tenney, vice president of Baldwin & Shell Construction’s Northwest Arkansas office, said he’s counting on volume to pick up in 2009 as the company begins work on several educational facilities.

“We made a strategic decision to pursue higher education and public school work and that’s starting to pay off,” he said.

The company is well positioned for 2009 with a backlog of projects in the educational sector, Tenney said, including a significant project for the Mountain Home School District that includes five different facilities.

However, private construction work has slowed down substantially, he said, and with fewer projects, there are a lot more contractors bidding for the same job.

Sam Hollis, president and co-founder of Milestone Construction in Springdale, agreed that less work has led to more competition in the bidding process.

“There’s 10 contractors bidding on a project now, whereas a year ago there might have been four or five,” he said.

Milestone is still getting a lot of work and actually increased its volume in 2008 over 2007, Hollis said.

The company brought in $12.8 million in revenue in 2007 and $14.4 million in 2008.

“We’ve been very fortunate to have a lot of repeat customers, so a lot of our work has remained the same,” he said.

Contractors that are local to the area and have good relationships are still getting work, according to Nathan Fairchild, president of Fairchild Construction Inc. in Bentonville.

Fairchild Construction generated $3.98 million in projects in 2008 and expects that number to almost double in 2009.

“People are really reaching out, especially in these times we’re in, to contractors they can trust,” he said.

“They want someone who has good relationships with good subcontractors and someone who pays their bills.”

The company will start work on some substantial projects this year, including a Volkswagen dealership in Bentonville, an art gallery in downtown Rogers and a 30,000-SF warehouse in Mountainburg.

Fairchild said he expects the economy will improve as the new administration takes office and starts putting some parts of the stimulus plan into action.

“Releasing the bank funding is the big thing right now,” he said.

“We have several clients who are just waiting on bank financing before they can go through with a project.”

Wish List

Northwest Arkansas cities are hoping a share of the government’s public spending program will create more jobs in the region.

The cities of Fayetteville and Springdale each contributed to a wish list of projects compiled by the U.S. Conference of Mayors in December.

Springdale requested about $35.9 million for three street projects, as well as funding for improvements to its municipal airport. The city estimated the investment would create about 400 jobs.

Fayetteville requested more than $247.8 million for several projects, including the purchase and development of an aerospace and technology park, the expansion of a community center, energy conservation for nonprofit facilities, and a feasibility study on Amtrak service between Little Rock and Fayetteville.

According to the city’s proposal, the investment would create 1,057 jobs.

The Northwest Arkansas Regional Mobility Authority is also lobbying for a piece of the stimulus package to fund the completion of the Bella Vista bypass as a toll road.

The project, which has been in the planning phase for over a decade, is expected to cost about $225 million.

Mike Malone, executive director of the Northwest Arkansas Council, said he’s hoping stimulus funds will fund a good portion of the bypass.

The Missouri Department of Transportation has funding available for its share of the project, he said, which means Arkansas needs to invest in it soon before Missouri moves its funding to other projects.

“By using stimulus funds, we would help keep the project moving and send a message to Missouri that we’re serious about getting that project going,” Malone said.

The Regional Mobility Authority wants to make the bypass a toll road, he said, as a way to leverage more of the state’s share of the stimulus funds.

The Bella Vista bypass was also listed by the Arkansas Highway and Transportation Department as one of the 130 projects that are ready to for construction but lacking the necessary funding.

Economic Impact

Malone said the current stimulus proposal includes about $30 billion for the nation’s highways, which would mean about $350 to $400 million for Arkansas.

“That would allow the highway department to get a good start on some of the bigger projects that they’re unable to fund through annual appropriations,” he said.

Also included in the package, Malone said, is funding for public buildings and research facilities.

“Hopefully our research and technology park and the community college can benefit from what’s in this stimulus package,” he said.

“It’s an $800 billion package, there are a lot of programs in there that would be a benefit to folks all around the state of Arkansas.”

Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas, said it’s hard to determine just how much a government spending program would benefit Northwest Arkansas.

“Without knowing what projects will get funded, it’s hard to predict exactly what economic impact it will have,” she said.

But any news of potential work is good news, Deck said.

“It will provide some work to the badly hurting construction sector, and help tide over some companies that have been dependent on residential and commercial construction at a time when those have been very weak sectors,” she said.

But it may take some time before the impact is seen.

“Sometimes it takes a while for bureaucracy to work its way through things,” she said. “So the desired impact may be a little later than everyone would prefer.”