WINTER 2013
PUBLICATION OF ASSOCIATED BUILDERS AND CONTRACTORS OF MICHIGAN
ABC Members
56% Safer
Than Industry AVERAGE
Also:
Michigan is Now a Right-to-Work State!
50th Anniversary Gala Highlights Michigan’s Still Recovering, But Slowly
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Inside 4
Good things are happening in Michigan: We are now the 24th Rightto-Work state and the numbers show that ABC members are significantly safer than the industry average.
6
Executive Perspective
ABC Members 56% Safer Than Industry Average New research shows that ABC-MI members are 56% safer than the construction industry average. This article explores the how and why of this impressive record, as well as the basic steps to creating a safety program.
10 50th Anniversary Gala Event
ABC of Michigan celebrated 50 years with a gala on October 27, 2012 at the University Club of Michigan State University. Enjoy the highlights and pictures of this momentous occasion.
14 Economic Outlook
Michigan’s recovery is slow.
VOLUME VII, ISSUE 1 The 50th Anniversary Timeline depicts the Merit Shop in Michigan over the last five decades.
Government Affairs Update 12 Right-to-work legislation has passed; ABC blocks efforts to carve out the construction industry. Property tax exemptions for new builds are passed. Federal court suspends Michigan PLA Law, ABCMI will fight.
ASSOCIATED BUILDERS and CONTRACTORS of MICHIGAN 2013 BOARD of DIRECTORS Chris Beckering – Chairman Pioneer Construction – Western Michigan Chapter Brian Stadler – Vice Chairman Wolgast Corporation – Greater Michigan Chapter Dave Sheffield – Secretary/Treasurer Onslow-Sheffield – Southeastern Michigan Chapter Dave Mollitor – Past Chairman Consolidated Electrical Contractors – Greater Michigan Chapter Jim Cripps Cripps Fontaine Excavating, Inc. – Western Michigan Chapter Rick Jackson Jackson Associates, Inc. – Southeastern Michigan Chapter Mike Kelly Wolverine Building Group – Western Michigan Chapter Rod Kloha Circle K Service Corp. – Greater Michigan Chapter Bill Molnar Wm. Molnar Roofing, Inc. – Southeastern Michigan Chapter Dan Murphy MAG Insulation – Greater Michigan Chapter Jack VandeGuchte Sobie Co., Inc. – Western Michigan Chapter Dan Welch Welch Tile & Marble Company – Western Michigan Chapter Michigan Merit Contributors Publisher: Christopher Fisher Managing Editor: Mary Boardway, CAE Communications Coordinator: Kelly Dancsok ABCMI Economist: Don Wilson
As ABC of Michigan wraps up our 50th year of advancing and defending the Merit Shop, we cannot help but acknowledge and thank the Michigan Legislature and Governor Snyder for standing up for hardworking women and men of Michigan by making Michigan the 24th Right-to-Work state. The leadership demonstrated during the lame-duck session of the 96th Legislature means that workers will finally have the right to freely choose whether or not to affiliate with a labor union. Empowering Michigan workers with this basic choice is a tremendous step forward on behalf of equity and fairness in the workplace. ABC of Michigan extends our heartfelt thanks to lawmakers and Gov. Snyder for showing great courage and tremendous resolve to do the right thing. ABC of Michigan In addition to celebrating the passing of this historic extends our heartfelt law to make Michigan a Right-to-Work state, this thanks to lawmakers edition of Michigan Merit also celebrates a legacy of safety that the Merit Shop embraces across Michigan. and Gov. Snyder for ABC of Michigan is proud that a majority (a supershowing great courage majority, actually) of our contractor members particiand tremendous pate in the ABC of Michigan Self-Insured Workers resolve to do the Compensation Fund. This program works every day to help keep members and their employees the safest right thing. in the construction industry. In fact, the loss data for ABC members when compared to the Compensation Advisory Organization of Michigan shows that ABC of Michigan contractors are 56% safer than the industry average! This is good news for our industry as we strive to be the safest contractors in our state. Yours for the Merit Shop,
Advertising Sales, Design and Printing: Keystone Millbrook Michigan Merit (ISSN# 1938-9051) is the official publication of Associated Builders and Contractors Inc. of Michigan (ABC of Michigan) and is published quarterly at 230 N. Washington Sq., Suite 202, Lansing, MI 48933, (517) 853-2545. Please direct all inquiries to the previous address. Articles written by outside authors do not necessarily reflect the views of Associated Builders and Contractors Inc. of Michigan. ABC of Michigan reserves the right to reject or edit all material submitted for publication. The appearance of an advertisement in Michigan Merit does not constitute endorsement of the advertiser, its products or services, nor do Michigan Merit or Associated Builders and Contractors Inc. of Michigan guarantee or warrant any claims or offers made by the advertisers.
