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Paving Arkansas: a year after passage, a $2.5 billion program is beginning to pay off.

The auditorium was packed, and the mood was expectant.

The site was the Arkansas Highway and Transportation Department headquarters in southwest Little Rock.

The date was Jan. 22.

Contractors crowded in to see who would get a piece of the largest letting by the Highway Department since the road-building glory days of the 1960s.

Contracts worth more than $69.8 million were awarded, but there were no screams of delight.

Because the competition was keen, some work-starved contractors left wondering if they had shaved their projected costs too thin.

As the months go by, smiles should be easier to find. The $2.5 billion state Highway Improvement Program (HIP) is beginning to make an impact statewide.

A year has passed since the Legislature and Gov. Bill Clinton put into motion the largest highway program in Arkansas history.

From March 1991 through February, the department let 219 HIP contracts to improve 783 miles of roads across the state.

The price for those projects will be $265.32 million.

And that's only a fraction of the expenditures expected during this 15-year project.

The first 12-month expenditure will create 16,715 jobs, according to Department of Commerce estimates.

Using the Commerce Department formula of 63 jobs per $1 million spent, HIP will create an average of 10,500 jobs per year. And that doesn't include federal matching funds.

"This will be a real boon to the economy," says Maurice Smith, the Highway Department director. "I can't think of anything else that would put this many people to work this fast."

In 1992, the Highway Department will award contracts worth $300 million. That healthy trend should continue for at least the next six years, not only because of legislation approved by the General Assembly in early 1991 but because of action taken later in the year at the congressional level. The $155 billion Intermodal Service Transportation Efficiency Act was signed by the president in December.

Arkansas traditionally has ended up with the short end of the fiscal stick when the federal government has allocated funds for highway improvements. The state has gotten back an average of 78 cents for every $1 paid in federal fuel taxes, which are 9 cents per gallon for gasoline and 15 cents per gallon for diesel fuel.

Arkansas is to receive $1.7 billion during the next six years through ISTEA. That's more than double what the state received the previous six years.

"Arkansas was a donor state," says Ron Harrod of Prescott, chairman of the state Highway and Transportation Commission. "Now, we're ... getting 105 percent of our contribution."

The previous federal highway bill expired in September, the end of fiscal 1991.

The state's HIP project lost some momentum heading into November as a deeply divided Congress wrangled 1,000 miles away over the legislation. One letting was canceled and another substantially reduced as the Highway Department waited to see how Arkansas would fare in the federal appropriations process.

Once the good news came from Washington, however, the Highway Department made up for lost time. Contract lettings that were canceled during the delay were rolled over into January and February.

The two-month delay in 1991 should mostly affect bridge contracts because of the lead time required for steel orders.

Michael Lawrence, president of Lawrence Brothers Inc. at North Little Rock, didn't mind the wait. Since HIP began, his company has landed bridge contracts in Fayetteville, Blytheville, Sherwood, East Camden and Grant and Washington counties worth more than $10 million.

"If we had gone through another two years like we had, we would have been better off selling the equipment and putting it in Wal-Mart stock," Lawrence says. "There has been a serious depression in the highway-building program."

Are Happy Days Here Again?

The lean times created intense competition among contractors trying to keep their doors open. Some companies made bids that did little more than cover their overhead. That bunker mentality was still evident at letting time in January, but it is slowly ebbing.

"We haven't seen the change yet," Lawrence says of the road-building sector as a whole. "We're looking for it late this summer or early next year. There are still too many folks out of work and desperate."

With fresh memories of how highway funding dried up in the late 1980s, contractors remain cautious when it comes to making major capital expenditures.

During the late '80s, some managed to keep just enough business to make equipment payments and meet payroll obligations. Most highway contractors were forced to lay off workers.

Equipment manufacturers and dealers are still waiting for the trickle-down effect of the state and federal spending programs.

At the January letting, Potashnick Construction Co. of Cape Girardeau, Mo., came away with the biggest contract, a $7.78 million job on the Pine Bluff bypass.

It's the second contract the company has received for work at Pine Bluff. The contracts add up to about $16.2 million for Potashnick, making it the biggest HIP winner through February.

Potashnick's vice president and treasurer is buoyant about the future now that a new federal road program is in place.

"We're going to see one of the biggest road-building programs since the original interstate legislation," says Larry Dunger of Potashnick. "We're looking forward to seven good years of work after several years of tough times."

