California Asphalt Magazine 2018 Forecast Issuu by CMS

2018 FORECAST ISSUE

SPECIAL REPORT: Staying ahead of SB1

INSIDE: The UCLA Anderson Forecast SB1 road repair law accelerates projects Member Spotlight: R.J. Noble Company

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Publisher’s Letter Closing the deal on SB1 Recently I needed to go shopping for a new suit so I stopped in to my neighborhood Men’s Wearhouse, where a very friendly salesman took my measurements and asked me about my occupation so he could suggest a suit that would be appropriate for my line of work. In the past, when a stranger asked me what I do, my shorthand response has always been “lobbyist.” I’m not actually a registered lobbyist – those functions are performed for CalAPA (in outstanding fashion) by our contract advocate, Jeff Sievers of the Sacramento firm of Carpenter Sievers. My job as Executive Director of CalAPA is to run an association. Part of my duties are to communicate with our contract lobbyist to ensure that, as he engages with our elected officials, he understands our issues and clearly communicates our industry positions. That guidance ultimately comes from our Board of Directors and our Legislative Committee. In the case of this suit purchase, however, I figured all the tailor needed to know was that periodically I would be at the state Capitol in Sacramento, and I needed to dress appropriately. He quickly shuffled off and returned with a couple of options that looked sharp, conservative and, well, lobbyist-like. As I was trying on a jacket in front of the mirror, peering at it from several different angles, my tailor and I proceeded to engage in some small talk. Then he asked me a question that almost made me fall over. “So,” he began. “You work at the Capitol. What do you think about.…” He paused for a moment, searching for the right words. I instantly thought, of the thousands of issues that are debated at the Capitol, what are the chances that I would know anything about his particular concern? “What do you think,” he began again, “about that new gas tax?” BAM! I was stunned. Of all the issues he could have asked, and with no knowledge of my true occupation, the passage of last year’s comprehensive transportation improvement bill, known as SB1, was top of mind. “Actually,” I stammered, “I do know something about that.” Then I quickly recited our standard talking points extolling the virtues of properly maintaining our state’s vast road network, and the problems that are created when there is not enough money to do the job properly. When I was finished, I turned to him and said, “Why do you ask?” He explained that he recently felt the pain of SB1 in the form of a much higher vehicle registration fee on his three cars. In an unfortunate coincidence, all three cars happen to come up for renewal in January. “That really hurt,” he said. Ouch. The passage of SB1 last year, which raised fuel taxes and registration fees to generate more than $5 billion a year for transportation, was an achievement of historic proportions for our industry. But the work is far from done. Now it is up to us and our agency partners to move quickly to fix the state’s roads to show our fellow Californians their tax dollars are being spend wisely. Some political operatives who want to repeal SB1 at the ballot box are saying the money is not needed, and will be wasted. They are even spreading false or misleading information about SB1 to rally support for their cause. They must not be allowed to succeed. In this issue of California Asphalt magazine, we are publishing a list of SB1 “myths” that have been debunked, and also providing you with a SB1 bumper sticker courtesy of our sponsor, Graniterock. Display it proudly. Let’s get the road improvement projects out to construction, finish them quickly, and then promote our successes. That is our best strategy for winning over my suit salesman and millions of other Californians. When the roads are fixed, everyone wins.

Sincerely,

Russell W. Snyder Executive Director California Asphalt Pavement Association 4

California Asphalt Magazine • 2018 Forecast Issue

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Contents

JOURNAL OF THE CALIFORNIA ASPHALT PAVEMENT ASSOCIATION

Volume 22, Issue 1

Publisher’s Letter

The UCLA Anderson Forecast

Real Refiner's Cost of Crude Oil (2009$/barrel)

100 80

CalAPA's 8th annual 'Better or Worse' survey

60 40 20 0 1974 1979 1984 1989 1994 1999 2004 2009 2014 2019

NAPA President Mike Acott announces retirement plans

Buoyed by robust economy, new SB1 dollars, long-deferred road-improvement projects start to move to construction

The R.J. Noble Company Continues to evolve with new Astec Double Barrel drum mix plant in Corona

(Mil. Units)

U.S. Housing Starts Vs. Mortgage Rate

(Percent)

2.5 2.0 1.5 1.0 0.5 0.0

1983 1987 1991 1995 1999 2003 2007 2011 2015 2019 Housing Starts

18 16 14 12 10 8 6 4 2

Mortgage Rate

Page 8

Page 24

On the Cover:

This cover illustration, designed by CMS, LLC is a riff on last year’s Forecast Issue cover (right) that wchronicled the uphill push for state road funding. With the passage of SB1, the Road Repair & Accountability Act of 2017, industry and agencies now will be challenged to stay ahead of a 10-year, more than $50 billion influx of transportation funding.

Page 30

CALIFORNIA ASPHALT PAVEMENT ASSOCIATION www.calapa.net

HEADQUARTERS: P.O. Box 981300 • West Sacramento • CA 95798 (Mailing Address) 1550 Harbor Blvd., Suite 211 • West Sacramento • CA 95691 • (866) 498-0761 EXECUTIVE DIRECTOR: Russell W. Snyder, CAE, rsnyder@calapa.net TECHNICAL DIRECTOR: Brandon Milar, P.E., bmilar@calapa.net. MEMBER SERVICES MANAGER: Sophie You, syou@calapa.net ADMINISTRATIVE ASSISTANT: Ritha Nhorn, rnhorn@calapa.net GUEST PUBLISHER: Russell W. Snyder, Executive Director, CalAPA PUBLISHED BY: Construction Marketing Services, LLC • P.O. Box 892977 • Temecula • CA 92589 (909) 772-3121 • Fax (951) 225-9659 GRAPHIC DESIGN: Aldo Myftari, Misty Swartz CONTRIBUTING WRITERS: Russell W. Snyder, CalAPA; Brian Hoover, CMS ADVERTISING SALES: Kerry Hoover, CMS, (909) 772-3121 • Fax (951) 225-9659 Copyright © 2018 – All Rights Reserved. No portion of this publication may be reused in any form without prior permission of the California Asphalt Pavement Association. California Asphalt is the official publication of the California Asphalt Pavement Association. This bimonthly magazine distributes to members of the California Asphalt Pavement Association; contractors; construction material producers; Federal, State and Local Government Officials; and others interested in ensuring that asphalt remains the high quality, high performance pavement choice in the state of California.

California Asphalt Magazine • 2018 Forecast Issue

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The UCLA Anderson Forecast for the nation

Sunny 2018, Cloudy 2019 By David Shulman, Senior Economist, UCLA Anderson Forecast, December 2017

ll of a sudden, propelled by strength (8 percent quarterly growth) in equipment spending, the economy is growing at a 3 percent clip and the near-term outlook has become decidedly sunny. Moreover, the 3 percent pace of growth is expected to continue through the second quarter of 2018. However, as the unemployment rate drops below 4 percent and employment growth stalls in the face of a labor shortage, economic growth will drop back to the 2 percent growth rate we have been used to since the end of the financial crisis eight long years ago. Indeed, by the end of the forecast horizon in 2019 real GDP growth could very well be running at a rate below 1.5 percent as the outlook becomes cloudy. Questions about Fiscal Policy As we are writing in late November, many questions remain about the major tax bills now working their way through Congress. There is uncertainty surrounding the corporate tax rate, state and local tax deductions, child credits and the permanence of the entire package. For modeling purposes we have assumed a 10-year $1.5 trillion tax cut, with a 25 percent corporate tax rate (a compromise from 20 percent), some allowance for state and local tax deductions and $100 billion in revenues coming from a tax on repatriated corporate profits in 2018. This last point is one of the reasons why the federal deficit declines in 2018. We are more certain that the next few years will reverse the seven-year annual decline in defense spending. With the 8

potential for missiles from North Korea reaching the West Coast, continued fighting in the Middle-East and growing worries about Russia and China, defense spending will likely be on the rise over the next several years. We are assuming real defense spending will increase by 2 percent and 2.7 percent in 2018 and 2019, respectively. If anything, our forecast is more likely to be low than high. Monetary policy in the post-Yellen era With the appointment of Jerome Powell as Fed chairman, the Janet Yellen era is coming to an end. Because Powell’s views on monetary policy are very similar to Yellen’s we do not anticipate any significant changes. However, with respect to regulatory policy, Powell is believed to be far more open than Yellen to reviewing the financial crisis regulations that were put into place from 2009 – 2012. Thus, we expect that the gradual interest rate normalization policy that has been underway for a year will continue well into 2019 with a 25 basis point increase from the current 1.375 percent rate in December and three more increases in 2018. By the end of 2019, the fed funds rate will likely approximate 3 percent. We caution that the futures markets, in contrast to our forecast and the Fed’s “dot plots,” are forecasting only one rate hike next year. Concomitantly, with the rise in short-term interest rates long rates will rise as well and we would not be surprised to see the yield on 10-year U.S. Treasury bonds to exceed 4 percent, up from the current 2.4 percent.

Figure 1

Housing Starts 2007Q1 - 2019Q4F

(Thousands of Units, Annualized Data) 1600 1400 1200 1000 800 600 400

2007

2009

2011

2013

2015

2017

2019

Sources: Bureau of the Census and UCLA Anderson Forecast

Rising inflation will be the driver in the increase in long rates, more on that below. The Powell Fed will also continue the policy of gradually shrinking the Fed’s bloated balance sheet that began in October. Simply put, after three phases of quantitative easing that expanded the balance sheet from $800 billion to over 4 trillion dollars will be unwound over a period of several years with the ultimate target of $2.5 - $3.0 trillion, quantitative tightening if you will. But make no mistake the balance sheet shrink the Fed is attempting to do is unprecedented. Inflation on the rise It now appears that the second quarter slowdown in inflation was transitory and the future quarterly track in inflation will be in excess of 2 percent throughout the forecast horizon. This will hold true for both “headline” and “core” consumer prices. Further, oil prices now appear to be tracking about $10/barrel higher than our forecast of just one quarter ago. The primary source of the rising rate of inflation will be a

California Asphalt Magazine • 2018 Forecast Issue

significant rebound in wage growth. After creeping along in the 2 percent range, we forecast acceleration in total compensation growth to approximately 4 percent by late 2018 on a yearover-year basis. The recent rise in labor productivity buttresses our view that the long-anticipated increase in wages is at hand. Consumer spending supported by rising wages and asset prices Real consumption spending is maintaining its strength experienced in 2016 by increasing 2.7 percent and 2.8 percent in 2017 and 2018, respectively. However, as auto sales slow in 2019 consumption growth will slip back to 2.2 percent. Simply put it is getting very late in the auto cycle. However, as long as stock and house prices remain elevated the consumer, or at least the high-end consumer, will remain in good shape. In the case of the lower end consumer we are encouraged by Walmart reporting a strong 2.7 percent increase in year-over-year same store sales in their latest quarter. One of the big puzzles in recent years is the lack of robustness in new single-family housing construction. Given low interest rates and strong employment growth housing activity should be doing much better. Two factors that are being discussed more and more are the unwillingness of the baby boom generation to move as they age in place and highly restrictive zoning in the booming coastal cities. As a result, housing starts have remained below the underlying demographic demand of 1.4 â&#x20AC;&#x201C; 1.5 million units a year for a decade. We are forecasting modest increases in housing starts from an estimated 1.19 million units this year to 1.27 million and 1.34 million in 2018 and 2019, respectively. (See Figure 1)

Real Refiner's Cost of Crude Oil (2009$/barrel)

