by Timothy McQuiston, Vermont Business Magazine Several reports locally and nationally suggest that the 2014 construction season could be the best since before the recession, despite the grizzly winter and concerns over possible government action, in Vermont and in Washington that could raise costs. The concerns are mostly theoretical, because nothing has really happened, yet.
Bart Frisbie is president of Sterling Construction. Pent-up demand is the most significant reason for his optimism.
"We see a busy season coming," he said. Sterling Construction is primarily a new home builder out of South Burlington.
While 2014 might not be the "heyday," as before the recession, Frisbie said, "We're upbeat about the future."
Buyers are more conservative than they were before the housing bust, he said. But home prices are moving up, he said, and business is brisker than a year ago in the home market. Mortgage rates are still good, he said.
"Ultimately, he have to build to meet the market's needs," Frisbie said. He said 2013 was a good year for the construction industry and he anticipates 2014 being even better.
According to Dodge Research and Analytics, a New York research firm that tracks contracts awarded for future construction, commercial (nonresidential) construction in Vermont for 2013 was $398.5 million, up 62 percent over 2012. Residential was $282.3 million, up 22 percent. And road and bridge (nonbuilding) construction was $227.2 million, up 10 percent. Total construction contracts for Vermont, according to Dodge, were $908.2 million, up 33 percent from 2012's $683.5 million.
For the US overall, total construction spending in February edged up from January despite adverse weather in much of the nation, as private residential and nonresidential components posted solid growth compared with early 2013, according to an analysis of new Census Bureau data by the Associated General Contractors of America (AGC). Association officials noted that the construction spending figures would have been stronger if not for declines in public sector construction and infrastructure investments.
Construction put in place totaled $946 billion in February, 0.1 percent higher than the January total, which was revised up $1.5 billion from the initial estimate. For January and February combined, spending in 2014 was 8.9 percent higher than in the first two months of 2013. Private residential construction spending increased by 15.2 percent in January and February from the same months of 2013. Private nonresidential spending climbed 11.8 percent over the same span, while public construction spending declined 2.0 percent.
The double-digit rise in private nonresidential construction so far this year is a big turnaround from 2013, when private nonresidential spending actually dipped 0.4 percent for the full year. Spending in the first two months of 2014 combined rose 3.0 percent compared with the same months of 2013 for power and energy (vs. a decrease of 13.9 percent in all of 2013); 17.3 percent for manufacturing (vs. 6.2 percent in 2013); 13.7 percent for retail, warehouse and farm (vs. 8.4 percent in 2013); and 19.5 percent for office (vs. 10.0 percent in 2013). In addition, lodging construction accelerated to a 43.8 percent rate (from 28.6 percent in 2013) and communications construction leaped 47.3 percent (vs. -11.4 percent in 2013).
Association officials warned in their January report, however, that federal investments in highway repairs could decline rapidly this summer because of funding shortfalls, undermining the sector's recovery.
Cathy Voyer Lamberton also is anticipating another solid construction year in Vermont; there should be enough money in the transportation budget for road and bridge building and repair, and there appears to be pent up demand for residential and industrial construction.
But she sees several bills before the Legislature that could dampen some of that enthusiasm.
Lamberton is the executive vice president of the Associated General Contractors of Vermont.
First up is the prevailing wage bill. This would link Vermont's construction wages to the federal scale.
"We're really working hard to kill this one," Lamberton said. "It's simply wrong."
She pointed out that using collective bargaining units to determine wages is not representative of the industry. Vermont, she said, has only about 10 percent of construction workers unionized. The current law works, she said, and employers are used to the system; it doesn't need to be changed.
The Shumlin Administration is behind the proposal, which was presented to the Legislature by Labor Commissioner Annie Noonan in January.
H878 states: "This bill proposes to change the requirements needed for state construction projects and increase the wage and benefits for the construction employees."
Lamberton maintains that it will not only drive up costs for employers, because of the wage increase. It will also, in essence, decrease the number of jobs that will get done because the state construction budget is fixed; if the cost of each project goes up, the number of projects undertaken will necessarily go down.
