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Clinton's boost to construction may be years away.

Contractors, Businesses Are Watching the New President Closely

COMMERCIAL CONTRACtors don't expect to see the impact of President Clinton on the construction industry anytime soon, regardless of the immediate economic policy of the former Arkansas governor.

That is the general opinion of several chief executive officers for the state's largest commercial construction companies.

Robert Daniels, vice president and district manager for the Arkansas division of the Colorado-based Hensel Phelps Construction Co., says even if the Clinton administration begins to make positive changes for business and the economy immediately, it will be more than a year before that trickles down to contractors.

"Regardless of what the new administration does, once the funds are released, it takes 12-18 months to get them designed and out to the contract community," Daniels says. "I don't think we're going to see a radical difference in the building sector.

"In general, I think if the public supports Clinton in his new economic plan, we might start to see some type of building recovery in two to three years. But I don't think it's going to be immediate."

Other construction executives had similar opinions:

* William Clark, chief executive officer of the largest construction company in the state, CDI Contractors Inc. in Little Rock, says Clinton may improve the infrastructure but doubts commercial construction nationwide will improve substantially.

"Specifically, I hope maybe Arkansas can generate some new industry because he

is our president," Clark says. "That's not to say that something is going to happen in the next six months. But hopefully it will in the next year or two or three."

* Jack Kinnaman, CEO of Kinco Inc. in Little Rock, which had $25 million in revenues last year, says those in the medical community have expressed concerns.

First lady Hillary Rodham Clinton is heading a task force on reforming the nation's health care system.

"They're waiting to see what Clinton's program is going to be on health care," he says. "The people who have planned to expand a clinic or doctors who have planned to build a new home have put those projects on hold until we see just what's going to happen."

* Rex Crane, CEO of Crane Construction Co. in Little Rock, says, "No one knows how much impact Clinton will have in Arkansas or the country. We'll just have to wait and see."

* Bob Shell, CEO of Baldwin & Shell Construction Co. in Little Rock and Arkansas' national director for Associated General Contractors of America Inc., says many would-be projects are on hold.

"There are an awful lot of owners who have postured themselves on the fence waiting to see what economic impact Clinton's tax situation will have," he says. "|They are~ also waiting to see the results of the health care bill that he will propose.

"We have two nursing homes right now on hold. Part of it is attributed to the Medicare problems in Arkansas. An awful lot of owners are waiting on the economy before they decide what to do. We've got about $16 million of work on hold right now."

Mixed Optimism

Last year, Arkansas' construction industry seemed to be on an upswing.

In its survey of the largest commercial contractors in the state, Arkansas Business found that most were optimistic and were enjoying successful years.

The optimism is still there in 1993, but it's mixed with wariness.

A survey of commercial contractors and construction equipment distributors in a four-state area, including Arkansas, reveals that confidence in construction activity has dropped dramatically since 1992.

According to last year's "Construction Industry Forecast" prepared by The CIT Group/Industrial Financing in Livingston, N.J., 47 percent of the distributors surveyed in Arkansas, Louisiana, Oklahoma and Texas predicted there would be greater non-residential construction activity than the year before.

That dropped to 30 percent in this year's survey.

Contractors themselves are somewhat more optimistic: 39 percent expect increased construction activity.

The CIT Group survey uses an "Optimism Quotient" to indicate an average calculation of the percentage of respondents who expect a change in local construction activity.

The national Optimism Quotient for 1993 is 100, down from 101 in 1992.

But in this four-state region, the Optimism Quotient is 96, down 19 points from the 1992 figure of 115. That represents the greatest confidence drop of any of the country's nine census regions The CIT Group covers.

However, Kinnaman points out several encouraging areas.

He says that many times when a new company locates in Arkansas, other firms soon follow. For instance, Kinco just completed an expansion of Kimberly-Clark Corp.'s Maumelle plant, which produces Huggies Baby Wipes.

Kinco recently got a job to build a 30,000-SF plant in Maumelle for Plastic Ingenuity of Cross Plains, Wis., which manufactures the plastic tubs Kimberly-Clark uses to package its wipes.

"I think more of that is going to happen," Kinnaman says. "When one firm moves in, another company will need to move in to help supply products for that customer.

"I don't know who R&G Sloane's suppliers are, but Lewis May |CEO of May Construction Co., which is building R&G Sloane Co.'s Little Rock plant~ probably has an idea who they are. I think we'll see more light industry move in. That's the kind of thing we need to build our economy on.

"We're not going to be a high-tech Silicon Valley market like California or Austin, Texas. But what we will continue to have are companies that locate here from places like California or the Great Lakes region. People who have moved here say good things about our work force and the work ethic."

