Tom Foss is starting to hear the threats just when the teasing appears to be coming to an end.
For years, Congress has played with the minds of those in the road and bridge industry regarding the passage of a multiyear highway bill. Hope would build and then be snuffed out in the form of another funding extension. Recent developments on Capitol Hill have anticipation finally feeling like realization. At press time, members of the House and Senate came together and agreed on a five-year, $305 billion bill, called the Fixing America’s Surface Transportation (FAST) Act. The measure was sent to the House for final passage before it was moved to the Senate. Federal lawmakers needed to act quickly. The deadline to approve FAST was Dec. 4.
For the first time since 2005 it looks like federal lawmakers are done playing around and will have a long-term solution to address a backlog of needed road and bridge projects.
Back in California, Foss, who leads Griffith Co. in the city of Brea, is eager to see an influx of federal dollars funnel through, but he also is making sure his operation is running a tight ship, otherwise it could be raided by a new band of fines.
“The fines are just beginning this year, so they really are on the horizon,” Foss told Roads & Bridges. “I have not been hit by an actual fine yet, [but] I have been threatened by some agencies.”
New storm-water regulations will be enforced in California, which will require contractors to use silt fences, sand bags, straw wattles and bales of hay to prevent runoff from jobsites entering the state’s water system.
“It’s been really dry so we haven’t really had a lot of runoff,” Foss said. “If you are on a job that has a lot of open slopes or dirt as you are building a road, it’s an effort because you have a lot of dirt you have to disturb on a project.”
Two other requirements affect the labor end of the operation. One is a federal requirement calling for the hiring of local workers. Griffith Co. has projects all over southern California, and when the company enters a city or town it must actively pursue the laborers in that area. When Foss has to rotate people in and out to meet local hiring regulations it affects his production. Another rule, which requires workers to take a 10-minute break for every four hours of work, has been in play since 2002, but many contractors like Griffith are still trying to make sure everything is properly documented. Foss could have hundreds of workers covering a 16-mile project, so the process is extremely difficult. Every week or so each crew member is required to sign a document stating that he or she has been receiving their breaks.
“That’s the kind of labor law that is just not friendly to the business community because most contractors do give breaks. They just do not know how to go about getting it documented properly,” said Foss.
The now infamous and more stringent air-quality regulations from the California Air Resources Board (CARB) also loom just around the corner. Like most contractors, Griffith Co. is in the process of replacing or retrofitting its fleet so that all machines have Tier 4 Final engines.
Despite the pressure of the law, Griffith Co. has been having a solid year in 2015. The Orange County contractor, which specializes in both road and bridge work, currently employs 800 workers and is expected to register $300 million in volume this year. As for 2016, Foss is expecting more of a normal construction season, which is about $200-$230 million in volume. If Congress does pass a multiyear highway bill, as most are predicting, Griffith could benefit slightly, but it will not come in the form of new jobs until the tail end of next year. Currently, Griffith is handling a lot of work that was awarded over the last two years, and for most of 2015 cities and counties were slow to advertise new jobs because of the funding situation in Washington.
“Getting a bill will, I think, allow the city and county agencies to begin to put out their projects and that will ease up everything for a company like ours as far as competition [is concerned],” said Foss. “There will be more work and the contractor pool will just get spread a little further, so there will be fewer bidders on every job.”
For bridge contractors in the state of New York, the funding pool received some needed depth in 2015. New York’s Critical Bridges over Water (CBOW) initiative was fed with billions of dollars, with some coming from Housing and Urban Development and even more from bank settlements. Gov. Andrew Cuomo also supplied New York City and its Metropolitan Transit Authority with $8.3 billion, and a group called Rebuild New York called for funding parity.
“If the MTA needs $25 billion over the next five years, we are saying the highway guys upstate need $25 billion over the next five years,” Jeff DiStefano, co-owner and CEO of Harrison Burrowes Bridge Constructors Inc., told Roads & Bridges. “Ten years ago we had close to parity with the MTA, and then through some gubernatorial and assembly leadership changes, it kind of fell off track.”
You might say Harrison Burrowes is a VIP of New York’s bridge bash. The company, which employs up to 130 during the summer construction season and sees much of its action in the Hudson Valley between Albany, N.Y., and the Tappan Zee Bridge, is experiencing a 20-30% growth compared to 2014, and the backlog is full for 2016.
