Public building projects keep contractors afloat during economic downturn

Public building projects, including major county government upgrades, helped keep contractors afloat during the economic downturn.

Timing is a critical but unpredictable element of business. When the economy soured and plunged into recession toward the end of the last decade, scores of construction companies had to slam on the brakes when developers put subdivision and homebuilding on hold.

The convergence of high fuel prices, a stingy credit market and plummeting investment income was unfriendly to builders.

But that bad timing had positive aspects for government-, school- and health care-related capital improvement projects when it came to competitive bidding and lower interest rates on bonds. Government and private-sector officials now view those factors as the saving grace for construction jobs.

Fred Parry, chairman of the Boone Hospital Center Board of Trustees, said the hospital’s new $89 million patient tower — part of a $125 million building project — helped keep the local economy afloat.

“During the worst economic downturn since the Great Depression, Boone Hospital undertook the most aggressive building project in its history,” Parry said during a June 2011 celebration that marked the opening of the patient tower.

The project, which broke ground in February 2008, led to $47 million in wages and 560,000 labor hours for 1,400 construction workers.

“It was huge for my company,” said Jerry Daugherty, president of Reinhardt Construction in Centralia, “and the other contractors that worked on that project.”

Reinhardt teamed with S.M. Wilson to build the state-of-the-art patient care tower and parking garage, which was financed by $100 million in bonds issued by Boone County and with $25 million in cash from the board’s reserves.

“The timing for Boone Hospital, as far as them getting value for their money, could not have been better,” Daugherty said.

The project was designed and funding was in place before the recession.

“When the downturn hit, prices dropped, and people were just trying to get work,” Daugherty said. “They got a whole lot more building for their money than if the economy had been very, very good and there had been a lot of work for everybody.”

Instead of a 470-car parking garage and a five-story patient tower with no basement, Daugherty said, the hospital was able to get a 940-car garage and a seven-story tower with a full basement “for the same money.”

“It worked out great for Boone Hospital, and it worked out great for my company,” Daugherty said.

The project came in under budget, allowing the hospital to relocate its lab to the new tower.

Construction jobs that go to market for bids today typically draw bids from eight to 10 general contractors, Daugherty said. In stronger economic seasons, perhaps half that many contractors are in a position to bid.

“If you’ve got a lot of work, then you can’t provide the manpower, or you don’t have the resources to bid all the work that’s out there,” Daugherty said. “You’re more selective.”

But it’s now Boone County government, Columbia Public Schools and the city of Columbia, among other entities, that are in a position to be more selective when it comes to awarding bids.

Since 2006, after passage of a three-year, one-fifth-cent capital improvement sales tax, Boone County has completed or awarded seven construction projects totaling nearly $20 million, with almost three-fourths of the cost covered by the sales tax. Excluding the expansion of the Boone County Courthouse and the current project to give the courtyard plaza a “green” face-lift, the county building jobs — adding some 66,700 square feet of floor space — generated more than 10,000 labor hours for hundreds of construction workers.

“It was the only thing working during the downturn,” Southern District Boone County Commissioner Karen Miller said.

“The bidding climate was so good — very competitive,” Northern District Commissioner Skip Elkin said. He also noted school construction in Columbia, Ashland and Centralia — “a lot of government-type construction projects.”

Presiding Commissioner Dan Atwill, who has been on the job for almost a year, agreed that the construction work had a beneficial impact on the economy, but he also pointed out a favorite comment of critics.

“All those things are non-taxable,” Atwill said.

Although government-related construction projects poured tens of millions of dollars into the local economy, fueling retail sales that generated sales tax to fund services and infrastructure needs, the new buildings aren’t assessed as new construction for taxing purposes because government entities don’t pay property taxes, another vital funding source for government sources and programs.

“But it got people working,” Miller said.

The courthouse expansion, a $9.5 million project funded by the three-year, one-fifth-cent sales tax, provided work for 18 subcontractors and construction manager S.M. Wilson. Payments ranged from $2,400 for Acme Erectors Inc. to $1.4 million for United HRB General Contractors.

An advisory committee that the county commission appointed in 2005 reviewed space-need studies and architect reports completed during the previous two years about ways to address courthouse overcrowding and options to build out the third-floor shell of the Boone County Government Center. The planning process culminated with voter approval of the capital improvement sales tax in April 2006.

Along with the courthouse expansion, the sales tax also funded a $330,000 remodel of the former Guarantee Land Title building at 607 E. Ash St. for use as an alternative sentencing center for the Boone County Circuit Court. That work took place in several phases, starting in 2007 and ending this year with the remodel of the basement.

The final phase of the alternative sentencing center remodel, costing $123,000, accounted for 1,167 labor hours. Rhad Baker Construction was the general contractor.