"It doesn't make any sense," she said.
Paid sick leave, another bill Lamberton is working against, is supported by many advocates, from ice cream legends Ben Cohen and Jerry Greenfield, to worker groups to the Shumlin Administration.
Lieutenant Governor Phil Scott, himself a co-owner of DuBois Construction in Middlesex, opposes the paid sick leave bill. He explained in January that a firm like his would not be directly hurt by such a law, but his workers would be.
He said his firm has good benefits now, but could not afford another layer, so they would have to shift the benefits around. Maybe, he said, the new sick leave would come out of vacation time. This would make the benefit package, in his view, less advantageous to the worker.
Lamberton said the new law might benefit temporary workers, but long-term employees would at least experience less flexibility in their benefits and might actually lose out. For instance in some firms, vacation time is carried over. It might also be paid out if unused when a worker leaves the firm. Paid sick leave has neither of those benefits, she said.
Despite Lamberton's angst on those two bills, she has reason to believe neither will pass this session. The prevailing wage bill is still languishing in the same House committee it was introduced in and paid sick leave likely will not get out of the House.
Speaker Shap Smith, despite being a supporter of it, does not see consensus among his own Democratic caucus.
But paid sick leave will not die quietly because many of its advocates, such as Cohen and Greenfield, are keeping up the pressure to pass it this session. They are also pushing for a hike in the minimum wage, which appears to have much more life.
Governor Shumlin has joined President Obama in calling for an increase in the minimum wage to $10.10 an hour by 2017. The current Vermont rate is $8.73, already third highest in the nation (Washington $9.32, Oregon $9.10).
Some members of the Legislature want to push it to $10.10 immediately; others want it higher, to $12 or even $15 an hour.
Lamberton said a hike in the minimum wage will have a "trickle-up effect" on wages. For her industry, while tradesmen typically make well above the minimum, someone like a flagger will see a significant increase. The skilled laborers, in her view, would then demand an increase, and each level would push the next up. Again, fewer government projects would be able to get done.
"Logic is kind of thrown out here," she said.
Bart Frisbie uses words like "sensible" and "balanced" and is also concerned about the Legislature getting ahead of the economy.
"If we have healthy businesses, we can afford to do these things," he said, referring to the menu of worker-related bills making their way slowly through the State House.
"We take care of our employees who take care of us," Frisbie said.
But like Frisbie, Lamberton said, the construction season appears to be promising.
"The Transportation budget is great. We're very happy with the direction the governor is going with it," she said.
Given the state of the Vermont's roads this long winter, there will be much work to be done.
As for the winter, there was little complaint. Contractors either muscled through it, worked indoors, or, as always, waited for the snow to disappear.
Here is a preview of the coming construction season and commentary from several businesspeople from around the state, gathered through email.
2014 Season
"We foresee a decent 2014 in construction industry," said Kevin McCarthy. "PC Construction has exciting projects just now fully ramping up for the State of Vermont on the rebuilding of the Waterbury Office Complex project as well as the Stowe adventure center. These are both high profile projects that are important to PC as well as the State of Vermont and its economy during the construction period and beyond. We are also in the final stages of construction for the new field house at Middlebury College, the State Health Lab in Colchester and the new dormitories at Champlain College."
McCarthy is president of PC Construction in South Burlington. PC is Vermont’s largest construction company and did $402 million in revenues in 2013.
"Very positive," Kevin Birchmore said. "We have several leads and we are doing a lot of estimating for summer building."
Birchmore is president of The McKernon Group in Brandon, which did $8 million in revenue in 2013.
"I have a positive outlook on this season," said Brian Carpenter. "People are talking about spring projects and asking for referrals. Other trades (excavators, electricians) I deal with are also ready for a busy year."
Carpenter is owner of Carpenter Home Systems, a remodeling company based in Richmond.
