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Construction & Mining
Demand for new homes and condos should remain strong across the board in 1997, contractors say. Florida led the nation in 1996 in housing starts, and big metro areas weren't the only ones getting all the action. "We did a recent study that showed Naples had the highest per capita number of building permits in the nation - higher than Las Vegas and Atlanta," reports Dan Mercer, research economist for the National Association of Home Builders in Washington, D.C. Mercer says homebuilding will probably slip somewhat in 1997 due to the cyclical nature of the business; but builders say the slip shouldn't turn into a fall as long as in-migration doesn't slow dramatically.
Contractors also expect to keep capitalizing on another trend that should hold up in 1997: Floridians who renovate their homes. In 1995, the most recent year for which data is available, "Floridians spent $2.8 billion in upgrading and renovation," says Lea Crusberg, spokesperson for the Florida Home Builders Association.
In South Florida, prospects look good "as long as the condo market holds," says John Siegle, executive vice president of the Construction Association of South Florida. Condo builders "represent the biggest segment of commercial construction down here, which is largely financed by offshore investors," Siegle says, but he adds that "there's a fear in the industry of any indication of a slowdown that will cause the banks" to retreat on lending to prospective buyers.
Commercial projects around the state will keep many contractors busy in 1997. In Jacksonville, there's ongoing downtown redevelopment and expansion of the city's performing arts center. In Orlando, between $8 billion and $10 billion will be spent on new public schools, expansion at Universal Studios and Disney and several new tourist accommodations. In Hillsborough County, a new half-cent "community investment tax" will generate $2.7 billion over its 30-year life and pay for public safety projects, infrastructure needs, school construction and a new football stadium for the Tampa Bay Buccaneers.
The most disturbing thing about 1997 for builders, according to Arch McLean, executive director of the Florida Associated General Contractors (AGC) Council, is that "the volume of work is there, but the profit margin isn't." A continuing shortage of skilled labor - master carpenters, plumbers and welders - is driving up costs. Steve Hall, AGC's vice president for the Jacksonville area, says, "Finding skilled labor ranks high on everybody's list. I know of a welder here in Jacksonville who left a $13-an-hour job to earn $14-an-hour in South Carolina."
Builders also complain about competition from unlicensed contractors. "What these lawbreakers do is a crime against the public," claims Siegle, who believes that law enforcement agencies, not building departments, should go after illegal builders.
Contractors also continue to complain that they lose too much time and money dealing with building codes and regulations that vary too much from area to area. "What we have now is a Wild West show," says Wellington Meffert, director of governmental affairs for the Florida Home Builders Association. "We'd like to see all the various and disparate codes unified into one document." The builders are hoping that a commission appointed by Gov. Chiles will see things their way.
Roads too-well traveled
The population growth that will keep homebuilders busy in 1997 could also create work for the state's road builders. The state Department of Transportation is spending $950 million in 1997 on the state's road system, but a St. Petersburg-based coalition of transportation interests, Floridians for Better Transportation (FBT), says the state isn't keeping up. FBT president Don Crane laments, "We're falling behind. DOT projects a shortfall of $22 billion needed for improvements to the intra-state highway system through 2010. But we expect only 23% of those improvements to be funded."
Making matters worse, the private sector isn't spending as much on improvements, according to Bob Burleson, president of the Florida Transportation Builders' Association. In addition, road builders are having to pay more to attract skilled labor. And there's also more competition: "I'm satisfied that many contractors have made a lot of money in the past few years," says Crane. "But today, a lot of out-of-state contractors are making bids and helping to divide the pie."
Many of those rivals are foreign-owned companies. "We're usually the only heavy marine contractor in the state bidding for a job in Florida," says Tim Martin, director of human resources and safety for Wood-Hopkins Contracting Co. in Jacksonville. Now, "sometimes we're competing with up to 18 foreign companies."
Some changes at the state level should favor well-run companies that can deliver a job on DOT's deadline. The department now has the authority to consider time as well as cost when it evaluates bids -that is, a company that can get the job done sooner may get a job even if its bid is higher than another firm's. "We're telling contractors that the state is willing to pay more if they're willing to work faster," says DOT secretary Ben Watts.
Another rule change streamlines the environmental permitting process and frees the contractor from having to deal with issues like wetlands mitigation. The new rule allows the DOT to pay $75,000 to the Department of Environmental Protection for each acre of wetland it needs to take; the DEP and various water management districts that handle eco-management tasks use the money to purchase endangered wetlands in other locations.
Contractors also will be watching carefully the progress of another DOT project: The state has allocated $40 million in fiscal 1997/98 to get Florida's high-speed rail project underway. "We could have a rail system up and running by 2004," enthuses Watts. "We need one. There are only so many highways you can build, and they won't solve all our problems."
Mining
The state's phosphate industry is continuing to rebound from a 1993-1994 nose dive, and indications are that it will bounce even higher in 1997. Florida already supplies 75% of domestic demand for fertilizer and 25% of the world's demand. With China as a major importer of phosphates, demand should continue to rise. "Right now, the phosphate industry is running wide open," says Robert C. Stewart, senior vice president of operations and administration for Mulberry Phosphates. "And that's also producing a ripple effect on support industries that make our pipelines, draglines and such."
Elin Oak, vice president of public affairs for the Florida Phosphate Council, agrees. "We've gone through mergers, trimmed the fat, and got down to the muscle. Today I don't know anybody who isn't making a profit or who is going to lay off anyone."
While the profits are rolling in now, the industry's long-term evolution will see fewer jobs, greater consolidation and more capital expenditures to reduce the need for labor. Employment in phosphate mining was up by 200 jobs in October 1996 compared with October 1995, but state estimates predict a loss of 445 phosphate mining jobs in Polk County between 1994 and 2005, a 13% decline.
State economist Kevin Brickey predicts the overall mining industry will employ 557 fewer people in 2005 than the roughly 6,200 it now employs. But there's a silver lining in that trend, Brickey says. "Those left behind will have higher responsibility and greater skills to keep things going." Their wages should stay high. In 1995, the $37,060 average annual wage for the industry far exceeded the construction industry's $25,139 and the state's overall average of $24,713 annually.
Spirits are also high within Florida's other big mining enterprise, the limestone-aggregate industry. Thanks to a statewide demand for construction materials such as crushed stone and cement, "We're predicting an increase in profits for 1997," says John Baker, president of Jacksonville-based Florida Rock Industries.
Ed Allsopp Jr., manager of marketing for Florida Crushed Stone in Leesburg, is also optimistic: "Our business looks good, and so does profitability. We're getting ready to start a $100 million cement mill in Brooksville; if we didn't think things looked good, we wouldn't be doing that."
There are concerns amid the optimism, however. Permitting problems and public opposition to mining projects still cause headaches. The industry is also jittery over a government study that will determine how much of South Florida's rich limestone deposits can be mined without wrecking the eco-system. Preliminary reports are due this year.
Some industry officials even worry that Florida's deposits eventually may not meet the state's stringent specifications for new highway material, which could cause Florida companies to lose market share to competitors in Alabama and Georgia. Also troubling for the industry is the potential impact on transportation costs of a recent announcement by J.B. Hunt Transport Services, the nation's second-largest truckload carrier, that it's raising the pay of its 4,000 truck drivers by 33%.