Chris Fisher
Permission to reprint in whole or in part is hereby granted, provided the following credit line is used: “Reprinted by permission from Michigan Merit, a publication of Associated Builders and Contractors Inc. of Michigan.”
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W i n ter 2013
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ABCMI Members
56% Safer Than Industry AVERAGE
WE KNOW ABC members are committed to seeing their employees are safe... ...And now we have the data to back it up. The data came from an analysis done by CMI, A York Risk Services Company, and the Regency Group, the company that administers ABC’s self-insured workers’ compensation fund (ABC-SIWCF). The fund is owned by its members and operates similar to an insurance company – providing the same employer protection and paying claims to employees injured on the job. According to Tim Hanna, CEO and President of Regency Group, because so many ABC members participate in the fund – approximately 500 – data could be collected on fund history, trade incident rates, etc., to compare to the industry average in Michigan. Roughly four years of data are included in the report. “Multiple years of data make the analysis more reliable,” says Hanna. When compared to the Compensation Advisory Organization of Michigan (CAOM) for all contractors in the state of Michigan, ABC of Michigan contractors are 56% safer than the industry average for all trades combined. (Fig. 1) Even more impressive is that additional data shows that ABCMI electricians are 68% safer, our masons are 89% safer, excavators are 71% safer, and plumbers are 66% safer. The outstanding safety record of ABC members was recently praised by Governor Rick Snyder. “ABC members work hard to provide safety and training excellence,” he states. To understand the evolution of construction safety in Michigan, we have to look back a few decades, according to Dan Kozakiewicz, ABC member and President of Three Rivers Corporation in Midland. In the 1980s, as global competition began to rise, American corporations recognized the need to compete; that meant keeping costs down. Safety was, and continues to be, an important component in that effort. According to OSHA, “direct costs [associated with accidents on the job] include workers’ compensation payments, medical expenses, and costs for legal services. Examples of indirect costs include training replacement employees, accident investigation and implementation of corrective measures, lost productivity, repairs of damaged equipment and property, and costs associated with lower employee morale and absenteeism.” Just one example illustrates the staggering costs of accidents; according to OSHA, a single fall by a roofer or carpenter costs between www.a bc mi. c om
$97,000 and $106,000. (Workers’ Compensation Costs of Falls in Construction [PPT* - 764 KB]. OSHA, 2012). But Kozakiewicz is quick to point out that it’s not just about the money. “We want our employees to go home to their families every night. There’s nothing worse than having to inform a family member that their spouse, child or sibling won’t be coming home because of a workplace accident.”
In the 1980s, as global competition began to rise, American corporations recognized the need to compete; that meant keeping costs down. Safety was, and continues to be, an important component in that effort. Since the 1980s, the quest for a safe workplace has gone beyond compliance with OSHA standards. “The issue of safety has become more and more relevant over the past ten years, to the point that customers are paying attention to the safety records of the contractors they hire,” says Paul Crivac, Safety Director for Three Rivers. “Today there’s a recognition that we can always do better, that to ensure the safety of our employees we must go beyond embracing the basic requirements,” says Kozakiewicz. “We need to create a culture of safety throughout the company.” That means commitment to safety at every level, from the owner to the contractors, to field management and finally to the craftsmen who work at the site. That commitment is translated into clear written procedures, employee training in those procedures, and the clear expectations that the outlined procedures will be followed every time. Winter 2013 7
Safety Program Basics ABC recognizes members who continually strive to maintain outstanding safety training programs with the National Safety Excellence Award. To receive this recognition, ABC member companies must meet stringent standards of safety performance. But if you’re just starting out, what are the “musthaves” of a safety program? ABC’s FirstSTEP program outlines some key components. 1. Employee Leadership and Support. An effective safety program starts at the top. ABC recommends that owners commit to making safety a company-wide value. This requires a willingness to make reasonable investments in safety. It also requires owners to be visible in their support of safety. ABC recommends writing a “Commitment to Safety” statement, appointing a safety coordinator, and actively participating in safety meetings and trainings whenever possible. 2. Written policies and programs. There should be a basic written safety policy that outlines employee safety expectations, accountability and disciplinary action; incident reporting, investigation and follow-up; general emergency preparedness and response; and safety rules – PPE, injury prevention and OSHA compliance. 