"I anticipate the upcoming season to be a little busier than the last few seasons," said Will Schwarz. "2009, 2010, and 2011 were slow years, and I was able to make it through the recession by taking on smaller jobs and having a flexible business model. This winter is really pretty average, and I'm a snowplow operator, which really helps my cash flow during the winter season. April is really my slowest month of the year, just waiting for the dirt roads to open for heavy traffic and for frost to disappear."
Schwarz is a general contractor and owner of WJS Contracting Company out of Plainfield.
Don Tredtin of Don Tredtin Corp in Rutland focuses on interior subcontracting and remodeling. He took a different view on how the state could assist contractors and homeowners.
"I think very little has changed in regards to the construction climate," Tredtin said. "There will be very little new construction. Some people will do small renovations/ additions. Lots of houses need work, but the socio/economic dynamics of the area don't allow people to afford to maintain their properties. There will be work, just not enough for the number of contractors needing it.
"Taxes & insurances make it difficult to keep prices affordable for the general public. For many, cosmetic repairs will have to wait.
"The area needs GOOD paying jobs to come around. The state should institute the equivalent of Efficiency Vermont -- but in the building trade -- where there is money for contractors to borrow at low interest rates, so they can create their own work and fix (rent/sell) properties in distress."
Jean V Burnett, a design consultant with Burnett Design, LLC in Williston.
"We are primarily a kitchen and bath remodeling/decorating firm that has a fairly constant flow of business throughout the year. I will share that the busy season began far sooner than anticipated this year, we only experienced a slow down during December of 2013; January of 2014 it was full speed ahead with planning and scheduling of projects. We anticipate this to be close to one of our banner years," Burnett said.
"I only have one store project bid for just under $150,000," said Richard C Soule III. "The commercial construction private sector is very weak in my opinion, easily the least amount of work-bid in years at this point. Our business has a strong service division which carries us always, but we have had as many as eight full-time here in the 2000s and now we run with three full time and subcontract the rest."
The Soule Boys, of Enosburg Falls, do sales, installation and service of agricultural and commercial refrigeration.
"Out of state contracts for window and door production are coming in at an continued level, lower than last year, but comparable," said Ursula Hirschmann. "The winter has not had any impact on our business, given the fact that we are a manufacturer and do not install our product in the field. Ongoing construction projects that are integrating our windows and doors have not been slowed down enough to have an impact on our production."
Hirschmann is office manager for H Hirschmann, Ltd, in West Rutland, which does custom wood windows and doors, and architectural millwork.
Dan McKeen's comments reflected the generally buoyant outlook for the coming season, while offering some of the same concerns about what is happening in Montpelier.
For 2014, he said, "Very bullish. Best start in four years. We have worked through the cold to meet demand. Glad to have the work."
As for state government, he said, "Be supportive, don’t tax us on every little item like the resale tax that was presented to me last year. I’ve worked for 30 years and never knew I might be a candidate. Now I am and report all items that matter under this area. Makes me less competitive with others in my industry from out of state."
McKeen is president of Green Mountain Timber Frames Inc in Middletown Springs, which specializes in post and beam construction of homes and barns.
"We are busy now," Doug Friant said, "with work booked into early summer, which is positive. Our large contracts are coming to an end, however, and we have yet to sign up very much new work for the coming year. We do have bids out there, but are waiting for the bids to be awarded."
He also was concerned with state action, but in a different regard.
"We need to know if we are going to single payer health care and how much it is going to cost us through additional taxes. If the costs are too high, the state will drive business to our competitors outside of Vermont. Not only do we lose money, but Vermont will lose the revenue we are pulling in from out-of-state contracts."
Friant is the CFO of Vermont Timber Works Inc, which also builds timber framed homes. They're based out of North Springfield.
"Economy uncertainties may affect the urge to spend," said Richard Villamil III of the upcoming season. "The long winter has delayed the interest in getting estimate requests that will certainly hit all at once as the weather breaks. This will create a backlog of work for the first month then all will go quiet earlier than normal as summer gets into high gear."
Richard Villamil III is president of Aquarius Landscape Sprinklers Inc, with 10 employees in Colchester.
