JACKSON — Because unseasonably warm, dry weather has speeded up the state’s four-lane highway program, leaving little cash for new construction, Mississippi roadbuilders face a potentially disastrous situation as Mississippi Department of Transportation officials report that the agency’s reserve funds are running low.
“There was a time when MDOT had a pretty good cash reserve, and MDOT was criticized by the Legislature for that,” said Central District Transportation Commissioner Dick Hall, chairman of the three-member state transportation board. “Legislators would ask, ‘why are you sitting on this cash instead of getting roads built?’ so we put a real emphasis on doing that. Then we had two years of unprecedented construction winters.”
Normally, road construction shuts down January through April because of cold weather and spring rains, Hall said.
“This year, in April, the commission approved $65 million in payments to contractors for March work, and usually they wouldn’t do half that much in March,” he said. “All of the work is eating up cash reserves, and, in short, we’ve been spending more than we’ve taken in. We finally reached the point where we ran out of cash, and we don’t have the authority to borrow short-term money. Local schools, local supervisors and other businesses can, but the agency that is assigned the responsibility of building the largest construction project in the history of the state can’t do that.”
Construction companies are making plans to reduce workweeks and cut employee hours to offset a slowdown in road building projects, said Don Richardson, executive director of the Mississippi Roadbuilders Association.
“The real effect will probably not hit construction companies until next spring or summer because most highway construction jobs are let a minimum of several months to several years,” he said. “If someone bid on a project six months ago, chances are he’ll continue to work on that project for another six months or so.”
Earlier this month, Lt. Gov. Amy Tuck asked the governor to allow lawmakers to seek solutions to a looming highway-funding crunch during an upcoming special legislative session.
“Good highways are basic to economic development in Mississippi,” she said. “Much needed highway projects may come to a screeching halt if the legislative decisions must wait until the 2001 session convenes. It seems very clear to me that the Legislature needs authority to meet and find solutions to this problem as soon as possible.”
Tuck said the amount of financial help is still open to debate, but that a slowdown of highway construction would hurt the state’s economy.
“In all fairness to MDOT, there have been indications that work would slow down, but there’s really not been any hint that work would stop,” said Richardson. “Some of my contractors may get excited about the Legislature considering highway funding in the special session, but that will only allow MDOT to match available federal funds for jobs that will be let in early 2001. It will not provide an immediate cash boost to MDOT.”
Even though favorable action in the upcoming special session could alleviate short-term concerns, MDOT officials plan to lobby for legislative action in the 2001 session to ease long-term problems.
Gov. Ronnie Musgrove has said he plans to address the MDOT funding problem in meetings with transportation officials in the next few weeks. No specific action on highways is planned for the Aug. 28 special session.
“With the $1.25-billion gaming roads program, we divert a minimum of $3 million of the state’s gaming revenues every month into a special fund for the construction of gaming roads,” Hall said. “That diversion has a sunset clause in it of 2012. We have authorization to issue some $200 million in bonds to build gaming impact roads. We’d like to issue $100 million right now, but the problem is issuing a 20-year bond when the revenue flow exists only until 2012. Obviously, nobody is going to want to buy those bonds. We want the Legislature to do away with, or extend for five or 10 years, the repealer, so we can go ahead and issue bonds we’re authorized to issue.”
Hall said MDOT would also seek the authority to issue another $200 million in non-gaming related road construction, with proceeds to match federal dollars.
“It would be embarrassing if, after Sen. Trent Lott and the rest of the congressional delegation fought so hard to get our monies from the federal government increased, we had to send money back,” Hall said. “We want to be able to match all available federal funds during the next fiscal year.”
Dan Holliday, partner at Davenport, Holliday and Spring, an accounting firm that specializes solely in commercial contractor clientele, said most road builders have a backlog of work — for now.
“This whole situation has already taken road builders by surprise,” Holliday said. “I’m concerned that, if they go six months to a year without accumulating any new MDOT work, they could face tough cutback times, not just over the next year, but the following years. These guys have to gear up to do this work with a lot of heavy equipment and personnel and maintain that for the course of the job. If they don’t have a good backlog of work and jobs coming to completion, they could face some shortfalls, perhaps liquidating equipment in the marketplace. The used equipment market is already softer than it was several years ago.”
Even though small contractors will be hurt by this, big contractors, who have started looking at jobs in Alabama, Louisiana and Tennessee, are at a disadvantage because of higher expenses, will take a bigger hit, Richardson said.
“Small contractors will be able to get private or county work, but folks with several hundred employees have a big overhead to maintain and need several jobs working at one time to keep it all going,” he said. “Otherwise, it’s like a factory shutting down.”
Contact MBJ contributing writer Lynne Wilbanks Jeter at email@example.com.
BEFORE YOU GO…
… we’d like to ask for your support. More people are reading the Mississippi Business Journal than ever before, but advertising revenues for all conventional media are falling fast. Unlike many, we do not use a pay wall, because we want to continue providing Mississippi’s most comprehensive business news each and every day. But that takes time, money and hard work. We do it because it is important to us … and equally important to you, if you value the flow of trustworthy news and information which have always kept America strong and free for more than 200 years.
If those who read our content will help fund it, we can continue to bring you the very best in news and information. Please consider joining us as a valued member, or if you prefer, make a one-time contribution.Click for more info