California Asphalt Magazine – 2019 Forecast Issue

2019 FORECAST ISSUE

TURNING DOLLARS INTO PROJECTS With SB1 protected by voters, attention turns to promised road improvements

INSIDE: UCLA Anderson Economic Forecast Exclusive ‘better-worse’ survey results Q&A with construction economist Ken Simonson

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Publisher’s Letter In December of 2010, in the depths of the “Great Recession,” I wrote the following letter to CalAPA® members to accompany their dues invoice, and to emphasize the point I attached a crisp dollar bill to each letter (paid for with my own personal funds): “Dear CalAPA® Member: “It’s just a dollar. But in this economy, every dollar matters. We know how hard you work to earn each one, and we know that a few dollars strung together can mean the difference between success and failure.

“We want you to know that we treat every dollar we receive from you as precious, and we’re committed to making every dollar go as far as possible on your behalf.

“We think our industry is worth fighting for. If you’ve made it through this Depression – and yes, that’s exactly what the construction industry is going through, a Depression – we know that you think it’s worth fighting for, too.

“We hope you can take a moment to look over our association’s 2010 Annual Report. We’ve done a lot with relatively little. This was only possible with your support, your input and your contributions.

We didn’t win every fight, but those we went up against knew they were in one.

“We’re ready to do battle again in 2011, but we can’t do it without you. I hope you view your annual dues payment as a modest but critically important investment in a brighter future for our industry.

There’s going to be plenty of hard work ahead, to be sure, but we’re up for it if you are. Thank you for your continued support.”

The California Asphalt Pavement Association turns 65 this year. Looking back, we’ve had some tremendous successes and some enormous challenges. But through it all, our members have been there every step of the way. Perhaps it’s fitting that the CalAPA® name and logo has recently won recognition by the U.S. Patent & Trademark Office, and that we also received a personal note from outgoing Gov. Jerry Brown thanking us for our efforts to protect SB1 road-repair funding. We’ve established ourselves as the voice of the asphalt pavement industry in California now and in the future. This forecast issue of our association magazine furthers our strategic goal of providing valuable information to our members to inform their business decisions, and it’s a responsibility we take very seriously.

We’ll continue to fight for our industry and to treat every dollar we receive as precious. We’ll also encourage our public agency partners to do the same. As you read this, there are literally thousands of our fellow Californians pumping gas. In doing so, they are also giving us some of their hard-earned money, a dollar at a time, with the expectation that we will use the money wisely. As I said in 2010, we’re committed to making every dollar go as far as possible. I know you are, too. Let’s get to work.

Sincerely,

Russell W. Snyder, CAE Executive Director California Asphalt Pavement Association 4

California Asphalt Magazine • 2019 Forecast Issue

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Contents Volume 23, Issue 1

4

Publisher’s Letter

8

The UCLA Anderson Forecast

16

CalAPA®’s 9th annual ‘Better or Worse’ survey

18

Q&A with construction economist Ken D. Simonson

24

California Commercial Asphalt

30

Page 8

California Asphalt Magazine

Recycled plastic additive shows promise on test application; goal is to help divert plastic waste from landfills into long-lasting pavements

Ken Simonson Page 18

Industry News

On the Cover:

Cover design by Aldo Myftari of Construction Marketing Services.

Page 24

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 • (916) 791-5044 EXECUTIVE DIRECTOR: Russell W. Snyder, CAE, rsnyder@calapa.net TECHNICAL DIRECTOR: Brandon M. Milar, P.E., bmilar@calapa.net MEMBER SERVICES MANAGER: Sophie You, syou@calapa.net GUEST PUBLISHER: Russell W. Snyder, CalAPA® PUBLISHED BY: Construction Marketing Services, LLC • (909) 772-3121

P.O. Box 892977 • Temecula • CA 92589 GRAPHIC DESIGN: Aldo Myftari CONTRIBUTING WRITERS: Russell W. Snyder, CalAPA® and Brian Hoover, CMS ADVERTISING SALES: Kerry Hoover, CMS, (909) 772-3121 Copyright © 2019 – 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.

6

California Asphalt Magazine • 2019 Forecast Issue

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The UCLA Anderson Forecast for California

Will the Tech-Boom Falter if NASDAQ Enters a Long-Term Bear Market?

By Jerry Nickelsburg, Director, UCLA Anderson Forecast, Adjunct Professor of Economics, UCLA Anderson School, December 2018

8

Venture Capital Investment In California (Billions of Constant $)

70 60 50 40 30 20

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

0

2001

10 2000

NASDAQ and Tech Employment Venture capital investment in California soared through the late 1990s and into 2000. It came to a screeching halt when the dot-com bubble burst. In the decade that followed investment adjusted for inflation was relatively flat. The recovery since the last recession (2008/2009) has seen a dramatic increase once again (150 percent). In the Bay Area tech employment growth, while still vastly higher than elsewhere, has abated of late, while real investment ought to increase in Los Angeles for the year.

While venture capital is not the only source of funding for technological developments, R&D, and innovation—Alphabet funds internally for example—it is a driving force in the sector. Since the NASDAQ exchange is the equity arm of tech funding, we want to ascertain whether or not this might be considered an indicator of tech sector growth, and if so, whether it might provide signals of a slowdown in the sector in the future.

The analysis covers the period following the dot-com bubble—2001 to 2017. Both the dollar amount of venture capital and the NASDAQ composite index have an upward trend during this time. Employment in the tech industry has been one of the keys to the growth in California, particularly in the Bay Area. Thus far in 2018 the NASDAQ index growth rate has not changed by much. The last two months (October and September, 2018) have seen negative growth, but the NASDAQ is not down relative to its December 2017 average. The lack of growth is consistent with a relatively constant growth rate in San Francisco and Silicon Valley employment through October 2018. The NASDAQ is clearly not the only factor affecting Bay Area employment. In fact, there was a surge in venture funding in the 2nd and 3rd quarters of this year, however it was primarily focused on roll-over and expansion funding for late-stage company financing. Importantly, a housing shortage in the Bay Area and continued full employment are contributory and possibly dominant factors.

Source: Price Waterhouse Coopers and SiliconValleyIndicators.org

However, venture capital and other start-up funding is one factor, and given that it has the greatest potential for dramatic swings, one that is important to follow. Were we to enter a longterm bear market in 2019, this would be cause for concern and it clearly represents a negative risk to the forecast. At present we do not expect that, however we have built into our forecast a California Asphalt Magazine • 2019 Forecast Issue

slowing of growth consistent with the current NASDAQ indicators beginning to end their multi-year run-up in valuations.

Our current forecast for 2019 and 2020 is not much changed from the September forecast as the economy has been evolving much as expected to this point. The expectation is for slowing growth, consistent with the US economy, through the forecast horizon. In part this is due to running out of workers. Though we expect positive net migration as well as natural population growth, it will not be enough to stem the trend of slowing job growth. Nevertheless, 2019 ought to see faster job growth in California than in the US as a whole.

The elevated risk we have discussed over the past year still exists. The risk to North American Free Trade Agreement (NAFTA) has only partially abated. The modifications in the agreement with Mexico and Canada will have little effect on the U.S. and on California since the new agreement focuses on the auto industry (it will increase auto parts manufacturing in Mexico due to the North American content rules) and the dairy industry (a very small sector in California’s $2.5 trillion economy).

Of significance to California is the establishment of modern Intellectual Property rules including domestic content calculations that recognize the role of software in modern autos and trucks.

Though the agreement has been signed by the executive branch of each of the three countries, it still has to be approved by the respective legislative branches. With a new congress in the United States and the election in Mexico California Asphalt Magazine • 2019 Forecast Issue

9

bringing Andres Manuel Lopez Obrado to the presidency, this is not guaranteed. If the new agreement is not approved by the U.S. Congress, the potential still exists for the Trump administration to follow through on threats to end NAFTA altogether. Therefore, this remains a forecast risk. The risk with a trade war with China is much greater and were that to come to pass, the logistics industry—one of the fastest growing sectors in California over the last year—will be very real.