100 80 60 40 20

0 1974 1979 1984 1989 1994 1999 2004 2009 2014 2019

Exports rebounding, but NAFTA risk looms In response to a recovering global economy, real exports are recovering from the near zero growth of 2015 and 2016. Real exports are estimated to increase by 3.2 percent this year and 4.5 percent and 4.1 percent in 2018 and 2019, respectively. According to a recent Goldman Sachs report, world economic growth is forecast to increase 3.7 percent this year and 4.1 percent in 2018. Growth will come from, 2+ percent growth in the Euro Area, 6.5 percent in China, a very strong 8 percent in India and a rebound in Brazil from O.9 percent in 2017 to 2.7 percent in 2018. The real risk to our export forecast and for that matter the entire forecast is political. In less than a year, President Trump has blown up the Trans Pacific Partnership (TPP) trade treaty and the global climate accord. The North American Free Trade Treaty (NAFTA) could be next especially given the hawkish views espoused by Secretary of Commerce Wilbur Ross and Trade Representative Robert Lighthizer. Although news from the Mexico City negotiations is not on the front burner, it would be advisable to pay very close attention. Why? Leaving NAFTA is not so simple because it would undo countless supply chains among the three countries (U.S., Canada and Mexico) involved. Just as a reminder, the gross trade volumes among the three NAFTA partners amounts to over 1 trillion dollars

California Asphalt Magazine â&#x20AC;˘ 2018 Forecast Issue

(Mil. Units)

U.S. Housing Starts Vs. Mortgage Rate

2.5

(Percent)

2.0 1.5 1.0 0.5 0.0

1983 1987 1991 1995 1999 2003 2007 2011 2015 2019 Housing Starts

18 16 14 12 10 8 6 4 2

Mortgage Rate

per year. Especially hard hit would be the U.S. automobile industry where parts cross borders several times in the manufacturing of a single automobile. In our view, should the U.S. leave NAFTA the growth outlook would deteriorate and the chance of a recession in late 2018 or 2019 would significantly increase. Conclusion With our weather forecast analogy for a title we are hoping to be as accurate as modern weather forecasting. Economics has a lot to learn from near-term weather forecasting. It looks like 2018 is shaping up to be a pretty good year. There is momentum coming from the recent strength in 2017, strong equipment spending, the likelihood of a tax cut and a consumer that is benefitting from higher asset prices and the prospect of higher wages. Unemployment will drop below 4 percent and remain there throughout most of the forecast horizon and inflation will experience an uptick. The Fed will respond by continuing to normalize short-term interest rates with the Fed Funds rate on a path to 3 percent by 2019. However, as we get into 2019, inflation could be approaching 3 percent and the economy will slow as it reaches capacity constraints. The risks to the forecast include the unknowable consequences of the Fed reducing its balance sheet and the potential failure of the ongoing NAFTA negotiations. All told a sunny 2018 with clouds coming in 2019. CA 9

The UCLA Anderson Forecast for California

A downshift in growth foretold

By Jerry Nickelsburg, Senior Economist, UCLA Anderson Forecast, Adjunct Professor of Economics, UCLA Anderson School, December 2017

California New Residential Permits (3 Mo. Moving Average, No. of Units) 25,000

20,000

15,000

10,000

5,000

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

alifornia is slowing down. The engine of growth driving a significant part of the U.S. recovery seems to have run out of its full head of steam. The business, scientific and technical services sector and the information sector—home for much of the tech boom—have ground to a growth halt in much of the state. But what sounds bad on the surface is just a symptom of good labor markets and tight, very tight, housing markets. This slowdown is one foretold some time ago, at least by the Anderson Forecast. As far back as two years ago we predicted a slowing growth rate for the California economy in 2017. The forecast produced in December 2015 was for the current year to come in at 1.6 percent growth for payroll employment and 1.2 percent growth for total employment. In this regard we have done quite well. Through October 2017 we are right on track with a 1.3 percent gain for both payroll and total employment. In this essay we will examine the economics that led us to forecast as well as we did and what it means for the next few years. Job gains and losses depend on business conditions. When firms are doing well, they expand and hire more workers and when they are doing poorly they do the opposite. A key element to this process is finding the workers that fit the firm’s requirements. Coming out of a recession when many skilled workers are unemployed, it is not difficult to hire. In an economy going full bore, one has to search longer, or engage in inhouse training or both to fulfill the

Source: U.S. Department of Census

requirement. This is where we are now in California and it is a story about good job markets and constrained housing markets. This essay will look first at job markets in the state; what is happening and where there might be room to move the needle toward faster job growth; and second at the housing market as a constraint on finding qualified workers for potential California employment. The final evidence that slower growth in California is real comes from airborne trade through the state’s regional airports. Employment Retrospective California economic growth depends on three elements; growth in the workforce, growth in the stock of physical capital, and growth in productivity. The last two have been growing, but rather slowly, during this expansion. If Congress passes a tax bill that includes the expensing of investment (charging 100 percent of depreciation in the

year in which the capital good is purchased) as is assumed in our U.S. forecast, then there will be a slight boost to California GDP due to increased capital and increased worker productivity (for the impact of the proposed tax bill on housing, skip ahead to the next section). But this boost to investment and productivity is expected to be short-lived. Sustained rapid growth needs a growing workforce. Thus far, California has been successful in this regard, but that engine is slowing down. California’s population is on average younger than the rest of the U.S., due to it being an immigrant heavy state. Therefore, one expects the unemployment rate differential to be at about the levels currently experienced relative to the national rate. Younger workers take longer to find employment as they lack as compelling a resume as older workers, and they tend to

[ Continued on page 12 ]

California Asphalt Magazine • 2018 Forecast Issue

HERRMANN EQUIPMENT, INC. and

R.J. NOBLE COMPANY

Above: R.J. Noble Company utilizing their Bomag “Cedarapids” CR552 paving machine on a public works street project in Mission Viejo.

The R.J. Noble Company is a Class A, General Engineering Contractor specializing in grading and asphalt paving, subcontracting underground, electrical and concrete work. Presently the company operates two large asphalt plants, including a rock quarry, a rock-crushing plant, and a recrush operation onsite. RJNC has been in the asphalt industry since 1950 and they have built a solid foundation and reputation. They have been doing business with Herrmann Equipment for over 20 of those years. It’s been a great partnership and R. J. Noble Company has purchased 11 asphalt pavers through the years.” They recently purchased two Bomag “Cedarapids” CR552 models, the one pictured above and one that they are waiting to be delivered. Chuck Spiers, RJNC general superintendent comments, “We purchase Bomag Cedarapids CR552 paving machines because they are for mainline paving applications such as airports, interstates, highways and roads all while meeting our stringent Tier 4 emissions standards. We love the productivity and reliability of the Bomag “Cedarapids” CR552 machines. Our operators appreciate the unique swinging control console and excellent visibility. The 16.7-ton hopper holds maximum material and the frame raise system and proportional steering give us incredible maneuverability.” Spiers adds, “Our decision to partner with Herrmann Equipment and Bomag Cedarapids is mainly due to their tremendous customer service and support. The personable response you get from their team is bar none in the industry. You just don’t see this kind of hands-on service any more. Mike Allen from Herrmann Equipment will answer his phone 24/7. He will trouble shoot an issue over the phone in the middle of the night and will come out to the jobsite if needed.” RJ Noble Company and Herrmann Equipment have a long history of succeeding together and many more years to come.

Sales • Service • Parts • Rental NORTHERN CALIFORNIA 9220 Viking Place Roseville, CA 95747 (916) 783-9333

SOUTHERN CALIFORNIA 2711 Lilac Ave. Bloomington, CA 92316 (909) 877-5597

California Employment (6-mo. moving avg.) Jan. 2005 to Oct. 2017 (Thous.)

(Percent) 14

17000

18500

16500

18000

16000

17500

15500

17000

15000

16500

14500

16000

14000

15500 05 06 07 08 09 10 11 12 13 14 15 16 17 Wage & Salary Emp. (Left) HH Survey Emp. (Right)

Source: U.S. Department of Census

[ Continued from page 10 ]

change jobs more often as they experiment with alternatives for life-long careers. Thus, the slightly higher unemployment rates are not suggestive of room for more rapid job growth. A fall in California’s unemployment rate has been associated with the slowing in employment growth. However, the surge of new entrants to the labor force over the last three months—200,000 people entered the workforce—does suggest there may be some more room for increased employment. Our analysis suggests that there is not much room though. On a sectoral level, job gain has been widespread during the past 12 months. Mining and logging and non-durable goods manufacturing sectors continued to post job losses over the last 12 months. The big winners during this time have been construction, education, health care and social services, and leisure & hospitality. Continued growth in construction is threatened by higher interest rates and the new tax bill. Health care and leisure and hospitality are at risk from changes to Obamacare and reductions in international tourism, respectively. The professional and business service sector, long a bright spot in the recovery from the 2008/2009 recession, has been flat over the last 12 months. To see what this means for the possibility of organic labor force growth in the state, consider the employment to population ratio. This shows 12

California Unemployment Rate Jan. 2000 to Oct. 2017

(Bil. $) 700 650 600 550

500

6 4

Taxable Sales in California 2003:1Q to 2016:4Q

450 01

Source: U.S. Department of Census

400

03 04 05 06 07 08 09 10 11 12 13 14 15 16

Source: U.S. Department of Census

the working age population divided into an estimate of the number of payroll jobs. There is a long-term downward trend in the state beginning in 1999. This corresponds to a national trend toward lower employment/ population. The reasons are not entirely clear, though in part the secular decline relates to the decline of manufacturing and the ability of displaced workers to obtain disability insurance, and to some extent to an increase in stayat-home parents raising children. The dips in the chart correspond to recessions. In the latest expansion, the increase in employment in California lifts this ratio above the previous trend but it remains slightly below the 2007 peak. When we disaggregate by regions we find that in most of California the ratio (now of total employment to total population) has returned to or exceeded the 2007 peak. This occurred even though demographics would suggest that the ratio should be somewhat lower. Therefore, it is unlikely that these regions have a pool of labor that can be brought back into the workforce, and inducing those who were previously not in the workforce would require substantially higher wages. There are several regions that have not returned to the 2007 employment to population peak. There are a number of potential reasons including data errors to be corrected in the expected benchmark revisions coming in March, but there is

a sense in which California can still grow faster than the U.S. The Mid-Coast, Ventura County and the San Joaquin Valley, have lagged in the recovery. As lower cost regions of the state, they may well be the next rapid growth regions, though the basis for this is purely speculative. The Orange County and San Diego data are suspect as they have unemployment rates of 3.3 percent and 3.7 percent respectively. It may be that San Diego is experiencing a demographic shift with a singlefamily housing boom in North County increasing the percentage of children in the county and that Orange County is all about an aging population, but we won’t know if either are true or just a good story for some time. Though the national data does not suggest a significant downturn in economic growth over the next 12 months, the ability of the growing U.S. economy to be led by growth in California as it has over the past eight years, is in doubt. Indeed, to continue the very rapid growth in employment likely requires domestic or international immigration to the state or both. With Trump’s policies decidedly reducing international immigration, net domestic migration to California would be required. And that brings us to the high cost of housing. Housing Affordability and Population Growth In previous California Reports, we have focused on the affordability of housing in the

California Asphalt Magazine • 2018 Forecast Issue

(Thous.) 700

California Existing-Home Sales Jan. 2006 to October 2017

(Thous. $) 600

California Existing-Home Prices 1989:Q1 to 2017Q3

(Thous.) 1000

600

500

900

500

400

800

400

300

200

100 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 Source: California Association of Realtors

