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2009 Construction Outlook: Michigan's forecast mostly calls for pain

Date Posted: January 30 2009

"If you seek a pleasant peninsula, look around you."

Our state's motto applies to Lake Michigan sunsets and the view from the Grand Hotel's porch, but "pleasant" is not necessarily the word to describe prospects for construction in Michigan in 2009.

Our completely informal and unscientific survey of anticipated construction activity in 2009 around the Great Lake State finds just a few pockets of good news.

The Bay Area, including Bay City, Saginaw and Midland, will be booming for many trades, with decent work prospects for the southwest Michigan region.

And for one statewide local, Boilermakers 169, "it's not all doom and gloom," said Business Manager Tony Jacobs. Outages at power plants around the state should bring about "an above-average year for us," Jacobs said. "And if Severstal and Marathon (described below) get going this year, it could be a banner year."

But that's a highly exceptional scenario compared to most local construction unions. Flint Area Building Trades President Zane Walker reported that union reps in that area are "burning up the phone lines" looking for jobs in and out of state for members, usually to no avail. "Work across the country is scarce," said Upper Peninsula Construction Council Executive Director Tony Retaskie.

Michigan is hardly in a one-state recession. "Unfortunately, there's not a lot of work out there anywhere," said Patrick Devlin, chief elected officer of the Michigan Building and Construction Trades Council. As we reported in our last edition, work prospects around the country are dismal. According to an employer survey by the Associated General Contractors, nearly a third of the entire construction workforce in the U.S. may be laid-off in 2009. The AGC and many of our union contacts pinned their hopes on the incoming Obama Administration, and quick passage of a hoped-for stimulus package that might be a boon to construction and the rest of the economy.

Such a federal stimulus could change the outlook. Until then, here's what's going on…

Ann Arbor area - Hail, hail to Michigan.

In 2008 and 2009, more than ever, the University of Michigan is leading the way in construction employment in Washtenaw County.

"Work at the U of M has been the savior for the building trades," said Bryce Mitchell, business manager of Plumbers and Pipe Fitters Local 190. He said while Local 190 has been "slower than normal," other local unions would report "slow and disappointing" levels of work.

At the U of M, the replacement $754 million Mott Hospital, as we reported in our last issue, was topped out in late December. The expansion of the University of Michigan Football Stadium is ongoing, as is construction of an indoor practice facility for the school's baseball team. The new $74 million Kellogg Eye Center is approaching completion and the $175 million North Quad student residence project is moving along.

The construction boom on the U-M campus continues, but the list of projects is not as extensive as it was a few years ago.

Elsewhere in the region, a new patient tower at St. Joseph Mercy Hospital is getting started. On the Eastern Michigan University campus, construction of a new science building is expected to start this year. Two decent-sized rehabilitation projects will take place at Washtenaw Community College.

Significant projects are going on at the Ann Arbor School District - Mitchell said about $3 million in work is ongoing at "just about all their schools."

Overall, Mitchell said the mechanical trades "could have a half-way decent year," in the Ann Arbor region in 2009, "but overall it's going to be a slow year for everybody."

Bay City/ Saginaw/ Midland area - "We've been blessed with a lot of work, we're very thankful, said Plumbers and Steamfitters Local 85 Business Manager Robert Anderson. "We may have worked record man-hours in 2008, and we're looking at full employment with travelers in 2009."

There is a full complement of about 850 Local 85 plumbers and fitters at work in the Tri-City Region, plus another 350 travelers. Other trades in the region are enjoying high employment levels, too. Their primary work destinations are Dow Chemical, Dow Corning and Dow's Hemlock Semiconductor plants, which are undergoing about $1.8 billion in construction.

The Hemlock plant is undergoing a $1 billion expansion that will double its production of polycrystalline silicon, a material needed to produce solar cells.

Dow Corning is also building nearby manufacturing space for the production of high purity monosilane, a key specialty gas used to manufacture thin-film solar cells and LCDs.

The presence of Dow's solar panel material manufacturing helped attract a $55.2 million plant to be built by Evergreen Solar Inc. Expected to be built in Midland's Eastwick Industrial Park, the plant is set to manufacture wafer solar cells.

Other work on the horizon includes a new $20 million tower at Midland Hospital, and at least $10 million work at the Saginaw Army Reserve Center. Plus there's a major ongoing outage at the Consumers Energy Karn-Weadock plant. A $28 million College of Health & Human Services Building was approved last month for Saginaw Valley State University.

