Alabama Contractors Feel Surge in Industry Despite Nationwide Slump

Tue June 22, 2004 - Southeast Edition
Giles Lambertson

Henry Hagood, executive vice president of the Associated General Contractors (AGC) of Alabama, generally characterizes the 2004 level of construction activity in the state as “a little bit better than in a lot of years.”

Hagood’s succinct analysis of activity is as follows:

• Highways: “Not great.”

• Utilities : “OK, not bad.”

• Commercial: “OK.”

• Industrial: “Doing pretty good.”

Other observers bear out Hagood’s view. The state’s Economic Advisory Council said Alabama entered the recession before the nation did as a whole, but is coming out of it this year.

Businesses are hiring and expanding facilities. State tax revenue for funding projects is swelling state coffers faster now. Major building projects promise to keep some contractors busy this year and into 2005.

The generally positive situation is not without worry, though. For instance, the legislature has eliminated a sales tax waiver effective July 1, a two-year measure that will produce some $40 million for the state’s general fund.

“We don’t know how it will affect new contracts,” Hagood said, but it could add as much as 8 percent to a bid. “It is significant.”

Alabama contractors also are anxious about the fate of the highway reauthorization bill stalled in Congress. Said Hagood: “We do need to up the ante in highway work.”

Contractors in the Dothan area in the southeast corner of Alabama are experiencing some of the cement supply problems that are challenging contractors just across the border in Florida.

Supplies of the binding powder still were meager in southwest Florida in mid-May, according to Ken Simonson, chief economist for AGC of America. A combination of strong demand and reduced imports is blamed for the shortage.

“It could lead to some problems in areas closer to Florida,” Hagood said.

Yet fast-rising steel prices and shortages of cement seem not to have affected Alabama contractors to the extent they have builders in some other states.

Hagood said he doesn’t know “of a particularly large project that has been affected to the extent that it is not going to be built.”

Some of the state’s surge in construction is tied to automobile manufacturing, which Hagood acknowledged “has been good for our state.”

Specifically, a plant turning out Hondas is located in the Anniston area. Mercedes-Benz has a plant in the Birmingham-Tuscaloosa market. Farther south in Montgomery, Hyundai is building a manufacturing facility that will begin to produce cars in March 2005.

The Hyundai facility is expected to spin off auxiliary construction activity, as did the plants established earlier. Large auto manufacturing facilities attract suppliers and equippers like a magnet.

But the effects of the Hyundai plant are being felt farther away, too, clear down to the tip of the state in Mobile, the state’s deepwater seaport and oldest city. There, a Korean company, Glovis, handles logistics for the Hyundai plant and has settled in to monitor shipment of auto parts through the port.

At the University of Southern Alabama in Mobile, the Center for Business and Economic Research tracks the ups and downs of employment and other indicators of well-being. The USA-Mobile researchers said the city is on track for an “up” economy.

Semoon Chang, director of the center, has predicted that 227 construction jobs will be created during the next two years on the city’s waterfront alone. Other estimates range higher.

One of the waterfront projects is a $38 million terminal to accommodate Carnival Cruise Lines ships that will homeport there.

But the larger construction project is linked to Hyundai. The port handles some 42 million tons of shipping each year. The volume is expected to increase dramatically once Hyundai begins building its cars.

The Alabama State Port Authority is racing to meet the new demand upon the port. It is building a $200 million terminal at Choctaw Point, just west of McDuffie Island, that will handle shipping containers.

Some 70 percent of cargo worldwide is containerized. Much of Hyundai’s cargo arriving in Mobile will be as well, including 7,500 containers by the end of 2004.

In two years, Hyundai containers are expected to be floated into the country at the rate of more than 20,000 a year, according to the port authority.

Choctaw Point is being built on 120 acres. Along with the dock itself, the project includes an adjacent intermodal facility to transfer arriving containers to connecting railroads.

So ships are spawning construction in Mobile. So are students. The Mobile County Public School system launched a building program seven years ago to erect a new high school, three middle schools and several elementary schools.

With more than 65,000 students in the system, however, not all can enroll in a brand new school. Consequently, the system is in the first year of a three-year $100 million renovation of some of the system’s existing 100 school buildings.

Hagood has been watching Alabama’s construction activity for 35 years from the window of the state’s AGC headquarters in Birmingham. (To note, this is not the same window. In fact, the AGC moved into a new $4.5-million, 40,000-sq.-ft. [3,600 sq m] facility this year. Rives Construction was design-build contractor on the job.)

In his 35 years, Hagood has seen contractors wrestle with numerous stubborn economies and has watched the evolving face of the industry.

“Industry issues change over the years,” he said. “It used to be labor union problems. Now it is a lack of qualified manpower.”

Viewed from that long perspective, 2004 is not so daunting.

“Contractors are better off today than they have ever been,” he said. He cited increased regulation as a generally bad trend, but noted that “younger contractors are not as fazed by all the regulatory hoops to jump through.”

Generally, Hagood said, “it is an exciting time for a contractor.”

AP Photo