Executives Predict Both Growth And Challenges

By Wisconsin Department of Revenue | September 28, 2010

Wisconsin's economy remains resilient, showing growth in personal income and employment, despite major drags on the national economy, according to the quarterly Wisconsin Economic Outlook released last week by the Department of Revenue (DOR). The steady growth is expected to continue into 2008.

"Under Governor Doyle's leadership, Wisconsin is experiencing solid growth despite the economic challenges we face nationally and our state also continues to perform well in the region," said Revenue Secretary Roger M. Ervin.

"As the credit crunch, downturn in the housing market and high oil prices continue to cause economic concerns across the nation, it is increasingly important that we maximize the strengths of our state's economy, which Governor Doyle has done through initiatives in agriculture, energy, technology, and education," he continued.

According to the DOR, Wisconsin personal income rose 5.3 percent in 2006 and is expected to grow a healthy 5.2 percent in 2007. Wisconsin continues to outperform the region in personal income, ahead of Indiana, Michigan and Ohio.

Employment in the state grew 0.7 percent in 2006, with a growth of 0.5 percent expected in 2007.

Some of those gains were in the manufacturing sector, which grew by 2,260 jobs in the past three years. In that same period, the trend in national manufacturing employment declined with a loss of 114,670 jobs.

Revenue collections in the first quarter of Fiscal Year 2008 are on target with estimates, increasing 3.3 percent over last year to $3.5 billion.

Sales tax collections through October 2007 increased 4.2 percent over the same period last fiscal year. After nearly a year of weak sales tax revenues, this increase is a welcome sign of stronger growth in sales.

The full Wisconsin Economic Outlook report is available at http://www.revenue.wi.gov/ra/0711/0711okma.html.

Construction Forecast For 2008 — Partly Cloudy

Steve Stone, president, ABC of Wisconsin

As the housing market continues to spiral down in the waning month of December, it will affect everyone to some extent.

The stock market continues to worry and move up and down without a strong trend either way.

Adding to our concerns is that gas prices are not showing signs of really falling back to any level we can enjoy.

In other words, the economy is sluggish at best. The only bright side to this is interest rates have come down too.

With the falling interest rates, institutional construction comes alive, as do church- and community-based construction with their new facilities. School construction is another opportunity during low-interest-rate times, but the number of contractors involved in that market is limited and it will affect few.

The condo market is becoming saturated, and many units remain empty. This does not mean construction will stop, though, as this is becoming the lifestyle trend of the younger generations. Apartments and the rental environment are showing signs of improvement, which might generate opportunities for construction.

We cannot say that commercial construction is going to be in for a great year, but we also do not feel that we are facing the same outlook as residential construction by any means.

The drop in home values will affect everyone to some extent, and we will just have to work our way through it.

Expect a slow start, but hopefully things will pick up as the year progresses.

We always want to be positive in our outlook, though, so partly cloudy is a good way to look at the coming year.

Wisconsin Earth Movers Association Forecast

By Jack Arseneau, director, Wisconsin Earth Movers Association

The forecasts for the next two years appear better than predicted last year — although after having quantities between 17 million and 24 million cubic yards the last few years, there is a drop-off in the future.

The fiscal-year 2008 estimate is a little over 16.3 million cubic yards, and the fiscal-year 2009 estimate is about 16.7 million cubic yards.

It appears that before earthmoving quantities can increase to higher levels, the Legislature is going to have to come up with even more solutions for increasing the revenues for highways. This also includes restarting the committee that allocates major projects the public is demanding for safety and economic reasons.

On other matters, the earthmovers have finally resolved uniformity in the Wisconsin Department of Transportation (WisDOT)'s administration of 3x EBS payment, as well as its method of payment for using waste, excavation within the R/W but not in the grading limits, and use of EBS to replace borrow taken from off the project.

The new specifications began with the December letting. An earthworks committee consisting of WisDOT and industry personnel is close to finalizing uniform procedures and process in computing earthwork and providing earthwork data sheets and a detailed earthwork summary table on all plans.

The use of global positioning systems (GPS) on grading equipment to achieve final-grading limits without relying on stakes appeared on many projects this last construction season. WisDOT and the industry both seem satisfied with the results. WisDOT will be letting approximately six to eight projects with the option of GPS or staking this year, and will continue to allow contractors the option of using GPS on any of its other projects. It's an exciting future and will improve the quality of construction. The WEMA annual meeting included a presentation concerning GPS use.

One saving issue the earthmovers have had is ASP 5, the cost escalation clause for fuel increases. There have been revisions to the base price, which was once again increased to $2.05 beginning in the January letting by WisDOT to try to meet the current cost so no adjustments are required.

Larger Lettings, New Spec System Bring Optimism

By Kevin W. McMullen, P.E., president, Wisconsin Concrete Pavement Association

The 2007 construction season was an interesting and challenging year for the concrete paving industry.

