Industry Attendance Needed
Press Conference
National Construction Appreciation Week
Host: State Senate Republican
Leader Kevin Kelly
Time: 9:00am
Date: Monday, September 12, 2022
Location: Burns Construction Company, 300 Sperry
Avenue, Stratford, CT.
Senator Kelly is hosting this media event to kick off
National Construction Appreciation Week that recognizes the dedicated,
hardworking men and women in the industry who are instrumental in the
development of our infrastructure and facilities.
The purpose of National Construction Appreciation Week is to
inspire a national conversation about construction and how vital it is to
American infrastructure and our economy.
I hope that you and others from your organization can join
us for this special kick-off conversation!
Darien officials approve overdue affordable housing plan
Mollie Hersh
DARIEN — Darien’s five-year affordable housing plan is
approved and headed to the state three months after the initial deadline.
The final version of the plan, with a few last-minute
changes, was unanimously approved by the Planning and Zoning commission at
Tuesday night’s meeting.
Under Connecticut law, all 169 municipalities were required
to submit affordable housing plans at the beginning
of June to address the statewide housing shortage.
Chairman Stephen Olvany attributed part of the delay to
July’s public
hearing, a measure not every town included when finalizing what he said he
considered “a very important document.”
Rather than define Darien as a purely residential community,
Vice Chairman George Reilly recommended revising the plan’s values and goals to
instead consider the town “a predominantly residential community.”
In making this change, Reilly acknowledged criticism from
those “defending our town because of its residential character,” but
recommended a more “open-minded” approach that reflected Darien’s growing
business and commercial districts.
“I am a lifelong Darienite so I know it is not the
residential community it was in the 1950s, and I think we need to come to grips
with that,” Reilly said. “There are terrific residential communities, but I
think we should note that there is a blend, and that blend is providing
opportunities for more affordable housing.”
Rather than define Darien as a purely residential community,
Vice Chairman George Reilly recommended revising the plan’s values and goals to
instead consider the town “a predominantly residential community.”
In making this change, Reilly acknowledged criticism from
those “defending our town because of its residential character,” but
recommended a more “open-minded” approach that reflected Darien’s growing
business and commercial districts.
Even with business interests reflected, the plan still
prioritizes preserving the “predominantly New England style, single-family
character” of Darien neighborhoods.
The commission is also considering tracking progress on
affordable housing with an annual report, though it would not be a formal
requirement.
Former zoning official David Keating, a consultant on the
plan, said he deliberately left out any kind of month-to-month timeline from
the original draft.
According to Keating, any detailed timeline would likely put
the town in violation of the plan within the first month from decisions or
factors outside of the commission's control.
Commission member Amy Barsanti called an annual evaluation
“logical” given the number of initiatives within the five-year plan, adding “I
also don’t think there’s anything wrong with us as a body reexamining in a year
how we are doing.”
The commission is waiting on the 2020 census data to confirm
the number of affordable housing units Darien must meet to achieve a third moratorium
on affordable housing.
The town was previously granted two four-year moratoria,
exempting the community from state-mandated affordable housing projects.
Cost of Middletown pool complex project, now a rebuild, increases 200 percent
MIDDLETOWN — Costs associated with renovations to the
64-year-old Veterans
Memorial Pool aquatic complex have risen significantly over the past
two years — from $2.6 million to nearly $8 million — an increase of 200 percent
now that the project is considered a rebuild.
Construction on the pool and new splash pad was delayed in
part by supply issues and material costs associated with the pandemic, Public
Works Chris Holden said Wednesday, when a group of people gathered on mounds of
dirt for a ceremonial ground-breaking as excavators worked in the background.
A contingency was factored into expenditures, which now
stand at $7.8 million, Public Works Director Chris Holden said. Initial
specifications didn’t include a larger pool with two additional lanes,
plumbing, the splash pad “exercise” area, utilities relocation and other
features, all of which upped the bottom line, he said.
Some road bond money went into the project at the park on
Walnut Grove Road, next to the Connecticut
Trees of Honor, Common Council Majority Leader Gene Nocera said. Also,
demolition work was conducted by public works, along with city trades people.
He pointed out that other projects have come in under budget, including Pat
Kidney Field, which ended up with an excess of $2 million.