The Ripple Effect

Kinnaman and other contracting executives indicate that some of Arkansas' major growth industries are having a ripple effect on construction.

"We continue to see throughout our region -- which is Tennessee, Arkansas, Louisiana, Oklahoma, Texas -- a lot of expansion in industries like trucking, with companies like American Freightways," Kinnaman says.

CDI Contractors, which had revenues of $168 million in 1992, does considerable work with Dillard Department Stores Inc. of Little Rock.

It is working on new Dillard's stores in Florida, Arizona, South Carolina and Texas.

At least four of the larger construction companies have worked on projects throughout the country for Bentonville-based retail giant Wal-Mart Stores Inc.

Crane Construction, which saw revenues increase 83.8 percent to $68 million in 1992, accumulated about $50 million in revenues on nine Wal-Mart jobs in Mississippi, Oklahoma, Arkansas, Tennessee, Louisiana, Missouri and Kansas in recent years.

At least three of the largest firms have done jobs for Tyson Foods Inc. of Springdale in the last two years.

LR Mourning Co. of Little Rock has built or is building McDonald's Corp. restaurants in Beebe, Lonoke and Eufaula, Okla., according to CEO Randy Mourning.

Shell predicts that Clinton's plans to use investment credits for companies to spur growth will have a big impact on the country's economy and the construction business.

Shell recalls how much similar incentives affected his own company in the middle 1980s.

At the time, Baldwin & Shell was considering purchasing a $400,000 tower crane.

"This was eight or nine years ago, when we were doing two parking decks in downtown Little Rock at the same time," Shell says. "I remember weighing everything and the deciding factor was the investment credit. If it hadn't been for that, we probably would have just rented the crane.

"So that affects a lot of people. We're really small potatoes when you look at someone like Rohr Industries or Sloane or Carrier, but just imagine what they could do if some form of investment credits is enacted."

Interest Rates Helpful

Lower interest rates are causing corporations throughout the country to go ahead with relocations that might not otherwise be considered, Hensel Phelps' Daniels says. That should bring more industries into Arkansas and particularly the booming area of northwest Arkansas in the next year.

Another positive influence for the state is the simple fact that an Arkansan is in the White House, Kinnaman says.

"I can remember several years ago when the |Arkansas Industrial Development Commission~ was criticized for advertising in The Wall Street Journal, trying to tell people back East where Arkansas is," Kinnaman says. "Now, everybody knows where Arkansas is.

"I'm optimistic about the year, but I'm a little puzzled that it's not already happening. I guess that maybe it is a wait-and-see thing. Later on, maybe by May, we'll see things pick up a little bit.

"I sure hope so. F.W. Dodge says that we are down by 55 percent for new construction contracts in January compared to |January~ last year."

Kinnaman says costs for contractors seem to be remaining steady, except for certain pieces of lumber such as framing lumber. Those costs have risen 40 percent in the last year.

One usually overlooked economic indicator is also giving projections of growth for contractors, Kinnaman says.

"We do a lot of church construction," he says. "And there is a lot of church construction planned for this year. We've talked to several churches in the last two or three months that plan to start construction on either a new worship center, a new family life center, an education building.

"Generally, churches are not building in the depths of a recession. But the funds are there. When people are suffering |financially~, one of the first places that get cut are church budgets. So I have to think that people are contributing their usual or above their usual offerings so churches are able to have building programs going. That's a good sign."

Kinco recently completed major construction jobs at Immanuel Baptist Church in Little Rock and St. Bernard's Catholic Church in Bella Vista.

Matson Inc. of Little Rock recently completed an impressive worship center for North Little Rock's First Pentecostal Church on Interstate 40.

Even though many contractors are encouraged by the possible benefits of the Clinton presidency, none seem totally confident of growth in the future.

"I don't see a large proliferation of jobs, but in our business this changes on a week-to-week basis," says Gus Vratsinas of Vratsinas Construction Co. in Little Rock. "But I've been around long enough to know that people do continue to build in good times, in flat times and in what some might consider bad times. You've just got to find your markets and go."

Daniels of Hensel Phelps acknowledged that Clinton has a "tough challenge ahead of him."

And Archie Beggs, CEO of Flynco Inc. in Little Rock, sees potentially bad times ahead because of Clinton.

"Overall, he will probably hurt the business side of construction," Beggs says. "Of course, I don't know that for a fact. But his union affiliation is certainly not conducive to good business. Therefore, I think he's going to impact construction in a negative way before it's over with."
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Article Details
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Title Annotation:Construction; US Pres. Bill Clinton
Author:Smith, David (American novelist)
Publication:Arkansas Business
Article Type:Industry Overview
Date:Mar 22, 1993
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