Vermont stays strong as others weaken

Vermont stays strong as others weaken

Barna, Ed

Certainly these are uncertain times, and the construction industry is seeing that from the viewpoint of those who have to build whatever future is coming.

Very few people saying it’s a bad year yet, thinking in terms of bidding opportunities and projects. Cooler than the previous year, but that year was fevered. Rather than saying (and people did not long ago) that it’s a lot better than the aftermath of the dot-com collapse at the turn of the century; people who want to give the dark side its due speak of what might happen in the future.

Everyone knows what rising interest rates did to the speculative stock market of the late 1990s, and the Federal Reserve raised rates 17 times before pausing this year – all to avoid inflation, which has come anyway for important construction items like concrete, copper, steel and of course gasoline. No one would be surprised by a downturn.

The Department of Labor’s latest annual tally showed that in 2005, overall construction jobs increased from 16,674 to 16,867. More specifically, building construction jobs dropped slightly from 6,112 to 5,867, heavy and civil engineering workers rose slightly from 1,854 to 1,881, and specialty trades took the biggest proportionately hike upward, from 9,708 to 9,905.

The most recent monthly corrected estimate has construction jobs increasing from June of 2000 to June of 2006, from 18,300 to 18,850.

At the South Burlington firm Works in Progress, which tracks bidding opportunities, principal Larry Cain gave this assessment based on comparable February numbers. “We at Works In Progress have noticed the following trends:

* “A drop in the quantity of PreDesign projects. 2006 ranks lower than 2005,2004 & 2003, 2004 being the highest of the 4 years.

* “A moderate raise in the quantity of In Planning projects from 2005 to 2006. Here, 2006 has so far seen the highest quantity of projects of the 4 years.

* “2006 has seen a slight decrease in the quantity of Bidding projects over 2004 and 2005. 2003 has the highest quantity of bidding projects of the four years.

“All figures are based on average quantity of projects reported on in the month of February in 2003, 2004, 2005 and 2006,” Cain said. “Pre-Design is defined as projects so early that no design team is in place. In Planning is defined as proects still in the early planning stage but a design team has been selected.

“Probably the most significant change this year over the past couple of years is the magnitude of projects. Although there will be sizable projects coming out of UVM, 2006 will not see another Renaissance pro project, Williston style development, Circumferential Highway, Winooski Redevelopment.”

McGraw-Hill Construction (Dodge Report) numbers for 2006 to (late show residential construction contract value dropping since 2005, with nonresidential (commercial, manufacturing, educational, hotel and so on) up and non-building (roads, bridges, sewer and water work, utilities, communications) way, way up – certainly in part due to the federal transportation bill putting $1 billion into Vermont over a fiveyear period, and possibly reflecting VELCO’s power line upgrades as well. The numbers cumulative through June were:

* Nonresidential: $109,452,000 to $129,857,000, up 19 percent.

* Residential: $279,545,000 to $247,725,000, down 11 percent.

* Nonbuilding: $83,595,000 to $219,766,000, up 162 percent.

* Total construction: $472,592,000 to $597,348, up 26 percent.

In June itself, compared with 2005, nonresidential dropped 47 percent, residential went down 43 percent, and nonbuilding was up 109 percent. The numbers may indicate a slowdown, or partly the influence of the wettest late spring on record, or partly waiting to see what the Fed would do – or any number of other factors.

Despite all the ambiguities and mixed messages, it would still be possible to do a kind of Late Night Show Est for this area of the Vermont’s economy, along the lines of “The Top Ten Ways We Know It’s Not a Bad Year for Construction.” These are the writer’s suggestions, based on regional experience; others in other areas might have made different suggestions:

10 – The former Pownal racetrack, after transitioning from thoroughbred showplace to white elephant and possibly dead duck, is coming back to life. An area partnership wants to turn the 144-acre tract, disused since 1993, into a complex with multiple uses, including a residential component.

9 – The town of Brandon, population roughly 4,200, decisively voted a $2.5 million bond for infrastructure maintenance and upgrading at the 2006 Town Meeting, even though the elementary school needs serious repairs and the 45-year-old union high school the town belongs to is in bad enough shape that it could use more than $10 million worth of work.