"Cole Company is a consulting engineering and construction management firm in Manchester, Vermont (southern tier) and we have some backlog of both residential and commercial projects but very little upcoming opportunities," said Chris Cole. "Slow recovery of second home projects and very few commercial projects available. We are trying to get more involved with state contracts/agencies for building construction related projects."
"VTrans has initiated an alternative contracting program that is geared towards construction management and design/build type contracts. This is great step forward for a state agency and we are seeing some of this with other state departments. This is a much better approach than traditional design/bid/build and we hope to see more opportunities like this."
Cole, PE, is owner of Cole Company.
"This is our slow season," said Len Griffes, "and our typical backlog is only 4–6 weeks, but so far it seems like the demand for our products and services is average. This would indicate a fairly normal or average construction season. Please keep in mind that we are a specialty contractor (sheet metal and ventilation) and much of our business is related to manufacturing as opposed to construction."
For government, he said, "Simplify sales tax law, come along side business instead of treating them like the enemy, ie, sales tax audits; look at business as the economic engine that can solve many of the state’s problems, not the 'goose that laid the golden egg;' shorten the permitting process."
Griffes is president of NEVTEC Ltd, which does fabrication and installation of commercial kitchen and industrial ventilation systems out of Newport with 10 employees.
"We are bidding lots of work," said Kathy Hayden, "and have work already scheduled through fall. We will be very busy."
Hayden had similar words for the state: "Stop telling us how to run our business by making laws about sick days; stop punishing us with high unemployment (insurance) rates as this has burned us badly. We had a job where we needed to hire six guys, but when the job was over, and not enough work to keep them all, we had to lay them off, my quarterly unemployment went from $600 to $4,000. Discourages us from hiring."
Hayden is Vice President of Hayden Plumbing & Heating, Inc in Bennington.
"As we raise our heads from a long winter's nap," said Gregg Beldock of Bullrock Corp, "the Vermont business and construction landscape will be, I am sure, the busiest it has been in a decade (or longer).
"The pent up demand within our assisted living portfolio encouraged us to begin construction of The lodge at Quarry Hill in South Burlington. Unfortunately, frigid temperatures halted the blasting and excavation of that $30 million project. Now, as the snow melts, it is a competition, and a healthy one, to get contractors back to the site for a May revival of the blasting and digging. It should be noted that snow and a deep frost will keep roads posted through April.
"In short, I anticipate a bottle neck this spring and summer with greatly accelerated construction prices that is the result of economic improvements, housing price recovery, rental housing stock backlog and old man winter returning to the Green mountains with a vengeance."
Beldock is president of Bullrock Corporation and The Lodge Senior Living Communities with 250 employees. His integrated firm, based in Shelburne, does construction and real estate development.
"Our methods are not all that scientific, said Joel Baker. "If we get more inquiries via e-mail or phone than we have had in years previous, then we rightly (I hope) suppose that there will be more activity in the coming season. If you subscribe to this theory, we will likely see at least double-digit growth in residential new construction starts. Can't claim to predict same in commercial side, but that is more likely based on commercial players being less likely to 'experiment' with 'modern' building methodology."
He would also like to see the state more aggressive on energy saving incentives for commercial development.
"I do think we should see some additional incentives or regulation as regards energy efficiency in the commercial building sector... Like it or not VEIC (Vermont Energy Investment Corporation) has made some (though not nearly enough to justify their budget) progress in the residential side."
Joel Baker is president of Vermont Insulated Concrete Forms in Waterbury and admits to having some self-interest in energy efficiency construction.
"Busy, very busy," said Ron Wanamaker. "We are booked through July currently and have back up projects to keep us at capacity through the Fall. Additionally we are currently estimating projects beyond that."
The state could "reevaluate the workers compensation rules and consider a better bid system in regards to qualifications and insurance requirements. Many of my fellow tradespeople refuse to bid on state projects out of fear of the red tape and potential liabilities."
Wanamaker is president of Wanamaker Restoration in Burlington, which specializes in the repair and restoration of period homes and furniture.
