December 1, 2009

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Article

On the Road Again

Highway Construction Paves Way for Economic Recovery

By Marie Mischel

December 1, 2009


The state’s most expansive—and expensive—road construction season in history is drawing to a close, and officials are heralding it a success in terms of maintaining jobs in the hard-hit construction industry as well as positioning Utah to emerge successfully from the recession. All Those Orange Cones More than 250 Utah Department of Transportation road construction projects were active throughout the Beehive State this year, says Carlos Braceras, deputy director of Utah Department of Transportation (UDOT). “We have more projects under construction and we have a larger dollar value put to work than we ever have before,” he says. Funding has come from several sources: the state’s general fund is paying for road widening and adding new roads, such as adding a lane to Interstate 15 at Beck Street in Salt Lake City and adding a passing lane on U.S. Route 6. One of the most high-profile projects was the widening of I-80, which required moving bridges. “It’s going to be one of these projects that, when we open it up, people are going to go ‘Wow. It made a noticeable difference,’” Braceras says, adding that reconstruction of 3500 South in West Valley City also had a significant impact and will give residents in that area some relief from traffic congestion. On the other end of the scale are more than 100 rehabilitation and preservation projects statewide paid for by federal stimulus money. Though smaller than the road-widening projects, these projects are necessary, Braceras says. “Utah continues to be one of the fastest-growing states in the country; our population is continuing to increase and no one is telling us that’s going to change in the future.” In addition, people are driving more; that rate in the last 10 years has increased faster than population, he says. “You put that on top of the population increase and there’s an increased need. That’s a big driver for us.” UDOT intentionally scattered these projects across the state. “The reason we did that is because we wanted to have work throughout the entire state to try to get as many people to work as possible,” Braceras says. Economic Impact “The road construction in Utah has helped maintain construction workforces in our area of the business,” says Wilford Clyde, president and CEO of Clyde Companies, which is a partner on a number of road projects in the state. Because home building is at low levels, and new large commercial building projects aren’t materializing, these two areas of the construction industry are struggling, says Clyde. “So one bright spot in the construction arena is the road construction and infrastructure we build.” The construction industry is seeing 16 to 19 percent unemployment, says Richard Thorn, CEO of Associated General Contractors of Utah. For example, in Southern Utah, there’s been “a drop off the face of the earth in construction activity,” he says, so projects such as the southern corridor in the St. George area are welcome. “It has provided a large number of employment opportunities and opportunities for apprentices or people who are new to the industry to get involved in the construction business and learn a craft or learn a skill.” While the money the state Legislature has dedicated to transportation projects has helped the economy, it’s not a cure-all, says Mark Knold, chief economist for the Department of Workforce Services. “Obviously, anytime you can do something to get people working and keep them working, it helps. But when you quantify the employment in road construction in relation to the whole Utah economy it’s basically less than 1 percent of all the employment in the whole state.” In fact, he says, road construction comprises only about 11 percent of all construction in the state and contributes less than 1 percent of all jobs, or about 10,000 people statewide. As a result, transportation construction isn’t significant enough to bring the state out of the recession, Knold says. “We’re going to have to wait for the whole United States economy to get back on its feet and the credit markets to loosen up and start lending and spur the economy onward again. This is a nice Band-Aid; it’s definitely a positive thing, it’s definitely wanted, and it has its impact, but it’s not big enough in and of itself to change the downturn or the recession or push it off in another direction or anything like that.” Even for construction companies, the transportation projects haven’t been a panacea. Because construction has slowed overall, Clyde Companies has laid off some workers, Clyde says, and he doesn’t anticipate hiring more despite W.W. Clyde being part of the Copper Hills Constructors Team that was recently awarded the $500 million contract for the design and construction of the Mountain View Corridor in southwest Salt Lake County. However, he added that Kiewit—one of the other partners on the project, along with Granite Construction—may be hiring because of a lack of workforce in that area. Kiewit is based in Nebraska but has district offices throughout the United States; it’s one of the nation’s largest construction companies. Despite the relatively low numbers statewide, keeping construction workers employed does benefit the overall economy, says Thorn. Research has shown that every billion dollars of freeway-type construction creates about 28,500 jobs, he says. “These are generally higher-paying jobs that are family-sustainable type incomes that are scattered literally across the state of Utah.” There’s a national effect as well. Large projects, such