3. Employee communications and involvement. Safety information should be disseminated through meetings at all levels throughout the company. Supervisory meetings should be held at least quarterly, although monthly is better. Items covered at all meetings should include incident reviews, safety audits, safety training, and status of injured employees, safety issues or concerns, and communication with all safety organizations. 4. Orientation, training and accountability. All new employees should be thoroughly oriented to the safety program and it’s policies and procedures; additional safety training is required prior to beginning work. Existing employees should receive ongoing safety training and re-training to meet the needs and requirements of state and federal regulations, and your customers. Employees must be held accountable for safety, and safety performance should be included as part of the yearly performance evaluation. 5. Monitoring, Analysis, and Reporting. There should be periodic worksite safety inspections and a system for both identifying preemptive action for correcting safety hazards and for incident reporting. There should also be an incident investigation program. Finally, incidents and accidents should be tracked and analyzed to see where improvements can be made. MM This is just an overview of the basic components of a comprehensive safety plan. For more information, visit the ABC FirstSTEP website at www.abc.org/step. 8 W i n ter 2013
“ABC members work hard to provide safety and training excellence.” — Governor Rick Snyder David Beemer, President of Windemuller Electric in Wayland, agrees that safety must be a company-wide effort and that communication is key: “We approach safety at all levels within our organizations and it is continually monitored and reported to our entire staff through many types of communication tools.” There are many ways to promote safety, according to Dan Welch, President of Welch Tile and Marble in Kent City. “Shop talks, company meetings, tool box talks, task specific training are some of the ways we communicate safety to our employees,” he says. These companies and other ABC members have shown their commitment to safety by investing the time, money, and resources to create comprehensive safety programs. “It is a significant and ongoing investment,” says Kozakiewicz. “One with which smaller contractors often struggle, especially in the current economy.” This is where ABC comes in. ABC has resources to help its members, large or small, establish a new safety program or enhance an existing one. For members who have some safety programming in place there’s the Safety Training and Evaluation Process (STEP) program. Established in 1989 by the ABC National Environment, Health & Safety Committee, STEP was developed and written by contractors, for contractors. There is no charge for this service and participant responses are strictly confidential.
ABC of Michigan State Legislative Day
Wednesday, April 24, 2013
SAVE the
DATE
WHAT:
Join ABC and our state lawmakers for the ABC of Michigan State Legislative Day and PAC Reception
WHEN:
Wednesday, April 24, 2013
Includes complimentary reception sponsored by ABCMI PAC
WHERE:
Radisson Hotel 111 North Grand Avenue Downtown Lansing
Michigan Mer it
Figure 1
ABC FUND VS. CAOM LOSS RATE 2007–2011
CLASS DESCRIPTION CODE ALL
PAYROLL
COMBINED TOTAL (ALL TRADES)
$508,217,057
The program incorporates OSHA-required safety data with self-assessment requirements to give a full, wide-ranging report on the company’s safety program. For small companies just starting a program, ABC National has the “FirstSTEP” program designed to offer a roadmap to assist them in laying the foundation for a comprehensive safety program. Another way ABC helps its members with safety is through their craft training and apprenticeship programs. There’s a tremendous emphasis on safety at all three chapters; OSHA 10-hour training is included in those programs. David Beemer speaks highly of ABC’s assistance: “Safety is an investment in our employees, families and clients that yields higher efficiency and professionalism. ABC provides us with the resources and education to help promote safety.” Finally, ABCMI members who participate with ABCSIWCF have access to additional risk-management resources. “Because the fund specializes in construction, they can spend more time and resources on helping member participants prevent accidents,” says CEO Tim Hanna. And because the fund is owned by its members, participants share in the savings created by accident
DEVELOPED & TRENDED LOSSES $12,590,036
ABC LOSS RATE
CAOM LOSS COST
% ADVANTAGE
$2.48
$5.64
56%
avoidance. Since its inception in 1994, ABC-SIWCF has returned $20,000,000 to ABC members with a 35% average return rating. The Regency Group data show that ABCMI members are indeed committed to safety and ABC of Michigan is there to support their efforts through training and other resources. “After all,” says Dan Kozakiewicz, “keeping people safe is our top priority. It’s good business, but it’s also the right thing to do.” MM
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Winter 2013 9
Article
F E AT U R E
Celebrating 50 years of Merit in Michigan