The feasibility study conducted in 2015 called for a
remodeling of the facility, but a rebuild was necessary, causing the price to
quickly rise, Nocera explained. “It was well beyond its years,” he said of the
complex.
There will be six pool lanes for swim competitions as well
as a resistance area, Holden said, which will allow people to swim against the
current.
The pool has been closed to the public since summer 2020.
The new state-of-the-art complex is expected to be ready by summer 2023.
Project plans were first
unveiled in October 2020.
That August, city officials took
part in a “smash party.” Mayor Ben Florsheim was among those who had
fun using mallets to break down the concrete to “retire” the pool.
Demolition of the site began last September.
Work
on the aging structure is being paid for with a portion of the $33.5
million parks bond voters passed in 2015, of which $9.3 million remains, Holden
said.
The pool is part of several large projects underway in
Middletown, including riverfront development, where city leaders incorporate
community input into the designs. “We’re not top down, we’re bottom up,” Nocera
said. “Inductively, the themes are emerging that it’s important to rebuild our
community post-pandemic.”
“It’s a very different thing as it is to realize it and to
see it come to fruition,” Florsheim said. “What has been especially challenging
over the last couple of years is not knowing how to get from Point A to Point
B.
“We used to know the order of the alphabet before, and now
it’s been scrambled,” something that the city has encountered similarly
downtown, at the riverfront and new recreation center, the mayor explained.
“I don’t need to articulate all the reasons for the
challenges and delays that we’ve had,” Florsheim said. “The important thing is
we’re working through all of those.”
The building that housed dressing rooms and lockers has been
entirely gutted, but the bones of the facility are good, so a complete
knockdown was unnecessary, Holden said.
Recreation and Senior Services Director Cathy Lechowicz said
her boys children learned to swim at the facility. For the past two years,
summer camps have been using Crystal Lake across town.
“We’ve always just made it work. That’s what we do in
recreation,” said Lechowicz. Over the last five years, the director said, the
city has invested more resources, and “it has paid dividends.”
“We’re rebuilding the heart of the city,” Florsheim said.
“This is what the people of Middletown demanded happen.”
The pool was built in 1958 after city veterans wanted the
community to have a summer recreation area at Veterans Park for the next
generation, Nocera said.
Council Minority Leader and Public Works and Facilities
Commission Chairman Phil Pessina talked about growing up in the inner city area
as a “little guy,” and enjoying the facility with friends nearly every day.
There were very few places to enjoy the water nearby at the
time, Pessina added. “If our parents had cars, they took us to Hammonasset (in
Madison). We had Crystal Lake,” and not much more, he said.
1 million-square-foot Cromwell warehouse decision delayed until October
Austin Mirmina
CROMWELL — The Inland Wetlands
and Watercourses Agency on Wednesday tabled until October its decision
on a proposal to construct a 1.04-million-square-foot warehouse on 250 acres in
the Mattabesset River watershed.
Town Planner Stuart Popper said that several agency members
had requested more time to review materials associated with the application,
prompting a 30-day extension. The agency will vote on the proposal at its next
meeting Oct. 5, according to Popper. It must act on that date, he added.
Details of the application were not discussed by agency members
on Wednesday.
These are the latest development in the saga to consider the
controversial application from Scannell Properties, the same
developer who constructed the 403,000-square-foot facility on County Line
Road now
occupied by Amazon.
The application has been stuck in the agency’s review
process since it was
first presented in November 2021. Public hearings have been extended
multiple times, and last month, the agency voted
to table its discussion on the issue until Wednesday.
Many residents who live near the site of the proposed
facility have
strongly opposed its construction, arguing that the warehouse would
negatively impact the environment and harm the species that live there.
But representatives for the developer have argued that the
warehouse’s construction wouldn’t adversely affect the surrounding wetlands.
Thomas Cody, an attorney representing Scannell Properties,
has also said that the application shouldn’t be rejected because it satisfies
the agency’s regulations.
According to the regulations, the agency can’t deny or place
conditions on an application for reasons relating to effects on aquatic, plant,
or animal life unless the activity will likely affect the physical
characteristics of the wetlands, Cody said at last month’s meeting.
“If you reject us, you’re basically saying that no
development can ever occur here,” he said. “We think we’ve satisfied every
single criteria.”