The signals at the moment are quite mixed. On the one hand President Trump has vowed to increase tariffs on Chinese goods to 25 percent and on the other there seems to be a willingness to postpone the imposition of tariffs in hopes of obtaining a modest deal in the coming months.

Our forecast is consistent with the latter.

Nevertheless, this is a risk that we will keep an eye out for as it has the potential to derail the forecast.

We expect California’s average unemployment rate to rise slightly to an average of 4.5 percent in 2020, an average consistent with full employment.

While the overall forecast is not much different

from that released in September 2018, some economic activity has been pulled forward into 2019 due to fiscal incentives. This results in a weaker 2020 than was implied by our previous forecast but not a significant change. Our forecast for 2019 and 2020 total employment growth is 1.4 percent and 0.7 percent respectively. Payroll jobs are expected to grow at a 1.5 percent and 0.9 percent rate respectively. Real personal income growth is forecast to be 3.7 percent and 4 percent 2019 and 2020 respectively. The continued growth in real personal income in 2020 is reflective of the changing mix of employment in California and tight labor markets in high wage occupations.

Homebuilding will accelerate to about 140,000 units per year by the end of the forecast horizon 2020 in spite of higher interest rates. This will be a response to easing zoning and regulatory requirements for developers and a continued strong demand for housing in the state. CA

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California Asphalt Magazine • 2019 Forecast Issue

The UCLA Anderson Forecast for the Nation

Downshifting to Slower Growth

By David Shulman Senior Economist, UCLA Anderson Forecast December 2018

After growing at a 3.1 percent pace on a fourthReal GDP Growth, 2010Q1–2020Q4F, Percent Change quarter-to fourth-quarter basis, the growth in real SAAR GDP downshifts to 2.1 percent in 2019 and 1 percent 6% in 2020. The downshift in growth is based on our 5% view that above-trend growth is difficult to achieve for an4% economy operating at full employment, given the sub-1 percent growth rate in the labor 3% force and productivity gains just above 1 percent.

Unless2%we witness surprising gains in productivity, the speed limit for the economy is around 2 percent.

1% Then, you might ask, why are you forecasting a further0%slowdown to 1 percent in 2020? Our position is that the benefits from the huge fiscal stimulus of -1% tax cuts and spending increases will wane by the end of-2% 2019 and the lagged effects of the Federal 2012 2014 2016 rates, 2018along 2020 Reserve’s 2010 normalization of interest with the negative effects of the administration’s Source: U.S. Department of Commerce; UCLA Anderson Forecast trade policies, will dampen growth further. In this environment payrolls will continue to expand, but the 190,000/mo. average gain thus far this year will slow to 160,000/mo. in 2019 and a much weaker 40,000/mo. in 2020. The unemployment rate will continue to decline from the current 3.7 percent to about 3.5 percent for most of 2019 and then gradually increase to 4 percent by the end of 2020.

The Fed Normalizes Policy

The recent policy of Federal Reserve has been gradually normalizing interest rates. After years of holding the Federal Funds rate at 0 percent–0.25 percent, over the past two years, the rate has increased to its current 2 percent–2.25 percent, and we expect another 25-basis-point increase to 2.25 percent–2.50 percent later this month. Further we anticipate three or four rate hikes in 2019 that will bring the funds rate up to 3.25 percent–3.50 percent by late 2019 or early 2020. Why so high? We perceive that the normalized funds rate, what the Fed calls R*, to be equivalent to a real rate of 1 percent. With inflation running somewhat above 2 percent, that implies a normalized funds rate somewhat above 3 percent.

Underpinning the Fed’s move to higher interest rates are growing inflationary pressures in the economy. At long last, wage rates are increasing and employee compensation is on track to increase 3.3 percent in 2019 and 4.0 percent in 2020. Simply put, the tight labor market is now showing up in 12

Unemployment Rate, 2010Q1–2020Q4F, Percent, SAAR

10% 9% 8% 7% 6% 5% 4% 3%

2010

2012

2014

2016

2018

2020

Sources: U.S. Bureau of Labor Statistics; UCLA Anderson Forecast

Real GDP Growth

(4-Qtr. % Ch.)

4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5

2012

2016

2020

the form of higher wages and benefits. Similarly, inflation as measured by the consumer price indices will approach 3 percent in both 2019 and 2020, largely driven by higher service sector prices.

Financial Turbulence Ahead The recent volatility in stock prices appears to signal that the era of benign financial markets we have been used to for the past several years is coming to an end.

Although most market pundits blame the increased volatility of Fed policy and a peak in the growth rate in corporate profits, when you look under the hood you will notice, perhaps, more serious risks facing the financial markets — namely, overCalifornia Asphalt Magazine • 2019 Forecast Issue

leveraged corporations and escalating trade tensions, especially with China. And don’t forget that the energy, social media, banking and pharmaceutical industries will soon find themselves in the crosshairs of the newly elected Democratic House of Representatives. While the zero and low interest rate policy of the Federal Reserve helped pull the economy out of the Great Recession and later stimulated growth, it also induced corporations to leverage up.

That means the slightest of economic downturns can force many of these credits into “junk” territory.

And this data does not take into account the huge issuance of less than investment grade paper over the past decade that now accounts for about half of the $9 trillion bond market.

With respect to trade it appears that we are in the process of entering an economic cold war with China. President Trump is threatening to impose tariffs on up to 25 percent on all $537 billion in Chinese imports. At an average rate of 20 percent, that would amount to a $107 billion tax on the U.S. economy. Although most market participants cling to the hope that a reasonable deal can be made, we would caution them to take careful note of the recent remarks made by Vice President Pence and former Secretary of the Treasury and Goldman Sachs CEO Henry Paulson, a longtime friend of Beijing. Pence, speaking to Hudson Institute, said the following: “America had hoped that economic liberalization would bring China into a greater partnership with us and with the world. Instead, China has chosen economic aggression (emphasis added), which has in in turn emboldened its growing military.” And: “Beijing provides funding to universities, think tanks and scholars, with the understanding that they will avoid ideas that the Communist Party finds dangerous or offensive. China experts know that their visas will be delayed or denied if their research contradicts Beijing’s talking points.”

With the Democrats taking control of the House of Representatives in November it is not clear that the newly signed substitute for NAFTA, the USMCA Treaty, will pass muster. Remember that the Democrats are less free-trade oriented than the Republicans, and it is our guess that, come this spring, the markets will once again be worried about the deal. The risks remain that BREXIT will blow up and Italy will slug it out with the European Union over its nonconforming budget. Thus, unless cooler heads prevail, our forecast is that the risks coming from the trade sector are all on the downside.

Our main theme is that growth will gradually taper off in all of the major sectors of the economy.

It looks like real consumer spending growth peaked at 4 percent in the second quarter and it will likely California Asphalt Magazine • 2019 Forecast Issue

Real Refiner's Cost of Crude Oil (2012$/barrel)

120

100 80 60 40 20 0

1978

(Mil. Units)

1985

1992

1999

2006

2013

2020

U.S. Retail Sales of Automobiles and Light Trucks

20 15 10 5 0

1992 1996 2000 2004 2008 2012 2016 2020 Automobiles

Light Trucks

U.S. Housing Starts Vs. Mortgage Rate

(Mil. Units)

(Percent)

14

2.5

12

2.0

10

1.5

8

1.0

6

0.5 0.0

4 1984

1990

1996

Housing Starts

2002

2008

Mortgage Rate

2014

2020

2

13

taper off to 2 percent by the fourth quarter of 2019 and 1.5 percent by the fourth quarter of 2020.

Although consumer spending has been strong of late, we can’t say the same for housing activity.

Put bluntly, housing activity remains in a rut.

