When times are tough and revenue isn’t flowing into general funds as fast as state budget-makers would like, they look around for pools of money to replenish the fund. Frequently, they spot the Department of Transportation.
There sit funds for new roads, maintenance of old ones and long-range transportation improvement projects. Sometimes the DOT money can be quite irresistible.
Budget-writers couldn’t resist in Tennessee and Mississippi and contractors there are coping with the situation the best they can.
Perry Nations, executive director of Associated General Contractors (AGC) of Mississippi, believes a raid on DOT funds is one of the reasons 2004 looks pretty shaky right now for Mississippi contractors.
“They took around $166 million out of the trust fund,” said Nations. “That is $166 million less to spend on building and repairing roads.”
The money lifted for the current budget came on the heels of $50 million taken last year for the general fund.
Nations isn’t pessimistic about 2004 just because of the DOT was raided again. In fact, he isn’t totally pessimistic at all and can cite places where contractors are working.
The strip of Mississippi below Interstate 10 on the Gulf of Mexico is rich in casino construction activity. A 13th gambling facility –– the Hard Rock Hotel and Casino Resort in Biloxi –– has just been approved. The $235 million project will feature a 10-story hotel.
The university system also is “well-funded,” Nations said, and various campuses have projects under way.
A $40 million University Medical Center project in Jackson is a profit-maker for contract-holders there.
“But with that said, the future is questionable,” said the AGC executive.
“I’m afraid before the year is over, the entire state is going to suffer.”
One reason for that prediction is the climb in steel prices, which is well-documented in various markets around the country.
It has hurt suppliers and bidders who have found themselves with bids guttedby quick and steep steel price rises. Nations said he knows of suppliers who honor quotes no longer than 48 to 72 hours.
The quickly rising price also has claimed entire projects that were bid but contracts never let because the bids exceeded available funding.
“We’re working with the state, trying to get an escalation clause in contracts,” Nations said. “I don’t know where the end of all that is.”
A highway project that is going strong is on the north edge of Jackson where the DOT is building an interchange on Interstate 55. The $17.3 million project is the latest construction in the area of a $1.4 billion Nissan auto manufacturing plant at Canton.
The plant rolled off its first assembled minivan about a year ago. Nissan came to the area after the state dangled a $295 million incentive package, including carving a roadway out of the countryside just for the plant and naming it Nissan Parkway and building an I-55 interchange.
Key Constructors is building the second interchange. Rick Webster, Key’s vice president, is glad the company has the interchange project, on which Key has about 20 employees working, as well as some other jobs.
But he is not mollified by the contracts in hand.
“Highways are going to pot,” Webster said. “The outlook for the rest of the year is terrible. It’s like someone said, we’ve got all these new schools but we won’t have any roads to get to them.”
It won’t take long, he said, until existing contracts are completed and necessary projects begin to pile up for lack of funding.
“If contractors aren’t strong, money wise, there are going to be some contractors going out of business,” he said.
Across the northern border in Tennessee, budget-makers dipped into DOT funds for a second year in a row to help the state’s general fund. More than $60 million was stripped out.
Even so, 58 individual road construction projects are on the 2004-05 Transportation Improvement Program.
While that sounds pretty solid, there’s a caveat: More than $750 million of the department’s $1.6 billion is expected to come from the federal transportation bill that was still unauthorized as of June 1.
R.C. Mathews Contractor has been building in Tennessee for 66 years, but is not doing highway work, so the DOT situation doesn’t directly affect the company.
And though commercial construction is relatively slow in middle Tennessee, that also hasn’t hadn’t much impact on Mathews. That’s because the company specializes in renovation projects and in building for institutional clients –– such as churches, hospitals and nonprofit agencies.
The contractor is constructing an $8.4 million facility for Hermitage Hills Baptist Church, for instance. And in Joelton, Mathews is erecting a $2.5 million building for New Hope Free Will Baptist Church.
Most of the company’s projects are clustered in middle Tennessee “by design,” said a third generation company executive of the Mathews family, Walker Mathews.
The company president also said that seeking diverse kinds of work has helped it weather the economic slowdown.“We build a wide variety of project types, and that’s enabled us to have more opportunities for work,” he said.
The $50 million-a-year firm also gravitates toward “landmark” projects. For instance, last year it renovated part of the Grand Old Opry House, a $4 million project. It also received recognition for the quality of its work on the Montgomery County Courthouse northwest of Nashville.
Still, the Tennessee firm is not insulated from the shaky construction economy. It, too, has had to deal with the steel price crisis.
“It has an impact on projects that get caught in the escalation,” Mathews said, “but the prices seem to have become a little more predictable.”
Back in Mississippi, the state’s AGC executive director said contractors generally aren’t as pessimistic as he is.“The gloom is on my part,” Nations said, “but I can see more than the job I’m on right now. Will the contractors have something to do when they are done with the one they’re on?”
Nations brings 30 years of perspective to the table and he acknowledges that despite the discouragement of the moment he is optimistic over the long haul.
“We’ve always recovered,” he said. “I guess we’ll recover this time, too.”
Construction continues on The University of Southern Mississippi’s $47 million Student Life Center Thursday, May 27, in the heart of the Southern Miss campus in Hattiesburg, MS. Mississippi’s university system is well-funded and various campuses have projects under way.