Monthly Archives: October 2011

A bit of sunshine on the economic horizon?

ABC’s Chief Economist Anirban Basu recently issued a statement regarding 3rd quarter GDP that is a bit more hopeful than previous news. The 2nd quarter was also revised upwards. “What the United States is now experiencing is acceleration in capital formation,” Basu said. His full report follows:

Putting fears of a looming recession at rest for now, nonresidential fixed investment jumped 16.3 percent in the third quarter of 2011 following a revised 9.2 percent increase in the previous quarter of this year, according to the October 27 Gross Domestic Report (GDP) report by the Department of Commerce. Nonresidential fixed investment in structures increased for the second straight quarter this year, up 13.3 percent in the third quarter following a 22.6 percent increase in the second quarter. Fixed investment in equipment and software expanded 17.4 percent last quarter following a 6.2 percent increase in the second quarter.

Residential fixed investment grew 2.4 percent in the third quarter after a 4.2 percent loss in the second quarter. Exports grew 4 percent in the third quarter as exports of goods were up 4.7 percent and exports of services increased by 2.4 percent. Imports were up 1.9 percent for the quarter as imports of goods increased by 1.8 percent and imports of services increased 2.4 percent.

Personal consumption expenditures increased 2.4 percent in the third quarter as expenditures of services were up 3.2 percent and expenditures in goods increased 1.4 percent. Changes in real private inventories subtracted 1.1 percent to the third-quarter change in real GDP. Private businesses increased inventories by $5.4 billion for the quarter. Real final sales of domestic product – GDP less change in private inventories – increased 3.2 percent for the quarter following a 1.3 percent increase in the second quarter.

Federal government spending increased 2 percent in the third quarter as national defense spending rose 4.8 percent and nondefense spending decreased 3.7 percent. State and local governments decreased spending for the fifth consecutive quarter, down by 1.3 percent in the third quarter.

Gross domestic purchases – purchases by U.S. residents of goods and services wherever produced – increased 2.2 percent in the third quarter following a 1 percent increase in the second quarter. Overall, real gross domestic product (GDP) increased 2.5 percent in the third quarter following a revised 1.3 percent increase in the second quarter.


“Today’s third quarter GDP report puts any talk of an imminent recession to rest for now,” said Associated Builders and Contractors Chief Economist Anirban Basu. “Indeed, economic data released over the past month have been surprisingly good.

“Today’s report shows that a growing share of American corporations are willing to spend money to spur top-line and bottom-line expansion,” Basu said. “However, this does not signify that the nonresidential construction industry is set to boom.

“Public sector support for construction services is likely to be flat at best, and job growth remains halted and lending disciplined,” said Basu. “But the overall economic outlook for the nonresidential construction industry has improved materially over the past several weeks.

“Eventually, the investment in equipment software and structures will trend late into expanded hiring. Capital and labor go together and what the United States is now experiencing is acceleration in capital formation,” said Basu.

“That, in turn, will help trigger more demand for construction services, whether in the form of office buildings, apartments, or shopping centers. In short, the improved outlook for the broader economy in 2012 signals more recovery for construction activities in 2013 than were contemplated just a few weeks earlier,” Basu said.

House Votes to Repeal Withholding Law

This morning the US House of Representatives voted to repeal the onerous 3 percent withholding law.  Under current law, starting 2013 federal and state contracts will be subject to 3% income tax withholding, which is larger than the profit margin of most public works projects. 

All members of Washington State’s House delegation voted in favor of the bill to repeal this law.  The overwhelming support in the House will hopefully give the issue new momentum in the Senate, where a bill to repeal the withholding law already failed once (with Sens. Murray and Cantwell voting against repeal).

AGC of America’s chief executive officer, Stephen E. Sandherr, issued the following statement in response to the House vote (by a margin of 405 to 16):

“An overwhelming majority of Representatives understand that the 3 percent tax withholding measure would force construction firms to provide the federal government with interest-free loans at a time when construction activity has declined by $400 billion and unemployment rates stand at over 13 percent.  Such a measure would force contractors to cut staff, purchase less equipment and raise bid levels for publicly funded projects, as a survey the association released last week found.