Housing starts will advance to 1.26 million units this year, up from 1.21 million units in 2017. We forecast further modest gains to 1.31 million and 1.32 million units in 2019 and 2020, respectively.

This level of activity lags below the 1.4–1.5 million units that we believe to be consistent with longrun demand. A real bright spot in the economy has been investment in intellectual property, forecast to increase a white-hot annual rate of 9 percent this quarter. This broad category consists of computer software, research and development and filmed entertainment. To be sure, growth in this sector will taper off, though it will still be consistently growing faster than the economy as a whole.

Another bright spot for next year will be the continued strength in real defense spending.

After increasing 3.4 percent this year, real defense spending is forecast to rise by 4.9 percent in 2019 and level off with a 0.8 percent gain in 2020. The Trump defense buildup is for real.

14

Conclusion

The economy is in the process of downshifting from the 3 percent growth in real GDP this year to 2 percent in 2019 and 1 percent in 2020. At full employment, 3 percent growth is not sustainable.

With the Fed tightening, trade tensions rising, the impact of the fiscal stimulus coming from tax cuts and spending increase waning, financial markets will likely experience increased turbulence. Overleverage in the corporate sector represents the major financial risk to the economy. Nevertheless, Main Street will likely experience higher real wages coming from a very tight labor market, as evidenced by a 3.5 percent unemployment rate.

Thus, a good year for Main Street and choppy year for Wall Street. CA 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.

California Asphalt Magazine • 2019 Forecast Issue

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EXCLUSIVE Optimism remains strong in

our 9th annual ‘better-worse’ survey; Prop. 6, workforce challenges among top comments

By Russell W. Snyder

The results are in. The ninth annual CalAPA® “Better or Worse” survey shows respondents are more optimistic than ever, although concerns about capacity, workforce recruitment, retention and training are a worry for industry and agency alike.

The brief, non-scientific poll of more than 2,600 “Asphalt Insider” newsletter subscribers, conducted in November and December, found optimism reaching the highest level in the nine years the survey has been conducted, besting the previous high recorded last year. The number of respondents who said next year would be better than 2018 stood at 67 percent, compared to 62 percent last year.

That is in stark contrast to 2011, when the “better” number was just 20 percent.

“We now have consistent, dedicated funding,” wrote one local agency representative. “Everyone seems to be very busy in our industry,” wrote an industry respondent. Added a paving contractor: “The business climate is outstanding.” An asphalt producer commented that there was “a good backlog of work to start the year.”

Indeed, the passage 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. Surveys show California has some of the roughest roads in the nation, due to lack of money for maintenance and repair.

The passage of SB1, which will split money between state and local governments, has spurred agencies to start ramping up road improvement work in anticipation of the new investments. A November ballot measure, Proposition 6, to repeal the fuel taxes that were part of SB1, was soundly rejected by voters. A June ballot measure, Proposition 69, to protect ensure that transportation revenues are used for their intended purposes, was approved by 80 percent of the electorate.

On the negative side, only 6 percent of respondents said next year would be worse than 16

2018, a slight uptick from the 5 percent who said that last year and 21 percent the year prior. The highest “worse” percentage in the history of the survey was 25 percent recorded in 2010, when the state was mired in a deep economic recession.

Of the overall respondents, about a quarter were public agency representatives, with the rest comprising asphalt producers, refiners, paving California Asphalt Magazine • 2019 Forecast Issue

contractors and other companies that are part of the industry, plus a smattering of others.

For the third year in a row, the survey added an optional question, “What is the No. 1 challenge where you work?” That question elicited 121 written responses, with lack of being able to attract and retain qualified workers the top issue by far, followed by regulatory challenges.

“Finding qualified people who want to work in this industry,” lamented one producer. “Finding drivers for the transportation of our products is very difficult.” Others said simply, “scarcity of labor,” “recruiting and training of new employees” and “finding qualified people.”

Bureaucratic and regulatory hurdles also were prominent in the survey results, and for agency personnel, converting dollars to projects.

“Prioritizing what, where, and first,” one agency representative wrote. “It took 30 years of lack of funding to get our roads where they are, It won’t be fixed overnight.”

This year’s bruising political campaign over Proposition 6, with attack ads focusing on government effectiveness, clearly put agency personnel on edge about how construction activities are perceived by the public. A top challenge, according to one local agency representative: “Changing public perception of the industry.

Currently, the public knows very little about the industry and the only time it becomes aware is when a project is proposed near them. Because of the trend towards infill development, residential California Asphalt Magazine • 2019 Forecast Issue

development is continuing to encroach on lands suitable for aggregate mining and adjacent to industrial lands. All projects face NIMBY (“Not In My Back Yard”) concerns with growing tenor. A substantial effort should be made to engage the public in areas where quarries and industrial lands are occupied by the industry.”

The main survey question is purposefully vague: “For your company or organization, how do you think 2019 will compare to 2018?” 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 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.

As in previous surveys, the weather largely depends upon where you are standing. Most respondents commented that work was booming, while a few were underwhelmed. One local agency representative said SB1 money would likely increase the number of projects in 2019, but that it would not be until 2020 when the full impact of the new funding would be felt.

A total of 173 people took part in the voluntary on-line survey, which was conducted from Nov. 7 to Dec. 15, 2018. CA Russell W. Snyder, CAE, is executive director of the California Asphalt Pavement Association.

17

Q&A with

Ken D. Simonson AGC of America Senior Economist

By Russell W. Snyder

Editor’s Note: Kenneth D. Simonson has been chief economist for the Associated General Contractors of America, the nation’s oldest and largest trade association for the construction industry, since 2001. He provides insight into the economy and what it means for construction and related industries through frequent media interviews, presentations and the “Data DIGest,” his influential weekly e-newsletter that goes to 43,000 subscribers worldwide. He has more than 40 years of experience analyzing, advocating and communicating about economic and tax issues.

He currently serves on the U.S. Census Bureau’s Scientific Advisory Committee. He is also a Fellow and past president of the National Association for Business Economics, and he is co-director of the Tax Economists Forum, a professional meeting group he co-founded in 1982. Simonson has a BA in economics from the University of Chicago, and an MA in economics from Northwestern University. He is a noted subject-matter expert and every year speaks to numerous groups, conferences and other events. His engaging style helps industry leaders make sense of complex and often contradictory information about the economy and the industry. He has strong family ties to California and is very familiar with the state’s unique economic climate and 18

influence on the nation and the world. He is also knowledgeable about the asphalt pavement industry, a key segment of the broader construction market he follows closely. Recently he agreed to discuss some of the economic trends he sees for the nation and California, and how they may impact the asphalt pavement industry.

California Asphalt Magazine: You are well-known and respected nationally and here in California, and we appreciate you taking the time from your busy schedule to share your thoughts about construction economics and what current trends and dynamics may mean for our industry in the months and years ahead.

Ken D. Simonson: My pleasure.

CAM: These certainly are interesting times for the U.S. economy, which in 2018 produced strong growth and employment numbers, but at the same time generated a fair amount of volatility. This has been reflected in wide swings in global oil prices and stock indices, particularly as 2018 drew to a close. The asphalt pavement industry, like most business sectors, tries to make sense of these trends and how they may impact future business operations. What insight can you offer our readers as we prepare for 2019 and beyond?

Ken D. Simonson

AGC of America, Senior Economist

KDS: First, I think 2018 has proven to be a pretty good year for the bulk of contractors, although it has certainly been a challenging one in terms of dealing with some unexpected price swings. Obviously, a lot of tariffs hit at different times, but also a big run-up in oil prices that showed up, after a lag, in asphalt prices. That also had a huge impact, for the second year in a row, in diesel prices. Just lately those things seem to have reversed.

But the tariff situation seems very much in flux, which has made contractors much warier for 2019.

CAM: Those tariffs, announced by the Trump administration in 2018, were said to be in retaliation for unfair trade practices by China and others.

