The Tunnel's End?
As an opening question, participants were asked when they expected the industry to begin its rebound. There was a good deal of divergence as to when that rebound would come, but no one was sanguine about the immediate future.
Said Aaron Neighbors, vice president of Neighbors Construction, “Until the banks loosen up, I don’t see this thing turning around. And I’m not a smart enough guy to put a time line on that.”
“If you would have asked me that question in the middle of 2008 when all this started,” said Ernie Straub, president of Straub Construction, “I would have said that in 2010, things were going to be better. Now it looks like we are really in for another couple years of some very difficult times in the construction industry.” Shane Lutz, senior vice president of Henderson Engineers, predicted 12, perhaps 18 months before the industry could right itself.
Don Greenwell, president of the Builders’ Association, was a little more optimistic. He expects some recovery in 2011, probably the second half of the year, and 2012 or 2013 “before things really start going well again.”
These problems are obviously not unique to Kansas City. Vince Migliazzo of Mark One, who also serves as the president of the Greater Kansas City chapter of the American Subcontractor Association, observed that other chapters are probably doing worse. “I think all of us are trying to get through 2010 and looking for improvements in 2011.”
The Stimulus Effect
Carl Privitera asked his colleagues whether they had seen any benefits from the various federal stimulus programs and, if so, which areas had been most affected.
Ernie Straub reported that stimulus money helped kick loose some low-income housing projects that had been stalled by the credit crunch. The architectural firm Gould Evans, reported principal Tony Rohr, likewise was able to finish a project that had stalled thanks to stimulus money.
“The stimulus dollars didn’t really stimulate anything,” clarified Patrick Pribyl, senior vice president of the Lockton Companies. “What they did was to provide funding for jobs that we already had on the table and bid.”
Susan McGreevy, a partner at Stinson Morrison Hecker, had also seen projects get unstuck because of the stimulus—but not without a catch. Given that there is a short time frame to use the money, contractors have had to push projects through despite problems that, in an ideal world, would have been corrected. “There are strings attached to this stimulus money that a lot of smaller municipalities aren’t used to having to deal with,” explained McGreevy. “It’s a double-edged sword.”
Mike Orth, managing director of Black & Veatch, also expressed frustration with the process. “I had a lot of clients who were interested,” said Orth, “but when they found out all the requirements to comply, they decided it was not in their best interest.”
“We’ve also seen some interesting paperwork being generated for the stimulus money,” said Ernie Straub, wryly. “For every million dollars in project work, they say it’s creating 14 jobs. So if you have a $10 million project, you just created 140 new permanent jobs.”
That prompted an interjection from panelist Dan Euston: “120 of those jobs were filling out the paperwork.”
“I don’t think it has really done what they wanted it to do with job creation,” affirmed Euston, President of J.E. Dunn Construction. “There is no industry that got hit harder with job losses than the construction industry, and if you really look at the impact to construction jobs as it relates to the stimulus package, it wasn’t there—at least it wasn’t there in KC.”
According to Augie Huber, CEO of A.L. Huber, the unemployment rate in the construction industry hit 24.9 percent, and he expects that it could reach 35 percent.
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