8 – Vermont’s largest second home community may not be large enough, according to the Quechee Lakes Development Company. The current property owners of the- 36-year-old, 5,200-acre, 1,400-residence Quechee Lakes community, whose sites for development are now “very limited,” will vote Labor Day Weekend on a 700-acre expansion that would add 80 single-family homes, 200 condominiums,’ 100 cluster homes, and a new championship golf course (of which there are now only two).

7 – Rutland County, which regularly castigates itself for slow growth and the lack of jobs to keep its children near home, is seeing an explosion of construction at a south side shopping plaza – with a new hotel recently added, in a separate project, between the plaza and another hotel.

6 – The section of US Route 7 from Pittsford to Brandon, the subject of several shelved studies since it was last rebuilt, has seen two sections of a 12-mile reconstruction plan receive their Act 250 construction permits, with four more sections of the 12-mile overhaul the way. The plans include removing the underlying 10-foot-wide concrete slabs, whose outlines have repeatedly broken through overlaying asphalt since the last major work, in the 1930’s.

5 – The term “ski area” is starting to sound a bit old-fashioned, with so many of them relying on second home construction to anchor the transition to four-season resorts. “Slopeside village” is part of the new terminology, but in fact these clusterings are only the nucleus for wider upland area development of both homes and businesses.

4 – Complaints about traffic delays due to road and bridge projects have in many areas replaced complaints about potholes, except for those who rely on gravel roads – the JuneJuly wet spell having etched a punch list of its own on the landscape.

3 – Figuratively speaking, the Northeast Kingdom’s castle wall has crumbled into what used to be the moat. No longer distant, in age when agencies expect savvy real estate buyers to preview properties online, it seems to be adding people in a pattern that’s the reverse Vermont’s pre-Revolutionary-War growth: from the lakes up rather than from the hills down.

2 – Most companies of any size keep a lookout for good employees, especially in high-skills areas, to the point where some say it’s time to develop ways for immigrants to do construction work as well as to pick most of the state’s apples and hold down all sorts of jobs at ski areas.

1 – Try getting an electrician for anything other than an emergency or minor alterations.

Road Less Taken Closed For Repairs

At Associated General Contractors, executive director Thom Serrani is delighted that roads and bridges were the stars of the June contract numbers, after years of grumbling that the state has been neglecting its infrastructure. Truth told, he still grumbles, warning that Vermont will still not get all the way caught up with its federal-infused spending, and worrying that there won’t be the will or wallet to maintain what’s built.

But there’s no denying that the numbers look much better for companies involved in “horizontal” work. The Agency of Transportation posts a Fiscal 2006-2007 budget comparison on its web pages that includes the following totals (which include federal and locally appropriated monies) under Program Development:

* Paving: $55,296,079, up 38.2 percent.

* Interstate bridges: $5,2488,000, up 2,466.3 percent.

* State highway bridges: $28,805,696, up 9.3 percent.

* Roadways: $73,302,066, up 36.5 percent.

* Highway Safety & Traffic Operations: $11,235,676, up 124.5 percent.

* Park & Ride facilities: $2,195,000, up 12.3 percent.

* Bike & Pedestrian facilities: $6,644,915, up 152.7 percent.

* Enhancements: $4,252,371, up 69.3 percent.

* Program Development Administration: $14,321,000, down 0.3 percent.

Add in bridge maintenance, rest areas, policy & planning, general maintenance, public transit (up 18.4 percent), aviation (up 22.4 percent), rail (up 109.5 percent), the central garage, and transportation buildings, and the total “VTrans” budget amounts to $388,059,472 – up 29.7 percent from Fiscal 2006’s $299,083,733.

Then there are various “Town Highway” programs, which includes town bridges, which total $66,104,935, up 20.1 percent from the previous $54,950,749. Add in the Transportation Board, which gets a 1.4 percent adjustment, and the total programs amount to $454,159,007 – a hike of a little more than $100,000, for a 28.3 percent increase.

Bridges, in past years a topic guaranteed to produce fulminations and tirades from those with professional experience in gauging their state of repair, will see an allprograms increase of 35.7 percent, from $51,769,788 to $70,228,866.