California Asphalt Magazine • 2019 Forecast Issue

They seem to have spooked Wall Street, leading to steep drops in the Dow Jones Industrial Average and other equity indexes as 2018 drew to a close. Heading into 2019, however, it still seems as though the economy has some positive momentum.

KDS: At the moment I expect 2019 also to be a generally positive year, but there are three challenges – tariffs and pricing, labor availability, and the question mark about interest rates. Those are things that contractors have to look at in varying degrees. With regard to the tight labor market, I don’t see any let-up. If anything, it’s going to get worse in 2019.

CAM: How about the highway market?

KDS: For highway contractors, there’s always the question about whether there will be a federal infrastructure bill, and what will happen in 2020 when it’s time to renew the Federal Highway Aid bill. At the state level, of course, you have survived the challenge to Prop. 6.

CAM: That of course was the November 2018 statewide ballot initiative that sought to repeal various fuel-tax and vehicle registration fee hikes enacted by the Legislature in 2017 to pay for transportation.

At stake was more than $5 billion a year for road and bridge repairs and other transportation programs in California. Voters rejected the measure in the Nov. 6 election.

KDS: For now it looks like California is in stronger shape in funding highway projects and other infrastructure than most states are.

CAM: We know you closely follow the price of raw materials used in construction. What trends are you seeing?

KDS: The producer price index for November showed that the cost of inputs to all construction industries – that’s an index that measures the selling price of all materials that go into every type of construction, plus items consumed by contractors, like diesel fuel, and services, such as trucking and leasing services – that index went up 4.9 percent from November of 2017 to November of 2018. That was somewhat higher than for the overall producer price index, or the consumer price index, which is going up at less than a 3 percent rate. For highway and street construction inputs, that index went up 6.2 percent, which is definitely a challenge for contractors who are buying the materials to do highway and street construction. Those numbers are a little less than they were a few months ago, but they still represent a major challenge and show that problems are not over with rising materials costs and also a lot of fluctuation in those costs. I think for 2019 we will be seeing contractors either try to get owners to allow selective cost adjustments for things that fluctuate widely, or they are going to be putting some contingencies or cushions in their bids to try to protect themselves from these unexpected price spikes.

CAM: What about the labor market? In our annual survey of California Asphalt Insider newsletter subscribers, conducted at the end of 2018, labor concerns were the most often cited challenge for companies and organizations.

California Asphalt Magazine • 2019 Forecast Issue

KDS: On the labor availability issue, AGC of America has been doing a survey for the last six years, each summer, about a number of workforce issues, and this past survey that we released on Aug. 29, 80 percent of the participants said that they were having trouble filling one or more craft positions. We had much wider participation that we had before, 2,550 firms, including 127 who identified California as their principal state of operations.

That was a 60 percent increase in total participation. By itself, that suggests that the concern about workforce availability is much more widespread. Every position that we asked about – and we asked about 20 different crafts – more than half the firms said the position was harder to fill than it was last year, except traffic control personnel, and even then 47 percent of the firms said it was harder to find people to hold up those “stop” or “slow” signs.

CAM: Most motorists don’t like to see “stop” or “slow” signs, but to us they are a welcome sight. That means there’s more road-repair work going on. And after many years of deferred maintenance on California roads and bridges, that’s good news.

Still, even as they gear up to deliver more transportation projects, our agency partners have also expressed concern about the capacity of the industry to deliver all the work that’s needed.

KDS: With the overall employment rate now at a 50-year low, and construction employment at the lowest it’s been in a series that dates back to 2000, and job openings in construction at a record high in a series that started in 2001, every indication is that workers 19

are still going to be very difficult to find in 2019. As you might expect under those circumstances, labor costs have begun to rise – although still not nearly as much as economists have generally expected. The cost increases on what’s called average hourly earnings, which are the average of all wages and salaries paid in construction, has been going up closer to 4 percent compared to the previous 2 percent to 3 percent, but still not as much as it did before the last recession. But I think that really understates the actual labor-related costs, because contractors do tell us that they are doing a lot more searching, going to job fairs and schools and so forth. The number of job openings at the end of each month have been setting a record in that series, as I mentioned, and then more is being spent on training, more on overtime, both to train workers and to make up for the lack of workers on the actual jobsites. So all of those things get rolled into what I call laborrelated costs, even though they are not showing up in the average hourly earnings that the government measures. I expect those costs to continue to accelerating in 2019.

CAM: What about interest rates?

President Trump, a former real estate developer, has commented frequently about interest rates and how they impact the overall economy.

The Federal Reserve, which sets benchmark interest rates, has been slowly raising them with a stated goal to keep the economy from overheating and inflation in check.

KDS: Contractors, for the most part, are not big borrowers, but they do have to pay attention to what this does to demand 20

for projects. Certainly, on the infrastructure side, that means what is the cost of municipal bonds, the interest the agencies have to pay, and how many miles of roads or schools are they able to build if they are putting out more in interest payments to the bond-holders.

CAM: Regardless of those concerns, our annual “Better or Worse” was the most optimistic for 2019 than it has in the 10-year history of the survey.

Workforce issues, however, were a dominant theme in the comments, particularly from agency personnel who participated in the survey.

Could this create a bottleneck for getting work done?

KDS: I do expect the workforce situation to get even more difficult in 2019. First, the U.S. demographics are unfavorable.

The number of people who are hitting retirement age, whatever age that happens to be for an individual, keeps growing, whereas the number of people coming into the workforce has been pretty stagnant and is not going to be increasing, just looking at the number of 16-, 17- and 18-year-olds, etc. Now, labor force participation can affect that, so if more people who have been staying home or staying out of the labor force for whatever reason, decide, OK, now is the time that I’m going to go out and get a job, or move up from part time to full time, or from a gig job, then yes, you can improve that situation. But I don’t have a reason to think that will suddenly get better. So, I think in terms of aging out, vs. aging in, shall we say, it’s an unfavorable situation. Add on to that the foreign-born worker situation, I don’t see that getting better in 2020.

CAM: That is another signature issue of the Trump administration, controlling the flow of immigrants to the United States, which some critics have said has overly restricted the flow of immigrant labor critical to many industries.

KDS: Construction has historically relied a lot on foreign-born workers, not necessarily so much in the paving and heavy construction side, but nevertheless that does affect the availability of other workers, so to the extent that fewer people are coming in and getting jobs, or people who are here are leaving the country, either voluntarily, or otherwise, or going underground, making themselves less visible to authorities, that exacerbates the workforce situation. I think that will continue to add to the problems of finding workers in 2019 and 2020.

CAM: The last recession hit California particularly hard, especially in construction, which lost hundreds of thousands of workers, and it seems that many of those workers have not returned to the industry and probably never will. Is that what you are seeing in other parts of the country?

KDS: Yes. CAM: We’ve focused a lot on the public sector, because obviously that is an important part of the asphalt market — public roads — but what about private development? All those developments and buildings need roads to connect them, parking lots and other pavement infrastructure. How do you view the private market heading into 2019? We hear some anecdotal reports that some private work may be slowing down.

[ Continued on page 22 ]

California Asphalt Magazine • 2019 Forecast Issue

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[ Continued from page 20 ]

KDS: I don’t get a sense of that.

I wouldn’t say that the work is accelerating, but overall I think it is staying about where it has been. Now, single-family housing, that has definitely slowed down a lot, but the flip side of that is when you have such a high number of people employed, and that number keeps going up a couple hundred thousand each month nationally, that means more people can afford some kind of housing, so I think it’s going to add to the demand for multifamily construction in 2019.

With regard to other private categories, the one I am most concerned about, and again this relates to interest rates, is the hotel and resort development, the lodging category. It has been, to my mind, surprisingly strong in 2018 but historically it is one sector that has been very sensitive to interest rates.