06 07 08 09 10 11 12 13 14 15 16 17 Source: California Association of Realtors

Source: U.S. Department of Census

state, and therefore, we won’t rehash the data here. Suffice it to say that California housing is expensive, it will remain so over our forecast horizon, and it will be a deterrent for domestic migration into the state. Home prices in the major metropolitan areas now exceed their housingbubble peaks, and with a lack of home building, will continue to go up. This is not organic, but a direct function of the demand for housing increasing as people from California and all over the world want to avail themselves of the California weather and lifestyle, faced with a relatively fixed number of homes. Building in the state has increased modestly of late. The number of permits has climbed on an annual basis to approximately 119,000 units per year. We expect that to increase a bit more due to State Legislature initiatives on affordable housing and the rebuilding of homes lost in the tragic wildfires this year. Nevertheless, the numbers will neither be large, nor sufficient to move the price needle. Not enough homes translates into a lack of support for a much larger population. Though there has been a modest increase in the number of new housing units permitted as a percentage of the number of households since 2009, the levels are considerably below the averages that supported significant migration to the state in the past. At about a 1 percent increase in the housing stock per year, new homes are being added

Source: U.S. Department of Census

at a rate that is only marginally greater than the indigenous increase in population. One wild card in home building is the proposed new tax law. As of the time of this writing, taxexempt municipal bonds for the purpose of constructing affordable units are poised to lose their tax exemption. As well, there is a proposal to eliminate state income tax and possibly property tax deductions on Federal income tax returns. This will lower disposable income in the state thereby reducing the demand for housing. Lower demand (fewer bids) reduces price (Econ 101), and therefore we should see prices for homes in California decline. But then we should become excited about a lower demand for housing resulting in more affordable housing. Well, no, the confetti needs to stay in the wrapper. The lower demand did not come from people leaving the state nor from balmy California weather going out of style. It would come because the cost of housing to the potential buyer went up. Were the tax proposals above to become law, housing would be less, not more affordable. How can this be? It is what economists call the incidence of the tax. When prices adjust in response to tax increases, part of the increase can be passed on to others. Where it falls is the incidence. Let’s take the potential homeowner, a millennial software engineer looking for their first

California Asphalt Magazine • 2018 Forecast Issue

California Construction Employment Jan. 2005 to Oct. 2017

700 600 500

05 06 07 08 09 10 11 12 13 14 15 16 17

Source: U.S. Department of Census

house. Prior to the tax change, they deducted state taxes from Federal taxes and their disposable income allowed them to pay a mortgage for one of those very nice California bungalow homes in the San Gabriel Valley. When they are not able to deduct their state taxes, adjusted gross income is higher and the Federal tax bill is higher. This is the idea of getting rid of the deduction; a higher revenue for the Feds to pay for tax cuts elsewhere. But our millennial has lower after tax income and now the bungalow is out of reach. This is the reduction in housing demand. With fewer people in the market to buy homes, and those in the market having less income, home prices must drop if they are to sell. But it is not lower prices that make the homes more affordable, it is lower disposable income that makes them less affordable. So the effective mortgage payment (principal + interest – tax deduction) goes up with a reduction in the tax deduction. At any given home price, the cost to the buyer increased. For homeowners the news is not good either. They will be less wealthy as the price at which they can sell their home will decrease. This capital loss will induce some to stay in their homes rather than take their equity and move to Sunny Acres in the Valley of The Sun. And for some others, being able to sell their home to move up, thereby freeing up homes all the way down the line, will be more difficult. So part of the incidence 13

(Thous.)

California Employment in Construction

1000 900 800

Growth in Population

3.0

(Thous. Units)

300

2.0

200

600

1.0

100

500

0.5

400 1984 1989 1994 1999 2004 2009 2014 2019

0.0 1965 1971 1977 1983 1989 1995 2001 2007 2013 2019

Source: U.S. Department of Census

of higher Federal taxes will be borne by a capital loss on the part of homeowners, and part by everyone who pays state taxes on their income. The implication for building is that with lower prices to the builder, less will be built. As a result, we have shaded, slightly, the new home construction forecast from 125,000 units to 121,000 units in 2019. This is not a huge change and there is risk on both the upside and the downside to the forecast. The state, for example, may take countermeasures that might offset the tax changes or their consequence for home building. Domestic Trade Indicators The final piece of evidence that the slowdown is real comes from cargo shipments through California’s main regional airports; Lindberg Field, Ontario International, Oakland International, San Jose Mineta, Sacramento International and Mather Field. One might ask, why are we leaving out the two largest airports in the state, LAX and SFO? The reason lies in the fact that these airports process a lot of cargo for international uses and for trans-shipments to other parts of the country. It is difficult to sort through that data and ascertain how it relates to the California economy. Having said that, we do look at these airports for tourist flows and for exports from California manufacturers. But here, we want to look more broadly at the state economy.

New Residential Units Through California Building Permits

400

2.5

1.5

700

(4-Qtr Percent Change)

Source: U.S. Department of Census

1977 1983 1989 1995 2001 2007 2013 2019 Single-Unit

Multi-Unit

Source: U.S. Department of Census

These airports were chosen because they turn out to be the preferred airports by package carriers for the transport of package goods in and out of the state. As such they are also a good indicator of overall economic activity. When considering cargo shipments in tons through these airports, there has been growth since the recession and both San Diego Lindberg and Ontario International traffic today exceed the pre-recession tonnage. However, a closer look reveals that the last 12 months are a bit different. In each case the growth in tonnage has ground to a halt. It might be possible, with squinting, to see some growth early in the year in the Northern California airports due to growth in the Sacramento region, but that dissipated in the latter part of the year. An acceleration of online purchases this holiday season could boost all of these, but that would be at the expense of brick and mortar retail. Thus, the data are not showing continued robust growth in the state in the coming year. The Forecast Our current forecast for California differs from the previous one in two ways. First, the aforementioned modest dampening of housing due to the new tax bill, assumed to pass in some form in our national forecast, reduces economic growth in the state. Second, the investment incentive, in particular the bringing forward of investment due to expensing,

increases our forecast growth rate for employment and income in 2018, though reduces it slightly by the end of 2019. The most likely outcome of these two opposite economic forces is for California’s unemployment rate to fall to 4.6 percent by the end of the forecast period (2019). Our forecast for 2017, 2018 and 2019 total employment growth is 1.2 percent, 1.5 percent and 1.1 percent, respectively. Payrolls will grow at about the same rate over the forecast horizon. Real personal income growth is forecast to be 1.6 percent, 3.1 percent and 3.6 percent in 2017, 2018 and 2019, respectively. Homebuilding will reach about 121,400 units per year at the end of the forecast horizon. The UCLA Anderson Forecast was prepared based upon assumptions reflecting the Project’s judgements as of Dec. 2017. It should be considered that this forecast was written and released prior to President Trump's Tax Cuts and Jobs Act. The UCLA Anderson Forecast is published quarterly and is a unit of the UCLA Anderson School of Management. The information provided in this article is only a small excerpt of the UCLA Anderson Forecast for the Nation and California. Visit www.uclaforecast.com to review the UCLA Anderson Forecast in its entirety. For information regarding sponsorship of the UCLA Anderson Forecast, please call (310) 825-1623. CA

California Asphalt Magazine • 2018 Forecast Issue

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Optimism soars in our 8th annual survey; SB1 road funding, workforce among the top concerns By Russell W. Snyder

If you’re feeling better about things in 2018, you’re not alone. The 8th annual CalAPA “Better or Worse” survey shows respondents are vastly more optimistic than ever, although concerns about workforce recruitment, retention and training are a concern for industry and agency alike. The brief, non-scientific poll of more than 2,600 California Asphalt Insider newsletter subscribers, conducted in December, indicated the optimism soared to its highest level in the eight years the exclusive survey has been deployed, reversing a slide that began following the previous optimism peak in 2014. California Asphalt Insider is an official publication of the California Asphalt Pavement Association, as is the survey. The number of respondents who said 2018 would be better than 2017 stood at 62 percent, compared to 43 percent last year. The previous record high was 51 percent in 2014. “Business is booming!” one industry respondent wrote, and another added: “This was a very good year. It will be tough to have a ‘better’ year based on experience.” An agency respondent wrote, “More resources, finally.” Another agency representative said: 16

“Because SB1 money from the new gas tax will start flowing in, we will be able to afford to take better care of our roads. This is a welcome development!” Indeed, the passage in the state Legislature last year of SB1, the ”Road Repair and Accountability Act of 2017,” clearly buoyed the optimism of the survey respondents. The bill, which raised the state's fuel taxes for the first time since 1994, will generate more than $5 billion per year for transportation, with most of the money devoted to roads, National studies show California has some of the roughest roads in the nation, largely due to lack of money for maintenance and repair. SB1 will split money between state and local governments, and has spurred agencies to start ramping up road improvement work in anticipation of the new investments. The fuel tax hike kicked in last November. Many counties also have taken matters into their own hands, with voters in 22 of California's 58 counties approving sales-tax hikes devoted to transportation by greater than a two-thirds majority required by the California Constitution. The prospect of adequate resources devoted to pavements clearly boosted optimism in the survey.

On the negative side, only 5 percent of respondents said 2018 would be worse than 2017, compared to 21 percent who felt that way in the 2017 survey. The highest “worse” percentage in the history of the survey was 25 percent recorded in 2010, with the state mired in a deep recession and road-repair budgets plummeting. Of the overall respondents, about 32 percent were public agency representatives, with the rest comprising asphalt producers, refiners, paving contractors and other companies that are part of the industry, plus a smattering of others. For the second year in a row, the survey added a bonus question, “What is the No. 1 challenge where you work?” That question elicited 147 written responses, with lack of being able to attract and retain qualified workers the top issue among industry and agency respondents, followed by regulatory challenges. “Qualified staff. Always is, always will be,” wrote one state agency respondent. A local agency representative added, “There has been a complete turnover in our office the last couple of years. Lack of institutional memory is an issue.”

California Asphalt Magazine • 2018 Forecast Issue

Industry respondents repeated the same concern over and over, worded in several different ways, such as “skilled labor,” “finding qualified and competent labor” and “having enough qualified people to build projects.” Bureaucratic and regulatory hurdles also were prominent in the survey results. Wrote one local agency respondent of their biggest challenge: “Building road improvements with our limited budget while complying with all of the bureaucratic and regulatory requirements, and meeting schedules,” the person wrote. “We have layers and layers of state and federal requirements that all take time and money to comply with.” Another agency representative added, “streamlining the process ... ability to make decisions in the best interest of the taxpayer without bureaucratic or industry interference.” “The main survey question is purposefully vague: “For your company or organization, how do you think 2018 will compare to 2017?” However, most of the voluntary comments offered up by survey respondents to justify their opinion centered around how much work is expected in the coming year. The answer varied slightly by company, agency and region, reflecting the size and diversity of California's massive economy and the economic micro-climates that are spread across the state that, if it were a separate country, would

be the sixth largest economy in the world. As in previous surveys, the weather largely depends upon where you are standing. Some respondents commented that work was booming, while a few were disappointed. “Funding is slow getting to road-builders,” one supplier said. Economists similarly note that California's economic recovery has been uneven around the state, although overall it does appear to be picking up steam and is outpacing the nation. In Gov. Jerry Brown’s proposed state budget for 201819, released in January, the governor said the state was bringing in record revenue, and that the state’s “rainy-day” fund of reserves was flush, but he cautioned that an economic downturn is inevitable, which could crimp state revenues. “California has faced 10 recessions since World War II and we must prepare for the 11th,” Brown, in his final year of office, said in his budget letter to the Legislature. “Yes, we have had some very good years and program spending has increased steadily. Let’s not blow it now." His $131 billion spending plan for the fiscal year that begins on July 1 is projected to include a “rainy day” reserve of $13.5 billion. Despite the large reserve fund, Brown said economic headwinds and future pension obligations could put the state’s finances at risk.

