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Construction figures drop after 3 years

Posted: Thursday, August 28, 2003

The head of the state's largest contractor's organization told the Kenai Chamber of Commerce on Wednesday that spending on Alaska construction projects has dropped significantly from last year.

Richard Cattanach, executive director of the Associated General Contractors of Alaska, said overall construction spending is down around 8.2 percent from last year.

However, he cautioned that those numbers are coming in the wake of three of the state's busiest construction years.

"(The years) 2000 through 2002 were the highest construction numbers since the pipeline," Cattanach said.

That's no longer the case. Cattanach said spending on both government and private construction has dropped over the past year, and that trend is likely to continue into next year, as well.

"I think that you're going to find from a construction standpoint that we're going to be down another 10 percent (next year)," he said. "The question is how far are we going to come down?"

Cattanach said there are several reasons why there has been less construction spending in Alaska this year. First, federal, state and local governments have cut the money they spend on new construction as less tax revenues and higher insurance costs have both put the pinch on government spending, he said.

Still, he said the state is doing better than most, thanks in part to the large amount of money spent in Alaska on road construction projects. He pointed out that the state will receive in excess of $450 million in highway funds this year.

"We pay $45 to $47 million into federal highway money," he said. "We get $10 for every dollar we put in."

In addition, Cattanach said military spending will be an important factor to look at next year. He said the Fort Greeley missile defense site alone likely will help construction next year, to the tune of a quarter of a billion dollars.

Another factor in the construction spending drop, Cattanach said, has been a major drop in spending by oil companies. He said oil companies spent roughly 25 percent less around $500 million on construction this year.

"We're seeing less money from the oil patch into the state," he said.

As spending on oil declines, Cattanach said he expects other industries in the state most notably mining to pick up the slack.

"The mining industry may be making up in the future what the oil industry is reducing," he said.

One bright spot in the construction business has come from the private sector, where residential construction has seen a huge jump over last year. Cattanach said spending on residential building jumped 44 percent in 2003, thanks mainly to low interest rates.

"(Home buyers) could buy more house for their dollar than they could do two years ago," he said.

However, he said that, too, is expected to change as interest rates begin to creep steadily higher.

So with so many spending numbers down, does Cattanach foresee a gloomy picture for the state's construction industry?

Not really. He said Alaska's construction business is still one of the most robust sectors of the state's economy, employing between 5 and 10 percent of the state's labor force.

Perhaps the biggest threat to the construction industry isn't cutbacks on spending by the government and oil companies, but a lack of interest from young people wanting to get into the business.

"There's a coming labor shortage in this state, and that's going to hit the construction industry very hard," he said.

Cattanach said the Alaska Department of Labor estimates that roughly 1,000 new construction workers are needed each year to maintain the state's current level of construction work. Cattanach said he's hoping to attract more young people into the business in order to stave off the shortage.

"It can be a very attractive career," he said.

Construction jobs are generally high paying in Alaska, he said, falling only behind jobs in the oil and mining industries in how much employees get paid. And in order to continue building the state's infrastructure, schools and homes, new workers are needed to replace the ones beginning to retire, he said.

"We're just really trying to keep kids' eyes on construction as a potential career," he said.



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