If approved by the agency, the matter would advance to the
Planning and Zoning Commission, where it would require at least one more public
hearing. The project will also require special permits from the state Department of Energy and Environmental
Protection and Department of Transportation, according to Cody.
“There’s still a long review process to go after you are
done with your review,” he said in August.
State and city to share millions in utility costs for proposed Route 82 roundabouts
Claire Bessette
Norwich ― If the proposed reconstruction of Route 82 goes
forward, the question of who would pay the millions of dollars needed to
relocate and upgrade utility lines depends on several factors, state project
officials told the City Council this week.
Among the many concerns voiced by Norwich Mayor Peter
Nystrom, a staunch opponent of the project, was the potential cost of upgrading
underground Norwich Public Utilities water, sewer and natural gas lines. The
reconstruction project runs 1.3 miles from an area west of the New London
Turnpike intersection to Fairmount Street, with six proposed roundabouts, a
median divider and single lanes of traffic in each direction.
Scott Bushee, project manager for the state Department of
Transportation, told the City Council Tuesday that the cost of the work would
vary, depending on the specific utility. While the DOT would be responsible for
the entire cost of relocating all current Norwich utility infrastructure that
are impacted by the work, the city would pay for additional work such as
placing electrical lines underground or replacing old water and sewer lines
that could be damaged by the project.
For electricity, Bushee said the DOT would pay the entire
cost of relocating NPU power lines and poles along the 1.3-mile length of the
project. For privately owned lines and poles, such as telephone, cable TV or
private electric companies, DOT typically pays half the cost of relocation, per
agreements that allow the utilities free use of state property for their
infrastructure, Bushee said.
If the city wishes to place the electric lines underground
the length of the project, Norwich Public Utilities would pay for the
difference between the cost of relocating above-ground lines and the cost to
bury the lines.
According to a financial report compiled by city Comptroller
Josh Pothier, moving the lines underground would cost an estimated $10.6
million, while relocating lines above ground was estimated at $2.8 million,
putting the city utility’s cost at $7.8 million if the city chooses that
option.
Pothier reported that the Route 82 project would escalate
NPU’s schedule of planned upgrades to water, sewer and gas lines in the area.
Vibrations from heavy construction and possible regrading of the road in spots
is expected to impact the underground lines.
Water lines in the area are more than 100 years old and are
“highly brittle,” according to Pothier’s report. NPU had planned to replace the
lines in five to 10 years but would need to escalate that work if the DOT
project starts construction in spring of 2025. NPU has estimated the cost of
replacing the water line at $8 million.
Days after Nystrom expressed concern about the aging water
lines during a public informational meeting on the project, a nearly
100-year-old water main broke on June 27 at the Route 82-Osgood Street intersection,
where one roundabout is proposed. Repair work closed Route 82 for several
hours.
“We all saw it. We all know it. We know how old it is. We
know how sensitive it is,” Bushee told the City Council Tuesday.
Bushee said the DOT would do a drainage study along the
length of the project to determine how much of the project would impact water
lines and would discuss with NPU officials how close the project would come to
the lines along with their concerns about vibrations and potential breaks.
“Hopefully some kind of a partnership is discussed at that
point,” Bushee said. “The state doesn’t want to rebuild a road and have it torn
up two years later or piecemealed later to have little pieces of water main
replaced. That’s certainly not in anyone’s best interest.”
He said there is no cost sharing estimates for the water
line at this point, because final design and state construction plans with
those calculations won’t be done until next winter or spring. The drainage
study would reveal how much of the water line should be replaced by DOT with
the project and how much money the city would have to contribute and whether
the two parties can reach a cost-sharing partnership.
Any situations where the DOT project would directly require
relocation or replacement of a utility main, the DOT would pay 100% of the
cost, Bushee said.
The city’s sewer lines along Route 82 are 30 to 50 years
old, and without the project, NPU had planned to re-line or replace the mains
in 10 to 20 years at an estimated cost of $3.5 million. Natural gas lines also
could wait 10 to 20 years without the proposed Route 82 construction. The “very
preliminary” cost estimate to replace the gas lines is $500,000 to $1 million,
Pothier reported.
NPU General Manager Chris LaRose told the City Council any
local share of the cost to replace utility lines associated with the project
would be borne by utility ratepayers. In some cases, state and federal grants
and low-cost loans are possible. In response to Mayor Nystrom’s questions,
LaRose said it would not be prudent to ask for rate increases to pay for the
Route 82 work. Instead he said NPU might need to reshuffle other capital
projects so it can complete the Route 82 work first.