Looking a bit farther into the future, the Michigan's legislature's passage of a new utility law opened the door for new power plant construction. Consumers Energy is proposing to build a new 800-megawatt, coal-fired plant on the grounds of its Karn-Weadock facility, and is waiting on the state permitting process. The price tag is more than $2 billion. A 750-megawatt coal-fired plant for Midland was planned by L.S. Power Group and Dynergy Inc., but the $1.9 billion project may be delayed because of a split between the developers.

In Alma, the Great Lakes Energy Research Park is a multi-billion-dollar project centered around an Integrated Gasification Combined Cycle clean-coal power plant. The proposed location is the former Total Refinery site. The owner has announced their intention to start building this year.

To the north, near Rogers City, the Wolverine Power Cooperative is proposing to build a $1.2 billion, 600-megawatt coal-fired power plant, with tentative permission to burn petroleum coke - a waste product of the oil refinery process. The company needs Michigan Department of Environmental Quality permit before starting construction, and the community seems to support the project and jobs it would bring. A windmill farm may be part of the construction.

"If everything falls into place, the work outlook looks good for the next several years," Anderson said.

Detroit/Southeast Michigan - The construction economy is looking a lot better in the rear-view mirror than through the windshield.

"A lot of major projects were substantially completed toward the end of last year, and right now, I just don't see much light at the end of the tunnel," said Ed Coffey, Southeast Michigan business representative with the Michigan Building and Construction Trades Council. "Let's face it, we're in an economy that's heavily based on the Big 3 automakers, and we all know what's happened with them."

A short list of some of the major projects that were complete or substantially complete during 2008 include the new North Terminal at Metro Airport, the renovation of the Book-Cadillac and Fort-Shelby hotels, the Greektown Casino hotel, and in health care, Oakwood South Shore Hospital, Providence Park Hospital, and St. Joe-Pontiac.

Now, this economy has spawned a new category of construction: halted or delayed projects. The $350 million Bloomfield Park retail/residential project couldn't get additional capital, and came to a grinding halt in early November. Because of declining steel prices, in Dearborn, Severstal Steel put the kibosh on $1 billion in work, including the rebuilding of "B" Blast Furnace, a new coal mill and a new galvanizer.

Beaumont Hospital shelved a new critical care tower on its Royal Oak campus, and pushed back some work on the west side of its Troy Hospital.

Work continues at the Marathon Petroleum Co. refinery in Southwest Detroit, but the planned $1.9 billion Heavy Oil Upgrade Project has been extended from the original completion date in 2010. The latest from Marathon is that due to "current market conditions" (read: lower gasoline prices) the petroleum refiner is working on a new extended timeline and cost estimate.

There is work to be done. Ground is expected to be broken later this year for Oakland University's $61 million Human Health Building. The $279 million expansion of Detroit's Cobo Center is still in the works. In Marysville, a new high school in the $50 million range is anticipated. A new parking deck will be built at Port Huron Hospital.

A 72-day shutdown is scheduled to take place at DTE Energy's St. Clair Power Plant, starting Feb. 21.

Given the new federal microscope the UAW is under, there's now a negative new reality for the building trades. Coffey said UAW skilled trades workers may be more willing to take on more factory remodeling/upgrade work - as they're contractually allowed to do.

"The UAW is going to be reclaiming some of that work, and the building trades are basically going to be at their beck and call," Coffey said. "There's a major remodel job coming up at Livonia Transmission, and we may see the leading edge of this right there."

The Big 3 haven't stopped building, but they're down to a crawl. The work at Trenton Engine is nearly done. Construction work continues at the $730 million Marysville Axle Plant, which will be run by a partnership of Chrysler and a German firm. Beyond that project, GM announced at the Detroit auto show that it would build a $30 million advanced battery plant in Southeast Michigan, starting this year.

On the highways, the Ambassador Bridge Gateway Project - the largest single construction contract ever undertaken by the Michigan Department of Transportation - is expected to continue through this year.

The $230 million investment is expected to improve traffic flow at the Ambassador Bridge, and help drivers navigating the area freeway interchanges leading to I-75 and I-96 and Mexicantown. The I-75 freeway through southwest Detroit has been closed for nearly a year as part of the project.

Flint area - "Work is terrible," said Flint Area Building Trades President Zane Walker, a business agent with Iron Workers Local 25. "Man-hours are way down. We just had a building trades meeting and nearly every local is running 30 percent, minimum, unemployment."

The biggest project on the horizon is on hold: General Motors is conserving its cash and has halted construction of its new $349 million plant that would build engines for the plug-in hybrid Chevy Volt and compact Chevy Cruze. The red light was placed on the half-million square-foot project in December. Structural steel has been fabricated by Bristol Steel, but Walker said it's not going anywhere.