Developers look at the revenue for available rooms, or what percentage of hotel rooms are occupied, and what the room rate is, and they also look at the cost of the money to finance new construction. So, if either of those turns more unfavorable we could see an abrupt slowdown in the amount of lodging construction. But for now I think other major categories are going to proceed.

With warehouse construction, there seems to be an insatiable demand for that. Office construction, I still think, will be growing, but probably a little less in 2019. It seems more and more people are working out of homes, or coffee shops or co-working spaces and not occupying traditional office space nearly as much, but still I think you do get some major headquarters buildings going up, and still some renovation of office space. I think the health 22

care sector is one that has shown uneven growth, and will continue to grow modestly in 2019. I think educational construction should also have a modest pickup in 2019. The strongest category I expect next year is going to be airport construction. It was already doing extremely well in 2018, and I think we will see even more airport projects. Practically every airport hub in the country is adding gates or reconfiguring space inside the terminal to try to speed the clearance process, baggage pickup, and modernize the retail space, and try to improve access and parking.

And finally, on the aircraft movement side, airports will sometimes be adding gates, taxiways or control towers.

CAM: Can you say a few words about oil prices? Oil, of course, is a key component of asphalt, but it is a global commodity and subject to wide price swings based on numerous factors.

The steep drop in oil prices of a couple of years ago, which seemed to catch everyone by surprise, has given way to steady increases. The last quarter of 2018, however, saw another sharp decline in prices.

What do you see in your crystal ball with regard to oil prices?

KDS: I’ve been doing economic and tax policy analysis and communication for over 45 years and I’ve followed oil all that time, and I’ve never gotten it right, so I’m not the one to ask (laughs).

CAM: Join the club. And that club has a lot of members.

KDS: I shouldn’t say I’ve never gotten it right – I’ve gotten it right about 50 percent of the time, but you could do as well by just flipping a coin (laughs).

CAM: Duly noted. Since this is the forecast issue, we’ll just say that oil prices are bound to change, and leave it at that.

KDS: I think we have a situation where the U.S. just keeps pumping more and more, and we have a leapfrog situation where they find new oil but they don’t have a way to get it to market, and then they complete a pipeline so that brings the price back down or that changes the mix of crude vs. gasoline prices, heavy crude vs. sweet crude and so forth.

And then you look at the rest of the world and you get all kinds of dynamics pushing and pulling. Suddenly Russia and Saudi Arabia seem to be buddybuddy, and they are fighting against Iran, and Venezuela is just collapsing, so I think my expectation is that oil prices are going to continue to fluctuate for a lot of technical and geophysical reasons, and also political and economic reasons.

CAM: We know you are very familiar with California, have family ties here, and travel to our state frequently. That gives you perhaps greater insight to our state than other economists based in other parts of the country. How do you perceive the California economy and its influence to the greater national economy? What makes California unique from other states?

KDS: California is certainly more globally focused than other states in terms of its exposure to international trade, particularly on the inbound side. You also produce a lot of goods and services the rest of the world wants, whether it is agricultural products, or entertainment, media, high-tech – all of those things make California a leader

California Asphalt Magazine • 2019 Forecast Issue

for much of the country. You have an interesting demographic dynamic that you continue to attract a lot of in-migration from other parts of the world, knowledge-workers as they are sometimes called, but that is offset by a huge out-migration of people who find the state too expensive or oppressive in terms of restrictions. The net is that you are growing at about the same rate as the U.S. population. California, while it has a reputation of being unaffordable and driving people out, the fact is you are still growing and in no danger of losing your role as the biggest state, and then you have these incredible natural disasters that seem to be getting worse and worse. In some ways you share the general issue of natural disasters getting worse with other states, but you are a leader in that area, unfortunately. It will be interesting to see how the state adapts to these climatic challenges, and the very aggressive role that the state and some of the local governments are taking, and what impact that is going to have on construction. It’s already been quite a difficult place to do business, to get permits and so forth, and I think as the concern about drought and fires and debris flows increases, then so will the challenges of getting construction designed and permitted and completed.

CAM: With regard to the California economy, because the state is so massive and diverse, there are areas that fare much better or much worse than other areas as the economy changes.

It certainly presents its own share of challenges.

sense of the many forces at play that impact our industry.

KDS: You’re quite welcome. CA Interview conducted by Russell W. Snyder, CAE, executive director, California Asphalt Pavement Association (CalAPA®).

KDS: Yes indeed.

CAM: Thank you again for all your insight in helping us make

CAM: As that song by “The Clash” goes, “Should I stay or should I go?”

KDS: (Laughs). I still find the state enormously appealing. I’ve traveled to a lot of parts of it. I know that there’s some fantastic scenery to see, but I only come as a visitor so that’s a different perspective.

California Asphalt Magazine • 2019 Forecast Issue

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Recycled plastic additive in asphalt shows promise on test application in San Diego; goal is to help divert plastic waste from landfills into longlasting pavements 100%

By Brian Hoover

top for a moment and look around you and you will notice just how many things are made from plastic. There are thousands of products made from plastic that add both convenience and comfort to our lives. It is cheap, lightweight and durable and it is used to manufacture everything from the obvious water bottle to your toothbrush that you hopefully use twice a day. Plastic is a central component in the manufacturing

of your electronic equipment, household appliances, cars, food packages, sports equipment, and the list goes on and on. Plastics can be useful in our society, but when improperly disposed of, they can be a significant hindrance and even lethal to animals and a long list of ocean-living species.

Is the world going to stop manufacturing items from plastic anytime soon? You can be confident that it will not, so how we manage our plastics matters.

Every step we can take and each plan that we make to recycle or reuse our plastic products will make our environment a safer, more beautiful and a more efficient place to live and thrive.

According to the United States Environmental Protection Agency (EPA), 34.5 million tons of plastic was generated in 2015 in the United States, making up 13.1 percent of all municipal solid waste (MSW). Just 9.1 percent [ Continued on page 26 ]

Background: Toby McCartney of MacRebur discusses finish compaction with contractor Southland Paving at the first three test strips at UCSD.

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California Asphalt Magazine • 2018 Forecast Issue

Left: Chris Sparks (left) with John Greenwood, California Commercial Asphalt onsite at UCSD. Above: Gordon Reid, MacRebur (left), Chris Sparks, CCA and Toby McCartney, MacRebur pose at the test project.

[ Continued from page 24 ]

of that was recycled. The rest is either incinerated, placed into our landfills or littered across our great land or at sea.

Every step we take to recycle, or reuse plastic is a step in the right direction, so what if we could build roads with recycled plastic? That is the exact question that the folks at California Commercial Asphalt (CCA) asked themselves after learning of a company in the United Kingdom doing just that, mixing recycled plastic with Bitumen to make a long-lasting and robust asphalt surface. Chris Sparks handles sales, marketing and special projects for CCA and to say that he is excited about the future of using plastic in asphalt would undoubtedly be an understatement. “I was noticing a lot of talk and images on social media about utilizing plastic in asphalt, while at the same time seeing other heart-wrenching posts showing turtles with plastic straws in their noses or plastic six-pack rings entangling birds and other wildlife, and it 26

hit home just how fragile our environment really is,” says Sparks. “I was immediately motivated to begin researching and looking into the possibility of using plastics in our asphalt mixes here in San Diego and beyond.” According to Sparks, he found himself in a conversation with Gary Oshima, construction commodity manager at the University of California, San Diego (UCSD), on the subject of utilizing plastics in asphalt construction.

“It was clear that we were both very passionate about the topic and we agreed that it would be great to test a mix design on some of the UCSD roads,” says Sparks. “Gary appeared to be confident that he could find a road to test the mix on, but we both got busy, and nothing was yet on the schedule.”

