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Total Impact of Commercial Construction in Ala. Tops $10B

A new study shows the industry's tremendous impact on the state economy.

Tue November 12, 2013 - Southeast Edition
Michael Tomberlin - AL.COM

BIRMINGHAM, Ala. (AP) The commercial construction industry has close to a $10 billion annual economic impact on Alabama, the first-ever study of its kind found.

The Associated Builders and Contractors of Alabama commissioned the first detailed look at the economic impact of the construction industry on the state. The findings by Keivan Deravi, economics professor at Auburn University at Montgomery, were surprising to ABC Alabama officials.

• The total economic impact of the commercial construction industry in the state is more than $9.6 billion.

• The economic output — payroll and non-payroll expenditures — of construction is more than $9.3 billion, making it the largest industry in the state, accounting for 41 percent of all output in Alabama. By comparison, all of manufacturing accounts for 19 percent of output and the services industry accounts for 16 percent.

• Construction accounts for 150,000 jobs in the state, 116,644 of which are direct jobs. Commercial construction alone accounts for 61,858 direct jobs in the state. The construction industry is responsible for 56 percent of all of the state’s jobs.

• Construction in Alabama has an annual payroll of $7 billion.

• Alabama’s construction industry has a direct impact of $402 million on the state’s Education Trust Fund.

• Construction in Alabama contributes $140 million in sales taxes, $19 million in use taxes, $27.4 million in utility taxes, and $216.7 million in individual and corporate income taxes each year.

"It was shocking to even us," Geoff Golden, chief executive of Birmingham’s Golden Construction and the chairman of ABC Alabama when the study was commissioned and completed. "We have thought all along we were a major industry in the state, but when we saw the actual numbers, it blew us away."

In an interview, Deravi said other measures of the construction industry have not included the entire industry, focusing only on contractors.

"When you ask, ’What is the construction industry?’ the answer is beyond the contractors and subcontractors," he said.

Deravi said the industries tied to construction are obvious, such as architecture and engineering, but others may not be so obvious, such as concrete, paper, pulp, lumber and wood industries or even carpet or flooring.

"What surprised me was the breadth and depth of it," he said. "We wanted to look at the whole enchilada."

Golden said when he became chairman of ABC Alabama the organization’s mission was to increase the exposure and relevance of the construction industry in the state. That was hard to do without data.

"We had never done something like this before," he said. "Other industries from farming to fishing can tell you their impact. We needed to be able to do the same. What is the size of this animal we call the construction industry?"

Jay Reed, president of ABC Alabama, echoed Golden’s point that other industries have been able to quantify their size and impact and the construction industry has not been able to do that until now.

"We had never stopped and sat down to see what it means to the state of Alabama," he said. "We wanted to know how big we were, but we also wanted to be able to demonstrate to elected officials our impact on the economy."

When a newly recruited company comes into the state, the focus is on the amount of investment and the number of jobs created. Tim Hightower, the president of Southern Carpet, Hardwood & Tile and the 2014 chairman of ABC Alabama, said the study will allow the construction industry to hold up similar numbers for its existing industry.

"Everybody talks about new industry coming in and we have a tremendous one already here having a huge economic impact," Hightower said.

For ABC Alabama member firms, the data from the report shows how the industry’s reach is beyond the general contractor level.

"There is a very significant trickle-down effect," said Randall Curtis of Hoar Construction. "As a general contractor, you know so many other industries are touched and involved in our projects, but we’ve never seen it shown like this."

Hightower said the industry has always had good support from the Alabama Legislature. However, being able to show how vital the industry is with the state could help ABC Alabama in its lobbying efforts, he said.

"We’ve got good legislators on both sides of the aisle," he said. "I think it just confirms what we knew: That we’re a major factor in the state’s economy. We just want everyone to recognize that and if legislation hurts us, it hurts the whole state. We’ve got to keep beating the drum."

As big as that drum is, Golden said it is probably even bigger.

"There were those who were concerned about doing the study now because the economy and our industry have not fully recovered," he said. "This economic impact study was done in a down year. Imagine what the impact is in one of our peak years."

Golden said he is glad he pushed for the study.

"The bottom line is the construction industry is very, very important to the state of Alabama from a tax base and an employment base standpoint," he said. "This industry affects a lot of people in our state."

Reed said the initial economic impact study only focused on the work the firms do within the state of Alabama. Most companies do work outside of the state and some even do projects in other countries. That “exporting’’ of construction will be captured in a future study to better show the industry’s impact, he said.

Deravi said that will require detailed, individual surveys of firms to determine the business done outside of Alabama.

"We just focused on what took place inside the four walls of Alabama," Deravi said.

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