"We are optimistic that the construction climate is improving," said Doug Ellwood. He said his business has increased because the cold winter has resulted in more burst pipes and fire damage.
His message for Montpelier: "Stop trying to mandate paid sick days and repeal single payer healthcare."
Doug Ellwood is vice president of GW Savage, a construction and insurance restoration business with 70 employees in South Burlington.
"We are in the solar business, which is booming, and has a significant growth forecast for 2014," said Katrina Wilson. "We are concerned with what will happen at the end 2016 when the federal tax credit either goes away or is reduced significantly."
As to that she said, "The state can continue to offer incentives to install renewable energy. The state could increase the system size requirements for the state incentive to 15kW and increase the system size for the streamed line permitting to 15kW as well. Our state representatives can represent Vermont at the federal level by trying to extend the 30 percent federal tax credit beyond the end of 2016. The state can continue to offer Group Net Metering (and) encourage the utility companies to continue the Solar Adder."
Hers is one of the notable businesses negatively affected by the weather.
"Due to the cold weather the installations are slow and difficult. This winter with the heavy snow fall we had to shovel roofs which are not priced into the jobs, therefore our winter margins are skinnier. I don’t see any long-term consequence of this past winter, other than trying to get back on our feet after taking a hit on our margins."
Wilson is vice president of Integrated Solar of Brattleboro. They design, install and service renewable energy systems, specializing in solar photovoltaics and geo-thermal systems.
Rick Irick is the owner of Vermont Nondestructive Testing, Inc, of South Burlington, which does quality control and inspections for the welding industry:
"There seem to be a few good jobs bidding it would be great if Vermont labor is included in them (specifically the natural gas pipeline). Major construction long-term seems to be gone. (IBM)
"Winter only affected our ability to work outside so it slowed our schedule. Beyond that no real impact.
"Vermont seems to be doing a really good job with most support. Let’s see how they are going to hire Vermont contractors first."
Atlantic Contracting, Inc sent along this note: “Fortunately we are starting off this particular season with a good amount of contracts. However, this has NOT been the NORM over the past several years. We do NOT feel our experience for this year is indicative of a returning economy.
“We were extremely slow. The long winter is delaying customer's ability to go outside and assess the exterior work needed on their home or building.”
And their advice for Montpelier: “Give tax & other economic breaks to start-up businesses & new businesses moving from another state.”
For the near term: “My business is very small — more like a cabinet shop than a house builder volume-wise (about 75k total sales this past year ). I ask clients for a schedule deposit to reserve a spot, and have a continuous queue at most times of the year, this allows me to see several months down the road.”
Nils Shenholm of Solhem Sauna LLC said: “I’m very busy, and ‘subbing some stuff out’ to keep up, it has been an upturn since last year.”
Help from Montpelier could be? “Insurance – both liability and workers comp is/are a racket in my view – and a very expensive barrier to business…
“*never mind the idiotic health insurance mess – thanks governor.”
Stephan Mindel, of Mindel and Morse Builders in Brattleboro, was succinct on the coming season: “A little hard to say. Inquiries about mainly smaller projects. Busy at the moment.”
What, if anything, can the state do to assist you and the construction industry as a whole?
“Fix roads.”
Anita Socinski A&N Stone Works said: “My evaluation of the upcoming construction season in my particular industry of custom natural stone counter top fabrication – I see homeowners moving forward with kitchen and bath remodeling. They are investing in and refreshing their spaces. We fabricate a lot of soapstone counter tops and sinks, Vermont Danby White marble counters in a 2" thick format, brushed or textured granite surfaces and natural Quartz. I see this year as being very, very busy.”
“The long winter-from my perspective feels normal... I love the cold weather of Vermont. I love the challenge of shoveling to clear paths for our daily. business. We had some terrific ice this year as well. I love the challenges of doing business in our climate. The weather has not affected our business. The people that want to visit us at our new showroom and stone gallery venture out.”
“I have lost a few bids due to the fact that we charge sales tax. Some do not. Some obtain their products from NH where there is no sales tax.”