Both men continued to do their research, and they came upon a company by the name of MacRebur® from the UK that was already producing and having great success with waste plastic road products. “While we were doing our research and about the

time that we came upon the name, MacRebur®, they coincidently began reaching out to us to discuss the option of paving a road at Miramar utilizing their plastic additive product,” says Sparks. “We then began the decision process of whether to test the product on a small plot or on a larger scale project like UCSD roads where we could let the public experience the results firsthand. We ended up pursuing the latter and began phone conferences with MacRebur® on our project at UCSD.” They were speaking with Toby McCartney, CEO, Gordon Reid, COO and Nick Burnett, CHRO, all co-founders of MacRebur®. “We covered everything from the benefits of the product to what they had accomplished and some of their success stories, and this satisfied us enough to know that we were on board and decided to team up with MacRebur® on this project and hopefully much more.”

Sparks points out the decision could not be made quickly or without definitive results. “There have been so many flavors of the

California Asphalt Magazine • 2019 Forecast Issue

Above: Southland Paving laying down the second test strip at UCSD. Right: Third test strip going down the final pull of the project.

month with new additives and new recyclable products,” says Sparks. “This particular product, however, proved to stand above the rest where we were able to see an immediate impact and difference, not only to our roads but also the environment.” They all proceeded to move into the next phase where MacRebur® sent all of the plastic additives on their dime and then flew into San Diego to begin the manufacturing and placement process. “We were working with Gordon and Toby and ran the product through our plant just like any other mix, except that we added six-pound bags of pelletized plastic right into the pugmill hopper,” says Sparks. “Next we delivered the new plastic asphalt material to the job at UCSD and began the paving process. We were immediately excited to see that we were getting excellent compaction and incredible tensile strength.”

The test project was an existing job going on at graduate housing on the North Campus at UCSD. Hensel Phelps was the general

contractor with Southland Paving serving as the subcontractor doing the paving construction work. “We picked out an arterial street outlet to do the test paving, and we began quizzing the paving machine and roller operators to see if they were noticing any discernible difference or adverse effects with the new plastic asphalt mix,” says Sparks. “They came back with positive reviews, saying that it handled the same as any other conventional asphalt mix and that they were getting compaction quickly, even at 97 percent on the second pass with their smaller roller.” It was at this time that Sparks and the owners at CCA realized that the MacRebur® plastic additives and the new mix had the potential to be an amazing product. “The paving crew and especially the roller operators were particularly mindful of making tears in the mat on their third and fourth pass but were surprised and impressed with the incredible tensile strength that the plastic additive appeared to bring to the mix,” continues

California Asphalt Magazine • 2019 Forecast Issue

Sparks. “They mentioned that it appeared to be easier to deal with and that they loved it.”

According to Sparks, the UCSD project was the first time the plastic asphalt mix has been implemented in the United States. “We tested the new mix in our in-house lab, as well as at an independent laboratory, and both came back right on as a conventional ½ inch Type II C2 San Diego mix,” says Sparks.

“For all intents and purposes, it changes zero properties concerning the finished product.

So, your SPF is going to look the same.” Sparks concedes that with any new product, getting clients to be the first to jump on board can be a challenge. “It does cost a bit more, but we have relationships with municipalities who have worked in partnership with CCA on environmentally friendly and special projects in the past and we are confident that they will support and have interest in getting behind an innovative mix option. In the early stages we will likely have a higher demand for the product in 27

Above: Finish compaction on the first test strip.

Top Right: Sample bags of the three types of recycled additives used on the project.

Right: Close-up of test strip before compaction.

the private sector, where they can get a lot of traction from the positive press and positive environmental impact it will have for their clients,” continues Sparks. “When you recognize that you are getting a potentially stronger, longer lasting road surface while keeping plastic waste material out of our oceans and landfills, the upside and benefits of using this material win the day.”

Sparks says that he initially thought that the environmental concept behind plastic asphalt was a great marketing platform, but then he saw firsthand what a great product it was going to be. “It is not an either-or decision or what is best or worst, it is about having choices,” says Sparks. “This new plastic asphalt mix is another option that like with rubber, keeps our environment safer and less impacted. Additionally, it is a super strong mix with impressive tensile strength and flexibility.

We predict that this new plastic asphalt product is going to be a popular choice and used quite effectively throughout California and eventually the entire country.”

Sparks points out that the ultimate goal is to utilize all local 28

plastics, harvested from local landfills, oceans and recycling centers. “We want to harvest, prepare and resell using local waste plastics and ocean waste plastics from our local and regional plants,” says Sparks.

“The next step will be to set up a plant where we can terminally blend this material and perhaps partner with a local recycling facility. Once MacRebur® gains market share worldwide, they could potentially set up a plant here on the West Coast to manufacture and terminally blend the plastics into oil. We are just so excited about the potential of this new product.”

The MacRebur® family of products are produced in pellet and flake form, making it very simple to administer and mix into asphalt. It is incorporated into the plant at the same time as the aggregate and bitumen, so there are no modifications to asphalt plants required. MacRebur® currently offers MR6, MR8 and MR10 (worldwide patent pending) high-performance asphalt binder additives with a new MR7 coming out very soon. According to Toby McCartney, California is ahead of the curve, and CCA is helping them introduce their products

here in the United States.

MacRebur® products are currently being utilized on job sites throughout the UK, Australia, New Zealand, Saudi Arabia and many other European countries. CA For more information on MacRebur® products, please log on to www.macrebur.com California Commercial Asphalt, LLC has been serving the San Diego area and beyond since 2005 with thousands of successful projects and a long list of asphalt products.

For more information on the use of plastics in asphalt construction, please log on to www.ccallc.com or call Chris Sparks at 858-513-0611.

California Asphalt Magazine • 2019 Forecast Issue

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INDUSTRY NEWS CalAPA® hosts Paving Contractor Mixer in Anaheim

Jeff Liebl, Quinn Cat (left), Joe Bonelli, Quinn Cat, Dennis Madden, Quinn Cat, Derek Miller, Quinn Cat and Ken Hammond, Coastline Equipment.

Brandon Milar, CalAPA® (left), Steve Cota, Patriot Risk & Insurance Services, Bryan Sonderby, The Crestwell Group, Robert Jarvis, Century Paving, Martin Jensen, Pro Link and Ken Hammond, Coastline Equipment.

On November 15th industry professionals and guests met up for a contractor mixer organized by the CalAPA® Southern California Paving Contractor Committee. The event was held at JT Schmid’s Restaurant & Brewery in Anaheim a popular spot and happening place to relax and enjoy the company of associates.

Attendees networked, feasted on delicious food and enjoyed distinctive beverages. For upcoming contractor mixers please contact the CalAPA® office at 916-791-5044. CA

Steve Cota, Patriot Risk & Insurance Services (left) with Brandon Milar, Technical Director, CalAPA®.

Hardy & Harper’s group included Mike Murray, Megan Manlove, Tina Pham and Justin Dooley.

Attendees enjoyed the relaxed atmosphere on the patio at JT Schmid’s.

Martin Jensen, Pro Link (left) and Robert Jarvis, Century Paving.

George Davis, Porter Group USA (left) and Mitch Mears, BOMAG Americas.

Carlos Hernandez, CalAPA® Life Member.

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California Asphalt Magazine • 2019 Forecast Issue

DRIVABILITY GETTING YOU WHERE YOU NEED TO BE, THAT’S

* Edelman Berland Driver Survey, 2014

| ** Edelman Berland Survey, 2013

55% of drivers today identify traffic delays due to road construction as the most frustrating part of their driving experience.* With off-peak construction, asphalt pavements leave roads and parking lots open when demand is at its highest. Surface maintenance and repair are quick, ensuring drivers and pavement owners have a smooth, high performance surface with minimal inconvenience. No wonder an independent survey found 87% of engineers, developers, transportation officials and other key stakeholders chose asphalt for its ease of maintenance.** Smoother, quieter, fewer delays… that’s drivability. That’s asphalt.

