A Rocky Road Back To Regional Recovery
There are top project starts and there are non-starters, making ENRMidwest’s list of 2010’s Top Starts as notable for what’s absent as for what’s present.
Still among the missing is just about anything smacking of commercial construction, particularly in the office, retail and hospitality sectors. Ditto multi-family housing, a sector suffering from foreclosures and plummeting housing values. In some areas, values continue to decline.
The downturn is particularly acute in metropolitan Chicago, ground zero for the region’s economic meltdown, says Anirban Basu, economist with the Arlington, Va.-based Associated Builders & Contractors.
Nevertheless, the Midwest is poised for healthier growth than other U.S. regions due to its robust industrial base, the purported beneficiary of a growing global economy, according to Basu.
Although health care, continuing care and senior housing facilities also are buoying the region, “it’s largely the premier health-care providers that continue to raise funds for large hospital projects,” says Jeff Riemer, executive vice president with construction manager Bovis Lend Lease, Chicago, which has four projects listed among the region’s Top Starts. “We have some senior housing facilities we’re at work on, but they were conceived before the economic crisis. Those projects are harder to build now, because they were previously tied to letter-of-credit banks that are gone.”
At present, the Midwest leads some regions in construction activity and lags others. Although ABC reported an average backlog of 7.1 months for the fourth quarter of 2010—a figure consistent with the pace of recovery in overall non-residential activity—the average backlog for Midwest states, including Indiana, Michigan and Ohio, only recently surpassed six months. By comparison, the South, which includes Louisiana, Oklahoma and Texas, achieved an average backlog of 7.8 months for the same period. The West, the nation’s worst performer, posted an average backlog of 5.8 months.
Despite progress, a dearth of publicly funded projects—a popular antidote for anemic markets—could stall recovery in the Midwest. “As with other regions, the challenge is to offset steep declines in federal stimulus funding, now that the program has begun to wind down,” Basu says.
“Much of those funds have been paid out, and contractors are back out looking for work,” says Ken Simonson, chief economist with Arlington, Va.-based Associated General Contractors of America. “Although states such as Illinois have imposed hefty tax hikes, those funds don’t come close to matching the amount that states received in stimulus funds,” he says. “I think it’s going to be a very grim year for public construction in the Midwest and elsewhere”
The signs are everywhere.
In Illinois, some $31 billion in public works projects hang in limbo after an appellate court ruled that funding sources, including tax hikes on liquor, candy and video gambling, violated a “single subject” clause of the state constitution.
In Missouri, state legislators are seeking to fund the state’s second nuclear power plant by allowing utilities to pass on project costs to consumers, despite a 1976 law barring utilities from doing so before such plants are operating.
Along with state lawmakers, Indiana’s Commission for Higher Education for the first time recommended a two-year moratorium on university construction, including $700 million in proposed projects.
Throughout the region, dwindling funds also are curtailing lower-education projects. “Property taxes are very important for the K-12 sector, but that base is shrinking due to falling housing values and rising delinquencies,” says Simonson. “We’re seeing districts close schools rather than open them.”
Federally funded projects face obstacles of their own. Although the Obama administration has proposed $50 billion for highways, transit, rail and airports for fiscal 2012, it has yet to indicate how it plans to fund its six-year, $559.9-billion surface transportation plan, which includes $53 billion for high-speed rail.
Federally funded building projects also present a mixed bag. Among the big losers is the Veteran’s Administration, which would see construction spending plunge by 51% in 2012 as the Obama administration attempts to trim non-security-related construction.
The situation is a bit brighter for the U.S. General Services Administration, although many of its planned projects, including a $194-million headquarters for the Dept. of Homeland Security, will be built outside the Midwest.
Significantly, fourth-quarter data compiled by ABC denote a shift away from public construction, particularly infrastructure work.
Even so, some Midwest states and municipalities are turning to public/private partnerships to support planned projects. In 2006, Indiana sold operating and toll-collection rights for the Indiana Toll Road, a major interstate linking the Midwest and the East Coast, to Spanish-Australian consortium Cintra-Macquarie for $3.85 billion, money it used to help fund languishing infrastructure projects.
Indiana also has formed a tri-state commission with Kentucky and Ohio to investigate public/private methods of funding bridge projects.
Michigan is taking a similar tact to fund construction of a bridge linking Detroit and Canada. Under one scenario, Detroit International Bridge Co., owner of another bridge linking Detroit and Canada, would fund the project by seeking federal matching funds on toll credits it has accrued since 1992.