Walker said the employment situation will improve - just a little - when the warm weather comes around. Two middle schools are scheduled to go up in Lapeer following the passage of a $56 million bond issue. Some smaller projects will take place in the Davison School District.

A new parking deck will go up in downtown Flint. Work will ramp up on the $30 million renovation of the historic Durant Hotel. Constructed in 1920 and closed in 1973, the Flint hotel will be renovated into about 100 apartments. About $20 million in work will take place at Mott Community College.

"There's work here and there and in a lot of little strip malls - actually that work is pretty steady," Walker said. "But overall it's going to be tough through the winter."

Grand Rapids/Muskegon - Construction in 2008 "wasn't too bad" with some crafts "staying fairly busy" - before the bottom dropped out at the end of the year.

So said Mark Mangione, assistant business manager of West Michigan Plumbers, Pipe Fitters and Service Trades Local 174 and President of the West Michigan Building Trades Council. "It's going to be a slow year in 2009," he added. "Developers are having a problem getting money to build."

Mangione said health care, food service and upper education work were the major employers for West Michigan trades last year. Multi-million dollar projects like the $170 million Van Andel Institute and the $250 million Devos Children's Hospital will continue to employ Hardhats into this year.

This year some work will also continue on the $115 million Gerald Ford International Airport parking project, which includes a four-story, 4,900-space parking deck. There is also ongoing work to erect new fieldhouses at Calvin College and Grand Valley State University. A new culinary arts school at Baker College has been enclosed for the winter.

The K-12 education construction outlook is slow right now, "but we could see a significant amount of work in that area based on the bond issues we're seeing," Mangione said. Also to come in 2009: the Meridian Project, an all-union 10-story apartment/mixed use building in downtown Grand Rapids, and a 10-story, $10 million Cambria Suites hotel near the Van Andel Arena.

Consumers Energy is also planning an outage to begin Feb. 6 at Campbell Plant, Unit 2.

"There is going to be some work, but overall 2009 looks slow," Mangione said.

Lansing area - "Last year at this time we were cautiously optimistic about work opportunities going into 2008," said Scott Clark, business manager of IBEW Local 665. "We were disappointed; there was unprecedented unemployment in the area. Unfortunately 2009 is continuing in the same vein."

There are some "promising" projects that will go out for bids/and or start in the springtime, Clark said, but not enough to ease the unemployment situation in the building trades.

The second phase of Delta Dental's $85 million headquarters expansion will begin in earnest. The $49.8 million renovation of Brody Hall on the Michigan State campus will commence, as will the redevelopment of the 78-year-old Mary Mayo Hall dormitory. Addition work will continue on the Wharton Center for Performing Arts.

The Accident Fund Insurance Company of America will be further along in 2009 in the $180 million redevelopment of the former Ottawa Street powerhouse into the company's corporate headquarters. The headquarters will span 333,000 square feet, and include a connected 101,000-square-foot, four-story building. The two structures will be connected by a four-story atrium that would serve as the main entrance to the complex. Also included will be a 1,000-vehicle parking deck.

Plans are in place for a new Lansing Market Place, a $24 million to $30 million mix of retail, office and residential space.

Unfortunately, aside from those few big- and medium- ticket items other work prospects are slim in other areas like K-12 and health care construction.

A highly publicized $550 million Facility for Rare Isotope Beams (FRIB) facility that was awarded to Michigan State University will take three to four years before shovels are turned. The Lansing area may get a new coal-burning power plant, but that might be two years away.

"Some heavily touted projects have not come about," Clark said, "and people have to realize that those we've heard about recently, like the FRIB, are still two to four years away. It looks like 2009 doesn't appear to have the makings of a good year, hopefully things will be better rolling into 2010."

Monroe - For some trades it was a very good 2008. And it will be a very good first quarter of 2009 - then the bottom drops out.

Construction work has been plentiful thanks to projects at DTE Energy. A project to install pollution control scrubbers on Units 3 and 4 at the Monroe Power Plant started in late 2007, continued through 2008, and will wrap up this spring. As many as 200 pipe trades workers have been on the project through last summer, and about 100 are still on the job, said Ron Sweat, business manager of Plumbers and Pipe Fitters Local 671.

Starting on Feb. 7, an eight-week outage at the Monroe Power Plant will begin on Unit 1, primarily using boilermakers to replace water walls. Then a 33-day outage will start in May, with similar work being performed. Some preliminary work on Unit 1-2 scrubbers may take place later in the year.

The Fermi 2 plant will experience a 23-day refueling outage starting March 27.