“One or maybe two more jobs will put us over the top [in 2016],” said DiStefano. “We are very pleased right now.”
One of the 2016 projects is a design-build joint venture, which falls under CBOW, that involves 18 bridges, and there are two more jobs that will involve single structures.
A part of Harrison Burrowes’ profit will turn into investment, especially on the equipment side. This year a sheeting hammer was purchased, and the plan is for Harrison Burrowes to handle bridge piling all on its own, work that in the past was farmed out to a subcontractor. A wheeled excavator also is being purchased as well as additional piling equipment and two new dump trucks. DiStefano predicts six to eight pieces will be new in 2015, and four to six pieces could be bought in 2016 if revenues continue to be on the upswing. The passage of a long-term federal highway bill would make another jump in activity in 2016 a very real possibility.
“We are a little bit concerned about next year with the ongoing projects in the Hudson Valley,” said DiStefano. “There is the new Tappan Zee Bridge, a casino project and a large water bypass tunnel under the Hudson River. So there’s a lot of work down there in the Hudson Valley, and I’m questioning if the unions can supply the help that we need.”
Good way of looking at it
As a whole, contractors in the road and bridge industry have not been searching for many answers when it has come to generating capital. According to the most recent state of the industry survey conducted by Roads & Bridges, almost 70% of respondents are rating 2015 as either a good or very good year, and almost 40% believe 2016 will be a success as well. More money could be on the table, too. When asked if they expect bid prices to go up, down or stay the same next year, over 57% said they believe the prices will go up.
Alison Premo Black is the chief economist for the American Road and Transportation Builders Association (ARTBA) and puts together a market report every year. Her numbers show a 7% growth in the road and bridge industry for 2015, and most of the contractors are feeling better about the business climate.
“They feel like things are returning to more of a normal market,” Premo Black told Roads & Bridges. “After 10 years of short extensions the industry also has adapted. This has been the new normal, so I think to a large extent that mentality has been adopted by the industry.”
Breaking it down, according to ARTBA, which looks at the value of construction put in place, work in the highway sector (pavements) will end up at $55.9 billion in 2015. The average since 2000 has been about $60 billion, but it was as low as $51 billion in 2013.
“The market really dropped for pavements and we are just climbing out of that hole the last couple of years,” said Premo Black. “I think we have bottomed out.”
On the flip side, bridge work continues to climb. The value of construction put in place for 2015 is $33.3 billion, breaking a record that was set last year.
Construction activity in Florida, New York, Indiana and California has been particularly high this year, but contract awards are up in almost half of the states. Big projects, like the New NY Bridge in New York City and Florida’s massive I-4 expansion, are stoking the overall numbers.
Even though a long-term highway bill is imminent, ARTBA is only projecting a 3.9% growth in the road and bridge market in 2016. Premo Black believes the recovering economy will play a larger role than a new dose of federal funding. ARTBA is predicting $58.1 billion worth of work in the highway sector and $34.6 billion for bridges next year.
“A stronger economy could increase growth, but many states, even though their tax revenues are recovering, are still struggling with a lot of budget issues,” said Premo Black.
Even with a fresh federal highway bill and more states taking action, funding is still falling far short of what is needed to address an overall network that remains in critical condition. According to the R&B survey, 53% of respondents said urban roads in their state are fair and another 22.3% said they are poor. Furthermore, over 65% said the condition has declined over the past year. The numbers are not much better for rural roads (49.8% in fair condition; 67.3% registered a decline since 2014) and bridges (65.5% of respondents said 16% or more of spans are structurally deficient).
More and more states, however, seem determined to flip the percentages. Michigan recently passed a $1.2 billion transportation plan, and Iowa, which raised its gas tax
10 cents per gallon, unveiled a $3.2 billion package in May.
Several transportation measures survived the ballot in November. Texas voters made the biggest commitment by passing Proposition 7, which directs $2.5 billion into the state’s transportation fund once Texas’s general sales tax revenue exceeds $28 billion in the fiscal year. Beginning in September 2019, 35% of the motor vehicle sales tax revenue over the $5 billion threshold will be used for transportation projects in Texas.
Seattle voters agreed to a $950 million property tax levy over nine years to maintain and modernize the city’s transportation infrastructure. R&B