Sustainable Land Development Today - January 2009 - (Page 6)

SLDT THE BOTTOMLINE Construction Dollars in a Downturn By Heather Jones P resident-elect Barrack Obama has pledged to increase infrastructure spending to boost the economy, which, if it comes to pass as expected, will have a significant impact on construction. The level of that investment has yet to be determined. Aside from that, overall federal spending will have an impact on a number of areas of the industry, providing a source of funding in a down market. Much of the funding at the state- and local-government levels actually comes from a federal source; funds are simply classified based upon who writes the check to the contractor. Public construction tends to be less cyclical than private construction, which is highly dependent on the general economy. For these reasons, the Federal Budget is critical to the construction industry. Public construction accounts for 25 percent of total, including residential, construction. Excluding residential, public construction accounts for 44 percent of nonresidential and non-building construction. Federal construction is only about seven percent of total public construction. However, much state and local construction is funded from federal programs. The largest segments in the public construction sector are educational, highway and street, sewage and waste disposal and water supply. The largest segments in the federal construction sector are office, conservation and development, commercial, transportation, educational and health care. The 2009 Federal Budget is aimed at keeping America safe and prosperous. A strong defense calls for investment of substantial resources to maintain high levels of military readiness. The most relevant use of this funding is the Base Realignment and Closure Act (BRAC). The Act funds construction at military bases across the nation. Homeland security is another focus of strong defense, which draws federal dollars to several construction segments including office buildings and transportation (i.e., airports and seaports) in addition to border fences. Public safety construction also benefits from this funding. Specifically, when combined with 2008 funding, the budget calls for $2 billion to construct a system using the most effective mix of current and next generation technology, as well as additional fencing to protect the borders. American prosperity focuses on quality education and affordable health care. Both of these construction segments will benefit. The Federal Budget also influences the general economy of which the private sector is directly related. Energy security will have a large impact on the power segment. However, the name is slightly misleading since it relates to having a secure supply of energy sources rather than physically securing our energy sources. This focus accelerates technological breakthroughs with the Advanced Energy Initiative, including a further focus on development of carbon capture and storage technologies. This will allow America to continue using its abundant domestic energy source — coal — with dramatically reduced greenhouse gas emissions. The Advanced Energy Initiative promotes licensing of new nuclear plants, develops an advanced nuclear fuel cycle and invests in making solar power cost competitive with conventional electricity by 2015. The budget emphasizes housing and homeownership as a way to keep America prosperous. Despite being directed at consumers, the funds benefit the construction industry. As housing eventually picks up, the general economy will improve, and in turn, drive nonresidential construction. The Federal Budget is important to the construction industry as it funds public construction, impacts the general economy and drives private nonresidential construction. Examining the Federal Budget indicates which construction segments will remain strong despite fluctuations in the economy. SLDT About the author: Heather Jones is construction economist with FMI Corporation. She can be reached at 919.785.9335 or hjones@fminet.com. 6 January 2009 Sustainable Land Development Today

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Sustainable Land Development Today - January 2009 Contents Our Voice Your Voice The BottomLine SLDI in Focus Calendar Industry Rebound Will Require Balanced Approach What Happened to Fannie and Freddie? Added Value in Entitlements Industry Spotlights Technology Wastewater Innovation Classifieds Advertiser Index Editorial Board SLDT Resources Last Word

Sustainable Land Development Today - January 2009

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