California Asphalt Magazine • 2018 Forecast Issue

Still, CalAPA survey respondents remained upbeat about the future. “Economy seems to be picking up ... on the private side,” one asphalt producer wrote. A supplier added, “People have more faith in the economy.” Industry respondents were slightly more optimistic than agency personnel, and the highest percentage of those predicting 2018 would be about the same as 2017 came from local agency personnel. A few worried about the potential repeal of SB1, which they feared could create havoc with road budgets. “A lot depends on whether SB1 is successfully repealed,” one agency respondent wrote. “If the repeal is not successful, I would expect things to be a whole lot better.” Political operatives and some Republican elected officials are backing a proposed initiative, currently in the signature-gathering stage, that would roll back the gas tax and require any future such tax hikes to go before voters. CalAPA is among a broad coalition of business, construction and union groups that oppose the potential initiative. A total of 205 people took part in the voluntary on-line survey, which was conducted from Nov. 10 to Dec. 15. CA

CalAPA Better-Worse survey selected comments grouped by category of respondent (Comments lightly edited for clarity) PAVING CONTRACTORS: (7 Better, 0 Worse, 3 Same) GENERAL COMMENT(S): • Quantity of work being advertised should play to the supply demand formula as long as all contractors can read the smoke signals and tea leaves. • Record-breaking backlog of work. • Strong Private market plus SB1 funding. • SB1 money and the economy is growing. • Already getting a good backlog. CHALLENGE: • Having enough qualified people to build the projects. • Trucking. • Finding good people that live in or near the Bay Area. • Keeping up with Caltrans specification's and contract administration. • No skilled workers. The effort it takes to teach the young workers the skills to do the job. • Finding profitable work and being low bidder. • Qualified help. • Finding and hiring good skilled labor. The second is identifying and permitting good, viable material sources. • Traffic/commute times/ability to get materials to projects. • Dealing with competent people from the Cities and Caltrans. • Finding qualified help throughout all aspects of the company. • Finding skilled labor. • Adding quality people. • Finding qualified and competent labor. • Regulations. • Finding enough qualified employees. • People. • Skilled labor. 18

• Finding people who will actually work as opposed to just accepting a pay check...and actually know what they're doing. STATE AGENCY: (13 Better, 2 Worse, 4 Same) GENERAL COMMENT(S): • SB1 "A whole lot of Money" may create funding opportunities that exceed any prior year by 5X. More projects and work for all industries. • More funding ($) coming that is more projects = good. • SB1 will provide appropriate funding for transportation. • SB1 funds. • SB1 State funding. • Coming to grips with the demands and opportunities of SB-1 will still continue through the new year. • With the additional funding coming from SB1, we anticipate a lot more maintenance related work including paving projects. • SB1 moneys will help all agencies and industry. • Increased workload is great if you have the personnel to complete the tasks. • Increased awareness of the impacts of our construction standards. Money can heal a lot of wounds. • SB1 will be repealed. Many layoffs. Loss of funding. Trump tax increases for CA workers and home owners means much higher taxes, increased personal debt, less spending money, drop in property values, possible repeat of the 2008 recession, loss of income for California budget. • Funding to do our job right. Energy from new hiring and increased workload.

• In my opinion it will be status quo at Caltrans. There will be more work but the way things are managed will be the same. • We are getting more funds for roads to improve. SB1 is bringing more funds. • More transportation funding. CHALLENGE: • Having experienced staff on board beyond 2-3 in the future. • Streaming the process, leading the way, ability to make decisions in the best interest of the taxpayer without bureaucratic or industry interference. • Need to be one team. • Appropriate staffing for increased work and hiring qualified staff. • Lack of experienced and trained personnel. • Staff turnover. • Getting trained staff to handle the additional workload. • To meet to additional requirements set forth by the legislation. • Finding, attracting and hiring "qualified" personnel. • Poor communication and coordination with other groups. • Morale. If SB1 is rescinded, all the new hires will be out the door. Succession plans will tank. • Qualified staff. Always is, always will be. • Graying workforce just as this increased workload is about to hit. • Having enough people to do the work who are trained and/or have the necessary technical experience. • To design the best pavement. [ Continued on page 20]

California Asphalt Magazine • 2018 Forecast Issue

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[ Continued from page 18]

LOCAL AGENCY: (30 Better, 3 Worse, 14 Same) GENERAL COMMENT(S): • Hopefully, bid prices will stop rising by then. I work for a local municipality, and we've been receiving fewer bids for projects, and the prices were usually higher than expected. • Federal Government funding is slow to disperse to state and local agencies level. • SB1. • Hoping for more significant work projects such as Biomass/ Pyrolysis/Gasification systems to help address Tree Mortality and improve air quality. • Additional funding provided by SB1. • Because SB1 money from the new gas tax will start flowing in, so we will be able to afford to take better care of our roads. This is a welcome development! • Our construction outlook is very good, plus, with new visionaries at upper levels of management, we are positioned to have better progress in the areas of technology and infrastructure. • Additional SB1 funding will start to kick in to supplement paving program. • More and more environmental agency requirements make it more costly and time consuming to get projects out to bid and constructed. • Potential of more HMA monies for our city. Recent fires have put many from different regions to work in our area. • SB-1! • Increased workload is planned, but staffing up is not happening fast enough. It is a challenge to attract talent. • Increased revenue. • SB1. • More money for building and road maintenance. • Lack of funding for high cost projects. 20

• Because of SB1 funds. • Things have not changed for us. • Increase in transportation funding. • More road projects administered. • Additional funding is anticipated to come in, starting in 2018 and continuing into the foreseeable future, to fund capital improvement projects, maintenance activities, and other essential Public Works functions. • 2017 was the best year since the great recession. Business was much improved. For next, year I except development activity to be the same as 2017: good but not amazing. • Annual city budget requests have been flat for the last several years and we have been told to keep them flat until further notice. • Hoping to see additional funding from SB1 and a new franchise agreement, but the reality is those funds will likely not be realized until after 2018. • More resources, finally. • More funding devoted to transportation. • Same policy. • With the addition of SB1 funding to the Road funds, more projects will be realized and this additional project workload will keep employment strong. • Not much has changed. • More funding is available to us. • Dedicated SB1 funds allow for future planning and spending. • With the new gas tax funds we should be better able to maintain existing infrastructure. Hopefully it will not be another tax and spend opportunity for the legislature with only a portion of the funds going toward their intended use. • Because I think California will face another recession, and we have people in charge who don't know what it takes to

•

• • •

•

get the job done, so they are not providing the necessary resources. Adjusted our County roads to multiple categories, each one shall receive different rehab strategies according to such factors as PCI, Traffic, etc. 2. Possible to have more available funds. Local residents have passed a ballot measure which allows us to take care of the infrastructure in the worst condition. The Gas Tax increase will also help, if it stays in force. Until the County I work permits a Hot Plant that is committed to supplying Quality HMA (not simply HMA that meets specification tolerances), our roadways will continue to deteriorate. When you live in a large county (acreage) with low population and have just one Hot Plant, that plant should work to provide the best product possible and price their mix accordingly. Mix that has a history of longevity and durability issues should be corrected by the supplier without having to be hounded by the Agency. If we want Quality HMA, let's act like it. Moving to Superpave. Additional staff and equipment. Our county's taxpayers voted yes to a half cent sales tax to fund much needed road repairs and safety projects. Similar revenues and expenses.

CHALLENGES: • Not having enough funding and internal staff to handle all the work that needs to be done. • Funding. • Keeping staff trained adequately in the face of high turnover. • Salary Increases (which have not been budgeted in almost 10 years!) • Permitting Biomass/Pyrolysis/ Gasification systems.

California Asphalt Magazine • 2018 Forecast Issue

• My biggest challenge: Getting NEPA clearance from Caltrans in a timely way on federallyfunded projects. In a more general way, here is my biggest challenge: Building road improvements with our limited budget while complying with all of the bureaucratic and regulatory requirements, and meeting schedules. We have layers and layers of state and federal requirements that all take time and money to comply with, such as CEQA and NEPA clearance, meeting CMAQ, STP, ATP, HSIP, and other funding requirements, and environmental/ regulatory requirements (ACOE, RWQCB, CDFW, etc.). Plus we have to meet deadlines tied to the funding. • Uniformity. • Availability of contractor and material may become a challenge. • Finding enough funding to repair our failing infrastructure. • Keeping our roads to a high standard. Large percent of monies needed to fix/surface treatment roads being diverted to ADA ramps. • Staffing / personnel. • Paying salaries sufficient to attract and retain talent. • Staffing. • No time. • Funding. • Finding sufficient funds to accomplish the necessary tasks. • Too many various types of projects competing for the same resources. • Recruiting and retaining qualified staff. • Extreme costs for employee benefits are restraining us from hiring the people we need. • Fulfilling work request schedules within the time frame asked with fluctuating staff availability due to flat budget (i.e., no new hiring), vacations, sick leave, etc.

• Funding. • Adequately trained staff. • Organizational capacity. • Funds. • Funding. • To get all roads up to a good PCI with the funding that we receive. • Choosing where and how the dedicated SB1 funds will be spent to make the best use of those funds and keep the public happy. • There has been a complete turnover in our office in the last several years. Lack of institutional memory is an issue. • Inept management who base decisions on theory rather than on practicality. • Add more tools to my Pavement Repair tool box. • Getting quality asphalt from suppliers. VMA tolerances are way too high. A 1/2" HMA with a 16+ VMA may be within specification but does not classify as quality mix. I can understand variations that are out of the suppliers control but when you continually produce a 1/2" HMA with a 16+ VMA (asphalt film thicknesses exceeding 11 microns) without adjustments to maintain JMF approval values and targets, that supplier is knowingly supplying low quality HMA. Quality is a two way street. • Resources. • Long commute. ASPHALT PRODUCERS: (14 Better, 1 Worse, 3 Same) GENERAL COMMENT(S): • Expanding number of plants, increased work on the books. • Until the feds can pass an infrastructure bill not much will change. • SB1. • Our backlog and upcoming jobs we hope to get. • I think there is more work being created, both Public and Private within our region.

California Asphalt Magazine • 2018 Forecast Issue

• SB1 money allowing for more much needed paving work in California. • We are highly involved with research and development to maximize profits in some of our many arenas. And, I believe that more asphalt will be available this year than last. • SB1, High Speed Rail. • SB1 transportation bill. • Anticipating more local agency work. • The new construction market is picking up in the greater Sacramento area. • More public money for roads and more private building. • Caltrans revenue is down. • Local funding seems to be increasing, Measure M and SB1. Economy seems to be picking up also on the private side. • Great staff. Knowledgeable team. Lots of potential work in our regions. • A lot depends on whether SB1 is successfully repealed. If the repeal is not successful I would expect things to be a whole lot better. CHALLENGES: • Keeping qualified staff. • Finding dependable, quality people. • Ridiculous specifications, typically private projects like Costco or Home Depot, Airport and AFB specs. • Hiring and training new talent. • Enough room to work. • Currently that would be permitting issues. • Communications, especially when things get hectic. • Revenue stream. • The current market conditions of low margins, low work. • Qualified labor. • Working with Caltrans. • Finding competent technical personnel. 21

REFINERS/SUPPLIERS EQUIPMENT MANUFACTURERS: (Note: These categories have been combined due to small individual category sample sizes) (20 Better, 1 Worse, 3 Same) GENERAL COMMENT(S): • SB1 money allowing for more much needed paving work in California. • Improved funding. • Costs going higher due to California fees, health care costs, raw material. • SB1 funding. • Hopefully the SB1 $ help grow the pie for everyone. As we are primarily emulsion I think there is a chance that much of $'s will go to overlay vs. seal coats. Good of APA bad for us. • New product line coming out. • Funding, Funding, Funding and Funding. • We are involved with pavement preservation and surface treatment applications and these have been growing steady as agencies get it pounded into them to go forward to preserve their asphalt inventory (roads). Really, SB1 is a result of the years of work. • Funding is slow getting to the road builders. • Anticipate the private sector falling a bit as the funding from the gas tax and a possible infrastructure bill start to come through. • It would be very difficult to improve beyond the results of this year. • SB1! • I don't really know, just hoping it won't be worse. • This was a very good year. It will be tough to have a "better" year based on experience! • New management. • 2017 began with high expectations of a large federal infrastructure funding boost which never occurred. Thankfully, state gas taxes helped but the year was late in getting started. • Funding seems to be about the same Year-Over-Year. 22

• Customers say they are busy. • Infrastructure upgrades have received so much attention for so long that it cannot be ignored. I believe we will see more investment in roads and bridges starting in 2018. • Growing economy. • Producers are getting busier due to long neglected roads that at one time were repairable but now are beyond repair and are structurally deficient and require complete removal and replacement. • Transportation budget for road repair. • People have more faith in the economy. • Business is booming! • I say about the same to be optimistic but will probably be a little worse. A lot of sales were made in 2017 so most of our customers will be set for 2018. CHALLENGE(S): • Profit margins and competitive nature of the asphalt supply market. • Challenges still remain with Caltrans contracts. • California costs. • Possibility that demand will outpace supply. • Labor shortage. • Finding qualified workers. • Effective marketing. • Finding good people (mechanics, sales, etc.). • Qualified help for the pay schedule. • Being a small business in the State of California. • Ego. • State of California regulations. • Supply chain. • Stalled approvals on High RAP mixes. • Finding customers that are ready to buy. • Finding the skilled labor is still difficult. Even with training or apprenticeship programs, finding good people to participate is tough.