“The Indiana Toll Road deal is as good an example as any of what you can achieve with public/private partnerships,” according to Simonson. “But it really isn’t happening elsewhere, at least not to the extent we thought it would.”
|Rank 2010||Project Location||Project Cost||Start Date/ End Date||Owner / Prime Contractor|
|1||Mississippi River Bridge St. Louis/St. Claire Cty., Ill.||$667 million||Feb. 2010 |
|MoDOT Massman Construction, Traylor Brothers, Alberici Corp.|
|2||Wishard Health Services Replacement Hospital Indianapolis||$621 million||June 2010 Nov. 2013||Wishard Health Svcs. Jacobs|
|3||Des Plaines Casino Des Plaines, Ill.||$450 million||June 2010 July 2011||Midwest Gaming and Entertainment Pepper Construction Co.|
|4||Glacier Hills Wind Farm Rudolph, Wis.||$367 million||May 2010 Dec. 2011||WE Energies Boldt Construction, Michels Corp., Edgerton Contractors, Inc.|
|5||Wacker Drive N/S Reconstruction Chicago||$366 million||June 2010 Dec. 2012||I-DOT FH Paschen|
|6||Charter Street Biomass Plant Madison, Wis.||$250 million||Oct. 2010 2013||State of Wisconsin, University of Wisconsin Boldt Construction|
|7||Palos Community Hospital Addition Palos Heights, Ill.||$224 million||Sept. 2010 Jan. 2013||Palos Community Hospital Pepper Construction Co.|
|8||2550 N. Lakeview Condominiums Chicago||$188 million||Aug. 2010 Early 2012||Ricker-Murphy Development Walsh Construction Co.|
|9||Good Samaritan Regional Health Center Mount Vernon, Ill.||$185 million||April 2010 Sept. 2012||SSM Healthcare McCarthy Building Cos.|
|10||Stickney Water Reclamation Plant Stickney, Ill.||$162.2 million||April 2010 April 2014||Metropolitan Water Reclamation District of GC James McHugh Construction Co.|
|11||Astellas North American Headquarters Glenview, Ill.||$150 million||May 2010 |
|Astellas Pharma U.S. Inc. Power Construction Corp.|
|12||Porter Replacement Hospital Valparaiso, Ind.||$138.6 million||June 2010 Aug. 2012||Porter Hospital Robins & Morton|
|13||Lakeshore East-Radisson Blu Chicago||$125 million||Nov. 2010 Sept. 2011||Carlson Hotels Worldwide, Magellan Development Group Bovis Lend Lease|
|14||Missouri Baptist Medical Center St. Louis||$120 million||June 2010 2013||Healthcare System Clayco Inc.|
|15||Roosevelt University Classroom/ Dorm Bldg. Chicago||$110 million||June 2010 2012||Roosevelt University Power Construction Co.|
|16||Admiral at the Lake Retirement Campus Chicago||$105 million||Nov. 2010 Feb. 2013||Kendall Corp. Bovis Lend Lease|
|17||Milton-Madison Bridge Madison, Ind.||$103.7 million||Dec. 2010 May 2013||I-DOT, Kentucky Transportation Cabinet Walsh Construction Co.|
|18||Evansville Arena Evansville, Ind.||$98.6 million||Jan. 2010 Sept. 2011||Evansville Redevelopment Commission Hunt Construction Group|
|19||I-94 N-S Freeway/Mitchell Interchange Milwaukee||$92 million||Feb. 2010 Dec. 2010||W-DOT Walsh Construction Co.|
|20||Midwest Park Place of Elmhurst Elmhurst, Ill.||$77 million||June 2010 April 2012||Providence Management & Development Bovis Lend Lease|
|21||Aberdeen Heights Senior Retirement Community Kirkwood, Mo.||$76.5 million||Mar. 2010 Nov. 2010||Presbyterian Manors Paric Corp.|
|22||Adventist Hinsdale Hospital Addition Hinsdale, Ill.||$75 million||July 2010 Feb. 2012||Adventist Hinsdale Hospital Miron Construction Co.|
|23||Southwest Area High School Chicago||$62.5 million||Aug. 2010 June 2012||Chicago Public Schools Miron Construction Co.|
|24||GreenFields of Geneva Senior Living Facility Geneva, Ill.||$50 million||Sept. 2010 Feb. 2012||Friendship Sr. Options, Greystone Communities Bovis Lend Lease|
|24||Westminster Christian Academy Town and Country, Mo.||$50 million||April 2010 July 2011||Westminster Christian Academy Brinkmann Constructors|
|24||Wisconsin Energy Institute Madison, Wis.||$50 million||April 2010 June 2011||State of Wisconsin Mortenson Construction|