“Given the fact that a majority of Senators have already voted to repeal the tax measure and the president has said forcing contractors to forgo 3 percent of their earnings will hurt the economy, we expect the Senate to act swiftly to repeal this measure.  And once that happens, we expect the president will quickly sign this desperately-needed legislation into law before the tax withholding mandate significantly damages our economy.”

Mowat saves the day (week)

I’ve been getting press releases on the Alaskan Way Viaduct closure several times a day from WSDOT. There’s even been morning briefings held near the site each day at 4:30 a.m. (sorry, not going).

With two days of weekday commutes under drivers’ belts, it seems they have been paying attention to WSDOT’s calls for “Viadoom” if they don’t take the bus, ride the train, shift work hours or just stay home.

Thank you drivers, but there’s another bunch of heroes out there that should be saluted. They are the crews working for Mowat Construction, the contractor building $1.23 million in improvements to Airport Way South, a major arterial that is handling a lot of detoured traffic.

For several weeks, the northbound direction of Airport Way has been reduced to one lane for the improvement project, but crews worked hard to open an extra lane in time for Monday’s commute.

That extra lane has made a big difference for southend commuters. The stretch of Airport Way running through Georgetown saw a few mild backups prior to the closing of the viaduct, but has been free-flowing since two lanes have been open.

Another round of “thanks” goes to whoever decided to delay the closure of the Airport Way Viaduct that spans the Argo railyard just north of G-Town. Mowat is also the contractor on that $16.68 million renovation project. The original plan was to close the Airport Way Viaduct for 14 months beginning in late August or early September. That would have diverted more than 13,000 drivers onto the Alaskan Way Viaduct’s detour routes (East Marginal Way South, First Avenue South, Fourth Avenue South). Can you say Viadoom?

Check out WSDOT’s recommended routes to Seattle here.


Mowat crews at work on Airport Way South earlier this month.





New Withholding is Larger than Most Profit Margins

According to a recent survey, 80% of Washington State contractors building public works projects in 2010 had profit margins of less than 3% on those projects.  Hold that thought for a second.

In 2013 a new law takes effect, subjecting all federal and state contracts for goods and services to 3% income tax withholding on each and every payment over $10,000.  The requirement also applies to large local governments that make $100 million or more in annual expenditures for goods and services.

That means that if the 3% withholding law were in effect now, the withholding would have been greater than the profit margin in the vast majority of cases!

How else would the new law affect Washington State contractors?  According to the same survey (by AGC of America) a whopping 92% of contractors said the withholding law would make it harder or more expensive to attract capital and/or bond projects.  Not only that…

  • 45% said the law would cause them to cut employees;
  • 64% said they would decrease equipment purchases;
  • 62% said it would raise bid levels;
  • 21% said it would make it difficult to continue operations.

The 3% withholding law is such a bad idea – such a jobs killer – that the majority of U.S. Senators (57) recently voted to repeal it.  Unfortunately, 60 votes were needed to pass it out of the Senate.  By the way, Senators Murray and Cantwell voted against repeal.

That’s not necessarily the last hope.  The U.S. House of Representatives is expected to vote on it soon, and a solid majority (267) of House Members are cosponsors of legislation to repeal the law, including WA State Reps. Larsen, Herrera Beutler, Hastings, McMorris Rodgers, Reichert and Smith.  Passage by the House would keep repeal alive, hopefully long enough for another path to final passage to be found.

Need a Monkey Wrench? I-1125 is Your Tool!

At a meeting today to discuss Initiative 1125, former WA State Transportation Secretary Doug McDonald made an interesting observation:  among the miniscule number of entities endorsing I-1125 is the Coalition for a Sustainable SR 520. 

Why is this odd? The Coalition is the organization still fighting the expansion of SR 520.  Even though it raises many good reasons to OPPOSE the initiative in its communication to its members, the Coalition praises I-1125, saying if it passes, “there will be insufficient funding to build the west side of SR 520, and the floating bridge probably can’t be expanded.”  The group enumerates the things it doesn’t like about I-1125 (It forbids tolls which vary by time of day to help control congestion; it prevents light rail on I-90; it prevents toll revenues from being used for maintenance and upgrading after the bonds are paid for) before blithely concluding, “the policies we don’t like can be changed by the legislature after two years.”

So the Coalition thinks the Initiative is a bad idea, but supports it anyway, on the hopes that the bad stuff would be changed later.  How does this make sense?  Because the group sees the initiative for what it really is:  a monkey wrench. 