LaRose said replacing the water line likely would be funded
by a small grant and a large loans.
Bushee said a partnership would be worked out with NPU to
determine how much of the cost the state would cover in utility replacement
costs.
$57.5 Million Proposal Heads to Lyme-Old Lyme Voters, as Packed Room Debates Board Oversight
Emilia Otte
LYME/OLD LYME — After almost two hours of debate, the
Board of Education voted to send a request to borrow $57.5 million for school
renovations to voters on November 8.
If approved, the borrowing will pay for planning the project
and then installing new boilers, updated electrical systems and HVAC systems in
Mile Creek Elementary, Lyme Consolidated School, Center School and Lyme-Old
Lyme Middle School. The money will also be used to bring the buildings up to
code where necessary, to install sprinklers in two of the buildings and make
sure that all buildings are compliant with the American Disabilities Act.
In addition, the plans include a build-out of additional
classrooms at Mile Creek Elementary School — a decision prompted by
enrollment projections estimating
that elementary school enrollment will exceed the capacity of Mile Creek and
Lyme Consolidated School in 2024-25.
The district expects to receive $9.7 million back in
reimbursement from the state, reducing the total cost to about $48 million.
Questioning the process
Members of the public at Wednesday’s hearing questioned the
planning process stretching back to 2019, when the board first began
considering repairs and upgrades, which at the time were estimated to cost
about $10 to $15 million.
In comments to the board, David Kelsey, a local resident who
also chairs the town’s Board of Finance, and co-founded a large real estate
private-equity investment company that owns and manages multifamily apartment
properties, urged Board of Education members to start the process over –
which he said would not set the project back very far.
“This process has been flawed from the very beginning,” said
Kelsey.
Kelsey told board members the process should have begun with
a disinterested third party conducting an evaluation of what was needed,
and that the Board of Education’s facilities committee should have determined
the “scope” of the project.
Instead, Kelsey said, the board had engaged an architectural
firm that could bid on the project and potentially benefit from more costly
renovations.
Jennifer Miller, who is current chair of the facilities
committee, said the committee hired QA+M, the architectural firm that presented
the board with an evaluation of the facilities and cost estimates, after
putting the work out to bid.
But Board Chair Steven Wilson told CT Examiner in hindsight
that he felt that the facilities committee could have been more involved in the
planning process.
The current proposal would also add 11 classrooms to the
Mile Creek school, five more than Neviaser said were needed, at an additional
cost of about $4 million to $6 million.
A local resident, Mona Colwell, questioned that decision, pointing out that the
added cost amounted to ten percent of the total cost of the project — not an
insignificant sum.
“We’re not against new HVACs — we want them. We want new
heating systems. We want our kids to be safe. But some people in our town can’t
afford a $58 million project. We have people that are scrambling to buy
groceries,” she said.
Several community members questioned why it wouldn’t be
possible to move kindergarteners and Pre-K students to the Center School. Board
members and Neviaser said they had considered a similar option in earlier
discussions but that certain concerns, such as the need to bus kindergarteners
to the school, the possibility of not having enough classrooms in Center School
and the need to move some of the alternative education programs to other
spaces. Preliminary
estimates showed that the cost would be about $59.9 million, or $45.5
million including state reimbursement.
Other community members objected to the total cost of the
project and said they believed that some of the items included in the $42
million “base project” — the lowest-cost option that QA+M presented to the
Board — were not necessary, or could be done for less.
A few also questioned the idea that interest rates would
continue to go up, making the project cost more, and hypothesized that interest
rates might actually lower over time.
Steve Cinami, who previously chaired the facilities
committee and works in the construction industry, questioned spending “$57
million on an HVAC system that no one has shown is needed will increase
property values.”
He said that low taxes were one of the reasons people live
in Old Lyme.
“What it will do is keep taxes artificially high, instead of reducing the tax
burden to residents. A low mill rate is also another reason people seek to live
in Old Lyme and Lyme,” said Cinami.
Others have come out in support of the project.
In a meeting last week, supporters referred to the school
system in Old Lyme as the “crown jewel” of the town and said it was an
attraction for residents looking to move to the town.