Whatever differences there are between the members of ABC, our support of the Merit Shop philosophy is the common thread that holds us together. There were so many instances where we saw evidence of this in 2012, but none more obvious than at the 50th Anniversary Gala held at the University Club of Michigan State University in Lansing on October 27th. Nearly 300 members from across the state showed their belief in the Merit Shop by their attendance at this once-in-a-lifetime gala event. The event, over a year in the making, brought together former members, long-time members and even a few new members to commemorate and celebrate 50 years of struggles and victories that have defined the Merit Shop construction industry in Michigan. The formal event highlighted stories from members about being a Merit Shop contractor in a time when threats and violence were a regular occurrence at job sites. The recounting of these stories was captured in a professionally produced video, which premiered at the event. Wolverine Building Group’s Mike Houseman introduced the video. Memories were also stirred as members slowly walked past the 36-foot-long serpentine timeline featuring the last 50 years in pictures and text. Materials gathered for months from chapters and members came together beautifully to create a visual history of the Merit Shop. Attendees were treated to a video tribute by Governor Rick Snyder in which he praised ABC’s commitment to free enterprise, saying: “For the past half century, ABC has always stood on
principle. The membership has literally helped build a better Michigan and we all benefit from your efforts.” Congressman Tim Wallberg then gave the invocation for the evening. Members received ceremonial champagne flutes to toast the Merit Shop philosophy and free enterprise, a toast led by David Masud of Masud Labor Law Group, the sponsor of the toast. Following a delicious gourmet meal, the group enjoyed Mistress of Ceremonies, Kathy Hoekstra, formerly with the Mackinac Center, now with Herman Cain’s staff, as she graciously led us through the rest of the evening’s events, including the presentation of three beautiful cakes, each decorated with one of the association’s logos through the years. Dennis Siekierski of Denken Engineered Electric explained the significance of the logos and introduced the chapter executives, John Doherty from the Western MI Chapter, Mark Sawyer from the Southeastern MI Chapter and Jimmy Greene from the Greater MI Chapter, who then expertly cut the cakes for all to enjoy. Mike Poggi from Pinnacle Insurance Partners introduced the entertainment for the evening, comedian Norm Stulz. Norm’s performance, sponsored by Pinnacle, sparked an abundance of laughs and fun. The success of the gala is due primarily to two groups of people—those who sponsored the event and those who served on the planning committee. ABC of Michigan is grateful for the work and support of these people. Without their help this gala would not have been possible. MM ABC Staff (far left), members and guests (left and below) enjoy the 50th Anniversary Gala held at the University Club of Michigan State University.
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Michigan Mer it
Article
Diamond Sponsor ABC Self Insured Workers Compensation Fund
F E AT U R E
Gold Sponsors Airport Lighting AIS Equipment – Southeastern MI Miller Johnson Regency Group Valley Electric Silver Sponsors Allied Electric
Specialty Sponsors Art Craft Display – Timeline Sponsor Enterprise Fleet – Reception Sponsor G. E. Insulation – Dessert Sponsor Masud Labor Law Group – Champagne Toast Sponsor Message Makers – Video Sponsor Pinnacle Insurance Partners – Entertainment Sponsor Titan Equipment – Crane Sponsor
Alloy Construction Citizens Management
Committee
Hannahs Electric Company
Members
Loomis, Ewert, Parsley, Davis, Gotting, PC Pioneer Construction Rockford Construction The Tancor Corporation Three Rivers Corporation Titan Interiors Tradesmen International Wm. Molnar Roofing Wolgast Corporation Wolverine Building Group Contractor Level 1 Andrews, Hooper & Pavlik, PLC Architectural Metals Consolidated Electrical Contractors Contractor Level 2 AIS Construction – Mid-Michigan Nearly 300 members from all three chapters celebrated the historic milestone of ABC of Michigan’s 50th birthday.
Cintas Corporation Dan Vos Construction
Ronnie Neumann, Alloy Construction – Event Planning Chair Sharon Novasel, Regency Group – Fundraising Chair Jan Parish, Parish Construction – Video/ Timeline Chair Bill Buyak, Capital Steel Erick Forshee, Fisher Companies Shannon Forshee, Fisher Companies Elissa Olson, ABC Greater Michigan Chapter Bhavika Patel, ABC Greater Michigan Chapter Ed Tanzini, The Tancor Corporation JoAnn Tanzini, The Tancor Corporation Lauri Tucker, ABC Western Michigan Chapter Alyssa Veneklase, Pioneer Construction
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www.a bc mi. c om
Winter 2013 11
Update
G OV E R N M E N T A F FA I R S
ABC of Michigan Successfully Fights to Prevent Construction Exemption from Right-to-Work ABC of Michigan was successful in lobbying efforts to ensure that the construction industry was not carvedout from Right-to-Work in Michigan. In the week leading up to the historic vote making Michigan a Right-toWork state, there was a serious effort from the building trades unions and some lawmakers to deny Michigan’s construction industry right-to-work protections. “This was one of the largest lobbying efforts from ABC in quite some time,” said ABC of Michigan president Chris Fisher. “We were up against tremendous pressure and fortunately we were able to protect the Merit Shop.” ABC argued that a carve-out was not only unfair, but also illegal, and that such carve-outs would make it difficult for any right-to-work law to withstand a court challenge. ABC also cited concerns that a carve-out would violate the equal protection clause of the First Amendment. “At the end of the day we prevailed and now all industries in Michigan, including construction, will benefit and grow as workers are provided the freedom to choose whether or not they want to affiliate with a union,” concluded Fisher.