“It is good out there,” Serrani said. But “as much as we love all the money, we’re still not going to catch up. We just let it go so long. Things fall apart, and if you wait until they fall apart, it costs much more to fix them. It’s like a house: if you let the roof go, you have to fix everything inside.”

Build It Out When And If They Come

In the past two years, checking the vital signs of the housing market has become a national sport. Whether or not it’s a bubble and if so whether it’s about to burst, how long the runup might continue, how the character of different areas is changing due to rising prices, the role of property taxes these are among the regular subjects for columnists and other pundits.

Meanwhile, homebuilding and remodeling have provided work for contractors at all levels, with many people who would otherwise move up to more expensive homes afraid to change horses in midstream, as it were, and deciding instead to borrow on their home equity and improve what they have.

There seems to be little doubt that rising interest rates will affect home equity borrowing and spending, and there are many reports from across the country saying the housing market has cooled, especially where prices were highest. (An August 13 AP report from New Hampshire, for instance, said existing home sales were down about 10 percent, and “mostly in areas where the average selling price is highest.”) Real estate agents in Vermont, too, say there is more inventory and some backing off on prices – less of a seller’s market and more of a buyer’s market, though the second home-vacation property market may be an exception.

“The slowdown in the once-sizzling housing market is spreading, with 29 states reporting spring sales declines, while in Vermont sales were up,” said an Associated Press report on August 16. One of the key questions for this state is whether there is a unique Vermont factor, comparable to the “Vermont brand” effect in the sales of many retails products – a perception about the quality of fife that means a reluctance to buy homes elsewhere might translate into more sales here.

Sitting in the eye of this cyclonic confluence of forces is Joe Sinagra, executive director of the Homebuilders and Remodelers of Northern Vermont. “The market is still hot,” he said, but he expects it to cool down. “Like so many other things, Vermont is probably a year behind the rest of the country.”

He’s encouraged to see more affordable units being built, like 92 that are planned in St. Albans and Essex Junction. “Throughout Vermont we’re seeing them,” he said.

At DeMag Riggers & Crane Service in Williston, co-owner Doug DeMag is seeing quite a bit of activity for his cranes in setting up manufactured modular homes, which are growing in popularity as a way of keeping down prices. These are not the “Mobile homes” of the past, he said: though you can put together a very simple and economical home with two “blocks,” as they call the units, you can go to four blocks for a 30- by 50-foot house, or more, in numerous designs. “We’ve done houses that are up to 16 blocks,” he said.

What Sinagra sees slowing is the market for existing homes, with new homes still booming. The energy situation is probably part of it, he said: older homes often have higher heating bills than tightly constructed new ones with state-ofthe-art insulation. “We’re seeing more and more people requesting energy-efficient appliances.”

“We’re still short a number of units,” Sinagra said, perhaps thinking of the study that said Chittenden County alone could use 10,000 more domiciles. There are only so many places where it’s possible to build, he observed, and when some people are holding onto potential sites in hope of soaring prices, meeting the demand gets that much harder.

That leads to phenomena like people buying houses less that three years old and immediately starting to add onto them, or buying little lakeside cabins and tearing them down to put up edifices. “Next thing you know, there’s a million-dollar house there,” Sinagra said.

If it turns out that the demand isn’t there, many builders can back off from the number of units for which they obtained a permit. Typically, larger-scale developments are pitched to local boards as market-driven that is, the town won’t immediately swell by several hundred more people, but will see steady, manageable growth to the extent that there is real demand.

In some cases, today’s plans are yesteryear’s abandoned visions. For example, the A. Johnson lumber company in Bristol was ready to put about 40 houses near Middlebury State Airport in the early 1990’s when the real-estate driven recession came. Now they have renewed the permit and the homes are being built – little by little, to meet the demand.

Larger projects increasingly are meeting multiple demands, by combining a variety of land uses. Around Chittenden County, for instance:

* In South Burlington, the South Village project is working around a wetland issue, which might be resolved by Retrovest either by redesign or a court appeal. Most aspect of the project did meet Act 250 approval; eventually, there could be 334 housing units, a private school, and an organic farm.