Paying The Price

At the state level, motorists have paid an extra 5 cents per gallon on gasoline and an additional 6 cents per gallon on diesel fuel for a year.

Four cents of the diesel fuel increase was part of a weight-distance tax settlement between the trucking industry and the state.

The 18.7-cent state tax on each gallon of gasoline and diesel fuel (18.5 cents of which go to road programs) is the major source of highway-improvement revenue. The money eventually winds up with the state Department of Finance and Administration.

During the past 10 months, DF&A has recorded motor fuel tax receipts of:

* May -- $26.39 million.

* June -- $20.9 million.

* July -- $32 million.

* August -- $28.41 million.

* September -- $18.49 million.

* October -- $31.02 million.

* November -- $9.25 million (most collections carried over to December because of Thanksgiving).

* December -- $38.38 million.

* January -- $28.14 million

* February -- $17.24 million.

Are revenues living up to projections?

The Highway Department had predicted that the new fuel taxes would generate $48.5 million annually. The surcharges brought in $30 million for the nine-month period that ended Feb. 29.

"We're on target," says Tony McArthur, administrative officer in the Highway Department's economics section. "But eventually, there will be an erosion because of better fuel mileage among newer vehicles."

McArthur and other Highway Department staffers are just beginning to examine the impact changing mileage figures will have on revenue projections. Early indications are that fuel-efficient cars will eventually make a $500,000 dent in annual tax receipts.

The new state funds and federal matching money will be used to improve more than 6,000 miles of roadway across Arkansas. The planned improvements break down this way:

* 3,600 miles of highway will be resurfaced at a cost of $200 million.

* 875 miles of highway will be replaced or widened at a cost of $250 million.

* 625 miles of two-lane highway will be widened to four lanes at a cost of $875 million.

* 250 miles of interstate highway will be resurfaced at a cost of $300 million.

* 250 miles of two-lane highway will have passing lanes added at a cost of $80 million.

* 225 miles of gravel roads will be paved at a cost of $70 million.

* 210 miles of new highways will be built at a cost of $530 million.

* 560 bridges will be improved at a cost of $195 million.

Supporters of the road program believe the improved infrastructure will pay economic dividends, especially when it comes to the state's industrial recruitment efforts.

That is yet to be seen.

But for now, at least, contractors are beginning to smile again.


Big 10 HIP Contracts Awarded To Date

1 2.59 miles of grading and bridge work on U.S. 71 between Woolsey and West Fork in Washington County -- $16.16 million, McGeorge Contracting Co. of Pine Bluff.

2 3.23 miles of new four-lane highway on U.S. 67 between Arkansas 17 and Arkansas 18 east of Newport -- $10.68 million, Four F Corp. of Memphis, Tenn.

3 1.93 miles of grading and bridge work on the Pine Bluff bypass between Arkansas 104 and U.S. 79 -- $8.42 million, Potashnick Construction Inc. of Cape Girardeau, Mo.

4 1.38 miles of grading and bridge work on the Pine Bluff bypass between U.S. 79 and Bobo Road -- $7.78 million, Potashnick Construction.

5 5.17 miles of reconstruction on Interstate 30 between Arkansas 108 and U.S. 67 in Miller County -- $6.95 million, The Hardaway Co. of Columbus, Ga.

6 .42 miles of interchange improvements at Wildwood Road and U.S. 67-167 in Sherwood -- $6.19 million, Lawrence Brothers Inc. of North Little Rock.

7 An interchange at the U.S. 49-63 intersection in Jonesboro -- $6.05 million, Robertson Inc. of Poplar Bluff, Mo.

8 4.81 miles of road rehabilitation and minor widening on Arkansas 69 from Batesville to Arkansas 106 in Independence County -- $5.14 million, White River Materials Inc. of Batesville.

9 A .62-mile Ouachita River bridge on U.S. 270 in Garland County -- $4.48 million, Jensen Construction Co. of Des Moines, Iowa.

10 3.48 miles of base and surface work on the Hot Springs bypass between U.S. 70 and Arkansas 7 in Garland County -- $4.32 million, Mid-State Construction & Materials Inc. of Malvern.
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Title Annotation:Raising Steel: Focus on Construction, Part I
Author:Waldon, George
Publication:Arkansas Business
Date:Mar 16, 1992
Previous Article:Rediscovering the waterways: more Pine Bluff industries are turning to the Arkansas River.
Next Article:Missing the mark.

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