South Carolina Report

Record level of state-funded road construction is driving growth

For the last few years, an aggressive road-building program has kept South Carolina contractors busy, and it's not over yet. Other sectors in the construction industry are also picking up.

By Bea Quirk

For years, South Carolina officials were frustrated by being stuck at the bottom of the list for receiving federal roads money. There were projects that had been on the books 30 years waiting for funding.

In 1999, the state's Department of Transportation decided to do something about it. The department initiated its "27-in-7, Peak Performance" program, an unprecedented $5 billion road-building effort with the goal of accomplishing 27 years worth of road and bridge projects - about 200 individual projects - in seven years.

"It's put quite a demand on our contractors and material suppliers," said Clem Watson, assistant to the administrator for engineering design at SCDOT.

SCDOT is issuing state highway bonds to make up for the shortfall in federal dollars and is retiring the bonds in an unusual way - using future federal funds rather than state highway dollars. In addition, the agency has partnered with two construction and resource management firms to oversee the "27-in-7" program without increasing the agency's size.

The SCDOT says that in addition to accelerating the rate at which the state is building badly needed roads, the program is saving taxpayers money by taking advantage of the current interest rates and by avoiding the inflation costs of construction.

advertisement

"We're catching savings by building these roads with today's dollars, not of those 27 years down the road," Watson said.

The program is currently funding 11 major projects. Five of them are among this year's 50 largest highway construction projects in the Southeast, according to a list compiled by Southeast Construction. That includes the largest road project in the region, the $632 million Cooper River Bridge connecting Charleston and Mount Pleasant.

Road construction couldn't be happening at a better time in South Carolina, a growing state (15th in the United States) with an economy that is beginning to show signs of recovery.

"Business activity, inventory levels, hiring, financing, volume of new equipment ordered, expectations - all are pointing up in South Carolina," said Tony Plath, a finance professor at the University of North Carolina at Charlotte who follows the construction industry. "The signs are there for business improvement."

Plath also conducts the quarterly Construction Barometer for the Carolinas Associated General Contractors. According to the most recent Barometer, the rate at which contractors report they're anticipating additional purchases of heavy equipment and capital assets is up for the first time in two years, with the exception of the Lowcountry region.

Plath has predicted "a good year for commercial contractors," with a 3-4 percent growth rate over 2003. By 2005, he expects growth to become "really strong," with a growth of 4-5 percent.

According to McGraw-Hill Construction, the value of contracts for future nonbuilding construction (which includes streets, highways and bridges) through July was up 53 percent over the same period in 2003. Nonresidential contracts increased by 12 percent.

When residential construction is included, the total value of future contracts increased by 21 percent, from nearly $5.8 billion to slightly more than $7 billion. Nonbuilding projects accounted for just over $1.5 billion of the 2004 total.

It's not just number crunchers who are seeing the change. "People in the field are telling us that projects are picking back up," said Leslie Hope, South Carolina director of the Building Division for Carolinas AGC.

There is one dark cloud, however: the cost of materials. Prices for concrete and structural steel have skyrocketed in recent months, and Plath said the same may happen with brick and sheet rock.

He said both the price and the disruption of supplies hurts contractors, and he added that conditions may get even worse for concrete because demand for it in Florida will increase markedly during the massive rebuilding in the aftermath of this summer's hurricanes.

"I have never seen pessimism so high about material costs," Plath said.

He also predicted that labor costs will go up 3-4 percent next year, mostly due to increased expenses incurred by employee benefits.

Meanwhile, roads keep getting built and new facilities are being constructed. The state's signature road project, the Cooper River Bridge, features two diamond towers as its hallmark. It will be the longest cable-stayed-span bridge in North America when it opens to traffic in spring 2005.

The span is 1,546 ft. long and features eight lanes of traffic and a shared pedestrian/bicycle lane.

Also slated for completion next year are the $54 million Carolina Bays Parkway to relieve traffic congestion along Myrtle Beach and adjacent beaches and the $50.6 million interchange between Interstate 26 and Ashley Phosphate Road in Charleston.

The $64.3 million widening of 10 mi. of Interstate 95 in Darlington and Florence counties was completed in June.

Major improvements in the state's infrastructure are meeting the needs of a growing state and creating another strong construction component.

Santee Cooper (South Carolina Public Service Authority) is adding two 580-megawatt units to its cross-power generating station along Lake Moultrie in Berkeley County at a cost of more than $1.4 billion. The first of the coal-burning units will go online in 2007, followed by the second one two years later.

Along Lake Murray, South Carolina Electric & Gas is constructing a $275 million back-up dam, and the Western Carolina Regional Sewer Authority is building an $88.5 million wastewater treatment plant in Greenville.

Educational building is another active sector. The school system in Charleston is finishing up a $429 million, five-year building program, and the Greenville schools are about halfway through a four-year, $862 million program. "The public sector has continued to find ways to keep building," Plath said.

The military is also contributing to the growth of the state's construction industry. In Beaufort County, the Department of the Navy is spending $138 million to improve and expand off-base family housing for its personnel stationed at Parris Island.

Plath said he also expects to see increased construction in the next six months in the health care and pharmaceutical industries and in manufacturing facilities along Interstate 85.

For more info:

www.dot.state.sc.us
www.cagc.org