• Finding the skilled labor is still difficult. Even with training or apprenticeship programs, finding good people to participate is tough. • Finding good people. • Finding qualified help to handle the increased work load. 1a. controlling ever-escalating costs for those employees to stay profitable. • Rules and regulations. • Finding and keeping good people. • Finding good mechanics to work on asphalt road-building equipment. NOTES ON THE SURVEY & COMMENTS: • The non-scientific on-line survey of 2,500 CalAPA “Asphalt Insider” newsletter subscribers was open in November and December. The newsletter subscribers include members, non-members, agency personnel and others. • Of the 205 people who took the on-line survey, 168 made a comment after the first “Why” question, and 147 made a comment on the optional “challenges” question. • Those surveyed were asked the following: For your company or organization, how do you think 2018 will compare to 2017?” and were given the following choices: “Better,” “Worse,” “About the Same” or “Don’t Know/No Opinion.” • The “Don’t Know/No Opinion” responses were not tabulated in the results above. • The “General Comment” question (“Why”), which was optional, immediately followed the questions above and was intended to prompt survey respondents to justify their answer. • A “Bonus (Optional)” question asked: “What is the No. 1 challenge where you work?” • For more information about this survey, contact CalAPA Executive Director Russell W. Snyder at (916) 791-5044, or via e-mail at: rsnyder@calapa.net . CA

California Asphalt Magazine • 2018 Forecast Issue

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California Asphalt Magazine • 2018 Forecast Issue

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NAPA PRESIDENT MIKE ACOTT ANNOUNCES RETIREMENT PLANS Mike Acott, longtime president of the National Asphalt Pavement Association and a familiar name to the asphalt industry in California and around the world, has announced he plans to retire in early 2019. In announcing the decision, Acott said, “It has been an honor to serve as NAPA’s president for more than 25 years. Although driven by the challenges and opportunities facing our industry, it is the people in the asphalt industry that have made my tenure so very special for me.” The NAPA Executive Committee has established a succession planning group to oversee the search for a successor. NAPA works in close coordination with the California Asphalt Pavement Association on numerous initiatives on behalf of the industry, including regulatory, legislative, engineering, research and market share preservation and enhancement. In addition to leading NAPA, Acott has also served as the Chairman of the Global Asphalt Pavement Alliance, which includes the paving industry from Japan, Australia, New Zealand, Europe, and Mexico. His career activities involve more than 30 years of experience in the pavement industry in Europe, South Africa, and the United States, including experience with aggregate and bitumen suppliers, and management of an asphalt construction company. He was named president of NAPA in 1992, and since then has helped develop partnerships with government agencies and unions that have resulted in an improved workplace environment. This has included successful national initiatives on engineering controls, warm mix, and best practices that have resulted in reduction in workplace exposure. Acott has authored and co-authored numerous peer-reviewed and non peer-reviewed 24

publications and reports on various facets of asphalt pavement design, construction, and materials technology. Many of these papers have been presented at national and international conferences such as Transportation Research Board, Conference for Asphalt Pavements for Southern Africa, Eurasphalt, Eurobitume, American Society for Civil Engineers, UK Institute for Asphalt Technology, International Conference on Low Volume Roads, International Conference on the Structural Design of Asphalt Pavements, the Association of Asphalt Paving Technologists, and the World of Asphalt. He has been active in the Transportation Research Board and is a former member of its Executive Committee and has also served as a Board member of the National Center for Asphalt Technology (NCAT), based at Auburn University. He was presented with a lifetime achievement award at last year’s NAPA Annual Meeting. Acott was a keynote speaker at the CalAPA Fall Asphalt Pavement Conference & Equipment Expo in Sacramento in 2013, and at that event also presented officials with the California Department of Transportation with a special “Pavement Pioneer” award on behalf of the Asphalt Pavement Alliance for Caltrans’ successful efforts to implement long-life (perpetual) asphalt pavement designs on state highways. Don L. Daley Jr., president of California Commercial Asphalt and a longtime CalAPA Board Member, also serves as a state director for NAPA. Daley is a past recipient of a NAPA “Asphalt Ambassador” award for his support of the NAPA legislative program. He said Acott’s leadership is recognized far and wide, and he will be missed.

Above: NAPA President Mike Acott speaks at the CalAPA Fall Conference in Sacramento in 2013.

“I have enjoyed working with Mike Acott over the years in areas of mutual interest,” Daley said. “NAPA and CalAPA have worked closely on environmental regulations, engineering standards and legislative matters. In California, we benefitted enormously from NAPA-led research on health and safety for our industry. Mike’s leadership has been exemplary, has elevated the entire industry, and we wish him well in his retirement.” Jim Roberts, Chief Executive Officer of CalAPA-member company Granite Construction, who served as a past NAPA Chairman, said, “In his tenure at the helm of NAPA, Mike’s hard work and dedication to the health and wellbeing of the HMA industry has been outstanding. The wfull extent of his tireless work behind the scenes will never be known.” CalAPA Executive Director Russell W. Snyder said that, under Acott’s leadership, California benefitted greatly from the synergy between NAPA’s national and international focus, and CalAPA’s activities in California, which is often a bellwether state for economic, regulatory and legislative trends that migrate across the country.

California Asphalt Magazine • 2018 Forecast Issue

known as State Asphalt Pavement Associations (SAPA). NAPA works closely with SAPA on numerous strategic issues, and the national and state organizations contribute to pooled funds for research and marketing. “During my tenure as NAPA President I have appreciated the partnership, leadership, and support from NAPA members in California and from the California Asphalt Pavement Association,” Acott

told California Asphalt magazine. “I particularly want to thank Don Daley, your state director, and Russell Snyder, your Association leader – we have worked together on numerous issues for the benefit of the asphalt pavement industry at the state and national level. Also, a big thanks to Jim Roberts of for his leadership as NAPA Chairman in 2006.” CA

Above: NAPA President Mike Acott, left, presents an Asphalt Pavement Alliance “Pavement Pioneer” award to Tony Tavares of Caltrans. The presentation was made in 2013 at the CalAPA Fall Asphalt Pavement Conference in Sacramento.

Snyder said a premier example of that partnership occurred in 2016 when NAPA and CalAPA, joined by the Asphalt Institute, teamed up to respond to a California Environmental Protection Agency scientific review of health impacts of asphalt. Building on many years of work done by NAPA and others on the international level, the state’s Carcinogen identification Committee ultimately agreed with the industry recommendation that further examination of asphalt, based on numerous scientific, health and occupational safety studies, was a low priority and not warranted at this time. “NAPA’s prompt response and support on this complex issue was instrumental in our industry securing a favorable result from this robust scientific review,” Snyder said. “Mike Acott and his leadership team, including Dr. Howard Marks, instantly realized the potential threat to our industry posed by this review were we not fully engaged, and responded in a very effective way.” Acott was featured in a lengthy interview in the 2017 Quality issue of California Asphalt magazine – an interview originally conducted by Cliff Ursich, president and executive director of Flexible Pavements of Ohio and a leader of a coalition

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California Asphalt Magazine • 2018 Forecast Issue

BUOYED BY ROBUST ECONOMY, NEW SB1 DOLLARS, LONG-DEFERRED ROAD-IMPROVEMENT PROJECTS START TO MOVE TO CONSTRUCTION By Russell W. Snyder

Jerry Brown, ever the contrarian, offered perhaps the most dour good fiscal news of any governor in California history. Entering the last year of his record four terms as California's chief executive, Democrat Brown in January released his proposed state budget for 2018-19 that includes a big boost in transportation funding brought about by the passage last year of SB1. The proposed $131 billion spending plan for the fiscal year that begins July 1 reflects the continuing strong performance of the California economy, which has resulted in higher tax revenue, the governor said. However, he cautioned that an inevitable economic downturn could pose problems for the state's ability to deliver services. “California has faced 10 recessions since World War II and we must prepare for the 11th,” the governor said in his budget letter to the Legislature. “Yes, we have had some very good years and program spending has increased steadily. Let’s not blow it now.” The governor’s comments threw cold water on economic forecasts that continue to show California’s economy growing at an impressive rate, and predictions that tax receipts will trend higher than expectations. The proposed budget is now in the hands of the Legislature, which will begin the monthslong process of reviewing, changing and forwarding a finalized budget to the governor prior to the end of the state’s fiscal year on June 30. As recently as 2011, the state faced a $27 billion deficit due to the “Great Recession,” during which unemployment spiked and the state scrambled to meet its obligations. An improving economy, a voter-approved tax increases and other factors have put the state on a much more sound footing financially, although Brown continues to worry aloud about the state’s pensions and other obligations. California tax revenues are closely tied to the economy and are susceptible to wild swings as economic activity swells or contracts. The governor’s voter-endorsed “Rainy Day Fund” will grow to $13.5 billion under his 2018-19 budget. The spending plan reflects the first full year of new transportation funding brought about by the Road Repair & Accountability Act of 2017, or SB1, which was passed by a two-thirds majority of the Legislature last year and signed into law by Brown on April 29. It will generate more than $50 billion in new funding for transportation over 10 years, generated by a combination of vehicle registration fee hikes and the first increase in the state's fuel tax, 12 cents per 26

