One of the key initiatives of the AGC Legislative Office is to improve communication with and enhance the participation of members in developing and undertaking legislative efforts. The issue survey is an important element in that plan.

Please take a few minutes to click on the link below and share your views on issues which we expect to be debated during the 2009 Legislative Session. Your responses will help shape AGC's 2009 Legislative Agenda and guide the government affairs team as it responds to proposals pushed by others.

The survey software allows you to offer issues and comments which are "out of the box" and not listed in the survey matrix.

Please click on this link for the 2009 Legislative Priorities Survey and make your views known.

"Construction costs have risen much more than consumer prices this year, due to the extreme run-up in petroleum costs," Barnhart explained during a meeting today at the White House. "The producer price index (PPI) for inputs to construction rose 10.4% from June 2007 to June 2008, vs. 5.0% for the consumer price index.

Barnhart continued, "The PPI for highway and street construction, the most fuel- and asphalt-intensive construction segment, rose 18.9%. The national average retail price of on-highway diesel fuel on August 4 was $4.50 per gallon, up 55% in a year, and 57 cents more than the average for gasoline."

The industry has faced unforeseen increases in all construction materials, which are resulting in a reduction in projects and causing job uncertainty.

Barnhart and Sandherr were among leaders from a coalition of eight other business associations to meet with the President. During the meeting, President Bush told the group, "Increased domestic energy production will have a ‘psychological impact' on the marketplace." He also said that the activities of the coalition, "have worked to increase the pressure on Congress."

Meanwhile, AGC of America Economist Ken Simonson reports that there is finally some good news, albeit limited, regarding construction materials costs. Simonson says:

By August 6, futures prices had retreated 20 percent from the record set in mid-July for crude oil, 15 percent from the May record for copper, and more than 30 percent from July's high for natural gas.

The degree and timing for changes in the cost of what contractors buy will vary with supply and demand for the specific product and how much processing it goes through. Diesel fuel prices have already begun to drop, falling 26 cents a gallon from the record set on July 14 to $4.50 on August 4. However, that price was still 55 percent higher than a year earlier, and 57 cents per gallon higher than gasoline.

In contrast, contractors have reported no relief yet on liquid asphalt prices. In fact, shortages have appeared in many states for liquid asphalt or the polymers added to it to improve the performance of asphalt pavement.

Gypsum prices, which fell sharply during the past two years of the homebuilding collapse, may be poised for sharp increases. Manufacturers have notified customers that they intend to raise prices 10-12 percent in each of the next three months, beginning August 11.

Many other products are also going up. Suppliers of plumbing supplies have posted increases of 4-38 percent in August and early September. Prices increased in the first week of August by 4-12 percent for a variety of wall, ceiling and insulation products. Suppliers continue to announce higher delivery charges or so-called "fuel surcharges" that may not actually vary with the amount of fuel consumed or the recent price.

Send examples of price change announcements to Ken Simonson at simonsonk@agc.org. For asphalt information, see AGC's Hot Topics page. For more economic news, visit the Construction Economics section of the AGC of America's website.

The prospects for the nonresidential construction industry have taken a definite turn south since the beginning of the year. In December, the AIA Consensus Construction Panel was calling for modest growth in inflation-adjusted nonresidential construction spending in 2008, balanced by a modest decline in 2009. However, now halfway through a year that has seen the broader economy weaken, their mood has grown more pessimistic. They are now calling for a modest decline in 2008 (-1.2 percent), followed by a more dramatic decline in 2009 (-6.7 percent).

Although the outlook for virtually every major nonresidential sector has deteriorated, forecasts have dropped more dramatically for commercial and industrial buildings. Hotels and manufacturing facilities are projected to show gains in 2008, but the office and retail sectors are expected to fall off considerably. For 2009, a double-digit decline in real construction levels is the consensus for the overall commercial and industrial building group, with significant declines in each of the categories in these major sectors.

Even though the overall consensus forecast for nonresidential activity has been lowered, the institutional building sector is still expected to fare considerably better than the commercial sector next year. The overall institutional outlook is now for a modest gain in construction levels this year, with almost no change for 2009. The two largest institutional categories-health and education-are both projected to see a modest increase this year. While growth should continue for health-care facilities in 2009, a small falloff in education facilities is anticipated.