Kim Thompson, a parent with a second-grader and a toddler,
who graduated from Lyme-Old Lyme Schools in 2005, said she was part of the
class just ahead of the previous building renovation project, and remembers
walking on floors “stripped to concrete and carpet glue.”
“While school is much more than just a building, our faculty
and staff certainly deserve all the credit for the exceptional education that
our children receive, those students, teachers and staff also deserve to learn
and work in buildings that are well designed and properly maintained,” said Thompson.
Teachers voice support for renovations
Multiple members of the Region Eighteen Teachers Association
asked the board to approve the project. Heather Fried, a co-president of the
association and a science teacher at the high school, said last week that it
was distracting for teachers and students to have to take off and put on layers
of clothing because of temperature changes, and that the limited space in the
buildings was creating conditions that made it difficult to teach.
“Many educators are providing critical support services to
students in hallways — hallways — and shared classrooms,” said Freid.
At the Wednesday meeting, ten teachers echoed concerns
raised by Fried and asked the board to send the proposals to a town
vote.
“In the music room, the radiator blows out hot air while the
window unit, the AC unit, blows out cold air. They’re in constant battle. And
even with the AC on the lowest temperature and the highest speed setting, the
room is still hot and humid, which is wasting a lot of electricity,” said Julia
Hackett, music teacher at Mile Creek.
Teachers spoke about having to teach in hallways and cafeterias
and borrow other teachers’ classrooms because of a lack of space.
“Some of the students I service for the Gifted and Talented
program have IEPs of their own.
And by teaching them in the hallway, it is compromising
their confidentiality and privacy,” said Nila Kaczor, who teaches Gifted and
Talented and 4th and 5th grade science at Mile Creek and Lyme
Consolidated.
“Every single classroom at Mile Creek is currently being
used. If an additional classroom is needed to help maintain the district’s posted
guidelines for class sizes, it is likely that the SRBI classroom will no longer
be available, which would cause even more students to have to receive services
in inadequate spaces,” said Francesca Fusaro, a fifth-grade teacher at Mile
Creek.
Other teachers talked about the noise from the window units,
which one likened to a 1970s-era dishwasher and another compared to the sound
of an airplane if the listener was sitting out on the wing.
“I have a hearing impairment myself and have to wear a
hearing aid. And I know several students who do the same or have auditory
processing needs. It is nearly impossible to hear students speak above the HVAC
systems,” said Kaczor. “I find myself straining all the time just to have a
conversation with students.”
Union co-president Mercedes Alger, a fourth-grade teacher at
Lyme Consolidated said that the “experts” who attended a meeting last week —
including representatives of the firm Colliers International, a former building
committee member on several earlier Lyme-Old Lyme school projects, and a former
construction manager who also worked on the Lyme-Old Lyme High School project —
had said the project was “fiscally responsible” and “in the community’s best
interest.”
Rebecca Tate, a fourth grade teacher at Mile Creek, said she
understood the concerns about process that were being raised. But she also
urged the board to send the referendum to the voters so that teachers and
students wouldn’t have to wait any longer to have the conditions in the schools
addressed.
“What do I tell my students right now? Do I tell them,
‘Well, we want to ask a fourth person. We want to ask a fifth one. We want to
ask a sixth one — when it’s 95 degrees?” said Tate “What I’m asking is, let’s
please just take it to referendum and let the people vote on it because we are
living this every day.”
A third-party review?
Wilson told CT Examiner that according to the various
experts the board had consulted, the $42 million project initially proposed as
the “base scope” was the minimal cost of renovations at the four schools. He
said that part of this cost came from the need to meet state requirements, and
he said that the boilers and the air conditioning window units needed to be
replaced.
Earlier this month, when the board expressed concern about
the $58 million estimate, Wilson asked that a third party evaluate the work
by QA + M.
Neviaser said that the district contracted with Colliers
International for the third-party review. Neviaser called Colliers “completely
disinterested.”
Chuck Warrington, director of project management at Colliers
International, told the board that QA+M’s estimates were consistent with what
they would expect for a school project in Connecticut, and described the board’s
budget as “lean.”
“The big chunk is the HVAC,” said Warrington. “You have unit
ventilators that are totally outdated. We don’t even install those. They’re
probably 20 years out of service. You’re going to get to the point where Ron
Turner can’t even service those pretty soon.”