gallon, since 1994. The funds are split evenly between the state and local governments, and the “Fix it First” emphasis of the bill means a large share of the money will be devoted to repairing or rehabilitating state and local streets. Among the highlights of the transportation budget: • Neighborhood roads, state highways and bridges ($2.8 billion in new SB1 revenues). This is intended to reduce the backlog of poorly-maintained roads that studies have shown cost the average California motorist more than $700 per year in vehicle repairs and wasted fuel from driving on rough pavement. This is $1.3 billion higher than the current year. • Making key investments in trade and commute corridors to support continued economic growth and implement a sustainable freight strategy ($556 million). • Matching locally generated funds for high-priority transportation projects ($200 million). State Sen. Jim Beall, D-San Jose, chairman of the Transportation & Housing Committee and SB1 author, released the following statement reacting to the governor’s budget as it relates to roads: “I support the fast implementation of projects funded by SB1. We are going to insist that the money be spent quickly to reduce the backlog of road repairs.” Beall delivered much the same message when he spoke at the CalAPA Fall Asphalt Pavement Conference last October in Sacramento. The California Department of Transportation (Caltrans) will have more than 19,500 employees, the budget notes, and a $13.6 billion budget. The new budget calls for the hiring of an additional 400 maintenance personnel. SB1 called for Caltrans to identify $100 million in cost-savings and efficiencies. The department is still working on its plan to realize those cost-savings, and has solicited input from CalAPA and other construction industry representatives for recommendations. Indeed, getting SB1 dollars converted to road improvements that motorists can see has become a mantra for state and local agency officials, as well as the construction industry that lobbied heavily in favor of SB1 and will now be tasked to build the projects quickly and efficiently. Getting the word out about the tangible benefits of SB1 has taken on greater urgency in recent months as political operatives California Asphalt Magazine • 2018 Forecast Issue

backing Republican elected officials have criticized SB1’s tax and fee hikes and are collecting signatures for a proposed ballot measure to repeal it. CalAPA, part of a broad coalition of SB1 backers, began the new year by distributing thousands of SB1 “Fixing YOUR Roads” bumper stickers statewide. Presenting samples to the California Transportation Commission during its January meeting, CalAPA Executive Director Russell Snyder told commissioners that the best SB1 advertisement is “orange cones and sign trucks that say ‘road work ahead.’” Transportation and SB1 were prominently featured in the governor’s annual “State of the State” speech he delivered in January at the Capitol. “Our economy, the sixth largest in the world, depends on mobility, which only a modern and efficient transportation system provides,” the governor said. “The vote on the gas tax was not easy but it was essential, given the vast network of roads and bridges on which California depends and the estimated $67 billion in deferred maintenance on our infrastructure. Tens of millions of cars and trucks travel over 330 billion miles a year.” Brown also took the opportunity to let some air out of the tires of Republicans in Washington, D.C., who have been unable to put forward a long-promised federal transportation plan despite controlling both houses of Congress and the White House. “The funds that SB1 makes available are absolutely necessary if we are going to maintain our roads and transit systems in good repair,” the governor said. “Twenty-five other states have raised gas taxes. Even the U.S. Chamber of Commerce has called for a federal gas tax because the highway trust fund is nearly broke. Government does what individuals can't do, like build roads and bridges and support local bus and light rail systems. This is our common endeavor by which we pool our resources through the public sector and improve all of our lives.” Brown reserved his harshest words in his final State of the State speech for Golden State Republicans and other political operatives who have seized upon the California gas-tax hike as a potential campaign issue, including a possible ballot-box repeal. “Fighting a gas tax may appear to be good politics, but it isn’t,” Brown said sternly. “I will do everything in my power to defeat any repeal effort that may make it to the ballot.” The CTC in October voted to speed up 90 construction projects worth about $3.4 billion, bringing the total approved for accelerated work to more than $5 billion under the Road Repair and Accountability Act of 2017, or Senate Bill 1. SB1 is expected to generate more than $50 billion over the next decade for state and local transportation projects. Ground-breaking ceremonies continue to be held up and down the state, sometimes creating awkward situations where California Asphalt Magazine • 2018 Forecast Issue

elected officials who voted “no” on SB1 stand next to those who voted “yes.” The spate of new projects are located throughout the state and vary in cost, from a $2.5 million repairing of a portion of a bridge on State Route 33 in Ventura County to a $339 million upgrade of shoulders, ramps and 11.6 miles of Interstate 10 in Riverside County. Other expedited large projects included an almost $136 million refurbishing of 25.4 miles of Interstate 5 between Dunsmuir and Mount Shasta; a $247.2 million bridge project on I-5 in Sacramento; and nearly $130 million for improving U.S. Highway 101 in Monterey County. Although roads are prominently featured in SB1, other neglected transportation infrastructure also will see investments. SB1 devotes $100 million per year to so-called “Active Transportation” projects, such as bike lanes and walking paths. At the CTC meeting in January, for example, the commission approved construction of a multi-use trail and parking lot alongside Cactus Avenue in the City of Rialto (San Bernardino County), which will connect up with an existing regional bicycle network. Another approved bike path project in Orange County along Hazard Avenue will provide a safe bike route to school for students attending 15 local schools and also provide access to a regional shopping mall and transit hubs. The law will effectively double maintenance dollars for state highways transportation. Cities and counties, also in line for a doubling of their transportation funds under SB1, can use that money for basic maintenance, rehabilitation and critical safety projects on local streets and roads. The “Rebuilding California” website offers an interactive map of SB1-funded projects through the state ( www.rebuildingca.ca.gov ). The law also emphasizes the importance of accountability and transparency in the delivery of California’s transportation projects. Cities and counties must annually highlight progress on projects funded by SB1, and the process will be overseen by an independent Inspector General, who recently was appointed to the newly created position. According to Caltrans projections, the law will enable Caltrans to fix more than 17,000 lane miles of pavement, 500 bridges and 55,000 culverts by 2027. The department also will fix 7,700 traffic operating systems, such as ramp meters, traffic cameras and electric highway message boards that help reduce highway congestion. Reflecting the wide reach of SB1, which will benefit communities in every part of the state, the CTC also adopted the final list of cities and counties eligible to receive SB1 funds, bringing the total to 479 cities and all 58 of California’s counties. The money will be devoted largely to maintenance, rehabilitation and 27

safety projects. The commission will oversee the disbursement of the money to ensure it is used for its intended purposes. Following Brown’s “State of the State” address, Assemblyman Jim Frazier, D-Oakley, Chairman of the Assembly Transportation Committee and major proponent of SB1, noted that he doesn’t always agree with the governor, but “I do applaud him for his leadership in righting the state financially these past seven years and for being an advocate for funding our transportation infrastructure.”

SB1: Debunking the Myths Special to California Asphalt Magazine 1. MYTH: Practically none of the SB1 funds will be used to fix our roads. FACT: SB1 invests more than $5 billion annually directly for maintenance, repair, and safety improvements on state highways, local streets and roads, and bridges. SB1 also provides investments in mass transit to help relieve congestion. 2. MYTH: SB1 will cost California families upwards of $700 a year. FACT: The California Department of Finance calculated that the average cost to motorists is roughly $10/month. Here’s the math: • Registration: Nearly 50 percent of all registered vehicles in California are valued at less than $5,000. Forty percent are valued at less than $25,000. Thus, the average annual amount for vehicle registration is approximately $48. • Fuel: California’s 26 million licensed drivers consume 15.5 billion gallons per year. That is 577 gallons per driver, multiplied by 12 cents per gallon is $69.24 each. The annual average cost per driver is: Vehicle Registration $47.85, Fuel $69.24, Total $117.09 per year OR $9.76 per month. 3. MYTH: SB1 funds go directly into the state's General Fund, meaning there's zero guarantee the money will be used to fund transportation improvement projects. FACT: Revenues go directly into transportation accounts and are constitutionally protected. Article XIX of the California Constitution already protects the gasoline excise tax and vehicle registration fees, and a portion of the sales tax on diesel, and dedicates them to transportation purposes. This accounts for about 70 percent of the 28

revenues generated by SB1. ACA 5, a constitutional ballot measure which will go before the voters in June 2018, extends these same constitutional protections to the remaining 30 percent of new revenues generated by SB1. It’s also important to remember, all gas tax moneys that were loaned in prior decades to the General Fund will have been repaid under SB1. 4. MYTH: There is no oversight. FACT: SB1 creates a new Office of the Inspector General (IG) charged with overseeing projects and programs to ensure all SB1 funds are spent as promised and to reduce bureaucracy, waste and red tape. The IG is required to report annually to the state Legislature. Furthermore, SB1 has significant accountability and transparency provisions designed to ensure the public has full access to information on how their tax dollars are being invested. Cities and counties must publicly adopt and submit to the state a planned list of projects and year-end reporting that accounts for every single dollar of SB1 revenue they receive. Bottom line: SB1 includes provisions to streamline projects by cutting red tape to ensure transportation funds are spent efficiently and effectively. 5. MYTH: None of the new funds can be used to build new roads. FACT: SB1 funds can and will be used to build new roads and increase capacity on our roads and highways. • SB1 funds will be used to restore the State Transportation Improvement Program (STIP). The CTC previously cut and delayed $1.5 billion in projects from STIP, including new capacity projects, which are now eligible to move forward. • There is $200 million annually in SB1 for self-help counties that can be used on new roads and capacity increasing projects. • SB1 includes $250 million annually for congested road and highway corridors and $300 million for the trade corridor programs, which can both fund increased capacity. • Lastly, while cities and counties will primarily (initially) be using local funds on “fix it first” projects to repair roads in bad shape, local governments can use these funds for new roads and capacity enhancements, especially once their road conditions are brought up into a state of good repair. California Asphalt Magazine • 2018 Forecast Issue

6. MYTH: California can dedicate existing General Fund revenues to fix transportation. FACT: California has a combined need of over $130 billion over the next 10 years just to bring the state highway and local street and road systems into a good and safe condition. If we were to use funds from the General Fund, we would need to pull $130 billion from important areas like education, healthcare, public safety, and other programs that Californians rely upon. SB1 follows the user-pay model where everyone pays their fair share and all drivers pay a little more to fix the roads they drive on. It’s a responsible, accountable way to fix our roads. 7. MYTH: California already has the highest gas tax in the nation. FACT: Figures from the Tax Foundation and the American Petroleum Institute show Pennsylvania tops out as the highest in the nation. California’s gas taxes haven’t been raised in more than 20 years and, as a result, transportation improvement funding simply hasn’t kept pace with inflation, leading to the backlogs of unfunded infrastructure. SB1 changes that. Since 2013, 26 states have increased gas taxes and other transportation revenues to fix their roads and bridges. In fact, of those 26 states, 17 are governed by Republicans. 8. MYTH: SB1 impacts on our economy are minimal. FACT: SB1 is a job creator. The White House Council of Economic Advisors found that every $1 billion invested in transportation infrastructure supports 13,000 jobs a year. With the $5 billion annually planned from SB1, this measure will put 650,000 people to work rebuilding California over the next decade. 9. MYTH: California’s working families and businesses cannot afford this tax increase. FACT: California motorists currently pay $763 per year, on average, in extra vehicle repair costs due to wear and tear because of the poor condition of our roads. With SB1, CA drivers will save money by driving on improved roads and will need fewer vehicle repairs. 10. MYTH: SB1 funds are being diverted to CSU and UC for research. FACT: SB1 directs $7 million (one-tenth of one percent of total SB1 revenues) to CSU and UC transportation research institutions for research directly related to improving transportation California Asphalt Magazine • 2018 Forecast Issue

technology, practices, materials, and impacts to the environment. 11. MYTH: According to polling, Californians oppose the gas tax increase. They will support a ballot measure to repeal SB1. FACT: Polls consistently show voters are fed up with California’s bad roads and will support new revenues to get them fixed. If a repeal measure makes it on the November 2018 ballot, we are confident voters will want to want to preserve funding to provide safer roads and bridges, improve congestion, and fix potholes. 12. MYTH: California Gov. Jerry Brown has proposed "diverting 30 percent of the funding" from the state’s gas tax increase "to non-road related projects like building parks and lifeguards." FACT: A percentage of the existing gas tax revenue related to fuel sales from boats, agricultural equipment, and other off-highway vehicles (quads, dirt bikes) has always gone toward supporting infrastructure related to these economic and recreational activities. The percent of gas tax revenues collected from these sources is 2 percent. 13. MYTH: Some of the funds raised by SB1 will be used to repay outstanding loans from certain transportation funds. FACT: All outstanding transportation loans are being repaid by the General Fund. In fact, the FY 2016-17 state budget already started to repay those loans. SB1 requires all loans to be repaid by 2020. 14. MYTH: According to the state legislative analyst, Caltrans is overstaffed by 3,500 positions. FACT: Caltrans staffing levels are currently at the lowest they’ve been in a decade. Additionally, SB1 mandates that the California Department of Transportation “shall implement efficiency measures with the goal to generate at least one hundred million dollars ($100,000,000) per year in savings to invest in maintenance and rehabilitation of the state highway system.” 15. MYTH: SB1 dollars will be diverted to fund high-speed rail. FACT: No funds raised from SB1 will be used to fund high-speed rail. California’s state-maintained transportation infrastructure will receive roughly half of SB1 revenue: $26 billion. The other half will go to local roads, transit agencies and an expansion of the state’s growing network of pedestrian and cycle routes. There is no remaining balance that could be used for the high-speed rail project. A full overview of how the funds are allocated can be found at http://rebuildingca.ca.gov . CA 29