as the Mountain View Corridor, bring out-of-state contractors, like Kiewit, to the area, Thorn says. “There are very few companies around the country that can take on that size and scope of a project. So joint ventures are forced to be created and that does bring in very, very large companies from around the country.” This could have a negative impact on small local businesses that don’t have the ability to partner on these projects, but may increase subcontractor opportunities, he added. One benefit of large-scale road construction is that they’re multi-year projects, employing a number of workers for long periods of time, Knold says. “An added benefit of having these highway projects is they’re not just short-term shots; they have a long life in terms of building and the amount of time it takes to do them.” In addition, they are good for 15 or 20 years, he says. “The amount of return you get from them over the long haul is just so valuable.” A Good Time to Build The economic belt-tightening at all levels doesn’t mean transportation projects should be shelved. In fact, says State Senator Sheldon Killpack, a member and former chair of the Transportation Committee, now is an excellent time to work on the roads. Braceras agrees. “We’re getting good value for the construction dollar,” he says, adding that two years ago costs were as high as he had ever seen them and continuing to escalate at an unprecedented rate, but today they’re seeing competitive bidding that’s providing the best value for transportation dollars in the last two to three years. Bond rates are under 2 percent and bids are coming in at least 30 percent less than they did a year ago, Killpack says. “Aside from the savings and being able to get more with money than we would have been able to just even more than a little over a year ago, and what we’ll likely be able to get in the future, the time is right and we’re maintaining jobs that otherwise we wouldn’t be maintaining at this critical time.” In addition, many of the projects in the state are critical for economic development, he says, pointing to the airport road in St. George, the Mountain View Corridor in Salt Lake County and adding a fourth lane from Farmington to Layton in Davis County. “All of these projects needed to take place.” Good infrastructure is important for economic development, Killpack says, and maintenance is just as important as new construction. “When you play catch up [on maintenance], you’re spending a lot more money than you would have spent had you done things right away.” In fact, the governor’s and Legislature’s emphasis on building infrastructure so that Utah will continue to attract businesses is “the big driver” behind UDOT’s full construction schedule, Braceras says. What’s to Come “Between now and 2014, just with the general fund money, we’ll spend about $4.4 billion in construction,” Braceras says. “What’s important to remember is that, while we have a very large program going on right now and we are addressing an awful lot of our needs, this is not the end. Being able to provide the transportation facilities and maintain and operate those facilities is something that we have to keep at.” While many members of the public may think once multi-year projects such as the Mountain View Corridor and reconstruction of I-15 in Utah County are complete, there’ll be a respite from road construction, “It’s an ongoing chore,” Braceras says, adding that the state can’t afford to allow a lapse in road construction. “We as a country have failed to maintain the investment in our infrastructure that has allowed this country to become what we’ve become. We as a country need to continue that commitment to invest in infrastructure if we’re going to remain a strong leading country.” Utah, like the rest of the country, has significant infrastructure needs, says Thorn. “We have probably billions worth of dollars that need to be spent in order to keep Utah a leader in the ability to transport people and goods and services and, above all, sustain the high level of our current quality of life that we’ve all come to recognize and appreciate.” Road construction projects in the Beehive State may come under the microscope, however, as the Legislature starts the year with a projected $700 million budget deficit. “We’re gearing up for what we believe will be a challenging legislative session,” says Thorn, whose organization has five full-time government affairs staffers. “I think there could be some challenges in 2010 regarding continued funding of these very, very important highway projects and other commercial building projects that help drive the state’s economy and help keep us at the forefront and able to travel across the state and move goods and services.” However, Killpack says he thinks existing transportation projects won’t face the ax wielded by his legislative colleagues. Although he doesn’t expect more bonding efforts or additional money for transportation, he does anticipate that the existing level will remain steady. “I think that we will see it being protected because we have bond payments that we have to make,” he says. “And in terms of maintaining our tax income, if those jobs were cut it wouldn’t be helpful to our current situation nor would it be helpful in positioning us for a quicker rebound.” In fact, Killpack says, the American Legislative Exchange Council recently released a report ranking states’ ability to pull out of the recession “and Utah was ranked No. 1 to rebound out of the current financial situation based on our tax structure, based on our aggressive projects to maintain infrastructure and the quality of our workforce.”
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