The employer blues
By Kathryn Buxton
When Tim Folster talks about the state of transportation funding in Maine and the impact it is having on Maine employers, he is brutally honest. “I don’t know what’s worse than a famine,” Folster said recently. “But this year is a famine, so I hate to see what next year will look like.”
Folster is justifiably concerned. As vice president of operations at Sargent Corporation, he is acutely aware of economic trends and their impact on Sargent’s business and employees. Now, as the region begins to emerge from the recession, the former Maine Better Transportation (MBTA) president and longtime board member fears a post-recession upturn in the construction industry will not come quickly – or strongly – enough. His company’s employment rolls currently stand at about 350, down from 400 before the recession hit. Still, Sargent has been able over the past two years to keep its core group of employees working – employees that the company has brought in and trained and are key to its efficiency – despite fewer jobs. But he doesn’t know how much longer that will last.
“Given market conditions, we may have to downsize, and that’s not something we want to do,” said Folster. “We think of these people as family.”
That the region is beginning its recovery from the recession is indisputable, according to James Haughey, chief economist with Reed Construction Data. Still, he said, employment in the construction industry in New England has a long way to go before it rebounds – maybe two or three years – and even then it likely will not reach the levels of the early and mid-2000s.
Furthermore, transportation investment is likely to remain a peripheral driver within the construction employment recovery, and some areas of New England will recover more slowly than others, according to Haughey.
“Rhode Island and Maine are not doing well,” said Haughey. He said the bright spot in the region’s economy is the Greater Boston area where “they still make products – software, health care, bio tech, technology. That recovery is not because of money coming from their gas tax.”
There is a chicken-and-egg-like component to the recovery story. To grow an economy and have the systems to support emerging industries, said Haughey, “you need to put your money up front and invest in infrastructure. That is important. Maine is a big state with only one big road,” said Haughey.
Folster agrees. Good roads and bridges and good connectivity to ports and rail attract new business to the state and, in turn, boost employment in all sectors. Folster is quick to point out that in a typical year transportation construction is a limited part of Sargent’s work. “People say this is the sand-and-gravel business being greedy, but it’s not. Better roads and bridges are just as good for the commercial side of the business because they bring new business to Maine.”
Folster sees the state’s lack of commitment to improving its roads and bridges as a key driver in Maine’s slow recovery. And he can attest first hand to the costs bad roads and failing bridges have. He said that every day that Sargent Corporation’s fleet runs on old, narrow and poorly maintained roads costs the company money in increased vehicle maintenance, increased fuel costs and lost transport time.
“Investing in transportation is good business for everyone,” said Folster.
Bottom line impact
Maria Fuentes, executive director of MBTA, says the cost to businesses can be enormous when you break it down. She cites an October 2009 report, “Falling Behind: The condition and funding of Maine’s roads, highways and bridges,” by The Road Information Program (TRIP). That report calculated the cost of bad roads as $251 million annually – or an average of $250 per driver – in increased vehicle maintenance costs for accelerated vehicle depreciation, additional repair costs and increased fuel consumption and tire wear.
“That’s just the cost for a typical passenger vehicle. Imagine what that means for a business with a fleet of commercial or heavy industrial vehicles. The increased cost is enormous and has a tremendous impact on the bottom line. That is certain to affect a company’s growth and ability to hire and retain good employees,” said Fuentes.
Fuentes said to make a lasting and profound impact on business and employment growth, the state has to make transportation investment a priority and find a way to fund those investments. The TRIP report said that to address Maine’s road and bridge needs – and reduce the drag that bad roads have on the economy – the state must invest $3.3 billion over the next 10 years.
Some employers have seen a brighter side to the downturn. Doug Hermann, president of Wyman & Simpson, a bridge contractor, reported that his firm has had a more skilled pool of potential part-time employees to choose from, as the 2010 construction season has geared up. Hermann, MBTA 2nd vice president, said his firm retains a core group of 50 employees year round, but hires additional laborers during the good weather months when his business is at its peak.
The quality of that occasional labor pool has improved because of the economy, said Hermann. “There’s a lot of good help out there right now,” he said.
The downside has been not being able to keep those workers on for more than a week or two. Wyman & Simpson has seen its bridge business fall off this year, as federal stimulus funding has dried up and MaineDOT has had to cope with continued underfunding of its road and bridge programs. The firm also does heavy construction for commercial firms, including Florida Power & Light and Central Maine Power. But commercial jobs have been virtually non-existent and competition for what jobs there have been has been fierce. Hermann said he has watched as a lot of promising new employees moved on, because there isn’t the volume of work coming in to grow his core workforce.
“It would be our preference to keep these people on, but unfortunately we’re doing all we can to keep our regular crews busy,” said Hermann. “Sometimes we’re just finding them stuff to do.”
How long Hermann thinks the company can sustain those core employees – working on community service projects and maintaining company vehicles and property – is another question. “There’s no overtime,” said Hermann. “It’s just 40 hours a week and sometimes just 32. We’re taking it on the chin this year.”
Economist Haughey sees the lack of consistent transportation funding taking a toll on the region’s skilled workforce. He said that a majority of the skilled workers – from equipment operators to job superintendents to engineers planning transportation projects – are aging and the industry isn’t able to attract and retain the new workers that will take their place as workers retire from the workforce. He said that while construction wages are very good, the lack of consistent employment opportunities often drives newer workers out of the industry and into lower paying jobs that offer more consistent employment.
MBTA’s Fuentes concurs. “Ask any of our construction industry members, and they will tell you that you need to be constantly building your work force,” said Fuentes. “It takes time and experience and steady opportunity to build a skilled crew. One of those day laborers you hire this year is bound to be a future project supervisor. It’s how construction businesses grow and adapt with young new talent.”
Getting the big picture
The TRIP report, issued last fall when there was still hope Congress and state governments would step up with a second round of stimulus funding, saw further investment in transportation infrastructure as a good short-term job creator and essential to Maine’s long-term economic health.
According to the report: “As Maine looks to rebound from the current economic downturn, the improvement of the state’s transportation system could play an important role in improving Maine’s economic well being by providing critically needed jobs in the short term and by improving the productivity and competitiveness of the state’s businesses in the long term.”
Those hopes for further stimulus investments have since given way to political realities and concerns about federal and state debt levels.
Economist Haughey sees a need to shift our view of how we fund transportation improvements in the future. He cites states including Texas, California and Indiana that have turned to user fees and privately funded toll roads to address persistent underfunding of transportation.
MBTA’s Fuentes agrees, though she believes that in a rural state like Maine, tolls and private funding may only be one element in the equation. “We need $3.3 billion over the next decade just to keep up with the system that we have and the status quo isn’t going to get us there,” said Fuentes. “We need to be thinking creatively and long-term.”
Sargent’s Folster believes change needs to come from the top, although he is pessimistic when he looks at the field of gubernatorial candidates. He worries that none of the candidates appear to grasp the critical role transportation plays in shaping Maine’s economic future. He’s weary of one party pitting its views against the other and said that “the Republican-Democratic mindset” prevents state leaders from seeing the big picture.
“We need a business person in the governor’s office who understands how bad roads cost us all in lost opportunity and lost jobs,” said Folster.