ABC Praises Final Passage of Michigan Freedom to Work Legislation
ABC of Michigan heralded final passage of legislation to make Michigan the 24th Right-to-Work state. “Today the Michigan Legislature stood up for the hardworking women and men of our state,” said Chris Fisher, president of ABC of Michigan. “Workers will now have the right to freely choose whether or not to affiliate with a labor union. Empowering Michigan workers with this basic 12
W i n ter 2013
ABC of Michigan 2013 Chairman of the Board, Chris Beckering from Pioneer Construction, is interviewed by ABC News at the State Capitol regarding the impact of Right-to-Work legislation for Michigan’s Construction Industry.
choice is a tremendous step forward on behalf of equity and fairness in the workplace.” Freedom to work provides workers the ability to choose to participate and pay fees to a union, or choose not to engage in these activities without fear of reprisal or loss of employment.
“Today was a major victory for more jobs, economic opportunity, and respect for the rights of Michigan workers,” concluded Fisher. “After a decade of decline, freedom to work is certain to be a positive contributor as Michigan continues its long-overdue comeback. We commend lawmakers Michigan Mer it
Update
G OV E R N M E N T A F FA I R S
and Governor Snyder for standing up for economic freedom and worker choice.”
Residential Dwellings and Building Inventory Tax Relief Approved
Legislation intended to provide property tax exemptions to inventory and spec homes in new developments has been passed by the legislature, and was signed by the Governor as P.A. 494 of 2012. The act, sponsored by State Representative Margaret O’Brien (R-Portage), provides relief to residential new builds and inventory in developments with a lower tax assessment until those properties are occupied. The new builds will be taxed as unimproved land so long as they satisfy the following criteria: • The property is not occupied and has never been occupied; • The property is available for sale. The exemption lasts until the new construction is no longer located on development property. • The legislation is not retroactive.
Federal Court Suspends Michigan PLA Law—ABC of Michigan Attorney Vows to Fight, File Appeals
The Federal District Court issued a preliminary injunction against Michigan’s 2012 law prohibiting government-mandated project labor agreements (PLAs). This ruling was in response to a complaint filed by the Michigan Building and Construction Trades Council, AFL-CIO. The matter was decided by the same judge who originally ruled with the unions on the 2011 Michigan Fair and Open Competition in Governmental Construction Act. Although ABC does not agree with the Federal District Court ruling, government-mandated PLAs are again permissible in Michigan. “While we disagree with the ruling, we are nonetheless confident that Michigan’s law will be upheld at the appellate level,” said Chris Fisher, president of ABC of Michigan. “We have known all along that this law would be settled at either the U.S. Court of Appeals or even the U.S. Supreme Court. As the case advances, we know
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that our chances of success improve because no federal appeals court has ever ruled against a state law prohibiting government-mandated PLAs.” The Court of Appeals sent notice that the oral argument in the 2011 Michigan PLA case will be held on the morning of January 15, 2013 in Cincinnati (where the appellate court is located). ABC of Michigan recently finalized and submitted an amicus brief to the court that will be considered in January. The National Federation of Independent Business has joined ABC in this effort. Governor Snyder, as the defendant, remains committed to fairness in PLAs and continues to pursue the appeal in defense of the legislation he has signed into law, saying: “I was honored to sign the Fair and Open Competition in Governmental Construction Act last year to establish fairness in project labor agreements. All businesses and workers in our state play a valuable role in reinventing Michigan and all deserve equal treatment.” Over the past 18 months Michigan has permitted, then prohibited, then permitted, then prohibited and then permitted again the use of PLAs. ABC of Michigan has been the tip of the spear in challenging what was otherwise an unacceptable status quo of allowing the discriminatory and costly use of PLAs. “ABC of Michigan is completely dedicated to our fight in support of fair and open competition. We know that the free enterprise philosophy of the Merit Shop will come out on top by ending union-only PLAs once and for all in Michigan,” Fisher concluded. MM
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Winter 2013 13 406184_JacksonAssociates.indd 1
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Outlook
ECONOMIC
Economic Outlook: Recovery Will Be Slow By Don Wilson