At the Wednesday meeting, Wilson asked whether it would be
possible to hire a disinterested third-party not to simply review the work done
by QA+M, as Colliers had done, but to present their own evaluation of the
needs.
“My thought is that it would make the referendum go more
smoothly,” said Wilson, saying he felt that it would satisfy both the people
who wanted the project to move forward quickly and those who wanted an
additional opinion.
Miller responded that the board had already received
estimates from three firms, all of which were very similar, and Neviaser warned
that, depending on the cost of an additional estimate, the board might need to
put the work out to bid, delaying the process.
Both Miller and board member Suzanne Thompson said that they
didn’t believe that an additional estimate would significantly change the
numbers they had been given.
“Mile Creek is falling apart. My daughter did not enjoy
Gifted and Talented at all because she was out in a noisy hallway. She wasn’t
engaged and I’m really frustrated with that. And I know it’s going to cost a
lot, but for Pete’s sake — I can’t believe that we can’t figure out a way to
say, ‘Cripes, the buildings are falling apart and need to be upgraded,’” said
Thompson.
Thompson said the building committee, which the board will
appoint if the referendum passes, will be responsible for finding cost savings
as the project goes forward.
Wilson told CT Examiner that when it came time to choose the
building committee, he planned to appoint people who would make responsible
decisions about how the funds were being spent.
“It’s my expectation and plan that the people in the
building committee will be watching every penny and constantly be thinking
about whether we’re doing it with value in mind,” he told CT Examiner.
A question of time
For the Mile Creek project to be eligible this year for
state reimbursement, the referendum would need to be held no later than
November 15, meaning that the district needed to approve the bond amount by
September 15 – but Wilson told CT Examiner the district could apply again next
year.
On Wednesday, Board member Laura Dean-Frazier made a motion
to put the hiring of a third party evaluation on the agenda. The motion died
without a second from another member.
Board member Christopher Staab said he wanted the referendum
held on November 8 – election day – a target raised earlier by
Kelsey, who said the referendum should be held when the largest number of
people would turn out to vote on the project.
Board member Martha Shoemaker expressed concern that a Nov.
8 referendum would overburden the Registrar of Voters, given the general
election. But Wilson said that he had spoken to the Registrar, who indicated
that holding votes on the same day would not be a problem.
The board voted 7-1 in favor of holding a referendum for
$57.5 million on November 8, with Staab voting against and Dean-Frazier
abstaining.
Staab told CT Examiner that he felt the $58 million project
included “a lot of wants” rather than necessities, and that there wasn’t enough
information about the details of what the project would bring to the
schools.
“With the cost of everything so high, with people struggling
with inflation … there’s too much other needs from the community to go spend
$58 million on wants, not needs,” said Staab.
But he said the board didn’t know any details about the cost
or the timeframe of bringing in a third party to review the proposal, and that
they needed to meet the deadline for state reimbursement. He also said he
feared that a failed referendum would set them back an additional year.
“We’re frankly out of time,” he said.
Road safety improvements slated for Old Wethersfield
The town of Wethersfield has hired Clover Construction
Company of Bristol to complete road safety improvements for drivers,
pedestrians and cyclists in Old Wethersfield.
The project, funded through a Community Connectivity Grant
Program grant from the state Department of Transportation, focuses on the area
of Hartford Avenue and Main, State, Garden and Nott streets.
Planned work includes installing new brick paver and concrete
sidewalks, concrete ramps, curb bump outs, parking spaces, crosswalks, pavement
markings and signage, and limited permanent pavement repair and drainage
improvements.
The winning bid came in at just over $708,000, which will be
funded through $393,300 from the state DOT Connectivity Grant, and a second
Urban Act grant, according to town inspector Dan Rebelo.
The town also retained Hartford-based BETA Group Inc. to
provide full-time construction inspection, engineering oversight and materials
testing services for this project, town officials said.
Site preparation work is expected to start as soon as this
week at the north end of Garden Street, with work moving toward the
intersection of Main and State, then to areas near Main Street and Hartford
Avenue.
Town officials estimate the work will be done in about three
months, with minor improvements and lawn restoration work finished in the
spring.