Commercial activity to bear the brunt of a weak economy; institutional activity expected to stabilize

As the economy slows, the more cyclical commercial construction sector can be expected to see the greatest changes. With consumer sentiment scores dropping, gas prices rising, stock market averages slipping, and the unemployment rate moving up, consumer spending is likely to see a significant slowdown, putting pressure on the retail sector. In fact, growth in retail sales in our economy slowed from 5.5 percent in 2006 to 4.1 percent last year and is increasing at only about a 3.5 percent pace through the first half of this year. This slowdown in retail activity already is affecting demand for retail space. The International Council of Shopping Centers predicts more than 6,000 retail store closings this year, the most since the 2001 national economic recession. As a result, forecast panelists are expecting an 8 percent decline in retail construction activity this year, and another 10 percent drop in 2009.

Office construction activity also is expected to suffer from a weak economic environment and payroll declines. However, office construction has been very measured during this past nonresidential construction expansion, and, as a result, national office vacancy rates are at favorable levels. CB Richard Ellis reported first quarter 2008 vacancies at 13.2 percent nationally. Although up 0.4 percent from the end of 2007, they still are about four percentage points below their early 2004 peak for this cycle. Even without much in the way of excess office space in most markets, our forecast panel is projecting a 4 percent decline this year, and another 12 percent drop next year as a result of falling demand for office space in a weakening economy.

The hotel market is benefiting from a strong tailwind, having seen very strong double digit growth last year. Our forecast panel expects activity in the pipeline to produce reasonably strong results this year before dipping by almost 10 percent in 2009. Manufacturing construction is benefiting from a resurgence in U.S. export activity. A weak dollar has made U.S. goods more attractive in international markets, thereby propping up our manufacturing sector. The consensus is for almost 5 percent growth in manufacturing activity this year, matched by a slightly higher decline next year.

The volatility on the commercial side of the market is expected to be moderated by relative stability in construction levels in the institutional sector. Overall construction of these facilities is forecast to grow very modestly this year before essentially leveling off next year. The health-care sector is projected to see very stable construction levels this year and next, which belies the turbulence surrounding this sector of the economy in the national political discussion. As health-care priorities and policies continue to develop, we may see more volatility in this sector in the coming years.

The other major institutional sector, education, is also expected to see relative stability over the next 18 months. However, these sector totals gloss over differences in some of the key segments in the educational category. Education construction is largely driven by expected enrollment levels, and the U.S. Census Bureau is projecting very strong growth in college and university enrollments (up 10 percent over the next seven years), moderately strong growth in elementary and secondary enrollments (up 8 percent over this time period), while much weaker growth in high-school enrollments (up less than 4 percent overall, and below current levels for the next five years). The demographic patterns are already reflected in the construction figures. McGraw-Hill Construction reports that secondary and high-school construction activity declined at a mid-single digit pace last year, while college and university construction increased by about 10 percent.

Sens. Max Baucus (D-MT) and Charles Grassley (R-IA), of the Senate Finance Committee, and Patty Murray (D-WA), who chairs the Transportation Appropriations Subcommittee, have championed efforts to restore monies to the trust fund. A stand-alone measure to do so was passed in the House earlier this year, with unanimous support from the state's U.S. House delegation.

Since then, the Senators have attempted to attach the trust fund fix to other pieces of legislation. Most recently supporters attached the trust fund fix to a bill extending certain expiring or expired tax provisions. (Not so incidentally, one of those expired tax provisions allowed Washington State residents to take an itemized deduction on their federal tax returns for state and local sales taxes.) The bill was prevented from moving forward when the 51-43 vote on a procedural motion failed to meet the required 60-vote support level. The defeat was not due to much opposition to the trust fund fix, but to other aspects of the bill.

The Baucus/Grassley/Murray proposal would have credited the Highway Account for $8 billion that was transferred out of the account to the federal General Fund by the 1998 surface transportation reauthorization law, known as TEA-21. In 1998, the $8-billion transfer was an attempt to appease certain members of Congress concerned about TEA-21's increased highway and transit investment levels and new budgetary protections for the Highway Trust Fund. Although this legislation was enacted 10 years ago, the fact remains the transferred funds were highway user fee revenues and the trust fund would not be facing a shortfall if these revenues had not been diverted to non-transportation purposes.