Michigan’s non-residential construction industry has been struggling the last few years due to a lack of growth in many state industries, the rise in commercial building vacancies, tight commercial real estate lending standards, and an excessive inventory of properties without buyers. Considering these factors, it seemed appropriate ABC of Michigan look into whether material could be developed to put current construction activity into perspective for their membership. U. S., GREAT LAKES REGION & MICHIGAN INDICES OF VALUE OF NON-RESIDENTIAL CONSTRUCTION PUT IN
110
U. S. & Great Lakes (2007 = 100)
U. S. Index
Exhibit # 1
Michigan (2007 = 100)
110
Great Lakes Index
Michigan Index 100
100
90
90
80
80
70
70
60
60
or vacate space. There are no reports that quantify the leasable space in many types of nonresidential structures located across the state, their level of vacancy, or the quantity of demand (or lack of it) for that space. However, there are industry-wide business and employment indicators for the industries that inhabit those buildings. Exhibits #2 through #8 portray indicators of annual activity or employment, which provide insight into the demand for space, services, and resources of commercial building contractors in several market segments. The data, as they are tabulated in different units of measure (dollars, tons, mileage, enrollment, number of vehicles, etc.), are converted to an index with 2007 selected as the base year equal to 100 and identified as a barometer. The dollar value (adjusted for inflation) of construction is also converted to an index for the purpose of differentiation from other types of measures. A barometer or index reading of 75 for a specific year means that year is 25% lower than in 2007, while a reading of 110 signifies it is 10% higher than in 2007. Exhibit # 2
MICHIGAN OFFICE MARKET CHANGE IN EMPLOYMENT / CONSTRUCTION ACTIVITY Employment
120 50
02
03
04
05
06
07
08
09
10
11
W i n ter 2013
30
Employment Change (000 - Advance One Year)
50
Exhibit 1 compares the overall value of investment (not adjusted for inflation and measured on an index basis) of nonresidential building construction put into place in Michigan, the U.S. and Great Lakes states region. Such construction declined 32.1% in Michigan between pre-recession 2007 and 2011, while falling 31.3% in the Great Lakes and 40.2% across the nation. The need for nonresidential space is determined by four factors: 1) the volume of business requiring the space, 2) the characteristics of its operations, 3) the availability of existing space to house those operations, and 4) the accessibility to funds to finance occupancy. A change in the volume of an organization’s line of products or services and/or identification of a need to operate more efficiently to better compete and survive can spur the company to construct new space, make renovations to existing space, 14
Change (000)
Office Construction Index
Source: U. S. Bureau of Census & FMI Consulting Building Projects Surveys 01
Construction Index (2007 = 100)
20 100 10
80
0
-10 60 -20
40
-30
-40 20 -50
0
Source: U. S. Bureau of Labor Statistics & FMI Consulting Building Project Surveys 02
03
04
05
06
07
08
09
10
11
12 Est.
-60
Employment change (advanced one year to show its effect on construction) in the industries quartered in office buildings is compared in Exhibit #2 with construction activity. With the housing bust in Michigan in 2005’s third Michigan Mer it
Outlook
ECONOMIC
quarter and the effect the subsequent credit crunch had on consumer spending, business profits, and government revenues, 121,000 jobs were lost from 2006 through 2009. Since the early 2010 start of Michigan’s recovery, the industries that lease office space have added about 60,000 jobs through 2012. Those employers are allocating less space per worker; shifting to digital record keeping from file cabinet storage, and allowing more employees to work from home. With office buildings 18% vacant in southeastern Michigan at mid-year 2012 and just under 12% in southwestern Michigan, the leasing rates building managers can charge are low. Lending standards are tight with the high number of buildings without owners and the low level of mortgage rates. Construction, as a result, after topping out at 103.1 in 2008, fell to a level of 51.8 in 2011, before rising slightly to 53.2 in 2012. Exhibit # 3
MICHIGAN DISTRIBUTION MARKET / CONSTRUCTION ACTIVITY Construction Index
110
Retail Sales / Wholesale Activity Barometer (2007 = 100)
(2007 = 100)
Retail Trade Sales Wholesale Trade Activity Construction Index
110
100
105
90 100
80
95
70
60
90
50 85
80
40 Source: Michigan Dep't. of Treasury, U. S. Bureau of Labor Statistics & FMI Consulting Building Project Surveys 02
03
04
05
06
07
08
09
10
11
12 Est.
MICHIGAN HEALTHCARE MARKET / CONSTRUCTION ACTIVITY
105
105
Construction Index
100
100
95
95
90
90
85
85
80
80
75
75
70
Source: U. S. Bureau of Labor Statistics & FMI Consulting Building Project Surveys 02