Susan Pelletier of Pelletier Plumbing & Heating said: “New construction is still very slow. Having a plumbing and heating business we were extremely busy this year with service work, due to the extreme cold temperatures. There were a lot of freeze ups. People are trying to keep their heat down because of high cost of heat fuels but unless your home is well insulated it cost people more money with service work with frozen pipes.”
“The state needs to realize that raising the gas tax is killing small business. We have to run trucks that are heavy with parts and tools. We drive to different towns to service homes and businesses and because of the rising costs of insurance and gas after 29 years in business we are working more hours and making less money. We can't continue raising our labor rates and in turn cannot keep up with rising costs for heat and electricity for our shop. As I mentioned workman's comp, liability insurance, rising gas and electrical costs make it very difficult to run a small family plumbing and heating business. Vermont needs to recognize the small business owners and think about the consequences for us before they raise a tax.”
Northeast Kingdom
The Northeastern Vermont Development Association, a planning and development organization serving Caledonia, Essex and Orleans Counties, has released its March report on economic development issues.
Downtown Newport
Proposed AnC Bio project continues through the permit pipeline, according to Alex MacLean, EB-5 Jay Peak Project Manager.
The AnC Bio building design has been adapted to reflect city zoning, including a new bylaw change about building heights. Newport's Planning Commission adopted new language in February to allow buildings taller than 72 feet to be built as long as the city fire chief signs off on the height. The original design was a multiple story office tower, close to 100 feet tall.
The new design, in compliance, has variable heights and a wider base. The project, under the name Jay Peak Biomedical Research Park, moves on through the permit pipeline for review by Newport's Development Review Board. Act 250 review will follow.
Jay Peak Resort
Jay Peak Recreation Center The Town of Jay Planning/Zoning Commission unanimously approved a permit to build a 7,500 square foot indoor recreation center near the Stateside Hotel site. The facility will include a multi-level climbing wall and ropes course, movie theater, bowling alley, arcade, and concession area to provide guests with indoor recreation opportunities year around, regardless of the weather. Next, plans are scheduled to be reviewed by the District 7 Environmental Commission for an Act 250 permit.
Newport State Airport
The VTrans has applied for an Act 250 permit amendment for the airport's $11.4 million expansion, enhancing the site as an integral part of the regional development plan and central hub of the NEK foreign trade zone. Following this review, VTrans will apply to the Federal Aviation Administration for federal funding to cover 90% of the initial construction cost for a 1,000 ft. runway extension, a new snow removal shed for equipment, a larger apron, on-site septic system, and a new well. The FAA has accepted forecast studies that show a need for the long-awaited expansion and the Agency has given a green light for the application.
NEK Workforce Development Initiative
Vision: To insure a job-ready workforce is available locally in the short and long term, and graduate our youth or unemployed/under-employed into existing and anticipated jobs.
Mission: To build a system to support career pathways for Vermonters to take advantage of existing and anticipated employment opportunities in industry sectors with livable wage jobs.
Last month Cindy Robillard, representing the Vermont Department of Labor, brought together professionals involved in workforce training in the St Johnsbury-Lyndonville labor market area to form NEK South Education Team. This targeted effort will assist businesses and employees in the region's southern tier.
Representatives from educational organizations and economic development service providers will connect every 4-6 weeks to collaborate on current career and job training activity and explore opportunities for future projects. St Johnsbury Academy, Lyndon Institute, Lyndon State College, Community College of VT, NEK Learning Services, NVDA, and the VT Association of Business Industry & Rehabilitation are involved in this effort.
NEK Transportation Infrastructure Study
The Draft Alternative Recommendations Report is currently being reviewed by the Steering Committee. The report will be revised based on steering comments and presented to the public for review by mid April. The final round of public meetings will be held during late April and early May. The report includes recommendations for intersection and highway access improvements in Newport City, Derby, Burke and Lyndon, as well as transit options throughout the region. For more information contact Doug Morton, Transportation Planner [email protected] (802) 748-1221
Timothy McQuiston is editor of Vermont Business Magazine.