Construction industry expects big boost from Annapolis spending measures

Debris is cleared from a lot on Russell and Barclay streets, the site of Baltimore's Horseshoe Casino.
Debris is cleared from a lot on Russell and Barclay streets, the site of Baltimore's Horseshoe Casino. (Baltimore Sun photo by Algerina Perna)

For Maryland's building industry, the good times may be coming back.

The construction sector, which has been in the tank for the better part of five years, is on the verge of receiving a sizable infusion of money from recent decisions in Annapolis.


Much to the chagrin of many Maryland motorists, the General Assembly has approved legislation to charge hundreds of millions of dollars a year in additional gas taxes — money that will build new roads and transit systems.

Also heading to Gov. Martin O'Malley's desk is a $1 billion plan to build 15 new schools in Baltimore and renovate three dozen more. And O'Malley's $1.1 billion non-transportation capital budget bill — explicitly billed as a job-creation package — is expected to be passed within days.


All this comes at a time when two mammoth, privately built casinos — one in Baltimore and the other in Prince George's County — are in the pipeline as a result of previous action by state lawmakers.

For people like David C. Bramble, the help can't come quickly enough. President of the Chestertown-based David A. Bramble Co., Bramble said his company employed about 450 people five years ago but has needed fewer than 100 lately because of a drought of road construction projects.

"I'm actually happy about the gas tax going up," Bramble said. "People in my industry have been devastated."

Maryland construction executives and union workers are celebrating the new jobs coming from Annapolis, especially the billions of dollars in public works spending set in motion this session. But critics of government spending — and of the higher gas tax in particular — say it will do more harm than good.


Sen. Edward R. Reilly of Anne Arundel County was one of several Republicans who warned before last week's vote that the gas tax increase was a "job killer."

"The construction industry is the beneficiary. Everybody else has the liability on their balance sheets," he said.

O'Malley, not surprisingly, doesn't see it that way.

"The job killer was the recession that fell on all of us," he said. "None of us ever wants to ask the public to pay more for anything, but if we're going to create jobs ... we've got to be willing to make actual public investments, especially in our infrastructure."

The administration projects that the transportation revenue bill will yield an added 57,000 jobs over a six year period and that its overall capital budget will, including transportation, produce another 43,000. Supporters of the Baltimore school construction plan, which is not an O'Malley administration initiative though the governor supports it, estimate that it will yield 8,000 jobs.

Richard Clinch, director of economic research at the University of Baltimore's Jacob France Institute, said the rule of thumb is that each $1 million in construction spending yields eight to 15 jobs. He said the state's construction industry has been down about 30 percent from its former levels.

Clinch said he's aware of the contention that the gas tax increase will cost some jobs as motorists take their business over the state border. But he said the gains in construction would outweigh that.

"This is all unambiguously good for the economy," he said.

Pierce Flanigan IV, president of the Baltimore-based road construction and asphalt company P. Flanigan & Sons, said the latest developments in Annapolis are "a huge plus."

Whatever ill effects the gas tax increase might have on consumers, the boost in revenue will finance the type of projects that are his firm's bread and butter. His company doesn't put up buildings, but he figures the school construction plan will include plenty of parking lots and sidewalks — work he'd be happy to bid on.

Even opponents of the gas tax increase concede that it will provide a boost to construction. But they warn that when all the other effects are accounted for, it won't be good for the state.

"That sector is going to get up off its knees and get moving, but at a much higher expense to the rest of the state," said Christopher Summers, president of the conservative Maryland Public Policy Institute,

Jermaine Jones, business manager for the Baltimore-based Local 710 of the Laborers International Union, said the schools, transportation, casino and other work will be good for his members.

"Right now we have more members out of work than we've ever had," he said. "This is not extra spending. These are jobs that people certainly need."

Anirban Basu, president of the Sage Policy Group, identified a downside to the revenue measure in a report he prepared for the conservative Americans for Prosperity Foundation. In that study, whose findings Reilly cited during floor debate, Basu found a 3 percent sales tax on gasoline — the amount Marylanders will start paying in 2015 — could cost the state almost 1,000 jobs and the loss of $124 million in economic activity.

Basu said in an interview, however, that his study did not examine the potential benefits of the expected boost in construction activity. He said it is hard to predict, given that state leaders have in the past diverted money raised for transportation for other purposes.

"If they spend it on transportation in the first place and they pick the right projects, the benefits then could outweigh the costs," he said.

Basu was less equivocal about the Baltimore school construction plan, which he predicted would have a "huge" impact — particularly if some of the counties launch similar initiatives.

David G. Lever, executive director of the state's Interagency Committee on School Construction, said the last five years have been rough on companies that specialize in school construction. As construction activity fell in recent years, he said, more bidders entered the market for each contract, driving prices and profit margins down.

Lever said it will be at least a year — and probably longer — before the money begins to flow into the new Baltimore school construction program. "When they do start, it's not going to be all 15 schools starting at once," Lever said. "At full bore, when this really is up and running, there could be a lot of projects going simultaneously."

Lever said the heightened activity will bring its own set of challenges. He said increased demand could lead to increases in the cost of materials and equipment, while the lure of a $1 billion pile of money could bring some poorly qualified contractors into the bidding.

"You'll about have to double your scrutiny to make sure the projects are being built correctly," he said.

Erin Henson, spokeswoman for the Maryland Department of Transportation, said the new gas tax revenue could allow the state to move up the start dates on some small projects. She said the department will certainly add some larger projects it previously couldn't afford to its comprehensive spending plan this fall — money that could begin flowing next year.

Henson said there is no lack of projects that have been designed and engineered and could move to the construction phase quickly.

Jim Russ, president of the Maryland Transportation Builders and Materials Association, said the additional revenue will help a wide variety of firms that have struggled through an industry "meltdown." He said the hard-pressed engineering sector will be among the first to benefit, while suppliers of asphalt, concrete and other road-building materials will also see a boost.


"By next year we'll start to see some relief," he said.


Flanigan said he's confident his industry will be able to ramp up to meet the increased demand, even if some workers have drifted away from construction.

"The capacity's there in the industry to do a whole lot more than we've been doing the past couple of years," he said. "We'll find people who are ready to come into the industry and learn it. It's a good industry to be a part of."

Construction spending

•State lottery money will help Baltimore borrow $1 billion to build 15 schools and renovate others

•Higher gas taxes will raise $600 million a year to pay for highway and mass transit projects in Maryland

•Preliminary work has begun on a $400 million privately owned casino in Baltimore, the result of state gambling laws

An earlier version of this article misstated the time period over which jobs would be added through the transportation revenue bill. The Sun regrets the error.

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