03
04
05
06
07
08
09
10
11
12 Est.
70
2007, contracted with the loss of health insurance coverage due to cutbacks in employment and earnings, which also curtailed household spending power. Services of providers then increased in 2011 and 2012 as healthcare coverage and spending power grew along with jobs and earnings. About 85% of the medical space segment of southeastern Michigan’s commercial building market was occupied in 2011, down from 94% in 2000. Hospital bed utilization across the state was about 57% in 2011 and 84% at nursing homes in 2010 per the latest reports. Construction activity in this market, after topping at 102.2 in 2008, dropped to 80.3 in 2011 before improving slightly to 82.4 in 2012. MICHIGAN EDUCATION MARKET / CONSTRUCTION ACTIVITY
30
Exhibit #3 presents a comparison of retail trade sales and wholesale trade barometers with construction at retail and wholesale trade facilities. Retail sales declined from 2004 through 2009, then started to improve in 2010 with pent-up demand, stronger earnings accompanying gradual rise in employment, improving consumer attitudes, a pick-up on housing activity, and lower consumer debt. Wholesale trade, after declining in 2008 through 2010, turned upward in 2011 with the advance of activity in its major customer segments—retailing, manufacturing, export trade, and residential construction. Construction, as a consequence, declined in 2008 to 2010 before rising in 2011 and 2012 with work mainly centered on renovation. Retailers are occupying more space, mostly after renovation, and large retailers are signing leases for less space as they set up outlets in smaller communities. The state’s population declined from 2005 through 2011 and significant quantities of retail space remain vacant—10% in southeastern Michigan, 12% in the Lansing area, and 13% in southwestern Michigan. The activities of Michigan healthcare service providers, as gauged by a healthcare barometer, are compared with construction in Exhibit # 4. The barometer, after peaking in
Exhibit # 4
Construction Index (2007= 100)
Healthcare Services Activity
110
www.a bc mi. c om
Healthcare Barometer (2007 = 100)
Enrollment Barometer (2007 = 100)
Exhibit # 5
Construction Index (2007 = 100)
Enrollment
105
Construction Index
108 100
106
104
95
102
90
100
98 85
96
94
80
92
90
Source: U. S. & Michigan Departments of Education & FMI Consulting Building Project Surveys 02
03
04
05
06
07
08
09
10
11
12 Est.
75
Public and private elementary and secondary school, and college and university enrollments are contrasted with construction activity in all educational facilities (schools, training facilities, libraries, dormitories, gymnasiums and all other related buildings) in Exhibit #5. Based on late-September/early-October student counts, enrollment continues to decline. Although attendance at colleges and universities has been on an uptrend, these have been significantly offWinter 2013 15
Outlook
ECONOMIC
set by the contraction of elementary and secondary school enrollments. In 2004 to 2008, building construction in the education market accounted for 22% of all nonresidential construction in all market segments of Michigan. Following a rise to 103.4 in 2008, construction dropped to 76.9 in 2011 before posting a moderate pick-up to 77.4 in 2012.
115
Passenger / Freight Barometer (2007 = 100)
MICHIGAN TRANSPORTATION MARKET / CONSTRUCTION ACTIVITY
Exhibit #7 Construction Index (2007 = 100)
110
110
105
105 100 100 95
95
Passenger Traffic Barometer (Advanced 0ne Year) Freight Traffic Barometer
90
90
Construction Index
85 85 80 80
75 70
Source: Michigan Dep't. of Transportation, Association of American Railroads, U. S. Army Corps of Engineers & FMI Consulting Building Project Surveys 02
03
04
05
06
07
08
09
10
11
12 Est.
75
rising again in 2010 through 2012. Construction activity, after falling to a level of 83.1 in 2005, climbed to 106 in 2008 and 106.4 in 2010, before falling in 2011 and rising slightly MICHIGAN LODGING MARKET / CONSTRUCTION ACTIVITY
120
Mileage & Passenger Barometer (2007 = 100) Occupancy Rate (%)
Exhibit # 8
Construction Index (2007 = 100)
200 180
100
Industrial market activity driven by Detroit automakers and southwestern Michigan’s office and institutional furniture operations is displayed in Exhibit # 6. Manufacturing activity moved fractionally higher in 2006 from 2005 with the upturn in furniture production and output in other industries before dropping to 74.8 in 2009, mainly due to the Detroit automakers loss of market share and credit crunch. Despite overall manufacturing activity peaking in 2006, construction continued to grow through 2009, much it due to the time required to complete contracts awarded in earlier years and some renovation work. Construction then declined in 2010 and 2011 before increasing slightly in 2012, but remains constrained. Manufacturers, instead of building new space to accommodate sales growth, are expanding utilization of existing space by increasing the number hours worked per week, adding work shifts to existing facilities, or sourcing increasing needs outside of Michigan and only renovating or redeveloping existing space as required. Activity in Michigan’s in non-highway transportation market at airport, railroad terminals and harbors are compared with construction activity at those facilities in Exhibit # 7. Passenger traffic, after posting its highest volume in 2005, continues to expand and contract depending on household spending power, business profits, and fuel prices. Freight traffic, after gradually weakening with the contraction in manufacturing from 2003 through 2007, plunged in 2008 and 2009 with the drop-off in car and truck sales and restructuring at the Detroit automakers. With the recovery of car, truck, and furniture sales and production and their secondary effect in other industries, freight traffic started 16
W i n ter 2013
160 140
80
120 60
100 80
40
Highway Vehicle Mileage Barometer (Advanced One Year) Occupancy Rate (Advanced One Year) Airline & Railroad Passenger Barometer (Advanced One Year) Construction Index
20
0
60 40 20
Source: Michigan Dep't. of Transportation, Travel Michigan Program, American Railroad Association & FMI Consulting Building Project Surveys 02