The Wisconsin Department of Transportation's (WisDOT) highway program was the smallest on record since 1982, with only 1.8 million square yards of concrete paving.

With Wisconsin's industry capacity estimated to be more than three times that quantity, it meant that the large paving equipment was idle for portions of the 2007 construction season for most pavers.

The major paving work was once again on Interstate 39 through Wausau, USH 10 east of Stevens Point, STH 95 from Hixton to Alma Center, and the USH 141 Oconto to Peshtigo. The 2007 airport program was at 250,000 square yards. The big paving projects were at the Dane County Regional Airport and Wittman Field in Oshkosh. The municipal paving market in 2007 exceeded 800,000 square yards

The major changes in the concrete paving work with WisDOT in 2008 will be the implementation of an entirely new concrete pavement quality management program specification.

The WCPA/WisDOT Concrete Pavement Technical Committee completed the development of the new statistical strength provisions and made several major changes to the specification including the frequency of testing.

The new specification was implemented in the December 11, 2007, letting. This is also when all quality-management specifications became incidental to the item of work.

Continued work on concrete-pavement warranties, the new performance-related specifications, and implementation of the new Mechanistic Empirical Pavement Design Guide by WisDOT assure that we will continue to see change in the future.

The 2008 WisDOT highway program has quantities for concrete paving estimated at 2.3 million square yards. This is a significant increase over 2007, but is still significantly below the levels let by WisDOT over the last 10 years.

The airport market and municipal paving market in 2008 look to be consistent in size with 2007.

We anticipate the airport market will be approximately 225,000 square yards. And, we believe the municipal market will see continued growth and is estimated to approach the 1-million-square-yard level in 2008.

We believe the continued high prices for fuel and asphalt are encouraging this growth.

WCPA continues to encourage early lettings for this work. Because of the strength of competition in the concrete paving industry, we believe that cities, letting their projects early, will encourage highly competitive prices for them.

Solid Opportunities Projected For Ready-Mixed Concrete In 2008

By Pat Bauer, technical marketing director and Cherish Schwenn, promotion director, Wisconsin Ready Mixed Concrete Association

Will the concrete industry rebound in 2008? There is a guarded optimism within the WRMCA membership, especially since 2008 is a national election year. But with the continuing downward spiral in residential construction and an expected decline in non-residential construction projects, 2008 looks to be a challenging one for WRMCA members.

The news is not all bad, though.

Market Realities

Wisconsin's concrete industry felt the effects of the slumping housing market in 2007, and continued slowing of residential construction in Wisconsin is predicted for 2008.

Commercial markets helped buoy the concrete industry by providing a steady source of work in 2007, but demand for ready-mix in commercial and other non-residential construction applications in Wisconsin is expect to slow slightly in 2008.

Agricultural markets were a real boon for many members in 2007, and members expect this to continue with the world markets and ethanol plants in need of our agricultural exports.

The Portland Cement Association's (PCA) recently published national forecast on cement consumption for 2008 predicts a decrease of 2.5 percent, due to weak mortgage markets and increased energy costs. Wisconsin ready-mix demand will most likely track with PCA's national forecast.

The Wisconsin Department of Transportation (WisDOT) forecast for statewide use of concrete on its projects appears to be on the rebound from the drastic decrease experienced in 2007. WisDOT predicts an increase in 2008 of more than 30 percent over its 2007 concrete usage. This increase in state concrete work will help WRMCA members.

Emerging Market Opportunities

The cost of oil on world markets has risen 40 percent since May 2007, triggering an unprecedented run-up in the cost of liquid asphalt, which significantly cuts the initial-cost gap between concrete and asphalt.

Combined with growing enthusiasm for sustainable development and acceptance of concrete as a "green" pavement material, unstable oil markets have created emerging opportunities in 2008 for ready-mixed concrete in driveway, parking lot and municipal paving applications.

As communities struggle to strike a balance between economic development and environmental issues, pervious concrete pavements are emerging in Wisconsin as a best-management practice for controlling stormwater runoff.

Pervious concrete pavements provide the durability and low life-cycle costs of typical concrete pavements while retaining stormwater runoff and replenishing local watershed systems.

Rising energy costs are creating increased demand in Wisconsin for homes and light commercial buildings constructed with insulating concrete forming (ICF) technology. The thermal performance value of ICF wall assemblies can be equal to R-40 or R-50 stud-wall construction, providing superior energy efficiency and significant energy savings for home and business owners.

Other emerging opportunities for increasing ready-mix demand in Wisconsin include structural concrete framing markets, site-cast tilt-up technology and decorative concrete flatwork.

Assuming investment capital is available, continued development of ethanol plants in the state would be beneficial for our members.

As WRMCA members work to gain footholds in these and other emerging market opportunities in 2008, they will be building the foundation for future success.