L E A R N M O R E A T W W W. D R I V E A S P H A LT. O R G

The APA is a partnership of the Asphalt Institute, National Asphalt Pavement Association and the State Asphalt Pavement Associations.

INDUSTRY NEWS Noted leaders inducted into CalAPA® ‘Hall of Fame’ at Annual Dinner in Los Angeles Asphalt industry leaders from the past, present and future gathered January 10 at the historic Jonathan Club in downtown Los Angeles to pay tribute to legendary figures from the public and private sector who distinguished themselves during their long careers for always elevating those around them.

The annual dinner also recalled those who passed away in 2018, providing a poignant reminder that today’s success is the cumulative effect of years of dedication and hard work by those who have gone before us.

“Tonight,” said outgoing CalAPA® Chairman Mike Murray with Hardy & Harper, “is a chance for us to look back at the many contributions our members have made to the betterment of our industry, and to look ahead toward the challenges and opportunities that we face in the future.”

The association installed Steve Healow, recently retired from the Federal Highway Administration, into the CalAPA® Hall of Fame as an “Honorary Member,” noting his quiet yet effective work over many years to help industry and Caltrans develop and update technical specifications and procedures.

Jack Van Kirk, recently retired from CalAPA® member George Reed, Inc., read a tribute from colleague Tony Limas from Granite Construction, noting that Healow “was always committed to one cause -- understanding the underpinnings of the technical arguments being made by various stakeholders. When issues went unresolved due to a lack of experience or information, it was not uncommon for Steve to reach out to his colleague on the national stage to gather additional information. In turn, this would often result in an

unsolicited follow-up phone call or e-mail from Steve with additional information or new perspectives that served to move the task group one step closer to the goal line.”

Van Kirk also received recognition as an Alumni Member for his many years of service to the industry advancing the frontier of knowledge in numerous technical areas related to asphalt pavement design, testing and acceptance, as well as recognizing his previous service as a materials engineer for the California Department of Transportation.

Also receiving “Alumni Member” recognition was Rich Shaon, recently retired from Sully-Miller/Blue Diamond Materials after a nearly 50-year career. He was introduced by Scott Bottomley with Sully-Miller, CalAPA®’s Treasurer.

Rich Shaon, Alumni Member (left), Juan Forster, Life Member.

Carlos Hernandez, Life Member, Len Nawrocki, Life Member.

Jack Van Kirk, Alumni Member.

Erik Updyke, Honorary Member, Ron Stickel, Life Member, Steve Healow, Honorary Member and Russell Snyder, Executive Director, CalAPA at the 2019 CalAPA Annual Dinner, held Jan. 10, 2019 at the Jonathan Club in downtown Los Angeles.

Steve D’Ambra, Maxam (left), Susana Mitchell, Taylor Environmental Services, Mike Butler, Butler Justice and Scott Taylor, Taylor Environmental Services.

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Pascal Mascarenhas, Vulcan Materials (left), Grant Hughes, Vulcan Materials, Steve Hollis, San Joaquin Refining Co. and Dennie Reed, Vulcan Materials.

Len Nawrocki, Life Member (left), Mayra Nawrocki, Jennifer Shoemaker, Melissa McCarty and LTC Chris McCarty

California Asphalt Magazine • 2019 Forecast Issue

Another “Honorary Member” Hall of Fame recognition was presented to Erik Updyke, who also retired in 2018 from the Los Angeles County Department of Public Works. Pascal Mascarenhas with Vulcan Materials introduced Updyke to a dinner audience no doubt familiar with Updyke’s many professional accomplishments, including his many contributions to the development and advancement of the Green Book of public works standards.

The evening program also paused remember the leadership and contributions from four giants of the industry who passed away in 2018: Paul Rademacher, Wayne Church, Wally E. Hunt Jr., and Frank C. Hermann.

The association also installed its officers for 2019: Jordan Reed with George Reed Inc. (Chairman); Jim Ryan with Marathon (Vice Chairman); Scott Bottomley with Sully-Miller/Blue Diamond Materials (Treasurer) and Toni Carroll with Graniterock (Secretary). In passing the gavel to Reed, Murray moved to Immediate Past Chairman. Other members of the CalAPA® Executive Committee are: Jeff Benedict with Valero, Scott Fraser with R.J. Noble, Alan French with DeSilva Gates Materials and John Greenwood with California Commercial Asphalt.

The landmark victory in 2018 of Proposition 69 on the June ballot, which gave state constitutional protections to transportation dollars, and

Nawrocki family from left; LTC Chris McCarty, Melissa McCarty, David Gluhaich, Codi Davis, Jennifer Shoemaker, Mayra Nawrocki and Len Nawrocki.

R.J. Noble Team enjoys another spectacular evening at the Jonathan Club with CalAPA Naveed Kharrat (left), Scott Fraser, Steve Mendoza, KaSondra Carver & Austin Carver.

Bill Grider, Griffith Company (left) Rich Shaon, Alumni Member, Jason Spear, Griffith Company, Yvette Shaon, John Rogers, Shon Esparza and Mike Acosta, Sully-Miller/Blue Diamond.

Need name and company (left), Brian Handshoe, Kenco Engineering, Matt Ramos, G3 Quality, Inc., Brian Platt, G3 Quality, Inc. and Mike Murray, Hardy & Harper.

Berlene (left) and Carlos Hernandez, Life Member at the 2019 CalAPA Annual Dinner, held Jan. 10, 2019 at the Jonathan Club in downtown Los Angeles.

Hardy & Harper group; Tina Pham (left), Tanner Hambright, Vanessa Garcia, Justin Dooley, Vanessa Garcia, Dan Maas, Megan Manlove, Mike Murray and Dennis Beyle.

Carl Rundquist (left), Jeff Benedict, Valero Marketing & Supply and Len Nawrocki, Life Member.

Nixon-Egli Equipment’s group included John Greaney (left), Vern Gunderson, Jay Rosa and James Nixon.

Jeff Reed, George Reed, Inc. (left), Gary Houston, Valero and Ron Turcotte, Syar Industries.

California Asphalt Magazine • 2019 Forecast Issue

the defeat of Proposition 6 in November, which would have eliminated more than $5 billion per year in road funding, were touted as signature achievements for the industry in the past year.

“Now that we have secured $5 billion a year in transportation funding by defeating Proposition 6,” Reed said in his first remarks as association chairman, “we’re going to need to work diligently with Caltrans and local agencies to convert those tax dollars to pavement projects. This must be done quickly. Voters have placed their trust, and their dollars, in our hands. We must deliver on that promise by improving their roads in a noticeable way.”

Reed also said he hoped leaders in Washington will follow California’s lead in protecting

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transportation infrastructure that is so vital to jobs, the economy and our quality of life.

“I believe that by leading by example, we may demonstrate to Congress that prudent investments, well spent, is just responsible, good governing,” Reed said. “That, I hope, will inspire Congress to address the insolvent federal Highway Trust Fund. Adequate road funding is

like a three-legged stool. There is local, state and federal funding.

We have strengthened the state and local legs of the stool, but the federal leg is very wobbly and risks undermining all of our efforts.”

The sponsors who made the evening possible were: (Table Sponsors) California Commercial Asphalt, CEI Enterprises, Hardy & Harper Inc., R.J. Noble Co., Valero

Marketing & Supply and Vulcan Materials. The Reception sponsor was San Joaquin Refining Co. The Dinner Sponsors were: Ergon Asphalt & Emulsions, G3 Quality, and Sully-Miller Contracting / Blue Diamond Materials. The rooftop “after-event” reception was sponsored by Nixon-Egli Equipment. CA

Anna Trinidad, Valero Marketing & Supply (left), John Holliday, Holliday Rock and Jackie Henry, Valero Marketing & Supply.

Russell Snyder, Executive Director, CalAPA greets the annual dinner guests.

Carlos Hernandez, Life Member paid tribute to his good friend and colleague Paul Rademacher.

