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NJ Reopens for Business After Budget Settlement

Sat July 08, 2006 - Northeast Edition
Mary Reed

While much attention had been focused on the shutdown of New Jersey casinos under the state’s current budget impasse, the construction business was being even more heavily impacted.

At press time a budget deal had been reached. Gov. Jon S. Corzine said during his July 6 press conference, the deal includes a 1 percent sales tax increase that would raise $1.1 billion a year. In return, half of the additional revenue raised as a result of the sales tax increase must be used to reduce property taxes; the other half would be used toward balancing the state’s budget.

The impasse was brought about by opposition to Corzine’s proposal to raise the state sales tax by 1 percent to 7 percent. Since the budget could not be passed by its constitutional deadline at the end of June, the state government ran out of funding and was forced to shut down for six days, causing a huge ripple effect in day-to-day life.

Every level of the construction industry was affected, with all New Jersey Department of Transportation (NJDOT) jobs halted.

“One hundred twenty-eight projects worth $1.5 billion are shut down,” said an NJDOT spokesman before word of a settlement came down, adding this meant “no construction, no engineering, no design, no work.”

This included jobs in areas affected by recent severe flooding. The state’s 45,000 workers, including NJDOT’s 37,000 employees, were on furlough, although certain vital workers in the police, welfare, mental health, and other fields, continued to work without pay. State construction companies were making individual decisions as to how they could handle the plight of their own workers.

Robert A. Bryant Jr., CEO of the Utility and Transportation Contractors Association (UTCA), headquartered in Wall, NJ, estimated between 10,000 and 12,000 construction site workers were affected.

It was not just those on-site workers who are impacted by the state shutdown.

“Company expenditures include the cost of shutting these jobs down safely,” said Bryant, “and contractors still have their carrying costs to meet.”

To make matters worse, banks would not waive interest because of the shutdown. This exacerbates cash flow difficulties as companies submit 30 day bills to NJDOT since no paperwork is currently being processed. The backlog when the Department of Transportation reopens will mean payment could take up to 90 days to arrive. Naturally, there is concern that some companies may fail because of this long delay on top of necessary operating costs that must continue to be carried.

Beyond that, Bryant noted, contractors’ critical path scheduling would be severely affected. This meant that a huge domino effect was set in motion, as careful timetables for deliveries of material and site work by subcontractors were increasingly thrown out of gear.

During the budget crisis, for example, steel, concrete beams, and asphalt could not be delivered. In turn, the effect of the critical path scheduling failures could mean a number of projects may not be completed by the winter weather shut down and therefore must continue in the new year.

It was unclear at press time when construction projects would be able to restart.

Summing up, Bryant spoke for many when he observed that the situation was very disappointing. He views it as a result of feet dragging by the New Jersey legislature, which is concerned about voter backlash if the sales tax is raised, whereas the governor wishes “to run the state like a business.”

While the construction industry had been strongly impacted, it was not alone in struggling with the effects of the impasse. The state’s motor vehicle offices, courts and parks, horse racing tracks, beaches, state parks, historic sites, and campgrounds were closed.

Even for houses, which were completed before the shutdown, new home warranty certification was delayed, meaning families could not move into completed houses. CEG

(The Associated Press contributed to this report.)

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