* The Winooski Falls project, either completed or under construction, is meant to have 213 condominiums or riverside apartments, student housing, a municipal parking garage, and headquarters for the Vermont Student Assistance Corporation.

* In Williston, the Finney Crossing development, still in early permitting stages, aims to add 190,000 more square feet of commercial space northeast of Taft Corners, plus 356 housing units of varying types.

* In Colchester, Severance Corners looks to become another big commercial crossroads, with S. D. Ireland Construction putting up 25,000 square feet of retail, 50,000 square feet of offices, and 152 residences southwest of that junction -with a similar development envisioned to the southeast.

The concept is not just viable in Chittenden County. Middlebury South Village, for instance, has begun sitework for an extension of the existing village area, which in turn may become infill if an even larger residential project takes Place along one of the streets it borders. Including in the plans, which finally met the criteria of both land-seller Middlebury College and local planners who had rejected a proposal for a large hotel there, are three distinct neighborhoods with different types of housing (30, 27 and 24 units); a mixeduse area with a town green and five commercial buildings with 45,000 square feet of retail, restaurant and office space; and sizable preserved areas (about half of the 31-acre parcel) with trails, sidewalks and bike paths that will link with, among other areas, a Trail Around Middlebury.

Some of the housing units, on sloping land, will have associated parking beneath them – a feature that is also in a 26-unit affordable apartment complex added this year a little way along Route 7. Knowledgeable developers – partners Jeffrey Glassberg of Waltham and Stephen Reid of Brookfield meet that test – realize that “mixed use” correlates with “fewer automobile trips” in the minds of anti-sprawl-oriented planners. The viewpoint that this country has left itself very vulnerable by adopting the land use pattern of single houses in the middle of separate lots – certainly vulnerable to oil price increases and possibly to food supply problems – is gaining more acceptance now that fuel prices are hurting both commuters and farmers.

The most speculative real estate markets have been the first to slow down, and second homes, such as condominiums, have been prime targets for speculation. When the Killington Ski Area’s partner in creating a large slopeside village pulled out earlier this year, some may have taken that as a signal that Vermont’s market for vacation-getaway-retirement homes might be slumping in similar fashion.

Tom Horrocks, Killington’s commu nications manager, said, “Our feeling is it’s not necessarily a market indicator,” and even if it is, resort properties are “a very elastic market.” They’re looking for another development partner, and expect the interruption to be a temporary setback for sound plans.

Vermont and its way of life will continue to be an attraction, Horrocks said. Skiing will, too, he said, because “skiing connects generations,” cross-country also being accessible even when the knees are no longer black diamond.

The family aspect has become important to resort development, Horrocks said. With the development of other activities than skiing – mountain biking, golf, hiking, fun parks, shopping at slopeside shops and more – the former “ski areas” have something for everyone to do if a family needs a place to hold a reunion. “These are aspects that will always keep ski area resorts attractive,” he said.

At the Vermont Ski Areas Association, Heather Atwell said there’s plenty going on. Sugarbush has built a new hotel, Smuggler’s Notch is doing condos, condos at Jay Peak, Okemo adding to the huge Jackson Gore project, Burke Mountain into permitting for major work starting in 2009, Stowe connecting Spruce Peak to Mount Mansfield, and more.

Atwell said she had just been to an Eastern Ski Instructors Association conference in Maine where James Chung of Reach Advisors, who follows ski industry trends, was a speaker. She heard nothing to contradict her belief that “it’s still pretty good here.”

Some have talked about a “9-11 effect” helping to drive outof-state demand – a wish to have a safe haven in an age of terrorism. In some cases, the ability to telecommute seems to have facilitated that goal. To some extent, there seems to be a desire just to get away from the stressful intensity of the Seaboard: the previously mentioned report on New Hampshire home sales reported increased sales for the Upper Valley, Claremont area, Strafford County and the White Mountains.

Quechee Lakes Development Company principal Michael Maynard said in their August 1 release, “The demand on the part of people from Boston, New York, Hartford, Florida and many other places, including overseas, for new second homes in and around Quechee Lakes makes us very excited about the expansion.” He added that any buildout “will reflect Quechee Lakes’ ambiance and sensitivity to the surroundings,”

Also on Aug. 1, the Governor’s office and the Vermont Housing Finance Agency announced a new $10 minion mortgage loan program designed to assist affordable homeownership, plus two new VHFA borrowers insurance products, aimed at the same goal, provided by the Mortgage Guaranty Insurance Corporation.