High Demand for New, Used Construction Equipment Continues Despite Challenges
LUCY PERRY
Emerging from a market coma worsened by the pandemic, the
new and used equipment sectors are in the midst of a high-demand cycle. If the
heavy machinery market can navigate its way through supply-chain and labor
issues, it should experience smooth sailing through 2023 and beyond.
At its second-quarter earnings conference in early August,
Alta Equipment Group outlined a corporate optimism expressed by other
construction companies across the United States.
"Demand for both new and used equipment continues to be
at high levels and sales backlogs remain at record levels," said Ryan
Greenawalt, chairman and CEO. "Our organic physical rental fleet
utilization and rates on rental equipment continue to improve and tightness of
supply continues to buy inventory values across all asset classes."
He attributed the rosy picture to "industry
tailwinds" from the passing of the Bipartisan Infrastructure Bill, saying
it is driving further demand for construction machinery.
"In our material handling segment, labor tightness and
inflation are driving the adoption of more advanced and automated solutions
while also driving the market to record levels," said Greenawalt.
Multiple Factors at Play
The U.S. construction equipment market specifically is
experiencing a high compound annual growth rate (CAGR) because of increased
building activities for infrastructure development.
That is the conclusion of a study conducted by India-based
market research firm BlueWeave Consulting.
"The U.S. construction market is estimated to grow at a
CAGR of 6 percent during the forecast period of 2022-2028," researchers
reported. "The growing demand for construction equipment in this region is
fueled by increased construction activities for infrastructural development as
a result of government and private investment."
Because of this considerable investment, the infrastructure
segment of the construction equipment market holds the biggest market share,
said BlueWeave.
In fact, "explosive" is how one industry legal
expert terms the global growth in demand for heavy machinery.
He attributes the explosion to economic and geopolitical
developments.
Chief among industries seeing a significant uptick in
machinery demand is the mining sector, said attorney James. R. Waite.
The uptick is driven by demand for lithium, graphene,
cobalt, nickel and other components for batteries, electric vehicles and clean
technologies, he said.
"Further bolstering the mining industry is increased
demand for precious metals and traditional commodities, especially in Latin
America, Asia and Africa," Waite said in an article in Engineering News
Record. "In construction, demand for equipment and parts continues to
skyrocket as countries around the world begin a new push to update roads,
bridges and other infrastructure."
But, he said, upgrades are especially pressing in the United
States, where roads, bridges, rail and other infrastructure projects are
finally starting to receive significant government funding.
"That will directly benefit the heavy equipment
industry, but it also will see logistical issues mount and supply shortages
become more acute," said Waite.
He predicts the war in Ukraine and sanctions against Russia
will drive up energy costs in the United States and elsewhere.
What the Future Holds
Waite also predicts regional consolidation specifically in
the southeastern United States, where the state of Georgia is gaining a
reputation as global hub for innovation in construction equipment.
"Six of the world's top 10 equipment manufacturers have
identified the state as the new Silicon Valley of equipment
manufacturing," said the heavy equipment industry attorney.
"Georgia's business-friendly climate and a host of strong structural advantages
have provided a strong boost to manufacturing and the heavy equipment industry
in particular."
Georgia provides significant tax breaks for manufacturers
and job creators, augmented by a generous state R&D tax credit.
The state also offers a skilled labor force, low rates of
unionization, a top-tier university and technical college system, a superb
manufacturing infrastructure and a world-class transportation system, he said.
Despite global issues including inflation, rising interest
rates and the war in Ukraine, the heavy equipment sector is among industries
continuing to make headway.
Waite said the industry has successfully leveraged global
economic, infrastructure and geopolitical conditions to considerable advantage.
"As a result," he believes, "the industry is
poised to continue thriving for the foreseeable future, driven by demand in
multiple, only partly overlapping, industries, including mining, construction,
energy and agriculture. States that seek to attract more heavy industry should
follow Georgia's business-friendly example."
Market's Cautious Optimism
Early this year, the Association of Equipment Manufacturers
(AEM) weighed in on the construction equipment market's expansion, saying that
a number of challenges could present obstacles.
Short-term factors such as the lingering pandemic, ongoing
supply-chain issues and persistent labor shortages were chief among AEM's list
of challenges.
Secondary to those issues that have emerged to dampen
enthusiasm were deglobalization and inflation.
"The last recession we experienced ended the longest
period of economic expansion in the United States, and that recession lasted
from February 2020 to April 2020," said Benjamin Duyck, AEM director of
market intelligence.