Initiative 1125, promoted by Tim Eyman, would wreak havoc on the state’s transportation financing.  It does indeed put in doubt the financing for the SR 520 expansion project…and the Alaskan Way Tunnel and the Columbia River Crossing Bridge, to name a few others.

At first blush I-1125 seems “pro transportation”, but it is definitely not.  By severely limiting the use of toll revenue, it threatens hundreds of current and future projects around the state.  It constricts available funding, and it makes new projects more costly by turning tolling decisions over to the State Legislature rather than an independent commission. According to the State Treasurer, this move alone would add up to 18 percent to the cost of bonds to finance projects, assuming anyone would agree to buy them in the first place with the Legislature setting tolls.

So we know who’s on the short list of I-1125 supporters.  Who’s on the list of groups opposing Initiative 1125?  AGC, ACEC, Washington State Building and Construction Trades Council, Sierra Club, League of Women Voters of Washington, Washington Environmental Council, Association of Washington Business, Washington State Labor Council…I could go on, but I’ll let you see the complete list at the No on I-1125 website.

Is an L&I inspection good for your bottom line?

The state Department of Labor & Industries claims getting cited for a workplace safety violation can be good for a company.

L&I says a recent study of 10 years’ worth of inspection data found significant reductions in claims and claim costs following a safety inspection or consultation.

The greatest impact came when an inspection resulted in at least one citation. Research found a reduction in worker injury claims of as much as 20 percent over similar worksites that weren’t inspected.

“Safety is not always at the forefront of an employer’s mind. But when a significant event takes place, like a serious injury or an L&I inspection, it can really get their attention,” said Barbara Silverstein, director of L&I’s Safety and Health Assessment and Research for Prevention program, in a press release. “This can lead to a greater recognition of what can be done in the workplace to reduce hazards, itself leading to safer workplaces and fewer injuries.”

The study found that enforcement inspections at fixed-site businesses were followed by a 4.3 percent greater decline in compensable claims rates than at non-visited businesses. At non-fixed-site businesses, such as construction sites, the number was 3.1 percent greater.

A study summary can be found at

Quarantine your 3M G-Series safety lanyards

3M issued a recall on its G-Series retractable lanyards. The company says to immediately stop using the devices and quarantine them.

The models affected are: GW-7, GW-11, GW-7-0241A, GW-7-0241H, GW-11-0241A, GW-11-0241H, GW-11NS, DLGW-7, DLGW-7-0241A and DLGW-11-0241A.

3M found that some of the lanyards returned to it didn’t properly lock up during pre-inspection pull tests on the webbing lifeline.

Owners of the lanyards should contact Ray Mann, 3M Fall Protection Technical Service, at (704) 743-2406.

Door to door construction

Icon Materials repaves a southend street.

Last month, Jerry remarked how tower cranes are making a comeback from the brink of extinction in Seattle. I’d like to add my observations as I drive northbound to Seattle on my daily commute.

It does look like construction is rebounding – at least in the local market. My point? Crews from Icon Materials recently finished a paving job in my neighborhood that included a fresh topping of asphalt right in my cul-de-sac. In back of my house, Schnieder Homes is in the midst of building out a 14-home development and just down the block has plans for 202 single-family lots.

Traveling north on I-5 from the Federal Way area, Mowat Construction is busy building new connections to SR 18, a $112 million project.

Farther north, near Southcenter, Lydig Construction is building the $43 million Bow Lake Recycling and Transfer Station.

Continuing north, this time on Airport Way South to avoid the crowds on I-5, Mowat Construction is repaving the roadway in preparation for a $16.7 million renovation to the Airport Way South Viaduct over the Argo Railroad Yard.

Mowat crews paving Airport Way South.

Nearing downtown, Skanska USA Civil is busy reconfiguring the southern mile of the Alaskan Way Viaduct so it will fit to the future deep-bore tunnel along the waterfront. That project is estimated at $114.6 million.

Arriving at work, I need only to look across the street to see Goodman Real Estate’s Colman Residence tower rising out of the ground at Columbia and Western. Turner Construction is building that one.

Turner builds up the Colman Residence.

There you have it – construction literally from one door to another. Looks like things are finally getting better for local construction folks.