“Vermonters are still facing high housing costs, despite evidence the housing market may not be as super-heated as in recent years,” Douglas said. “The concern over housing affordability on the part of consumers, employers and the housing industry remains high, which is why we still need the kind of creative and effective thinking that goes into programs like the ones we’re announcing today. Creating more affordable housing helps us create more and better paying jobs.”

Bid …. Out

The biggest headache for many construction companies this season may not be finding bidding opportunities, but making accurate bids – something that is also causing problems for potential clients.

A half century ago, schoolchildren at recess played a game called Crack the Whip, in which they held hands in a line and tried to follow the leader’s twists and turns. The one on the end had the hardest time holding on during the abrupt changes.

Vermont builders are on the end of a worldwide game of Crack the Whip when it comes to supplies. If the Chinese are putting up ranks of high-rise workers’ housing the way Sunbelt cities are adding suburbs, cement and steel prices may soar. Copper prices have escalated to the point where Vermont courts are processing cases of people stealing the stuff to sell as scrap. And so on.

A case in point: the city of Vergennes was delighted to get a Scenic Byways grant for $210,000 five years ago that would allow them to build a stairway down the eastern side of historic Vergennes Falls, thus helping to attract visitors to their downtown business district. After getting over all the design and permitting hurdles, the project went out to bid this summer. The lowest bid was over $1 minion, with the stairway alone coming in at around $650,000.

At the Education Department, school construction consultant Cathy Hilgendorf said almost every project to land on her desk had to be reconsidered and rebid, because all the initial offers came in higher than the amounts the voters authorized. Remember that $2.5 million bond the voters of Brandon approved at Town Meeting? The Selectboard’s clinching argument, accepted by a decisive majority, was that waiting to do the work would mean much higher costs, due to the steady escalation of materials costs, particularly for asphalt.

This has been a difficulty, of course, not an obstacle. Vermont construction firms have gotten better and better at making accurate estimates, partly thanks to computer assistance. But it’s indicative of the way the global economy applies to construction as much as any other Vermont business sector, making predictions problematical at best.

Why Not Us, Too?

The latest federal estimates, relying heavily on Homeland Security information, were that by the start of 2006 there would be 11 million illegal immigrants in this country, about 6 minion from Mexico. Some are already in Vermont and doing construction work, Serrani said, pointing to arrests in Rutland and in the Connecticut River Valley.

But why not? ask some. Why should construction costs be lower in the Southwest, leading businesses to prefer siting branches there, rather than in New England? If no one has a problem with Jamaicans coming in the fall to pick the bulk of Vermont’s apples, and to spend a considerable amount of their earnings in local stores buying things for their families or themselves, why can’t Mexicans help to fill the gap created by young Americans’ unwillingness to pursue any kind of career involving substantial manual labor?

Some industry contacts said the real need is for skilled construction workers, so immigrant labor would be of limited value. But if the migrants could stay long enough to go through training programs … which could perhaps be outsourced to India.

Actually, a few Vermont companies do use Mexican workers, legally. At the A Marcelino paving company in South Burlington, a spokesperson said “No one wants to do the physical work,” and not just in construction. “I do know there are people who come here,” lots of them in the hospitality industry, or working in restaurants.

The Jamaican apple pickers come under the Immigration and Naturalization Service’s H2A program, which does not limit the total number of workers, she said. Construction and hospitality workers have to come under program H2B, which has Emits that those who started it 30 years ago never imagined would be so much out of line with the need, she said.

Getting a H2B visa is not only highly bureaucratic, it takes place on a yearly schedule that is out of synch with the construction industry, she said. It runs from October to October, which is too soon for many companies to plan in advance. “Some people don’t want to go through that hassle,” she said.

“It’s unbelievable the process you have to go through,” she said. “But it’s definitely worth it.”

Copyright Boutin-McQuiston, Inc. Sep 01, 2006

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