Boone County Auditor June Pitchford recognized the building projects have had a positive impact on the local economy, but she has a more practical analysis. The needs were identified, and the county crafted a plan — and sought voter approval of the sales tax — to address those needs.

“Certainly the timing and scope of these projects was completely independent of any local economic impact,” Pitchford said.

But as the economy began to bottom out, county officials held their breath, nervous about the prospect of the sales tax not generating the funds needed for the courthouse expansion.

“It was very close,” Pitchford said. “But it did.”

She said the county “accomplished everything it set out to accomplish” with the three-year sales tax.

“They did so in spite of the unexpected recession,” Pitchford said.

The timing of the economic downturn had definite positive aspects.

“It enabled us to take advantage of lower pricing in the market,” Pitchford said. “And it provided some employment opportunities locally.”

Residual assets from the capital improvement sales tax also have come into play in the latest project, an $828,000 contract awarded in August to Rost Inc. for renovation of the courtyard plaza. The project, expected to be finished before Veterans Day, calls for eliminating most of the concrete, adding green space and making the area between the courthouse and the government center more inviting.

That project also is the result of favorable timing, county officials said. A delay in deciding whether to relocate the prosecuting attorney’s office to the government center or to expand the courthouse had a “silver lining,” Pitchford said.

The prosecutor’s office relocation was rejected in favor of the courthouse expansion, and when it came time to complete the third floor of the government center, that project was bundled with renovation of the former Johnston Paint Building at 613 E. Ash, which now houses the county’s purchasing, facilities maintenance and human resources offices. Both of those jobs went to bid at the same time, “when the recession had significantly lowered labor and material costs,” Pitchford said.

As a result, the government center build-out and Johnston Paint remodel projects came in under budget. The leftover funds were used to award the courtyard plaza project to Rost Inc.

GBH Builders of Jefferson City was the winning bidder from among a dozen companies vying for the government center and Johnston Paint projects. The $3.5 million project had 22 subcontractors — most of which were from Boone County and Central Missouri — and accounted for 18,033 labor hours.

A remodel of the Johnson Building at 601 E. Walnut St., a $500,000 project also funded by the capital improvement sales tax, is in progress. Grove Construction of Columbia recently was awarded a $59,177 contract as part of that work.

A 20,000-square-foot warehouse and training facility at the Boone County Sheriff’s Department was completed last year at a cost of $1.6 million. The facility is shared by the sheriff’s department and the county clerk for storage of election equipment. The funding came from civil process fee collections from the sheriff’s department and the amount paid for a downtown lease, which was going to increase by about $75,000 annually.

The warehouse project generated 10,173 labor hours. Little Dixie Construction of Columbia was the general contractor and hired 21 subcontractors.

The county commission also tapped into a federal stimulus-funded “recovery zone” bond program, which provided a rebate of 45 percent of the interest on a 10-year bond issued by the county. Pitchford said that was the county’s only use of federal stimulus programs.

Several other high-dollar construction projects have been completed or are ongoing in Columbia. The parking garage at Fifth and Walnut streets, a $15 million structure, was headed by Graham Construction of Omaha, Neb. An addition to City Hall, a nearly $21 million job, provided work for multiple local subcontractors. The general contractor was K&S Associates of St. Louis.

School construction in Centralia, Ashland and Columbia — including the $85 million Battle High School under construction just east of the city limits — also provided work for local companies.

Other projects under way:

The seven-story patient care tower at University Hospital, a $203 million structure that will occupy 315,000 square feet. The project includes relocating Ellis Fischel Cancer Center to the first two floors.

Beautification efforts for the Historic Avenue of the Columns on Eighth Street in downtown Columbia are under way after years of planning. The city of Columbia is paying for a portion of the $625,000 project, which coincides with the courtyard plaza renovation at the north end of Eighth Street.

Columbia College has a number of projects under way, including a $15 million science building, with Reinhardt Construction as the general contractor. Columbia College President Gerald Brouder said the institution’s ability to reinvest wisely, along with support from the community, helped the college weather the economic downturn.

Truman Memorial Veterans’ Hospital has awarded $7.1 million in construction projects for 2012.

Daugherty eyes the future as “cautiously optimistic” but didn’t hazard a guess as to what the economic climate will be. Even though the economic landscape is brighter, there are still stark realities that force construction companies to be competitive.

“The thing that’s still affecting us right now is there’s very little work in Kansas City,” he said. Many construction firms from western Missouri are bidding on Mid-Missouri jobs, keeping local firms on their toes when it comes to making competitive bids.

“If they’re going to get the work, they’re going to have to be,” Daugherty said.