03
04
05
06
07
08
09
10
11
12 Est.
0
in 2012. Barometers of highway vehicle mileage and airline and railroad passenger traffic, plus Michigan’s lodging industry occupancy rate (each advanced one year) are contrasted with hotel and motel construction activity in Exhibit # 8. Vehicle mileage declined to 97.1 in 2008 and 92.2 in 2009 from 100 in 2007, before rising slightly to 92.9 in 2010 and 93 in 2011. Airline and railroad traffic oscillated, from 112.7 in 2005 to 102.2 in 2011, with a low of 96.7 in 2009. Hotel and motel occupancy rate, as a result, dropped from 53.9% in 2007 to 47.5% in 2009 before rising to 51.8% in 2010 and 55.3% in 2011. Occupancy started rising in 2010 and 2011 with improvement in travel and lodging accompanying the resurgence in sales and profits for Detroit’s automakers and their suppliers, the secondary effect this had in other industries and a strengthening in tourism activity as tracked by the Michigan Tourism Index, up 17% in 2011 from 2009. Construction, after peaking at a level of 118.9 in 2008 (2007=100), plunged to 81.1 in 2009 and 26.1 in 2011 before turning slightly upward to 27.1 in 2012. Construction Michigan Mer it
Outlook
ECONOMIC
continues to be constrained as occupancy, with only slightly over one-half of rooms filled, is not sufficient to generate the profits required to encourage investment, according to Exhibit #9
120
MICHIGAN NON-RESIDENTIAL CONSTRUCTION ACTIVITY / NON-FARM EMPLOYMENT CHANGE Employment (000)
Construction Index (2007 = 100)
100
Construction Index Employment Change - (000 Advanced One Year)
100
50
0 80 -50 60 -100 40 -150
20
0
-200
02
03
04
05
06
07
08
09
10
11
12 Est.
13 Fcst.
-250
industry observers. Exhibit #9 presents a profile of statewide index of nonresidential construction compared with change in year-end
employment (advanced one year). Employment, up 1.5% in 2011,and about 1.2% in 2012, is expected to continue to grow, but at a slower pace in 2013. Investment plans (adjusted for inflation) authorizing start of new nonresidential construction, after declining 8% in 2011, shrank about 15% in 2012. Why the decline in investment? Fourteen percent of all types space in southeastern Michigan was vacant at mid-2012 and just under 12% in southwestern Michigan’s offices and 8% in industrial facilities at start of 2012’s second quarter. Commercial real estate lending standards remain high because of the vacancy rates of several properties, the number of properties without buyers, and low interest rates. Also, many landlords still resist investing because of low lease rates. According to a late October press release by the state’s business round table, Business Leaders for Michigan, about 50% of the state’s business leaders believe Michigan’s economy will be stalled and not shrink during the next eighteen months as Michigan continues to address many of the same issues currently faced at the national level. About 45% of leaders forecast it will grow, and 5% believe it will shrink. MM
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Winter 2013 17
Article
NEWS
ABC of Michigan Recognizes MIOSHA Director Patty Meyer On Monday, November 26, 2012 leaders of ABC of Michigan recognized Patty Meyer, Director of the MIOSHA Construction and Safety Health Division, for her continued service and partnership to Michigan’s Construction Industry. ABC member Mike Kelly, President of Wolverine Building Group in Grand Rapids, presented the award on behalf of the nearly 1,000 member companies and four offices of ABC-MI. The award was presented at a special luncheon in Lansing attended by ABC leaders from across the state. ABC chapters across the state work in partnership with MIOSHA to keep worker safety a top priority among ABC member companies. MM
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W i n ter 2013
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Index
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Winter 2013 19
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