Juan Forster, Life Member paid tribute to his former employer and industry leader Wally Hunt.

Passing of the gavel from out-going chairman Mike Murray to new CalAPA chairman Jordan Reed, George Reed, Inc.

Russell Snyder (right) recognized CalAPA Technical Director Brandon Milar.

Scott Bottomley, Sully-Miller/Blue Diamond introduces Rich Shaon and presents him with an alumni member status.

Rich Shaon new alumni member of CalAPA (left) with Scott Bottomley, Sully-Miller/Blue Diamond.

Erik Updyke, Retired LA County was inducted as an honorary member.

Pascal Mascarenhas, Vulcan Materials presented Erik Updyke his honorary member plaque.

Jeff Reed, George Reed, Inc. (left) with Jack Van Kirk, Retired who was honored as an alumni member.

Jack Van Kirk, Alumni Member presents Steve Healow with his CalAPA honorary member plaque.

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California Asphalt Magazine • 2019 Forecast Issue

California Asphalt Magazine • 2019 Forecast Issue

35

INDUSTRY NEWS

Wallace Everett Hunt Jr. February 2, 1930 – December 26, 2018 On Wednesday, December 26, 2018, Wallace (Wally) E. Hunt Jr passed away at the age of 88 in Nipomo, CA. Wally was born February 24, 1930 to Wallace E. Hunt Sr and Mary (Jerri) Jackson in Salt Lake City, UT. Shortly after his birth, the family settled in Los Angeles where Wally grew up and graduated from Los Angeles High School. Following high school, Wally attended Brigham Young University where he ran on the track team, was involved in clubs and was a member of the Air Force ROTC. After graduating BYU with a degree in accounting, he was stationed in Texas for flight training as a jet pilot in the Air Force during the Korean War. While on leave he met Patricia Diane Harrison. After only three dates he proposed to her and they were married 2½ weeks later in the Mesa, Arizona LDS temple on June 24, 1955. They celebrated their 63rd wedding anniversary in 2018 having added to the family, five children, 21 grandchildren, 21 greatgrandchildren.

After retiring as a captain from the Air Force, he joined the family asphalt business with his father and brother at Industrial Asphalt where he worked in

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management until Gulf Oil purchased the company. He worked at Gulf Oil as an executive in Oklahoma and Texas until he and his brother started Huntmix Asphalt and Huntway Refining Company in California.

They later purchased Industrial Asphalt back from Gulf Oil forming the largest asphalt producer west of the Mississippi.

He had many other business ventures over the years including printing, engraving, dehydrated foods, software development, Gig magazine, Hunt/Brown Productions, real estate development, and construction to name a few. He also had many hobbies such as photography, hunting, shooting, boating, tennis, BYU sports, LDS church book collecting, and traveling the world with family and friends.

Wally was a Boy Scout, earning the Eagle Scout award and was always proud of his three sons and many grandsons who became Eagle Scouts.

Throughout his life, one thing that never changed was his love and devotion to the gospel of Jesus Christ and membership in the Church of Jesus Christ of Latter Day Saints. He held numerous positions in the church and gave countless hours of service.

He is preceded in death by his parents Wallace and Jerri and his brother Robert (Bob) Hunt.

He is survived by his sisters Mary Jane (Jan), Margaret Ann (Peggy), wife Pat and five children and spouses along with their children and grandchildren; Dennis and Lori Hunt, Marsha and Corey Pace, Elizabeth and Mark VanLangeveld, John and Heidi Hunt and Jeff and Kitty Hunt.

Funeral services were held January 5th in the Church of Jesus Christ of Latter Day Saints in Northridge followed by a graveside service at Forest Lawn Hollywood Hills. CA

California Asphalt Magazine • 2019 Forecast Issue

California Asphalt Magazine • 2019 Forecast Issue

37

Asphalt Consulting Services............................35

Matich Corporation........................................... 14

Bomag America....................................................7

Nixon-Egli Equipment Co.................. Back Cover

CalAPA................................................................. 31

Phoenix Industries............................................. 11

Clairemont Equipment......................................37

Pine Test Equipment..........................................25

Coastline Equipment...........................................7

Pavement Recycling Systems..........................37

Diversified Asphalt Products............................29

Peterson CAT........................................................2

E.D. Etnyre & Co.................................................39

Quinn Co...............................................................2

GoldStar..............................................................23

Roadtec...............................................................21

Hawthorne CAT....................................................2

Scott Equipment................................................ 10

Herrmann Equipment........................................15

Sitech NorCal.....................................................35

Holt of California..................................................2

Taylor Environmental Services, Inc.................39

Marathon Petroleum Company..........................3

Volvo Construction Equipment & Svcs.............5

NEW MEMBERS OF CalAPA BEARCAT MFG.

3650 Sabin Brown Road Wickenburg, AZ 85390 www.bearcatmfg.com

Steve Karl

Sales Manager P: 253.709.7578 skarl@bearcatmfg.com

MUSTANG HOT PLANT SIERRA NEVADA CONSTRUCTION AND Q&D CONSTRUCTION

1050 S. 21st Street Sparks, NV 89431 www.snc.biz / www.qdconstruction.com Frank Cavalier

Materials Manager P: 775.342.6000 fcavalier@snc.biz

MERCER - FRASER COMPANY P.O. Box 1006 Eureka, CA 95502

Justin Zabel

President P: 707.443.6371 jzabel@mercerfraser.com

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California Asphalt Magazine • 2019 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 SPRING CONFERENCE Date: March 20 & 21, 2019 DoubleTree Hotel 222 N. Vineyard Avenue Ontario ‘DAY AT THE RACES’ Date: July 20, 2019 2260 Jimmy Durante Boulevard Del Mar Meeting dates are subject to change.

Watch the weekly Asphalt Insider newsletter for meeting updates or call CalAPA® at (916) 791-5044 to confirm meeting date and location.

California Asphalt Magazine • 2019 Forecast Issue

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NIXON-EGLI EQUIPMENT CO., HAMM AND GRIFFITH COMPANY

Left & Below: Griffith Company using their new Hamm H 12i compactor at Pier E for the Port of Long Beach at their new automated terminal.

Griffith Company is one of the earliest contractors to contribute to the phenomenal growth in California over their 110-plus years of service. Their capabilities, resources and engineering expertise have earned them a reputation as a clear leader in full-service contracting. Griffith Company offers a long list of services including: grading & paving, structural concrete, underground utilities, concrete flatwork, landscape & irrigation, as well as masonry, environmental services, material recycling and other heavy construction focuses that include dams, treatment plants and pump stations. Their work on ports, roads, bridges, airports and redevelopment projects have been well documented throughout California.

A part of Griffith Company’s success over the past century can be attributed to the heavy construction equipment they choose to use on their numerous jobsites. They recently took delivery of a brand-new Hamm H 12i compactor with a vibratory smooth roller drum from Nixon-Egli Equipment Co. Brian Van Hook is the equipment manager for Griffith Company and you can be sure that he researches every piece of equipment before adding it to the company’s vast fleet. “We purchased our new Hamm (H 12i) compactor because it is Tier IV Final, offers high productivity and compaction performance, and we like the 3-point articulation that provides our operators with outstanding traction and off-road mobility. Additionally, their Hammtronic machine management system links, monitors and controls all of the important machine functions which frees up our operators for other duties,” says Van Hook. “We also traveled to Hamm’s factory in Germany and were very impressed with their innovation, quality and overall superior products.

“This is the third Hamm roller that we have purchased and we continue to buy these Hamm rollers and other equipment in part because of the tremendous service we have received from Nixon-Egli over the years,” says Van Hook. “I have been working with Jay Rosa (Nixon-Egli Wirtgen Specialist) for more than a year and a half now and I have to say that I am impressed with his service and follow-up. The overall service and teamwork displayed by the entire staff at Nixon-Egli Equipment Company is the reason we plan to remain partners now and 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