"We had full employment for most of last year and into this year, and we still have some travelers on," Sweat said. "But we're looking at a lull after the spring. "There's not much school work, and commercial work is slow. "Our problem is that everything we have is going to wrap up at the same time, and later in the year, there's not much on the horizon."

 

Southwest Michigan - "It was a flat year in 2008, with some trades doing better than others," said Hugh Coward, president of the Southwest Michigan Building Trades Council. "In 2009, I would describe prospects as generally good in light of what's gone on in the financial markets and the economy."

The list of construction projects that are going on and are expected to take place during 2009 is fairly lengthy. The $300 million Firekeepers Casino, slated to open in August, is employing between 100 and 150 Hardhats.

Battle Creek Public Schools is spending about $119 million in bond money on new renovations. Bellevue Public Schools will spend $55 million in bond money on renovation work. Portage Schools will be spending $120 million to upgrade their schools through 2011.

A new $35 million juvenile home in Kalamazoo will be completed this year.

The Unisolar project is a $225 million plant to be constructed in Battle Creek - and that price tag could rise to $1 billion.

Kellogg's in Battle Creek will underwrite a new six-story, $30 million office building. A total of $86 million in revitalization work is expected to be constructed downtown in conjunction with that work, including the relocation of a YMCA.

Two outages are planned at the region's two nuclear power plants. Outages will commence at Consumers Energy's D.C. Cook plant and at its Palisades Plant beginning in March, with both lasting 30-45 days. There is also ongoing turbine repair work at the Cook plant. The $80 million renovation of an old GM stamping plant at the Midlink Business Park in Kalamazoo into a Kaiser Aluminum casting and extrusion facility began in October, but is on hold.

Other projects are less certain. Redevelopment of a major Parchment paper mill has been on and off. The latest version of the proposal calls for $100 million in redevelopment into new housing and retail. A planned new terminal at the Kalamazoo/Battle Creek International Airport, with a price tag of $31.5 million, is awaiting financing.

The City of Holland has applied to the state to build a $250 million, 78-megawatt coal-fired boiler at the James De Young Plant, replacing an aging boiler. The proposed $225 million Gun Lake Casino in Wayland is tied up in the courts.

"I'm optimistic," said Coward, who is also business manager of Iron Workers Local 340, "especially if Obama is able to shake loose the stimulus money. It's not all doom and gloom, by far."

Traverse City/NW Lower Peninsula - Last year started well, with the construction of the $80 million Turtle Creek Casino and hotel in Williamsburg winding down, said Jeff Bush, business manager of IBEW Local 498. About 300 building trades workers were on the site last January.

Fast forward 12 months, that job is long completed and employment in the region is down significantly. "Last year was a pretty good year, not super," Bush said. "This year we're slow in the residential market, slow in the service, and we have about a third to half of our members off. We don't have very good prospects for 2009."

Bush said there are some relatively small projects in the works, such as a patient room remodeling project at Munson Hospital, work at a Wal Mart in Traverse City and some wrap up work at the Blue Lake Gas Compressor Station.

"There are a few jobs out there, but everything just depends on whether those purse strings start to loosen up," Bush said.

Upper Peninsula - Construction man-hours have been dropping in recent years in the U.P., and 2009 is likely to see a continuation of that trend.

"We're hoping for the best, to get as many people working as possible," said Tony Retaskie, executive director of the U.P. Construction Council. "I wish we could just shut off the TVs and not listen to all the negative economic news, because it seems to have a snowball effect."

There are some jobs on the horizon. Mascoma Corp. has intentions of building a $250 million clean-burning, fuel-grade ethanol plant in Chippewa County, south of Sault Ste. Marie. The plant will use timber fiber to create cellulosic ethanol. State and federal funding is in place to help the project along.

Steel is going up this month at the new $37 million Mackinac Straits Hospital in St. Ignace. Iron County Community Hospital is undergoing a $17 million, 38,000 square-foot renovation/addition. New high schools will be erected in Houghton and Hancock. Hangar facilities at the former K.I. Sawyer Air Force Base in Marquette County are being upgraded for use in the winter.

If prices in the heavy metals market go back up, the Empire iron ore mine may start a planned $250 million pellet production plant. Lower nickel prices, lower demand and legal action have also slowed the process for the start of construction of the Kennecott Eagle Mine near Marquette. The $80 million rehabilitation of the Humboldt mill, which would work in conjunction with the Eagle Mine, also may or may not go this year.

Michigan Tech and Northern Michigan University both have requests in for funding projects, and NMU engineers are still studying a $55 million addition to the Ripley Heating Plant that would burn coal, wood chips and natural gas.

"It's going to be lean a lean year, but we're not destitute," Retaskie said. "But I sure would like to see more blueprints out there."