Sen. Baucus expressed little hope of a bipartisan deal in the short term. Congress is adjourning for its summer recess and the lack of support for this bill is likely to put off solving the trust fund crisis until September at best. AGC of America continues to press the Senate to pass the fix using any other viable vehicle.

The only negotiation which resulted in a strike was the sprinkler fitters. The strike by the union representing 300 members, shut down 40 construction sites, with an estimate 20,000 other union members honoring the pickets at various times.

This is the first strike in the construction industry since the Operating Engineers, Local 302 shut down the industry for almost the entire month of August when negotiations broke down between them and the concrete suppliers. The settlements in all three negotiations continue to be in the record levels, even though there are beginning signs of the economy slowing.

For more information, contact Doug Peterson, AGC's Director of Labor Relations, at 206-284-0061 or dpeterson@agcwa.com.

Dale Aamot is currently working as a laborer for IMCO General Construction, Inc. Specifically, Dale is on IMCO's SR 20 Fredonia to I-5 Widening Project.

"Dale has been working with our storm drain, watermain, sanitary sewer and erosion control crews," said CJ Handforth of IMCO. "He is a hard worker with a great attitude and we are real pleased with his progress. Within the next month or so Dale will be enrolling in the CITC operator apprenticeship program. We are excited to have him start in the apprenticeship program and are even more grateful to have him on our team."

Meanwhile, Jarred Smith has been working at Andgar Corporation working as an apprentice plumber. "Jarred started with us in June, and he has shown a solid work ethic," said Vicki Pine, Human Resources Manager for Andgar. "We've received great feedback on him from the field." Jarred plans to attend Whatcom Community College in the Fall.

Pine noted that Jarred, as all Academy students do, got his initial safety training and orientation at the Academy. "Normally a high school graduate is clueless about these issues and you have to start them from scratch. But Academy students have already taken a huge step forward," she said.

"The Academy is filling the need created by the skilled workforce shortage," Pine added. "Even though the shortage may not be as acute now as it has been in recent years, we must still invest in future construction workers and show young people that there are so many avenues to make a career out of construction."

The Academy exposes students to the many options they have in the construction industry. Students complete the program and move on to the next phase of their education. Several AGC member firms worked with the school district and other partners to make the Academy a reality. Participating AGC firms, in addition to IMCO and Andgar, include Dawson Construction, Inc., Wilder Construction, Diamond B Constructors, Tiger Construction LTD, Matia Contractors, Inc., BP Cherry Point Refinery, Whatcom Construction, Inc., and Haskell Corporation.

Spectacular bridges, toll and access roads, innovative interchanges and interstates will now compete for the Grand National Prize - selected by a panel of community, business and transportation leaders - and the People's Choice Award - which will be decided by an online voting process. On-line voting for the People's Choice Award continues through to Oct. 19. Cast your vote by clicking here.

Earlier this year Tacoma Narrows Constructors, a joint venture of Kiewit Pacific Co. and Bechtel Construction Co., received the Grand Award for Construction through AGC of Washington's Build Washington Awards.

The America's Transportation Award recognizes achievement in the development and construction of transportation projects, and instills an appreciation of transportation as a key element of our quality of life. Forty-one projects were entered into the America's Transportation Awards competition with 23 chosen as regional winners, narrowing the field to 10 finalists. The Tacoma Narrows Bridge project team won the regional competition among 18 western states in the category for "on time delivery" for projects exceeding $200 million.

"We believe the New Tacoma Narrows Bridge was a special project that represents the best of what our people stand for - hard work, determination and success," said Transportation Secretary Paula Hammond. "Now is the chance for the entire region to show the rest of the country that our project - on time and on budget - was the best of the best transportation projects in 2007."

The Grand National Prize-winning state will receive funds to support a graduate-level educational grant in the transportation field. The People's Choice Award will fund a community service project selected by the winning state department of transportation. Awards will be presented at the AASHTO Annual Meeting in Hartford, Connecticut, October 19.

The competition is cosponsored by the American Automobile Association (AAA), the U.S. Chamber of Commerce, and AASHTO to bring public attention to transportation projects around the country that make a positive difference to people, businesses and communities.

For complete information on each of the finalists and the voting ballot, go to www.americastransportationaward.org/.