"Two months, in traditional economic terms, can't even
be accurately described as a recession," he said. "However, this
economic disruption has impacted us all greatly, and we are still dealing with
the aftereffects today — labor shortages, supply chain problems and higher
interest rates."
The responses to AEM quarterly member surveys for the past
two years have been positive in regard to how quickly they expect to recover to
pre-COVID-19 levels.
"But the data for this last quarter is moving again in
the other direction, largely due to the headwinds we're facing with inflation,
workforce issues and supply chain disruptions," said Duyck.
Though inflation is a little lower, it has risen gradually,
with a 9.7 percent increase in the last quarter of 2021.
Talent acquisition also is a troublesome factor for both ag
and construction equipment manufacturers.
AEM's most recent quarterly member survey found that hiring
remains a major issue.
In fact, 84 percent of all respondents have experienced
issues in this area, while 90 percent of all ag members surveyed are affected.
Members are strategic in addressing hiring challenges,
incorporating internships, educational partnerships, higher wages, bonuses,
marketing and recruitment efforts, flexible hours and outsourcing.
But the association believes workforce will remain a
prevalent issue for equipment manufacturers for the foreseeable future.
Supply-chain problems plaguing ag and construction equipment
manufacturers also remain a major issue.
"COVID-19, followed by growing numbers of employees
leaving the workforce, have led to both shutdowns and scarcity of
products," he added.
In response, the supply chain has adjusted production
downward to meet expected lower demand.
Plus, there's the fact that shipping companies cut schedules,
expecting a drop in demand for shipments.
And though demand in some aspects of the economy dropped,
the decrease was not evenly spread over all industries and all workers, AEM
noted.
"While people still continued to spend money on homes
and consumer purchases, interest rates remained low, and the U.S. experienced
an expansion in monetary supply," said the association. "Furthermore,
workers and businesses were supported by the government. All of this, combined
with the scarcity of products and higher demand results in inflation, adversely
impacting supply chains.
An eventual scarcity of products coupled with higher demand
resulted in inflation making its way up the supply chain.
At the same time, factories could not expand easily due to
bottlenecks in the chain caused by both low production and the global nature of
production, according to AEM.
Now, overdemand makes it difficult for suppliers to
understand the true demand for their products.
"We can see this in our industries, not only from the
OEMs and from the component manufacturers, but also from the end users of the
OEMS," said Duyck. "That, in short, is why we have supply-chain
issues. Workforce, supply chain and all of it ties together and the results of
policies and actions decades in the works set off by COVID-19."
Supply Chain Is a Choker
In AEM's most-recent quarterly survey, more than 95 percent
of responding ag and construction equipment manufacturers said they are
experiencing supply-chain issues.
However, last winter it appeared either demand was beginning
to normalize, or supply chain signaling was improving, because 44 percent of
respondents noted the issues are beginning to turn around, according to the
association.
"For the vast majority of these people, issues are both
domestic and global," said Duyck. "The issues are also widespread,
but consensus opinion among members is that the issues lie particularly with
prices, shipping and quantities of raw materials and, subsequently, inputs and
components."
Further, the issues do not necessarily lie at the endpoint
or receiving shipping, but rather at the supplier source — and especially
international shipping, he added.
Supply-chain issues have caused many AEM members to fall
behind, despite ongoing growth.
This situation could eventually lead to changes in inventory
management, the survey found.
Duyck reported that the third quarter of 2021 saw inventory
levels increase between 15 and 20 percent in both the ag and construction
segments.
However, the ag side saw an additional 15 percent jump in
the fourth quarter of last year.
"Whether changes in inventory management will actually
take place has yet to be seen, but it's quite possible that higher inventory
levels will become more prevalent for some time," said Duyck.
The bottom line, according to AEM, is that despite all the
challenges, growth is still expected in the ag and construction equipment
sectors, even at a slower rate than in recent months.
"Ultimately, the imbalance between supply and demand
and COVID-19 restrictions eliminated all the inventory and the grease that
allows the global supply clock to operate," said Duyck. "Another
metaphor that maybe hits closer to our industries is this: We're running a machine
that's low on oil, and almost out of it. The machine will continue to run, and
maybe even run for a while — until it doesn't." CEG