MEMBER SPOTLIGHT

The R.J. Noble Company continues to evolve with new Astec Double Barrel drum mix plant in Corona By Brian Hoover

R.J. Noble Company (R.J. Noble) is a General Civil Engineering Contractor that specializes in grading and asphalt paving projects, with two asphalt plants, a rock plant, and a recycling operation. The company started out in 1950, when Robert Noble made a deal with landowner Roy Kokx, to acquire land to form a rock plant, small asphalt plant and a pit mining operation in the City of Orange. The company started out on a bare minimum of 25-acres, and by 1953, Robert Noble had grown his company to 25 employees while acquiring an additional 50-acres from Roy Kokx to expand the rock quarry operation. The business has been family oriented from the start, with Robert Noble, two of his brothers, a cousin and a nephew, along with Robert’s brother-in-law contributing to the company’s success. Robert’s

brother, Bert Noble, developed and designed the company’s first asphalt plant, and in 1962, he became vice president in charge of engineering for the R.J. Noble Company. Paul Cleary, Sr. had been serving as the vice president, and upon Robert Noble’s death in 1965, he took over ownership of the land and company based on an agreement where the survivor takes all. The Cleary family, led by Paul, Sr. and his two sons, continued to own and operate the company for more than 28 years. In 1956, Roy Kokx’s son-in-law, William T. Carver, was brought in to learn the business from the ground up. His son, Michael J. Carver (Mike Carver), started his career with

R.J. Noble in 1977, and he also worked his way up, literally starting with tasks like pulling weeds and sweeping floors. He attended night school and graduated with a BS degree in business management from Cal State Fullerton. Carver worked hard and eventually became the company’s top estimator and project manager. He was promoted to vice president in 1998 and went on to purchase the company from Paul Cleary, Jr. in 1999. Through Carver’s leadership, the company now owns the original 25-acres in Orange, along with an additional 100-acres in Corona. R.J. Noble performs most of their asphalt

Background: R.J. Noble Company's new Astec Double Barrel drum mix plant in Corona.

California Asphalt Magazine • 2018 Forecast Issue

paving and construction operations in Orange and Riverside counties, while occasionally working in Los Angeles, San Bernardino and San Diego counties. In addition to contracting and production, the company also owns and operates a large landfill, a trucking enterprise, and several storage facilities. R.J. Noble has been a leader in the production, manufacturing, engineering, and recycling of asphalt for more than 60-years. They currently produce a variety of materials for their own paving company, as well as for the state of California, its cities, and private enterprise. These products include hot and warm mix asphalt, Reclaimed Asphalt Pavement, sand, and concrete products. They own and operate two large multiple-resource plants, as well as a rock quarry, a rock-crushing plant and a recycling operation at both production facilities. Their recycling facilities currently process around 500,000 tons of asphalt, concrete, and rubber annually, while producing more than a million tons of asphalt mix between their two manufacturing facilities. R.J. Noble Company has been at their Orange headquarters for more than 65 years, and at their Corona location for 40 years. They upgraded their batch plant operation in Orange to a Double Barrel drum plant in 2008, and due to its success, the decision

Left: The Carver Family (L to R) KaSondra, Brenda, Mike and Austin performing the ribbon cutting ceremony in Corona.

Above: Astec Double Barrel drum dryer/mixer at R.J. Noble Company Corona location combines the latest in hot mix technology.

was made to do the same at the Corona location. Terry McGill is the general manager in charge of all operations for R.J. Noble Company, and a big part of his job is to continually look for ways to make R.J. Noble Company safer and more productive. “Our research indicates that there will be continued aggressive growth in the Inland Empire and surrounding areas, so we made the decision a few years back to upgrade our Corona batch plant to a new Astec Double Barrel drum plant,” says McGill. “While the batch plant allowed us to produce individual 5-ton mixes, the drum plant offers much higher efficiencies and more production and storage capabilities. We use the new silos to store multiple mixes in larger production runs which benefits everyone.” According to McGill, the new Astec plant is full of the industry's newest technology, including a state-of-the-art computer system and fiber optics. “We began the planning stages of our new drum plant in late 2015, and by the end of 2017, it was up and running. That may seem like a long time, but is actually quite an amazing feat,” says McGill.

“There are other companies and agencies that have been at it for four or five years and still have not yet broken ground. We are fortunate to have an owner like Mike Carver who has taken such a hands-on, aggressive approach to this new plant.” McGill points out that there are many other individuals that have contributed to the implementation, construction and overall success of the new Astec drum plant. “In addition to our owner, Mike Carver, who was the ramrod behind this entire operation, it is important to recognize others that have helped to make this new plant a reality,” says McGill. “Our VP of operations, Austin Carver, for instance, and our VP of administration and marketing, KaSondra Carver, have both worked hard at making sure that things continued to progress at a fast pace.” McGill also says that Mike Carver’s wife, Brenda, was extremely involved and helped out in several roles along the way. “I would also like to take a moment to give special thanks to Tom Davis and his daughter, Kristen Davis of Davis Consulting, along with Scott Taylor of Taylor Environmental Services, who worked very hard at putting

California Asphalt Magazine • 2018 Forecast Issue

together the environmental plans and worked closely with the county of Riverside to get the necessary approvals. This was a tedious and arduous task, and their knowledge and experience enabled us to move forward on time.” McGill believes that Astec is the leading manufacturer in the asphalt production business and points out that R.J. Noble has been working with the company for many years. “Our relationship with Astec has grown and matured over our many years in business. We have looked at other plants, but the support we have received from Astec is just A-number-one,” says McGill. “They put a great deal of research and development into their products, and it shows on the production and efficiency side of our operation.” JR (Robert) Gillespie is the plant superintendent for R.J. Noble out at their Corona facility. He has been with the company for many years, and like McGill, he was assertively involved in the implementation and construction of the new Astec drum plant. “Our new Astec Double Barrel drum mix plant is capable of producing 500-tons an hour, and with new legislation like SB1 now in place, I have a feeling we will need that sort of production in Background: R.J. Noble Company's new Astec drum plant is capable of producing 500-tons per hour.

the near future,” says Gillespie. “In the past, we have operated our Corona production facility through an asphalt batch plant without storage silos, and we averaged close to 400,000 tons annually over the past five or so years. I believe that we will exceed the 500,000-ton mark within the next year, and our goal is to reach 1 million tons in production within the next five years.” Astec Double Barrel drum plant is a game changer regarding production and efficiency for R.J. Noble. “It is more efficient with the new state-of-the-art motors and components that not only help with added production but also to conserve valuable energy resources,” says Gillespie. “We are not burning as much gas or creating as much blue smoke because we are running at cooler temperatures with our new green system.” Gillespie points out that because they can produce more tons per hour, they can now better serve their customers with any and all mix designs. “If I have a customer that wants 2,000 tons of ¾ inch mix and another requires ½ inch mix, I can easily supply that and store a variety of other mixes in our new high capacity Astec storage silos.”

According to Gillespie, the new Astec 500-ton Double Barrel drum mix plant includes six 300-ton asphalt storage silos, five 35,000-gallon CEI oil tank storage silos, as well as a 10,000-gallon CEI emulsion tank. “The majority of the components that make up our new drum plant are an Astec product,” says Gillespie. “This includes the Double Barrel drum, the conveyors and screens, as well as the three RAP bins, six aggregate bins, drag conveyor, baghouse, storage silos and scales. We custom designed and built the block house, which is located under the two-level Astec control room.” Gillespie continues by pointing out that the blue smoke control system was provided and installed by Butler-Justice, Inc. out of Anaheim. “Most of the components came from Chattanooga, Tennessee, except for the blockhouse and blue smoke control system,” says Gillespie. “The CEI tanks came from New Mexico, and everything was delivered safely and without damage or other issues.” Gillespie says that there were around 68 loads in all, and Astec sent out a construction crew July 14, 2017 that worked closely with R.J. Noble’s six operating engineers. “We began by [ Continued on page 34]

R. J. NOBLE COMPANY Wanted the most environmentally responsible asphalt plant.

They Got It!

Blue Smoke Control made their new Corona plant the cleanest plant in California.

A Division of Butler-Justice, Inc.

We are proud to Partner with R.J. Noble to Achieve the Highest Standard of Environmental Responsibility. Blue Smoke Control’s flagship Collector, Model BSC 6-S24-C, rated at 48,000 CFM, removes nearly 100% of the emissions at R.J. Noble’s new Corona, California plant. Our revolutionary system covers every emission point—Tops of Silos, Conveyor Transfer Points and Truck Load Out areas.

Truck Load-Out Areas

Contact:

Mike Butler, President Butler-Justice, Inc., 5594 East LaPalma, Anaheim, CA 92807 (714) 696-7599 mikeb@butlerjustice.com

Conveyor Transfer Points, Top of Silos.

Above: Terry McGill, General Manager, KaSondra Gonzalez, VP of Admin. & Marketing, Mike Carver, President, Brenda Carver, Austin Carver, VP of Operations and JR Gillespie, Plant Superintendent. [ Continued from page 32]

setting the legs onto the newly poured concrete foundation for the storage silos, as we continued building, more components would arrive,” says Gillespie. “We then moved on to install the Double Barrel drum, followed by the baghouse which arrived in two pieces.” According to Gillespie, the control center was then set on top of the blockhouse, and then the MCC room was put in place. “We finished off construction by installing the feeder bins for the aggregate and RAP, and then lastly the oil tanks,” says Gillespie. “This entire process required a lot of hard work and not much sleep, but we had some great minds at work here that made the entire process much more rewarding.” R.J. Noble worked closely and affectively with Edison, the gas company, and other permitting agencies. “We got a lot of help from companies like Davis Consulting and Taylor Environmental 34

Top Right: Terry McGill, General Manager R. J. Noble Company with Kristen Davis, Davis Consulting.

Above Right: R. J. Noble Company new Astec Drum Plant ribbon cutting ceremony catered by In-N-Out Burger.

Services who were instrumental in putting together a safe and aggressive plan while working respectfully with all of the various governmental and local entities,” says Gillespie. “I also personally received uncompromised support from our owners, who put the responsibility in my and others hands without micromanaging us in the process. Terry McGill and I worked well together, and we had an outstanding crew from our own R.J. Noble team, Astec, CEI, Butler-Justice and other vendors. It is also important that we thank and recognize our wives, who were so very patient during this long and challenging project.” R.J. Noble Company is a vertically integrated company that produces and installs hot mix and warm mix asphalt products, while also providing materials to contractors and government agencies throughout Southern California. The company has a reputation for championing environmental issues that affect

the asphalt paving industry. They also have a reputation for caring greatly for their employees, providing a family oriented atmosphere throughout their long history. R.J. Noble has had as many as four generations of family working for them at one time, and several of these families are still represented at R.J. Noble. These include the Schildts, Wrights, Clearys, Carvers, Stices, Kirbys, McCowens, Mendozas, Rodriguezes, McGheheys, Hiltons, Porters and Carrolls. “Family values, along with safety are the two most important goals for Mike Carver and everyone else here at R.J. Noble,” says McGill. “We are here for the long haul and investing in our future through,people and equipment is what is going to take us into the next decade.” For more information on R.J. Noble Company, please visit their website at www.rjnoblecompany.com or call their Orange headquarters at (714) 637-1550. CA

California Asphalt Magazine • 2018 Forecast Issue

The Industry Leader in Asphalt Plant Technology

Your California Representatives:

ASTEC,INC.

Eddie Van Zyl - Regional Sales Manager 423.667.3270 • evanzyl@astecinc.com

a subsidiary of Astec Industries, Inc.

4101 Jerome Avenue Chattanooga, TN 37407 USA 423.867.4210 • www.astecinc.com

Mike McClure - Parts Regional Sales Manager 423.667.6361 • mmcclure@astecinc.com

YOUR FULL LINE DEALER ANNOUNCING OUR NEWEST LOCATION

Santa Fe Springs

10918 Shoemaker Ave. Santa Fe Springs, CA 90670 562-777-0775 COMPACTION / MILLING / PAVING

EXCAVATORS/DUMP TRUCKS/LOADERS

MINI EXCAVATORS / SKID STEERS / BACKHOES / LOADERS

SALES • RENTALS • PARTS • SERVICE

(800) 316-0327

www.scottequip.com Serving California For 50 Years!

California Asphalt Magazine • 2018 Forecast Issue

14635 Valley Blvd., Fontana, CA 92335 10918 Shoemaker Ave., Santa Fe Springs, CA 90670

Industry pays tribute to the past, looks ahead during the CalAPA Annual Dinner in Los Angeles More than 100 industry leaders, spouses and guests attended the gala event Jan. 18 to pay tribute to the latest inductee into the CalAPA "Hall of Fame," Len Nawrocki, and also to recognize the installation of association officers for 2018. The dinner program also featured a keynote speech by former Assemblyman Roger Dickinson, who is now executive director of CalAPA-supported Transportation California, who spoke of the many roadimprovement projects in the pipeline due to the historic passage of SB1, the Road Repair & Accountability Act of 2017. Dickinson was introduced by Brian Handshoe with Kenco Engineering, who took over as Political Action Committee Chairman last year upon the retirement of Nawrocki.

Dickinson and others emphasized that the industry and public works agencies must work together to get SB1 roadimprovement projects designed, advertised and built quickly and efficiently to show the public their tax dollars are being spent wisely. "If those of you in this room can't hear opportunity knocking, it can't get much louder," Dickinson said. The passage last year of SB1, which will generate more than $50 billion in new revenue for state and local transportation improvements over the next decade, will finally begin to address many years of neglect of our infrastructure, Dickinson said, which he said "is deteriorating at an exponential rate. Dickinson also made reference to a campaign launched by political operatives seeking to overturn SB1 at the ballot box, which he described as a "cynical" political

ploy. "It will be up to us to make sure they don't succeed." To underscore the point, Dickinson unveiled updated SB1 fact sheets and a talking-points memo that debunks the many "myths" being spread by SB1 opponents. CalAPA also distributed special SB1 "Fixing YOUR roads" bumper stickers. The SB1 fact sheets, in PDF format, are available to download on the CalAPA.net website. The industry-agency collaboration theme was further reinforced with the attendance at the Annual Dinner of Pat Probano, Deputy Director of the Los Angeles County Department of Public Works, and Angela Driscoll, of the agency's government relations group. They said LADPW is redoubling its efforts to work in partnership with industry to protect and enhance the county's vast road network.

Featured speaker The Honorable Roger Dickinson, Executive Director of Transportation California.

Brian Handshoe, CalAPA Political Action Chairman introduces the featured speaker at the 2018 CalAPA Annual Dinner.

Len Nawrocki, new Life Member (left), is delighted to receive one of the limited edition “asphalt scarves” knitted by Adrienne Snyder from Russell Snyder, CalAPA Executive Director.

Len Nawrocki (left) was honored with a CalAPA Life Membership presented by long-time friend and co-worker Juan Forster and Russell Snyder, Executive Director, CalAPA .

CalAPA team members Brandon Milar, Technical Director (left), Ritha Nhorn, Administrative Assistant and Sophie You, Member Services Manager honored and recognized Russell Snyder for his 10 year anniversary as CalAPA Executive Director.

Mike Murray,Vulcan Materials and the newly elected CalAPA Chairman speaks at the 2018 CalAPA Annual Dinner.

Jeff Reed, George Reed, Inc. (left), Yanlong Liang, International Road Federation Scholarship recipient and Russell Snyder, CalAPA Executive Director.

Deborah Benedict (left), Bill Darnell, Valero Marketing & Supply, John Todorovich, All American Asphalt and Jeff Benedict, Valero Marketing & Supply.

California Asphalt Magazine • 2018 Forecast Issue

Scott Bottomley, Sully-Miller Contracting (left), Sean Palmer, Holliday Rock, Scott Taylor, Taylor Environmental Services and Richard Champion, CEI.

Terry Rainey, Troxler Electronic Labs (left) with Jordan Reed, George Reed, Inc.

Scott Fraser, RJ Noble Co. (left), Taylor Schmidt, World Oil Co. and Warren Coalson, EnviroMINE.

Taylor Schmidt, World Oil Co. (left), Vern Gunderson, Nixon-Egli Equipment Co., T. Rex Thomas, Capital Equipment Finance and Jay Rosa, Nixon-Egli Equipment Co.

Juan Forster, Life Member (left), Carlos Hernandez, Life Member, Andy Andrews, Mission Paving & Sealing and Doug Sweeney, Mission Paving & Sealing.

Life Members and their spouses from left to right Scott Lovejoy, Ann and Jim St. Martin, Berlene and Carlos Hernandez (seated), Don and Mary Goss, Dan Chapman, Ron Stickel, Mayra and Len Nawrocki and Juan Forster at the 2018 CalAPA Annual Dinner, held Jan. 18th at the Jonathan Club in downtown Los Angeles.

The Annual Dinner was attended by many members of the CalAPA industry "Hall of Fame," who gave a thunderous standing ovation to the association's newest "Life Member" -- Len Nawrocki, who recently retired from Valero. Nawrocki, who was active in the industry and the association for many years and held several leadership positions, was introduced by another Life Member, Juan Forster. Forster noted that Nawrocki embodied the noble qualities of many other leaders in the room, donating time and expertise for the betterment of the industry as a whole through active participation in CalAPA. The 2018 association leadership was also announced to the gathering, including incoming Chairman Mike Murray with Vulcan Materials. The other officers for 2018 are Alan French with DeSilva Gates Materials (Vice-Chairman), Scott Bottomley with Sully-Miller (Treasurer), and Jim Ryan with Delek US (Secretary). Mike Herlax with Syar Industries, the 2017 Chairman, will serve as "Immediate Past

Chairman" in 2018 to ensure the association has continuity in its leadership ranks. At a meeting of the CalAPA Board of Directors, held earlier in the day, the association officially named Toni Carroll with Graniterock as the association's new co-chair of the Technical Advisory Committee, and also welcomed Tony Limas with Granite Construction to the Board of Directors. The evening program also included a memorable demonstration by Life Member Carlos Hernandez, a veteran, on the proper way to salute the flag while leading the room in the Pledge of Allegiance. Don Goss, recently retired from Valero, delivered an inspirational invocation. CalAPA past Chairman, Jeff Reed of George Reed, Inc., introduced Yanlong Liang, a graduate student in engineering from U.C. Davis, as this year's CalAPA-sponsored International Road Federation "Road Scholar" Scholarship recipient. At the conclusion of his remarks, Murray and the CalAPA staff

California Asphalt Magazine â&#x20AC;˘ 2018 Forecast Issue

Ron Stickel, Life Member (left), Bill Darnell, Valero Marketing & Supply and Bob Humer, Asphalt Institute.

surprised Executive Director Russell Snyder with a special recognition marking his 10 years representing the industry -- a presentation that left Snyder dumbfounded and nearly speechless. Snyder repeated his oft-cited mantra that association work is "all about the members" and paid tribute to his hardworking and dedicated staff: Member Services Manager Sophie You, Director of Technical Services Brandon Milar and Administrative Assistant/Training Coordinator Ritha Nhorn, who is majoring in engineering at Sacramento State University. CalAPA extends its gratitude to the sponsors of the evening: California Commercial Asphalt Enterprises LLC; CEI Enterprises; CRM Company; Ergon Asphalt & Emulsions; R.J. Noble Company; Road Science, a Division of Arrmaz; Sully-Miller Contracting / Blue Diamond Materials; Valero Energy Corporation; and Vulcan Materials Company. The event's Jonathan Club host was "Life Member" Scott Lovejoy. CA 37

California Asphalt Magazine â&#x20AC;˘ 2018 Forecast Issue

Scott Taylor

P: (714) 587-2595 Ex 101 C: (562) 762-5142 scott.taylor@tayloresinc.com

Susana Perez

P: (714) 587-2595 Ex 102 C: (562) 447-4210 susana.perez@tayloresinc.com

www.tayloresinc.com

CALENDAR UPDATE STATE CAPITOL FLY-IN March 13 & 14, 2018 Esquire Grille (Start of event) 1213 K Street, Sacramento, CA 95814 SPRING CONFERENCE April 25 & 26, 2018 Doubletree Hotel 222 N. Vineyard Ave., Ontario, CA 91764

Meeting dates are subject to change. Watch the weekly Asphalt Insider newsletter for meeting updates or call CalAPA at (866) 498-0761 to confirm meeting date and location.

California Asphalt Magazine â&#x20AC;¢ 2018 Forecast Issue

NIXON-EGLI EQUIPMENT CO., VOGELE AND MISSION PAVING AND SEALING, INC.

Above: Mission Paving and Sealing Inc.’s new Vogele Super 1700-3i paver working at Dodger Stadium. Right: Close up of the new Vogele Super 1700-3i paver.

Mission Paving and Sealing has proudly been serving Southern California’s asphalt paving and maintenance needs since 1940. Asphalt maintenance projects are becoming more advanced and demand the latest in equipment technology and innovation. Whether its Dodger Stadium or the local mall, clients receive the same unparalleled service and expertise. Mission Paving and Sealing recently took delivery of a new Vogele Super 1700-3i universal class paver from Nixon-Egli Equipment Co. Doug Sweeney, President of Mission Paving and Sealing, comments, “This is our third Vogele paving machine, and we do a lot of research and demos before any purchase. The main feature that sold us on this machine was the ErgoPlus 3 control system, with state-of-the-art technology. We also like the fact that the operating consoles for both driver and screed operator have multiple machine functions. The crew has also commented that they love this machine for its overall ease of operation.” Sweeney adds, “We have a long-standing relationship with Nixon-Egli Equipment Co. Our Nixon-Egli sales representative, Jay Rosa, was great to work with from start to finish. He is very knowledgeable about his products and has always made himself available. Over the years, Nixon-Egli Equipment’s parts and service departments have always been there for us, and we have never been disappointed. We have relied on Nixon-Egli Equipment for our paving equipment needs for decades and will continue to do so in the future."

California’s Largest General Line Construction and Municipal Equipment Dealer. So. California: 2044 S. Vineyard Ave., Ontario, CA 91761 • (909) 930-1822 No. California: 800 E. Grant Line Rd., Tracy, CA 95304 • (209) 830-8600 www.nixon-egli.com